Choose combination of statements that are true about dissolution-

(A) Dissolution of partnership can not take place without intervention of the court.
(B) Court can order a firm to be dissolved when a partner becomes insane.
(C) A firm is compulsorily dissolved when a partner decide to retire.
(D) A partnership is dissolved when there is a death of a partner.

Choose the correct answer from the options given below:

(B) and (D) only

The correct answer is Option (1) → (B) and (D) only

• (A) Dissolution of partnership can not take place without intervention of the court. This is False. A partnership agreement (the partnership itself) dissolves whenever there is a change in the existing relationship (like admission, retirement, or change in profit-sharing ratio), which occurs without a court. Furthermore, the partnership firm (the business) can be dissolved by mutual agreement or by notice.

• (B) Court can order a firm to be dissolved when a partner becomes insane. This is True. One of the grounds under which a court may intervene and order the dissolution of the firm is when a partner becomes permanently of unsound mind (insane).

• (C) A firm is compulsorily dissolved when a partner decide to retire. This is False. Retirement only causes the dissolution of the existing partnership agreement (reconstitution). The firm can and usually does continue business with the remaining partners. Compulsory dissolution of the firm only occurs if the business becomes illegal or all partners (or all but one) become insolvent.

• (D) A partnership is dissolved when there is a death of a partner. This is True. The death of a partner automatically dissolves the old partnership agreement, although the remaining partners often choose to form a new partnership and continue the business.