Chathu Kottollathil S/o Kannan Therath v. Parveettil Haris S/o Pakran
2025-07-16
C.PRATHEEP KUMAR
body2025
DigiLaw.ai
JUDGMENT : 1. The additional defendants 2 to 5 in O.S.80/2011 on the file of the Subordinate Judge, Vatakara are the appellants. (For the purpose of convenience the parties are hereafter referred to as per their rank before the trial court.) 2. The plaintiff filed the above suit originally for dissolution of partnership and rendition of account. Subsequently the prayer for declaration was also incorporated. During the pendency of the suit, the original defendant died and his legal representatives were impleaded as additional defendants 2 to 5. The plaintiff and the original defendant had entered into a partnership business in the name and style 'M/s.Unique Wood Industry' at Thanneerpanthal. It was a partnership at Will. The share capital of the firm was Rs.5,50,000 and out of which, the plaintiff contributed 25% and the original defendant contributed 75%. Ext.B1 is the partnership deed dated 8.9.2000 executed by them in that respect. Till 2004, the business was running smoothly. According to the plaintiff, thereafter the defendant himself managed the firm, forged his signature for filing applications before authorities and obtained new licence. He also alleged that in spite of repeated demands, the defendant failed to show the accounts of the firm to him. Therefore, he issued a lawyer notice dated 23.12.2010 calling upon the defendant to execute a dissolution deed and to settle the accounts within 15 days from the date of the notice. Since the above request was not complied, the plaintiff filed the suit originally for dissolution and for rendition of accounts. 3. In the written statement filed by the defendant, while denying the allegations in the plaint he contended that the land and the building wherein the partnership business has been carried on are the assets of the firm and that the plaintiff's share capital of Rs.1,38,750/- is the value of the land and building as estimated by them. The sum and substance of the contention raised by the defendant is that the land and building wherein the partnership business has been carried on, are to be treated as the assets of the firm and the same also is to be partitioned among the plaintiff and defendant. Thereafter the plaintiff amended the suit incorporating a prayer that the land and the building wherein the partnership business has been carried on exclusively belong to him.
Thereafter the plaintiff amended the suit incorporating a prayer that the land and the building wherein the partnership business has been carried on exclusively belong to him. Therefore, he prayed for a declaration to that effect and also a mandatory injunction for getting possession of the said property. 4. The trial court framed seven issues. No oral evidence was adduced by both sides. The only documentary evidence produced are Exts.A1 to A6. After evaluating the above evidence the trial court decreed the suit ordering dissolution of the firm, rendition of its accounts and declaring that the plaint schedule property belongs to the plaintiff. The trial court passed a mandatory injunction directing the defendants to remove themselves from the scheduled property. The trial court further held that the plaintiff is entitled to get damages for use and occupation of the land and building w.e.f. 14.1.2011 till additional defendants 2 to 5 vacate the premises and it further held that the quantum thereof shall be ascertained and fixed at the time of passing final decree. Aggrieved by the above judgment and decree to the extent it granted declaration, mandatory injunction and damages for use and occupation of the land and building, the additional defendants preferred this appeal. 5. Now the points that arise for consideration are the following : i) Whether the individual property of the plaintiff used for the business of the firm, can be treated as the property of the partnership? ii) Whether the trial court was justified in awarding damages for use and occupation of the land and building to the plaintiff ? iii) Whether the impugned judgment and decree of the trial court calls for any interference, in the light of the grounds raised in the appeal ? 6. Heard Sri.A.T.Anilkumar, the learned counsel for the appellants and Sri.Sreegesh, the learned counsel for the respondent/plaintiff. 7. Point No.1:- As noted above, the decree to the extent it ordered dissolution of the partnership and rendition of accounts are not challenged. The challenge in this appeal is whether the plaint schedule property is the exclusive property of the plaintiff or the property of the firm. According to the plaintiff, the plaint schedule property exclusively belongs to him and that he only permitted the firm to use the said property for conducting its business.
The challenge in this appeal is whether the plaint schedule property is the exclusive property of the plaintiff or the property of the firm. According to the plaintiff, the plaint schedule property exclusively belongs to him and that he only permitted the firm to use the said property for conducting its business. On the other hand, the contention of the defendant is that, towards the 25% share capital of the defendant, the plaint schedule property was brought into the stock of the firm. Therefore, according to the defendant, the plaint schedule property is the asset of the firm and the said asset is also to be taken into consideration, while ascertaining the loss and profit of the firm. 8. In this case both parties have adduced no oral evidence. The only documents produced are Ext.A1 lawyer notice dated 23.12.2010, Ext.A2 postal receipt, Ext.A3 acknowledgment due card, Ext.A4 reply notice dated 12.1.2011, Ext.A5 partnership deed and Ext.A6 certified copy of the assignment deed in respect of the plaint schedule property in favour of the plaintiff. 9. In Ext.A5 partnership deed it is only stated that the business of the partnership will be conducted in the building situated in the scheduled property and the head office of the firm also will be in the said building. Therefore, from the contents of Ext.A5 we will not get any clue as to whether the said property was brought into the stock of the firm. From Ext.A6 it can be seen that as per the above assignment deed of the year 1999, the plaintiff purchased the said property. The other documents are only the lawyer notice, the reply notice and the postal receipt and acknowledgment due card in that respect. 10. Relying upon Section 14 of the Partnerships Act, the learned counsel for the appellants would argue that, by the intention and conduct of the parties, the scheduled property became the asset of the firm. To substantiate his argument that for the said purpose execution of any registered instrument is not required, he has relied upon certain precedents also. 11.
10. Relying upon Section 14 of the Partnerships Act, the learned counsel for the appellants would argue that, by the intention and conduct of the parties, the scheduled property became the asset of the firm. To substantiate his argument that for the said purpose execution of any registered instrument is not required, he has relied upon certain precedents also. 11. Section 14 of the Partnership Act, 1932 reads as under: The property of the firm.— Subject to contract between the partners, the property of the firm includes all property and rights and interests in property originally brought into the stock of the firm, or acquired, by purchase or otherwise, by or for the firm, or for the purposes and in the course of business of the firm, and includes also the goodwill of the business. Unless the contrary intention appears, property and rights and interests in property acquired with money belonging to the firm are deemed to have been acquired for the firm. 12. Relying upon the decision in Sunil Siddharthbhai v. Commissioner of Income Tax, Ahmedabad, Gujarat , 1985 KHC 745 , the learned counsel would argue that when a person brings in even his immovable property as his contribution to the capital of the firm no written document or registration is required under clause (b)of sub-section (1) of Section 17 of the Registration Act. 13. In the decision in S.V. Chandra Pandian and Others v. S.V. Sivalinga Nadar and Others , (1993) 1 SCC 589 , in paragraph 16 the Apex Court held that : “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....” 14. In the decision in Travancore Regal Resorts Ltd. v. District Collector, Idukki, 2025 KHC OnLine 501 , a learned Single Judge of this Court after relying upon various decisions on the topic held that, the assets of the partnership firm on being registered as a Company as per the provisions of Section565 of the Companies Act, automatically pass to and vests with the Company. 15. In the decision in Sachin Jaiswal v. M/s. Hotel Alka Raje, 2025 KHC OnLine 6192, the Apex Court held that the separate property of an individual partner, when brought into the stock of the firm, becomes the partnership property . 16. As per the decision in Park Residency v. State of Kerala, 2013 (1) KLT 855, with regard to the conversion of individual partner's property into that of the partnership or vice-versa , what is relevant is the intention of the parties. In the above decision, a learned Single Judge held that : "Partners may convert which was property of the partnership, movable or immovable into separate property of the individual partner or property of the individual partners into property of the firm by agreement which may be express or implied. What is relevant is the intention of the partners. For such conversion no document, registered or otherwise is necessary. There must be some evidence to prove that intention. Such intention may even be proved by a course of conduct, for eg., by entries in the partnership books. The term 'partnership property' is generally used to denote everything to which the firm, i.e., all the partners qua the partners can be considered to be entitled. The partners may be entitled jointly or in common to some property, and the same persons may happen to be partners, yet the property may not be partnership property.” 17.
The term 'partnership property' is generally used to denote everything to which the firm, i.e., all the partners qua the partners can be considered to be entitled. The partners may be entitled jointly or in common to some property, and the same persons may happen to be partners, yet the property may not be partnership property.” 17. Therefore, the law is settled that by the conduct of the parties the property of the individual partner can be converted into the property of the partnership and for that purpose even documents in writing or registered instrument is not required. Therefore, what is to be looked into is the conduct of the parties and their intention as to whether they intended to bring the plaint schedule property into the stock of the firm. 18. In the absence of any oral evidence, the intention of the parties in that respect is to be ascertained from the documentary evidence available in this case. The most crucial document available in this case is the partnership deed. Ext.B5 partnership deed only states that the business of the partnership firm will be conducted in the plaint schedule property. At the time of formation of the firm, the plaint schedule property exclusively belonged to the plaintiff. As per Ext.A5 25% share capital was contributed by the plaintiff and 75% by the defendant. The contention taken by the defendant is that towards 25% of the share capital of the plaintiff, instead of paying contribution in money, the plaint schedule property was infused into the assets of the firm. 19. From the contents of Ext.A5, no assumption can be drawn to the effect that towards 25% share capital of the plaintiff, instead of paying contribution in money, the plaint schedule property was brought into the stock of the firm . Instead, in clause 5 regarding share capital it is specifically stated that the plaintiff contributed Rs.1,38,750/- and that the defendant contributed Rs.4,16,250/-. As argued by the learned counsel for the plaintiff, if the parties had the intention to bring the plaint schedule property into the stock of the firm by way of 25% share capital of the plaintiff, nothing prevented the parties from expressly stating the said fact in Ext.A5. 20.
As argued by the learned counsel for the plaintiff, if the parties had the intention to bring the plaint schedule property into the stock of the firm by way of 25% share capital of the plaintiff, nothing prevented the parties from expressly stating the said fact in Ext.A5. 20. Relying upon the decision of the Hon'ble Supreme Court in Arjun Kanoji Tank A.R. Santaram Kanoji Tankar , (1969) 3 SCC 555 , the learned counsel for the plaintiff would argue that there can be no presumption that the property of the partner become the property of the partnership merely because it was used for the business of the partnership. In paragraph 13, the Apex Court held that : “Property belonging to a person, in the absence of an agreement to the contrary, does not, on the person entering into a partnership with others, become the property of the partnership merely because it is used for the business of the partnership. It will become property of the partnership only if there is an - agreement express or implied that the property was, under the agreement of partnership, to be treated as the property of the partnership.” 21. Further in paragraph 14 the Apex Court held that : “There is no evidence in the present case that the plaintiff had, when entering into a partnership with the defendant, surrendered his individual interest in the assets brought by him into business, or had admitted that the defendant was to be the owner in equal share with him in all the assets brought into the partnership. The right of the defendant to a share in the assets brought into the business depended upon the terms of the agreement of partnership. 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.” 22. In the decision in Shashi Kapila v. R.P. Ashwin , (2002) 1 SCC 583 in paragraph 9, the Apex court held that : “A partnership firm is an association of persons. But in spite of that unity between themselves, every partner can have his own separate existence from the firm. Any right which a partner has over any property, other than the partnership property, would remain as his individual asset.
But in spite of that unity between themselves, every partner can have his own separate existence from the firm. Any right which a partner has over any property, other than the partnership property, would remain as his individual asset. The mere fact that the particular person has chosen to include himself as a partner of a firm will not result in incorporation of all his individual properties as the assets of the partnership. Section 14 of the Indian Partnership Act 1932 says: Subject to contract between the partners, the property of the firm includes all property and rights and interests in property originally brought into the stock of the firm, or acquired, by purchase or otherwise, by or for the firm, or for the purposes and in the course of the business of the firm, and includes also the goodwill of the business.” 23. Further, in paragraph 10 the Apex Court held thus : “Here it is an admitted fact that appellant was a tenant of the building even earlier than the formation of the firm M/s Shiva and Co. In such a situation the tenancy right of the appellant in respect of the building is a separate right available to the appellant individually over which the partnership has no claim. Appellant never contended that he had offered the suit property as an asset of the partnership firm.....” 24. In the decision in Arm Group Enterprises Ltd. v. Waldorf Restaurant and Others, (2003) 6 SCC 423 , the tenanted premises were sublet to the sole proprietor of the business concern, who later on with other two individuals, constituted a partnership firm. In the above context, the Apex Court held : “The tenanted premises were sublet to the sole proprietor of a business concern, who later on with other two individuals constituted a partnership firm. Whether in such a situation, the tenanted premises held by him in as erstwhile sole proprietor, would become a partnership property or not would depend upon the terms of the partnership agreement. The burden to prove as to when the subtenancy was created and that the suit premises which were sublet to the proprietor, on is forming a partnership firm, became property of the firm, was squarely on the firm which is resisting the execution proceedings and seeking to claim a benefit in the form of a statutory protection.” 25.
The burden to prove as to when the subtenancy was created and that the suit premises which were sublet to the proprietor, on is forming a partnership firm, became property of the firm, was squarely on the firm which is resisting the execution proceedings and seeking to claim a benefit in the form of a statutory protection.” 25. Further in paragraph 35 the Court held that: “Under Section 14 of the Partnership Act 1932, property exclusively belonging to a person, in the absence of an agreement to the contrary, does not, on the person entering into partnership with others, became a property of the partnership merely because it is used for the business of the partnership. Such property will become property of the partnership only if there is an agreement - express or implied- that the property was, under the agreement of the partnership, to be treated as the property of the partnership.” 26. In the decision in Jayalakshmi v. Shanmugham and Others, AIR 1998 Ker. 128 , a learned Single Judge of this Court further held in paragraph 6 that : “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. Rights depend upon the terms of the agreement of partnership. 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 the partnership....” 27. From the above decisions also it can be seen that merely because the individual property of the partner is used for the business of the firm, there is no presumption that the property of the partner became the asset of the firm. A property exclusively belonging to an individual partner will become the property of the partnership only if there is an agreement to treat the property as that of the partnership. The intention of the parties in that respect is the deciding factor. 28.
A property exclusively belonging to an individual partner will become the property of the partnership only if there is an agreement to treat the property as that of the partnership. The intention of the parties in that respect is the deciding factor. 28. In the instant case, according to the plaintiff, though the plaint schedule property was used for the business of the firm, it continued to be his individual property, that he continued to pay land tax for the same and it was never brought into the stock of the firm. The averment in the plaint that the plaintiff continued to pay the land tax for the said property was not denied by the defendant in the written statement. Since the plaint schedule property is the individual property of the partnership, it is the burden of the additional defendants to prove that there was an agreement either express or implied, to treat it as the property of the partnership. However, in this case there is no pleading or evidence regarding such an agreement. Though the defendant has taken a contention that towards the 25% share capital of the plaintiff, instead of contributing the cash, the plaint scheduled property was given, there is no evidence in that respect also. In the absence of any such evidence, no presumption can be drawn that the individual property of the plaintiff ceased to be his individual property and became the property of the partnership firm. In other words, it is to be held that, the plaint schedule property continued to be the individual property of the plaintiff and not became the property of the partnership firm. In the above circumstance, there is nothing wrong in the finding of the trial court that the plaintiff is entitled to get a declaration that the said property exclusively belongs to him. Point No.1 answered accordingly. 29. Point No.2:- In this case, there was no prayer for damages for use and occupation of the plaint schedule property, from the defendants. Even then, the trial court has awarded such a relief. In the absence of such a prayer in the plaint, the defendants did not get an opportunity to oppose the claim or to adduce any evidence in that respect and as such the trial court was not justified in awarding damages for use and occupation of the land and building.
Even then, the trial court has awarded such a relief. In the absence of such a prayer in the plaint, the defendants did not get an opportunity to oppose the claim or to adduce any evidence in that respect and as such the trial court was not justified in awarding damages for use and occupation of the land and building. In the above circumstance, the relief of damages for use and occupation of the schedule property is liable to be set aside.Point No.2 answered accordingly. 30. Point No.3:- In the light of the findings on point Nos.1 and 2 above, the appeal is liable to be allowed in part. The impugned judgment and decree of the trial court to the extent it granted damages for use and occupation of the schedule property is set aside. The said judgment is confirmed in all other respects. Considering the facts, I order no costs. All pending interlocutory applications in the appeal will stand dismissed.