# MOHD. LAIQUIDDIN AND ANR v. KAMALA DEVI MISRA (DEAD) BY LRS. AND ORS

- **Citation:** [2010] 1 S.C.R. 873
- **Court:** Supreme Court of India
- **Decided:** 2010-01-05
- **Case number:** Civil Appeal Nos. 6933-34 of 2002
- **Bench:** Tarun Chatterjee, V.S. Sirpurkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mohd-laiquiddin-and-anr-v-kamala-devi-misra-dead-by-lrs-and-ors-26553
- **Pages:** 26

## Headnote

Indian Partnership Act, 1932:
A
B
ss.42 and 4 - Deemed dissolution of firm - Two partner5 c
- Death of one partner - LRs of deceased partner not
interested in continuing the firm or in constituting a fresh firm
- Effect of - Held: Since there were only two partners
constituting the partnership firm, on death of one of them,
there was deemed dissolution of the firm, despite existence
D
of a clause in the partnership deed which said otherwise - A
partnership is a contract between partners - There cannot be
any contract unilaterally without acceptance by the other
partner - LRs of the deceased partner could not be asked to
continue the partnership, as there was no legal obligation upon
E
them to do so, as partnership is not a matter of heritable status
but purely one of contract, which is also clear from definition
of partnership under s.4.
ss. 14 and 48 - Property of firm - Partnership firm,
constituted for construction of a cinema theatre, consisted of F
two partners - While the first partner offered her land for
construction of cinema theatre, the second partner
constructed cinema theatre and other allied constructions by
procuring funds - Deemed dissolution of the firm in view of
death of the first partner - Distribution of residual property G
amongst the partners - Held: On facts, there was no intention
from either partner to treat the land, building, structures etc.
as properties of the firm - As the partnership got dissolved
on death of a partner, it would be reasonable to allow both the
873
H
874
SUPREME COURT REPORTS
(2010) 1 S.C.R.
A parties to take their respective properties - First partner
entitled to exclusive possession of the land while second
partner entitled to take away the movables and recover the
value of buildings and structure embedded to the land.
8
Appeal - Second appeal - New plea - Question of law,
based on pleadings and evidence on record, not raised before
lower courts - Held: Such question of law can be permitted
for the first time before the High Court.
Constitution of India, 1950 - Article 136 - Powers under
C - Not to be exercised, until grave injustice is shown to be
caused to the aggrieved party by way of the impugned order.
The partnership firm in question, constituted for
construction of a cinema theatre, consisted of two
0 partners. One of the partners filed suit for dissolution of
the partnership firm alleging that the other partner
mismanaged the business of the firm, manipulated the
account books and stopped payment of the minimum
guarantee profit, as envisaged under the partnership
E deed, to the plaintiff-partner.
In terms of the partnership deed, the plalntlff-partner
offered her land for construction of the cinema theatre,
while the defendant-partner constructed the cinema
theatre and other allied constructions by procuring
F necessary funds.
During pendency of the suit, the plaintiff-partner died
and her legal representatives, i.e. the appellants, were
brought on record. The trial court held that there was
G deemed dissolution of the partnership firm due to death
of the plaintiff-partner, and since the appellants were not
agreeable to enter into partnership with the defendantpartner, they were entitled for rendition of accounts and
to be handed over the entire cinema theatre with allied
H structures as per the deed of partnership. Meanwhile the
MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI
875
MISRA (DEAD) BY LRS.
defendant-partner
also
died,
and
his
legal .A
representatives, i.e. the rospondents were brought on '
record before the First App~llate Court, which confirmed
the decree passed by the trial court.
The respondents filec:t appeal before the High Court,
8
which also held that the partnership firm stood dissolved
on account of death of ono of the partners, but permitted
the respondents to take away the movables from the
cinema theatre and recovor the value of the byllding and
structures embedded to tho land. On a combined reading
of the terms of the partnership deed, the High Court

## Text

_Characters 0–39,439 of 48,053. This is a partial read: ask again with offset=39439 for what follows._

[2010] 1 S.C.R. 873
MOHD. LAIQUIDDIN AND ANR.
v.
KAMALA DEVI MISRA (DEAD) BY LRS. AND ORS.
(Civil Appeal Nos. 6933-34 of 2002)
JANUARY 5, 2010
[TARUN CHATTERJEE AND V.S. SIRPURKAR, JJ.]
Indian Partnership Act, 1932:
A
B
ss.42 and 4 - Deemed dissolution of firm - Two partner5 c
- Death of one partner - LRs of deceased partner not
interested in continuing the firm or in constituting a fresh firm
- Effect of - Held: Since there were only two partners
constituting the partnership firm, on death of one of them,
there was deemed dissolution of the firm, despite existence
D
of a clause in the partnership deed which said otherwise - A
partnership is a contract between partners - There cannot be
any contract unilaterally without acceptance by the other
partner - LRs of the deceased partner could not be asked to
continue the partnership, as there was no legal obligation upon
E
them to do so, as partnership is not a matter of heritable status
but purely one of contract, which is also clear from definition
of partnership under s.4.
ss. 14 and 48 - Property of firm - Partnership firm,
constituted for construction of a cinema theatre, consisted of F
two partners - While the first partner offered her land for
construction of cinema theatre, the second partner
constructed cinema theatre and other allied constructions by
procuring funds - Deemed dissolution of the firm in view of
death of the first partner - Distribution of residual property G
amongst the partners - Held: On facts, there was no intention
from either partner to treat the land, building, structures etc.
as properties of the firm - As the partnership got dissolved
on death of a partner, it would be reasonable to allow both the
873
H
874
SUPREME COURT REPORTS
(2010) 1 S.C.R.
A parties to take their respective properties - First partner
entitled to exclusive possession of the land while second
partner entitled to take away the movables and recover the
value of buildings and structure embedded to the land.
8
Appeal - Second appeal - New plea - Question of law,
based on pleadings and evidence on record, not raised before
lower courts - Held: Such question of law can be permitted
for the first time before the High Court.
Constitution of India, 1950 - Article 136 - Powers under
C - Not to be exercised, until grave injustice is shown to be
caused to the aggrieved party by way of the impugned order.
The partnership firm in question, constituted for
construction of a cinema theatre, consisted of two
0 partners. One of the partners filed suit for dissolution of
the partnership firm alleging that the other partner
mismanaged the business of the firm, manipulated the
account books and stopped payment of the minimum
guarantee profit, as envisaged under the partnership
E deed, to the plaintiff-partner.
In terms of the partnership deed, the plalntlff-partner
offered her land for construction of the cinema theatre,
while the defendant-partner constructed the cinema
theatre and other allied constructions by procuring
F necessary funds.
During pendency of the suit, the plaintiff-partner died
and her legal representatives, i.e. the appellants, were
brought on record. The trial court held that there was
G deemed dissolution of the partnership firm due to death
of the plaintiff-partner, and since the appellants were not
agreeable to enter into partnership with the defendantpartner, they were entitled for rendition of accounts and
to be handed over the entire cinema theatre with allied
H structures as per the deed of partnership. Meanwhile the
MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI
875
MISRA (DEAD) BY LRS.
defendant-partner
also
died,
and
his
legal .A
representatives, i.e. the rospondents were brought on '
record before the First App~llate Court, which confirmed
the decree passed by the trial court.
The respondents filec:t appeal before the High Court,
8
which also held that the partnership firm stood dissolved
on account of death of ono of the partners, but permitted
the respondents to take away the movables from the
cinema theatre and recovor the value of the byllding and
structures embedded to tho land. On a combined reading
of the terms of the partnership deed, the High Court held C
that the land and the cinema were not the properties of
the firm but were propertioa of the respective pnrties, and
thus the appellants were ontitled to exclusive possession
of. the land and the respondents were entitled to take
away the projectors and other machineries, the furnitures
D
and all other items, which can be safely removed from
their place and that tho appellants should pay the
respondents the value of the remaining portions of the
structures which could m>t be removed without any
damage, after proper valuation of the same.
E
In appeal to this Court, the questions which arose for
consideration were: 1) whether the High Court erred in
permitting the respondent$ in raising a question for the
first time in second appeal, which was not in the
F
pleadings before the Trial Court or the First Appellate
Court; 2) whether the High Court erred in holding that
there had been dissolution of the partnership firm on
account of death of a partner and 3) whether the High
Court also erred in permitting the Respondents to remove
G
the movables from the cinema theatre.
Dismissing the appealJ, the Court
HELD: 1. The contention that the High Court erred
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[2010] 1 S.C.R.
A in permitting the respondents to raise a new plea for the
first time in the second appeal has no substance. 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 is to be dealt with under
B Section 48 of the Partnership Act, 1932 and the proceeds
is to be disbursed to the two partners in accordance with
the respective shares as per the partnership deed. The
High Court had dismissed this plea. The Respondents
did not appeal against the said finding of the High Court.
c 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, one fails
0 to 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. There is thus no scope for
exercise of powers by this Court under Article 136 of the
E Constitution. [Paras 17 and 19) [889-G-H; 890-A-C; 891A-B]
F
Santakumari & Ors. v. Lakshmi Amma Janaki Amma (DJ
By Lrs. & Ors. (2000) 7 sec 60, relied on.
Hardaya/ Gir v. Sohna Ram 1970 (3) SCC 635 and
Chandra Singh v. State of Rajasthan (2003) 6 SCC 545,
referred to.
2.1. Dissolution of a partnership firm on account of
death of one of the partners is subject to the contract
G entered into by the parties. Though Clause 22 of the
Partnership deed herein reads that "the partnership deed
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
H death of any partner shall not have the effect of
MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI
877
MISRA (DEAD) BY LRS.
dissolving the firm. However, in the facts and A
circumstances of the case, absolute effect to this clause
cannot be given. [Paras 22 and 23] [892-A-D]
2.2. When there are only two partners constituting the
partnership firm, on the death of one of them, the firm is
8
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 the deceased C
partner were 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 D
ofthe Partnership Act, 1932. 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. [Para 26] (893-D-F]
E
Smt. S. Parvathamma/ v. CIT 1987 Income Tax Reports
161, approved.
3. As to the issue related to removing the movables
F
from the Cinema and allowing the Respondents to
recover the value of the building and structures
embedded to the land, from the appellants, 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 of the Partnership Deed clearly G
indicates that the land as well as the building with the
fixtures etc., to be vested with the plaintiff-partner (since
deceased), after the expiry of term of 42 years. It is also
true that directing the delivery of the entire property to the
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SUPREME COURT REPORTS
[2010) 1 S.C.R.
A appellants would cause prejudice to the rights of the
Respondents and would put him to loss. As the
partnership got dissolved on the death of the plaintiff.
partner, it would be reasonable to allow both the parties
to take their respective properties. The appellants are
B 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
structure embedded to the land. It has to be assessed by
the technically qualified person. The appellants are liable
c to pay the value of the remaining structures after
adjusting the amount if any due to the appellants. [Paras
27 and 41) [893-G; 897-H; 898-A-D]
Arjun Kanoji Tankar v. Santaram Kanoji Tankar (1969)
3 SCC 555; Arm Group Enterprises Ltd. v. Waldorf
D Restaurant (2003) 6 SCC 432; Commissioner of Income Tax,
Madhya Pradesh v. Dewas Cine Corporation (1968) 2 SCR
173; Narayanappa v. Krishtappa (1966) 3 SCR 400; Malabar
Fisheries Co. Calicut v. CIT (1979) 4 SCC 766 and S. V.
Chandra Pandian v. S. V. Sivalinga Nadar (1993) 1 SCC 589,
E referred to.
F
G
H
Mills v. Clarke 1953 (1) AER 779, referred to.
Halsbury's Law of England, 4th Edition, referred to.
Case Law Reference:
AIR 1978 AP 257
referred to
Para 4
1910 (3) sec 635
referred· to
Para 18
(2003) 6 sec 545
referred to
Para 19
(2000) 1 sec 60
relied on
Para 19
1987 ITR 161
approved
Para 25
(1969) 3 sec 556
referred to
Para 31
MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI
879
MISRA (DEAD) BY LRS.
(2003) 6 sec 432
referred to
Para 32
1953 (1) AER 779
referred to
1 Para 34
(1968) 2 SCR 173
referred to
Para 36l-.
(1966) 3 SCR 400
referred to
Para 38
(1979) 4 sec 766
referred to
Para 39
(1993) 1 sec 589
referred to
Para 39
CIVIL APPELLATE JURISDICTION : Civil Appeal
No.6933-6934 of 2002.
From the Judgment & Order dated 9.4.2002 of the High
Court of Judicature, Andhra Pradesh at Hyderabad in AS. Nos.
1048 & 1050 of 2001.
WITH
C.A. Nos. 4411-4412 of 2002.
Dr. K. Parasaran, Rakesh Dwivedi, R.F. Nariman, A.D.N.
A
B
c
D
Rao, A. Subba Rao, Roy Abraham, Kishore Rai, Seema Jain,
E
Anant Prakash, Shantanu Krishna, Mukti Choudhary, Preetika
Dwivedi, Rahul Dua, Himinder Lal for the appearing parties.
The Judgment of the Court was delivered by
TARUN CHATTERJEE, J. 1. These four appeals are
F
directed against the judgment and order dated 9th 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 appeals and modified the order dated
1
17th of October, 2001 of the First Appellate Court, which G
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,
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A 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
B 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
C deceased) in her plaint was as follows:
Shri Jai Narayan Mishra, original defendant (since
deceased) made a proposal to constitute a firm for construction
of a cinema theatre on the land of the original plaintiff (since
deceased) and on acceptance of the said proposal by her, they
D executed a deed of partnership dated 26th 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
E 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
F
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
G defendant in 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 nonH furnishing of annual accounts to the plaintiff and hence the suit.
MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI
881
MISRA (DEAD) BY LRS. [TARUN CHATTERJEE, J.]
The original defendant (since deceased) entered appearance
A
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
8
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 cinematheatre and no transaction relating to the said business
had been concealed from the plaintiff. An extent of 1000 C
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 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 D
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/
E
- 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
F
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
G
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)
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[2010) 1 S.C.R.
A
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 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
B
plaintiff. The plaintiff had not laaued 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
c
dismissed with costs."
4. By the judgment and order dated 18th of January, 1999,
the Vllth 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
D further directed to hand over the entire property with allied
structure and other materials to the plaintiff.
E
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
F
adduced by both the parties, and after verifying the relevant
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
G original plaintiff (since deceased) on 17th 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
H
MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI
883
MISRA (DEAD) BY LRS. [TARUN CHATIERJEE, J.]
agreeable to enter into partnership with the defendant and in
A
view of the dissolution of the pa1tnership 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 17th of May,
B
1996 due to the death of the original plaintiff (since deceased)
and consequently the appellants, her legal 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 c
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
D
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 Vllth Senior Civil
Judge, City Civil Court, Hyderabad, the respondents, the legal
E
representatives of the defendant, preferred an appeal before
the Xlllth Addi. 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 mis'management. The First Appellate Court, by an
F
order dated 17th of October, 2001, dismissed the appeal
confirming the judgment and decree of the trial court and
allowed the cross objections filed l;>y the Appellants. The issue
framed by the First Appellate Court was as follows:
(a)
Whether the plaintiffs are entitled for the dissolution
G
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
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SUPREME COURT REPORTS
[2010] 1 S.C.R.
A
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
s 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
C preferred by the appellants. The respondents did not disclose
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.
D
10. Aggrievecj by the order of the First Appellate Court
dated 17th 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 9th of April, 2006,
E
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:
F
( 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 ?
(2) Whether there was mismanagement of the business of
G
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 ?
H
(4) Whether the land given by the plaintiff No.1 and the
MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI
885
MISRA (DEAD) BY LRS. [TARUN CHATTERJEE, J.)
theatre constructed by the defendant No.1 was the
A
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
8
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?
C
12. The findings of the High Court as to these issues raised
were as follows.
(1)
(2)
As to the point of the dissolution of the firm, the
E>
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
E
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).
F
On the question of mismanagement of the firm, the
High Court held that the First Appellate Court was
G
right in holding that there was mismanagement on
the grounds of (i) non production of the account
books for the verification of the original plaintiff
(since deceased); (ii) the non inclusion of the
certain amounts received by way of income in the
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A
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c
D
E
F
G
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[2010) 1 S.C.R.
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 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
..
MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI
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(5)
themselves to change the general rule and such an
A
agreement may be expressed or implied.
In the partnership deed, it was clearly mentioned
that the "1st party" (original plaintiff) offered her land
towards her two-anna share capital for the
B
construction of cinema theatre and other allied
constructions for running a cinema business. The
"2nd party" (Origina~ defendant) agreed to construct
cinema theatre and other allied constructions by
procuring the necessary funds. It was agreed that
C
the 1st 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
D
the properties of the firm and they were the
properties of the respective parties.
In relation to the question of directing delivery of the
land along with the structures, machi11eries and
E
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
F
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 G
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
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exclusive possession of the land and respondents
were entitled to take away the projectors and the
other machineries, the furnitures and 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.
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 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
.
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MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI ·.·$39
MISRA (DEAD) BY LRS. [TARUN CHATTERJEE, J.]
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 le9ve, 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
A
B
the Respondents in raising a question for the first c
time in second appeal, which was not in the
pleading before the Trial Court or the First Appellate
Court?
(b)
Whether the High Court was justified in holding that
D
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 E
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
F
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 · G
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
· factual background neither before the Trial Court nor the first
appellate court. The new plea which was allegedly raised
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[2010] 1 S,C.R.
A 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
B 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
c 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.
D
18. In the case of Hardaya/ 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
E 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,
F 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
G 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) in which decision
this Court, after examining the orders of the Courts below
H arrived at a conclusion that the Second Appellate Court had
MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI
891
MISRA (DEAD) BY LRS. [TARUN CHATIERJEE, J.]
not made out a new plea by merely interpreting the documents A
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 B
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 C
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
arrived at by the Courts below, it is necessary to examine the D
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 E
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 alt."
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
F
dissolvedG
(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;
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A
(c) by the death of a partner; and
(d) by the adjudication of a partner as an insolvent."
22. Dissolution of a partnership firm on account of death
of one of the partners is subject to the contract entered into by
8
the parties. In this context, it is pertinent to refer to the terms of
the deed of partnership.
c
.
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 dissolvinr the firm. However, in the facts
D 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
E 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 ler:ial
representative of the partner, who dies, would be under a duty
to enter into a fresh deed of partnership. The legal
F
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 ; :iced reliance on Smt. S.
G Parvathammal v. C/T(1987 lncorne 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:
H
"A partnership normally dissolves on the death of the
MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI
893
MISRA (DEAD) BY LRS. [TARUN CHATTERJEE, J.]
partner unless there was an agreement in the Original A
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 thirc;J party can be introduced.
B
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 and the assessee. Partnership
was not a matter of heritable status but purely one of c
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
D
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 tc
E
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
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one of the partners and the first appellate court as well as the
High Court have taken the correct view in upholding the same.
27. As to the issue related to removing the movables from
Anand Cinema and allowing the Respondents to recover the
G
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:
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[2010) 1 S.C.R.
"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 prqperty acquired with money
belonging to the firm are deemed to have been acquired
for the firm."
29.