TMI Blog1997 (3) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... t have the effect of dissolving the firm, but the firm may be continued by the surviving or remaining partners on such terms and conditions as may be agreed upon in writing between them. On February 9, 1970, Sudevan, one of the partners, died. Sudevan had executed a will on January 28, 1970, by which his properties devolved upon his three adult sons, K. S. Krishnadas, K. S. Haridas and K. S. Bhagavandas. On February 20, 1970, a fresh partnership deed was executed. The partners were : 1. K. S. Krishnadas (No. 2 above--also heir under the will), 2. K. A. Jayapalan (No. 3 above), 3. K. S. Haridas (No. 4 above--also heir under the will), 4. K. A. Mohandas (No. 5 above), 5. K. A. Haridas (No. 6 above), 6. K. S. Krishnadas (No. 2 above but described in the partnership as Krishnadas representing the heirs of the late Shri K. K. Sudevan as per the registered will No. 10 of 1970 and being the attorney of the heirs hereinafter called the six partners). All these six partners had signed the partnership deed. K. S. Krishnadas signed it twice, in his individual capacity and also in his representative capacity. The Income-tax Officer initially granted registration to the newl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , they will have to account for the share of the deceased partner to his legal representatives. But if a partner dies, his legal representative may be admitted to the new partnership by the surviving partners. The only question in such a case will be whether any share of profit received by him qua partner belongs to him personally or to the estate which he represents. The answer will inevitably depend on the facts and circumstances of the case. However, there can be no legal bar to a legal representative of the deceased partner being admitted to the partnership by the surviving partners. If the legal representative of the deceased is also one of the surviving partners, he can agree to join the new partnership as a nominee of the legal heirs of the deceased partner. The only difficulty that is being pointed out in this case is that the executor, Krishnadas, who was one of the surviving partners of the erstwhile partnership, has joined the new partnership individually and also as representative of the deceased Sudevan. This would have created a problem, had there been any conflict of interest of Krishnadas as an individual and as a representative of the legal heirs of Sudevan. Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbers of a joint family were not entitled to the entire beneficial interest in their shares of profits but had to divide their shares with other members of their family which was partitioned. Subba Rao J. observed : " A contract of partnership has no concern with the obligation of the partner to others in respect of their shares of profit in the partnership. It only regulates the rights and liabilities of the partners. A partner may be the karta of a joint Hindu family ; he may be a trustee ; he may enter into a sub-partnership with others ; he may, under an agreement, express or implied, be the representative of a group of persons ; he may be a benamidar for another. In all such cases he occupies a dual position. Qua the partnership, he functions in his personal capacity ; qua the third parties, in his representative capacity. The third parties whom one of the partners represents, cannot enforce their rights against the other partners nor the other partners can do so against the said third parties. Their right is only to a share in the profits of their partner-representative in accordance with law or in accordance with the terms of agreement, as the case may be. " We were refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defined by the Indian Contract Act. In such a case the family as a unit does not become a partner, but only such of its members as in fact enter into a contractual relation with the stranger : the partnership will be governed by the Act.' " It was observed in that case : " ...it appears to me that the partnership which was sought to be entered into on the 24th of February, 1936, was between Lokenath on the one hand and Lokenath on the other as the managing member of the joint Hindu family with the result that in this case the family as a unit did not become a partner ; in other words that the partnership could be only treated to be in fact between the member of the joint Hindu family and the karta as the other contracting party which in this case is the same person. The result inevitably follows that there is no partnership in law which could have been registered by the Income-tax Officer. The case before us is not of a partnership between the karta of a Hindu undivided family with himself in another capacity. The case of Agarwal and Co. v. CIT [1970] 77 ITR 10 (SC) dealt with a partnership where the two kartas of the two Hindu undivided families had formed a partnership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of his separate and individual property. In this case before us, there are as many as six partners. Krishnadas signed the partnership agreement on his behalf as well as representing the heirs of Sudevan. There is no legal bar to Krishnadas entering into an agreement of partnership with the heirs of Sudevan. The only problem is Krishnadas was himself one of the heirs. But, having regard to the principles laid down by the Judicial Committee of the Privy Council and the decisions of this court in the cases of Finn Bhagat Ram Mohanlal v. CEPT [1956] 29 ITR 521 and Chandrakant Manilal Shah [1992] 193 ITR 1, where it was held that a karta could enter into a partnership with a coparcener of the same Hindu undivided family, we do not see why the validity of this partnership agreement should be doubted, especially in view of the fact that there were four other partners and Krishnadas was holding a power of attorney on behalf of the other legal heirs. There is nothing in the Partnership Act or the Contract Act which prevents an agreement of this nature being entered into by the six partners. In our view, the Kerala High Court has come to the right decision in this case. The appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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