"Retirement Of One Partner Amounts To Dissolution Of Partnership Firm Consisting Of Only Two Partners": Supreme Court - Synopsis
Nilanjana Ganguly 4 Jun 2020

The Supreme Court has observed that when there are only two partners and one has agreed to retire, then the retirement amounts to the company's dissolution. 

The Bench of Justice NV Ramana, Justice Sanjiv Khanna and Justice Krishna Murari found a civil appeal in which the point presented was that since the appellant had resigned as a partner and, thus, only the capital deposited in his name in the books of accounts would be entitled as regards the applicable clause of the partnership deed.

The bench discussed the distinction between 'retirement of a partner' and 'dissolution of a partnership firm,' while considering this argument and said: “The reconstituted firm continues on the partner 's retirement and the former partner is to be paid his dues under section 37 of the Partnership Act. In the event of a dissolution, accounts must be settled and distributed in accordance with the mode prescribed in Partnership Act Section 48. If the partners agree to dissolve a relationship it is a case of separation rather than retirement. In the present case, only two partners were present, the partnership could not have continued to function as a business. A partnership company must have a minimum of two partners. If there are only two partners and one has agreed to retire then the company's retirement amounts to dissolution.”

The court also said there were only two partners in the instant case and there is ample evidence on record that Amar Singh hadn't resigned as a partner.


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