Where money received from a third party by the firm, in the ordinary course of business, is misapplied by one of the partners for personal use, then:

Correct option is C

As per Section 27 of the Indian Partnership Act, 1932, if a partner misapplies firm funds received from a third party in the ordinary course of business, the entire firm is liable for the loss. The liability of a partnership is joint and several, meaning the third party can recover compensation from the firm, even though an individual partner committed the act.