In a firm of four partners, three are adjudicated insolvent. Under the Indian Partnership Act, 1932, what is the effect on the firm?
Question and options
In a firm of four partners, three are adjudicated insolvent. Under the Indian Partnership Act, 1932, what is the effect on the firm?
The firm continues until the court dissolves it in a suit
The firm continues until the solvent partner gives notice
The firm continues; the three merely cease to be partners
The firm stands dissolved without any court order or notice
Answer and explanation
Section 41(a) of the Indian Partnership Act, 1932 provides for compulsory dissolution of a firm when all the partners, or all but one, are adjudicated insolvent; no court order or notice is needed. The rule in section 34, under which an insolvent partner simply ceases to be a partner, fits the case where solvent partners remain who can carry on, but a single solvent partner cannot continue a firm.
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