Interim Reliefs a Retiring Partner Can Seek from a Firm or LLP

A partner who retires from a firm or a limited liability partnership rarely walks away with a cheque in hand. What follows is usually a contested settlement of accounts, and throughout that period the continuing partners hold every asset, every bank mandate and every ledger on which the retiring partner's claim depends. Interim relief in such a dispute is often the only thing standing between a good claim and a worthless award. What follows sets out the categories of interim and ad interim relief a retiring partner in India can seek, the statutory hook for each, and the arguments that tend to work.

Why a Retiring Partner's Claim Is Not an Ordinary Money Claim

The costliest mistake in a retirement dispute is to plead it as a debt recovery matter. A retiring partner is not a creditor chasing a defaulter, and that distinction drives almost every relief described below.

The Proprietary Interest That Survives Cessation

Section 37 of the Indian Partnership Act, 1932 provides that where a partner has ceased to be a partner and the surviving or continuing partners carry on the business of the firm with the property of the firm without any final settlement of accounts, the outgoing partner is entitled, at his or her own option, either to such share of the profits made since cessation as is attributable to the use of his or her share of the property, or to interest at six per cent per annum on the amount of that share. Two features of that wording do a great deal of work at the interim stage.

The election belongs to the outgoing partner. A firm cannot unilaterally pick the six per cent option to cap its own exposure while continuing to earn far more from assets in which the retiring partner still holds an undivided interest.

The entitlement is also conditioned on the absence of a final settlement of accounts. Until that settlement happens, the retiring partner's stake in the firm's property has not been extinguished. It has been converted into a right to have that stake valued and paid out. The Supreme Court said as much in M/s Crystal Transport Private Limited v. A. Fathima Fareedunisa [2024 INSC 859], holding that where business continues to be carried on with the assets of the firm without a final settlement, the outgoing partner retains the right to seek accounts and a share in the profits derived from her share of those assets, and that this right persists even where the assets have been taken over by another entity without her consent.

The distinction between retirement and dissolution was drawn by a three-judge bench in Guru Nanak Industries, Faridabad v. Amar Singh [AIR 2020 SC 2484], which confirmed that on retirement the reconstituted firm continues and the retiring partner must be paid dues in terms of Section 37, whereas on dissolution accounts fall to be settled under Section 48. The practical consequence is that a retiring partner who is being kept waiting is not a creditor queuing for payment. She is a person whose property is being used by others for their own profit.

Section 24(5) of the LLP Act Confers an Entitlement, Not a Concession

For limited liability partnerships, Section 24(5) of the Limited Liability Partnership Act, 2008 provides that unless the LLP agreement provides otherwise, a former partner is entitled to receive from the LLP an amount equal to the capital contribution actually made, and his or her right to share in the accumulated profits after deduction of accumulated losses, determined as at the date of cessation.

The date matters. Because the sum is fixed as at cessation, anything the continuing partners do afterwards to deplete the accumulated profit pool cannot lawfully reduce what is payable. When they distribute, lend out or otherwise apply those profits after the retirement date, they are dealing with a fund that the statute has already earmarked in part for the former partner. That is the whole case for freezing it.

Why the Order 38 Rule 5 Objection Has Limited Bite

Continuing partners almost invariably resist security applications by invoking Raman Tech & Process Engg. Co. v. Solanki Traders [(2008) 2 SCC 302], where the Supreme Court described the power of attachment before judgment under Order 38 Rule 5 of the Code of Civil Procedure, 1908 as drastic and extraordinary, not to be used to convert an unsecured debt into a secured one.

The objection is answerable. Order 38 Rule 5 protects defendants against plaintiffs who have no antecedent interest in the defendant's property and want to manufacture security for a bare money claim. The retiring partner sits at the opposite end of that spectrum. Her interest in the firm's property came first, still subsists, and is conferred by statute. Preserving a fund in which the applicant already holds an unextinguished share is preservation of the res itself, not the creation of security over a stranger's assets.

The Supreme Court's approach in Essar House Private Limited v. Arcellor Mittal Nippon Steel India Limited [2022 SCC OnLine SC 1219] supports the retiring partner directly. The Court held that while the basic principles of the Code cannot be ignored, the power to grant interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 is not curtailed by the rigours of every procedural provision in the Code, and that procedural safeguards designed to advance justice cannot be construed so as to defeat it. Relief should not be withheld on the mere technicality of an absence of averments where a prima facie case exists.

Practitioners should note that a coordinate bench took a stricter view in Sanghi Industries Ltd. v. Ravin Cables Ltd. [2022 SCC OnLine SC 1329], requiring the conditions of Order 38 Rule 5 to be satisfied before security is directed under Section 9. The two decisions have not been reconciled by a larger bench. The better reading, and the one a retiring partner should press, is that Sanghi Industries concerned an ordinary contractual money claim under performance guarantees, whereas a partner's claim to her share of firm property is proprietary in origin and falls outside the mischief that Order 38 Rule 5 was designed to address.

Choosing the Forum Correctly Before Anything Else

The reliefs described below are worthless if sought from a forum that cannot grant them, and a great deal of time is lost in retirement disputes on precisely this question.

Entry 14 of the First Schedule Supplies an Arbitration Agreement by Default

An LLP agreement that contains no arbitration clause does not leave a retiring partner in the civil courts by default. Entry 14 of the First Schedule to the LLP Act provides that all disputes between the partners arising out of the LLP agreement which cannot be resolved in terms of that agreement shall be referred for arbitration under the Arbitration and Conciliation Act, 1996. Read with Section 23(4), which applies the First Schedule in the absence of agreement on any matter, this operates as a statutory arbitration agreement. A retiring partner facing silence in the LLP agreement can therefore invoke arbitration and proceed directly to Section 17 relief before the tribunal.

The LLP Is a Necessary Respondent, Not a Stranger

A common obstruction is the contention that the LLP itself, not being a signatory to the LLP agreement, cannot be dragged into the arbitration, with the result that no relief can be directed against the entity that actually holds the bank accounts and the books. The Bombay High Court rejected that argument in Kartik Radia v. M/s. BDO India LLP [Commercial Arbitration Application No. 31 of 2022, decided in March 2025], observing that arguing an LLP is a third party to its own LLP agreement is much like arguing that a company is a third party to its own articles of association. The body corporate is the very cause for the existence of the agreement. That holding matters for a practical reason. Most of the protective reliefs a retiring partner needs (restraints on withdrawals, directions to place funds in fixed deposit, production of statutory records) have to bind the entity itself to be worth anything.

When the Court Remains Available Despite a Constituted Tribunal

Section 17 of the Arbitration Act, as amended in 2015, confers on the arbitral tribunal the same powers to grant interim measures as a court exercising jurisdiction under Section 9, and an order under Section 17 is deemed to be an order of the court and enforceable as such. In most retirement disputes the tribunal is therefore the correct forum.

The court does not, however, disappear. In Arcelormittal Nippon Steel (India) Ltd. v. Essar Bulk Terminal Ltd. [(2022) 1 SCC 712], the Supreme Court held that the constitution of a tribunal does not denude the court of power under Section 9 where the remedy under Section 17 is not efficacious. That principle was applied in Ambrish H. Soni v. Chetan Narendra Dhakan [2024 SCC OnLine Bom 2280], a partnership dispute in which a partner acted in brazen disregard of the tribunal's order, and the Bombay High Court, finding it just and convenient to safeguard the firm's property, appointed the Court Receiver over it under Section 9. A retiring partner facing a counterparty that has already ignored a tribunal's directions has clear authority for taking the matter to the High Court.

Disclosure Reliefs Are the First Line of Protection

A retiring partner almost never has the documents needed to prove dissipation, because the very partners accused of dissipation control the records. This asymmetry should be pleaded as a ground for relief rather than treated as a weakness in the application.

Production of Accounts, Filings and Supporting Vouchers

The first category of relief is a direction that the firm and the continuing partners furnish audited and unaudited accounts, balance sheets, income tax returns, ledgers, resolutions, bank account statements, instructions issued to bankers, and all filings made with the Registrar, together with supporting back-up documents. For an LLP this is reinforced by Section 34 of the LLP Act, which requires proper books of account to be maintained at the registered office and a Statement of Account and Solvency to be prepared within six months of the end of each financial year and filed with the Registrar.

Entry 10 of the First Schedule places the obligation in still plainer terms: each partner shall render true accounts and full information of all things affecting the LLP to any partner or his legal representatives. Continuing partners sometimes argue that a former partner falls outside "any partner". The answer is that Section 24(5) creates an entitlement measured as at the date of cessation, and an entitlement that cannot be quantified without accounts is no entitlement at all. The duty to render accounts necessarily survives to the extent required to work out what was owed on the day the partner ceased.

Continuing Disclosure on a Rolling Basis

A single snapshot of the books is of limited use where the concern is ongoing depletion. The stronger prayer is for continuing disclosure, typically monthly bank statements furnished until the culmination of the arbitration. This form of relief is modest, imposes almost no burden on the respondents, and is difficult to oppose without appearing to have something to conceal. It also builds the evidentiary record for any later application for security, since each month's statements either confirm or dispel the apprehension of dissipation.

Section 24(6) of the LLP Act Does Not Bar Protective Relief

Continuing partners routinely deploy Section 24(6), which provides that a former partner shall not have any right to interfere in the management of the LLP. Read properly, the provision has nothing to do with interim relief. It prevents a former partner from directing the commercial affairs of the business, from voting, from binding the LLP or from second-guessing operational decisions. What it does not do is immunise the LLP from orders preserving a fund in which a former partner holds a statutory entitlement, or turn the continuing partners into unaccountable custodians of that fund. A prayer for disclosure, preservation or security is protection of a crystallised financial entitlement. The distinction is worth drawing expressly in the pleading rather than leaving the tribunal to infer it.

Injunctive Reliefs That Freeze the Asset Base

Section 17(1)(ii)(d) empowers the tribunal to grant an interim injunction or appoint a receiver. Section 17(1)(ii)(e) permits such other interim measure of protection as appears to it to be just and convenient. Between them the two clauses cover every negative relief a retiring partner is likely to need.

Restraint on Disposal, Encumbrance and Discretionary Outflows

The core injunction restrains the firm and the continuing partners from disposing of, encumbering or creating any third-party interest in the assets of the firm pending final settlement. Where the firm's principal asset is itself a litigation claim or a purchased receivable rather than land or plant, the injunction should be drafted to cover the claim, its proceeds, and any compromise or assignment of it.

A related and often overlooked prayer restrains the approval of third-party fee quotes without the retiring partner's consent. In firms whose value lies in pending litigation, professional fees are the most convenient route for value to leave the entity, and inflated or related-party engagements can quietly consume the fund from which the outgoing partner is to be paid.

Capping Withdrawals and the Prior-Notice Alternative

A cap on withdrawals or transfers from the firm's bank accounts beyond a stated monthly figure without written consent is a strong relief, and tribunals grant it where the record shows unexplained outflows. Because it is intrusive, the application should always plead a fallback: that no payment be made without prior written notice of a stated number of working days to the retiring partner. The notice alternative preserves the firm's ability to trade while giving the applicant the ability to approach the tribunal before money leaves. Offering the fallback in the pleading itself signals proportionality and materially improves the prospects of obtaining at least the lesser relief.

Injunctions Against Unilateral Statutory Filings

Two categories of filing can prejudice a retiring partner irreversibly. The first is the income tax return. Where the firm characterises income as contingent when it has already been received and applied, or recasts sums earlier paid to partners as profit and remuneration into loans repayable with interest, the retiring partner's position is damaged in a forum she is not party to. Whether a payment to a partner was in truth profit and remuneration rather than a loan is a question with direct consequences for what she is owed, and once a return is filed on the contrary basis she may be forced into filing consistently to avoid a discrepancy.

The second is filings with the Registrar. Statements of account and solvency and annual returns become the official record of the firm's finances and are relied upon by third parties and by the tribunal. An injunction restraining filings without prior consultation, or in the stronger form a positive direction to file returns reflecting a specified and accurate characterisation of the income, is available under the just and convenient limb of Section 17. Two points assist the applicant. The relief operates between the parties and does not purport to direct any revenue authority. And it asks for nothing more than compliance with obligations the firm already owes under Section 34 of the LLP Act.

Security, Deposit and Lien Reliefs

These are the reliefs that decide whether an eventual award will be worth anything, and they work best pleaded as a graduated cascade rather than a single demand.

The Mandatory Injunction to Bring Funds Back

Where sums have already left the firm, whether as distributions later recharacterised as loans or through the misuse of signed blank cheques, the appropriate relief is a mandatory direction that the recipients remit the amounts back to the firm with interest. Mandatory relief at the interlocutory stage attracts a higher threshold. In Dorab Cawasji Warden v. Coomi Sorab Warden [(1990) 2 SCC 117], the Supreme Court explained that interlocutory mandatory injunctions are granted to preserve or restore the status quo of the last uncontested position preceding the controversy, or to compel the undoing of acts illegally done, or to restore what was wrongfully taken from the complaining party.

That formulation fits a retirement dispute well. Where a firm distributed sums to its partners on a particular footing and the continuing partners have since asserted a different characterisation, the retiring partner is asking for restoration of the last uncontested position, not for a new advantage. Where the continuing partners have themselves indicated a willingness to treat the sums as loans repayable with interest, the mandatory direction merely holds them to their own stated position, which is a powerful and difficult argument to resist.

The Interest-Bearing Fixed Deposit With a Lien

The most useful protective order in this class is a direction that the firm place a specified sum in an interest-bearing fixed deposit over which the retiring partner holds a lien, to abide the outcome of the arbitration. Its advantage over an outright deposit into court is that the fund continues to earn, so the respondents suffer no dead loss and the objection of prejudice largely falls away. Its advantage over a bare injunction is that the money is identified, segregated and beyond the reach of ordinary operational drawing. Where a firm has set aside amounts against a contingent tax liability that may never crystallise, ring-fencing that amount in the same manner prevents the continuing partners from later releasing it to themselves once the outgoing partner's account has been settled at a lower figure.

Security by Bank Guarantee as the Pleaded Alternative

Every deposit prayer should carry an alternative that the respondents furnish security to the equivalent value by bank guarantee or in such other form as the tribunal may direct, invocable on leave. Framing it as an alternative shows the applicant is after protection rather than premature execution, which is exactly the concern animating the Order 38 Rule 5 line of cases. It also gives the tribunal a middle path, and tribunals reach for middle paths.

Comparing the Principal Categories of Relief

Asset Disclosure on Affidavit and the Value of a Cascading Prayer

The residual relief, and the one to plead last, is a direction that the respondents disclose on affidavit all their assets, movable and immovable, including shares, mutual funds and investments of every description with current market values as at a date proximate to the affidavit, followed by an injunction restraining disposal or encumbrance of the assets so disclosed. This is the Indian analogue of the disclosure order that supports a freezing injunction in common law jurisdictions, and it is available under the just and convenient limb of Section 17.

Because it is the most intrusive relief on the list, it belongs at the end of a cascade: disclosure of the firm's records first, then negative injunctions, then deposit and lien, then security, and only then personal asset disclosure. A prayer structure that descends in that order earns the applicant two things. It signals to the tribunal that the harshest order is a last resort rather than an opening demand, which is frequently the difference between an order and an adjournment. It also ensures that the refusal of one relief does not drag the rest down with it, since each alternative has been separately pleaded and can be separately granted.

Ad interim relief follows the same logic. Every substantive prayer should be repeated as a prayer for immediate relief pending the hearing of the application, because an application of this kind is defeated entirely if the fund is emptied between filing and final hearing. Where the record shows that the continuing partners refused to appoint an independent valuer, declined to account for post-retirement dealings, or took a stand on the firm's income inconsistent with their own conduct, that conduct is itself material going to urgency.

Frequently Asked Questions

Can a retiring partner obtain interim relief if the LLP agreement contains no arbitration clause?

Yes. Entry 14 of the First Schedule to the LLP Act, 2008, applied by Section 23(4) where the LLP agreement is silent, provides that all disputes between partners arising out of the LLP agreement shall be referred to arbitration under the Arbitration and Conciliation Act, 1996. This functions as a statutory arbitration agreement, so a retiring partner can invoke arbitration and seek interim measures under Section 9 before the court or Section 17 before the tribunal once constituted.

Does retirement extinguish a partner's interest in the firm's assets?

No. Under Section 37 of the Indian Partnership Act, 1932, where the continuing partners carry on the business with the property of the firm without a final settlement of accounts, the outgoing partner remains entitled, at her option, to the share of profits attributable to the use of her share of the property or to interest at six per cent per annum. The Supreme Court confirmed in M/s Crystal Transport Private Limited v. A. Fathima Fareedunisa [2024 INSC 859] that this right to accounts and profits continues until final settlement.

Can a tribunal direct the firm to place money in a fixed deposit over which the retiring partner has a lien?

Yes. Section 17(1)(ii)(b) of the Arbitration and Conciliation Act, 1996 permits an order securing the amount in dispute, and Section 17(1)(ii)(e) permits any other interim measure of protection that appears just and convenient. A fixed deposit with a lien is frequently preferred because the fund continues to earn interest, so the respondents suffer no loss of yield while the applicant obtains identified and segregated security.

Does Section 24(6) of the LLP Act prevent a former partner from seeking orders against the LLP?

Section 24(6) provides that a former partner has no right to interfere in the management of the LLP. It restricts participation in commercial decision-making. It does not bar reliefs that preserve the fund from which the former partner's statutory entitlement under Section 24(5) is to be satisfied, and orders for disclosure, preservation or security are protective rather than managerial in character.

What can a retiring partner do if the firm files income tax returns that mischaracterise her dues?

Interim relief may be sought restraining the filing of returns or Registrar filings without prior consultation and consent, or in the stronger form directing that returns accurately reflect the character of the income and of amounts previously paid to partners. The relief operates between the parties to the arbitration and does not direct any revenue authority. Its justification is that once a return is filed on a contrary basis, the retiring partner may be forced into consistent filings to avoid a discrepancy, and the prejudice becomes difficult to reverse.

Must a retiring partner satisfy Order 38 Rule 5 of the CPC to obtain security?

The position is not fully settled. Essar House Private Limited v. Arcellor Mittal Nippon Steel India Limited [2022 SCC OnLine SC 1219] held that the power under Section 9 is not curtailed by the rigours of every procedural provision in the Code, while Sanghi Industries Ltd. v. Ravin Cables Ltd. [2022 SCC OnLine SC 1329] required the conditions of Order 38 Rule 5 to be satisfied. The two coordinate bench decisions have not been reconciled by a larger bench. A retiring partner can distinguish the stricter line on the footing that Order 38 Rule 5 addresses bare money claims, whereas a partner's claim to her share of firm property is proprietary in origin.

Can the High Court grant interim relief after the arbitral tribunal has been constituted?

Yes, where the remedy before the tribunal is not efficacious. Arcelormittal Nippon Steel (India) Ltd. v. Essar Bulk Terminal Ltd. [(2022) 1 SCC 712] holds that a constituted tribunal does not denude the court of its power under Section 9. In Ambrish H. Soni v. Chetan Narendra Dhakan [2024 SCC OnLine Bom 2280], the Bombay High Court appointed the Court Receiver over partnership property under Section 9 where a partner had disregarded the tribunal's order.

Is it better to seek one strong relief or several alternatives?

Several, pleaded as a descending cascade. Beginning with disclosure of the firm's records, moving through negative injunctions, then deposit and lien, then security by bank guarantee, and ending with personal asset disclosure on affidavit demonstrates proportionality and gives the tribunal graduated options. It also ensures that the refusal of the most intrusive relief does not carry the lesser protections with it.

How quickly should a retiring partner apply for interim relief?

Promptly. The value of disclosure and freezing orders lies in catching the firm's asset position before it changes, and delay both weakens the case for urgency and gives the continuing partners time to move funds or restructure holdings. A retiring partner who waits until the final accounts are disputed at trial commonly finds that the assets on which the claim depended are no longer there to be secured.

What evidence supports an application to freeze the firm's assets?

The strongest material is contemporaneous: the last audited balance sheet, bank statements showing unexplained outflows after the date of retirement, filings with the Registrar of Companies recording changes in the firm's structure, and correspondence in which the continuing partners acknowledge the retiring partner's dues. An application resting on suspicion alone, without documents showing dissipation or a real prospect of it, rarely succeeds.

Can relief be sought against individual continuing partners as well as the firm?

Yes, where the relief sought depends on their conduct. Orders restraining disposal of firm property run against the firm and those controlling it, and where a continuing partner has diverted assets personally, relief can be framed against that partner directly. Naming the firm alone can leave a gap where the assets in question have already passed into an individual partner's hands.

Does an interim order compel the firm to pay the retiring partner's dues at once?

Ordinarily not. Interim relief in these disputes is protective rather than final: it secures the fund, preserves the accounts and restrains dissipation while the entitlement is determined. A direction to deposit money in court or into an interest-bearing account is common. An order simply directing payment of the claimed sum before the accounts have been taken is not, because it would grant the substantive relief at the interlocutory stage.

Does retirement end a partner's liability for the firm's existing debts?

Retirement does not by itself end liability to third parties for obligations incurred while the partner was in the firm, and public notice of retirement is what limits exposure for obligations incurred afterwards. A retiring partner negotiating a settlement should deal expressly with indemnity for pre-retirement liabilities, because securing a share of the assets is of limited value if creditors can still pursue the partner personally for old debts.

Related reading

How Operational Creditors Assign Claims During CIRP · Commercial Arbitration in Mumbai and the Bombay High Court's Role · How to E-File a First Petition Before the NCLT in 2026

Vikrant D. Shetty | Vikrant D. Shetty leads the Arbitration and Commercial Litigation Practice at the Mumbai-based law firm - Vikrant D. Shetty & Associates, Advocates & Solicitors which advises and represents partners, limited liability partnerships and closely held businesses in partnership and LLP disputes, including applications for interim measures under Sections 9 and 17 of the Arbitration and Conciliation Act, 1996, settlement of accounts and valuation claims, and related proceedings before the Bombay High Court.

This article is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please seek direct consultation with an advocate.