Partnership act
SANGAMESWARA RAO DHUPAM
(Querist) 02 December 2012
This query is : Resolved
Partnership firm was formed in 1991. There were 6 partners in that firm. One partner retired from the firm taking his capital balance . He at the time joining in the firm contributed certain immovable property i.e. towards his capital. Afterwards the firm developed its business by constructing Mill and was doing business. The firm was reconstituted and filed a deed of Reconstitution Deed with the other partners duly paying 5% stamp duty on the property which retired partner invested as his capital fund since the property remains with the firm as per Article 41-B(a) of Schedule I-A to the Indian Stamp Act, 1899 . Now the remaining partners approached a Bank for obtaining loan to the firm. The Bank Manager advised them that the retired Partner who invested immovable property should transfer his immovable property in the name of the firm by means of a REGISTERED SALE DEED. In this connection I need advice whether a separate SALE DEED is necessarily be registered in the name of the Firm or not ? In this connection I bring to your kind notice the judgement in ILR 1947(2) Cal.1 "if any person brings his own property in to the Partnership firm it is not necessary for him in order to bring it into the Partnership stock to transfer it by registered instrument to himself ..... " Please advise me
Devajyoti Barman
(Expert) 02 December 2012
Yes, any property brought in the capital of the firm would be treated as property of the firm unless the partner makes it intention otherwise clear.
In this case no separate sale deed is required if his written consent is there.
Raj Kumar Makkad
(Expert) 02 December 2012
There is no suspecion over the citation mention by you but the same is entirely distinguishable because in that citation the dispute was whether a partner bringing his immovable property as his capital in the partnership firm is liable to transfer in the stock of the firm or not but in the situation now is otherwise in your firm. The outgoing partner is not associated with the firm and he still is its lawful owner. Had he been with the firm, there was no need for the transfer of ownership but when he has left, this is the legal requirement to get it transferred in the name of firm. The opinion of Banker is legal and justified.
SANGAMESWARA RAO DHUPAM
(Querist) 03 December 2012
I differ with the opinion of Respected Sri Raj Kumar Makkad. In the case of Boda Narayana Murthy and Sons Vs. Valluri Venkata Suguna (AIR 1978 AP 257) it was held that the property belonging to a person in the absence of any agreement to the contrary does not, on the person entering into partnership with others, become the property of the partnership merely because it is used for the business of the partnership. It would become property of the partnership only if there is an agreement, express or implied that the under the agreement of partnership to be treated as property of the partnership.In the present case the retiring partner expressly states in the Reconstitution deed that he contributed his own property as his capital and that property remains with the firm by taking cash as his share in the firm while he is outgoing.For the said Reconstitution Deed also Stamp Duty @5% has been paid as Conveyance under Article 41-B(a) of Schedule I-A to the Indian Stamp Act, 1899 and it was duly registered in the Office of the concerned Registrar`s office. Thus the property becomes the property of the firm In this connection, in my humble opinion, a Reconstitution Deed and also separate Sale Deed in favour of the firm is not necessary as expressed by Respected Sri Devajyothi Burman
ajay sethi
(Expert) 03 December 2012
It is competent for partners by agreement amongst themselves to convert that which was partnership property into the separate property of an individual, or vice versa. And the nature of the property may be thus altered by any agreement to that effect; for neither a deed nor (save where the property consists of land) even writing is absolutely
necessary. Thus where an asset the title to which is vested solely in one partner is
shown in the balance-sheet as an asset of
the partnership, this would be evidence to show an agreement to treat that asset as partnership property. However, so long as an agreement is dependent upon the unperformed condition, the ownership of the property will remain unchanged."
Halsbury's "Laws of India" (Volume 4) at page 214
states, "the property of the firm, subject to
contract between the partners, includes all
property and rights and interests in the
property originally brought into the stock of
the firm, or acquired by purchase or
otherwise, by or for the firm or for the
purpose and in the course of the business
of the firm and includes also the goodwill of
the business. Partners may convert that
which was partnership property into the
separate property of an individual partner
or vice versa by agreement, express or
implied".
3)Section 14
furnishes a useful guide in determining and
what is and what is not property of the firm
but, the question must ultimately depend on the real intention and agreement of the partners".
the general rule stated in the Section
(Section 14) is applicable subject to contract between the partners. It is open to the partners to agree emselves as to what is to be treated as the property of the firm and what is to be the separate
property of one or more of the partners.
Such an agreement need not be express but may be implied from the facts and circumstances of the case".
in the present case since the retiring partner has stated in reconstitution deed that he has contributed his property as capital of firm and said agreement is duly stamped and regd separate sale deed is not necessary
SANGAMESWARA RAO DHUPAM
(Querist) 03 December 2012
yes, I agree with the opinion of Respected Sri Ajay Sethi. I invite some more opinions from the respected lawyers of the forum for clarification on this issue, Please.
Raj Kumar Makkad
(Expert) 04 December 2012
As many facts have been disclosed by you in subsequent clarification so I do agree with your plea that as the outgoing partner by way of specific agreement has left the property in favour of the firm which in turn has also got registered the reconstruction deed so there is no need for further getting the sale-deed registered.
Raj Kumar Makkad
(Expert) 04 December 2012
The interest of a partner in partnership assets comprising of movable as well as immovable property should be treated only as movable property. His right during the insistence of the partnership is to get his share of the profits from time to time, as may be agreed upon among the partners, and his right after the dissolution of the partnership, or with his retirement from, the partnership, is only to receive e the money value of his share in the net partnership assets as on the date of dissolution or retirement, after a deduction of Liabilities and prior charges.
prabhakar singh
(Expert) 04 December 2012
The interest of a partner in partnership assets comprising of movable as well as immovable property should be treated only as movable property. His right during the insistence of the partnership is to get his share of the profits from time to time, as may be agreed upon among the partners, and his right after the dissolution of the partnership, or with his retirement from, the partnership, is only to receive e the money value of his share in the net partnership assets as on the date of dissolution or retirement, after a deduction of Liabilities and prior charges is my opinion gathered from my practice experience.
prabhakar singh
(Expert) 04 December 2012
Supreme Court of India
Addanki Narayanappa & Anr vs Bhaskara Krishtappa And 13 Ors on 21 January, 1966
Equivalent citations: 1966 AIR 1300, 1966 SCR (3) 400
supports my view
Raj Kumar Makkad
(Expert) 04 December 2012
Prabhakar sir! It seems that you have copied and posted similar portion which I have already posted. Anyway, the citation is ok.
