Section 49, of the Indian Partnership Act 1932, deals with

Section 49 of the Indian Partnership Act 1932 deals with the order in which assets should be applied when settling debts of a firm and its partners.

The section establishes two key principles:

Application of Assets - It specifies the sequence in which firm's property and partner's private property should be utilized for payment of debts.

Private Debts and Firm's Debts - It distinguishes between the firm's debts and the private debts of individual partners and sets rules for their settlement.

The section provides that:

The property of the firm must be applied first in payment of the firm's debts. Any surplus remaining after satisfying the firm's debts is then available for payment of partners' private debts in proportion to their claims.

The separate property of any partner must be applied first in payment of that partner's private debts. Any surplus remaining after satisfying private debts is then available for payment of the firm's debts.

This ensures a clear distinction between firm liabilities and personal liabilities of partners, protecting both firm creditors and private creditors by establishing priority rules for asset application.

Therefore, Options 2 and 4 are correct as Section 49 specifically addresses both the Application of Assets and the relationship between Private Debts and Firm's Debts.