A partnership firm 'Global Traders' has three partners: Arun, Varun, and Kiran. The bank honors a cheque of 12,00,000 rupees signed only by Arun based on an 'Either or Survivor' account mandate, despite a clause in the partnership deed (held in bank records) requiring all three signatures for transactions exceeding 5,00,000 rupees. Later, Kiran is declared insolvent by a court. Evaluate the bank's liability for the cheque and the consequence of Kiran's insolvency on the account operation.

Question

Accepted Answer

The bank is liable for the cheque due to negligence in not following the specific restrictions in the deed held in its records, and Kiran's insolvency necessitates stopping the account to determine the firm's position.

Answer

The bank is not liable because any partner has implied authority under the Partnership Act, and the account remains operational if an indemnity is provided.

Answer

The bank is liable because the partnership deed is a public document and the bank had constructive notice, and Kiran's insolvency automatically dissolves the firm's account operations immediately.

Answer

The bank is not liable because the 'Either or Survivor' mandate overrides the deed, and Kiran's insolvency has no effect as long as two partners are solvent.

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