Banking · Partnership Accounts and Operations
A partnership firm with three partners (Amit, Binoy, and Chandan) has a fully utilized Cash Credit limit of ₹50 lakh. The deed states that the death of a partner will not dissolve the firm. Binoy passes away when the debit balance is ₹48 lakh. Surviving partners issue a cheque of ₹2 lakh to a supplier. How should the bank handle the account under standard guidelines?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Continue the account uninterrupted because a partner's liability is strictly limited to capital contribution.
- 2Allow credits in the old account but freeze all debits until a fresh partnership deed is signed.
- 3Stop operations in the old account to crystallize the deceased partner's estate liability and open a new account for subsequent transactions.✓
- 4Clear the cheque immediately to ensure business continuity as per the partnership deed.
Correct answer
Stop operations in the old account to crystallize the deceased partner's estate liability and open a new account for subsequent transactions.
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