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Partnership Dissolution Deed in which some Partners continuing with Business.

Format of Deed of Dissolution of Partnership in which some partners Continuing with the Business.

At the time of dissolution of Partnership some partners may be interested to continue with the Business. In such circumstances the Partnership can be dissolved with Dissolution Deed with condition that the interested partners will continue with the business and future assets and liabilities will be handled by them only. As per Section 40 of Indian Partnership Act 1932 a Partnership firm can be dissolved by way of Dissolution by agreement. The remaining partners can carry on the business on the basis of agreement made between the partners.

Sample Format of Deed of Dissolution of Partnership in which some partners continue with the business is given below.



This Deed of Dissolution made at _____________ this ________ day of ______ 20__


Mr. __________________________, son of Mr. ________________________ resident of _____________ _____________ _____________ _____________


Mr. __________________________, son of _____________ resident of _____________ _____________ _____________ _____________ _____________ (hereinafter collectively called as "Continuing Partners") of the ONE PART


Mr. __________________________, son of _____________ resident of ___________ _____________ _____________ (hereinafter called as "Retiring Partner") of the OTHER PART

Whereas The parties hereto were carrying on the business of carrying on _____________ under the name and style of M/s. __________________________ at _____________ _____________ under the terms of a Deed of Partnership dated _____________ made between them.

And Whereas the retiring partner has indicated his desire to retire from the partnership.

And Where as the partners have agreed to dissolve the said partnership in the manner hereinafter appearing.


1. That the retiring partner shall retire from the partnership from the date of these presents, but the partnership between the continuing partners will continue on the terms of the said Deed of Partnership as modified by this deed.

2. That the accounts of the assets and liabilities of the said partnership have been taken and a Balance Sheet of the same has been prepared and signed by the partners showing the net value of assets of the firm at Rs. _____________ after deducting the debts and liabilities thereof and the value of the share of retiring partner has been computed at Rs. _____________ and the continuing partners have paid the said sum of Rs. _____________ to the retiring partner vide D.D. No. _____________ dated _____________ drawn on _____________ Bank _____________ Branch, _____________ (the receipt whereof the retiring partner hereby acknowledges).

3. That in consideration of the said Rs. _____________ paid by the continuing partners to the retiring partner, the retiring partner hereby assigns to the continuing partners all the share and interest of the retiring partner and in the goodwill, book debts, credits and all property, cash in hand and at the bank and chattels of or belonging to the partners hereto in connection with the partnership TO HOLD unto the continuing partners in equal shares absolutely.

4. The continuing partners hereby jointly and severally covenant, with the retiring partner to pay, discharge and fulfill all debts, liabilities and obligations of the partnership and at all times to indemnify and keep indemnified the retiring partner and his legal representatives, estate and effects and from all proceedings, costs, claims and expenses in respect thereof.

5. The retiring partner hereby covenant to execute such deeds or other documents as
may be required for releasing his share and interest in the partnership and leasehold premises to the continuing partners.

6. The retiring partner hereby irrevocably appoints the continuing partners his attornies, in his name, solely or jointly with the continuing partners to collect all assets, and property of the partnership and to demand, sue, recover and receive and to sign and give full and effectual receipts and discharges for all the debts, estate and effects of or due or owing or in anywise belonging to the partnership and to settle all accounts and matters relating thereto and to compound, compromise or release all or any of the debts or claims belonging to the partnership and to institute suits, actions or other proceedings for compelling payments, discharge or delivery thereof and to appoint a substitute or substitutes for any of the purposes aforesaid from time to time and at any
time to remove any substitute and generally to do all such acts or things as may be necessary or expedient for the vesting of rights and assets in the continuing partners hereby assigned.

7. The retiring partner shall not carry on or be concerned or interested in the business of _____________ within the city of _____________either, directly or indirectly, alone or jointly with or as director, manager, agent or employee of any other company, firm corporation or person.

8. The capital of the partnership shall belong to the continuing partners in equal shares and the profits and losses of the partnership (including profits and losses of capital nature) shall belong to and shall be borne by the continuing partners in equal proportion.

9. The continuing partners will give due notice of retirement of retiring partner through the gazette, newspapers and by circulars to all persons, firms and bodies with whom the partnership has had dealings. The continuing partners shall also file necessary forms with the Registrar of Firms _____________ and Assessing Officer _____________ regarding the retirement of retiring partner and change in the constitution of the said firm.

10. The said Deed of Partnership as modified by this deed shall remain in full force and effect as between the continuing partners.

IN WITNESS WHEREOF the parties have hereunto set their hands the day and year first above written.


Mr. ____________________


Mr. ____________________


Mr. ____________________

Relevant Sections of Indian Partnership Act 1932


Section 39 Dissolution of a Firm

The dissolution of a partnership between all the partners of a firm is called the "dissolution of the firm".

Section 40 Dissolution by Agreement

A firm may be dissolved with the consent of all the partners or in accordance with a contract between the partners.


Section 41 Compulsory Dissolution

A firm is dissolved
(a) by the adjudication of all the partners or of all the partners but one as insolvent,


(b) by the happening of any event which makes it unlawful for the business of the firm to be carried on or for the partners to carry it on in partnership :

Provided that, where more than one separate adventure or undertaking is carried on by the firm, the illegality of one or more shall not of itself cause the dissolution of the firm in respect of its lawful adventures and undertakings.


Section 42 Dissolution 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 adventures or undertakings, by the completion thereof;

(c) by the death of a partner; and

(d) by the adjudication of a partner as an insolvent.


Section 43 Dissolution by Notice of Partnership at Will

(1) Where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm.

(2) The firm is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice.


Section44 Dissolution by the Court

At the suit of a partner, the Court may dissolve a firm on any of the following grounds, namely :-

(a) that a partner has become of unsound mind, in which case the suit may be brought as well by the next friend of the partner who has become of unsound mind as by any other partner;

(b) that a partner, other than the partner suing, has become in any way permanently incapable of performing his duties as partner;

(c) that a partner, other than the partner suing, is guilty of conduct which is likely to affect prejudicially the carrying on of the business regard being had to the nature of the business;

(d) that a partner, other than the partner suing, wilfully or persistently commits breach of agreements relating to the management of the affairs of the firm of the conduct of its business; or otherwise so conducts himself in matters relating to the business that it is not reasonably practicable for the other partners to carry on the business in partnership with him;

(e) that a partner, other than the partner suing, has in any way transferred the whole of his interest in the firm to a third party, or has allowed his share to be charged under the provisions of rule 49 of Order XXI of the First Schedule to the Code of Civil Procedure, 1908, or has allowed it to be sold in the recovery of arrears of land revenue or of any dues recoverable as arrears of land revenue due by the partner;

(f) that the business of the firm cannot be carried on save at a loss; or

(g) on any other ground which renders it just and equitable that the firm should be dissolved.


Section 45 Liability for Acts of Partners done after dissolution
(1) Notwithstanding the dissolution of a firm, the partners continue to be liable as such to third parties for any act done by any of them which would have been an act of the firm, if done before the dissolution, until public notice is given of the dissolution :

Provided that the estate of a partner who dies, or who is adjudicated an insolvent, or of a partner who, not having been known to the person dealing with the firm to be a partner, retires from the firm, is not liable under this section for acts done after the date on which he ceases to be a partner.

(2) Notices under sub-section (1) may be given by any partner.


Section 46 Right of Partners to have business wound up after Dissolution
On the dissolution of a firm every partner or his representative is entitled, as against all the other partners or their representatives, to have the property of the firm applied in payment of the debts and liabilities of the firm, and to have the surplus distributed among the partners or which representatives according to their rights.


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