Dispute Resolution & ADR Newsletter - October 2026

Assets of a dissolved partnership cannot be retained by a successor firm without settling the former partners’ entitlements

V Sumitra Reddy v. K Ranganadha Reddy

Supreme Court of India | 2026 INSC 979

In a significant decision, the Supreme Court clarified that a partner's entitlement to undistributed assets of a dissolved partnership cannot necessarily be restricted to their value on the date of dissolution. It further held that a newly constituted partnership cannot retain assets of the dissolved firm without settling the former partners' entitlements.

Unlike partnerships with a fixed duration or LLPs, a partnership at will may be dissolved by any partner through written notice, triggering the settlement and distribution of the firm's assets. This distinction has significant commercial implications, as the remaining partners cannot simply continue using those assets through a new partnership without settling the former partners' entitlements. Consequently, even a single partner's