Withdrawal of excess capital in a partnership firm

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Querist : Anonymous

Querist : Anonymous (Querist)

28 November 2014 There are two equal partners in an ongoing partnership firm. The partners start business with equal capital. In due course of time one partner withdraws more capital from the firm's account. As a result his capital is now in negative. He has siphoned all of the working capital from the firm. The firm is now facing financial crisis as regards to supplier's dues, worker's salaries and other statutory due. An Arbitration clause is provided in the partnership deed with a named Arbitrator.
What are the remedies to tackle such an issue. Is dissolution of the firm the only option left?

Amol S Joglekar

Amol S Joglekar (Expert)

28 November 2014 LEt it go to Arbitrator in the first phase. If nothing works out, the final would be the Dissolution.

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Rupesh Jain

Rupesh Jain (Expert)

29 November 2014 you go to arbitrator and then take dissolution.

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Querist : Anonymous

Querist : Anonymous (Querist)

01 December 2014 Is the matter concerning refunding of share capital arbitrable in an on going partnership firm? The defaulting partner has withdrawn the capital, the value is manifested in the share capital.

I have learnt that a partner can not raise the dispute of share capital in an ongoing firm, unless it is present as a special clause in the partnership deed. It is only after dissolution that share capital issue can be raised.

Please let me know if this stance is correct?

Amol S Joglekar

Amol S Joglekar (Expert)

02 December 2014 Please provide some additional inputs.
Who of 2 are the signatories to withdraw money from FIRM/CASH/BANK?

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