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Kerala High Court · body

2013 DIGILAW 63 (KER)

Joseph Kutty v. George Mathew

2013-01-23

N.K.BALAKRISHNAN

body2013
JUDGMENT : 1. The substantial questions of law raised in these appeals are: i) Should not the courts below have held that the plaintiff was only a co-owner of the plaint schedule property and so he is not entitled to seek recovery of possession of the co- ownership property from the other co-owner? ii) Even if the property was held to be of a partnership firm should not the courts below have held that without a decree for dissolution of the partnership, the recovery of the possession of the plaint schedule building from one partner to the other is unsustainable? iii) Did not the courts below go wrong in assuming that the plaint schedule property is of a partnership firm without properly construing the partnership deed and the document of title? 2. Ext.A1 agreement was entered into on 2-09-1992. The recitals in Ext.A1 would show that the partnership had come into existence with effect from 28-8-1992 and that the duration of the partnership was for 15 years. The place of business of the firm as per Ext.A1 was shown to be the land having an extent of 6 cents in Sy.No.764/2D of Adoor Village. According to the plaintiff, he was the Managing partner of the partnership firm. It was also stated that though the share of the plaintiff and defendant was 50% equal, subsequently the partnership was amended on 13-4-1993 as per which the plaintiff's share over the partnership was enhanced to 80% and the defendant was having the balance 20 %. It was also stated that the defendant had availed a loan of Rs. 87,700/-from the Kerala Financial Corporation ("K.F.C."for short ) and that amount, including in the interest, totaling to Rs. 102949/- was prayed by the plaintiff and thus the loan was closed. It was also contended that for the construction of the building in the plaint schedule property plaintiff had spent Rs. 1,10,000/-from his own profit. It was stated that the plaintiff had paid Rs. 25,000/-as advance amount to Print Pack Engineers, New Delhi for purchasing machinery and also another sum of Rs. 10,000/- as fees to the K.F.C. It was stated that the plaintiff had spent some more amounts towards the partnership business. 3. 1,10,000/-from his own profit. It was stated that the plaintiff had paid Rs. 25,000/-as advance amount to Print Pack Engineers, New Delhi for purchasing machinery and also another sum of Rs. 10,000/- as fees to the K.F.C. It was stated that the plaintiff had spent some more amounts towards the partnership business. 3. Though the defendant contended that the sale deed was a sham document and that it was not acted upon, that contention was negatived by the courts below for want of the required pleading and evidence. I find no reason to differ from the view so taken by the courts below. 4. The learned counsel appearing for the appellants would submit that the evidence would clearly show that the partnership business as such did not commence at all. In other words, except the fact that the partnership deed was entered into, there is nothing in evidence to show that the business as such was conducted in the plaint schedule building. The evidence would also show that now the appellant's wife and children are residing in the plaint schedule building. The learned counsel for the appellant would submit that the courts below grossly erred in holding that the plaint schedule building is the asset of the firm. The relevant recital in Ext.A1 partnership deed has been referred to for that purpose. This would show that the partnership agreement was to the effect that the partnership business was intended to be conducted in the six cents of dry land in Sy. No. 764/2D of Adoor Village belonging to the partners jointly. as per deed No. 582/1991. Clause (2) of the partnership deed further recites "the place of business of the firm will be the land having an extent of 6 cents in Sy. No. 764/20 of Adoor Village, already mentioned". Therefore, the learned counsel for the appellant would submit that the intention of the partners was only to use the land covered by Ext.A3 as the place where the Offset Printing Press was intended to be started on partnership basis. The third clause also would reinforce the said view, the learned counsel submits, for, otherwise, it could have been stated specifically that the said land measuring 6 cents and building to be constructed in that property are the assets of the partnership firm. The third clause also would reinforce the said view, the learned counsel submits, for, otherwise, it could have been stated specifically that the said land measuring 6 cents and building to be constructed in that property are the assets of the partnership firm. It is further submitted by the learned counsel that clause 6 of Ext.A1 would also throw light on this aspect which makes it clear that the partners will have equal share in the investment of Rs. 5 lakh in the firm and will subscribe such capital as may be agreed upon from time to time from the K.F.C. and shall arrange for finance. It was mentioned that a sum of Rs. 80,700/- was availed of by the appellant herein from K.F.C. and that both parties are responsible for repayment of the said amount. The fact that the six cents of land and the building to be constructed therein were not made the assets of the firm would itself indicate that the said land or the building was never intended to be the assets of the firm, the learned counsel for the appellant submits. It is in evidence that no business could actually commence. Except the fact that a partnership agreement was entered into, there was no further progress. The learned counsel for the respondent submits that after the ground floor of the building was constructed, the wife and children of the appellant started residing in the said property and so further construction could not be effected and that is why the suit was filed for recovery of possession of the building. The learned counsel for the appellant would submit that as per Ext.A1 the term of the partnership was only for 15 years and that the period of 15 years had already expired. That also has to be taken into account, the learned counsel submits. 5. It is further submitted by the learned counsel for the appellant that Ext. A3 is the sale deed dated 14-08-1992 as per which half right over the 6 cents of land mentioned above was sold by the appellant to the respondent. That also has to be taken into account, the learned counsel submits. 5. It is further submitted by the learned counsel for the appellant that Ext. A3 is the sale deed dated 14-08-1992 as per which half right over the 6 cents of land mentioned above was sold by the appellant to the respondent. The evidence would show that even as on the date of execution of Ext.A3, the parties had agreed to form the partnership and according to the plaintiff the property was purchased for that purpose but the conspicuous absence of any such statement in Ext.A3 would also demolish the case of the respondent that the plaint schedule property was purchased or intended to be used as the assets of the firm. Ext.A3 would only show that it was an outright sale by the appellant in favour of the respondent of the half right in that property. It is further pointed out that if as a matter of fact the immovable property was actually the asset of the firm then certainly it would have been shown in Ext.A3 by a separate schedule. The conspicuous absence of the schedule showing the immovable property as the assets of the firm would also loom large in this case and would run counter to the plea raised by the respondent that it was the assets of the firm. 6. The decision in Ajudhia Pershad Ram Pershad v. Sham Sunder - AIR 1947 Lahore 13 is relied upon by the learned counsel for the respondent to fortify her submission that while the partnership is in existence, no partner can point to any part of the assets of the partnership as belonging to him alone. It has already been found that the immovable property measuring 6 cents and the building constructed or intended to be constructed thereon was never treated as the assets of the firm. The mere user of the building or the land for the purpose of the business of the firm will not partake the character of a partnership asset, the learned counsel for the appellant submits. 7. A firm is not an entity or a person in law but only a compendious mode of designating persons who have agreed to carry on the business of partnership. 7. A firm is not an entity or a person in law but only a compendious mode of designating persons who have agreed to carry on the business of partnership. All partners are joint owners or co-owners of the entire partnership property and as such a partner has an equal right with its other partners to posses specific partnership property or partnership purpose. It is true 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 his property and upon dissolution of the partnership to a share in the money representing the value of the property. The learned counsel for the appellant submits that admittedly there was no dissolution of partnership nor is the suit for dissolution of partnership. As pointed out earlier, the plaint schedule property was not brought to the common stock of the firm; it remains to be the co-ownership property of the plaintiff and defendant. 8. It was held in Jayalakshmi v. Shanmughan -1987 (2) KLT SN Case No. 67 that the property belonging to the partners or to one of them does not become the property of the firm merely by being used for the purpose of the business and that there is no rule that whatever is brought by a partner in the partnership and is continued to be used by the members is presumed to have become the property of the partnership. It will become so, only if the partners show an intention to make it so. There must be an agreement express or implied that the property is to be treated as the property of partnership. Here Ext. A1 agreement or the earlier sale deed does not indicate that the property in question was to be brought into the common stock of the partnership asset. The further fact that Ext.A1 shows that the total share capital of the partnership firm is only Rs. Here Ext. A1 agreement or the earlier sale deed does not indicate that the property in question was to be brought into the common stock of the partnership asset. The further fact that Ext.A1 shows that the total share capital of the partnership firm is only Rs. 5 lakhs, and at the time of entering into the partnership, the share of the plaintiff and the defendant was equal and the further fact that the immovable property was not shown in the schedule or to the partnership deed showing it as the asset of the partnership would make it clear that the plaint schedule property was never intended to be brought in as the asset of the partnership firm. It was held by the Hon'ble Supreme Court in the decision in Karunakaran v. Krishnan - 2007 (1) KLT 243: "The partners as pre-existing co-owners had a definite share of the property. They merely applied their own property for running a business in partnership. On dissolution of the partnership, their right in the property revived. Using of premises for business purpose would not automatically lead to the conclusion that the premises belonged to the partnership firm". Going by the title deed, the plaintiff and defendant are co-owners and there is no contract to the contrary to indicate that this property was brought into a common hot chpot to treat it as assets of the firm. There is merit in the submission made by the learned counsel for the appellant that the plaintiff and defendant continued to have undivided share in the property and as such the claim made by the plaintiff for recovery of the property as if it is the asset of the firm, cannot be sustained. The further fact that the prayer in the plaint is to bring the property to the partnership firm. Admittedly, the firm as such has not commenced its business .Even as per Ext.A1 the term of the partnership expired long back. There are only two partners; the plaintiff and the defendant. Since the firm has not commenced its work and as the property remained to be the co-ownership property of the plaintiff and defendant, the remedy open to the plaintiff is to sue for partition. There are only two partners; the plaintiff and the defendant. Since the firm has not commenced its work and as the property remained to be the co-ownership property of the plaintiff and defendant, the remedy open to the plaintiff is to sue for partition. It is contended by the plaintiff that he had spent large sum for the construction of the building and for other purposes and for improvement of the landed property mentioned above. It is for the plaintiff to claim reservation if any in respect of the same in the suit for partition that may be filed. 9. It is argued by the learned counsel for the respondent that it is competent for the partners by agreement among themselves to convert what is the joint property or co-ownership property of all of them into separate property of someone or more of them and vice versa. In other words, even if the property was separate property that can be brought to the common stock during the partnership. But there is no evidence or circumstance to hold that the aforesaid immovable property was intended to be treated or that the said property was treated by the plaintiff and defendant as the property of the partnership. 10. Much was argued on behalf of the respondent that the loan was obtained by the appellant from the KFC and that amount was subsequently repaid by the defendant. It was pointed out that the plan and permit stood in the name of the appellant. That alone may not be a reason to hold that the property was the individual property of the party who obtained license or permit but the fact remains that the property continued to be the co-ownership property. Merely because the respondent/defendant had repaid the loan amount due to KFC, even if it is accepted as correct, cannot convert the co-ownership property as the property of the partnership firm as there was no other agreement or any other evidence to prove the same. 11. The evidence would show that the firm did not commence its work. The building in the plaint schedule property is being occupied by the wife and children of the appellant. Certainly, the respondent/plaintiff may be entitled to claim share of profits contending that the plaintiff/respondent is entitled to get his due share in the building situated in the plaint schedule property. The building in the plaint schedule property is being occupied by the wife and children of the appellant. Certainly, the respondent/plaintiff may be entitled to claim share of profits contending that the plaintiff/respondent is entitled to get his due share in the building situated in the plaint schedule property. Therefore, in the light of the specific recitals in Ext.A1 and A3 and the circumstances pointed out earlier, the findings entered by the courts below that the plaint schedule property is the property of the partnership firm, cannot be sustained. Simply because the plaint schedule property was intended to be used as the office of the business of the firm or that the Offset Printing Press was intended to be constructed in the plaint schedule property, it cannot be said that the land covered by Ext.A3 can treated as the asset of the firm so as to enable the appellant to seek recovery of possession of the building from the defendant/appellant. As such, the decree and judgment of the courts below are liable to be set aside. The remedy open to the plaintiff is to sue for partition. In the result, this Second Appeal is allowed. The decree and judgment of the courts below are set aside. The suit stands dismissed.