Section 55 of IPA : Section 55: Sale Of Goodwill After Dissolution

Explanation using Example

Imagine a scenario where 'Tasty Treats Partnership', a bakery business run by three partners, has decided to dissolve. According to Section 55 of The Indian Partnership Act, 1932, the partners agree to include the bakery's goodwill in the assets for sale. They find a buyer who is interested in purchasing both the goodwill and the bakery equipment.

After the sale, one of the former partners, Ravi, decides to open a new bakery across town. Though he is competing with the buyer's new business, he does not use the 'Tasty Treats' name, refrains from suggesting he is continuing the old business, and does not approach the former regular customers of 'Tasty Treats' to solicit their business, respecting the terms of Section 55.

Furthermore, Ravi and the buyer have agreed that Ravi will not open another bakery within a 5-kilometer radius of the original 'Tasty Treats' location for the next 3 years. This non-compete agreement is considered valid under the law, given that the time and distance restrictions are reasonable.