# [1973] 2 S.C.R. 598

- **Citation:** [1973] 2 S.C.R. 598
- **Court:** Supreme Court of India
- **Decided:** 1972-10-09
- **Case number:** CIVIL APPEf,l..\11: JURISDICTION : Civil Appeals Nos. 14191420 of 1970
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1973-2-s-c-r-598-5878
- **Pages:** 5

## Headnote

598
SHAD! LAL
\'.
NAGIN CHAND & ORS.
October 9, 1972
IA. N. RAY, D. Ci.. PALEK.AR, M. H. BEG AND s. N. DWIVEDI, JJ.J
PaJ'111ership-Allotn1etrt of quot" hy
Go1·ernn1ent-Dissolution
of
par111t.•rship <Uld firnr nanre giren to one partner-A llot'111ent of quota to
thar partner--7! other partners can lay a clabn.
U:nder cl. 6 of the Woollen Yarn (Production
and
Distribution)
Control Ord:.!r, 1960, .th~ Textile
Commissioner.
\~:ith a vie\\' to scc.ure
proper distribution of woollen yarn, issues directions to a manufacturer
of or dealer in yarn to sell woollen yarn to manufacturers of hosiery to
whom quotas arc allotted. The quotas are allotted on the hasis of consumption during the basic period 1956-1959.
The ;:.?pcllant,\ first respondent and another \\'Crc
partners doing
hosiery business. and the partnership was dissolved on 31-3-1959. After
the dissolution, the three partners were doing hosiery busines; separately.
The firm name belonged to the appellant under the deed of dissolution and
he obtained quota in the firm :r.ame. The first respondent filed a suit
for a declaration that he was entitled to draw 1-1/3 of the auota allotted
to the appellant.
The High Court. in Lcttl.!rs Patent Appeal. <lccrcc<l the suit.
Allowing the appeal to this Court,
HELD : A declaration can only be founded on a legal right and the
first respondent had no such legal right. [602C-DJ
(a) After the dissolution of the partnership each partner was entitled
to ask for a quota for himself which would be considered on its merits.
[602A-BI
(b) Even if the appellant claimed the quota on the basis of past performance during the years 1956.59. it lay within the power of the Textile
Commissioner to allot to the appellant the qua;ntity he thinks fit and proper and the respondent can have no proprietary claim to the appellant's
quota. 160 I H; 602A, B-Cl
.A
B
c
D
F
( c) The quota granted to the appellant was in his individual business
right and was his own property. It was not a:nd could not be an asset
G
of the partnership.
Quota is a licence and a matter of privilege. The
fact that it was granted in the firm name does not convert it into a
partnership "'sset, because, the name belongs to the appellant. [6010-Hl
CIVIL APPEf,l..\11: JURISDICTION :
Civil Appeals Nos. 14191420 of 1970.
Appeals by certificates from the judgment and decre.: dated
Januaf\ 19. 1970 of the Punjab & Haryana High Court at
Chandigarh in LP.A. Nos. 273 and 274 of 1964.
H
A
8
c
SHAD! LAL V. NAGIN CHAND (Ray, J.)
599
B. Sen, IJ. P. Maheshwari, Maya Krishnan, N. K. Jain
arrd
R. K. Maheshwari, for the appellant.
M. C. Stla/vad, D. N. Misra, J.B. Dadachanji, 0. C. :'vlatlwr
and Ravinder N araitl, for the respondents.
The Judgment ot the Court was delivered by.
RAY J.-These two appeals are by certificate against the judgment dated i 9 January 1970 of the Punjab and Haryana High
Court.
The question which falls for consideration in these appeals is
whether the respondent is entitled to a declaratory decree to draw
I/3rd quota of the woollen yarn allotted to the business of the
appellant under the name and style of Jain Bodh Hosiery.
Ludhiana.
The appellant and the respondents are partners. They carried
on hosiery business in Ludhiana under the name of Jain Bodh
D
Hosiery.
The three persons were partners in the. aforesaid business.
On 31 March 1959 the partnership was dissolved. After
the dissolution the three partners started hosiery business separately and individually. Shadi Lal carried on the hosiery business
under the name and style of Jain Bodh Hosiery.
E
F
Under the deed of dissolution of partnership the entire business assets of the firm along with goodwill and liabilities were
taken over by Shadi Lal.
The respondent Nagin Chand filed a suit against the Hosiery
Industrial Federation and Shadi Lal and Ran1esh . Chand. The
Federation was authorised by the Government to distribute woollen yarn amongst the members of the Federation. The parties proceeded on the admitted procedure of allotment of

## Text

598
SHAD! LAL
\'.
NAGIN CHAND & ORS.
October 9, 1972
IA. N. RAY, D. Ci.. PALEK.AR, M. H. BEG AND s. N. DWIVEDI, JJ.J
PaJ'111ership-Allotn1etrt of quot" hy
Go1·ernn1ent-Dissolution
of
par111t.•rship <Uld firnr nanre giren to one partner-A llot'111ent of quota to
thar partner--7! other partners can lay a clabn.
U:nder cl. 6 of the Woollen Yarn (Production
and
Distribution)
Control Ord:.!r, 1960, .th~ Textile
Commissioner.
\~:ith a vie\\' to scc.ure
proper distribution of woollen yarn, issues directions to a manufacturer
of or dealer in yarn to sell woollen yarn to manufacturers of hosiery to
whom quotas arc allotted. The quotas are allotted on the hasis of consumption during the basic period 1956-1959.
The ;:.?pcllant,\ first respondent and another \\'Crc
partners doing
hosiery business. and the partnership was dissolved on 31-3-1959. After
the dissolution, the three partners were doing hosiery busines; separately.
The firm name belonged to the appellant under the deed of dissolution and
he obtained quota in the firm :r.ame. The first respondent filed a suit
for a declaration that he was entitled to draw 1-1/3 of the auota allotted
to the appellant.
The High Court. in Lcttl.!rs Patent Appeal. <lccrcc<l the suit.
Allowing the appeal to this Court,
HELD : A declaration can only be founded on a legal right and the
first respondent had no such legal right. [602C-DJ
(a) After the dissolution of the partnership each partner was entitled
to ask for a quota for himself which would be considered on its merits.
[602A-BI
(b) Even if the appellant claimed the quota on the basis of past performance during the years 1956.59. it lay within the power of the Textile
Commissioner to allot to the appellant the qua;ntity he thinks fit and proper and the respondent can have no proprietary claim to the appellant's
quota. 160 I H; 602A, B-Cl
.A
B
c
D
F
( c) The quota granted to the appellant was in his individual business
right and was his own property. It was not a:nd could not be an asset
G
of the partnership.
Quota is a licence and a matter of privilege. The
fact that it was granted in the firm name does not convert it into a
partnership "'sset, because, the name belongs to the appellant. [6010-Hl
CIVIL APPEf,l..\11: JURISDICTION :
Civil Appeals Nos. 14191420 of 1970.
Appeals by certificates from the judgment and decre.: dated
Januaf\ 19. 1970 of the Punjab & Haryana High Court at
Chandigarh in LP.A. Nos. 273 and 274 of 1964.
H
A
8
c
SHAD! LAL V. NAGIN CHAND (Ray, J.)
599
B. Sen, IJ. P. Maheshwari, Maya Krishnan, N. K. Jain
arrd
R. K. Maheshwari, for the appellant.
M. C. Stla/vad, D. N. Misra, J.B. Dadachanji, 0. C. :'vlatlwr
and Ravinder N araitl, for the respondents.
The Judgment ot the Court was delivered by.
RAY J.-These two appeals are by certificate against the judgment dated i 9 January 1970 of the Punjab and Haryana High
Court.
The question which falls for consideration in these appeals is
whether the respondent is entitled to a declaratory decree to draw
I/3rd quota of the woollen yarn allotted to the business of the
appellant under the name and style of Jain Bodh Hosiery.
Ludhiana.
The appellant and the respondents are partners. They carried
on hosiery business in Ludhiana under the name of Jain Bodh
D
Hosiery.
The three persons were partners in the. aforesaid business.
On 31 March 1959 the partnership was dissolved. After
the dissolution the three partners started hosiery business separately and individually. Shadi Lal carried on the hosiery business
under the name and style of Jain Bodh Hosiery.
E
F
Under the deed of dissolution of partnership the entire business assets of the firm along with goodwill and liabilities were
taken over by Shadi Lal.
The respondent Nagin Chand filed a suit against the Hosiery
Industrial Federation and Shadi Lal and Ran1esh . Chand. The
Federation was authorised by the Government to distribute woollen yarn amongst the members of the Federation. The parties proceeded on the admitted procedure of allotment of quota.
In
order to be eligible for quota a manufacturer is required to be a
member of any of the five associations registered with the Hosiery
Industry Federation. The quota is to be allotted to the manufacturer members on the basis of figures of consumption of woollen
yarn by the members during the years 1956 to 1959 called the
G basic period.
H
The respondent Nagin Chand's cause of action was this. The
three partners carried on hosiery business in co-partnership. The
partnership business was entitled to quota of woollen yarn on the
figures of consumption in the years 1956 to 1959. · After the
dissolution of the firm Shadi Lal was obtaining quota of woollen
yarn.
The quota was allotted on (he consumption figure of the
years 1956 to 1959. Nagin Chand a'ong with his partners consumed woollen yarn during those years.
After the dissolution
600
SUPREME COURT REPORTS
[1973] 2 S.C.R.
Shadi Lal was drawing quota of woo]ien yarn on the basis of
A
consumption figures of the firm during the years 1956 to 1959
when the three partners were co-partners.
Quota is not part of
goodwiH.
Nagin Chand was therefore entitled to 1/3rd share of
the quota given to the business named Jain Bodh Hosiery.
·
~
It may be stated here that Ramesh Chand filed a suit against
Shadi Lal and the other parties on a similar cause of acti,h .
Both the suits were tried together. The trial Court di 0 n•;<<e<1
the suits.
B
The first Appellate Court decreed the suits and declared that
each of the plaintiffs was entitled to l/3rd share of the quota
c
allotted in the name of Jain Bodh Hosiery.
The learned Single Judge of the High Court on second appeal
set aside the decree granted by the first Appellate Court and dismissed the suits.
The High Court in Letters Patent Appeal accepted the appeal
and decreed the suits in terms of the decree of the first Appellate
Court. The High Court arrived at these conclusions. The basis
of allotment was consumption of woollen yarn during the years
preceding the date of dissolution of partnership. The three partners after dissolution carried on their individual business.
The
claim to quota on the basis of consumption during partnership
was nor lost by the dissolution. The partners had the right to do
hosiery business in their individual capacity.
Therefore,
1he~
were each entitled to draw l/3rd of the quota.
Counsel for the respondent contended that the origin of quota
D
E
was the perfomiance of the partnership during the years 19 5 6 to
F
1959 and therefore quota was an"asset of partnership to which the
respondent was entitled.
The Woollen Yarn (Production and Distribution) Control
Order 1960 which came into force on 29 October 1960 is the
relevant order. There was a similar order which came into force on
G
21 September 1960. The earlier order was repealed by the later
order.
The Textile Commissioner with a view to securing proper distribution of woollen yarn, issues directions to any manufacturer of or dealer in woollen yarn to sell any stock of woollen
yarn held by such manufacturer or dealer to any person specified
by the Textile Commissioner. lt is under that provision in clause
H
6 of the Order that woollen yarn is allotted to manufacturers of
hosiery.
The Federation was authorised by the Government to
discharge the duties of the Textile Commissioner.
-
-
'
-~
I
A
B
c
J)
E
F
SHAD! LAL v. NAGIN CHAND (Ray, /.)
601
The question is whether the quota which is allotted to the
appellant Shadi Lai after the dissolution of business is an item
in the assets of partnership.
On the dissolution of partnership
mained oue among the partners i111er-se.
No asset remained unmained due among the partners inrer-se.
No as;et remained undistribut~,d.
Shadi Lal obtains quota by reason of his qusiness. The quota
enables him to obtain raw material.
Raw material is converted
into finished products.
Th<:se goods arc marketed.
After the dissolution of partncr>hip the three partner> brothers
carried on hosiery business separately.
Each is entitled to ask
for quota of woollen yarn in accordance with the provisions of
the Woqllen Yarn Control Order.
The grant of quota is within
the power and discretion of the Textile Commissioner. The quota
which is granted to an applicant is in his individual busines~ right
and it is his property. If the partnership had continued the partners would have been entitled to quota as partners. The fact that
quota is granted in the name of Jain Bodh Hosiery does not convert the quota into a partnership asset.
The business name belongs to the appellant under the deed of dissolution.
It was said by counsel for the respondents that the past performance during the years 1956 to 1959 was important because
during the partnership the quota was earned by
joint Jabour.
Therefore, after separation it was said that the quota to Jain Bodh
Hosiery was given to three persons.
This contention is unsound
The appellant after dissolution carried on business in the name
of Jain Bodh Hosiery. He is entitled to apoly f'or quota in that
business name.
Quota that is granted in that business name is
his separate prooerty.
Neither Nagin Chand nor Ramesh Chand
has any proprietary right in that quota.
It must be recognised that quota attaches to the owner of a
business at the roint of time the quota is granted. It is the business at the relevant time which .obtains quota.
Therefore, quota
enures to the benefit of the bm1ness.
G
Quota was not and could not be an asset of the partnership.
Assets are divisible among partners.
Quota could not be divided. Quota is a matter of privilege and the grant of.it lies with the
Textile Commissioner.
Quota is a licence for a particular time
for a part!cular quantity.
Quota is worked out by getting the
raw matenal represented by the Quota .
. I I
It was said by counsel for the respondents that the aopellanc
was obtaining quota on the basis of the oerformance of the oartnershio. business durin~ the relevant material years. If the appellant claims on that basis and the Textile Commissioner allots quota
602
SUPREME COURT REPORTS
[1973) 2 s.c.R.
on that basis it lies within the power of the Commissioner to allot
the quantity he thinks fit and proper.
If the respondent by virtue of his individual busine>s is entitled to make an application for grant that application will merit its
own consideration. The relevant merits and demerits of the
appellant or of the respondents will be a matter for the relevant
authorities granting quota.
The respondent claimed I /3rd share of the appellant's quota.
The respondent has no proprietary claim to the appellant's quota.
The appellant's quota is not an asset in the items of partnership.
A fortiori it is not an acquired asset of the partnersh:p.
The High Court was in error in decreeing the suits on the
consideration that the respondent was entitled ·to l /3rd quota.
A declaration can be founJed only on a legal right. The respondent has none.
A
B
c
The appeals are therefore accepted.
The judgment of the
High Court is set aside. The suits are dismissed. In view of the
D
fact that there is no order as to costs in the High Court parties will
pay and bear their own costs.
V.P.S.
Appeals allowed.
'
I
' ,.