Liability of estate of deceased partner
📘 Liability of Estate of Deceased Partner – Indian Partnership Act, 1932
When a partner in a firm dies, certain legal consequences arise with respect to their liability, especially regarding the debts and obligations of the partnership. The Indian Partnership Act, 1932 governs these aspects.
🔹 Key Legal Provision: Section 35 – Liability of Estate of Deceased Partner
🧾 Text of Section 35:
"Where under a contract between the partners the firm is not dissolved by the death of a partner, the estate of a deceased partner is not liable for any act of the firm done after his death."
✅ Legal Interpretation and Key Points
1. Acts Done After Death – No Liability
The **estate of a deceased partner is not liable for any acts of the firm done after the partner’s death.
This applies even if the firm continues its business after the partner’s death.
2. Acts Done Before Death – Estate is Liable
The estate remains liable for all acts done by the firm before the partner’s death.
This includes debts incurred, contracts executed, or liabilities existing at the time of death.
3. Death Does Not Necessarily Dissolve the Firm
If there is a contract to the contrary (like a clause in the partnership deed), the death of a partner does not dissolve the firm.
The firm can continue with remaining partners or with legal representatives.
⚖️ Case Laws on Liability of Estate of Deceased Partner
📚 1. Narayanappa v. Bhaskara Krishnappa, AIR 1966 SC 1300
Held that a deceased partner's estate is liable for all obligations of the firm up to the date of death, but not beyond unless there was an agreement or continuation with the legal representatives.
📚 2. CIT v. Dewan Badridas & Co., AIR 1958 SC 559
The Court held that a partnership firm can continue its business after a partner’s death if the partnership agreement permits, but the estate of the deceased partner ceases to be liable from the date of death.
📚 3. Babulal v. Firm Hukumchand Mills, AIR 1956 MP 45
The estate of a deceased partner was held not liable for debts incurred after his death where there was no express agreement binding the estate to future liabilities.
📌 Practical Example
Let’s say:
Partner A, B, and C form a partnership.
A dies on 1st January 2025.
The firm incurs a debt on 15th January 2025.
Liability:
A’s estate is not liable for this new debt (incurred after death).
But A’s estate is liable for debts incurred before 1st January 2025.
🧾 Summary Table
| Event | Liability of Deceased Partner’s Estate |
|---|---|
| Debts or acts before death | ✅ Liable |
| Debts or acts after death | ❌ Not liable |
| Partnership continues by agreement | ✅ Allowed, but estate still not liable for post-death acts |
| No agreement to continue | Firm is dissolved; estate liable only for past obligations |
🛑 Important Notes
Legal heirs or executors must settle dues owed by the deceased partner only up to the date of death.
A notice of death to creditors and stakeholders is important to limit post-death claims.
In some cases, insurance or indemnity clauses are used to cover risks post-death.
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