2026 INSC 979

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 8167 OF 2017

V. SUMITRA REDDY & ANR. …APPELLANT(S)

VERSUS

K. RANGANADHA REDDY & ORS. ....RESPONDENT(S)

J U D G M E N T

UJJAL BHUYAN, J.

In this appeal, challenge has been made to the

judgment and order dated 09.04.2012 passed by the then High

Court of Judicature of Andhra Pradesh at Hyderabad (briefly

the ‘High Court’ hereinafter) in Civil Revision Petition No. 1554

of 2011 filed by the first respondent.

2. The issue involved pertains to the share of the first

respondent in the assets of the partnership firm on its dissolution.

2

Pertinently, the issue centers around the interpretation of the

provisions of Sections 46 and 48 of the Indian Partnership Act,

1932 (briefly ‘the Partnership Act’ hereinafter) in the context of

Sections 7 and 43 thereof.

3. At the outset, relevant facts may be noted.

4. In the year 1964, the following persons constituted a

partnership firm under the name and style of M/s Viraj

Constructions:

(1) Kasireddy Lakshmi Narayana Reddy,

(2) Vallappareddy Sundara Ram Reddy,

(3) Vardhireddy Mohan Krishna Reddy,

(4) Vallappareddy Kodanda Ram Reddy, and

(5) Vallappareddy Sumitra Reddy.

4.1. Be it stated that Kasireddy Lakshmi Narayana Reddy

is the father of the first respondent and the plaintiff in the

original suit. Vallappareddy Sundara Ram Reddy is the father-

in-law and father of appellant Nos. 1 and 2 i.e. Vallappareddy

Sumitra Reddy and Vallappareddy Raja Gopal Reddy. Appellant

3

No. 1 herself is the fifth partner of the aforesaid partnership

firm.

5. The principal business of the partnership firm was

carrying on construction works with the Railways. It is not in

dispute that the partnership was at will. Terms and conditions

of the partnership were reduced into writing in the partnership

deed dated 31.12.1964.

6. A new partner, Vardhireddy Dashrat Rami Reddy,

was admitted to the partnership firm on 13.12.1968 with the

consent of all the partners. Accordingly, a new partnership deed

dated 13.12.1968 came to be executed by and between the

partners. The respective shares of profit and loss amongst the

partners were divided in the following manner:

(1) Kasireddy Lakshmi Narayana Reddy- 25 percent out

of 100.

(2) Vallapareddy Sundara Ram Reddy - 17 percent out of

100.

(3) Vardhireddy Dashrat Rami Reddy - 10 percent out of

100.

4

(4) Vardhireddy Mohan Krishna Reddy - 15 percent out

of 100.

(5) Vallappareddy Kodanda Ram Reddy - 16 percent out

of 100.

(6) Vallappareddy Sumitra Reddy - 17 percent out of

100.

7. In the course of its business, a landed property to the

extent of Ac. 3.27 Guntas bearing survey Nos. 28/1, 28/2 and

28/3 situated at Begumpet, Hyderabad was acquired in the

name of the partnership firm (though there appears to be some

confusion regarding the actual date of purchase of the land,

either 25.06.1966 or 05.09.1975).

8. Some of the partners mooted a proposal that if

Kasireddy Lakshmi Narayana Reddy retired from the

partnership firm, a promissory note for a sum of Rs. 22,500.00

towards his share would be executed. They also assured

settlement of accounts as and when required. In response to

such a proposal, Kasireddy Lakshmi Narayana Reddy decided

to retire from the partnership firm. He circulated a letter dated

03.03.1970 to all the partners stating that he would be retiring

5

from the partnership on and from 01.04.1970. As promised and

assured, a promissory note was executed on 17.07.1970 in

favour of Kasireddy Lakshmi Narayana Reddy for a sum of Rs.

22,500.00, agreeing to pay the said amount together with

interest at the rate of 12 percent per annum.

9. As payment of the said amount was not made despite

demand being made, Kasireddy Lakshmi Narayana Reddy

instituted a civil suit being O.S. No. 128 of 1975 in the Court of

Additional District Judge, Nellore for recovery of a sum of Rs.

30,457.50 being the amount due under the aforesaid

promissory note dated 17.07.1970. Partners of the partnership

firm contested the suit taking the stand that the partnership

firm was not dissolved. Consequently, Kasireddy Lakshmi

Narayana Reddy did not retire and continued to be a partner of

the partnership firm. Therefore, he was not entitled to any of

the reliefs sought for in the suit.

10. Additional District Judge, Nellore vide the judgment

and decree dated 04.05.1979 dismissed O.S. No. 128 of 1975,

agreeing with the contentions advanced on behalf of the

6

defendants. The consequence of such dismissal of the suit

would mean that the partnership firm continued to remain in

existence and Kasireddy Lakshmi Narayana Reddy did not retire

from the partnership firm.

11. Kasireddy Lakshmi Narayana Reddy thereafter preferred

a first appeal against the judgment and decree dated 04.05.1979

which was registered as ASSR No. 90685 of 1979 before the High

Court. However, vide the order dated 02.11.1983, the first appeal

was dismissed as not pressed. Thus, the judgment and decree

dated 04.05.1979 passed in O.S. No. 128 of 1975 became final

and binding between the parties.

12. In the meanwhile, on 15.10.1983, Kasireddy

Lakshmi Narayana Reddy sent a legal notice to all the remaining

partners of the partnership firm stating that he was unable to

continue in the said partnership firm and called upon them to

dissolve the partnership firm. He also sought for rendition of

accounts and his share in the profits and properties of the

partnership firm.

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12.1. As he did not receive any response, he filed O.S. No.

1601 of 1983 in the Court of Additional Judge, City Civil Court,

Hyderabad against the remaining partners of the partnership

firm and Andhra Bank, Sultan Bazar, Hyderabad seeking the

following reliefs:

(i) to direct the defendants to render accounts of the

dissolved partnership firm and in the event of their

failure to do so, a Commissioner be appointed for

scrutiny of books of account and to ascertain the

profits; and

(ii) to pay the amount found due to the plaintiff

(Kasireddy Lakshmi Narayana Reddy) together with

interest at the rate of 12 percent per annum.

13. It may be mentioned that prior to institution of O.S. No. 1601

of 1983, one of the partners Vallapareddy Sundara Ram Reddy passed

away. Consequently, his legal representatives were added as

defendants in the suit. During the pendency of the suit, another

partner, Vardhireddy Dashrat Rami Reddy died, following which

his legal representatives Smt. Vardhireddy Tulsamma and

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Vardhireddy Rajasekhar Reddy, being his wife and son, were

brought on record as defendants in the suit.

14. After consideration of the issues framed, the evidence

brought on record and having due regard to the rival

contentions of the parties, learned trial court passed a

preliminary decree on 06.11.1995 in the following terms:

1. plaintiff is entitled to 0.25 ps. share out of 100 ps.

capital amount of the partnership firm M/s. Viraj

Constructions;

2. defendant Nos. 1 to 6 and defendant Nos. 8 and 9 are

hereby directed to render accounts on or before

31.03.1996 to the plaintiff towards his share of the

partnership up to 31.03.1970;

3. if the defendants fail to render accounts as directed

above, the plaintiff is at liberty to file a petition to pass

a final decree for appointment of a Commissioner for

settlement of accounts of the partnership firm in terms

of this preliminary decree;

9

4. plaintiff is entitled to claim interest at 12% p.a. on the

amount found to be due to him towards his share after

settlement of accounts, from 01.04.1970 onwards till

the date of realization;

5. the suit as against defendant No. 7 is dismissed;

6. defendant No. 7 shall bear his own costs of the suit;

and

7. defendant Nos. 1 to 6, 8 and 9 to pay to the plaintiff

a sum of Rs. 4,788.00 towards costs of the suit.

15. Feeling partly aggrieved by the preliminary decree

dated 06.11.1995, the plaintiff i.e. Kasireddy Lakshmi Narayana

Reddy preferred a first appeal before the High Court which was

registered as CCCA No. 52 of 1999. The defendants i.e. the

appellants herein preferred cross objection.

16. The High Court vide the order dated 28.03.2001

disposed of CCCA No. 52 of 1999 as well as the cross objection

by modifying the preliminary decree dated 06.11.1995 in the

following manner:

10

As the partnership is at will, under Section 43 of the

Partnership Act, soon after the partner has expressed his

willingness to dissolve the partnership firm, after giving

notice, the partnership firm M/s. Viraj Constructions was

dissolved on 18.10.1983 and the defendants 1 to 6, 8 and

9 are liable to render the accounts to the plaintiff

towards his share upto 18.10.1983 and if any

amount is due payable to the appellant, from out of

the profits of the partnership firm, he is entitled to

receive the same with interest at 12% per annum

till the date of realization.

17. At this stage, it may be mentioned that during the

pendency of the first appeal before the High Court, defendant

No. 8 i.e. Vardhireddy Dashrat Rami Reddy died and he was

substituted by his legal representatives Vardhireddy Mohan

Krishna Reddy and Vardhireddy Rajasekhar Reddy (respondent

Nos. 2 and 6 in the present appeal).

18. Original plaintiff Kasireddy Lakshmi Narayana Reddy

thereafter filed an interlocutory application in O.S. No.

1601/1983 i.e. IA No.1247/2001 for passing final decree by

appointment of a Commissioner and to direct him to take over

possession of the assets of the partnership firm including the

11

land admeasuring Ac. 3.27 Guntas situated at Begumpet,

Hyderabad (referred to hereinafter as ‘the land in question’) and

to settle the accounts of the partnership firm including the

share of the plaintiff in terms of the preliminary decree dated

06.11.1995 as modified by the High Court on 28.03.2001.

19. The said interlocutory application was contested by

the defendants. However, the trial court i.e. the City Civil Court

rejected such objection vide the order dated 25.11.2002 and

appointed Shri J. Prabhakar, Advocate as the Commissioner for

execution of the warrant.

20. Defendants filed application for review of the order

dated 25.11.2002. By order dated 26.04.2004, the City Civil

Court allowed the review petition by recalling its order dated

25.11.2002 to the extent of directing the Commissioner to take

possession of the assets of the dissolved firm. The City Civil

Court accepted the plea of the defendants that as per the

preliminary decree, as modified, the plaintiff is only entitled to

his share in the profits of the business of the partnership firm

till 18.10.1983. Therefore, he is not entitled to any share in the

12

properties of the firm which is being run by the remaining

partners. It was clarified that the question of selling of property

would arise only when the other partners fail to pay the amount

to the plaintiff.

21. Assailing the review order dated 26.04.2004, plaintiff

filed CMA No. 1485 of 2004 before the High Court.

22. In the meanwhile, plaintiff filed an interlocutory

application before the City Civil Court being IA No. 655/2003

for appointment of an advocate as a Commissioner to sell the

property whereas defendant Nos. 4 and 5 filed another

interlocutory application before the said court being IA No.

892/2005 for appointment of a chartered accountant or a

person who is well versed in accounts as the Commissioner for

determining the value of the share of the plaintiff as on

18.10.1983 in the dissolved partnership firm. The City Civil

Court dismissed the interlocutory application filed by the

defendants and allowed the interlocutory application of the

plaintiff vide the order dated 25.07.2006. City Civil Court held

that the preliminary decree had not limited the right of the

13

plaintiff to receive the value of his share as on 18.10.1983 in

the assets of the dissolved firm and that his rights will exist till

passing of the final decree.

23. Feeling aggrieved by the order dated 25.07.2006

passed in IA No. 655/2003, the defendants filed CRP No.

3825/2006 before the High Court.

24. Assailing the above order dated 25.07.2006 passed

by the City Civil Court in IA No. 892/2005, defendants also filed

CRP No. 4063 of 2006 before the High Court which was

dismissed at the admission stage on 13.10.2006. The special

leave petition filed against the order dated 13.10.2006 was

dismissed by this Court on 05.01.2007.

25. Both CMA No. 1485 of 2004 and CRP No. 3825 of

2006 came to be disposed of by a common judgment and order

dated 30.01.2009 passed by a learned Single Judge of the High

Court. On a detailed consideration of the respective pleas of the

parties, the High Court set aside the review order dated

26.04.2004 and after referring to the provisions of Sections 46

and 48 of the Partnership Act, held as follows:

14

27. ……… The language of the above section is very

clear that the outgoing partner is entitled to get his

share of profits out of the assets also in addition to

other sources available for them for distribution

after discharging the liabilities of third parties.

When once there is a preliminary decree in favour

of the plaintiff for ascertaining the profits on

verification of the accounts rendered by the other

partners, value of the movable and immovable

properties of the firm has to be ascertained and if

the other partners who are running the subsequent

partnership business are ready to pay the share of

the plaintiff, there would not be any problem.

Otherwise, the properties have to be brought to sale

and the sale proceeds have to be distributed

rateably as per their share in the partnership firm.

25.1. High Court noted that the receiver, who was

described as the Commissioner, was appointed under Order XL

of the Code of Civil Procedure, 1908 (briefly ‘the CPC’ hereafter)

and that he had taken over possession of the land in question

after getting the said land surveyed through the Mandal

Surveyor and on verification of the TSLR record. After rejecting

the plea of the defendants that the Commissioner (receiver)

15

ought not to have been appointed, the High Court held that

under Order XL of the CPC, the receiver is entitled to take

possession of the property whereafter the High Court issued the

following directions:

30. ....... Now the Commissioner has to take steps

to get the value of the property assessed. After

determining the value of the property, if the other

partners come forward to pay 25% of the value of

the property after deducting the liabilities, if any,

the properties can be left to the partners after

satisfying the share of the plaintiff, otherwise, the

property has to be sold to realize the amount for the

purpose of distribution. If the parties come to an

understanding, the plaintiff may also take 25% of

the land towards his share instead of selling the

property for the purpose of distribution of the same

out of the sale proceeds among the partners ....

25.2. In view of the aforesaid findings, CMA No. 1485 of

2004 came to be allowed and CRP No. 3825 of 2006 was

dismissed.

26. Thereafter, the plaintiff filed I.A. No. 541 of 2009 before

the trial court under Order VII Rule 7 CPC and Section 47 of the

16

Partnership Act for a direction to the advocate Commissioner to

sell the land in question and to pay 25% of the sale proceeds to

him after discharging the liabilities of the partnership firm,

towards his share, while passing the final decree.

27. However, the trial court accepted the plea of the

defendants that all that the plaintiff was entitled to receive is

the value of the partnership assets assessed as on 18.10.1983

and that he is not entitled to insist on the sale of the property

and receive 25% of the sale proceeds. Accordingly, the trial

court dismissed I.A. No. 541 of 2009 vide the order dated

28.04.2010.

28. In the meanwhile, the original plaintiff Kasireddy

Lakshmi Narayana Reddy died, and the first respondent K.

Ranganadha Reddy filed CRP No. 1554 of 2011 as his legal

representative before the High Court assailing the order dated

28.04.2010.

29. By way of the impugned judgment and order dated

09.04.2012, the High Court allowed the civil revision by setting

aside the order dated 28.04.2010. Consequently, the High

17

Court allowed the interlocutory application filed by the plaintiff

i.e. IA No. 541/2009 by holding that unless the parties mutually

agree to settle their shares and file a joint memo before the trial

court within two months, the advocate Commissioner shall sell

the assets of the dissolved firm i.e. the land in question through

public auction and deposit the sale proceeds before the trial

court within four months. The final decree shall be passed by

the trial court within a period of six months for payment of 25%

of the sale proceeds to the plaintiff-petitioner (respondent No. 1

herein) after discharging the liabilities of the dissolved

partnership firm, if any.

30. Assailing the aforesaid impugned judgment and

order dated 09.04.2012, the appellants (defendants) filed the

related special leave petition. By order dated 30.07.2012, this

Court had issued notice and, in the meantime, directed stay of

sale of the property for a period of three months, which was

extended thereafter. Though an attempt at mediation was

resorted to, it was not successful whereafter order dated

10.04.2017 was passed by this Court granting leave.

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31. Learned counsel for the appellants firstly referred to

the undisputed facts of the case. He submits that assets of the

partnership firm M/s Viraj Constructions which included

appellant No. 1 as the sole surviving appellant (since appellant

No. 2 has passed away), V. Sundara Ram Reddy and the plaintiff

(father of respondent No. 1) included a plot of land admeasuring

Ac. 3.27 guntas situated in Survey Nos. 28/1, 28/2 and 28/3

at Begumpet, Hyderabad (already referred to as the ‘land in

question’). This landed property is presently in the custody of

the advocate Commissioner appointed by the City Civil Court

vide the order dated 25.11.2002.

31.1. M/s. Viraj Constructions, being a partnership at will,

was dissolved at the instance of the plaintiff on 18.10.1983 by

serving a legal notice on the other partners. The other partners

thereafter took over the assets and liabilities of the partnership

firm and carried on the business by constituting a new firm.

31.2. In O.S. No. 1601/1983 instituted by the plaintiff for

rendition of accounts, a preliminary decree dated 06.11.1995

was drawn by the City Civil Court holding that the plaintiff is

19

entitled to 25% out of 100% capital amount of the partnership

firm and that the defendants were liable to render accounts to

the plaintiff upto 31.03.1970 with plaintiff entitled to claim

interest at the rate of 12% per annum on whatever amount

found due to him following rendition of accounts.

31.3. The preliminary decree was partially modified by the

High Court vide the order dated 28.03.2001 to the extent that

the defendants were liable to render accounts to the plaintiff

upto 18.10.1983 i.e. the date when the partnership firm stood

dissolved.

31.4. Plaintiff initiated final decree proceedings which were

ultimately carried to the High Court. Vide the impugned

judgment and order dated 09.04.2012, the High Court opined

that the landed property should be valued by the advocate

Commissioner as on the date when he assesses the value and

accordingly directed the advocate Commissioner to sell the

asset by public auction and to deposit the sale proceeds before

the City Civil Court. Of course, the aforesaid order has been

stayed by this Court.

20

31.5. In the above factual backdrop, learned counsel for

the appellants Mr. Ananga Bhattacharyya submits that the

short question which arises for consideration in the present

appeal is, in the event of dissolution of a partnership at will at

the instance of one of the partners, whether the outgoing

partner is entitled to his share in the immovable assets of the

partnership firm valued as on the date of dissolution of the firm

or on the date of assessment of the valuation of the property?

31.6. Mr. Bhattacharyya submits that a cut-off date in the

preliminary decree is specified so that the final decree can be

worked out, taking the valuation of the landed asset on the date

mentioned in the preliminary decree. Further, the provision of

interest in the preliminary decree is to compensate the outgoing

partner for the delay in realization of his entitlement from the

date of the preliminary decree till payment.

31.7. According to the learned counsel, the High Court’s

order dated 28.03.2001 whereby the preliminary decree was

modified to the extent that defendants were made liable to

render accounts to the plaintiff upto 18.10.1983 has attained

21

finality. Therefore, the date 18.10.1983 has to be reckoned as

the date upto which the accounts have to be settled. However,

by way of the impugned judgment and order dated 09.04.2012,

the High Court has traversed beyond the preliminary decree as

modified by the High Court vide the order dated 28.03.2001.

31.8. In this connection, he submits that the plaintiff

had actually conceded to the aforesaid position by seeking

implementation of the High Court’s order dated 28.03.2001.

In fact, the High Court by way of the impugned judgment and

order has also opined that no partner can take advantage of the

increase in value of the partnership assets after dissolution of

the partnership. The issue, therefore, is whether a partner who

dissolved the partnership firm in 1983 and has since been in no

manner involved with the affairs and business of the partnership

firm, can take advantage of the increase in the value of the

partnership’s assets? According to Mr. Bhattacharyya, the

answer has to be in the negative. In this connection, he has

placed reliance on the following decisions of this Court and that

of the Madras High Court:

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(i) Addanki Narayanapppa Vs. Bhaskara Krishtappa

1;

(ii) Pamuru Vishnu Vinodh Reddy Vs. Chillakuru

Chandrasekhara Reddy

2;

(iii) N. Muhammad Ussain Sahib Vs. S.N. Abdul Gaffoor

Sahib

3.

31.9. He submits that the principles that can be culled out

from the above decisions are fully applicable to a dissolved

partnership at will too. The plaintiff who dissolved the partnership

way back in 1983, now cannot be allowed to take advantage of

the appreciation in the value of the landed assets.

31.10. He, therefore, submits that the impugned judgment

and order of the High Court cannot be sustained and should be

set aside and quashed with the further direction that the plaintiff

(respondent No.1) would be entitled to the commensurate share of

the partnership as on the date of dissolution i.e. 18.10.1983.

1

AIR 1966 SC 1300

2

(2003) 3 SCC 445

3

AIR 1950 Mad 758

23

32. In response, learned counsel for the first respondent

also referred to the factual background of the case and submits

that appellants in the final decree proceedings had raised two

objections as to the entitlement of the plaintiff (respondent No.

1) in the context of the preliminary decree:

(i) plaintiff is not entitled to the immovable property of

the partnership firm but is only entitled to the profits

accruing out of the business of the partnership firm;

and

(ii) even if the plaintiff is held to be entitled to the

immovable property of the partnership firm, he is

entitled to have a shared value only as on

18.10.1983. In other words, as per the appellants,

plaintiff will not be entitled to the escalation in value

of the immovable property, post dissolution of the

partnership firm.

32.1. Learned counsel submits that both the aforesaid

objections are legally unsustainable. Besides, those have

already been adjudicated in favour of the plaintiff (respondent

24

No. 1) and have attained finality. Thus, it is not permissible for

the appellants to re-agitate the two issues once again.

32.2. Adverting to the first objection, learned counsel

submits that the plaintiff (respondent No. 1) filed an interlocutory

application being I.A. No. 1247 of 2001 for appointment of an

advocate Commissioner to take over possession of the immovable

property and to settle the accounts of the partnership firm by

including his share in the immovable property. The adjudication

of the said application was carried up to the High Court in CMA

No. 1485 of 2004. The High Court vide the judgment and order

dated 30.01.2009 upheld the contention of the plaintiff that he

is entitled to 25 percent of the value of the immovable property

after deducing the liabilities of the partnership firm. Thereafter,

plaintiff (respondent No. 1) filed I.A. No. 655 of 2003 seeking a

direction to the advocate Commissioner to settle the accounts

of the partnership firm by selling the immovable property. This

interlocutory application came to be allowed by the City Civil

Court vide the order dated 25.07.2006. This was assailed by the

appellants (defendant Nos. 4 and 5) by filing CRP No. 3825 of

25

2006 which came to he dismissed by the High Court vide the

common judgment and order dated 30.01.2009.

32.3. From the above, learned counsel submits that after

the common judgment and order of the High Court dated

30.01.2009, which has admittedly attained finality, it is no

longer open to the appellants to re-agitate that the plaintiff

(respondent No. 1) is either not entitled to 25 percent share in

the immovable property or that the immovable property ought

not to be put to sale.

32.4. As regards the second objection i.e. 25 percent share

of the plaintiff in the immovable property be restricted to the

value of the property prevailing as on 18.10.1983, learned

counsel submits that appellants (defendant Nos. 4 and 5) had

filed I.A. No. 892 of 2005 for appointment of a Commissioner to

determine the value of the share of the plaintiff in the

partnership firm as on 18.10.1983. The City Civil Court vide the

order dated 25.07.2006 held that the plaintiff’s right exist till

the passing of the final decree and that his share in the firm

26

including in the immovable property cannot be restricted to

18.10.1983.

32.5. The revision filed by the apellants against the

aforesaid order dated 25.07.2006 came to be rejected by the

High Court vide the order dated 13.10.2006 in CRP No. 4063 of

2006. The special leave petition filed by the appellants

challenging the aforesaid order of the High Court was dismissed

by this Court on 05.01.2007.

32.6. In the above backdrop, it is contended on behalf of

the plaintiff (respondent No. 1) that it is not open to the

appellants to re-agitate that the valuation of the plaintiff’s share

in the immovable property should be restricted to the date on

which the firm stood dissolved i.e. 18.10.1983.

32.7. Counsel for the respondent, therefore, submits that

the impugned judgment and order of the High Court is perfectly

in order. All that the High Court has directed is that the

advocate Commissioner should sell the immovable property

through public auction and thereafter to deposit the sale

proceeds in the court and out of sale proceeds, respondent No.

27

1 would be entitled to 25 percent thereof. No fault can be found

with the view taken by the High Court. On the contrary, the

insistence of the appellants that the right of the plaintiff

(respondent No. 1) in respect of the immovable property be

restricted to the date of dissolution of the firm i.e. 18.10.1983

has no basis either in law or in equity. He, therefore, submits

that the civil appeal may be dismissed and the impugned

judgment and order of the High Court be affirmed.

33. Submissions made by learned counsel for the parties

have received the due consideration of the Court.

34. At the outset, let us briefly deal with the law relating

to partnership.

35. In England, the law of partnership developed almost

exclusively through court decisions. As a matter of fact, the law

of partnership was on the whole illustrated an example of judge

made law, gradually developing with the growth of trade and

commerce. This continued until enactment of the Partnership

Act of 1890.

28

36. In India, the first attempt to formally regulate the

relationship of partners and of a partnership firm with third

parties was made in 1878 when the law relating to partnership

was included in Chapter XI of the Indian Contract Act, 1872

comprising of Sections 239 to 266. However, in due course of

time, these provisions were found to be inadequate.

Development of trade in India created need for a specific

legislation on partnership. As a result, the Indian Partnership

Act, 1932 (already referred to as ‘the Partnership Act’) came to

be enacted. Consequently, Sections 239 to 266 of the Indian

Contract Act, 1872 came to be repealed by the Partnership Act.

Presently, the Partnership Act lays down the statutory

framework dealing with partnerships. However, those

provisions of the Indian Contract Act, 1872 insofar as they are

not inconsistent with the Partnership Act continue to apply to

a partnership firm. The Partnership Act, therefore, supplements

the Indian Contract Act, 1872.

37. Thus, the Partnership Act has been enacted to define

and amend the law relating to partnership. Section 4 defines

29

‘partnership’ to mean the relation between persons who have

agreed to share the profits of a business carried on by all or any

one of them acting for all. The persons who have entered into

partnership with one another are individually called ‘partners’

and collectively a ‘firm’.

38. Section 5 declares that relation of partnership arises

from contract and not from status.

39. A partnership firm is not a legal entity, like a

company. It continues to exist as a group of individual partners.

The firm name is only a compendious name given to the

partnership and the partners are the real owners of the assets.

In other words, the partnership property belongs to all the

partners constituting the partnership firm. If a partner

contributes property to the partnership, it does not remain the

property of the partner but becomes the property of all the

partners constituting the partnership. All the partners would

have interest in that property as part of the assets of the

partnership in proportion to their shares.

30

40. Section 7 deals with ‘partnership at will’. Since this

provision has some relevance, the same is extracted hereunder:

7. Where no provision is made by contract between

the partners for the duration of their partnership, or

for the determination of their partnership, the

partnership is ‘partnership at will’.

40.1. This Court has examined this provision on several

occasions and laid down the broad contours of Section 7. The

essence of ‘partnership at will’ is that it is open to any partner

to dissolve the partnership by giving notice. Section 7

contemplates two exceptions. Firstly, there is a provision in any

contract made between the partners for the duration of the

partnership; secondly, there is also a provision made in any

contract between the partners for the determination of their

partnership. In either of these cases, the partnership is not at

will. In other words, where the partners fix the duration or mode

of determination of the partnership, the same is not a

partnership at will (please see Karumuthu Thiagarajan Chettiar

Vs. E.M. Muthappa Chettiar

4; and M.O.H. Uduman Vs. M.O.H.

4

Air 1961 SC 1225

31

Aslum

5). Therefore, when there is a partnership at will, its

existence will depend on the intention of the partners and their

volition to continue to function as a firm or otherwise.

41. Chapter VI of the Partnership Act comprising of

Sections 39 to 55 deals with dissolution of a ‘partnership firm’.

As per Section 39, the act of dissolution of partnership between

all the partners of a firm is called the ‘dissolution of the firm’.

Section 40 says that a firm may be dissolved with the consent

of all the partners or in accordance with the contract between

the partners. According to Black’s Law Dictionary, 9

th Edition,

‘dissolution’ generally refers to the formal act or process of

bringing a legal relationship, contract or entity to an end; the

act of bringing to an end.

42. Section 43 deals with dissolution by notice of

‘partnership at will’. Section 43 reads thus:

43. Dissolution by notice of partnership at will.—

(1) Where the partnership is at will, the firm may be

dissolved by any partner giving notice in writing to

5

(1991) ! SCC 412

32

all the other partners of his intention to dissolve the

firm;

(2) The firm is dissolved as and from the date

mentioned in the notice as the date of dissolution

or, if no date is so mentioned, as from the date of

the communication of the notice.

42.1. Thus, as per sub-section (1) of Section 43, where the

partnership is at will, the firm may be dissolved by any partner

by giving notice in writing to all the partners of his intention to

dissolve the firm. As per sub-section (2), the firm is dissolved

from the date mentioned in the notice as the date of dissolution

or, if no date is so mentioned, from the date of communication

of the notice.

43. Section 44 provides for dissolution of a partnership

firm by the court. It says that at the instance of a partner, a civil

suit may be filed, and the court may dissolve a partnership firm

on any of the grounds mentioned in the said provision. Amongst

the various grounds, a partnership firm can also be dissolved

by a civil court on any other ground which renders such

dissolution just and equitable.

33

44. This brings us to the core provisions i.e. Sections 46,

47 and 48. Section 46 says that on the dissolution of a firm,

every partner is entitled, as against all other partners, to have

the property of the firm applied in payment of the debts and the

liabilities of the firm and to have the surplus distributed

amongst the partners according to their rights. Needless to

observe, a partner includes his legal representatives. Section 46

of the Partnership Act is as follows:

46. Right of partners to have business wound up

after dissolution.— On the dissolution of a firm

every partner or his representative is entitled, as

against all the other partners or their

representatives, to have the property of the firm

applied in payment of the debts and liabilities of the

firm, and to have the surplus distributed among the

partners or their representatives according to their

rights.

45. Section 47 deals with the stage after dissolution of a

partnership firm. As per Section 47, after the dissolution of a

firm, the authority of each partner to bind the firm and the other

mutual rights and obligations of the partners continue

34

notwithstanding the dissolution so far as may be necessary to

wind up the affairs of the firm and to complete the transactions

which had begun but which remained unfinished at the time of

the dissolution. The proviso, however, clarifies that the firm

would not be bound by the acts of a partner who has been

adjudicated insolvent.

46. The mode of settlement of accounts between partners

after dissolution is provided for in Section 48. Section 48 reads

thus:

48. Mode of settlement of accounts between

partners.—In settling the accounts of a firm after

dissolution, the following rules shall, subject to

agreement by the partners, be observed:

(a) losses, including deficiencies of capital, shall be

paid first out of profits, next out of capital, and,

lastly, if necessary, by the partners individually in

the proportions in which they were entitled to share

profits;

(b) the assets of the firm, including any sums

contributed by the partners to make up deficiencies

of capital, shall be applied in the following manner

and order—

35

(i) in paying the debts of the firm to third

parties;

(ii) in paying to each partner rateably what is

due to him from the firm for advances as

distinguished from capital;

(iii) in paying to each partner rateably what is

due to him on account of capital; and

(iv) the residue, if any, shall be divided among

the partners in the proportions in which they

were entitled to share profits.

46.1. Thus, in terms of Section 48 while settling the

accounts of a partnership firm on dissolution, the rules

mentioned thereunder would be observed but that is subject to

agreement by the partners.

47. Let us now deal with some of the case laws relied

upon by the parties.

48. In N. Muhammad Ussain Sahib , Madras High Court

was considering the question that upon dissolution of the

partnership, whether the book value of the assets should be

taken for assessing profit and loss of the partnership or whether

36

the market value of those assets should be considered in

arriving at the profits.

48.1. The above question arose in the following factual

context. The partnership in question was commenced on

01.01.1937. A period of ten years was fixed as the duration of

the partnership. The articles of partnership provided for annual

settlement of accounts and the method of settling those

accounts. The settlement proceeds on the basis of the book

value of the assets and not on the real value. On 05.12.1942,

the partnership was dissolved. A suit was instituted by one of

the erstwhile partners for rendition of accounts and for a share

of the profits. A preliminary decree was passed by consent on

the basis of which a Commissioner was appointed to go into the

accounts and to submit his report to the court.

48.2. It was in the above context that the question framed

arose for consideration. Madras High Court held that upon

dissolution of the partnership or when a partner retires, the

settlement of his account must not be on a notional basis but

on a real basis i.e. every asset of the partnership should be

37

converted into money and the account of each partner settled

on that basis. The High Court declared that no partner is

entitled to take advantage of the appreciation of the value of the

assets to the detriment of the other partners. So long as the firm

continues, it is not possible for any partner to claim exclusively

the benefit of the appreciation of the value of the assets for

himself and at the time of the dissolution, such benefit must be

shared by all the partners equally. While carrying out the

valuation for the purpose of winding up of the partnership, the

assets have to be valued on the basis of the market value on the

date of the dissolution. In that case, it was 05.12.1942.

49. A 3-Judge Bench of this Court in Addanki

Narayanappa was considering the question as to whether the

interest of a partner in the partnership assets comprising of

movable as well as immovable property should be treated as

movable or immovable property for the purposes of Section 17(1)

of the Registration Act, 1908. It was in that context that the

Bench had considered various provisions of the Partnership Act

and observed that the whole concept of partnership is to embark

38

upon a joint venture and for that purpose to bring in as capital

money or even property including immovable property. Once

that is done, whatever is brought in would cease to be the

trading asset of the person who brought it in. It would be the

trading asset of the partnership in which all the partners would

have interest in proportion to their shares in the joint venture of

the business of partnership. The person who brought it in

would, therefore, not be able to claim or exercise any exclusive

right over any property which he has brought in, much less over

any other partnership property. Though a partner’s share does

not include any specific part of any specific item of partnership

property, still where the partnership is entitled to immovable

property, such share does include an interest in immovable

property and, therefore, every instrument operating to create or

transfer a right to such share requires to be registered under

the Registration Act. On the death of a partner, his share in the

partnership property is to be treated as money and not as land.

The Bench endorsed the view that for the purpose of the

Partnership Act and irrespective of any mutual agreement

39

between the partners, the share of each partner is his proportion

to the partnership assets after they have been all realised and

converted into money, and all the partnership debts and

liabilities have been paid and discharged.

50. Chillakuru Chandrasekhara Reddy is a 2-Judge

Bench decision of this Court wherein the question for

consideration was, what would be the relevant date for the

purpose of ascertaining the value of the share of the plaintiff in

the partnership firm? Whether it would be the date of retirement

of the partner from the partnership firm or the date on which

the Commissioner made the valuation of the share of the

partner?

50.1. After referring to various provisions of the Partnership Act and

the facts of that case, this Court observed that the plaintiff partner had

retired from the partnership firm on 05.04.1971 after selling his

share in the partnership firm. Once he had retired from the

partnership firm, he had no right to claim any further share in

the profits of the firm. The defendants had not paid the value of

the share of the plaintiff pursuant to the agreement for retiring

40

from the partnership firm. It was in that context this Court held

that if the defendants have failed to pay the value of the share

of the plaintiff as agreed to, it has become a debt on the

defendants and the plaintiff is entitled to recover the same with

interest. This Court clarified that after the retirement from the

partnership firm, particularly when the firm was reconstituted

with new partners, there was no question of using the plaintiff’s

share for earning profit in the reconstituted firm. This Court

held that there was no reason to say that the relevant date for

valuation of the share of the plaintiff would be the date when

the Commissioner valued his share, that too, after a long lapse

of time, particularly having regard to the fact that the plaintiff

had retired from the firm on 05.04.1971 having sold his share

and the firm had been reconstituted with new partners

thereafter. When the plaintiff retired from the partnership firm

on 05.04.1971, his share could be valued as on that date and

once the valuation is made as on that date, for any delay in

payment, he is to be compensated by awarding interest. Mere

non-payment of consideration does not take away the legal effect

41

of retirement from the partnership firm. This Court finally held

that the cause of action of the plaintiff arose on the date of his

retirement from the partnership firm and on which date the

liability of the defendants also arose. Plaintiff could certainly

claim the value of his share as on 05.04.1971 with interest till

the payment was made.

51. In Guru Nanak Industries Vs. Amar Singh

6, a 3-Judge

Bench of this Court analysed the distinction between ‘retirement

of a partner’ and ‘dissolution of a partnership firm’. The Bench

held that on retirement of a partner, the reconstituted

firm continues and the retiring partner is to be paid his dues in

terms of Section 37 of the Partnership Act. In case of dissolution,

accounts have to be settled and distributed as per the mode

prescribed in Section 48 of the Partnership Act. When

the partners agree to dissolve a partnership, it is a case of

dissolution and not retirement. In the facts of that case, it was

noted that there being only two partners, the partnership firm

could not have continued to carry on its business as a

6

(2021) 14 SCC 672

42

partnership firm because when there are only two partners and

one has agreed to retire, then such a retirement would amount

to dissolution of the firm.

52. Let us now sum up our analysis of the case law.

52.1. Madras High Court in N. Muhammad Ussain Sahib

was dealing with a partnership which had a fixed duration of

existence. It was a case of dissolution of the partnership. The

question was, upon dissolution of the partnership, whether the

book value of the assets should be taken for assessing the profit

and loss of the partnership or whether the market value of those

assets should be considered in arriving at the profits? The High

Court held that upon dissolution of the partnership or in a case

where a partner retires, the settlement of his account should not

be on a notional basis. It must be on a real basis. In other words,

every asset of the partnership should be converted into money

and the account of each partner settled on that basis. In that

context, the High Court clarified that post retirement of a

partner he is not entitled to take advantage of the appreciation

of the value of the assets of the partnership.

43

52.2. In Adanki Narayanappa, in the context of the

question as to whether the interest of a partner in the

partnership assets comprising of both moveable as well as

immovable property, should be treated as a movable or

immovable property for the purposes of Section 17 (1) of the

Registration Act, 1908, a three-Judge Bench of this Court held

that on the death of a partner his share in the partnership

property has to be treated as money and not as land. The share

of each partner is his proportion to the partnership assets after

those assets have been realized and converted into money.

52.3. The question which came up for consideration before

a two-Judge Bench of this Court in Chillakuru Chandrasekhara

Reddy was, in the event of retirement of a partner what would

be the relevant date for the purpose of ascertaining the value of

the share of that partner in the partnership firm. Whether it

would be the date of retirement of the partner from the

partnership firm or the date on which the Commissioner made

the valuation? The Bench held that after a partner retires from

the partnership firm he has no right to claim any further share

44

in the profits of the partnership firm. Therefore, in such a

scenario, there is no reason to say that the relevant date for

valuation of the share of the plaintiff would be the date when

the Commissioner valued his share, that too, after a long lapse

of time.

52.4. In Guru Nanak Industries, this Court noted that when

there are only two partners in a partnership firm and one has

agreed to retire, then such a retirement would amount to

dissolution of the firm whereafter the consequences would

follow.

53. As would be evident from the above, none of the cases

referred to supra deal with a case of partnership at will and the

peculiar fact scenario of the present lis. However, certain general

principles are deducible which we are applying to the facts of

this case.

54. Having surveyed the statutory framework and after

an analysis of the case laws, the admitted facts of the present

case may now be adverted to.

45

55. In O.S. No. 1601 of 1983 instituted by the plaintiff

(first respondent herein) for rendition of accounts of the

dissolved partnership and for payment of the amount due to the

plaintiff as his share together with interest, the learned City Civil

Court passed a preliminary decree on 06.11.1995 holding that

plaintiff is entitled to 0.25 ps. share out of 100 ps. capital

amount of the partnership and directed the defendants to

render the accounts for payment to the plaintiff his share of the

partnership up to 31.03.1970 with the condition that if

defendants failed to do so, plaintiff would be at liberty to petition

the trial court for a final decree by way of appointment of a

Commissioner for settlement of accounts. The trial court further

held that plaintiff would be entitled to interest at the rate of 12

percent per annum on the amount found due to be paid to the

plaintiff till the date of realization.

55.1. In appeal before the High Court at the instance of the

plaintiff (defendants also preferred cross objection), the High

Court passed order dated 28.03.2001 disposing of the appeal as

well as the cross objection by modifying the preliminary decree

46

dated 06.11.1995 by holding that the plaintiff is entitled to seek

rendition of accounts from the defendants till the date of

dissolution of the firm i.e. 18.10.1983; since the partnership is

at will, the moment the plaintiff as a partner expressed his

willingness to dissolve the partnership firm after giving notice,

the partnership firm stood dissolved on 18.10.1983 rendering

the defendants liable to settle the accounts and to pay to the

plaintiff his share with interest at the rate of 12 percent per

annum till realization.

55.2. Thereafter, plaintiff filed an interlocutory application

in the suit before the trial court for passing the final decree by

appointing a Commissioner and directing him to take over

possession of the assets of the partnership firm for the purpose

of settlement of the accounts of the partnership firm. The trial

court vide the order dated 25.11.2002 appointed Shri J.

Prabhakar, Advocate as the Commissioner for execution of the

warrant.

55.3. On a review application filed by the defendants, the

trial court i.e. the City Civil Court passed order dated

47

26.04.2004 recalling its order dated 25.11.2002 to the extent of

directing the Commissioner to take over possession of the assets

of the dissolved firm holding that plaintiff is only entitled to his

share in the profits of the firm which is being run by the

remaining partners. Question of selling of property would arise

only when the other partners fail to pay the amount (share) to

the plaintiff.

55.4. This order dated 26.04.2004 came to be challenged

by the plaintiff before the High Court in appeal being CMA No.

1485 of 2004.

55.5. In the meanwhile, plaintiff filed I.A. No. 655 of 2003

in the suit for appointment of an advocate as the Commissioner

to sell the property whereas defendants filed I.A. No. 892 of 2005

in the suit for appointment of a chartered accountant or a

person well versed in accounts as the Commissioner for

determining the value of the share of the plaintiff as on

18.10.1983. By a common order dated 25.07.2006, the City

Civil Court dismissed the interlocutory application filed by the

defendants and allowed the interlocutory application filed by the

48

plaintiff. City Civil Court clarified that the preliminary decree

had not limited the right of the plaintiff to receive the value of

his share as on 18.10.1983 in the assets of the dissolved firm

and that his rights will exist till passing of the final decree.

55.6. Against this order passed by the City Civil Court

dated 25.07.2006 in I.A. No. 655 of 2003 filed by the plaintiff,

the defendants filed CRP No. 3825 of 2006 before the High

Court.

55.7. Both CMA No. 1485 of 2004 and CRP No. 3825 of

2006 were disposed of by the High Court by a common judgment

and order dated 30.01.2009. The High Court set aside the review

order dated 26.04.2004 and held that once there is a

preliminary decree in favour of the plaintiff for ascertaining the

profit of the firm on verification of the accounts rendered by the

other partners, value of the movable and immovable properties

of the partnership firm has to be ascertained. If the other

partners do not pay the share of the plaintiff, the properties

would have to be sold and the sale proceeds would have to be

distributed rateably as per the respective shares of the partners.

49

The High Court further held that the Commissioner was entitled

to take over possession of the property and in fact had taken

over possession of the land in question. The High Court directed

that the Commissioner has to take steps to get the value of the

property assessed. On determination of the value of the

property, the plaintiff should be paid 25 percent of the value of

the property after deducting the liabilities, if any. If that is not

done, the property has to be sold to realize the amount for the

purpose of distribution of shares. The High Court put in a caveat

that if the parties come to an understanding, the plaintiff may

also take 25 percent of the land in question as his share instead

of selling the property.

55.8. Since the defendants did not comply with the

directions of the High Court, plaintiff filed an interlocutory

application before the trial court for a direction to the advocate

Commissioner to sell the land in question and to pay 25 percent

of the sale proceeds to him after discharging the liabilities of the

partnership firm. However, the trial court did not entertain the

said interlocutory application and dismissed the same vide the

50

order dated 28.04.2010 holding that plaintiff was entitled to

receive the value of the partnership asset assessed as on

18.10.1983 and that he is not entitled to insist on the sale of the

property and thereafter to receive 25 percent of the sale

proceeds.

55.9. As the original plaintiff Kasireddy Lakshmi Narayana

Reddy died, his legal representative i.e. the first respondent

herein K. Ranganadha Reddy filed CRP No. 1554 of 2011 before

the High court assailing the aforesaid order dated 28.04.2010.

55.10. By way of the impugned judgment and order

dated 09.04.2012, the High Court allowed the civil revision by

setting aside the order dated 28.04.2010. In the process, the

High Court allowed the interlocutory application of the plaintiff

by holding that unless the parties mutually agree to settle their

shares and file a joint memo before the trial court within two

months, the advocate Commissioner shall sell the assets of the

dissolved firm i.e. the land in question through public auction

and deposit the sale proceeds before the trial court within four

months. The final decree will be passed by the trial court within

51

a period of six months for payment of 25 percent of the sale

proceeds to the plaintiff (respondent No. 1 herein) after discharging

the liabilities of the dissolved partnership firm, if any.

56. Let us now analyse the impugned judgment and order

of the High Court dated 09.04.2012 in detail.

57. After considering the materials on record and the

rival contentions, the High Court held that the right of each

partner on dissolution of the partnership firm is two-fold: (1)

right to settle the account as on the date of dissolution; and (2)

right to share the residue in the assets of the partnership

following liquidation of the assets after satisfying the liabilities

set out in Section 48. High Court concluded that liquidation of

the assets of the partnership firm is, therefore, a necessary step

towards payment of the shares of each partner in the

partnership assets.

57.1. The High Court also held that the right of the partner

on the dissolution of the partnership firm is to receive the profits

till dissolution and to receive the value of the assets in

proportion to his share after settlement of accounts. The

52

preliminary decree passed by the trial court as modified by the

High Court needs to be understood accordingly. The profits or

losses in the business of the partnership firm should be

ascertained as on 18.10.1983. The significance of referring to

this date is limited to ascertainment of profits and losses alone

and it has no relevance to the right of the partners to receive the

value in the residue of the assets.

57.2. With the dissolution of the partnership firm, all its

assets have to be necessarily liquidated unless any one or more

partners of the dissolved firm come forward to pay the market

value of the share of the remaining partners/all partners in lieu

of liquidation with the consent of the remaining partner or

partners. The reconstituted firm has no right whatsoever to

utilize the assets of the dissolved firm unless all the partners of

the dissolved firm reach an agreement to settle the accounts and

to pay the outgoing partner his share in the value of the assets.

However, if such an agreement is not reached, there is no option

other than liquidation of the assets and distribution of the value

53

realized from such liquidation in proportion to their shares

amongst all partners.

57.3. After referring to the previous judgment and order of

the High Court dated 30.01.2009 whereby the order passed by

the City Civil Court dated 26.04.2004 allowing the review

petition of the defendants by recalling its previous order dated

25.11.2002 was set aside, the High Court was of the view that

by its aforesaid earlier judgment and order it had unequivocally

rejected the stand of the defendants that there was no need for

the advocate Commissioner to take over possession of the

partnership property for sale. Though the High Court did not

render a finding as to the date on which the value of the property

should be determined, a reading of the said judgment and order

in its entirety would leave no room for any doubt that what the

High Court had meant was that the property should be valued

by the advocate Commissioner as on the date when he assesses

the value of the property. This order is in consonance with the

settled legal position. The preliminary decree had not limited the

right of the plaintiff to receive the value of his share as on

54

18.10.1983 in the assets of the dissolved partnership and that

his right will exist till passing of the final decree.

58. In the above context, let us go back to the order dated

25.07.2006 passed by the City Civil Court. Plaintiff had filed I.A.

No. 655/2003 before the City Civil Court in the suit for

appointment of an advocate as a Commissioner to sell the

property whereas the defendants filed I.A. No. 892/2005 in the

said suit for appointment of a chartered accountant or a person

who is well versed in accounts as the Commissioner for

determining the value of the share of the plaintiff as on

18.10.1983 in the dissolved partnership firm. By the order dated

25.07.2006 the City Civil Court dismissed I.A. No. 892/2005

filed by the defendants and allowed I.A No. 655/2003 filed by

the plaintiff. The City Civil Court clarified that the preliminary

decree had not limited the right of the plaintiff to receive the

value of his share as on 18.10.1983 in the assets of the dissolved

firm and that his rights will exist till passing of the final decree.

59. In the judgment and order of the High Court dated

30.01.2009, Section 48 (b) of the Partnership Act and the

55

provisions of Order XL Rule 1 (b) CPC were examined whereafter

the High Court directed that the Commissioner has to take steps

to get the value of the property assessed. After determining the

value of the property, the other partners may come forward to

pay 25 percent of the value of the property to the plaintiff after

deducting the liability, if any. The properties can be left with the

defendants after satisfying the share of the plaintiff. Otherwise,

the property has to be sold to realize the amount for the purpose

of distribution. If the parties come to an understanding, the

plaintiff may also take 25 percent of the land towards his share

instead of selling the property for the purpose of distribution of

the sale proceeds amongst the partners.

60. We are of the considered opinion that the decision

rendered by the High Court in its impugned judgment and order

dated 09.04.2012 is in accordance with law. It is pragmatic and

equitable as well. The partnership in question is a partnership

at will. Therefore, on receipt of notice of dissolution issued by

the plaintiff, the partnership firm stood dissolved on and from

18.10.1983. The remaining partners may have continued to

56

retain the assets of the erstwhile partnership by constituting a

fresh partnership. But that is not permissible. The properties,

i.e. the land in question belong to the erstwhile partnership M/s

Viraj Constructions. The new partnership could have retained

the said land in question only by purchasing it from the

erstwhile partnership which had not been done. Therefore,

retention of the land in question by the new partnership is

illegal. That apart, if the same has to be sold today at the value

which prevailed as on 18.10.1983, it will cause serious prejudice

to the plaintiff and would be grossly unfair to him, besides being

a wholly impractical proposition. On the dissolution of the

partnership firm, all the partners are entitled to their share of

profits rateably. Defendants had the option and still has the

option to purchase the land in question on auction whereafter

the sale proceeds from such auction sale can be distributed

amongst the erstwhile partners as per their share. But this is

an option for the defendants to explore and not for this Court to

suggest.

57

61. Consequently and having regard to the discussions

made above, we do not find any error or infirmity in the

impugned judgment and order of the High Court dated

09.04.2012. No interference is warranted. Accordingly, the civil

appeal is dismissed. All interim stay orders passed in the related

special leave petition would stand vacated. The parties as well

as the advocate Commissioner shall now comply with the

directions of the High Court in the manner prescribed.

62. However, there shall be no order as to costs.

……………………………J.

[UJJAL BHUYAN]

……………………………J.

[VIPUL M. PANCHOLI]

NEW DELHI;

SEPTEMBER 09, 2026.