The Supreme Court adjudicated upon the legal status of a 2-member partnership firm, when one of the Partners retires, in the case of, Guru Nanak Industries, Faridabad and Ors. vs. Amar Singh (Dead) through L.Rs. MANU/SC/0453/2020, and it was held that:-
“There is a clear distinction between ‘retirement of a partner’ and ‘dissolution of a partnership firm’. On retirement of the partner, the reconstituted firm continues and the retiring partner is to be paid his dues in terms of Section 37 of the Partnership Act. In case of dissolution, accounts have to be settled and distributed as per the mode prescribed in Section 48 of the Partnership Act. When the partners agree to dissolve a partnership, it is a case of dissolution and not retirement.”