Holding

Upon dissolution, the heirs of the deceased partner may transfer the partner’s share of the property, and a transferee in possession is entitled to obstruct delivery of possession to the auction purchaser, leading to dismissal of the appeal.

Summary

Two brothers, Madhavan and Bahuleyan, formed a partnership and were co‑owners of a property. Madhavan died, causing the partnership to dissolve. The legal heirs of Madhavan sold the property to Krishnan (predecessor in interest of the respondents). A third party later obtained a decree against the dissolved firm and the property was auctioned; the appellant purchased it and sought delivery of possession. The respondents, who were in possession, obstructed delivery. The trial court dismissed the appellant’s application, holding that the heirs could transfer the deceased partner’s share and that the respondents were lawful owners. On appeal, the Supreme Court affirmed that upon dissolution the heirs may transfer the partner’s share and that a transferee in possession has the right to obstruct delivery of possession to an auction purchaser under Order 21 Rule 97. Consequently, the appeal was dismissed.

Issues considered

Whether the legal heirs of a deceased partner in a dissolved partnership can transfer the partner’s share of partnership property.
Whether a transferee who is in possession of the property can lawfully obstruct delivery of possession to an auction purchaser under Order 21 Rule 97 of the CPC.
Whether the title of an auction purchaser can be determined in execution proceedings when the property has been transferred by the heirs of a dissolved partner.

Legislation cited

Code of Civil Procedure, 1908s. Order 21 Rule 97
Indian Partnership Act, 1932s. 29(2)

Subjects

partnershipdissolutiontransfer of propertyheirsexecution of decreeobstructionOrder 21 Rule 97s.29 Partnership Actco‑ownershipauction purchaser

Judgment

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A M.V. KARUNAKARAN
v.
KRISHANAN (DEAD) BY LRS. \-

DECEMBER 15, 2006

B [S.B. SINHA AND MARKANDEY KATJU, JJ.]
.,
Partnership Act, 1932:

s. 29(2) - Right of transferee under heirs of partner of dissolved
c partnership - partnership of two brothers being co-owners of property
dissolved due to death of one of them - Heirs ofdeceased partner transferring
suit property - Right of transferee in possession to obstruct delivery of
possession to auction purchaser in execution of decree in a suit for recovery
of dues against erstwhile partnership - Held, partnership having stood
dissolved after death of one partner, his heirs could transfer the property, and
D
transferee having been put in possession had right to obstruct delivery of
possession to auction purchaser - Code of Civil Procedure, 1908 - Order
..
21, r.97.

Two brothers being co-owners of certain property formed a partnership.
E One of them died later and with that the partnership firm stood dissolved.
Legal heirs of the deceased partner transferred the suit property through a
sale deed to the predecessor-in-interest of the respondents. Thereafter a third
party filed a suit for recovery of certain amount against the said partnership
firm. The vcndee was not a party to the said suit. The suit was decreed and
the suit property was auctioned in execution of the decree to the appellant,
F who claimed delivery of possession. The vendee under the sale deed obstructed
thereto and the appellant-auction purchaser filed an application for removal
of obstruction. The executing court dismissed the application holding tbat
legal heirs of deceased partner could sell the property and the respondents
were lawful owner thereof. The appeal of the auction purchaser was dismissed
G so also was his second appeal.

In the instant appeal filed by the auction purchaser it was contended on
his behalf that respondents not being the legal heirs of the dissolved firm
they did not derive any share and as such they had no right to offer resistance.

H 1234
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\'I:
M.V. KARUNAKARAN v. KRISHANAN (DEAD) BY LRS. [S.B. SINHA, J.] 1235
Dismissing the appeal, the Court A
HELD: 1.1. A distinction exists between the right of a partner to sell a
property during subsistence of the partnership and the right of an erstwhile
partner to sell the property of the firm after it stood dissolved. In the instant
case, the partnership stood dissolved on the death of one partner, whose heirs
and legal representatives, therefore, could transfer the property at least to B
\
_,. the extent of their own share. (1236-G-HI

Addanki Narayanappa and Anr. v. Bhaskara Krishnappa (dead) and

• thereafter his heirs and Ors., AIR (1966) SC '1300, referred to.

1.2. It has been found as of fact by all the three courts below that after c
purchasing the property from the heirs and legal representatives of the
deceased partner, the respondents had been put in possession and they had
been residing therein when the auction sale was effected. They had caused
some improvements and a new building had also been constructed by them.
As the suit was filed after the deed of sale was executed and registered, the
respondents predecessor, in interest was a necessary party. He was not D
arrayed as a party in the suit. He having been found to be in possession of
the property as on the date when the delivery of possession of the property
was sought to be effected, a 'fortiori' he had a right to obstruct thereto.
11236-H; 1237-A-BJ

CIVIL APPELLATE JURISDICTION : Civil Appeal No. l 0588 of 1995. E
From the Final Judgment and Order dated l 0.10.1988 of the High Court
ofKerala at Emakulam in E.S.A, No. 4of1983.

B.V. Deepak (NP) for the Appellant.
F
C.S. Rajan, Fazlin Anam and E.M.S. Anam for the Respondent.

S.B. SINHA, J. Auction purchaser is the appellant before us being
aggrieved by and dissatisfied with a judgment and order dated· 10.10.1988
passed by the High Court of Kerala dismissing an appeal preferred by the
appellant herein. G
Three brothers, Madhavan, Bahuleyan and Karunakaran, were owners
of the property. Madhavan and Bahuleyan started a partnership under the
name and style of "The Trustful Daily Banking Company". Madhavan died
on 26. l 0.1960, leaving behind Defendant Nos. 3 to 5 as his legal heirs and
representatives. The partnership firm stood dlssolved with his death. The H
I \
1236 SUPREME COURT REPORTS [2006] SUPP. 10 S.C:R.

A legal heirs and representatives of Madhavan by reason of a registered deed
of sale da~ed 28.05.1963 transferred the property in question in favour of
Krishnan (since deceased) being predecessors in int.erest of the respondents
herein. A money suit for recovery of a sum of Rs.312.20 was filed against
the said partnership firm by a third party. The said suit was marked as O.S.
No. 523 of 1964. It was decreed.
B
The respondent admittedly was not a party to the said suit. The
property in question was auction sold in execution of the said decree. Appellant
purchased the same for a sum of Rs.5050 being the highest bid. The said sale
was confirmed. The Auction Purchaser prayed for delivery of possession.
C Respondent obstructed thereto. An application for removal of obstruction
was filed by the appellant. The Executing Court by a judgment and order
dated 9.10.1979 dismissed the said application, directing the respondent to
deposit a sum of Rs.590.07, inter alia, on the premise that on the death of
Madhavan, the partnership became dissolved and keeping in view the fact
that the other partner was also dealing with certain items of the partnership
D assets, the legal heirs and representatives of Madhavan could sell the
property. The respondent, therefore, was the lawful owner thereof.

The appellate court, however, while dismissing the appeal .also opined
that the respondent being a co-owner of the property along with the auction
purchaser, the trial court was not correct in directing the respondent to
E deposit a sum of Rs~590.07. In the second appeal preferred by the appellant,
the High Court having not found any error in the said judgment, dismissed
the same. It was opined that the partnership having been dissolved, the
dissolved firm cannot have status of partnership subsequently.

F Contention of Appellant is that Respondents are not the legal heirs of
the dissolved firm and they have not derived any share. Therefore, the
respondents had no right to offer resistance.

It is not in dispute that the partnership stood dissolved on- the death
of Madhavan. The heirs and legal representatives, therefore, could transfer
G the property at least to the extent of their own share.

A distinction exists between the right of a partner to sell a property
during subsistence of the partnership and the right of an erstwhile partner to
sell the property of the firm after it stood dissolved.

H It has been found as of fact by all the three courts that after purchasing

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M. V. KARUNAKARAN v. KRISHA NAN (DEAD) BY LRS. [S.B. SINHA, J.) 123 7
the property from the heirs and legal representatives of Madhavan, the A
respondent herein had been put in possession and they had been residing
therein when the auction sale was effected. He had caused some improvements
and a new building had also been constructed by him. As a suit was filed
after the deed of sale was executed and registered, the respondent was a
necessary party. He was not arrayed as a party in the suit. He having been
found to be in possession of the property as on the date when the delivery B
of possession of the property was sought to be effected; a 'fortiori he had
a right to obstruct thereto. Once the title in respect of the property in
question is found to be existing in the obstructionist, an application for
removal of the obstruction as envisaged under Order 21 Rule 97 of the Code
of Civil Procedure has rightly been determined in favour of the appellant. c
What could be sold in the auction was the right, title and interest of
the judgment-debtor in the property. The right of the auction ·purchaser, if
any, keeping in view of the facts and circumstances of the case, could not
have been determined in such a proceeding. Section 29 of the Indian
Partnership Act, 1932 states as to what would be the interest of transferee D
• of a partner. Sub-section (2) thereof determines the right of a transferee if
the firm is dissolved or if the transferring partner ceases to be a partner
thereof. The right the respective purchaser from the erstwhile partner of
dissolved partnership, therefore, was required to be worked out in an
independent proceeding.
E
In Addanki Narayanappa and Anr. v. Bhaskara Krishnappa (dead)
and thereafter his heirs and Ors., AIR (1966) SC 1300, this Court opined :

" ... The whole concept of partnership is to embark upon a joint venture
and for that purchase to bring in as capital money or even property
including immovable property. Once that is done whatever is brought F
in would cease to be the exclusive property of the person who brought
it in. It would be the trading asset of the partnership in which all the
partners would have interest in proportion to their share in the joint
venture of the business of partnership. The person who brought it
in would, therefore, not be able to claim or exercise any exclusive right G
over any property which he has brought in, much less over any other
partnership property. He would not be able to exercise his right even
to the extent of his share in the business of the partnership. As
already stated his right during the subsistence of the partnership is
to get his share of profits from time to time as maybe agreed upon
H
1238 SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R.

A among the partners and after the dissolution of the partnership or
with his retirement from partnership of the value of his share in the
net partnership· assets as on the date of solution or retirement after
a deduction of liabilities and prior charges .... "

Herein we have to consider the case from altogether a different angle.
B It is not a case where the partners of the firm were not the owners of the
property. It is also not a case where the property was owned by the partnership
finn. 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
C revived. Using of a premises for business purpose would not automatically
lead to the conclusion that the premises belonged to the partnership firm.

The tenns and conditions of the partnership agreement, in any event,
are not known. It is also not the case where the partners ceased to be co-
owners. If they continued to have undivided share in the property even
D during subsistence of partnership, question of their ceasing to have any
interest therein on its automatic dissolution would not arise.

Respondents were found to be in possession of the property. They
were found to have some interest therein. In that view of the matter, we do
not find any legal infinnity in the impugned judgment.
E
For the reasons aforementioned, we do not find any ground to interfere
with the impugned judgment. The appeal is dismissed accordingly. No costs.

R.P. Appeal dismissed.

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