📘 Page 1: Introduction to Dissolution of Firm and
Registration
1. Dissolution of Firm – Overview
Under the Indian Partnership Act, 1932, the term "dissolution" refers to the discontinuation of
the relationship among all partners. It can happen in various ways, as covered in Sections 39 to
44.
Section 39: “Dissolution of a firm” means the dissolution of partnership between all partners of a
firm.
2. Registration of Firm – Overview
Registration is not compulsory under the Act, but it carries major legal consequences. It is
covered under Sections 56 to 59 (procedure) and Section 69 (effects of non-registration).
📘 Page 2: Section 40 – Dissolution by Agreement
🔹 Mutual Agreement (Section 40)
A firm may be dissolved with the consent of all partners or in accordance with a contract
between the partners.
✅ Key Points:
No legal formality is needed if mutually agreed.
Can be done even before the fixed term ends.
📌 Case Law:
S. Pattabhiraman v. S. Radhakrishnan (2000)
Held that a firm can be dissolved by agreement at any time unless the partnership deed restricts
it.
📘 Page 3: Section 41 – Compulsory Dissolution & Section 42
– Contingent Dissolution
🔹 Compulsory Dissolution (Section 41)
Occurs when:
1. Business becomes unlawful, or
2. Insolvency of all partners (except one).
Example: Ban on sale of liquor results in dissolution of a liquor-selling firm.
📌 Case Law:
Keshavlal Lallubhai Patel v. Lalbhai Trikumlal Mills (1958)
Held that if the firm's business becomes illegal by law, dissolution is compulsory.
🔹 Dissolution on Contingencies (Section 42)
Occurs in the following situations:
1. Expiry of fixed term
2. Completion of adventure/project
3. Death of a partner
4. Insolvency of a partner
However, partnership deed can provide otherwise.
📌 Case Law:
CIT v. Pigot Chapman & Co. (1937)
Death of a partner dissolved the firm in absence of a contract to the contrary.
📘 Page 4: Sections 43 & 44 – Dissolution by Notice and
Court
🔹 Dissolution by Notice (Section 43)
Applicable only to partnership at will.
Any partner may give written notice to dissolve the firm.
Firm is dissolved from the date mentioned in the notice.
📌 Case Law:
Moti Lal v. Firm Badridas (1930)
Held that proper notice is sufficient to dissolve a firm at will.
🔹 Dissolution by Court (Section 44)
Court may dissolve a firm on grounds such as:
1. Insanity of a partner
2. Permanent incapacity
3. Misconduct
4. Breach of agreement
5. Transfer of interest
6. Continuous losses
7. Just and equitable cause
📌 Landmark Case:
Khindria v. Bhupinder Singh (1970)
Court allowed dissolution on the ground that it was just and equitable due to persistent quarrels
and loss of mutual trust.
📘 Page 5: Registration of Firms – Sections 56 to 59
🔹 Section 56 – Power to Make Rules
The State Government has the power to frame rules regarding:
Forms,
Fees,
Manner of filing documents,
Inspection procedures.
🔹 Section 57 – Appointment of Registrar
Each state appoints a Registrar of Firms, who maintains the register and records.
🔹 Section 58 – Application for Registration
Application must contain:
1. Firm name
2. Place of business
3. Names & addresses of partners
4. Date of joining
5. Duration (if any)
Must be signed and verified by all partners.
🔹 Section 59 – Recording of Entry
Upon satisfaction, the Registrar records the statement and issues Certificate of Registration.
📌 Case Law:
Jagat Mittar Sain v. D.N. Kapoor (1970)
Held that registration takes effect only when entry is made in the Register by the Registrar.
📘 Page 6: Legal Consequences of Non-Registration (Section
69)
🔹 Section 69 – Effects of Non-Registration
1. No suit by partners against the firm or other partners.
2. No suit by the firm against third parties.
3. No claim for set-off exceeding ₹100.
✅ Exceptions:
Suits for dissolution or accounting
Suits by third parties against unregistered firms
Firms in states where registration is not mandatory
📌 Landmark Case:
Jagdish Chandra Gupta v. Kajaria Traders (AIR 1964 SC 1882)
Held that an unregistered firm cannot file a suit to enforce contractual rights.
📘 Page 7: Conclusion and Summary Table
🔹 Summary Table
Mode of Dissolution Section Trigger
By Agreement 40 Mutual consent
Compulsory 41 Illegality/Insolvency
On Contingencies 42 Term completion, death, insolvency
By Notice 43 In case of partnership at will
By Court 44 Misconduct, incapacity, etc.
Registration Process Section
Power to Make Rules 56
Registrar Appointment 57
Application Procedure 58
Entry in Register 59
Effect of Non-Registration 69
🔹 Final Words
Dissolution and registration are foundational to partnership law in India. While registration is
optional, it is practically essential to secure legal rights. Dissolution can occur voluntarily or
through legal intervention depending on the circumstances.
