Partnership Project

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NATIONAL LAW INSTITUTE UNIVERSITY,

BHOPAL

2017-18

LAW OF PARTNERSHIP

7TH TRIMESTER

ANALYSIS OF OUTGOING PARTNER

SUBMITTED TO: SUBMITTED BY:

SANJAY KUMAR YADAV DHRUV KHURANA

Assoc. PROF. 2015 B.A.L.LB 51


ACKNOWLEDGMENT

I take immense pleasure in thanking Dr. Sanjay Yadav, our respected teacher of Law
Relating to Partnership, for having permitted me to carry out this project work. I express my
gratitude to him for giving me an opportunity to explore the world of information concerning
my project topic.

Words are inadequate in thanking my seniors and batch mates for their support and
cooperation in carrying out the project work.

Finally, I would like to thank my family members for their blessings and wishes for the
successful completion of the project.
ANALYSIS OF OUTGOING PARTNER

TABLE OF CONTENTS

ACKNOWLEDGMENT ......................................................................................................... 2

INTRODUCTION.................................................................................................................... 4

ANALYSIS OF RETIREMENT OF A PARTNER .............................................................. 5

SECTION 31: INTRODUCTION OF A PARTNER ........................................................................... 5


SECTION 32: RETIREMENT OF A PARTNER ............................................................................... 7
SECTION 33: BY EXPULSION ................................................................................................... 9
SECTION 34: INSOLVENCY OF A PARTNER ............................................................................. 11
SECTION 35: LIABILITY OF ESTATE OF DECEASED PARTNER ................................................ 12
SECTION 36: RIGHTS OF OUTGOING PARTNER TO CARRY ON COMPETING BUSINESS .............. 12
SECTION 37: RIGHT OF OUTGOING PARTNER IN CERTAIN CASES TO SHARE SUBSEQUENT
PROFITS ................................................................................................................................. 14

SECTION 38: REVOCATION OF CONTINUING GUARANTEE BY CHANGE IN FIRM ...................... 17

CONCLUSION ...................................................................................................................... 19

BIBLIOGRAPHY .................................................................................................................. 20

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ANALYSIS OF OUTGOING PARTNER

INTRODUCTION

Partnership is a legal relationship brought about through an agreement or contract between


persons. In order to ascertain whether a group of persons have joined together to form a
partnership or not, the intentions of the parties and the real legal relationship the parties desire
to enter into are to be determined. The legal relationship of a partnership is based on an
agreement between persons to share the profits of a business carried on by all or any of them
acting for all. The relationship is based on an agreement.

Chapter V of the Act as the special committee pointed out is novel in form. It collects in one
body, the rules as to the coming in of new partners and going out of existing ones, insofar as
the change does not put an end to the firm but leaves the relation between the continuing
partners untouched. Men of business will welcome this re-arrangement as convenient.

There is no dissolution of the firm by the mere incoming or outgoing of partners. A partner
can retire with the consent of the other partners and a person can be introduced in the
partnership by the consent of the other partners. The reconstituted firm can carry on its
business in the same firms name till dissolution.

The mutual relations of partners are based on the principal that they have to be just and
faithful to each other and are bound to carry on the business of the firm to the greatest
common advantage (section 9). Therefore, a new partner can be included in a firm only when
the existing partners have faith and trust in him.

In Satyanarayan Murthi v. Gopalan1 it was held that where a person so nominated is not
acceptable to the other partners, the court cannot force them to enter into partnership with
him because the foundation of partnership is mutual confidence, which the court cannot
supply where it does not exist.

1
(1939) 2 MLJ 279

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ANALYSIS OF OUTGOING PARTNER

ANALYSIS OF RETIREMENT OF A PARTNER

SECTION 31: INTRODUCTION OF A PARTNER

(1) Subject to contract between the partners and to the provisions of section 30, no person
shall be introduced as partner into a firm without the consent of all existing partners.
(2) Subject to the provisions of section 30, a person who is introduced as a partner into a
firm does not thereby become liable for any act of the firm done before he became a
partner.

Modes of Introduction of a Partner


A partner who is new can be introduced into a firm in the following ways

(i) with the consent of all the existing partners,


(ii) in accordance with a contract between the partners,
(iii) in accordance with the provisions of section 30.

1. Introduction of Partners by Agreement


Express power for a senior or principal member of a firm, to introduce one or more new
partners named or not under agreed conditions, is in fact constantly given by partnership
articles.

Byrne v. Reid2
A person duly nominated under such a power acquires rights in the partnership property
which the court will enforce by way of appropriate specific relief though it cannot enforce an
agreement to enter into partnership because the foundation of partnership is mutual
confidence, which the court cannot supply where it does not exist.

Bachubai v. Shamji3
The consent of all existing partners is required to the introduction of a new partner so that the
firm may work harmoniously.

2
(1902) 2 Ch 735 (CA)
3
(1885) 9 Bom 536 (554):

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ANALYSIS OF OUTGOING PARTNER

2. Introduction in accordance with a contract between the parties


If a contract between the partners permits the introduction of a new partner even without the
consent of all the existing partners, that can possibly be done. For example, the contract
provides the majority of the partners shall be competent to admit a new partner or anyone of
them may nominate a partner or appoint his successor, a new partner could be introduced
accordingly.

Lovergrove v. Nelson4

To make a person a partner with two others, their consent must clearly be had, but there is no
particular mode or time required for giving that consent, and if three persons enter into
partnership by a contract which provides that on one retiring, one of the remaining two, even
a fourth person, who is no partner at all, shall name the successor to take the share of one
retiring, it is clear that this would be a valid contract which the court must recognise and the
new partner would come in as entirely by the consent of the other two, as if they had adopted
him by name.

Byrne v. Reid5
A, B, C, and D were four partners and they, in their partnership deed authorised A to admit
his son S into partnership when S had attained the age of twenty-one years. After S attained
the age of twenty-one years, A nominated him as a partner in accordance with the partnership
deed and he accepted the nomination, but the other partners refused to recognise heir as a
partner. It was held that the son on accepting the nomination had become a partner.

Mulchand v. Manekchand6
It may be noted that a person does not become a partner merely by his nomination. He has an
option to become a partner or not. He becomes a partner when after nomination he expressly
or impliedly agrees to the same.

British Home Insurance Corpn. v. Paterson7


The plaintiff corporation appointed B their solicitor and instructed him to act for them in a
mortgage transaction, while the business was pending, B took the defendant P into
partnership and gave the plaintiffs notice in writing. The plaintiff paid no attention to the

4
(1834) 3 Ny & K 120
5
(1902) 2 Ch 735
6
(1906) 8 Bom LR 8
7
(1902) 2 Ch 404

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ANALYSIS OF OUTGOING PARTNER

notice, continued to correspond with B in his own name and finally sent money to advance on
the mortgage by cheque made payable to his order and accepted his receipt in his own name.
B paid the money into his own account and misappropriated it. The plaintiff sued the new
partner.

It was held that the plaintiffs had by their conduct declined to accept the liability of the new
partner. They had elected to deal with the old partner alone and could not afterwards hold the
new partner liable.

Farewell said where A knowing B and C to be a partners, refused to contract with them
jointly and insists on contracting with B alone, he cannot afterwards treat C as liable.

Central Bank of India v. Tarseema Compressed Wood Mfg Co8 after a 4th partner was
admitted to a partnership firm, which earlier consisted of only three partners, all of them gave
the following undertaking to the bank:

We are jointly and severally liable to the bank for the liabilities of the firm with the bank. The
bank may recover its claims and dues from any or all of the partners of the firm and the
assets of any deceased partner.

SECTION 32: RETIREMENT OF A PARTNER

1. A partner may retire-


(a) with the consent of all the other partners,
(b) in accordance with an express agreement by the partners, or
(c) where the partnership is at Will, by giving notice in writing to all the other
partners of his intention to retire.
2. A retiring partner may be discharged from any liability to any third party for acts of
the firm done before his retirement by an agreement made by him with such third
party and partners of the reconstituted firm, and such agreement may be implied by a
course of dealing between such third party and the reconstituted firm after he had
knowledge of the retirement.
3. Notwithstanding the retirement of a partner from a firm, he and the partners continue
to be liable as partners to third parties for any act done by any of them which would

8
AIR 1997 Bom 225

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ANALYSIS OF OUTGOING PARTNER

have been an act of the firm if done before the retirement until public notice is given
of the retirement:
Provided that a retired partner is not liable to any third party who deals with the firm
without knowing that he was a partner.
4. Notices under sub-section (3) may be given by the retired partner or by any partner of
the reconstituted firm.

A partner of a firm makes himself separate from the firm by any of the following modes

(a) by retirement,
(b) by expulsion
(c) by insolvency
(d) by death.

Retirement of partner
A partner may retire from the firm with the consent of the other partners in accordance with
an express agreement by the partners or where the partnership is at Will, he may retire by
giving notice in writing to all the other partners of his intention to do so.

A retiring partner may get exemption from any liability to third party for the act of the firm
done before his retirement by an agreement made by him with such third party such
agreement may be either express or implied.

After the retirement of a partner from a firm he is not discharged from his liability unless he
has delivered a public notice in that connection showing his intention, he and other existing
partners or any of them would be liable for the acts of the firm to the same extent as that work
would have been before his retirement from the firm. However, such retired partner is not
liable to any third party who deals with the firm without knowing that he was a partner.

It is necessary for a retiring partner to give public notice about his retirement to such class of
persons who might be concerned in firm s business transaction.

Retire

The expression Retire used under section 32 makes it clear that it applies to the situation
when a partner retires from the firm without the dissolution of the firm and the business of
the firm is being continued by other existing partners. Therefore, where a partner is retiring

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from the firm after dissolution that would be dissolution of the firm and does not amount to
retirement.

According to Lindleys partnership rule, the right of a retiring partner is subject to some
restriction. Lindley has laid down three rules which widens the rights of a retiring partner but
in fact it restricted the right to some extent.

According to section 32(1), a partner may retire

(a) with the consent of all the other partners, or


(b) in accordance with an express agreement by the partners, or
(c) where the partnership is at Will, by giving public notice or writing to all the other
partners of his intention to retire.

Section 7 Partnership at Will


Where no provision is made by contract between the partners for the duration of their
partnership the partnership is partnership at Will .

Notice should be in writing, signed by the partners and should be served upon all the partners.
As between the partners, the retirement becomes effective from the date mentioned in the
notice, or if no date is mentioned, from the date of service.

SECTION 33: BY EXPULSION

(1) A partner may not be expelled from a firm by any majority of the partners, save in the
exercise in good faith of powers conferred by contract between the partners.
(2) The provisions of sub-sections (2), (3), (4) of section 32 shall apply to an expelled
partner as if he were a retired partner.

Where the terms of partnership confer power to expel a partner, its exercise will not be in
good faith unless it is done with an honest view in the interest of the firm and with notice
to the partner affected and an opportunity of being heard.

Shivraj Reddy & Bros. v. S. Raghu Rao Reddy9


A partner cannot be expelled from a firm by any majority of partners. But section 33 provides
that a partner may be expelled in the exercise in good faith of the powers of expulsion, if any,

9
AIR 2002 NOC 120 (AP):

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given to the partners by their mutual agreement. Thus expulsion, is justifiable only when it is
authorised by an agreement between the partners.

Blisset v. Daniel10

Where in exercise of their power conferred in most unfettered terms, majority of the partners
expelled a partner on the ground that he had opposed the appointment of one of the partner s
son as manager, the court held the expulsion to be unwarranted and an abuse of power.

Green v. Howell11
Where a clause in a partnership deed empowered the partners to expel a partner who was
guilty of flagrant breach of his duties, the court refused to interfere when it found on evidence
that kind of breach of his duties was established. The expelled partner s contention that he
was not given show cause notice before expulsion did not help him because the partners who
expel do not act as a tribunal.

Ganesh Chandra v. Gopal Chandra12

The power of expulsion can be exercised by a majority and not by a single partner. Where, of
the three partners, two were guilty of misconduct and the third proceeded to expel them, the
court held that if this expulsion is allowed it would reverse the meaning of the section which
contemplated expulsion by the majority of a minority and not vice versa.

Wood v. Wood13
Where a plaintiff partner was expelled from the firm and kept out of its business and was also
denied his share of profits etc., it was held that the case of action for questioning the validity
of the ousting and for reinstatement as partner or for seeking dissolution arose at the time of
expulsion and, therefore, the proceedings instituted four years thereafter were barred by time.

10
[1853] 90 RR 454
11
(1910) 102 LT 347 (CA).
12
AIR 1976 Cal 459
13
(1874) 43 LJ Ex 153

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ANALYSIS OF OUTGOING PARTNER

SECTION 34: INSOLVENCY OF A PARTNER

1. Where a partner in a firm is adjudicated an insolvent he ceases to be a partner on the


date on which the order of adjudication is made, whether or not the firm is thereby
dissolved.
2. Where under a contract between the partners the firm is not dissolved by the
adjudication of a partner as an insolvent, the estate of a partner so adjudicated is not
liable for any act of the firm and the firm is not liable for any acts of the insolvent,
done after the date on which the order of adjudication is made.

Insolvency of a partner
Section 34 of the Indian Partnership Act deals with the circumstances and effect of
insolvency of a partner from a firm. This section provides that where a partner in a firm has
been adjudicated as an insolvent he ceases to be a partner on the date on which the order of
adjudication is made.

Sub-section (2) of section 34 lays down the circumstances where under a contract between
the partners, the firm is not dissolved by such adjudication of a partner as an insolvent. In
such case, the estate of a partner declared insolvent would not be liable for any act of the firm
and the firm is also not liable for the act of such insolvent partner from the date of
adjudication made as an insolvent.

Dissolution on Insolvency
Generally, a firm is dissolved after the order of adjudication is made on account of insolvency
of a partner. However, it is not necessary to dissolve a firm after such adjudication. The other
existing partners are competent to continue to do the business of the firm by mutual contract.
The other partners may by agreement agree not to dissolve the firm after adjudication of
insolvency of a partner and can carry on the business of the firm. An effect of insolvency of a
partner of a firm may be conveniently read along with the sections 34, 41(a), 42(d) and 47 of
this Act.

Effect of Insolvency of a Partner


Where a partner has been declared as an insolvent he ceases to be a partner from the date on
which the order of adjudication is made as an insolvent. In the absence of an express

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agreement the firm will be dissolved from the date of such adjudication. The other existing
partners can continue the firm only by contract or agreement after such adjudication.

The insolvency of a partner does not invariably result in dissolution of the firm, for it is open
to the partners to agree that the adjudication of a partner as an insolvent will not dissolve the
firm as regards the continuing partners.

SECTION 35: LIABILITY OF ESTATE OF DECEASED PARTNER

Where under a contract between the partners the firm is not dissolved by the death of a
partner, the estate of a deceased partner is not liable for any act of the firm done after his
death.

When a partner dies, he; of course, ceases to be a partner. The firm may or may not thereby
be dissolved. The estate of the deceased deserve to be protected from any partner s further
liability in respect of any act of the firm done after the time of his death. This section is
designed only to provide that protection. No public notice is necessary to terminate the
liability of the deceased partner. Death is also a notice by itself.

Sections 45(1) and 35 jointly lays down a general rule that the estate of a deceased partner is
not liable for any act of the firm done after the death of that partner, whether or not the firm is
dissolved. Since death is a public incident, it does not require to give a public notice to
absolve the estate of a deceased partners from liability for the future obligation of the firm.

SECTION 36: RIGHTS OF OUTGOING PARTNER TO CARRY ON COMPETING BUSINESS

1. An outgoing partner may carry on a business competing with that of the firm and he
may advertise such business but, subject to contract to the contrary, he may not
(a) use the firms name,
(b) represent himself as carrying on the business of the firm, or,
(c) solicit the customer or persons who were dealing with the firm before he ceased to
be a partner.
2. A partner may make an agreement with his partner that on ceasing to be a partner he
will not carry on any business similar to that of the firm within specified period or

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within specified local limits and notwithstanding anything contained in section 27 of


Indian Contract Act, 1872 (IX of 1872), such agreement shall be valid if the
restrictions imposed are reasonable.

Rights of outgoing partners to carry on competing business


Under Indian Partnership Act, the outgoing partners have certain rights which are enunciated
under sections 36, 37 of the Act. Section 36 deals with the rights of an outgoing partner to
carry on a competing business.

Essentials-

Section 36 of the Partnership Act, authorises an outgoing partner to carry on a business


competing with that of the firm and he may advertise his business but subject to contract to
the contrary, he may not,

(a) use the firm name,


(b) represent himself as carrying on the business of the firm,
(c) solicit the customers or persons who were dealing with the firm before he ceased to be
a partner.

Sub-section (2) of the section allows a partner to enter into an agreement with his co-partner
that on ceasing to be a partner he will not carry on any business similar to that of the firm,
within a specified period or within specified local limits. Such agreement is valid and shall
not be considered as violative of the restraint of trade, provided, the restrictions imposed are
reasonable.

Section 36(2) permits an agreement being made that the outgoing partner be restrained from
carrying on business similar to that of the firm. Such an agreement has been declared to be
valid and constitutes an exception to the rule contained in section 27 of Indian Contract Act
which declares an agreement in restraint of trade as void. It is, however, necessary that:

(i) the agreement restraining the outgoing partner from carrying on a similar business
should stipulate that such a business will not be carried on for a specified period or
within specified local limits, and
(ii) the restriction imposed should be reasonable.

When a partner ceases to be a partner by retirement, expulsion, insolvency or death, his share
in the property of the firm may not be immediately paid to him and the firm may continue the

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business without any final settlement of accounts between the outgoing partner or his estate
and the other. Section 37 gives an option to the outgoing partner or the representative of the
deceased partner, who has not been paid his share of the property, either:

(i) to claim such share of the profits made since he ceased to be a partner as may be
attributed to the use of his share of the property of the firm, or
(ii) to claim an interest at the rate of 6% per annum on the account of his share in the
property of the firm.

Where a partner has retired from the firm after selling his share in the partnership firm and
the firm is reconstituted with new partners, the share of the retired partner is to be valued as
on the date of his retirement.

Espley v. Williams14

Two persons entered into an agreement to run an estate agency in partnership. There was a
covenant restraining one of them from practising as an estate agent on his own account, or
with any other person or company within two miles of the partnership premises and also
within two years of the termination of the partnership. He left the partnership and
commenced practice as an estate agent with another agent within the time period and within
the given area.

The court enforced the covenant. The court said that the goodwill of the partnership was a
legitimate interest which the other partner was entitled to have protected. The restrictive
covenant could not be described as a covenant against competition. The covenant was no
more than was adequate to protect the goodwill of the partnership.

SECTION 37: RIGHT OF OUTGOING PARTNER IN CERTAIN CASES TO SHARE SUBSEQUENT

PROFITS

Where any member of a firm has died or otherwise ceased to be a partner and the surviving or
continuing partners carry on the business of the firm with the property of the firm without any
final settlement of accounts as between them and the outgoing partner or his estate, then, in
the absence of a contract to the contrary, the outgoing partner or his estate is entitled at the
option of himself or his representative to such share of the profits made since he ceased to be

14
(1997) QBEG 137 CA.

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a partner as may be attributable to the use of his share of the property of the firm or to interest
at the rate of six per cent. per annum on the amount of his share in the property of the firm:

Provided that where by contract between the partners an option is given to surviving or
continuing partners to purchase the interest of a deceased or outgoing partner, and that option
is duly exercised, the estate of the deceased partner, or the outgoing partner or his estate, as
the case may be, is not entitled to any further or other share of profits, but if any partner
assuming to act in exercise of the option does not in all material respects comply with the
terms thereof, he is liable to account under the foregoing provisions of this section .

Section 37 deals with rights of outgoing partners. It lays down a substantial law relating to a
liability of the surviving or continuing partner, who without a settlement of accounts with
legal representatives of the deceased partner utilises the assets of partnership for continuing
the business.

Although the principle applicable to such cases is clear but at times some complicated
questions arise when disputes are raised between the outgoing partner or his estate on the one
hand and the continuing or surviving partners on the other in respect of subsequent business.
Such disputes are to be resolved keeping in view the facts of each case having due regard to
section 37.

Pamuru Vishnu Vinodh Reddy v. Chellakuru Chandrashekhar Reddy15

A and B are partners. A dies. B instead of winding up the affairs of the partnership, retain all
the assets in the business. B must account to A s legal representative for the profits arising
from A s share of the capital.

The principle of this section is applicable even when only part of the retiring partner s assets
is utilised by the surviving partners. The section lays down the substantive law relating to the
liability of a surviving partner who without a settlement of accounts with the legal
representative of the deceased partner utilises the assets of the partnership for continuing the
business on his own.

15
(2003) 3 SCC 445

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Barclays Bank Trust Co. Ltd. v. Bluff,16

The partnership between a father and son as farmers was dissolved by the death of the father.
There was, however, a substantial delay in winding up of the affairs of the firm. During their
period of delay, the son carried on the farming business and the value of the firm appreciated
considerably. It was held that the executer was entitled, at his option, to interest at the rate of
five per cent. as prescribed in the corresponding provision of the English Act contained in
section 42(1), on the fathers share of the partnership asset or to a share of the profits
occurring in the ordinary course of carrying on the business since the date of death, i.e.,
profits arising from the use of the farm land and building not including any capital profits
which might be realised on a sale of the land and buildings. It was held that the estate s
entitlement would not be affected by an election to take interest.

Illustration

(i) A, B, C are partners in a manufacture of machinery. A is entitled to three-eighth of the


partnership property and profits. A becomes bankruptcy, whereas B and C continue
the business without paying out A s share of the partnership assets or settling
accounts with his estate. A s estate is entitled to three-eighth of the profits made in
the business, from the date of his bankruptcy until the final liquidation of the
partnership affairs.
(ii) A, B, C are partners. C after selling his share in the partnership firm, A and B fail to
pay the value of the share to C as agreed to the value of the share of C on the date of
his retirement from the firm would be pure debt-from the date on which he ceased to
be a partner as per the agreement entered between the parties. C is entitled to recover
the same interest.

Tilokram Ghosh v. Gita Rani17


The right and/or the option contained by the provision of section 37 on the estate of the
deceased partner cannot be properly exercised until the account of the subsequent business
are made available and as much the estate of a deceased partner is not bound to make the
election until the profit earned in respect of the share of the deceased partner is ascertained on
dissolution of the firm, they will be entitled to exercise their option enforced by section 37

16
(1982) Ch 172
17
AIR 1989 Cal 254 (258).

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when the accounts of the dissolved firm would be taken in accordance with the provisions of
section 48 of the Partnership Act.

M.C. Sharma v. B.C. Sharma18

Section 37 does not contemplate the dissolution of firm by a notice under section 43. A suit
by an individual partner for continuing of business, when other partners are seeking
dissolution is not hit by section 37.

SECTION 38: REVOCATION OF CONTINUING GUARANTEE BY CHANGE IN FIRM

A continuing guarantee given to a firm, or to a third party in respect of the transaction of a


firm is, in the absence of agreement to the contrary, revoked as to future transactions from the
date of any change in the constitution of the firm.

Section 38 of the Indian Partnership Act deals with the cases of revocation of the continuing
guarantee to a firm. The section, lays down that a continuing guarantee given to a firm or to a
third party in respect of the transaction of the firm is in the absence of agreement to the
contrary, revoked as to future transaction from the date of any change in the constitution of
the firm.

N.C. Mukherjee v. Biro Das19


In this case A was a surety to the firm N.C. Mukherjee for the conduct of B , a
cashier in the firm of N.C. Mukherjee. Later on a change took place in the constitution of the
firm and its name was altered to N.C. Mukherjee & Sons . It was held that the surety was
not liable for B s defamations subsequent to the change in the constitution of the firm.

Effect of change
Section 38 deals with the effect of the change in the constitution of a firm on continuing
guarantee and provides that any change in the constitution of a firm will have the effect of
revoking a continuing guarantee given to that firm or to a third party in respect of transaction
of a firm, from the date of change in the constitution of the firm, unless there is an agreement
to the contrary.

18
AIR 1986 All 69.
19
ILR 1901 Cal 397

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ANALYSIS OF OUTGOING PARTNER

Continuing Guarantee
The expression continuing guarantee has been defined in section 129 of the Indian
Contract Act as follows

A guarantee which extends to a series of transactions is called continuing guarantee. This


continuing guarantee may be revoked. Section 130 of the Indian Contract Act deals with the
revocation of continuing guarantee and provides that: A continuing guarantee may at any
time be revoked by the surety as to future transactions, by notice to the creditor.

Neel Comul Mookerjee v. Bipro Das Mookerjee20

It was held that on this change the guarantee was revoked and the surety was not liable for the
conduct of the cashier subsequent to such change.

20
(1901) 28 Cal 597

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ANALYSIS OF OUTGOING PARTNER

CONCLUSION

A retiring partner continues to be liable for the acts of the firm done before his retirement. He
may, however, free himself from his liability towards third parties for the debts of the firm
incurred before his retirement by an agreement with such third parties and the partners of the
reconstituted firm discharging the outgoing partner from all liabilities.

The remaining partners alone cannot give this freedom to the retiring partner. He may be
discharged only if the creditors agree.

A retiring partner also continues to be liable for the acts of the firm, even after retirement,
until public notice is given of the fact of retirement. Similarly, the partners of the
reconstituted firm continue, to be liable for the acts of the retired partner though done after
retirement, until public notice is given of the retirement.

Such a public notice may be given either by the retiring partner or by any partner of the
reconstituted firm. A dormant or sleeping partner, however, need not give any such notice.

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BIBLIOGRAPHY

www.manupatra.com
www.indiakanoon.org
www.judis.nic.in
www.lawctopus.com
www.legalservicesindia.com

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