SUPREME COURT DECIDES UPON RIGHTS OF LEGAL HEIRS OF DECEASED PARTNERS IN THE PARTNERSHIP FIRM PROPERTIES

The #SupremeCourt has in a recent case of Rajendra Bajoria and Others vs Hemant Kumar Jalan and Others, Civil Appeal Nos. 5819­-5822 of 2021 passed a #Judgment dated 21-09-2021 and decided upon the rights of #legalheirs of the original #partners of a #partnershipfirm in respect of the #assets and #properties of the firm.

In this case, a partnership firm named ‘Soorajmull Nagarmull’ (Firm) was constituted by way of a Partnership Deed dated 06-12-1943. However, none of the Partners of the Firm are alive today (Deceased Partners). The Plaintiffs and the Defendants in this case are the legal heirs of the Deceased Partners of the Firm.

The Plaintiffs filed a Civil Suit bearing C.S. No. 79 of 2017 before the Calcutta High Court seeking (a) a decree for declaration that both the Plaintiffs and the Defendants are entitled to the assets and properties of the Firm (Assets) as they are the heirs of the Deceased Partners; (b) a decree for perpetual injunction to restrain the Defendants from representing as the authorised representative of the Firm and from receiving monies on behalf of the Firm; (c) dissolution of Firm; (d) full accounts of the Firm for the purpose of dissolution of the Firm, etc. It is the Plaintiff’s case that despite the demise of the Deceased Partners of the Firm, the Defendants are carrying on the business and representing the Firm to the exclusion of the Plaintiffs and that the Defendants are siphoning off funds of the Firm without paying the Plaintiffs their share of profits in the Firm.

Thereafter, the Defendants filed two Applications seeking dismissal of the Civil Suit. However, the Single Bench of the High Court dismissed the said Applications and allowed the Civil Suit, vide Order dated 22-09-2017.

Being aggrieved, the Defendants filed Appeals before the Division Bench of the High Court, which passed an Order dated 14-09-2018 and allowed the Appeals and rejected the Plaint filed in the above Civil Suit C.S. No. 79 of 2017.

Aggrieved, the Plaintiffs filed Appeals before the Supreme Court (Appellants-Plaintiffs), thereby, challenging the Order dated 14-09-2018 passed by the Division Bench of the High Court.

The Apex Court made the following observations in this case:

1) That as per Sections 39-44 of the Partnership Act 1932, a partnership firm may be dissolved by the partner(s) of the firm either by mutual consent or upon expiry of the term of the firm, etc or the firm may be dissolved by the court upon filing of a suit by a partner.

2) But in this case, the Civil Suit seeking Dissolution of Firm has been filed by the Appellants-Plaintiffs, who are the legal heirs of the Deceased Partners. Hence, the dissolution of Partnership Firm cannot be ordered by the Court at the instance of a non-partner.

3) Further, as per Section 48 of the Partnership Act 1932, upon dissolution of a partnership firm, partners are entitled to the profits and surplus of the sale proceeds of the assets and properties of the firm, if any, after paying off the debts and liabilities of the firm, as agreed in their partnership deed. However, the partners do not have any right, title or interest in the assets and properties of the firm, per se, so long as the partnership firm is carrying on the business. Hence, the Appellants-Plaintiffs as legal heirs of the Deceased Partners cannot maintain any claim in respect of the Assets of the Firm, per se.

Thus, the Supreme Court in this case held that the Appellants-Plaintiffs, as legal heirs of the Deceased Partners, are not legally entitled to (a) seek for dissolution of the Partnership Firm; (b) seek for accounts of the Firm for the purpose of dissolution of the Firm; (c) claim any right, title or interest in respect of the Assets of the Firm and thereby, seek for declaration of co-ownership of Assets of the Firm. The Apex Court, therefore, held that the Division Bench of the High Court rightly rejected the Plaint as none of the reliefs sought in the Plaint could be granted under the law.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer

Edited by

Sushila Ram Varma

Chief Consultant and Editor

The Indian Lawyer