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IN THE HIGH COURT OF PUNJAB AND HARYANA
ANIL KSHETARPAL, J.
Vinod Krishan Khanna and Others - Appellant
Versus
Krishan Khanna (Since Deceased) Through Lrs and Others - Respondent
Regular Second Appeal No. 2922 of 2017
Decided on : 06-02-2019
PARTNERSHIP - RIGHTS OF DECEASED PARTNER'S HEIRS - INDIAN PARTNERSHIP ACT, 1932 (SECTIONS 14, 35, 37, 42, 48)
Fact of the Case:
Plaintiffs, claiming to be heirs of a deceased partner in a partnership firm, sought dissolution of the firm, rendition of accounts, and partition of properties. The defendants, remaining partners, contested the suit, denying the plaintiffs' rights as partners and claiming a new partnership deed.
Finding of the Court:
The trial court granted the plaintiffs' claims, but the first appellate court held that the heirs were entitled to the deceased partner's share in the firm's assets on the date of her death, as per Section 37 of the Indian Partnership Act, 1932.
Issues: The key issues were whether the legal heirs of a deceased partner could claim the deceased partner's share in the firm's assets and whether the value of the assets should be determined on the date of death or at the time of distribution.
Ratio Decidendi: The court held that while Section 37 of the Act entitles heirs to share profits or interest on the deceased partner's share, Section 48 governs the settlement of accounts between partners after dissolution, including the heirs of a deceased partner.
Final Decision: The court modified the appellate court's judgment, granting the heirs rendition of accounts and entitlement to profits or interest, and ordering distribution of the immovable properties or their value to the heirs, with a decree for injunction against alienation of the property.
ANIL KSHETARPAL, J.
1. Plaintiffs-Appellants are in the regular second appeal against the judgment passed by the learned first appellate court partly reversing the judgment of the trial court.
2. In the considered view of this court, questions which require determinations are:-
(1) Whether the remaining partners on the death of a partner can exclude the legal heirs of the deceased partner from succeeding to his/her share in the assets, properties of the firm and profits earned from use of that property?
(2) Whether the legal heirs of a deceased partner are entitled to claim value representing the share of the deceased partner in the immovable properties of the firm on the date of the death of the deceased partner irrespective of the fact that the surviving partners delayed the distribution of the property?
3. Plaintiffs-Appellants are claiming to be heirs of late Smt. Kailash Wati Khanna, who was partner in the partnership firm, namely, M/s Esskay Industries, Batala Road, Amritsar.
4. Initially she was partner to the extent of 30% when the firm started in the year 1965. However, as per the last partnership before the death she was partner to the extent of 25% vide partnership deed dated 01.04.2003 and on this aspect both the courts have recorded finding which is not subject matter of challenge before this court.
5. As per the partnership deed dated 01.04.2003 Ex.P7, it was provided that in the event of death of any of the parties, partnership shall not ipso facto dissolve. Clauses 10 and 12 of the partnership deed which are relevant for the decision of the case are extracted as under:-
"10. That in the event of death of any of the parties, the partnership shall not ipso facto dissolve. The remaining partners may admit the legal heirs or representatives of the deceased partner and such legal heirs or representatives shall step into the shoes of the deceased partner."
"12. That in the event of death or retirement of any of the parties, the surviving partners shall have absolute power to operate upon the Bank accounts and particularly to withdraw the bank balances and such withdrawals shall be duly accounted for in the books of the firm. The retiring partners or the legal heirs of the deceased partner shall have no right or power to prevent or hinder the operation of the bank account or withdrawals of the bank balances."
6. Smt. Kailash Wati Khanna died on 03.05.2005. Plaintiffs claiming to be heirs filed a suit with the following prayers:-
(1) Order dissolution of the firm M/s Esskay Industries;
(2) direct the defendants to render the accounts of the said firm;
(3) partition of the properties with building constructed thereon owned by the firm;
(4) restraining the defendants from alienating the property.
7. As per partnership deed dated 01.04.2003, there were 5 partners and late Smt. Kailash Wati Khanna was partner to the extent of 25%.
8. Defendants who were remaining/surviving partners of the firm contested the suit by pleading that the plaintiffs have no right, title or interest in the business as well as in the properties of M/s Esskay Industries, although, it was admitted that late Smt. Kailash Wati Khanna was partner of 25% share in the business but it was pleaded that as per the alleged Will only plaintiffs No.4 and 5 can claim the amount lying to the credit of late Smt. Kailash Wati Khanna and that to after obtaining probate/succession certificate. It was claimed that the plaintiffs were never the partners at any time, hence, they have no right, title or interest to file the present suit. It was further pleaded that after the death of Smt. Kailash Wati Khanna, a new partnership deed dated 04.05.2005 has been executed and the defendants are having their respective shares accordingly. It was admitted that the firm is owner of land, buildings situated at Batala Road, Amritsar and the immovable properties of M/s Esskay Industries is let to the tenants since decades.
9. Learned trial court on appreciation of the evidence found that
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