Sections 46 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.
Once a firm is dissolved, its affairs have to be wound up. Section 46 gives every partner a right to have the firm's property applied to pay debts and to have any surplus shared. Section 47 says each partner's authority to bind the firm continues after dissolution only as far as winding up needs. If you are winding up a firm, our legal consultation service can help you plan the order of steps.
On dissolution, every partner or his representative may require, as against all the other partners or their representatives, that the firm's property be applied in payment of the debts and liabilities of the firm and the surplus distributed among the partners according to their rights (s.46). After dissolution, each partner's authority to bind the firm, and the other mutual rights and obligations of the partners, continue so far as necessary to wind up the affairs of the firm and complete transactions begun but unfinished at dissolution, but not otherwise (s.47). The firm is in no case bound by the acts of a partner who has been adjudicated an insolvent, though a person who holds himself out as the insolvent's partner after adjudication stays liable.
Section 46: the right to have the business wound up
The text says: on the dissolution of a firm every partner or his representative is entitled, as against all the other partners or their representatives, to:
- have the property of the firm applied in payment of the debts and liabilities of the firm; and
- have the surplus distributed among the partners or their representatives according to their rights.
| Feature | What the text says |
|---|---|
| Who has the right | Every partner or his representative (for example the estate of a deceased partner) |
| Against whom | All the other partners or their representatives |
| First step | The firm's property is applied to debts and liabilities |
| Second step | The surplus is distributed according to their rights |
| Words "subject to contract" | Not present in the section |
Two things stand out. The right can be exercised by a representative, so the estate of a deceased partner is not left outside. And the section fixes the sequence in principle: debts first, surplus after. The detailed order of payment, and how losses are met, is in section 48, and the position of the firm's debts against a partner's personal debts is in section 49.
The section does not say how long winding up may take, who conducts it, or whether the Court appoints a receiver. The text is silent on those. In practice, a partner who wants winding up and meets resistance from the others may need to go to Court; our legal dispute resolution service can help with that.
Example. A three-partner firm is dissolved. It owns stock and a bank balance and owes Rs 6 lakh to suppliers. One partner wants to take the stock for his own use and leave the debts unpaid. Under section 46, each of the other partners can insist that the firm's property first be applied in paying the debts, and that only the surplus be divided according to their rights.
Section 47: authority that continues for winding up
Section 47 says that after the dissolution of a firm the authority of each partner to bind the firm, and the other mutual rights and obligations of the partners, continue notwithstanding the dissolution, but only:
- so far as may be necessary to wind up the affairs of the firm, and
- to complete transactions begun but unfinished at the time of the dissolution,
"but not otherwise."
So after dissolution a partner cannot start new business for the firm. He may collect debts, pay creditors, sell stock, and finish a contract that was already under way. The words "so far as may be necessary" set the limit. The Act does not list what counts as necessary; it depends on the facts.
Example. After dissolution, partner Rohit signs a letter completing delivery under a contract the firm had entered into before dissolution. That is a transaction begun but unfinished, within section 47. If instead Rohit takes a fresh order from a new customer on the firm's behalf, it falls outside "but not otherwise", though a third party who did not know of the dissolution may still be able to rely on section 45 until public notice is given; see section 45.
The proviso: the insolvent partner
The proviso says that the firm is in no case bound by the acts of a partner who has been adjudicated an insolvent. But this does not affect the liability of any person who, after the adjudication, has represented himself, or knowingly permitted himself to be represented, as a partner of the insolvent. That mirrors the holding-out rule in section 28.
| Case | Result |
|---|---|
| Insolvent partner acts after adjudication | The firm is not bound |
| Another person represents himself, or knowingly lets himself be represented, as a partner of the insolvent after adjudication | His liability is not affected by the proviso |
The copy consulted carries a "Short Note" case summary under section 47; it is the compiler's note, not the Act, and is not used here.
Sections 46 and 47 together
| Section 46 | Section 47 | |
|---|---|---|
| Subject | Right to have property applied and surplus distributed | Authority and mutual rights that continue |
| Whose right or power | Each partner or his representative | Each partner |
| Limit | Debts and liabilities first; then surplus | Only as necessary to wind up and finish unfinished transactions |
| "Subject to contract" in text | No | No |
What can the deed change?
Neither section carries "subject to contract" wording. The deed can supply the machinery, for example naming who will wind up and by when, but it is not stated to remove the rights in section 46 or the limit in section 47. Accounting rules in section 48 are expressly subject to agreement.
Practical points
- Appoint one partner or a liquidator-like person in the dissolution deed to run the winding up.
- List unfinished contracts on the dissolution date and decide who will complete them.
- Stop fresh business in the firm's name.
- Pay debts before distributing anything.
- Follow with settlement of accounts; see settlement of accounts after dissolution.
Need help with winding up?
Winding up involves bank accounts, creditors, stock, tax closure and records. Our legal consultation service can help you set the sequence and prepare the dissolution deed and closing accounts. Bring the deed, the last balance sheet and a list of creditors and unfinished work.
Key takeaways
- On dissolution, every partner or his representative can require the firm's property to be applied in paying the firm's debts and the surplus to be distributed according to their rights (s.46).
- After dissolution, a partner's authority to bind the firm continues only as needed to wind up and complete unfinished transactions (s.47).
- The firm is in no case bound by the acts of a partner adjudicated insolvent; holding-out liability remains.
Read next
- Section 45: liability for acts of partners after dissolution
- Section 48: settlement of accounts between partners
- Sections 49 and 50: firm debts, separate debts and profits after dissolution
- Partnership dissolution: the five ways and the order of settling accounts
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.