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(C) when the business of the firm is earning a large amount of profit.(D) when some event has taken place which makes it unlawful for the partners to carry on the business of the firm in partnership Choose the correct answer from the options given below:
- A(A), (B) and (D) only
- B(A), (B) and (C) only
- C(A), (B), (C) and (D)
- D(B), (C) and (D) only
Solution & Step-by-step Explanation
Under Section 41 of the Indian Partnership Act, 1932, a firm is dissolved compulsorily:(A) When all partners or all but one partner become insolvent (as a minimum of two solvent partners are needed to maintain a partnership).(B) & (D) When an event happens that makes it illegal or unlawful to carry on the firm's business activities.Earning profits (C) is a positive outcome and never a reason for compulsory dissolution. Thus, (A), (B), and (D) only are true.