Sections 35 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 35 protects the estate of a partner who dies where the contract keeps the firm going. Section 36 deals with an outgoing partner: he may compete, but, subject to contract, he cannot use the firm's name, hold himself out as carrying on the firm's business, or solicit its old customers. A deed can also bind him not to compete, within limits, which is something our changes in partnership agreement service can add to an existing deed.
Where, under a contract between the partners, the firm is not dissolved by a partner's death, the estate of the deceased partner is not liable for any act of the firm done after his death (s.35). An outgoing partner may carry on a competing business and advertise it, but subject to contract to the contrary he may not use the firm name, represent himself as carrying on the firm's business, or solicit persons who dealt with the firm before he left (36(1)). A partner may agree not to carry on a similar business within a specified period or specified local limits, and such an agreement is valid if the restrictions are reasonable, despite section 27 of the Contract Act (36(2)).
Section 35: the estate of a deceased partner
The text of section 35 is one sentence. Where under a contract between the partners the firm is not dissolved by the death of a partner, the estate of a deceased partner is not liable for any act of the firm done after his death.
Two things follow from the wording:
- Starting point. Section 42(c) says that, subject to contract, a firm is dissolved by the death of a partner; see sections 42 and 43. Section 35 applies where the partners have agreed that death does not dissolve the firm.
- Acts after death only. The text speaks of acts done after his death. It says nothing here about acts done before.
This sits alongside section 28(2), which says that continued use of the old firm name or the deceased partner's name does not of itself make his estate liable; see section 28.
Example. The deed of Verma & Co says the firm continues despite a partner's death. Mr Verma dies in March. In June the surviving partners buy goods on credit for the firm. Under section 35, Mr Verma's estate is not liable for that June purchase.
What the estate is entitled to receive is a separate matter, dealt with in section 37.
Section 36(1): an outgoing partner may compete
An outgoing partner may carry on a business competing with that of the firm and may advertise it. The default permits competition. The text does not limit this to retiring partners; "outgoing" covers a partner who has ceased to be one, whether by retirement, expulsion or otherwise.
But, subject to contract to the contrary, he may not:
| Prohibited | Text |
|---|---|
| (a) Use the firm name | He cannot trade under the old name |
| (b) Represent himself | He cannot say he is carrying on the business of the firm |
| (c) Solicit custom | He cannot solicit the custom of persons who were dealing with the firm before he ceased to be a partner |
The words "subject to contract to the contrary" mean the partners can agree on something different, for example that the outgoing partner may keep dealing with a particular customer, or may even use a version of the name. They can also agree on tighter limits.
Note the exact reach of (c): it speaks of persons who were dealing with the firm before he left. A person who becomes a customer only after he leaves is outside the wording of clause (c). Advertising to the general public is allowed. The text does not draw the line further; check the contract.
Example. Tara leaves the "Tara & Mehra Studio" and opens her own design studio, advertising it in the newspaper. That is allowed. She may not call it "Tara & Mehra Studio", say she is carrying on the old studio's business, or write to the studio's existing clients asking them to move to her. If the deed had said she could keep three named clients, that contract would govern.
Section 36(2): agreement in restraint of trade
A partner may make an agreement with his partners that on ceasing to be a partner he will not carry on any business similar to that of the firm within:
- a specified period, or
- specified local limits.
Such an agreement is valid if the restrictions imposed are reasonable, notwithstanding section 27 of the Indian Contract Act, 1872. Section 27 of the Contract Act is the general rule against agreements in restraint of trade. The text of 36(2) lets this kind of agreement stand.
| Element | What the text requires |
|---|---|
| Parties | A partner and his partners |
| Content | No business similar to that of the firm |
| Limits | A specified period or specified local limits |
| Validity | Reasonable restrictions |
The Act does not say what is "reasonable", gives no maximum period or distance, and does not say whether both a period and an area can be combined. Reasonableness depends on the facts, so draft limits tied to the firm's actual business. Restraint during the partnership and after dissolution is covered separately in sections 53 and 54.
Example. A deed says that a partner who leaves will not run a similar accounting practice within 5 km of the firm's office for 2 years. Those are specified limits of period and place. Whether they are reasonable is a question of fact. A clause saying "never, anywhere in India" would invite challenge, because the text requires reasonableness.
What can the deed change?
- Section 35 applies where the contract keeps the firm going; it is built on the contract.
- Section 36(1)'s three prohibitions apply subject to contract to the contrary, so the deed may relax or tighten them.
- Section 36(2) is itself a power to make a restraint agreement, within reasonableness.
Practical points
- State in the deed whether death or insolvency of a partner dissolves the firm.
- Write a clear non-compete clause with a stated period and area, tied to the actual business.
- Settle the name: say who may use the firm name after a partner leaves.
Need help with a non-compete clause?
A restraint clause needs to be specific enough to stand and balanced enough to be reasonable. Our changes in partnership agreement service can add or revise such clauses in an existing deed, and we can review one you have already signed. Bring your current deed and the facts of the exit.
Key takeaways
- Where the contract keeps the firm going after a death, the estate is not liable for acts of the firm after the death (s.35).
- An outgoing partner may compete and advertise (36(1)).
- Subject to contract, he may not use the firm name, represent himself as carrying on the firm's business, or solicit its earlier customers.
- A restraint on a similar business within a specified period or area is valid if reasonable, despite section 27 of the Contract Act (36(2)).
Read next
- Sections 33 and 34: expulsion and insolvency of a partner
- Sections 37 and 38: outgoing partner's share of profits and continuing guarantee
- Sections 53 and 54: firm name and restraint of trade after dissolution
- Rights of an outgoing partner: goodwill and share
Disclaimer: Based on the text of the Indian Partnership Act, 1932 as consulted on 1 October 2026. Several States have amended the registration chapter and make their own rules, forms and fees for the Registrar of Firms. This article is general information, not legal advice; check the official text and your State's rules before acting.