1985 Supreme(Cal) 153

High Court Of Calcutta
SUKUMAR CHAKRAVARTY
SHYAM SUNDARSHAW - Appellant
Versus
NETAI CHAND SHAW - Respondent
A. F. A. D.  706  Of  1974
Decided On : 04/19/1985

The share of a partner in the partnership business is movable property and the transfer of the same does not require any registered deed to become valid and effective.

Headnote:

PARTNERSHIP - Dissolution - Agreement for sale of share in partnership business - Construction - Transfer of share - Registration - Validity - Agreement opposed to public policy - S. 23, Contract Act.

Fact of the Case:

Plaintiff filed a suit for dissolution of partnership and accounts. The plaintiff's case was that he became a partner in the partnership business under the style of Mrs. Farquhar alone on 10-7-62 when Mrs. Farquhar accepted the defendant as an 8 as. partner in her business with effect from June 1962 on the defendant's payment of Rs. 6000/- only towards capital. Mrs. Farquhar took loans from the plaintiff and the total amount of such loan stood at Rs. 6000/-. Mrs. Farquhar took the aforesaid loan with an intention to sell her share in the partnership business to the plaintiff provided she would fail to repay the loan. Mrs. Farquhar finally decided to leave India for settling permanently in England and on 25-3-63 a bond with regard to the loan amount of Rs. 6000/- and agreement for sale of the 8 as. share of Mrs. Farquhar to the plaintiff in case of her failure to repay the loan were executed between the plaintiff and Mrs. Farquhar in presence of the defendant who put his signature in the aforesaid document. The defendant also on the same date wrote a letter to the plaintiff accepting him as a partner in the partnership business. Mrs. Farquhar also executed the power of attorney in favour of the defendant on the same day. All the documents were executed in the office of the Solicitors G. C. Mitra. The defendant contested the suit after filing the written statement. The defendant denied the allegations of the plaintiff and denied also that the plaintiff became a partner in the partnership business under the style Mrs. Farquhar's Bakery by his alleged purchase of the share of Mrs. Farquhar.

Finding of the Court:

The court found that the plaintiff became the partner in the partnership business under the style of Mrs. Farquhar's Bakery on the basis of Mrs. Farquhar's sale of her share to the plaintiff when Mrs. Farquhar sold her such share on the basis of her letter dated 8-10-65 from England expressing therein definitely that she would not repay the loan of Rs. 6000/- taken by her from the plaintiff. The court also found that neither the deed of agreement of sale, exhibit 1, nor the sale itself of Mrs. Farquhar's share in the partnership business to the plaintiff was hit by S. 23 of the Indian Contract Act as neither of them was opposed to any public policy or against any law. The court also found that the sale of the share of a partner in the partnership business does not require any registered deed as the share of the partner in the assets of the partnership business is a movable property. The court also found that the defendant knowing full well the contents of the documents because of his knowledge in English put his signatures on the documents in question and wrote also the letter, exhibit 5, to the plaintiff. The court also found that because of the misconduct of the defendant in running the partnership business and because of the defendant's denial of the plaintiff's right in the partnership business as a partner the plaintiff was entitled to bring a suit for dissolution of the partnership and accounts and was entitled to get the relief.

Issues: 1. Whether the plaintiff became a partner in the partnership business under the style of Mrs. Farquhar's Bakery by his alleged purchase of the share of Mrs. Farquhar with the consent of the other partner, the defendant? 2. Whether the transfer of the share of a partner in the partnership business with its assets which included also immovable property is compulsorily registrable to be legally effective? 3. Whether the agreement for sale in respect of the share of the partner Mrs. Farquhar being opposed to public policy and being against the law was hit by S. 23 of the Contract Act because of the continuing contract between the partnership firm and the Union of India (Railway Administration) which was in force up to 30-11-65 and which prevented the partners of the firm Mrs. Farquhar Bakery from allowing any person to be interested in the partnership business without the consent of the Railway Administration during continuance of the said agreement?

Ratio Decidendi: 1. The court held that the plaintiff became the partner in the partnership business under the style of Mrs. Farquhar's Bakery on the basis of Mrs. Farquhar's sale of her share to the plaintiff when Mrs. Farquhar sold her such share on the basis of her letter dated 8-10-65 from England expressing therein definitely that she would not repay the loan of Rs. 6000/- taken by her from the plaintiff. The court also found that neither the deed of agreement of sale, exhibit 1, nor the sale itself of Mrs. Farquhar's share in the partnership business to the plaintiff was hit by S. 23 of the Indian Contract Act as neither of them was opposed to any public policy or against any law. 2. The court held that the sale of the share of a partner in the partnership business does not require any registered deed as the share of the partner in the assets of the partnership business is a movable property. 3. The court held that the agreement for sale in respect of the share of the partner Mrs. Farquhar being opposed to public policy and being against the law was not hit by S. 23 of the Contract Act because of the continuing contract between the partnership firm and the Union of India (Railway Administration) which was in force up to 30-11-65 and which prevented the partners of the firm Mrs. Farquhar Bakery from allowing any person to be interested in the partnership business without the consent of the Railway Administration during continuance of the said agreement.

Final Decision: The court dismissed the second appeal and confirmed the judgment and decree passed by the learned Additional District Judge.