Dissolution of Partnership Firm:

The dissolution of the partnership among all the partners of a firm is called the “Dissolution of the Firm.”

A) Dissolution without the Intervention of Court

1) By Agreement:

 a) By Partnership Contract:

A firm may be dissolved in accordance with the contract between the partners.

 b) By Mutual Consent:

A firm may be dissolved with the consent of all the partners.

2) Compulsory Dissolution:

 a) Insolvency:

A firm is dissolved by the adjudication of all the partners as insolvent.

 b) Subsequent Illegality:

A firm is dissolved by the happening of any event which makes it unlawful for the business of the firm to be carried on or for the partners to carry it on in partnership.

 3) By Notice (Partnership at Will):

Where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm.

4) Contingencies (Subject to Contract between Partners):

 a) Expiry of Terms:

If partnership is constituted for a fixed term, partnership is dissolved by the expiry of that term.

 b) Completion of Business:

If partnership is constituted to carry out one or more adventures or undertakings. it is dissolved by the completion of that adventure.

 c) Death:

A partnership is dissolved by the death of partners.

 d) Insolvency:

A partnership is dissolved by the adjudication of a partner as insolvent.

B) Dissolution by the Order of the Court

At the suit of a partner, the court may dissolve a firm on any of the following grounds:

1) Insanity:

Where a partner has become unsound mind, the court may dissolve the firm on the petition of any of the other partners or by the next friend of the insane partner.

 2) Permanent Incapacity:

Where a partner, other than the partner suing, has become in any way permanently incapable of performing his duties a partner, the court may dissolve the firm.

3) Misconduct:

Where a partner, other than the partner suing, is guilty of misconduct and it is likely to affect the carrying on of the business regard being had to the nature of business, the court may dissolve the firm.

4) Persistent Breaches:

Where a partner, other than the partner suing, willfully or persistently commit breach of the partnership agreement relating to the management of the affairs of the firm or the conduct of its business, or otherwise so conducts himself that it is not reasonably practicable for the other party to carry on the business of the firm with him, the court may dissolve the firm.

5) Transfer of Interest:

Where a partner has in any way transferred the whole of his interest in the firm to a third party or where his interest has been attached under a decree or sold in the recovery of arrears of land revenue, the court may dissolve the firm at the instance of any other partner.

6) Perpetual Loss:

Where the business of the firm cannot be carried in except at a loss, the court may dissolve the firm at the suit of a partner.

7) Just and Equitable:

The court may dissolve a firm on any ground which renders it just and equitable that the firm should be dissolved.