Law · Partnership Act and Banking Operation
A partnership firm has three partners (X, Y, and Z) with a mandate 'Jointly by any two partners.' Partner X is adjudicated insolvent, and the bank receives official notice. A cheque signed by Y and Z before the insolvency is presented. What is the correct legal course of action for the bank?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank should pay one-third of the balance to the Official Assignee and allow Y and Z to operate the remainder.
- 2The bank must pay the cheque only after obtaining a No Objection Certificate from local law enforcement.
- 3The bank must stop operations in the account because the insolvency of a partner dissolves the firm unless there is a contract to the contrary, revoking the authority to bind the firm.✓
- 4The bank should honor the cheque signed by Y and Z as the mandate requirements are met.
Correct answer
The bank must stop operations in the account because the insolvency of a partner dissolves the firm unless there is a contract to the contrary, revoking the authority to bind the firm.
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