The Supreme Court has affirmed that upon dissolution of a partnership at will, an outgoing partner is entitled to their share of the partnership assets valued at the date of liquidation, not the date of dissolution. The Court upheld the High Court's direction for public auction of partnership property, rejecting the argument that the outgoing partner's share should be frozen at the 1983 dissolution value. The ruling clarifies that while profits and losses are ascertained as on the dissolution date, the right to participate in the residue of assets after liquidation survives until final decree.
Case Details
V. SUMITRA REDDY vs K. RANGANADHA REDDY .
2026 INSC 979
Court
Supreme Court of India
Date
2026-09-09
Case Number
C.A. No.-008167 - 2017
Bench
HON'BLE MR. JUSTICE UJJAL BHUYAN, HON'BLE MR. JUSTICE ATUL S. CHANDURKAR
Counsel
Pet: Ananga Bhattacharyya
Frequently Asked Questions
The relevant date for valuing the outgoing partner's share in the partnership assets is the date of liquidation/assessment by the Commissioner, not the date of dissolution. Profits and losses are ascertained as on the dissolution date, but the right to share in the residue of assets after liquidation continues until final decree.
No. The reconstituted firm has no right to utilize the assets of the dissolved firm unless all partners of the dissolved firm agree to settle accounts and pay the outgoing partner their share. Absent such agreement, liquidation of assets and distribution of proceeds is mandatory.
Section 48 prescribes the mode of settlement of accounts after dissolution. The assets must be realized and converted into money, and the residue distributed in profit-sharing ratios. The Supreme Court endorsed valuation at current market value (date of assessment) as equitable and consistent with the statutory scheme.
On retirement, the reconstituted firm continues and the retiring partner is paid under Section 37. On dissolution, accounts are settled under Section 48. In a two-partner firm, retirement of one amounts to dissolution. The present case involved dissolution of a partnership at will by notice under Section 43, not mere retirement.
