• Best way to retire from the firm to avoid any possible liability

1) In 2013, a partnership firm was formed by 5 partners in Delhi, who were all relatives to each other, to conduct business of trading of clothes. The partnership was formed on 'at will' basis. The partnership deed was registered but the partnership firm itself was not registered with the registrar

2) Because the partners had family relations (cousins), they used to sign undated, blank cheques and give it to one specific partner in the normal course of business

3) In 2014, after one year of business, that specific partner and his father made a plan and stole 15 signed, undated, blank cheques of the firm, however there was no evidence to prove that in the court. The four good partners informed the bank about the missing cheques and asked for stop payment. No further work was done in the partnership firm

4) In 2015, the four good partners and the criminal partner briefly talked through their lawyers putting blame on each other, but the talks were abandoned midway. Later that year, the family of the criminal partner said that he had committed suicide. We don't know if it was true or not, but out of decency we did not follow-up. The criminal partner might still be alive

5) In 2016, the bank account of the firm became dormant because of no activity in the account. Later, that year, some more written communication was made between the lawyers of the four good partners and the father of the criminal partner, but again the talks were abandoned midway

6) In 2017, the four good partners approached the bank to close the account. However, the bank refused to close it without death certificate of the criminal partner, which the four good partners did not have. The father of the criminal partner verbally threatened the four good partners but again there was no evidence to prove that. From then, the four good partners abandoned the case totally

7) In 2020, one of the good partners, on advice from learned lawyers, filed a police report about the 15 missing cheques. He also gave two newspaper ads, one in an english and one in a hindi newspaper, to give public notice about the missing cheques, mentioning the cheque numbers, account name, account number, and bank branch. I am that partner

8) However, one issue still remains. The partnership firm was never officially dissolved and neither I nor any other partners ever officially retired from the firm. In other words, although practically there is no partnership firm anyone, we do not have any proof that the firm does not exist anymore and that we are not partners anymore. As per the partnership act, we might still be liable for actions of any one of us

What should I do to make sure that I do not have any ties with this firm anymore?

If you have read my entire case, I sincerely thank you just for reading it.
Asked 3 years ago in Business Law

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5 Answers

Under section 32(1) of the Indian Partnership Act, 1932, in the case of a partnership being at will, every partner shall have the right to retire by giving notice to that effect to all the other partners. .

2) In case of a registered firm, the retiring partner must give notice of his retirement to– (i) the Registrar of Firms (ii) in the Official Gazette, and (iii) in at least one vernacular newspaper circulating in the district where the firm has its principal place of business.

3) advisable to execute Deed of Retirement recording the terms and conditions of such retirement.

Ajay Sethi
Advocate, Mumbai
96981 Answers
7831 Consultations

If you re one of the partners, s you would not like to get into trouble in this regard in future, you may follow the procedures to announce your retirement from the partnership firm by following the conditions of partnership deed.

You may refer to section 32 of the partnership act in this regard  to follow the procedures for retirement.

A partner may retire,

  1. with the consent of all the other partners,
  2. in accordance with an express agreement by the partners, or.
  3. where the partnership is at will, by giving notice in writing to all the other partners of his intention to retire.

The word ‘retire’ in the said section is confined to cases where a partner withdraws from the firm and the remaining partners continue to carry on the business without dissolution as between them. It does not cover a case where a partner withdraws from the firm by dissolution and not by retirement.

Section 39 of the Act defines dissolution as the dissolution of partnership between all the partners of a firm. As per the said definition, a firm is said to be dissolved only when all and every one of the members of the firm cease to carry on its business in partnership with each other.

when a partner retires from a partnership consisting of more than two partners, the partnership is not automatically dissolved. It shall depend upon terms of partnership governing the parties.

 

Therefore you may issue a notice.

The mode of giving notice has been laid down in Section 72 of the Partnership Act which says that a public notice has to be given by intimation to the Registrar of Firms under Section 63 and by publication in the Official Gazette and in at least one vernacular news-paper circulating in the district 

T Kalaiselvan
Advocate, Vellore
87183 Answers
2341 Consultations

if the partnership is at will then any one partner can issue notice to the firm and its other partners for dissolution of the firm (please see. s.43 of the Indian partnership act, 1932)

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.

 

as regards the partner who is claimed to have died, you just need to send a dissolution notice to him at his usual address. Whether or not he receives it is not relevant as per the above provision. 

Yusuf Rampurawala
Advocate, Mumbai
7691 Answers
79 Consultations

Dear sir,

1. Sir since your firm is established as partnership at will, then you can also carry out the procedure for Dissolution of firm by instituting a notice to the rest of the partners

2. you can file for notice of retirement  to registrar of the firms and in the official gazette and a local newspaper 

3 . You can choose a regional vernacular newspaper and a national newspaper(Times of India, Dainik Bhaskar, etc.) stating the notice is hereby given to all affiliates of the (Company Name) that I am retiring from the position at ...(company's name)... also a notice should be advertised in the Official Gazette and Registrar of firms

thank you

 

Anik Miu
Advocate, Bangalore
10186 Answers
120 Consultations

1. First of all find out whether that partner is dead or not and if dead then collect his death certificate from the office of the Municipal Corporation of the area where he stayed. It is not a difficult job at all. 

 

2. What was the terms and conditions mentioned in the said partnership deed about dissolution of the partnership firm and also how the share of the deceased partner will be allocated or inherited.

 

3. You shall have to dissolve your partnership firm accordingly.

 

4.    If he is found to be alive and he does not want to dissolve the firm, all of you should retire as per the terms mentioned in the partnership deed. 

Krishna Kishore Ganguly
Advocate, Kolkata
27461 Answers
726 Consultations

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