Dissolution of a firm cannot take place in which of the situation?

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Voluntary retirement by any one partner

Retirement of a partner ends the existing agreement, so the partnership is dissolved, but the remaining partners carry on the business; the firm is not dissolved. The firm itself is dissolved only in the ways the Partnership Act lists, and the other three options are among them.

Option (1) Dissolution by Agreement — A mode of dissolution of a firm. The firm ends with the consent of all the partners or under a contract between them.
Option (2) On the happening of certain contingencies — A mode of dissolution of a firm. Subject to their contract, the firm ends on expiry of its fixed term, completion of its venture, death of a partner or a partner’s insolvency.
Option (3) Dissolution by Court — A mode of dissolution of a firm. At a partner’s suit, the court may order dissolution, for example when a partner becomes insane or the business can be carried on only at a loss.

NCERT (2026-27 edition):
Summary – “… 2. Dissolution of Partnership : A partnership gets terminated in case of admission, retirement death, etc. of a partner. This does not necessarily involve dissolution of the firm.”

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 – “… 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