Statutory Framework

Section 14 of the Partnership Act, 1932 (“Partnership Act”) talks of the property of the firm, which include property (a) brought in by the partners, and (b) acquired by or for the firm, for its business (including the goodwill of the business). In this regard, unless stated otherwise, any property acquired from funds of the firm shall be deemed to have been acquired for the firm.

Section 48 of the Partnership Act talks of settlement of accounts upon dissolution of the firm. For the purposes of this article, sub-section (b) talks of assets of the firm, and that upon paying (i) debts of the firm, (ii) the partners, (what they are due for advances as distinguished from capital, and on account of capital. Thereafter, the residue will be divided among the partners in proportion to the profit sharing ratio.

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