REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 6933-6934 OF 2002

Mohd. Laiquiddin & Anr. ..Appellants

Versus

Kamala Devi Misra (Dead) By L.Rs & Ors. ..Respondents

WITH

CIVIL APPEAL NOS. 4411-4412 of 2002

Smt. Kamala Devi Misra (Dead) By L.Rs & Ors .Appellants

Versus

Mohd. Laiquiddin Khan & Anr. ..Respondents

J U D G M E N T

TARUN CHATTERJEE,J.

1.These four appeals are directed against the judgment and

order dated 9

th

of April, 2002 passed in second appeal Nos.

1048 & 1050 of 2001 of the High Court of Andhra Pradesh at

Hyderabad, by which the High Court had partly allowed the

1

appeals and modified the order dated 17

th

of October, 2001 of

the First Appellate Court, which affirmed the order of the Trial

Court decreeing the suit for dissolution of partnership firm

and other relief filed by the appellants who are appellants in

C.A.Nos.6933-34 of 2002.

2.It may be mentioned that during the pendency of the

suit, the original plaintiff died and her legal representatives

were substituted as plaintiffs before the trial court. The

original defendant also died before the filing of the first appeal,

and his legal representatives were brought on record as

Appellant Nos. 2 to 6 before the first Appellate Court. For the

sake of convenience, the Plaintiffs would be referred to as the

‘Appellants’ and the Defendants would be referred to as ‘the

Respondents’.

3.The case made out by the original plaintiff (since

deceased) in her plaint was as follows:

Shri Jai Narayan Mishra, original defendant (since

deceased) made a proposal to constitute a firm for

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construction of a cinema theatre on the land of the original

plaintiff (since deceased) and on acceptance of the said

proposal by her, they executed a deed of partnership dated

26

th

of June, 1977. Clause 4 of the partnership deed envisaged

that the plaintiff’s share in the profits would be 2 annas in a

rupee. The original plaintiff (since deceased) was receiving Rs.

2,000/- per month from the original defendant (since

deceased) in pursuance of Clause 13, which guaranteed that

the minimum profit of Rs. 2,000/- per month would be paid to

her. The defendant never disclosed to the plaintiff as to what

amount was due to her on settling the annual accounts of the

firm. The defendant never furnished the statement of accounts

to the plaintiff. He never disclosed the amount of profit

payable to her towards her two anna share in the business.

The defendant mismanaged the business of the firm and

manipulated the account books. There was mutual

irretrievable distrust between the plaintiff and the defendant

and hence it was impossible to get along with the defendant in

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the business of the firm. The defendant stopped payment of

the minimum guarantee profit to the plaintiff with a motive to

strain her financial resources. The gravity of distrust assumed

such proportions that the plaintiff could not continue as a

partner in the firm. The defendant is also guilty of non-

furnishing of annual accounts to the plaintiff and hence the

suit. The original defendant (since deceased) entered

appearance and contested the suit by filing a written

statement. In the written statement, it was, inter alia, alleged

as follows:-

“The value of the land given by the

plaintiff for construction of the cinema

theatre was only Rs. 70/- per sq.yard in the

year 1977. The defendant invested more

than Rs. 25 lakhs for the construction of

the theatre. He has been maintaining

accounts day-to-day in respect of the

business of cinema-theatre and no

transaction relating to the said business

had been concealed from the plaintiff. An

extent of 1000 sq.yds. had been acquired

by the Government for widening the road

out of the total extent of 6808 sq. mts. of

the site given by the plaintiff for

construction of the cinema theatre and

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only the remaining land was available for

the business of cinema-theatre. The

duration of the partnership as per Clause

2 of the partnership deed was 42 years but

subsequently it was agreed to give option

to the defendant for another period of 20

years. The terms and conditions of the

partnership deed were onerous to the

defendant. Irrespective of whether the

business made profit or not the plaintiff

was guaranteed a minimum income of Rs.

2,000/- per month whereas the plaintiff

suffered no loss on account of the business

running losses. The defendant had been

maintaining regular accounts of the firm

and after the scrutiny and approval of the

plaintiff those accounts were submitted to

the Income Tax Department. At the

instance of the second son and the General

Power of Attorney (GPA) holder of the

plaintiff, the defendant stopped payment

of minimum profit of Rs. 2,000/-per month

to the plaintiff till the clearance of the

amount due to Income Tax Department.

The defendant had always been ready and

willing to pay the amount due to the

plaintiff as and when the plaintiff

obtained clearance from the Income Tax

Department. The plaintiff never whispered

any doubt about the correctness of the

accounts. The Plaintiff No.2 who is the

GPA holder of the original plaintiff (since

deceased) had been acting in a highly

irresponsible manner detrimental to the

interest of the parties. The alleged gravity

of distrust is a result of the willful actions

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on part of the G.P.A holder of the plaintiff

who sought to take advantage of the

deteriorating mental and physical

condition of the plaintiff. The plaintiff had

not issued any notice alleging any

contravention of the terms and conditions

of the partnership deed and the business

was made for a specific period subject to

the option of the defendant. The present

suit was frivolous and misconceived and

therefore was liable to be dismissed with

costs.”

4.By the judgment and order dated 18

th

of January, 1999,

the VIIth Senior Civil Judge, City Civil Court, Hyderabad,

decreed the suit and passed a preliminary decree of

dissolution and for rendition of accounts. The defendant was

further directed to hand over the entire property with allied

structure and other materials to the plaintiff.

The trial court framed the following issues for trial:

a)Whether the plaintiffs are entitled for dissolution of the

partnership firm as prayed for?

b)To what relief ?

5.After examining the oral and documentary evidence

adduced by both the parties, and after verifying the relevant

6

provisions of the Partnership Act the Trial Court, inter alia,

arrived at the following findings:

“The Partnership firm stood dissolved by the death of the

original plaintiff (since deceased) on 17

th

of May, 1996. Since

there was no mutual confidence between the parties and as

there had been severe disputes since 1988, carrying on the

business of the firm became practically impossible. It was

further held that since the legal representatives of the original

plaintiff (since deceased), the appellants before us, were not

agreeable to enter into partnership with the defendant and in

view of the dissolution of the partnership due to the death of

the original plaintiff, the necessary consequence was rendering

of accounts and complying with the other terms of the

partnership deed. It was ultimately held that there was

deemed dissolution of the partnership firm with effect from

17

th

of May, 1996 due to the death of the original plaintiff

(since deceased) and consequently the appellants, her legal

7

representatives, were entitled for rendition of accounts and to

be handed over the entire cinema theatre with allied

structures as per Clause 24 of the deed of partnership within

three months from the date of the judgment. But the Trial

Court recorded a finding that there was no mismanagement by

the defendant as alleged in the plaint.”

6.As noted herein earlier, after the suit was decreed and

before an appeal was preferred from the same, the defendant

in the said suit died and his legal representatives were brought

on record before the First Appellate Court.

7.Feeling aggrieved by the order of the VIIth Senior Civil

Judge, City Civil Court, Hyderabad, the respondents, the legal

representatives of the defendant, preferred an appeal before

the XIIIth Addl. Chief Judge, (Fast Track Court), City Civil

Court, Hyderabad. The appellants also filed cross objections

praying that it should be held there was dissolution of the firm

on account of mismanagement. The First Appellate Court, by

an order dated 17

th

of October, 2001, dismissed the appeal

8

confirming the judgment and decree of the trial court and

allowed the cross objections filed by the Appellants. The issue

framed by the First Appellate Court was as follows:

a)Whether the plaintiffs are entitled for the dissolution of

partnership firm?

8.The Appellate Court, on the question of dissolution of the

partnership firm, concurred with the findings of the Trial

Court, holding that since there were only two partners in the

partnership firm and as one of the partner died there was no

scope and possibility to continue the partnership firm. The

appellate court further held that the Respondents could not

rely upon clause 24 of the Partnership Deed which stipulated

that after the expiry of 42 years the land as well as the

building with the fixtures etc., would be vested with the

original plaintiff (since deceased).

9.On the question of mismanagement of the accounts of

the firm, the Appellate Court had allowed the cross objections

preferred by the appellants. The respondents did not disclose

9

the accounts and they were ignorant of the amounts and the

profits to which appellants were entitled to. The respondents

also did not produce the corresponding ledger and cash books.

In the light of these findings it was held that the management

of the account was not proper.

10.Aggrieved by the order of the First Appellate Court dated

17

th

of October, 2001, the Respondents took an appeal before

the High Court of Andhra Pradesh at Hyderabad. The High

Court, by its judgment and order dated 9

th

of April, 2006,

allowed the appeal in part and substantially modified the

judgment and decree of the trial court.

11.The issues that were raised for consideration of the High

Court were as follows:

(1) Whether the partnership firm stood dissolved by virtue of

Section 42 (c) of the Indian Partnership Act on account of the

death of the plaintiff No.1 ?

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(2) Whether there was mismanagement of the business of the

partnership firm by the defendant No.1 as he failed to

maintain proper accounts?

(3) Whether the partnership can be treated as a license as

contended by the defendant-appellants ?

(4) Whether the land given by the plaintiff No.1 and the theatre

constructed by the defendant No.1 was the properties of the

firm liable to be shared as per the shares of the respective

partners?

(5) Whether the Courts below were justified in directing

delivery of the land along with the structures, machineries and

equipments to the plaintiff on account of the dissolution of the

partnership firm?

(6) Whether the plaintiff was entitled for rendition of accounts

from the date of commencement of the firm till the date of

dissolution?

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12.The findings of the High Court as to these issues raised

were as follows.

1)As to the point of the dissolution of the firm, the

respondents submitted that since the parties agreed that

in spite of the death of any of the partners, the firms

shall continue for 42 years irrespective of the death of the

original plaintiff (since deceased) in respect of the

partnership deed after examining the relevant provision

of the Partnership Act, the Court concurred with the

findings of the Trial Court and the First Appellate Court.

To reach this conclusion, the High Court had placed

reliance on the following decisions of this Court, namely,

CIT v. Suraj Bhan Omprakash, [1986 ITR 833] and Smt.

S. Parvathammal v. CIT, [1987 ITR 161].

2) On the question of mismanagement of the firm, the High

Court held that the First Appellate Court was right in

holding that there was mismanagement on the grounds

of (i) non production of the account books for the

1

verification of the original plaintiff (since deceased); (ii)

the non inclusion of the certain amounts received by way

of income in the accounts, (iii) the non submission of

correct accounts to the income tax department and (iv)

the failure of the original defendant(since deceased)

apprising the original plaintiff(since deceased) about the

profits and losses of the firm.

3)The Respondents pleaded that in the event the court

comes to a conclusion that the firm stood dissolved, the

partnership deed was to be treated in the nature of

license. The High Court held that the respondent could

not deny their liability under the other terms of

Partnership deed, at the same time, seeking benefit from

the same. The respondents laid undue stress on Clause

20 of the partnership deed, which showed that the deed

was one of partnership and that both parties had acted

upon it. Once the issue of dissolution was already

decided against him on the basis of Section 42 of the Act

1

and also Clause 20, he could not urge the Court to

construe the same as a license, since both these pleas

were irreconcilable with each other.

4)In relation to the question of property of the partnership

firm, the Court examined Section 14 of the Partnership

Act, 1932, the legal position and the terms of the

contract between the parties. Section 14 defines what a

property of the firm is. It is subject to the contract

between the parties. According to this section, the

property of the firm includes all properties and rights and

interests in property originally brought into the stock of

the firm or acquired by purchase or otherwise by or for

the firm or for the purposes and in the course of the

business of the firm and includes also the goodwill of the

business. The general rule laid down in the section

"subject to contract between the parties" makes it clear

that the partners may agree between themselves to

1

change the general rule and such an agreement may be

expressed or implied.

In the partnership deed, it was clearly mentioned that the

“1

st

party” (original plaintiff) offered her land towards her

two-anna share capital for the construction of cinema

theatre and other allied constructions for running a

cinema business. The “2

nd

party” (Original defendant)

agreed to construct cinema theatre and other allied

constructions by procuring the necessary funds. It was

agreed that the 1

st

party would not be bound to

contribute any amount towards such constructions. In

the light of Section 14 of the Act and in the light of the

decision of Boda Narayana Murthy & Sons v. Valluri

Venkata Suguna, [AIR 1978 AP 257], the High Court

held that the land and the cinema were not the

properties of the firm and they were the properties of the

respective parties.

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5)In relation to the question of directing delivery of the land

along with the structures, machineries and equipments

to the appellants on account of the dissolution of the

partnership firm, the High Court came to a conclusion

that the direction for delivery of the entire property to the

Appellants would cause prejudice to the rights of the

Respondents and would put them to loss. Since the

partnership got dissolved on account of the death of the

original plaintiff (since deceased), it would be just and

reasonable if each party is directed to take their

respective properties. But, in view of the embedding of

the walls, the flooring, pillars etc., to the land of the

original plaintiff (since deceased), it may not be possible

for the Respondents to realize the value of the entire

building. Further, the High Court held that the

appellants were entitled to have exclusive possession of

the land and respondents were entitled to take away the

projectors and the other machineries, the furnitures and

1

all other items, which can be safely removed from their

place and the Appellants should pay the Respondents the

value of the remaining portions of the structures which

could not be removed without any damage, after proper

valuation of the same.

As the First Appellate court held that the management of

the account of the firm was not proper, with which the

High Court was also in agreement, the High Court noted

that the amount, if any, due to the Appellants after

rendition of the account of the firm shall be determined.

It was observed that the trial court also asked for

rendition of accounts on the dissolution of the firm.

6)As for the rendition of accounts, the High Court

concurred with the findings of the Courts below.

13.The High Court finally concluded that:

“The defendants are permitted to take away the

machineries, the equipments, the furnitures and all

other items including the material of the structure to

the extent possible and deliver possession of the

land with the remains of the structure which could

not be removed on account of impossibility due to

1

embedding of those structures to the land. The

defendants are entitled to get the value of such

remaining structures assessed through a qualified

technical expert and are entitled to get the value of

such structures from the plaintiffs after adjustment

of the amount, if any, found due to the plaintiffs after

finalisation of the accounts which are going to be

rendered by them. If the amount due to the 1st

plaintiff towards profit of the business to the extent

of her share, is more than the value of the remaining

structures, the plaintiffs are entitled to recover the

same from the defendants.”

14.Feeling aggrieved by the order of the High Court, the

Appellants and Respondents filed the present special leave

petitions, which on grant of leave, were heard in the presence

of the learned counsel for the parties.

15.Before us the pivotal issues which were raised by the

parties are as follows:

a)Whether the High Court was justified in permitting the

Respondents in raising a question for the first time in

second appeal, which was not in the pleading before the

Trial Court or the First Appellate Court?

1

b)Whether the High Court was justified in holding that

there had been dissolution of the partnership firm on

account of death of a partner?

c)Whether the High Court was justified in permitting the

Respondents to remove the movables from the disputed

property, contrary to the deed of partnership entered

into between the original plaintiff and the original

defendant?

16.We have heard the learned senior counsel for the parties

and examined the impugned judgment and the materials on

record.

17.As to the issue raised by the Appellants that the High

Court was not justified in permitting the Respondents to raise

a new plea for the first time in the second appeal, we may at

the outset note that we do not find any substance in this

contention raised by the learned counsel for the appellants.

They contended that the High Court committed an error of law

in considering a new ground of challenge without any plea or

1

factual background neither before the Trial Court nor the first

appellate court. The new plea which was allegedly raised

before the High Court for the first time was that all assets of

the firm including the land and building shall be dealt with

under Section 48 of the Act and the proceeds shall be

disbursed to the two partners in accordance with the

respective shares as per the partnership deed. The High Court

as can be seen from the record had dismissed this plea. The

Respondents have not appealed against the said finding of the

High Court. That apart, when a question of law is raised on

the basis of the pleadings and evidence on record which might

not have been raised before the courts below, it is difficult to

hold that such question of law cannot be permitted for the first

time before the High Court. Therefore, we do not see how the

Appellants are aggrieved by this finding of the High Court even

assuming the High Court had formulated a new question of

law, which was not raised before the Courts below.

2

18.In the case of Hardayal Gir v. Sohna Ram, [1970 (3)

SCC 635], this Court had set aside the judgment of the High

Court which allowed the plaintiff to raise a plea of

misrepresentation, raised for the first time in the second

appeal. In that case, however, the High Court held that the

contract had become unenforceable on account of the plea of

misrepresentation. Hence, the defendant in that case was

indeed aggrieved as the High Court had allowed a plea which

he could not have defended properly. In the case at hand, the

plea in question, assuming it had been raised for the first

time, had been rejected by the High Court, and there had been

no appeal from the said finding.

19.The Respondents relied on the following decisions:

Chandra Singh v. State of Rajasthan [(2003) 6 SCC 545], in

which case this Court enunciated the principles governing the

exercise of its jurisdiction under Article 136 of the

Constitution of India; and Santakumari & Ors. v. Lakshmi

Amma Janaki Amma (D) By Lrs. & Ors., [(2000) 7 SCC 60]

2

in which decision this Court, after examining the orders of the

Courts below arrived at a conclusion that the Second Appellate

Court had not made out a new plea by merely interpreting the

documents and by putting a form to the nature of transactions

in question. In the light of our views expressed hereinabove on

this issue, we do not find it necessary to further delve into this

matter. Suffice it to say that as held in the case of

Santakumari (supra), this Court would not exercise its

powers under Article 136 of the Constitution, until grave

injustice is shown to be caused to the party by way of the

impugned order.

20.The sole issue raised by the Respondents in this appeal,

who are the appellants in Appeal No. 4411-4412 /2002, is

whether the finding of the Courts below that the Partnership

firm stood dissolved on account of death of one of the partners

was correct in the light of the express provisions of the

Partnership Act, namely, Section 42 (c) of the same. Before we

proceed to examine the correctness of this concurrent findings

2

arrived at by the Courts below, it is necessary to examine the

relevant provisions of the Partnership Act, 1923 and the

relevant clauses of the partnership deed entered between the

original plaintiff and the original defendant.

“Partnership” is defined under Section 4 of the Act which

reads as under:

“Partnership is the relation between persons

who have agreed to share the profits of a

business carried on by all or any of them

acting for all”.”

21.Section 42 of the Act reads as under:

“Dissolution on the happening of certain

contingencies:--Subject to contract between the

partners a firm is dissolved-

(a) if constituted for a fixed term, by the expiry

of the term;

(b) if constituted to carry out one or more

adventures or undertakings, by the completion

thereof;

(c) by the death of a partner; and

(d) by the adjudication of a partner as an

insolvent.”

2

22.Dissolution of a partnership firm on account of death of

one of the partners is subject to the contract entered into by

the parties. In this context, it is pertinent to refer to the terms

of the deed of partnership.

23.Clause 22 of the Partnership deed reads as follows:

“The partnership shall be in force for a

period of 42 years certain from this date and

the death of any partner shall not have the

effect of dissolving the firm.”

This clause clearly states that death of any partner shall

not have the effect of dissolving the firm. However, in the facts

and circumstances of the case, we are not in a position to give

absolute effect to this clause of the deed of partnership.

24.The learned counsel for the Respondents contended that

since the parties agreed that in spite of the death of any of the

partners, the firm shall continue for 42 years irrespective of

the death of the original plaintiff (since deceased). They

further, argued that it clearly contemplates that the legal

2

representative of the partner, who dies, would be under a duty

to enter into a fresh deed of partnership. The legal

representatives were precluded from claiming benefits if they

deny entering into a fresh partnership agreement.

25.In order to arrive at the conclusion that the partnership

firm stood dissolved on account of death of one of the

partners, the High Court had rightly placed reliance on Smt.

S. Parvathammal v. CIT (1987 Income Tax Reports 161),

wherein this Court held that in a firm consisting of two

partners on account of death of one of the partners, the firm

automatically dissolved and observed as follows:

“A partnership normally dissolves on the death

of the partner unless there was an agreement

in the original partnership deed. Even

assuming that there was such an agreement in

a partnership consisting of two partners on the

death of one of them the partnership

automatically comes to an end and there is no

partnership which survives and into which a

third party can be introduced. Hence on the

death of S, the original partnership was

dissolved. The subsequent taking in of the

assessee as a partner was only as a result of

entering into of a new partnership between R

2

and the assessee. Partnership was not a matter

of heritable status but purely one of contract.”

26.In the light of aforementioned case, it is clear that when

there are only two partners constituting the partnership firm,

on the death of one of them, the firm is deemed to be dissolved

despite the existence of a clause which says otherwise. A

partnership is a contract between the partners. There cannot

be any contract unilaterally without the acceptance by the

other partner. The Appellants, the legal representatives of

original plaintiff (since deceased) was not at all interested in

continuing the firm or constitute a fresh firm and they cannot

be asked to continue the partnership, as there is no legal

obligation upon them to do so as partnership is not a matter of

heritable status but purely one of contract, which is also clear

from the definition of partnership under Section 4. Therefore,

the trial court was justified in holding that the firm dissolved

by virtue of death of one of the partners and the first appellate

court as well as the High Court have taken the correct view in

upholding the same.

2

27.As to the issue related to removing the movables from

Anand Cinema and allowing the Respondents to recover the

value of the building and structures embedded to the land,

from the appellants, we should examine the relevant provision

of the Act and the relevant clause of the partnership deed.

28.Section 14 of the Partnership Act talks about the

property of the firm. It reads as follows:

“Subject to contract between the partners, the

property of the firm includes all property and

rights and interest in property originally

brought into the stock of the firm, or acquired,

by purchase or otherwise, by or for the firm for

the purposes and in the course of the business of

the firm, and includes also the goodwill of the

business.

Unless the contrary intention appears,

property and rights and interest in property

acquired with money belonging to the firm are

deemed to have been acquired for the firm.”

29.In addition to this, it is necessary to examine the certain

clauses of the Partnership deed, which were entered between

the original plaintiff and the original defendants.

2

Clause 24 -

"The Party of the Second Part hereby declares,

covenants and agrees that at the end of the

period of forty two (42) years, this partnership

shall automatically come to an end and

thereafter the entire property, that is land,

buildings, constructions, machineries,

equipment, furniture, fixture, fittings etc.,

shall automatically vest in the party of the

first part in "As is where is" condition. Neither

party shall be entitled to remove any item or

property except for replacement by the firm

during the subsistence of this Partnership

Firm"

30.The learned counsel for the Appellants contended that

the High Court was in error in allowing the Respondents to

remove the movables from Anand Cinema and in holding that

they are entitled to the value of the building and structures

embedded to the land, from the Appellants. Further, he argued

that the High Court had concurrently found that the

partnership is dissolved by operation of law and

mismanagement by the Respondents and therefore by virtue of

Clause 24 of the deed, the Appellant was entitled to get the

2

entire Anand cinema hall, which was admitted by the

Respondent during his examination.

31.The learned counsel for the appellants on the question of

the partnership property relied on various cases of this Court.

In the case of Arjun Kanoji Tankar v. Santaram Kanoji

Tankar [(1969) 3 SCC 555], this Court held that “the property

belonging to a person, in the absence of an agreement to the

contrary does not, on the person entering into a partnership

with others, become the property of the partnership merely

because it is used for the business for partnership. It will

become property of the partnership only if there is an

agreement express or implied at the property was, under the

agreement of partnership, to be treated as the property of the

partnership.” [Emphasis supplied]

32.The same view has been reiterated in the case of Arm

Group Enterprises Ltd. v. Waldorf Restaurant, [(2003) 6

SCC 432].

2

33.The learned counsel for the Appellant placed reliance on

Halsbury’s Law of England, to determine how to construe a

partnership agreement. Paragraph 39 of the Halsbury’s Law of

England (4

th

Edition) states as follows:

“Partnership agreements, like any other

agreements, will be construed according to

normal canon of construction, so that a court

will construe a partnership agreement in the

light of partners objectives, and terms may be

implied by the Court to give the agreement

business efficacy.”

34.In the case of Mills v. Clarke, [1953 (1) AER 779] the

defendant started the business of a photographer and then

admitted the plaintiff- a successful freelance photographer as

a partner. The leasehold premises, furniture and studio

belonged to the defendant. It was intended to record the terms

of partnership into a formal agreement, but no terms were ever

settled, except that the partners were to share the profits

equally. On dissolution of the partnership it was held that no

terms ought to be implied except such as were essential to

business efficacy and that only consumable items of stock-in-

3

trade were to be regarded as assets of the partnership, and the

lease of the property, equipment and personal goodwill were to

be treated as being the property of the partners who brought

them into business.

35.The learned counsel for the Respondents contended that

as per clauses 11 and 13 of the deed, the land, the building

and the machinery became the property of the firm and the

said property has to be treated as the property of the firm

under Clause 21 and learned counsel for the respondents

further submitted that as the plaintiff’s share was only 2 anna

as per clause 4, the value of the above properties of the firm

shall be distributed in the ratio of 2:14 between them.

36.The learned counsel for the respondents relied on various

cases of this court. In the case of Commissioner of Income

Tax, Madhya Pradesh v. Dewas Cine Corporation, [(1968) 2

SCR 173], this Court held that “a partner may, it is true, in an

action for dissolution insist that the assets of the partnership

be realised by sale of its assets, but where in satisfaction of

3

the claim of the partner to his share in the value of the residue

determined on the footing of an actual or notional sale

property is allotted, the property so allotted to him cannot be

deemed in law to be sold to him.

37.Under the Partnership Act, 1932, property which is

brought into the partnership by the partners when it is formed

or which may be acquired in the course of the business

becomes the property of the partnership and a partner is,

subject to any special agreement between the partners,

entitled upon dissolution to a share in the money representing

the value of the property.”

38.In the case of Narayanappa v. Krishtappa, [(1966) 3

SCR 400], the issue was whether on relinquishment of rights

by partners of an erstwhile partnership, there was a transfer of

immovable property, which required to be registered to

constitute a valid transfer. This Court observed:

“No doubt, since a firm has no legal existence,

the partnership property will vest in all the

partners and in that sense every partner has an

interest in the property of the partnership.

3

During the subsistence of the partnership,

however, no partner can deal with any portion of

the property as his own…His right is to obtain

such profits, if any, as fall to his share from

time to time and upon dissolution of the firm to

share in the assets of the firm which remain

after satisfying the liabilities set out in S.48.

The whole concept of partnership is to embark

upon a joint venture and for that purpose to

bring in as capital money or even property

including immovable property…The person who

brought it in would, therefore, not be able to

claim any exclusive right over any property

which he has brought in, much less over any

other partnership property.”

39.This principle was reiterated in the case of Malabar

Fisheries Co. Calicut v. CIT, [(1979) 4 SCC 766].

40.In the case of S.V. Chandra Pandian v. S.V. Sivalinga

Nadar [(1993) 1 SCC 589], this Court held that:

“In the entire asset of the firm all the partners

have an interest albeit in proportion to their

share and the residue, if any, after the

settlement of accounts on dissolution would

have to be divided among the partners in the

same proportion in which they were entitled to

a share in the profit… The mode of settlement

of accounts set out in Section 48 clearly

indicates that the partnership asset in its

entirety must be converted into money from the

pool disbursement has to be made…”

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41.In the light of the argument advanced by the learned

counsel for the parties, the relevant provisions of the Act and

the clauses of the deed, we do not find any infirmity in the

reasoning given by the learned Judge of the High Court. It is

true that there was no intention from either of the parties to

treat these properties as the properties of the firm. A careful

perusal of Clause 24 clearly indicates that the land as well as

the building with the fixtures etc., to be vested with the

original plaintiff (since deceased), after the expiry of term of 42

years. It is also true that directing the delivery of the entire

property to the appellant would cause prejudice to the rights

of the Respondents and would put him to loss. As noted

hereinabove, the partnership got dissolved on the death of the

original plaintiff (since deceased), it would be reasonable to

allow both the parties to take their respective properties. The

Appellants are entitled to the exclusive possession of the land

and the Respondents are entitled to take away the movables

from the property and recover the value of the buildings and

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structure embedded to the land. It has to be assessed by the

technically qualified person. The Appellants are liable to pay

the value of the remaining structures after adjusting the

amount if any due to the Appellants.

42.Accordingly, we do not find any merit in these appeals

and the appeals are thus dismissed. There will be no order as

to costs.

……………………J.

[Tarun Chatterjee]

New Delhi; ………………………J.

January 05, 2010. [V.S.Sirpurkar]

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