K. T. Thomas, J. - In execution of a decree for money against the partners of a dissolved firm one of the items of immovable properties of the firm was brought to sale. The appellant purchased it in court sale, but the could not get delivery of possession as the respondent offered resistance on the strength of a deed of transfer executed in his favour by the legal heirs of a deceased partner. The execution court upheld his claim and held that the respondent got valid title through the deed of transfer, but directed him to deposited the decree amount in court and allowed the appellant to withdraw the bid amount deposited by him in court. The lower appellate court while upholding the resistence of the respondent, took the view that the respondent became a co-owner of the property on the strength of the deed of transfer. The direction to deposit the decree amount in court was deleted by the lower appellate court. The second appeal is in challenge of the said conclusion that the respondent has valid title was a co-owner.

The name of the dissolved firm was "The Trustful Daily Banking Company". The two partners, Bahuleyan and Madhavan were brothers. Madhavan died on 26-10-1960. It is not disputed that the firm stood dissolved with his death. As per Ext. P-1 sale deed dated 28-5-1963, the legal heirs of Madhavan transferred the property in favour of the respondent for consideration. The suit was filed in 1964 by a stranger against Bahuleyan and the legal heirs of Madhavan claiming a sum of Rs. 312.20 as due from the firm. The suit was deceased on 5-6-1968 and the decree-holder was allowed to realise the amount from the property scheduled in the decree (35 cents situated at Kaloor, Cochin). The said property originally belonged to Madhavan which was brought into the assets of the firm along with or after the formation thereof. When the property was brought to sale, it was bid in auction by the appellant who is another brother of Bahuleyan. One of the allegations of the respondent is that the auction purchaser bid it at the behest of Bahuleyan who succeeded in cornering the other properties of the firm for himself. The merit of that contentions was not gone into by the two courts below. Though the same contention was repeated in this appeal among other contentions. I do not think it necessary to consider it in view of the legal position involved.

The main contention advanced is that the property of the firm remained as such until settlement of account of the firm and the erstwhile partners have only a right to divide the residue in proportion to their respective shares and hence no transfer could be effected by the legal heirs of one of the former partners until such settlement. The question therefore to be considered is whether the respondent got any right in the property as per Ext. P 1 sale deed.

Under Section 42(1) of the Indian Partnership Act, 1932 (for short 'the Act') the firm stood dissolved on 26-10-1960, the date of the death of Madhavan. This position is not disputed. Ext. P1 sale deed was executed about three years thereafter and the suit was filed only a year after the execution of Ext. P1. There is no evidence to show whether any settlement of account was made between Bahuleyan and the legal heirs of Madhavan before the execution of Ext. P1. Sec. 48 of the Act lays down the rules to be observed in settlement of account of a dissolved firm. Losses shall be paid first out of profits, next out of capital and lastly by the partners individually in proportion in which they were entitled to share profits. The assets of the firm shall be applied in paying the debts of the firm to the third parties, and then for paying to each partner what is due to him. Clause (iv) if the last Clause which reads thus : "the residue, if any, shall be divided among the partners in the proportion in which they were entitled to share profits". The contention is based on the said Clause that until the making of such settlement of account no