Consider the facts from the following related to compulsory dissolution of a partnership firm.
(A) When all the partners or all but one partner, become insolvent, rendering them incompetent to sign a contract
(B) When the business of the firm becomes illegal
(C) When a partner becomes permanently incapable of performing his duties as a partner
(D) When a partner persistently commits breach of partnership agreement
(E) When some event has taken place which makes it unlawful for the partners to carry on the business of the partnership firm
Choose the correct answer from the options given below.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A), (B) and (E) only
Compulsory dissolution happens by force of law, without any choice of the partners or order of a court.
(A) When all the partners or all but one partner, become insolvent, rendering them incompetent to sign a contract — True. The firm is dissolved compulsorily.
(B) When the business of the firm becomes illegal — True. An illegal business cannot go on.
(C) When a partner becomes permanently incapable of performing his duties as a partner — False. This is a ground on which the court may dissolve the firm at the suit of a partner.
(D) When a partner persistently commits breach of partnership agreement — False. This too is a ground for dissolution by the court.
(E) When some event has taken place which makes it unlawful for the partners to carry on the business of the partnership firm — True. The law itself dissolves the firm.
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