Monday, October 08, 2007

Parternship Act_Practical Problems_2

D, J and A are only partners in a firm. They decide to dissolve the partnership with effect from 1st April, 1988. The partners do not give a public notice of the dissolution, but continue the business. During the course of business, D, J and A endorse certain Bills of Exchange of the partnership to a third party M, who was not aware of the dissolution. M, the third party, had supplied certain stationery to the firm. The Bills of Exchange are dishonoured. The third party M wants to claim the money. Decide:

(i) Whether the firm will be liable to pay for the bills of exchange?
(ii) What are the provisions of the Indian Partnership Act in this regard?

The problem is based on the provisions of Section 45 of the Indian Partnership Act. The Section provides that notwithstanding the dissolution of a firm, the partners continue to be liable as much to third parties for any act done by any of them which would have been an act of the firm if done before the dissolution, until Public Notice of the dissolution is given.

Therefore, the firm shall be liable on the bills, as no public notice was given by the partners regarding dissolution of the firm. Similar view was expressed in Robinson's case also.

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