TMI Blog1966 (1) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... tnership consisted, among other things, of some lands belonging to the families. During the course of the business of the partnership some more lands were acquired by the partnership. The plaintiffs who are two members of the Addanki family instituted a suit in the court of Subordinate Judge, Chittoor on March 4, 1949 for the following reliefs (a) for a declaration that the suit properties belong to the plaintiffs and defendants IO to 14 and defendants 1 to 9 equally for a division of the same into four equal shares, one share to be delivered to the plaintiffs or for a division of the same into two equal shares to be delivered to the plaintiffs and the defendants 10 to 14 jointly; (b) or in the alternative dissolving the partnership between the plaintiffs and defendants 10 to 14 on the one hand and defendants 1 to 9 on the other hand directing accounts to be taken; (c) directing the defendants 1 to 9 to render accounts of the income of the suit properties; (d) directing the defendants 1 to 9 to pay the costs of the suit to the plaintiffs; (e) and pass such further relief as may be deemed fit in the circumstances of the case. It may be mentioned that in their suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nership assets. included immovable property and the document records relinquishment by the members of the Addanki family of their interest in those assets, this document was 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 oh 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. by the firm for the purposes and in the course of the business of the firm. Section 15 provides that such property shall ordinarily 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 he held by the partners for the business of the partnership. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary, by the partners individually in the proportions in which they were entitled to share profits. (b) The assets of the firm, including any sums contributed by the partners to make up deficiencies of capital, shall be applied in the following manner and order :- (i) in paying the debts of the firm to third parties: (ii) in paying to each partner rateably what is due to him from the firm for advances as distinguished from capital; (iii) in paying to each partner rateable what is due to him on account of capital; and (iv) the residue, if any, shall be divided among the partners in the proportions in which they were entitled to share profits. From a perusal of these provisions it would be abundantly clear that whatever may be the character of the property which is brought in by the partners when the partnership is formed or which may be acquired in the course of the business of the partnership it becomes the property of the firm and what a partner is entitled to is his share of profits, if any, accruing, to the partnership from the realisation of this property, and upon dissolution of the partnership to a share in the money representing the value of the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities 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 pressed 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(15 V6s. 218.) and by Sir W. Grant in Featherstonhaugh v. Fenwick(17 Ves. 298) 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 a special contract would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the profits of a colliery on the ground that it was partnership property and it was objected that 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 facte and as if there was an issue upon it. If by facts and circumstances it is established as a fact that these persons were partners in the colliery, 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 hold 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 (5 Ha. 369 on appeal 2 Ph. 266. ). Even so, it is pointed out that it must be treated as a binding authority in the absence of any decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ley 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 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(L.R. 10 Eq, 178) 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 agreement or direction to the contrary), is, as between the partners and as between the real and personal representatives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R. 55 Mad. 72). The learned Judges there relied upon the decision in Ashworth v.Munn(6) in addition to the opinion of Telang J., I 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(3) though: that was: one of the decision relied upon by Phillips J., in the earlier case. In so far as Ashworth s case((1880) 15 Ch. D. 363) 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(43 Ch. D. 208.) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ached 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. Mad. 884. 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 amount 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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