# NARAYANAPPA v. KRISIITAPPA (Mudholkar, !.)

- **Citation:** [1966] 3 S.C.R. 400
- **Court:** Supreme Court of India
- **Decided:** 1966
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/narayanappa-v-krisiitappa-mudholkar-3725
- **Pages:** 12

## Headnote

402
SUPREME COURT REPORTS
[1966] 3 S.C.R.
Setty, who was presumably the karra of the Bhaskara family, by
five members of the Addanki family, who presumably represented
all the members of the Addanki family.
Therefore, according
to the Bhaskara defendants, the plaintiffs had no cause of action.
Alternatively they contended that the suit was barred by time.
IR the view which we take it would not be necessary to consider the
second defence raised by the Addanki family.
The relevant portion of the karar reads thus : "As
disputes have arisen in our family regarding partition,
it is not possible to carry on the business or to make
investment in future.
Moreover, you yourself have
undertaken to discharge some of the debts payable
by us in the coastal parts in connection with our private
business.
Therefore. from this day onwards we have
closed the joint business. So, from this day onwards,
we have given up (our) share in the machine etc., and in the
business, and we have made over the same to you alone
completely by way of adjustment. You yourself shall carry
on the business without ourselves having anything to do
with the profit and loss. Herefor, you have given up to us
the property forming our Ven~atasubbayya's share which
you have purchased and delivered possession of the same
to us even previously.
In case you want to execute and
deliver a proper document in respect of the share which
we have given up to you, we shall at your own expense,
execute and deliver a document registered."
This document on its face shows that the partnership business
had come to an end and that the Addanki family had given up
their share in the "machine etc., in the business" and had made it
over to the Bhaskara family.
It also recites the fact that the
Addanki family had already received certain property which was
purchased hy the partnership presumably as that family's share
in the partnership assets.
The argument advanced by Mr. Alladi
Kuppuswami is that since the partnership assets included immovable property and the document records relinquishment by the
members of the Addanki family of their interest in those assets,
this document \\as compulsorily registerable under s. 17(1)(c) of the
Registration Act and that as it was not registered it is inadmissible
in evidence to prove the dissolution of the partnership as well as
the settlement of accounts.
Direct cases upon this point of the courts in India are few
but before we examine them it would be desirable to advert to the
provisions of the Partnership Act itself bearing on the interest of
partners in partnership property. Section 14 provides that subject to
contract between the partners the property of the firm includes all
property originally brought into the stock of the firm or acquired
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NARAYANAPPA v. KRISIITAPPA (Mudholkar, !.)
4 03
by the firm for the purposes and in the course of the busi~ess .of
the firm. Section 15 provides that such property shall ordmanly
be held and used by the partners exclusively for the purposes of
the business of the firm. Though that is so a firm has no legal
existence under the Act and the partnership property will, therefore,
be deemed to be held by the partners for the business of the partnership. Section 29 deals with the rights of a transferee of a
partner's interest and sub-s. (I) provides that such a transferee
will not have the same rights as the transferor partner but he
would be entitled to receive the share of profits of his transferor and
that he will be bound to accept the account of profits agreed to
by the partners. Sub-section (2) provides that upon dissolution of
the firm or upon a transferor-partner ceasing to be a partner the
transferee would be entitled as against the remaining partners to
receive the share of the assets of the firm to which his transferor
was entitled and will also be entitled to an account as from the
date of dissolution. Section 30 deals with the case of a minor
admitted to th

## Text

402
SUPREME COURT REPORTS
[1966] 3 S.C.R.
Setty, who was presumably the karra of the Bhaskara family, by
five members of the Addanki family, who presumably represented
all the members of the Addanki family.
Therefore, according
to the Bhaskara defendants, the plaintiffs had no cause of action.
Alternatively they contended that the suit was barred by time.
IR the view which we take it would not be necessary to consider the
second defence raised by the Addanki family.
The relevant portion of the karar reads thus : "As
disputes have arisen in our family regarding partition,
it is not possible to carry on the business or to make
investment in future.
Moreover, you yourself have
undertaken to discharge some of the debts payable
by us in the coastal parts in connection with our private
business.
Therefore. from this day onwards we have
closed the joint business. So, from this day onwards,
we have given up (our) share in the machine etc., and in the
business, and we have made over the same to you alone
completely by way of adjustment. You yourself shall carry
on the business without ourselves having anything to do
with the profit and loss. Herefor, you have given up to us
the property forming our Ven~atasubbayya's share which
you have purchased and delivered possession of the same
to us even previously.
In case you want to execute and
deliver a proper document in respect of the share which
we have given up to you, we shall at your own expense,
execute and deliver a document registered."
This document on its face shows that the partnership business
had come to an end and that the Addanki family had given up
their share in the "machine etc., in the business" and had made it
over to the Bhaskara family.
It also recites the fact that the
Addanki family had already received certain property which was
purchased hy the partnership presumably as that family's share
in the partnership assets.
The argument advanced by Mr. Alladi
Kuppuswami is that since the partnership assets included immovable property and the document records relinquishment by the
members of the Addanki family of their interest in those assets,
this document \\as compulsorily registerable under s. 17(1)(c) of the
Registration Act and that as it was not registered it is inadmissible
in evidence to prove the dissolution of the partnership as well as
the settlement of accounts.
Direct cases upon this point of the courts in India are few
but before we examine them it would be desirable to advert to the
provisions of the Partnership Act itself bearing on the interest of
partners in partnership property. Section 14 provides that subject to
contract between the partners the property of the firm includes all
property originally brought into the stock of the firm or acquired
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NARAYANAPPA v. KRISIITAPPA (Mudholkar, !.)
4 03
by the firm for the purposes and in the course of the busi~ess .of
the firm. Section 15 provides that such property shall ordmanly
be held and used by the partners exclusively for the purposes of
the business of the firm. Though that is so a firm has no legal
existence under the Act and the partnership property will, therefore,
be deemed to be held by the partners for the business of the partnership. Section 29 deals with the rights of a transferee of a
partner's interest and sub-s. (I) provides that such a transferee
will not have the same rights as the transferor partner but he
would be entitled to receive the share of profits of his transferor and
that he will be bound to accept the account of profits agreed to
by the partners. Sub-section (2) provides that upon dissolution of
the firm or upon a transferor-partner ceasing to be a partner the
transferee would be entitled as against the remaining partners to
receive the share of the assets of the firm to which his transferor
was entitled and will also be entitled to an account as from the
date of dissolution. Section 30 deals with the case of a minor
admitted to the benefits of partnerships. Such minor is given
a right to his share of the property of the firm and also a right to
a share in the profits of the firm as may be agreed upon. But his
share will be liable for the acts of the firm though he would not be
personally liable for them. Sub-section (4) however, debars a
minor from suing the partners for accounts or for his share of the
property or profits of the firm save when severing his connection
with the firm. It also provides that when he is severing his connection with the firm the court shall make a valuation of his share in
the property of the firm. Sections 31 to 38 deal with incoming
and outgoing partners. Some of the consequences of retirement
of a partner are dealt with in sub-ss. (2) and (3) of s. 32 while some
others are dealt with in ss. 36 and 37. Under s. 37 the outgoing
partner or the estate of a deceased partner, in the absence of a
contract to the contrary, would be, entitled to at the option of
himself or his representatives to such share of profits made since
he ceased to be a partner as may be attributable to the property of
the firm or to interest at the rate of six per cent. per annum on
the amount of his share in the property of the firm. The subject
of dissolution of a firm and the consequences are dealt with in
chapter VI, ss. 39 to 55. Of these the one which is relevant for
this discussion is s. 48 which runs thus :
"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.

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NARAYANAPPA v. KRISHTAPPA (Mudholkar, !.)
405
"When a debt due to a firm is got in no partner,
has any definite share or interest in that debt; his right
is merely to have the money so received applied, together
with the other assets, in discharging the liabilities of the
firm, and to receive his share of any surplus there may be
when the liquidation has been completed."
No doubt this decision was subsequent to the enactment of the
English Partnership Act of 1890. Even in several earlier cases,
as for instance, Darby v. Darby(') the same view has been expressed. That was a case where two persons purchased lands
on a joint speculation with their joint monies for the purpose of
converting them into building plots and reselling them at a profit
or loss. It was held by Kindersley V.C. that there was a conversion of the property purchased out and out and upon the death
of one of the partners his share in the part of the unrealised
estate passed to his personal representatives. After examining
the earlier cases the learned Vice-Chancellor
observed at p.
995 :
"The result then of the authorities may be thus stated :-Lord Thurlow was of opinion that a special contract was necessary to convert the land into personalty :
and Sir W. Grant followed that decision. Lord Eldon
on more than one occasion strongly expressed his opinion
that Lord Thurlow's decision was wrong. Sir J. Leach
clearly decided in three cases that there was conversion
out and out : and Sir L. Shadwell, in the last case before
him, clearly decided in the same way. That is the state
of the authorities .
Now it appears to me that, irrespective of authority,
and looking at the matter with reference to principles well
established in this Court, if partners purchase land merely
for the purpose of their trade, and pay for it out of the
partnership property,
that
transaction
makes
the
property personalty, and effects a conversion out and
out."
He then observed :
"This principle is clearly laid down by Lord Eldon in
Crawshav v. Collins(2)
and by Sir W. Grant in Featherstonhaugh v. Fenwick(') and the right of each partner
to insist on a sale of all the partnership property, which
arises from what is implied in the contract of partnership,
is just as stringent as a special contract would be. If, then,
this rule applies to ordinary stock-in-trade, why should it
(1) 61 E.R. 992.
(2) 15 Yes. 218.
(3) 17 Yes. 298 .
406
SUPREME COURT
REPORTS
[1966] 3 S.C.R.
not apply to all kinds of partnership property ? Suppose
that partners, for the purpose of carrying on
their
business,
purchase, out of the funds of the partnership,
leasehold estate, or take a lease of land, paying the rent
out of the partnership funds, can it be doubted that
the same rule which applies to ordinary chattels would
.apply lo such leasehold property ? I do not think it
was ever questioned that, on a dissolution, the right of
each partner to have the partnership effects sold applies to
leasehold property belonging to the partnership as much
as to any other stock-in-trade. No one partner can insist
on retaining his share unsold. Nor would it make any
difference in whom the legal estate was vested, whether in
one of the partners or in all; this Court would regulate the
matter according to the equities.
And Sir W. Grant so
decided in Featlzerstonlzauglz v. Fenwick.( )"
We have quoted extensively from this decision because of
the argument that the decision in Rodriguez's case(') would have
been otherwise but for s. 22 of the English Act. Adverting to this
Lindley has said :
"From the principle that a share of a partner is nothing
more than his proportion of the partnership assets after
they have been turned into money and applied in liquidation of the partnership, whether its property consists of
land or not, must, as between the real and personal representatives of a deceased partner, be deemed to be personal
and not real estate, unless indeed such conversion is inconsistent with the agreement between the parties. Although
the decisions upon this point were conflicting, the authorities which were in favour of the foregoing conclusion certainly preponderated over the others, and all doubt upon
the point has been removed by the Partnership Act, I 890,
which contains the following section :
22. Where land or any heritable interest therein has become partnership, property it shall, unless the contrary
intention appears, be treated as between the partners (including the representative of a deceased partner), and also
ai between the heirs of a deceased partner and his executors
or administrators, as personal or movable
and
not
real or heritable estate."
Even in a still earlier case Foster v. Hale(') a person
attempted to obtain an account of the profits of a colliery on the
ground that it was partnership property and it was objected that
(I) 17 Vos. 298.----·
(2) [1919) A.C. 59.
(J) S Vcs. 30~.
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NARAYANAPPA v. KRJSHTAPPA (Mudholkar, J.)
407
there was no signed writing, such as the Statute of Frauds required.,
Dealing with it the Lord Chancellor observed :
"That was not the question : it was whether there was
a partnership. The subject being an agreement for land,
the question then is whether there was a resulting trust for
that partnership by operation of law. The question
of partnership must be tried as a fact, and as if there was
an issue upon it. If by facts and circumstances it is establi·
shed as a fact that these persons were partners in the col-
. liery, in which land was necessary to carry on the
trade, the lease goes as an incident. The partnership being
established by evidence upon which a partnership may be
found, the premises necessary for the purposes of . that
partnership are by operation of law held for the purposes
of that partnership.''
It is pointed out by Lindley that this principle is carried to its
extreme limit by Vice-Chancellor Wigram in Dale v. Hamilton(') .
Even so, it is pointed out that it must be treated as a binding
authority in the absence of any decision of the Court of Appeal to
the contrary.
It seems to us that looking to the scheme of the Indian Act
no other view can reasonably be taken. The whole concept of
partnership is to embark upon a joint venture and for that purpose
to bring in as capital money or even property including immovable'
property. Once that is done whatever is brought in would cease
to be the exclusive property 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 share 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. He would not be
able to exercise his right even to the extent of his share in the
business of the partnership. As already stated, his right during the
subsistence of the partnership is to get his share of profits from time
to time as may be agreed upon among the partners and after the
dissolution of the partnership or with his retirement from part"
nership of the value of his share in the net partnership assets as
on the date of dissolution or retirement after a deduction of liabilities and prior charges. It is true that even during the subsis·
tence of the partnership a partner may assign his share to another.
In that case what the assignee would get would be only that which
is permitted bys. 29(1), that is to say, the right to receive the share
of profits of the assignor and accept the account of profits agreed to
by the partners. There are not many decisions of the High Courts
on the point. In the few that there are the preponderating view is
(I) 5 Ha. 369 on appeal 2 Ph. 266.
MIOSup./CI/66-13
408
SUPREME COURT REPORTS
[1966) 3 S.C.R.
in support of the position which we have stated. In Joharmal v.
Tejram Jagrup(•) which was decided by Jardine and Telang JJ.,
the latter took the view that 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 registeted under the Registration Act. In
coming to this conclusion he mainly purported to rely upon an
observation contained in the fifth edition of Lindley on Partnership
at p. 347. This observation is not to be found in the present edition of Lindley's Partnership nor in the 9th or 10th editions which
were brought to our notice. The 5th edition, however, is not
available. The learned Judge after quoting an earlier statement
which is that the "doctrine merely amounts to this that on the death
of a partner his share in the partnership property is to be treated
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as money, not as land" says : "This obviously would not affect
matters either during the lifetime of a partner-Lindley, L.J.,
says in so many words that it has no practical operation till his
death (p. 348)-or as against parties strangers to the partnership,
e.g., the firm's debtors." While it is true that the position so far
as third persons are concerned would be different it may be
pointed out that in Forbes v. Steven(') James V.C., has, as quoted
by the learned Judge, said : "It has long been the settled law of this
Court that real estate bought or acquired by a partnership for
partnership purposes (in the absence of some controlling agreeE
ment or direction to the contrary}, is, as between the partners and .
as between the real and personal representatives of a partner
deceased personal property, and devolves and is distributable and
applicable as personal estate and as legal assets." Telang J.,
eeems to have overlooked, and we say so with great respect, the
words "as between the partners" which precede the words
"and as between the real and personal representative of the
partner deceased" and to have confined his attention solely to the
latter. We have not found in any of the editions of lindley's
Partnership an adverse criticism of the view of the Vice-Chancellor.
But, on the contrary, as already stated, the view expressed is in
fnll accord with these observations. Jardine J., has discussed the
English authorities at length and after referring to the documents
upon which reliance was placed on behalf of the defendant stated
llil opinion thus :
"'To lay down that the three letters in question, which
deal generally ~ith the ass~ts, movable and imm?vable,
without specifymg any particular mortgage or other interest
in real property require registration,
would,
I
incline to think, in the present state of the authorities, go
(I) I.LR~ i7Rom. :m-. -·
(2) L.R. JO Eq, 178.
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NARAYANAPPA v. KRISHTAPPA (Mudholkar, J.)
409
too far. It may be argued that such letters are not 'in·
struments of gift of immovable property' but rather disposals of a share in a partnership of which the business
is money lending, and the mortgage securities merely incidental thereto."
The view of Telang J., was not accepted by the Madras High
Court in Chitturi Venkataratnam v. Siram Subba Rao(').
The
learned Judges there discussed all the English decisions as also the
decisions in Sudarsanam Maistri v. Narasimhulu Maistri(2) and
Gopala Chetty v. Vijayaraghavachariar(3)
and the opinion of
Jardine J ., in Joharmal' s case(•) held that an unregistered deed of
release by a partner of his share in the partnership business is
admissible in evidence, even where the partnership owns immovable property. The learned Judges pointed out that though a
partner may be a co-owner in the partnership property he has no
right to ask for a share in the property but only that the partnership
business should be wound up including therein the sale of immovable property and to ask for his share in the resulting assets .
This decision was not accepted as laying down the correct law by
a Division Bench of the same High Court in Samuvier v. Ramasubbier(').
The learned Judges there relied upon the decision
in Ashworth v. Munn(•) in addition to the opinion of Telang J.,.
and also referred to the decision
Gray v. Smith(') in coming
to a conclusion contrary to the one in the earlier case. It may be
pointed out that the learned Judges have made no reference to the·
decision of the Privy Council in Gopla Chetty' s case(') though
that was one of the decision relied upon by Phillips J., in the earlier
case. In so far as Ashworth' s case(6)
is concerned that was a
case which turned on the provisions of the Mortmain Acts and is
not quite pertinent for the decision on the point which was before
them and which is now before us. In Gray. v. Smith(7) Kakewich J., held that an agreement by one of the partners to retire·
and to assign his share in the partnership assets including immovable property, is an agreement to assign an interest in land
and falls within the. Statute of Frauds. The view of Kekewich J.,
seems to have received the approval of Cotton L.J., one of the
Judges of the Court of Appeal, though no argument was raised
before it challenging its correctness. It may, however, be observed that even according to Kekewich J., the authorities (Foster
v. Hale(') and Dale v. Hamilton(•~ establish that one may have an
agreement of partnership by parol, notwithstanding that the partnership is to deal with land. He, however, went on to observe :
(I} l.L.R. 49 Mad. 738.
(2) 1.L.R. 1925 Mad. 149.
(3) l.L.R. 45 Mad. 378 (P.C.)~[1922] A.C. I (4) !.L.R. 17 Born. 235.
(5) l.L.R. 55 Mad. 72.
(6) (188u) 15 Ch. D. 163.
(7) 43 Ch. D. 208.
(8) 5 Yes. 318.
(9) 5 Ha. 369 on appeal 2 Ph. 266
410
SUPREME COURT
REPORTS
(1966] 3 S.C.R.
"But it docs not seem to me to follow that an agreement
for the dissolulion of such a partnership need not be
expressed in writing, or rather than there need not be a
memorandum of the agreement for dissolution when one
of the terms of the agreement, either expressly or by
necessary implication, is that the party sought to be charged
must part with and assign to others an interest in land.
That seems to me to give rise to entirely different
considerations.
In the one case you prove the partnership by
parol; you prove the object, the terms of the partnership,
and so on. But in the other case it is one of the essential
terms of the agreement that the party to be charged shall
convey an interest in land, and that seems therefore to
bring it necessarily within the 4th section of the Statute of
Frauds".
In the case before, us also in Samuvier's case(') the document
cannot be said to convey any immovable property by a partner to
another expressly or by necessary implication. If we may recall,
the document executed by the Addanki partners in favour of the
Bhaskara partners records the fact that the partnership business
bas come to an end and that the latter have given up their share
in "the machine etc., and in the business" and that they have
"made over same to you alone completely by way of adjustment".
There is no express reference to any immovable property herein.
No doubt, the document does recite the fact that the Bhaskara
family has given to the Addanki family certain property.
This,
however, is merely a recital of a fact which had taken place
~rlier. To cases of this type the observations of Kekewich J.,
which we have quoted do not apply. The view taken in Samuvier's
-case(!} seemed to commend itself to Varadachariar J., in Thirumalappa v.
Ramappa
but he was reversed in Ramappa v.
Thirumalappa.(2)
We may also refer to the decision of a Full Bench in Ajudhia
Pershad Ram Pershad v. Sham Sunder & Ors.(3) in which Cornelius J., has discussed most of the decisions we have earlier referred
to in addition to several others and reached the conclusion that
while a partnership is in existence, no partner can point to any
part of the assets of the partnership as belonging to him alone.
After examining the relevant provisions of the Act, the learned
judge observed :
"These sections require that the debts and liabilities
should first be met out of the firm property and there-
(I) I.LR. 55 Mad. 72.
(2) A.l.R. 1939 Mad. 884.
,3; A.I.R. 1947 Lah. 13.
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NARAYANAPPA v. KRJSHTAPPA (Mudholkar, J.)
411
after the assets should be applied in rateable payment to
each partner of what is due to him firstly on account of
advances as distinguished from capital and, secondly on
account of capital, the residue, if any, being divided
rateably among all the partners. It is obvious that the Act
contemplates complete liquidation of the assets of the
partnership as a preliminary to the settlement of accounts
between partners upon dissolution of the firm and it
will, therefore, be correct to say that, for the purposes of
the Indian Partnership Act, and irrespective of any
mutual agreement between the partners, the share of
each partner is, in the words of Lindley : "his proportion
of 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."
This indeed is the view which has commended itself to us.
Mr. Kuppuswamy then referred us to two decisions of English
courts in In re Fuller's Contract(')
and Burdett-Coutts v. Inland
Revenue Commissioners(2) and on the passage at pp. 394 and
395 in Lindley's Partnership under the head "Form of Transfer"
in support of his argument.
Both the cases relied upon deal
with contracts with third parties and not with agreements between
partners inter se
concerning retirement or dissolution.
The passage from Lindley deals with a case where there is an actual
transfer of immovable
property and is, therefore, not in
point.
Mr. Chatterjee brought to our notice some English decisions
in addition to those we have adverted to in support, which agree
with the view taken in those cases.
He has also referred to the
decisions in Prem Raj Brahmin v. Bhani Ram Brahmin(3) and
Firm Ram Sahay v. Bishwanath(4). We do not think it necessary
to discuss them because they do not add to what we have
already said in support of our view.
For these reasons we uphold the decree of the High Court
and dismiss the appeal with costs.
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(1) (1933] Ch. D. 652.
(2) (1960] 1 W.L.R. 1027.
(3) l.L.R. [1946] 1 Cal. 191.
(4l A.l.R. 1963 Patna 221.
Appeal dismissed.