A Report on Procedure of Winding up Partnership Firm

Contents [hide]

 1 INTRODUCTION :
 2 AIMS AND OBJECTIVES :
 3 METHOD AND METHODOLOGY :
 4 DETAIL REPORT OF PROJECT :

INTRODUCTION :

According to sec.4 of the Indian Partnership Act 1932,“Partnership is the relation between
persons who have agreed to share the profits of a business carried on by all of them or any of
them acting for all.” Persons who have entered into a partnership are called individually
‘partners’ and collectively a ‘firm’. Dissolution of a firm means a firm ceases to exist. The
relationship existing between the partners discontinues. The whole firm is dissolved and the
partnership terminates. The dissolution of partnership between all the partners of the firm is
called the

‘DISSOLUTION OF THE FIRM’

[sec.39].Dissolution puts an end to the right of the partners to existing as a going concern and is
followed by its liquidation. Dissolution of a firm is different from the dissolution of a partnership.
Dissolution of the partnership involves a change in the relationship between partners and a new firm is
reconstituted. For eg:- A, B and C are partners in the firm and C retires. The partnership between A, B
and C come to an end and partnership between A and B comes into being. Thus retirement of a partner
does not dissolve the firm. It merely severs the relation between retiring partner and continuing
partners.

The entire procedure for bringing a lawful end to a life of a company is divided into two stages. These
two stages are winding up and dissolution. Winding up of a company is defined as a process by which
the life of a company is brought to an end and its property administered for benefit of its members and
creditors. It is the last stage, putting an end to a life of a company. The main purpose of winding up is to
realize the assets and make the payments of company’s debts fairly. Thus, winding up is the process by
which management of a company’s affairs is taken out of its directors, its assets are realized by a
liquidator and its debts are discharged out of proceeds of realization.

AIMS AND OBJECTIVES :

The project aims to learn different methods of winding up of partnership firm

Objectives of the study are

To learn the difference between the dissolution of partnership and dissolution of the firm.

To learn about Dissolution without the intervention of Court

To learn about Dissolution on the happening of a contingent event.

To learn about Dissolution by notice.

To learn about Dissolution by Court.

METHOD AND METHODOLOGY :

In this project, we are going to learn about different types of winding up of a partnership firm

Primary data is data gathered for the first time by the researcher. It is the raw form of data and
thoroughly studied and hence a helpful tool for secondary data. Here the method used for collection of
primary data is by using reference of the website.

The referred websites in this project are used as a source of data for this project. Most of the content is
collected from these websites. The authenticity of this information cannot be taken seriously and thus
keeping that in mind most of that data might be true or fake.

DETAIL REPORT OF PROJECT :

1. Dissolution by Agreement:

Partnership arises from contract and can come to an end by contract. Therefore, the firm may be
dissolved with the consent of all the partners or in accordance with a contract between the
partners.

2. Dissolution by Notice:
Where the partnership is at will, the firm may be dissolved by any partner giving notice in
writing of his intention to dissolve the firm. The firm is dissolved from the date mentioned in the
notice as the date of dissolution. An individual partner is empowered to bring an end to the firm.

3. Dissolution on the happening of certain contingencies:

Subject to contract between the partners, a firm can be dissolved on the happening of following
circumstances :

1. Expiry of the term when constituted for a fixed term.

2. Completion of the venture or undertaking when the firm constituted to carry on a venture
or undertaking.
3. Death of a partner.
4. Adjudication of a partner as an insolvent.

The partnership agreement may provide that the firm will not be dissolved in any of the above
circumstances.

4. Compulsory Dissolution:

A firm is compulsorily dissolved under any of the following circumstances :

 When all the partners or all but one are adjudged insolvent.
 When the business of the firm becomes unlawful because of the happening of some
event.

5.Dissolution by the Court:

When the partners are having a difference of opinion regarding the dissolution of the firm on
certain grounds, a suit can be filed by any partner in the court to dissolve the firm. Depending
upon the merits of the matter, the court may order for dissolution of the firm. Under Section 44
of the Act, the court may dissolve the firm on the following grounds :

 Insanity:

When.a partner becomes insane, the court may order to dissolve the firm. The suit can be filed by
any of the other partners or even by any friend of the insane partner.

 Permanent incapacity:

When a partner becomes permanently incapable of doing his duties as a partner, the court may
dissolve the firm. The suit for dissolution must be filed by a partner other than the incapacitated
partner.

 Misconduct:
When a partner, other than the partner suing is guilty of misconduct and such misconduct is
likely to affect the carrying on of the business, the court may dissolve the firm. The misconduct
may be outside the business (punishment for an offense, adultery of a partner etc.

 Persistent breach of agreement:

When a partner persistently or willfully commits the breach of an agreement or conducts himself
in such a manner that it is impossible on the part of other partners to carry on the business with
him, the court may dissolve the firm. Maintaining wrong accounts, taking away the books of
accounts, continuous quarreling with other partners are good grounds.

 Transfer of interest:

When a partner transfers his whole interest in the firm to a third party or all his shares are sold or
attached by the court under a decree, the court may dissolve the firm.

 Continuous losses:

When the business cannot be carried on except at a loss, the court may dissolve the firm.

 Any other ground:

The court may dissolve the firm on any other ground where the court considers it just and
equitable to wind up the business.

ANALYSIS OF DATA :

STEP 1: One has to submit a declaration to Registrar of Companies, stating that company will
pay its dues and liquidation is not to defraud any person;
STEP 2: Within 4 weeks of such declaration, special resolution has to be passed for approval of
proposal of voluntary liquidation and appointment of liquidator;

STEP 3: Within 5 days of such approval, public announcement in newspaper and website of
company has to be made for inviting claims of stakeholders;

STEP 4: Within 7 days of such approval, intimation should be given to ROC and Board;

STEP 5: Submission of preliminary report containing capital structure, estimates of assets and
liabilities, proposed plan of action within 45 days to a corporate person;

STEP 6: Verification of claims within 30 days and preparation of list of stakeholders within 45
days from the last date of receipt of claims;

STEP 7: For receipt of money due to corporate person, bank account needs to be open in name of
the corporate person having words ‘involuntary liquidation’ after its name.

STEP 8: Sale of assets and recovery of dues money, uncalled capital is realized;

STEP 9: The proceeds from realization to be distributed within 6 months from receipt of amount
to the stakeholders;

STEP 10: The final report by the liquidator has to be submitted to corporate person, ROC, the
Board and application to NCLT.

STEP 11: The order of NCLT regarding dissolution to be submitted within 14 days of receipt of
order.

CONCLUSION :

In the year 1999, as per Justice Eradi Committee Report, 473 winding up cases were pending for
more than 25 years and in 2015, there were 1479 winding up cases pending for more than 20
years, as per data furnished by the Department of Financial Services. The Insolvency and
Bankruptcy Code, 2016 was passed to ensure time bound settlement of insolvency which would
in turn help in solving India’s bad debt problem.

To expedite the process of voluntary winding up, Government had introduced New Regulations
as the procedure of voluntary winding up under Companies Act, 1956 was time-consuming and
there was no prescribed qualification for the liquidator. The Code mandates that insolvency
professionals are to be appointed as Liquidators, such a move is welcome by corporates and
professionals.

The Code and Regulations provide a favorable framework for companies and limited liability
partnerships. Though the process remains almost similar to the previous regime, the major
change has taken place in the initiation of winding up the process. Earlier, company or any of its
creditors could file a voluntary winding up a petition but now company, directors, designated
partners or persons responsible for exercising its corporate powers can initiate the winding up
process. Moreover, approval of creditors representing two-thirds of corporate debt is mandatory
under the Code for initiating voluntary winding up proceeding.

To sum it up, now every company who proposes to wind up is required to follow Insolvency and
Bankruptcy Code, 2016. The Code is quite comprehensive and wider as against Companies Act,
1956. It is expected that Code would help in overcoming delays and complexities involved in the
process due to the presence of four adjudicating authorities, High Court, Company Law Board,
Board for Industrial and Financial Reconstruction and Debt Recovery Tribunal. It would also
lessen the burden on courts as all the litigation will be filed under the Code.

DISCUSSION :

1. Can other partners continue the same business under the same firm name and style?

In the matter of P. Venkateswarlu v. Lakshmi Narshima Rao, AIR 2002 AP 62, the court held
that in case of dissolution of the partnership, the firm might be dissolved by any partner giving
notice in writing to all the other partners of his intentions to dissolve the firm.

2. If the notice is sent by two partners out of 4, can the remaining two continue?

if no notice is issued section 43 of partnership act then partner can also move court seeking
dissolution of firm and for taking of accounts under order 20 Rule 15 of CPC

SUGGESTION:

In this case which firms under dissolution then it should take in the consideration of the all
debtors and receive the money pending and sale all the fixed assets of the firm to paying the
debts and all pending liabilities . in that case the company under dissolution will pass the special
resolution in boards meeting. all debts of the company paying and fixed assets all sale and if
company pay it’s total liabilities then the company is solvency company. this is the main
suggestions that the company pay it’s debts and merger and amalgamate with other company.

ACKNOWLEDGEMENT :

My profound gratitude to all the faculty members of the Department, for their timely assistance
and encouragement throughout my research work.

I duly acknowledge the encouragement and support by the research scholars in the department,
and all my colleagues and friends.

I thank my friends in the stock market and the management of broking firms who helped me with
valuable data in time.
It gives me immense pleasure to take the opportunity to all the people who are directly or
indirectly involved in the completion of my project based on A Report on Procedure of
Winding up Partnership Firm

With deep reverence, I offer my deepest gratitude _____, without whom this project could not
have been fulfilled.

Lastly, I thank Almighty, my parents, family members, friends and teachers for their constant
encouragement and support without which this project would not be possible.

Name of School/College

BIBLIOGRAPHY / REFERENCE :

1. https://blog.ipleaders.in/comparative-analysis-winding-company-companies-act-1956-
companies-act-2013-insolvency-bankruptcy-code-2016/
2. http://www.legalservicesindia.com/article/article/dissolution-of-partnership-firm-1063-
1.html
3. http://www.preservearticles.com/201101153419/procedures-for-dissolution-of-
partnership-firm-in-india.html