Status of a partnership firm with two partners on death of one partner

541 votes

Section 42 of the Partnership Act 1932 provides dissolution on the happening of certain contingencies and the Section provides, "Subject to contract between the partners a firm is dissolved (a) ..(b)..(c) by the death of a partner;" though in Mohd Laiquiddin v Kamala Devi Misra (deceased) by LRs,(1) the Supreme Court has ruled that on the death of a partner of a firm comprised of only two partners, the firm is dissolved automatically; this is notwithstanding any clause to the contrary in the partnership deed on the ideology that a contract between more than one person (since it uses the term 'persons'). Therefore, if in a firm comprised of only two persons as partners one dies, the contract comes to an end. There cannot be any contract unilaterally without acceptance by the other partner, hence a partnership firm comprised of two partners will automatically dissolve on the death of one of them, notwithstanding any contract to the contrary. In the judgment, if the courts were to enforce strictly the terms of the partnership deed between the parties in the present case, one may assume an implied contract, during the execution of the partnership deed. According to the law, this will create a legal fiction, since this will lead to an assumption that the legal representative of a deceased partner automatically becomes a partner. Hence your partnership deed may be important to decide the other issues. All the best. Regards

Advocate Ujjal Kumar Ray LawRato