In professional partnerships, breakdowns in trust are not uncommon. But the law on how to deal with such situations—especially when one partner no longer wishes to continue with another—is often misunderstood.
A common question arises in such cases:
Can the remaining partners expel a disruptive or dishonest partner and carry on the business without them?
The short answer: Not unless the Partnership Deed permits it.
The Legal Position: Section 33 of the Indian Partnership Act, 1932
Section 33(1) of the Indian Partnership Act, 1932 lays down that:
A partner may not be expelled from a firm by any majority of the partners, save in exercise in good faith of powers conferred by contract between the partners.
What this means in practice:
There must be an explicit expulsion clause in the partnership deed;
Even then, expulsion must be exercised in good faith;
In the absence of such a clause, any attempt to expel a partner will be legally invalid and susceptible to challenge.
This principle has been reiterated by courts in several decisions, including S. Vel Aravind v. Dr. Radhakrishnan, where the absence of an expulsion clause made removal unlawful. Even where such a clause existed, as in Serajuddin & Co., the court stayed the expulsion for lack of good faith.
When a Partner Breaches Fiduciary Duties
Consider a scenario where one of the partners:
Is operating a competing business;
Is doing so without the knowledge or consent of the firm;
Refuses to retire voluntarily, and
Continues to withhold profits or information about such activities.
Despite the seriousness of such conduct, the firm cannot expel the partner unless specifically permitted by the partnership deed.
This does not mean that the remaining partners are without remedy. The law provides clear alternatives.
Option 1: Voluntary Retirement and Reconstitution
The first route is to propose a Deed of Reconstitution, under which the offending partner may:
Voluntarily retire;
Receive their due financial entitlements;
Be legally separated from the firm.
Where there are pending issues, such as immovable properties held by the firm, a separate settlement agreement may record the treatment of future sale proceeds in proportion to the retiring partner’s share.
Option 2: Dissolution of the Firm under Section 44
Where voluntary exit is refused, the firm may be dissolved by filing a suit under:
Section 44(c) – When a partner’s conduct is such that it prejudicially affects the carrying on of business;
Section 44(d) – When a partner wilfully commits breach of the partnership agreement or acts in a manner rendering further association impracticable.
This approach allows the remaining partners to seek reliefs including:
Declaration of dissolution;
Account of profits earned through the competing business;
Injunctions against further breach or misuse of goodwill;
Damages for harm caused to the firm;
Distribution of assets in accordance with law.
Fiduciary Duties Continue Until Separation
Under Section 9 and 16(b) of the Act, a partner is prohibited from engaging in competing business without consent, and must account for profits derived from such activity.
Importantly, these duties remain until the partner is formally retired or the firm is dissolved.
Failure to comply can lead to claims for recovery, injunctions, and cost orders against the defaulting partner.
Conclusion
Prevention Begins with the Deed
Disputes of this nature reveal a hard truth—a poorly drafted or outdated partnership deed is often the root cause of prolonged legal battles.
Every partnership deed must contain:
Clauses on expulsion, voluntary retirement, and retirement procedure;
Non-compete provisions;
Clarity on distribution of immovable assets;
A defined dispute resolution mechanism.
Because when conflicts arise, it is the deed—not oral understanding—that defines your legal rights.