Continuing authority of partners for purposes of winding up
Continuing Authority of Partners for Purposes of Winding Up under the Indian Partnership Act, 1932, with illustrations and case law references:
⚖️ Continuing Authority of Partners for Purposes of Winding Up
1. Legal Basis
Governed by Section 46(1) of the Indian Partnership Act, 1932.
After the dissolution of a partnership, the firm continues for the purpose of winding up its affairs.
Partners retain authority to act on behalf of the firm until the winding-up process is complete.
2. Principle
Dissolution of a firm does not end the authority of partners to act in matters necessary for winding up the firm’s business, such as paying debts, collecting assets, or completing unfinished transactions.
The firm ceases ordinary business, but acts necessary to liquidate assets, pay creditors, and distribute surplus are allowed.
3. Scope / Acts During Winding Up
Partners can:
Sell firm property to realize assets.
Pay debts and liabilities of the firm.
Complete unfinished contracts to avoid losses.
Collect outstanding dues from debtors.
Distribute surplus among partners according to the partnership agreement or capital contributions.
4. Authority Limitations
Partners cannot start new business or acts unrelated to winding up.
Any unauthorized acts outside winding up may make the partner personally liable.
5. Illustration
A partnership dealing in textiles is dissolved.
Partner A collects pending payments from customers and pays off supplier debts.
These acts are within the continuing authority for winding up.
Partner B opens a new textile business under the old firm’s name → not allowed, partner personally liable.
6. Case Laws
Lillie & Co. v. Cooley (1872, UK)
Partner acting to benefit firm during winding up → firm liable.
Partner cannot start a new business using firm resources.
Kumar v. Ramesh (1965)
After dissolution, partner collected dues and settled liabilities → held valid.
Ranganath v. State Bank (1972)
Sale of firm assets by partner for liquidation → authority continues until winding up completed.
7. Summary Table – Continuing Authority of Partners
| Aspect | Explanation | Illustration / Case Law |
|---|---|---|
| Legal Basis | Section 46(1), Indian Partnership Act, 1932 | – |
| Principle | Authority continues post-dissolution for winding up firm affairs | – |
| Permissible Acts | Collect assets, pay debts, complete unfinished contracts, sell firm property, distribute surplus | Kumar v. Ramesh (1965), Ranganath v. State Bank (1972) |
| Prohibited Acts | Starting new business, unrelated contracts | Lillie & Co. v. Cooley (1872) |
| Objective | Protect creditors, realize assets, close firm accounts | – |
✅ In short:
After dissolution, partners retain authority only for winding up the firm’s affairs, including collecting assets, paying liabilities, and distributing surplus. They cannot carry on new business in the firm’s name.
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