A partnership firm is dissolved compulsorily in the following cases:(A) when all the partners or all but except one partner, become insolvent, rendering them incompetent to sign a contract(B) When the business of the firm becomes illegal(C) Change in existing profit sharing ratio among partners(D) 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. 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
Section 41 of the Indian Partnership Act, 1932 covers Compulsory Dissolution:(A) is a compulsory case: If all partners or all except one become insolvent, the partnership can no longer legally exist.(B) and (D) are compulsory cases: If the business activity becomes illegal or unlawful due to external context or geopolitical events (like an alignment creating an alien enemy status), the firm must stop operations and dissolve immediately.(C) is not a case of compulsory dissolution: A change in the profit-sharing ratio is simply a reconstitution where the existing partnership relationship changes, but the business enterprise continues to run.Thus, the correct option is (A), (B) and (D) only.