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Section 255: Sections 239 to 266 [Repealed by the Indian Partnership Act, 1932]

Indian Contract Act • Official Statutory Text & Practice Guide

Statutory Regulation
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Act 1872
Section 75 All 266 Sections of Indian Contract Act Section 77

Legal Commentary & Landmark Judgments: Section 255

Section 255 historically codified the automatic dissolution of a partnership by supervening illegality when the business of the firm is prohibited by law, now reenacted as Section 41(b) of the Indian Partnership Act, 1932.

  • Automatic Dissolution by Supervening Illegality: A partnership is dissolved by operation of law the moment an event occurs which makes it unlawful for the business of the firm to be carried on or for the partners to carry it on in partnership.
  • Immediate Operation Without Judicial Decree: Dissolution takes effect automatically at the exact moment the statutory prohibition or state of war takes effect, without requiring a notice of dissolution or a court decree.
  • Modern Reenactment in Section 41(b) IPA 1932: Repealed by Act 9 of 1932 and reenacted verbatim as Section 41(b) of the Indian Partnership Act, 1932, reflecting the doctrine of statutory frustration.
Key Landmark Precedents:
  • Hugh Stevenson & Sons v. Aktiengesellschaft Für Cartonnagen-Industrie [1918] AC 239: The House of Lords held that the outbreak of war between countries of co-partners automatically dissolves the partnership by supervening illegality under Section 255 principles.
  • Esposito v. Bowden (1857) 7 E&B 763: Foundational common law precedent establishing that contracts involving trading with the enemy or prohibited transactions are dissolved by operation of law.
  • Satyabrata Ghose v. Mugneeram Bangur & Co. AIR 1954 SC 44: The Supreme Court affirmed that supervening legal impossibility terminates commercial relationships under Section 56 of the Contract Act, mirroring the automatic dissolution rule under partnership law.
Courtroom Practice & Strategic Litigation Guidance:

When a firm's business becomes prohibited by regulatory ban, environmental order, or statute, plead automatic statutory dissolution under Section 41(b) of IPA 1932. This relieves partners from filing formal dissolution notices and restricts subsequent transactions strictly to winding up under Section 47.

Section 75 All 266 Sections of Indian Contract Act Section 77