The retirement of one partner amounts to the dissolution of the partnership firm if it consists of only two partners

Citation

CDJ 2020 SC 544

*There is a clear distinction between ‘retirement of a partner’ and ‘dissolution of a partnership firm’. On retirement of the partner, the reconstituted firm continues and the retiring partner is to be paid his dues in terms of Section 37 of the Partnership Act. In case of dissolution, accounts have to be settled and distributed as per the mode prescribed in Section 48 of the Partnership Act. When the partners agree to dissolve a partnership, it is a case of dissolution and not retirement [See – Pamuru Vishnu Vinodh Reddy v. Chillakuru Chandrasekhara Reddy and Others (2003) 3 SCC 445]. In the present case, there being only two partners, the partnership firm could not have continued to carry on business as the firm. A partnership firm must have at least two partners. When there are only two partners and one has agreed to retire, then the retirement amounts to dissolution of the firm [See – Erach F.D. Mehta v. Minoo F.D. Mehta, (1970) 2 SCC 724].*

*NON-REPORTABLE*

*IN THE SUPREME COURT OF INDIA*

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 6659-6660 OF 2010

*GURU NANAK INDUSTRIES, FARIDABAD Vs AMAR SINGH*

*SANJIV KHANNA, J.*

Judgement Dated: MAY 26, 2020