Under the Indian Partnership Act, 1932, the assets of the firm shall be applied first in payment of:

Section 48(b) applies the assets of the firm, including sums contributed by partners to make up deficiencies of capital, "first, in paying the debts of the firm to third parties", then partners' advances, then capital, with any residue divided in the profit-sharing ratio. Partners' advances and capital rank only after outside debts. Section48 expressly frames its internal settlement rules subject to agreement between the partners; that qualification does not itself extinguish outside creditor rights.