When all the partners except one become insolvent, the firm is compulsorily dissolved.

Explanation:
- When a partnership firm is formed, it consists of two or more partners who agree to carry on a business with the objective of making a profit.
- However, there are certain situations where a partnership firm may need to be dissolved, including when all partners except one become insolvent.
- Insolvency refers to a situation where an individual or entity is unable to pay off its debts as they become due.
- When all partners except one become insolvent, it means that they are no longer able to contribute to the firm's liabilities and obligations.
- In such a scenario, the remaining partner is left as the sole responsible party for the firm's debts and liabilities.
- This puts an unfair burden on the remaining partner, as they may not have the financial resources to single-handedly manage the firm's debts and continue its operations.
- As a result, in order to protect the interests of the remaining partner and to ensure a fair distribution of liabilities, the firm is compulsorily dissolved.
- Compulsory dissolution means that the partnership firm is dissolved by operation of law, without the need for any formal agreement or consent from the partners.
- Once the firm is dissolved, its assets and liabilities are liquidated and distributed among the partners, in accordance with the partnership agreement or the applicable laws.
- The remaining partner may choose to start a new business or enter into a new partnership arrangement, if they wish to continue with their entrepreneurial pursuits.

In conclusion, when all the partners except one become insolvent, the partnership firm is compulsorily dissolved to protect the interests of the remaining partner and ensure a fair distribution of liabilities.

According to Section 41 of Indian partnership act, 1932, If in a partnership one partner is solvent and rest all partner becomes insolvent then it leads to compulsory dissolution of firm. The court orders in this case to dissolve the firm.