In which of the following ways does dissolution of a firm take place?…

In which of the following ways does dissolution of a firm take place?

(A) Dissolution by agreement
(B) Compulsory dissolution
(C) On the happening of certain contingencies
(D) Dissolution by notice

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → (A), (B), (C) and (D)

A firm can be dissolved with or without the intervention of a court: by agreement, compulsorily, on certain contingencies, by notice, or by an order of the court on the suit of a partner.

(A) Dissolution by agreement Correct. With the consent of all partners, or as their contract provides.

(B) Compulsory dissolution Correct. When all (or all but one) partners become insolvent, or the business becomes illegal.

(C) On the happening of certain contingencies Correct. Expiry of the fixed term, completion of the venture, death or insolvency of a partner, subject to the contract.

(D) Dissolution by notice Correct. In a partnership at will, any partner may dissolve the firm by written notice.

NCERT (2026-27 edition):
Dissolution of a Firm – “… 1. Dissolution by Agreement: A firm is dissolved : (a) with the consent of all the partners or (b) in accordance with a contract between the partners.”

NCERT (2026-27 edition):
Dissolution of a Firm – “… 2. Compulsory Dissolution: A firm is dissolved compulsorily in the following cases: (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; or (c) when some event has taken place which makes it unlawful for the partners to carry on the business of the firm in partnership, e.g., when a partner who is a citizen of a country becomes an alien enemy because of the declaration of war with his country and India.”

NCERT (2026-27 edition):
Dissolution of a Firm – “… 3. On the happening of certain contingencies: Subject to contract between the partners, a firm is dissolved : (a) if constituted for a fixed term, by the expiry of that term; (b) if constituted to carry out one or more ventures, by the completion thereof; (c) by the death of a partner; (d) by the adjudication of a partner as an insolvent.”

NCERT (2026-27 edition):
Dissolution of a Firm – “… 4. Dissolution by Notice: In case of partnership at will, the firm may be dissolved if any one of the partners gives a notice in writing to the other partners, signifying his intention of seeking dissolution of the firm.”