AB Bank filed a suit for recovery of loan advanced to X, a partnership firm. C, D and E, partners…
A partner's retirement does not itself discharge liability for a firm debt incurred while that person was a partner. Creditor-agreed discharge or novation is required;…
Choose your answer
AB Bank filed a suit for recovery of loan advanced to X, a partnership firm. C, D and E, partners constituting X, were impleaded as defendants along with X. C and D pleaded that they had retired from the partnership after the loan transaction and now E was the sole proprietor of X. Which proposition is correct?
Answer and explanation
Correct answer D
A partner's retirement does not itself discharge liability for a firm debt incurred while that person was a partner. Creditor-agreed discharge or novation is required; section 32(2) recognises an agreement implied from a course of dealing after knowledge of retirement, and does not insist that every discharge be written.
See sections 25 and 32(2) of the Indian Partnership Act, 1932 and section 62 of the Indian Contract Act, 1872.
Option feedback
Option A
Retirement alone does not restrict recovery of the antecedent debt to X and E.
Option B
An agreement only among C, D and E does not bind the bank to release its debtors.
Option C
Writing is not the exclusive possible form of a creditor-agreed discharge.
Option D
An effective discharge or novation with the bank's consent can release C and D; agreement may be express or properly implied, rather than confined to a written release.
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