"Dissolution of partnership doesn't mean dissolution of firm". Do you agree with this statement? State any three situations where court can dissolve the partnership firm.

Dissolution of partnership doesn’t mean dissolution of firm. According to Section 39 of the Indian Partnership Act, 1932, the dissolution of partnership between all partners of a firm is called the 'dissolution of the firm'. Thus, the dissolution of firm means the discontinuation of the legal relation, the dissolution of firm means the discontinuation of the legal relation existing between all the partners of the firm. But when only one or more partners retires or becomes incapacitated from acting as a partner due to death, insolvency or insanity, the partnership, the relationship between such a partner and other is dissolved, but the rest may decide to continue. In such cases, there is in practice, no dissolution of the firm. The particular partner goes out, but the remaining partners carry on the business of the firm, it is called dissolution of partnership. In the case of dissolution of the firm, on the other hand, the whole firm is dissolved. The partnership terminates as between each and every partner of the firm. Important note: Different mode of presentation to an answer Dissolution of partnership doesn’t mean dissolution of firm. This statement can be proved with the help of some points of distinction between both of them, which are as follows: Dissolution of Firm Vs. Dissolution of Partnership Basis of Difference | Dissolution of Firm | Dissolution of Partnership Continuation of business | It involves discontinuation of business in partnership. | It does not affect continuation of business. It involves only reconstitution of firm. Winding up | It involves winding up of the firm and requires realization of assets and settlement of liabilities. | It involves only reconstitution and requires only revaluation of assets and liabilities of the firm. Order of court | A firm may be dissolved by the order of the court. | Dissolution of partnership is not ordered by the court. Scope | It necessarily involves dissolution of partnership. | It may or may not involve dissolution of firm. Final closure of the books | It involves final closure of books of the firm. | It does not involve final closure of the books of the firm. Dissolution By the Court (Section 44 of the Indian Partnership Act, 1932): Court may, at the suit of the partner, dissolve a firm on any of the following grounds: (a) Insanity/unsound mind: Where a partner (not a sleeping partner) has become of unsound mind, the court may dissolve the firm on a suit of the other partners or by the next friend of the insane partner. Temporary sickness is no ground for dissolution of firm. (b) Permanent incapacity: When a partner, other than the partner suing, has become in any way permanently incapable of performing his duties as partner, then the court may dissolve the firm. Such permanent incapacity may result from physical disability or illness etc. (c) Misconduct: Where a partner, other than the partner suing, is guilty of conduct which is likely to affect prejudicially the carrying on of business, the court may order for dissolution of the firm, by giving regard to the nature of business. It is not necessary that misconduct must relate to the conduct of the business. The important point is the adverse effect of misconduct on the business. In each case nature of business will decide whether an act is misconduct or not. (d) Persistent breach of agreement: Where a partner other than the partner suing, wilfully or persistently commits breach of agreements relating to the management of the affairs of the firm or the conduct of its business, or otherwise so conduct himself in matters relating to the business that it is not reasonably practicable for other partners to carry on the business in partnership with him, then the court may dissolve the firm at the instance of any of the partners. Following comes in to category of breach of contract: ➢ Embezzlement, ➢ Keeping erroneous accounts ➢ Holding more cash than allowed ➢ Refusal to show accounts despite repeated request etc. (e) Transfer of interest: Where a partner other than the partner suing, has transferred the whole of his interest in the firm to a third party or has allowed his share to be charged or sold by the court, in the recovery of arrears of land revenue due by the partner, the court may dissolve the firm at the instance of any other partner. (f) Continuous/Perpetual losses: Where the business of the firm cannot be carried on except at a loss in future also, the court may order for its dissolution. (g) Just and equitable grounds: Where the court considers any other ground to be just and equitable for the dissolution of the firm, it may dissolve a firm. The following are the cases for the just and equitable grounds- (i) Deadlock in the management. (ii) Where the partners are not in talking terms between them. (iii) Loss of substratum. (iv) Gambling by a partner on a stock exchange.