Sale of immovable property by partners
Rajan
(Querist) 21 October 2022
This query is : Resolved
I want to know that if a property is registered with name of partnership firm and all partners after signing the dissolution deed ,can sale the property? If yes ,after selling the property how the name of purchaser can register their names in revenue records if the firm have not registered any bylog (rules) with registrar.
kavksatyanarayana
(Expert) 22 October 2022
The registration of the Firm is not compulsory. But the firm shall sell the property before the dissolution. If after dissolution, the partners of the firm have no right to sell it and that sale is void.
T. Kalaiselvan, Advocate
(Expert) 23 October 2022
as per section 14 of the Indian Partnership Act, 1932, in respect of the property of the firm, it is stated taht:
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.
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 by the firm.
As per section 46 : once the firm is dissolved, each partner or their representative shall be entitled against the rest of the partners to have the firm’s property applied to pay the debts and liabilities of the firm. The surplus property, if any is to be distributed among each partner or their representatives as per their respective rights in the firm.
Supreme court in Addanki Narayanappa & Another v. Bhaskara Krishnappa & Ors has stated that upon the partnership’s dissolution, first the debts and liabilities should be met out of the property of the firm and thereafter the assets of the firm be applied in rateable payment to each partner of the firm of what is due to him on account of advances made by him as distinguished from the capital and secondly, on account of capital, the residue, if any, being divided rateably among all partners.
The Apex Court also pointed out that the Act presupposes total liquidation of the partnership’s assets before the settlement of accounts between the firm’s partners post-dissolution of the same.
Thus the property can be bought by the buyer only after the firm has followed the above procedures
