Insolvency a partner
Liability of Estate of Deceased Partner under the Indian Partnership Act, 1932
Key Provision: Section 35 of the Indian Partnership Act, 1932
"Where under a contract between the partners the firm is not dissolved by the death of a partner, the estate of the deceased partner is not liable for any act of the firm done after his death."
Explanation:
Liability for Acts Before Death:
The estate of the deceased partner remains liable for all obligations and liabilities incurred by the partnership up to the date of the partner's death. This includes debts, contracts, and any liabilities undertaken by the firm during the deceased partner’s lifetime.
No Liability for Acts After Death:
If the partnership continues after the death of the partner (usually under a clause in the partnership agreement), the estate will not be liable for acts of the firm done after the death of the partner.
Firm Dissolution vs Continuation:
If the partnership is dissolved on the death of the partner (i.e., no contract to continue the firm), the estate’s liability ends with the dissolution.
If the partnership continues under an agreement (with the legal representatives or remaining partners), the estate is not liable for future acts, only for past liabilities.
Important Points:
| Situation | Liability of Deceased Partner’s Estate |
|---|---|
| Liabilities before death | Estate is liable |
| Liabilities after death (if firm continues) | Estate is not liable |
| Firm dissolves on death | Estate liable for liabilities till dissolution |
Case Laws:
Narayanappa v. Bhaskara Krishnappa, AIR 1966 SC 1300
Estate liable for liabilities incurred before death, not after.
CIT v. Dewan Badridas & Co., AIR 1958 SC 559
Firm can continue after death but estate not liable for post-death acts.
Babulal v. Hukumchand Mills, AIR 1956 MP 45
Estate not liable for debts after death if no agreement to the contrary.
Summary:
The estate of a deceased partner is liable only for debts/liabilities existing at the time of death.
It does not bear liability for any acts or debts incurred after the partner’s death, provided the firm continues.
This provision safeguards the heirs of the deceased partner from unlimited post-death liabilities.
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