Dissolution by Court may take place:

The correct answer is Option (3) → When a partner becomes permanently incapable of performing his duties as a partner

At the suit of a partner, the court may order dissolution on grounds such as insanity, permanent incapacity, misconduct or persistent breach of the agreement by a partner.

Option (1) With the consent of all the partners — Incorrect. This is dissolution by agreement; no court is needed.

Option (2) In accordance with the contract between partners — Incorrect. This too is dissolution by agreement among the partners.

Option (4) When all the partners or all but one partner, become insolvent — Incorrect. This is compulsory dissolution, which happens by law without a court order.