In the context of settlement of accounts among the partners, when a partner is unable to contribute towards the deficiency of his capital account, he is said to be insolvent, and the sum not recoverable is treated as capital loss for the firm. In the absence of any agreement, which principle is applied for such a capital loss that is to be borne by the remaining solvent partners?

Principle laid down in Garner vs. Murray case

In the context of settlement of accounts among the partners there is still another important aspect to be noted, i.e., when a partner is unable to contribute towards the deficiency of his capital account (the account finally showing a debit balance), he/she is said to be insolvent, and the sum not recoverable is treated as capital loss for the firm. In the absence of any agreement, to the contrary, such a capital loss is to be borne by the remaining solvent partners in accordance with the principle laid down in Garner vs. Murray case, which states that the solvent partners have to bear such loss in the ratio of their capitals as on the date of dissolution.