A partner in a firm lacks authority to sell immovable property without express consent from all partners, as stated in Section 19(2)(g) of the Indian Partnership Act.

1. Through the present Appeal, the Appellants (Plaintiffs before the learned Single Judge) assail the correctness of the Judgment dated 18.04.2018 [hereinafter referred to as ‘Impugned Judgment’], whereby the learned Single Judge dismissed the Appellants’/Plaintiffs’ suit for possession, mesne profits, cancellation of documents, etc.

2. The Appellant Nos.1, 2 and 3 were Plaintiff Nos.1, 2 and 3 in the suit, whereas Respondent Nos.1 and 2 were Defendant Nos.1 and 2. Herein, the parties shall be referred to by their status and ranking in the suit, i.e., CS(COMM) No. 1666/2016.

FACTUAL MATRIX:

3. In order to comprehend the issues involved in the present case, relevant facts in brief are required to be noticed.

4. The Plaintiff Nos.2 and 3 are wife and husband, whereas Defendant Nos.1 and 2 are related to each other as brother-in-law and sister-in-law. Defendant No.1 proposed an idea to Plaintiff No.3 to carry on a business under the partnership. Since Plaintiff No. 3 was a government employee, it was decided that Plaintiff No.2 and Defendant Nos.1 and 2 would be partners in the partnership firm. Accordingly, on 16.05.1998, a partnership firm was constituted under the name and style of M/s Gupta International [Plaintiff No.1]. It was agreed that the partnership business shall be of export/import, trading/distribution in gold, bullion, jewellery, leather coats, garments, handicrafts, or other items or goods which may be mutually agreed upon. In terms of the partnership, all the partners were entitled to share profits and losses equally.

5. After the constitution of the partnership firm, Plaintiff No.2 and Defendant Nos.1 and 2 continued to carry on the business. However, it is stated by the Plaintiffs that Plaintiff No.2 and Defendant No.2 are dormant partners, whereas Defendant No.1 is an active partner, and the entire business of the firm was carried out by Defendant No.1 only.

6. The dispute in the present case arose with respect to the two properties built on Plot Nos.31 and 32, out of Khasra No. 4/2, situated in Block Number-C, Uttam Nagar, Delhi [hereinafter referred to as ‘suit property’]. The said suit property was purchased by the Plaintiff No.1 (Partnership firm), vide registered sale deed dated 22.01.1999, for a consideration amount of Rs.3,40,000/-. It is the case of the Plaintiffs that the construction was demolished and a new three and a half storey building was constructed on the suit property.

7. Further, vide a Retirement Deed dated 15.06.2000, Defendant No.2 retired from the partnership firm and received a sum of Rs.73,269.80/- in lieu of her share, title and interest in the said partnership, including its assets and goodwill. It was specifically stated that the aforesaid amount had been paid to the retiring partner vide Cheque No. 813696 dated 17.06.2000 in full and final settlement of her share.

8. Thereafter, a new Partnership Deed dated 16.06.2000 was entered into between the continuing partners, i.e., Plaintiff No.2 and Defendant No.1, under the same name and style.

9. It is pertinent to note here that as per Clause 9 of both the aforesaid Partnership Deeds [hereinafter referred to as “Clause 9”], no party was entitled to sell, mortgage, assign, or in any manner alienate his share or interest in the partnership firm to any outsider, nor was any partner permitted to create any charge or encumbrance upon the assets of the partnership firm.Clause 9 of the Partnership Deed dated 16.05.1998 is reproduced thereof:

“…that no party to this deed shall be entitled to sell, mortgage or assign his share to any outsider or otherwise alienate his interest in the firm or create any charge on the partnership assets and any such action shall be considered null and void and shall not be binding on other partners of the firm.”

10. Further, on 03.07.2000, during the subsistence of the partnership, Defendant No.1, executed various transfer documents in favour of Defendant No.2, namely, a registered General Power of Attorn