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2006 DIGILAW 1511 (RAJ)

Surinder Nath Kapoor v. Kailash Kumar Kapoor

2006-05-05

DALIP SINGH

body2006
Judgment Dalip Singh, J.-In this revision petition, the petitioner has challenged the order dated 011.2004 passed by the Executing Court rejecting the objections filed by the petitioner in the execution of a decree dated 24.04.1989. 2. Briefly stated the facts are that in respect of a partnership business by agreement the parties agreed for dissolution of the business of the firm and referred the matter to the sole Arbitrator vide agreement dated 14.08.1988. The Arbitrator after hearing the parties passed an award dissolving the assets of the firm which included both moveable and immoveable properties between the parties in accordance with the shares indicated in the said award alongwith the map indicating the respective portions. The award was passed on 212.1988. The said award was filed before the Court and the parties were issued notices by the District Judge, Jaipur City, Jaipur. 3. The District Judge after service of the notice also received application from Ramnath Kapoor, Narendra Nath Kapoor, Kamla Kapoor and Sudershan Kapoor as well as another set of applications from Surendra Nath Kapoor, Vikram Kapoor, Kailash Kumar Kapoor and Sharda Kapoor stating that they have no objection to the award being made a rule of the Court. Consequently, vide the order dated 25.02.1989, the award passed by the Arbitrator dated 212.1988 was found to be in order and was ordered to be made a rule of the Court and that a decree to be drawn in accordance with the said award in favour of the parties. The said order dated 25.02.1989 passed by the District Judge reads as under:- 4. After the said order dated 25.02.1989 was passed by the District Judge making the award a rule of the Court and directing that a decree in terms of the award may be drawn in favour of the parties, a decree dated 24.04.1989 was drawn. The relevant portion of the decree reads as under:- the parties did not act upon the terms of the award in respect of the property situated at Khawasji-ka-Bagh, Amer Road, Jaipur, the execution application came to be filed by the non-petitioners for possession of the portions marked in the site plan annexed with the award which formed part of the decree. 6. 6. After the execution application was filed, the petitioner submitted his objections and primarily the objection was that since it was a decree for partition, the same was only a preliminary decree and no final decree having been drawn up the decree dated 24.04.1989 could not be executed. It was also submitted that till such time that the decree is not registered or executed on a stamped paper the same is inexecutable. 7. The above contentions were repelled by the learned executing Court vide its order dated 011.2004 and hence, this revision petition. 8. Learned Counsel for the petitioner has reiterated the objections in this revision petition and has contended that the decree in question dated 24.04.1989 is only a preliminary decree partitioning the property and since on final decree was passed, the same is inexecutable and that the decree being one for partition of immoveable property, the same requires compulsory registration and in absence of the same, it did not confer any right, title or interest on the non-petitioners to execute the same. Learned Counsel for the petitioner in this behalf relied upon a Judgment of the Honble Supreme Court in the case of Satish Kumar & Ors. vs. Surinder Kumar & Ors., reported in AIR 1970 SC 833 , wherein it was held that an award given under the Arbitration Act on a private reference requires registration under Section 17 of the Registration Act, if the award effects partition of the immovable property exceeding the value of Rs. 100/-. To the same effect, learned Counsel for the petitioner relied upon the Judgment in the case of Sardar Singh vs. Smt. Krishna Devi & Anr., reported in 1994 (4) SCC 18 , wherein it has been held that award made by a private Arbitrator is a non-testamentary instrument under Section 17 and, therefore, the same requires registration. 9. On the second point that decree dated 24.04.1989 amounted to a preliminary decree and until and unless the final decree determining the rights of the parties by metes and bounds is drawn up, the same is not executable, learned Counsel for the petitioner relied upon the Judgment in the case of Shankar Balwant Lokhande vs. Chandrakant Shankar Lokhande & Anr., reported in AIR 1995 SC 1211 . On the basis of the aforesaid Judgment , it was submitted that unless and until the executing Court draws up the final decree, the executing Court cannot on the basis of the preliminary decree execute the same. 10. As against the aforesaid contentions of the learned Counsel for the petitioner, learned Counsel appearing on behalf of the non-petitioners has submitted that the award in question passed by the Arbitrator was for the dissolution of firm. It was contended that so far as the award is concerned, no objection to the same was filed either before the District Judge in response to the notice issued by the District Judge, as is evident from the order dated 25.02.1989 passed by the District Judge making the same a rule of the Court and the case of an award assigning respective rights and liabilities in the assets of the firm upon its dissolution is distinct and separate from the case of the decree for partition being passed by an Arbitrator. It was submitted that the Honble Supreme Court as in the case of S.V. Chandra Pandian & Ors. vs. S.V. Sivalinga Nadar & Ors., reported in 1993 (1) SCC 589 , has held accordingly. It was also submitted that aforesaid Judgment of the Honble Supreme Court reported in 1993 (1) SCC 589 was relied upon by the Honble Supreme Court in the subsequent Judgment in the case of N. Khadervali Saheed & Anr. vs. N. Gudu Sahib & Ors., reported in 2003 (3) SCC 229 . It was submitted that since an award passed dissolving the assets of the firm stands on a different footing than a decree for partition, either obtained from the Court or based upon an award passed by the Arbitrator, the same, in the light of the Judgment of the Honble Supreme Court in the above mentioned cases of S.V. Chandra Padian (Supra) and N. Khandervali Saheeb (Supra), was not liable to be registered and, as such, the objection with regard to inexecutability of the decree in the absence of its being registered is not maintainable. It is also submitted that present decree passed upon the award dated 212.1988, as mentioned in the decree dated 24.04.1989, is not a decree for partition but a decree for dissolution of the partnership and, as such, the question of the decree dated 24.04.1989 making the award dated 212.1988 a rule of the Court and the decree being passed in terms of the award did not require any final decree to be prepared in the facts and circumstances of this case as the respective shares have clearly been marked and indicated in the said award and the annexed site plan, nothing more was required as the respective portions/shares have been clearly demarcated therein. Also that no such objection was raised by any party when this award was made a rule of the Court. 11. I have heard learned Counsel for the parties and considered the rival submissions as well as the impugned order passed by the learned Executing Court dated 011.2004 and perused the record including the award dated 212.1988 which has now become the decree dated 24.04.1989. 12. So far as the present case is concerned, it is not in dispute that the parties by the agreement agreed to the appointment of Shri H.L. Tikku as the sole Arbitrator for carrying out the dissolution of the assets and liabilities of the firm to which the parties were partners. This fact has clearly been mentioned in the opening paragraph of the award itself . Thus, the case in hand is one of dissolution of the firm as distinct from the suit for partition or an award passed carrying out partition of the properties between the parties. 13. The Judgment which has been relied upon by the learned Counsel for the petitioner in the case of Satish Kumar & Ors. (Supra), is a case of partition as distinct from the case of dissolution of partnership which is the case at hand. This was the specific question which was being decided in this case as is evident from Para 6 of the Judgment . Similarly the case of Sardar Singh vs. Smt. Krishna Devi (Supra), is also a case of partition and the Arbitrator appointed for this purpose had passed the award and it was held that the award passed by the Arbitrator amounted to a non-testamentary instrument which requires to be compulsorily registered. 14. Similarly the case of Sardar Singh vs. Smt. Krishna Devi (Supra), is also a case of partition and the Arbitrator appointed for this purpose had passed the award and it was held that the award passed by the Arbitrator amounted to a non-testamentary instrument which requires to be compulsorily registered. 14. The Judgment of Satish Kumars case was referred by the Honble Supreme Court in Para 5 of the Judgment in Sardar Singhs case wherein it has specifically been mentioned as under:- "In Satish Kumar vs. Surinder Kumar, an arbitrator was appointed as parties without reference to the Court to partition their immovable properties......... The question arose whether such award was admissible in evidence as affecting partition of the immovable property......" The Honble Supreme Court in Para 6 again dealing with Satish Kumars case explained the same in the following terms:-".......As seen in Satish Kumar case this Court found that in case the award, if it creates for the first time a right in the immovable property of the value of Rs. 100 or above, in the absence of its registration, the awardee would not get title on the award and the title would remain with the party against whom the award was made......" 15. On the other hand, as was held by Honble Supreme Court in the case of S.V. Chandra Pandian & Ors. (Supra), the case of dissolution of assets and liabilities of the firm is distinguishable. Their Lordships of the Honble Supreme Court after considering the earlier Judgment s in the case of Addanki Narayanappa vs. Bhaskara Krishnappa, reported in AIR 1966 SC 1300 and Malabar Fisheries Co. vs. C.I.T., reported in AIR 1980 SC 176 have laid down as follows in Para 16 of the said report:- "16. From the foregoing discussion it seems clear to us that regardless of its character the property, brought into stock of the firm or acquired by the firm during its subsistence for the purposes and in the course of the business of the firm shall constitute the property of the firm unless the contract between the partners provides otherwise. On the dissolution of the firm each partner becomes entitled to his share in the profits, if any, after the accounts are settled in accordance with Section 48 of the Partnership Act. On the dissolution of the firm each partner becomes entitled to his share in the profits, if any, after the accounts are settled in accordance with Section 48 of the Partnership Act. Thus in the entire asset of the firm all the partners have an interest albeit in proportion to their share and the residue, if any, after the settlement of accounts on dissolution would have to be divided among the partners in the same proportion in which they were entitled to a share in the profit. Thus during the subsistence of the partnership a partner would be entitled to a share in the profits and after its dissolution to a share in the residue, if any, on settlement of accounts. The mode of settlement of accounts set out in Section 48 clearly indicates that the partnership asset in its entirety must be converted into money and from the pool the disbursement has to be made as set out in Clause (a) and Sub-clauses (i), (ii), and (iii) of Clause (b) and thereafter if there is any residue that has to be divided among the partners in the proportions in which they were entitled to a share in the profits of the firm. So viewed, it becomes obvious that the residue would in the eye of law be moveable property i.e., Cash, and hence distribution of the residue among the partners in proportion to their shares in the profits would not attract Section 17 of the Registration Act. Viewed from another angle it must be realised that since a partnership is not a legal entity but is only a compendious name each and every partner has a beneficial interest in the property of the firm even though he cannot lay a claim on any earmarked portion thereof as the same cannot be predicated. Therefore, when any property is allocated to him from the residue it cannot be said that he had only a definite limited interest in that property and that there is a transfer of the remaining interest in his favour within the meaning of Section 17 of the Registration Act. Therefore, when any property is allocated to him from the residue it cannot be said that he had only a definite limited interest in that property and that there is a transfer of the remaining interest in his favour within the meaning of Section 17 of the Registration Act. Each and every partner of a firm has an undefined interest in each and every property of the firm and it is not possible to say unless the accounts are settled and the residue or surplus determined what would be the extent of the interest of each partner in the property. It is, however, clear that since no partner can claim a definite or earmarked interest in one or all of the properties of the firm because the interest is a fluctuating one depending on various factors, such as, the losses incurred by the firm, the advances made by the partners as distinguished from the capital brought in the firm, etc., it cannot be said, unless the accounts are settled in the manner indicated by Section 48 of the Partnership Act, what would be the residue which would ultimately be allocable to the partners. In that residue, which becomes divisible among the partners, every partner has an interest and when a particular property is allocated to a partner in proportion to his share in the profits of the firm, there is no partition or transfer taking place nor is there any extinguishment of interest of other partners in the allocated property in the sense of a transfer or extinguishment of interest under Section 17 of the Registration Act. Therefore, viewed from this angle also it seems clear to us that when a dissolution of the partnership takes place and the residue is distributed among the partners after settlement of accounts there is no partition, transfer or extinguishments of interest attracting Section 17 of the Registration Act." 16. The aforesaid decision of the Honble Supreme Court was affirmed by their Lordships in the subsequent Judgment in the case of N. Khadervali Sahed (Supra), and their Lordships of the Honble Supreme Court in Para 3 have held as under:- "3. We have carefully perused the award in question. By the award the arbitrators have distributed the assets of the dissolved firm between the partners in accordance with their respective shares in the partnership. We have carefully perused the award in question. By the award the arbitrators have distributed the assets of the dissolved firm between the partners in accordance with their respective shares in the partnership. The real question for consideration is whether such an award amounts to creation of or transfer of any fresh rights in movable or immovable properties so as to bring it within the ambit of Section 17 of the Registration Act. A perusal of the award shows that it is simply a case of distribution of assets of the dissolved firm amongst the partners themselves. A partnership firm is not an independent legal entity, the partners are the real owners of the assets of the partnership firm. Actually the firm name is only a compendious name given to the partnership for the sake of convenience. The assets of the partnership belong to an are owned by the partners of the firm. So long as partnership continues each partner is interested in all the assets of the partnership firm as each partner is owner of the assets to the extent of his share in the partnership. On dissolution of the partnership firm, accounts are settled amongst the partners and the assets of the partnership are distributed amongst the partners as per their respective shares in the partnership firm. Thus, on dissolution of a partnership firm, the allotment of assets to individual partners is not a case of transfer of any assets of the firm. The assets which hereinbefore belonged to each partner, will after dissolution of the firm stand allotted to the partners individually. There is no transfer or assignment of ownership in any of the assets. This is the legal consequence of distribution of assets on dissolution of a partnership firm. The distribution of assets may be done either by way of an arbitration award or by mutual settlement between the partners themselves. The document which records the settlement in this case is an award which does not require registration under Section 17 of the Registration Act since the document does not transfer or assign interest in any asset. This question stands concluded by a decision of this Court in S.V. Chandra Pandian vs. S.V. Sivalinga Nadar. This was also a case of distribution of assets of a dissolved firm by way of an award. This question stands concluded by a decision of this Court in S.V. Chandra Pandian vs. S.V. Sivalinga Nadar. This was also a case of distribution of assets of a dissolved firm by way of an award. This Court noticed that the award read as a whole made it clear that the arbitrators had confirmed themselves to the property belonging to the partnership firm and had scrupulously avoided other properties. While distributing the residue assets, the arbitrators allocated the properties to the partners. Section 48 of the Partnership Act was applied and the properties were allocated to the partners as per their share on the distribution of the residue. The award sought to distribute the assets of the partnership firm after settlement of accounts on dissolution. This Court took the view that the property falling to the share of the partner on distribution of the residue would naturally belong to him exclusively. but since in the eye of law it is money and not immovable property there is no question of registration under Section 17 of the Registration Act. It was further observed (at SCC Page 607, Para 18) "even if one looks at the award as allocating certain immovable property since there is no transfer, no partition or extinguishment of any right therein there is no question of application of Section 17(1) of the Registration Act." As observed in the above case, in the present case also we are satisfied that the award seeks to distribute the residue after settlement of accounts on dissolution, while distributing their residue the arbitrators allocated the properties to the partners. The award in such circumstances did not require registration under Section 17(1) of the Registration Act." (Emphasis supplied.) 17. Thus, in the subsequent Judgment s their Lordships of the Honble Supreme Court have distinguished the cases of partition as in the case of Satish Kumar (Supra), and Sardar Singh (Supra), where the requirement for registration of the award was insisted upon in the case of a partition decree based upon the award on the ground that award created for the first time a right in the immoveable property and hence was liable to be registered and in the absence of the registration the awardee would not be entitled any title in the award and the title would remain with the party against whom the award had been passed. In contradistinction to the above, in the case of a dissolution of partnership, it was held that it was not a case of creation of interest for the first time in the property whether moveable or immoveable but on the contrary, was a case of distribution of the assets of the partnership amongst its partners as per their respective shares in the partnership, as has been held in he case of N. Khadervali Saheb (Supra). It was further held and made clear that upon the dissolution of the partnership, the allotment of assets to the individual partners is not a case of transfer. The assets hereinbefore belong to each partner and after dissolution of firm stand allotted to the partners individually. It was further held that the same did not amount to transfer or assignment of any of the assets in the case of a distribution of assets on dissolution of the partnership. The aforesaid distinction having been clearly spelt out in the subsequent Judgment in the case of N. Khadervali Saheb (Supra), the present one being the case of dissolution of partnership by the Arbitrator in accordance with the award passed by him, therefore, stands on a different footing from the case of an award in the case of partition and as such as held by the Honble Supreme Court was not liable to be registered. 18. Thus, in the light of the above, it is clear that a case of dissolution of partnership stands on a different footing from the one of partition and as has been held by the Honble Supreme Court the distribution of the assets of the partnership firm, irrespective of the fact they are moveable or immoveable the same does not amount to being a transfer of interest or creating/extinguishment of interest so as to attract the provisions of Section 17 of the Registration Act. It is neither a partition nor transfer nor extinguishment of the interest as held by the Honble Supreme Court. In view of the aforesaid, the objection of the learned Counsel for the petitioner deserves to be dismissed that the award was required to be registered and stamp duty paid thereon. 19. It is neither a partition nor transfer nor extinguishment of the interest as held by the Honble Supreme Court. In view of the aforesaid, the objection of the learned Counsel for the petitioner deserves to be dismissed that the award was required to be registered and stamp duty paid thereon. 19. So far as other submissions of learned Counsel for the petitioner that decree dated 24.04.1989 cannot be looked into nor is the same executable without a final decree being prepared are concerned, suffice it to say that award which has been passed is not an award for partition which would amount to a preliminary decree but is an award passed by the Arbitrator distributing the assets and the liabilities of the firm between the respective partners. The award is comprehensive and indicates exactly what each partner has received under the terms of the award and what are the liabilities of each of the partners. It may also be observed that the parties, as is evident from the order dated 25.02.1989 recorded by the District Judge while making the award a rule of the Court, did not submit any objection to the award being made a rule of the Court. On the contrary, both the parties prayed that the same may be made a rule of the Court. In the light of the above, since I have already held that award in question and the decree passed thereon dated 24.04.1989 passed upon the terms of the award and passing of the decree on the basis of the aforesaid award dated 212.1988, is a decree for dissolution of the firm and in the facts and circumstances, the same does not require any final decree to be prepared. The Judgment relied upon by the learned Counsel for the petitioner of the Honble Supreme Court relied in AIR 1995 SC 1211 arises out of a suit for partition requiring a preliminary decree to be followed by a final decree in terms of Order 20 Rule 18, CPC which is not applicable in the case of an award for dissolution of the assets of the partnership firm where the award has spelt out in detail what each partner shall be entitled to as against the respective shares. A perusal of the terms of the award dated 212.1988 which from the decree dated 24.04.1989 shows that it is not a decree in terms of Order 20 Rule 18 CPC. The award/decree is a composite one spelling out the exact properties which the parties are to receive. Hence, the objection of the petitioner that since no final decree has been prepared, the same cannot be executed as a preliminary decree is inexecutable and ill-founded is liable to be rejected in the facts and circumstances of this case. 20. There is yet another very significant aspect of the matter which has to be considered while deciding the present objection. It is not denied that the parties sought dissolution of the firm. It is not denied that the parties agreed to arbitration for the said purpose. It is not denied that the Arbitrator passed an award dissolved the firm assigning the respective properties being assets and liabilities to each of the parties as per the award dated 212.1988. It is also not denied that this award was filed by the Arbitrator before the District Judge. It is also not denied that all the parties applied for making it a rule of the Court and the District Judge by his order dated 25.02.1989 made it the rule of the Court. It is not disputed that the District Judge passed the decree dated 24.04.1989 in terms of the award dated 212.1988. Accordingly, the award became a part and parcel of the decree. It is also not in dispute that the decree in part has been acted upon as per the terms of the award as some properties have been taken over by the petitioner and the petitioner is in possession of the same and some have even been sold. These allegations in the execution application are not denied. Instead objections to the executability of the decree dated 24.04.1989 passed in terms of the award have been raised by the petitioner who has already taken benefit of the award that the decree is inexecutable. When some of the parties including the petitioners have received their respective shares after dissolution of the firm in terms of the award, it hardly lies with the petitioner to object that the decree is inexecutable as it is a preliminary decree. When some of the parties including the petitioners have received their respective shares after dissolution of the firm in terms of the award, it hardly lies with the petitioner to object that the decree is inexecutable as it is a preliminary decree. When specified properties have been assigned to each parties and when the possession of those properties is denied to the non-petitioners, the non-petitioners filed this execution application for possession of their assigned specified properties in terms of the award. In this background, there is hardly any merit in any of the objections and the same stand rejected. 21. The objection was also raised that the award dated 24.04.1989 has been put to execution after seven years and, as such, in terms of Article 135 of the Limitation Act, 1963 since it is a decree for mandatory injunction, inasmuch as, the parties were required to construct a well after partitioning the property of Khawasji-ka-bagh, as per the parties indicated therein the execution was required to be filed within three years. 22. So far as the above submission of the learned Counsel for the petitioner is concerned, I am of the view that award is in fact an award directing the distribution of the assets as indicated in the award including the distribution of the immoveable property in accordance with the provisions made in the award distinctly marking out the portion of the immoveable property and providing for the possession of the same to be handed over to the persons in whose favour the award has been passed, namely the non-petitioners, by the petitioner. In terms, therefore, the award is a decree for possession and cannot be termed to be a decree for mandatory injunction. Consequently, a decree for possession could be executed in terms of Article 136 of the Limitation Act within twelve years of the passing of the same. It is only after the aforesaid decree for possession is carried out that the question of construction of the wall would arise. Therefore, there is no force in the above submission of the learned Counsel for the petitioner. 23. The petitioner has also moved an application for impleading certain alleged transferees as parties to this revision petition. Since the revision petition is not being admitted, this application also stands disposed of . 24. Therefore, there is no force in the above submission of the learned Counsel for the petitioner. 23. The petitioner has also moved an application for impleading certain alleged transferees as parties to this revision petition. Since the revision petition is not being admitted, this application also stands disposed of . 24. Consequently, I find no error of jurisdiction having been committed by the learned Court below while passing the order dated 011.2004. In the facts and circumstances, this revision petition is dismissed. There shall be no order as to costs.