Legal Question in Business Law in India

Mr. Lawguru, we have started a partnership firm (2 partners) and taken a loan to start it a year ago. My partner wants to have the whole business and at that time bank and he verbally said that if i will sign and handover the business to my partner then i will be free from the liability of loan.After signature on that dissolution deed he and bank refused and said i am fully liable for loan.What can i do now. Can this dissollution deed be cancelled?Or is their any other option.What should i do?

Asked on 5/23/13, 10:42 am

3 Answers from Attorneys

Mukesh Ralhan RALHANS - Immigration & Overseas Affairs Law Group

Dear Client,

According to the Indian Partnership Act, 1932, you are liable to pay the loans taken in the name of the Partnership firm to the extent of your share in the firm before the dissolution. Please see the relevant provisions below:

48. Mode of settlement of accounts between partners - In

setting the accounts of a firm after dissolution, the following

rules shall, subject to agreement by the partners , be observed.

a) Losses, including deficiencies of capital, shall be paid first

out of profits, next out of capital and, lastly, if necessary,

by the partners individually in the proportion in which they

were entitled to share profits.

b) The assets of the firm, including any sums contributed by

the partners to make up deficiencies of capital, shall be

applied in the following manner and order:-

i) In paying the debts of the firm to third parties.

ii) In paying to each partner rateably what is due to

him from the firm for advances as distinguished

from capital:

iii) in paying to each partner rateably what is due to

him on account of capital and.

iv) The residue, if any shall be divided among the

partners in the proportions in which they were

entitled to share profits.

49. Payment of firm debts and of separate debts- Where there

are joint debts due from the firm, and also separate debts due

from any partner, the property of the firm shall be applied in the

first instance in payment of the debts of the firm, and if there is

any surplus, him. The separate property of any partner shall be

applied first in the payment of his separate debts and the

surplus ( if any) in the payment of the debts of the firm.

Please contact me on [email protected] or 011-22596698, 8527945077



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Answered on 5/23/13, 9:19 pm
Fca Prashant Chavan Expert Edge LLP


Dear Sir / Madam,

You should draw up the Accounts of the firm to ascertain your Capital A/c as on date. Thereafter, you should repay the bank loan and all other liabilities in the proportion of your Capital A/c vis a vis the Capital A/c balance of your partner in the books and dissolve the firm.


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Answered on 5/24/13, 7:03 am
Nikhil Soni lawmitra

Dear Friend.

There are so many issues;

-Lot of things have to be discuss. Partnership deed was registered partnership or not.

if the registered partnership than the dissolution deed has to be submitted before the registrar of partnership and the new partner or dissolution of the said partnership should be introduced. otherwise the said partnership will not stay in it's existence.

-in case of a notaries partnership, primarily the said partnership is not a legal entity for loan and recovery procedure.

-in case of the said loan borrowed by the registered partnership firm than after execution of the said partnership dissolution deed (execution - amendment at registrar of partnership) you are not liable to reimburse the said loan amount. the firm will be the liable for every liability.

- in case of, at the moment of time of loan in a unregistered partnership firm, the firm should be a secondary borrower, primary borrowers are both the partners, in that situation you have to be liable for the said loan amount.

For further consultancy feel free to ask anything.

mail - [email protected]

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Answered on 5/24/13, 8:10 am

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