Partnership

Dissolution

Medium

The Court may order a partnership firm to be dissolved in which of the following case?

When the business of the firm becomes illegal

On the death of a partner

When a partner becomes insane

On the expiry of the term of the partnership

✅ Correct Option: 3

The question asks about dissolution by court order, which is different from automatic dissolution.

Under the Indian Partnership Act, 1932, certain events lead to automatic dissolution without requiring a court order:

When business becomes illegal → Dissolution by operation of law (Section 41)
Death of a partner → Automatic dissolution (Section 42)
Expiry of partnership term → Automatic dissolution (Section 43)

However, when a partner becomes insane (of unsound mind), the partnership does not dissolve automatically. Instead, under Section 44 of the Partnership Act, any partner can file a suit, and the court may order the dissolution of the firm.

This is because insanity affects a partner's ability to perform partnership duties, but the other partners may choose to continue. Therefore, court intervention is necessary to decide whether dissolution is appropriate based on the circumstances.

Option 3 is correct as it specifically requires a court order for dissolution, which aligns with the question's requirement.

2025: 16 May Shift 1

While settlement of Accounts, what should be the order of application of assets of Firm

(A) In paying the debts of the firm to the third parties

(B) In paying to each partner proportionately what is due to him on account of capital

(D) In paying each partner proportionately what is due to him/her from the firm for advances as distinguished from capital (i.e. partner's loan)

Choose the correct answer from the options given below:

2025: 3 June Shift 1

Unrecorded assets when taken over by a partner are shown in :

2025: 22 May Shift 2

On the dissolution of a firm, creditors is transferred to:

2025: 31 May Shift 1

Which combination of statements is true about dissolution-

(A). Dissolution of a partnership is different from dissolution of a firm.

(B). A partnership is dissolved when there is a death of a partner.

(C). A firm is dissolved when all partners give consent to it.

(D). A firm is compulsorily dissolved when a partner decides to retire.

Choose the correct answer from the options given below:

2025: 4 June Shift 2

In case of Fixed Capital Method, at the time of dissolution of a firm, An un-recorded asset are taken over by a partner, which Journal Entry will be recorded in the books of the Partnership Firm :-

2025: 30 May Shift 1

All assets (except cash/bank and fictitious assets) are transferred to the__________ side of __________Account.

The Court may order a partnership firm to be dissolved in which of the following case?

Solution

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