31 to 35 of the Indian Partnership Act, 1932 deals with the effect of and the
extent of liability on introduction, retirement, expulsion, and insolvency of a
partner in a partnership firm.
Section 31: Introduction of a Partner
new partner to a partnership firm can only be introduced with the consent of
all the existing partners. In consideration with the general rule, a new
partner to the firm could not be made liable for such debts, which are incurred
before he joined the firm. However, such a partner can assume liability for
previous debts of the firm by novation or a tripartite agreement between the
creditor, new partner and all the existing partners of the partnership firm.
Section 32: Retirement of a Partner
partner to a partnership firm may retire by:
consent of rest of the partners;
express agreement between the partners; and
giving notice in writing to all the other partners communicating his intention to retire, in case of partnership at will.
However, the retiring partner
has certain liabilities even after his retirement. He is still liable for the
partnership debts contracted during the course of him being the partner. By
novation of the contract, he may be discharged.
In case he allows his name to
remain the firm name then also he is liable.
An express notice of
retirement has to be served by the retiring partner to protect himself from
liabilities, before his retirement or as prescribed under Section 72 of the
Expulsion of a Partner
A partner cannot generally be
expelled from a firm by the majority of the partners. A partner can be expelled
by a majority of partners only in good faith or based on a contract between the
partners. An expelled partner has the same liability as a retired partner.
Section 34: Insolvency of a Partner
When a partner becomes
insolvent, his estate is not liable for partnership debts contracted after the
date of insolvency. However, he will be liable for all debts that were incurred
before his insolvency.
Liability of estate of deceased partner
When a firm cannot be
dissolved by the death of a partner as per the contract, on death of one of the
partner, his estate is not liable for partnership debt after his death.