Introduction
A partnership firm will be registered under the Indian Partnership Act of 1932, and the provisions of this Act will apply to all such firms. Dissolution occurs in two categories- the dissolution of the partnership and the dissolution of the partnership firm. The dissolution of the partnership firm would mean the end of the firm as an individual entity, and it would cease to exist, and one of the modes of dissolution is by the direction of the court. There are several reasons for a court to direct dissolution of a partnership firm. One of the reasons is when a partner continuously breaches the partnership agreement.
Section 44 in The Indian Partnership Act, 1932
The court, under S.44 of the Indian Partnership Act, 1932, is empowered to order the dissolution of a firm consequent on a suit by a partner in case a partner conducts himself/herself in such a way that the other partners can’t carry on partnership with him.
44. Dissolution by the Court.—At the suit of a partner, the Court may dissolve a firm on any of the following grounds, namely:—
(d) that a partner, other than the partner suing, wilfully or persistently commits a breach of agreements relating to the management of the affairs of the firm or the conduct of its business or otherwise so conducts himself in matters relating to the company that it is not reasonably practicable for the other partners to carry on the company in partnership with him;
The decision of the Supreme Court in the case of Hind Overseas Private Limited vs Raghunath Prasad Jhunjhunwalla[1] 1976 SCR (2) 226 justifies the dissolution of the partnership on the following grounds:
(1) if the partnership agreement is wilfully or persistently violated;
(2) if one partner so behaves in matters relating to the partnership business that the other partners find it impossible to carry on business in partnership with him;
(3) if some partners are, in effect, excluded from the concern;
(4) if the misconduct of one or more partners is such that the confidence which must subsist in a partnership is destroyed,
(5) if there is a state of animosity which precludes all reasonable hope of reconciliation and friendly cooperation;
In the case of S Hardutt Singh Vs. Ch Mukha Singh[2], AIR 1973 J & K 46, the Jammu & Kashmir High Court had allowed the appellant’s suit asking for the dissolution of the partnership firm as confidence amongst the partners had been lost and the partnership business could not be carried on and that it was just and equitable.
Conclusion
The partnership relationship between the partners is based on the belief that the partners will not violate the agreements. The provision in the Act clearly states that when a partner continuously breaches the partnership agreement, the entire relationship collapses as the trust between the partners slowly vanishes. Under such circumstances, continuing the business and performing the duties becomes challenging. Every viable option will be included in dissolving the partnership firm, especially if there are just two partners.
[1] Hind Overseas Private Limited vs Raghunath Prasad Jhunjhunwalla, 1976 SCR (2) 226
[2] S Hardutt Singh Vs. Ch Mukha Singh, Air 1973 J & K 46
