Chapter VI - Dissolution of a Firm
Section 42
Section 42: Dissolution on the happening of certain contingencies
Section 42 lists four events that dissolve a firm unless the partners have agreed otherwise: expiry of a fixed term, completion of the undertaking, death of a partner and a partner's adjudication as insolvent.
On this page
Need advice on Section 42?
This article is for general information. Refer to the Indian Partnership Act, 1932 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
Subject to contract between the partners a firm is dissolved—
(a) if constituted for a fixed term, by the expiry of that term;
(b) if constituted to carry out one or more adventures or undertakings, by the completion thereof;
(c) by the death of a partner; and
(d) by the adjudication of a partner as an insolvent.
Key takeaways
Four contingencies
Expiry of a fixed term, completion of the adventure or undertaking, death of a partner, and adjudication of a partner as an insolvent.
Subject to contract
The partners can agree that the firm continues despite any of these events.
Using the 'subject to contract' opening
Because section 42 is subject to contract between the partners, a partnership deed can provide that the firm continues with the remaining partners after a partner's death or insolvency, or after the term or project ends, and can set the terms for paying out an outgoing partner's share.
Continuing after a fixed term
If a firm constituted for a fixed term carries on business after the term expires, section 17(b) provides, subject to contract, that the partners' mutual rights and duties remain the same as before, so far as they are consistent with the incidents of a partnership at will.
Death and insolvency
Under the proviso to section 45(1), the estate of a partner who dies or is adjudicated an insolvent is not liable for acts done after the date on which he ceases to be a partner. Under the proviso to section 47, the firm is in no case bound by the acts of a partner who has been adjudicated insolvent.
Hypothetical business example
Hypothetical: A three-partner firm's deed says that the death of a partner will not dissolve the firm and that his legal heirs will be paid his share. When one partner dies, the firm carries on with the other two under that clause; without it, section 42(c) would dissolve the firm.
Check the applicable state law
The India Code consolidated central text (as on 7 July 2025) records no State amendment to section 42, although several States have amended other sections of the Act, mainly those on registration of firms. Confirm the law of the State where the firm carries on business, and the firm's own partnership agreement, before acting.
Practical checklist
Do
- Decide in the deed whether the firm continues after death, insolvency, expiry of term or completion of the project.
- Set out how an outgoing partner's share will be valued and paid.
Avoid
- Do not leave continuation terms out of the deed for a long-term business.
- Do not carry on after a fixed term without recording the revised terms.
Glossary
- Fixed term
- A duration for the partnership agreed in the contract.
- Continuation clause
- A deed term providing that the firm continues despite an event listed in section 42.
Frequently asked questions
Does the death of a partner always dissolve the firm?
No. Section 42(c) applies subject to contract; the partners may agree that the firm continues.
What if the business continues after the fixed term?
Subject to contract, section 17(b) keeps the partners' mutual rights and duties as before, so far as consistent with a partnership at will.
Is a deceased partner's estate liable for later acts?
Under the proviso to section 45(1), the estate of a partner who dies is not liable for acts done after the date on which he ceases to be a partner.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026