Q. Can be Partnership business be compulsory wound up after its dissolution?

Discuss the
nature of continuing authority of partners for purpose of winding up.
Ans. Section 39 of Indian Partnership Act provides that "the dissolution of partnership between
all the partners of a firm is called the "dissolution of the firm."
So dissolution of partnership means complete breakdown of relation of partnership between all
the partners. It means severance of relation which law of partnership had created for them.
However dissolution does not immediately end partnership.

Section 45 of Act says notwithstanding the dissolution of firm the partners continue to be liable
as such to third parties for act done by any of them which would have been the act of firm if
done before the dissolution until public notice of dissolution is given. However this principle
does not apply to the case of deceased partner, insolvent partner or in case of sleeping partner or
dormant partner.

Then Section 47 of Act further provides that notwithstanding the dissolution of firm, the
authority of partners to bind the firm and other mutual rights and obligations of partners
continue, so far as may be necessary to wind up the affairs of the firm and to complete
unfinished transactions. So the authority of each partner to bind the firm by acts done in course
of winding up the business extends to the pledging the assets of firm to secure the debts or to pay
cash in hand for payment of pending bills and to satisfy the claims of creditors, even after
dissolution of firm.

In the case of Saligram Ruplal Khanna v. Kanwar Rajnath, A.I.R. 1974 S.C. 1094 there was a
partnership dated 30th August, 1952 constituted for a period of 5 years. The firm got dissolved
and was subsisting after August 30, 1957 which was the date on which the period of 5 years for
which the partnership had been formed came to an end. But there was a transaction of arbitration
proceedings, which had been begun but remained unfinished at the time of dissolution. One of
the partners gave his consent on behalf of the firm after the date of dissolution to the award given
by the arbitrator against the firm. Held that the partner could do so, as it was a necessary step in
connection with the adjudication of a dispute to which the firm before its dissolution was a party.
So in view of provisions of Sections 45 and 47 of Act, dissolution of firm does not end the
partnership immediately.
Section 47 – Continuing Authority of partners for purposes of winding up
After the dissolution of the firm the authority of each partner to bind the firm continues so far as
for being necessary to wind up the affairs of the firm and to complete the transactions begun but
unfinished at the time of dissolution. This section focuses on the transactions that are unfinished
until the time of dissolution. Partners have to finish all the transactions that are related to a 3rd
party for the purpose of winding up the business. It also states that firm is not bound by the acts
of a partner who has been adjudicated insolvent but this provision does not affect the liability of
any person who has after the adjudication represented himself as a partner of the insolvent