Perumal Raja 21 June 2022

Dormant partner's retirement status from partnership firm

A dormant / Sleeping Partner of a Partnership Firm at Will has not issued any formal letter of Retirement from the Firm. But he has issued notices of Dissolution of the Firm to Bank / Tax authorities / Press etc.a few years back.

The Firm remains undissolved to date as per the letter received from the Registrar of Firm. and the Firm is continuing its business with the remaining Partners.

Can the act of issuing such notices by the Sleeping Partner of the Firm be taken as legal proof of his declaration of his retirement from the Firm without any formal letter of Retirement?

Any earlier Court judgments in support of this --- " Dormant / Sleeping partner's attempts to dissolve the Firm, , forcing Bank accounts to freeze etc, are themselves a clear proof of not only his willingness to retire but can be treated as retirement itself."

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2 Replies

SHIRISH PAWAR, 7738990900 (Advocate) 21 June 2022

Hello,

Partners can be retired by executing the retirement deed registered with the Registrar of Partners. He can also approach the court. But by issuing the letters he cannot retire himself from the partnership firm.

Sravika Reddy Kohir 21 June 2022

Hello Perumal Raj, I acknowledge your question. A dormant partner is the one that does not participate in the daily functioning of the partnership firm, i.e., he does not take an active part in the daily activities of the firm. A dormant partner can effect dissolution but unless all the other partners accept and sign it cannot be executed. Any dormant partner has to first issue a formal letter of retirement and an act of dormant partner to issue notices of dissolution without proper reasons or evidence is misconduct and such an act cannot be impliedly taken as notice of retirement. But for the misconduct by him you can go for dissolution of such partnership by court under section 44 of Indian Partnership Act,1880.

I hope I have answered your question.

Have a good day.