Holding

The tenancy right formed part of the partnership assets, making the respondent’s claim untenable; the appeal is dismissed.

Summary

The brothers Shreedhar Govind Kamerkar (appellant) and Yesahwant Govind Kamerkar (respondent) entered into a partnership in 1971 that was dissolved in 1977. The dispute concerned whether the tenancy rights to a premises in Navalkar Building, used for the Deepak Provision Store and later for Shree Medico, formed part of the partnership assets. The respondent claimed a one‑third share in the business and tenancy rights, a claim upheld by the High Court. The Supreme Court examined the partnership Act, the absence of a deed of partnership, the deed of dissolution, and the appellant’s admission that royalties from the premises were deposited in the partnership account. It held that the tenancy right was indeed an asset of the partnership and that the cause of action survived the dissolution; the appeal was dismissed.

Issues considered

Whether the tenancy right to the premises is part of the partnership property under Section 14 of the Partnership Act, 1932.
Whether the partnership was duly registered under the Partnership Act.
Whether the business (Deepak Provision Store) existed at the time of dissolution and was excluded from the deed of dissolution.
Whether the respondent is entitled to a one‑third share in the business and tenancy rights.
Whether the suit is barred by limitation.
Whether Section 15 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 is applicable.

Legislation cited

Bombay Rents, Hotel and Lodging House Rates Control Act, 1947s. 15
Indian Contract Act, 1872s. 23
Indian Evidence Act, 1872s. 58
Indian Partnership Act, 1932s. 14, s. 17, s. 37, s. 50, s. 53

Subjects

partnershiptenancy rightspartnership propertydissolutionlimitationadmission as evidenceSection 14 Partnership ActSection 58 Evidence ActBombay Rents Act

Judgment

SHREEDHAR GOVIND KAMERKAR A
v.
YESAHWANT GOVIND KAMERKAR AND ANR.

DECEMBER 12, 2006

[S.B. SINHA AND MARKANDEY KA TJU, JJ.] B

Partnership Act, 1932-Section 14-Property belonging to the firm-
First partner claiming share in tenancy rights of second partner when
partnership not in existence on the date of acquiring of the said premises by C
the second partner and no contribution by first partner towards acquisition
ofpremises-Held: Premises acquired when partnership not in existence-No
direct evidence that second partner brought the same as his investment in
the partnership at the initial stage but it is evident that it was done later-
Also in absence of deed of partnership, it cannot be held that the same had
been originally brought in the stock ofthe firm-Agreement not being decisive, D
conduct of the parties assumes significance-Admission of second partner
that the royalty received from the tenanted premises was being deposited in
the partnership account thus, the property formed part of the assets of the
partnership-Evidence Act, I 872-Section 58.

The original tenant of the premises died in 1966 leaving behind him E
the assignors. The business as also the tenanted premises was assigned for
valuable consideration. Appellant allegedly acquired the tenancy right in
respect of the suit premises in terms of a deed of assignment Appellant started
business of DP Store in the said premises. He executed leave and licence
agreement in relation to the self-same premises in favour of Win 1970. W F
was running a business in the said premises under the name and style of DP
Store. Dispute arose between parities. W filed suit which was compromised.
Appellant, respondent no 1 and one more entered into a partnership in the

I name of MIS Shreedhar Govind Kamerkar. Since appellant claimed full
ownership in relation to tenanted premises as also in Shree Medicos, the same
was dissolved in 1977. The deed of dissolution postulated that the said tenancy G
was a part of the assets of the partnership. Thereafter, appellant obtained
possession of the premises in 1978. He started a business under the name
and style of'Shree Medico'. Appellant refused to render accounts and started
claiming partnership business and partnership premises as his own.
751 H
752 SUPREME COURT REPORTS [2006) SUPP. 10 S.C.R.

A Respondent no.1 filed suit claiming 1/3 share in suit business of Medical
and General Store and also tenancy rights. Though in the suit respondent
did not claim any relief in respect of the business of DP Store, but at the
hearing, he claimed business running under the name and style of 'Shree
Medico' and also interest in 'DP Store'. Trial Judge dismissed the suit. Single
B Judge of High Court allowed the appeal holding that the respondent and
appellant had l/3rd share each in the business of DP Store carried in the
premises and also equal tenancy rights ir1 the premises where DP Store
business was being carried out and that the partnership business of DP Store
at the aforesaid premises stood dissolved from 1981. Hence the present appeal.

C Dismissing the appeal, the Court

HELD: 1.1. Although a claim was made by the respondent no. 1 that the
tenancy had been acquired by the partnership from the beginning, from the
deposition l'fthe respondent no.I, the following facts have been elicited: (i)
DP Store was not run by the partners; (ii) All licences of Shree Medico were
D standing in the name of appellant. Respondent no I had never signed on any
document pertaining to Shree Medico; (iii) He had no source of income in
1966; (iv) There is no documentary evidence to show that the said premises
were acquired out of the funds of partnership firm and that the business of
partnership was carried out at the same premises; (vi) The property was under
attachmen~ from 1969 to 1978; (vii) The possession of the property was
E obtained in 1978; and (viii) respondent no. 1 claimed a share in the business
which was running under the name and style of 'Shree Medico'. Despite that
it appears, a statement was made by respondent no. 1 which was recorded by
trial court that he is not claiming any right in the business of 'Shree Medico'
but is claiming the right only in respect of the business of'DP Store' and the
p tenancy rights in respect of the shop premises. (760-H; 761-A-El

1.2. Appellant may be right in his submission that in view the pleadings
of the parties as also the statements of the respondent no. l in his deposition
before the trial court, the respondent could not lay any claim in respect of
any business which was being carried in the premises under the name and
G style of 'DP Store', but the same, may not be decisive to arrive at a conclusion
that the right in respect of the tenanted premises in question never formed
the part of the assets of the partnership. (761-F-H; 762-Al

1.3. The parties have entered into the deed of dissolution voluntarily.
Appellant is not an illiterate. He has been carrying on business. He had
H
SHREEDHARGOVJNDKAMERKARv. YESAHWANTGOVINDKAMERKAR 753

acquired tenancy right on his own showing and in his own name and also been A
fighting litigation with W for a long time. (763-E-Fl

1.4. From the preamble of the deed of dissolution, it is evident that the
partnership had been carrying on business under the name and style of
'Mis Shreedhar Govind Kamerkar' at X place, a tobacco shop at Y place and
a tobacco godown at Z place but also 'DP Store' at the disputed premises. B
Clause (1) of the deed also refers to 'DP Store'. In clause (3) of the deed,
royalty in relation to a hotel, was assigned to respondent No.2. In relation to
the 'DP Store', it was categorically stated that the matter was pending in the
court. Clause (4) of the deed of dissolution suggests that the parties
intentionally left out division of their properties in respect of 'DP Store'. C
(763-F-H; 764-A-BJ

1.5. All properties of the owner may not be partnership property and
each case, thus, must be determined on the basis of fact materials on record.
The very fact that the parties had referred to the business carried out under
the name and style of 'DP Store' which was not and could not be the subject- D
matter of the partnership as the same was entered into in the year 1971 and
dissolved in 1977, the admission of the appellant that the royalty received from
the said tenanted premises was being deposited in the partnership account
assumes significance. If the said property was the exclusive property of the
appellant, and he had been dealing therewith as the so!e owner thereof, the
question of any reference being made thereto in the deed of dissolution would E
not have arisen. It may be true that in absence of the original deed of
partnership having been brought on records, it is difficult for the court to
arrive at a finding that the same had been originally brought in the stock of
. the firm. There is also no direct evidence that the appellant had brought the
same as his investment in the partnership at the initial stage thereof but it is F
evident that the same was done at a later point of time. What, formed 'the
assets' of the partnership must be gathered from the admission of the parties
as also the other materials available on records. The said agreement having
been in dispute, it may not be decisive. In a case of this nature, the conduct of
the parties assumes significance. Admission, as is well-known, is the best
proof of a claim. Section 58 of Evidence Act states that the facts admitted need G
not be proved. The very fact that the royalty received in respect of the said
premises was being deposited in the partnership account is a clear pointer to
show that the same was the property of the partnership. (764-B-G)

Dwijendra Nath Mullick and Anr. v. Rabindra Nath Chatterjee and Ors.,
AIR (1987) Cal 289; Jaya!akshmi v. Shanmugham and Ors., AIR (1988) Ker H
..
II f'
754 SUPREME COURT REPORTS [2006] SUPP. IO S.C.R .

.A 128 and Arm Group Enterprises Ltd v. Waldorf Restaurant and Ors., (2003)]
6 sec 423, referred to.

'Lindley & Banks on Partnership', 18th Edn., referred to.

2. Mere execution of deed of dissolution did not discharge the parties
B thereto from their rights and liabilities. The rights and liabilities of the
partners in respect of the partnership property would ~discharged only when
the firm is finally wound up and the properties of the firm are distributed.
The partner of a dissolved firm can not only exercise his right under section
50, he may also restrain the use of the firm's name and firm's property in
C terms of se(!timi 53 of the Partnership Act Section 37 determines the rights
of the outgoing partner in certain cases to avoid shares to subsequent profits.
If the tenancy right was being subjected to any profit by one of the partners,
the cause of action arose. Therefore, the cause of action for the suit did not
perish with the execution of the deed of dissolution. (768-F~H; 769-A-B)

D 1.8. With regard to the applicability section 15 of the Bombay Rents,
Hotel and Lodging House Rates Control Act, 1947, the instant case is not
where a landlord has brought any suit for eviction of the tenant on the ground
that he had wrongfully assigned his right, title and interest in the tenanted
premises in contravention of Section 15 of the Bombay Act, thus, liable for
eviction. Instant case is with regard to partnership. Assignment of tenancy
E having regard to the statutory provision would not attract section 23 of
Contract Act Even otherwise in a case of this nature, the said question does
not arise. (765-C-F.J,

CIVIL APPELLATE JURISDICTION : Civi! Appeal No. 5720 of2006.

F From the Final Judgment and Order dated 25.2.2005 of the High Court
of Judicature at Bombay in First Appeal No. 213 of 1995.

Uday Lalit, Chinmoy Khaladkar, P.N. Patwardhan and S.K. Nandy for
the Appellant.

G Shekhar Naphade, Shivraj M. Jadhav for the Respondents.

The Judgment of the Court was delivered by

S.B. SINHA, J. Leave granted.

H Parties herein are brothers. The dispute between them is tenancy right

II
SHREEDHARGOVIND KAMERKAR v. YESAHWANTGOVINDKAMERKAR[S.B. SINHA,J.J 755

-· in respect of a premises known as 'Navalkar Building' situate at N.C. Kelkar A
Road, Dadar in the town of Mumbai. Appellant herein allegedly acquired the
said tenancy right in tenns of a deed of assignment entered into by and
between him and one Saraswati Balkrishna Pawar and three others. One
Krishna Tatoba Pawar alias Balkrishna Tatoba Pawar was the original tenant
of the said premises. He was running a hair cutting saloon therein under the
name and style of' Anant Hair Dressing Saloon'. He died leaving behind him B
the assignors of the said deed of assignment dated 18. l 0.1966. The business
as also the tenanted premises was assigned for valuable consideration. He
was allegedly carrying on business therein. Leave and licence agreement was
executed by him in relation to the self-same premises in favour of one Shri
Walke on 01.02.1970. The said Walke was running a business in the said C
premises under the name and style of 'Deepak Provisional Store'. A dispute
arose between the parties resulting in initiation of a proceeding under Section
145 of the Code of Criminal Procedure, The properties were attached. The
said Walke also filed a suit. The said suit is said to have been compromised.
Appellant herein is said to have obtained possession of the said premises
on 23.3.1978, whereafter he started a business under the name and style of D
'Shree Medico'.

The parties hereto i.e. the three brothers, entered into a partnership on
1.4.1971. The same was dissolved on 31.03.1977, inter alia, on the premise
that the appellant had been claiming full ownership in relation to the said E
tenanted premises as also the business in Shree Medico. A suit was filed
by Respondent No. I in the City Civil Court, Mumbai, which was registered
' as S.C. Suit No.5903 of 1981 wherein, inter alia, the following prayers were
made:

(a) It be declared that the Plaintiff and the Defendants Nos. 1 and F
2 have 1/3 shares in the suit business of Medical and General
Store carried on Navalkar Building on the ground floor, N.C.
Kelkar Road, Dadar, Bombay 400 028 as also the tenancy rights
in the presmises as also the premises on the ground floor of
Navalkar Building, N.C. Kelkar Road, Dadar, Bombay-400 028.

(b) It may be declared that the partnership business of Medical and G
General Stores carried on in Navalkar Building on the ground
floor, N.C. Kelkar Road, Dadar, Bombay-400 028, stood dissolved
as from the date of the suit or from such other date as this
Hon'ble Court may deem fit.
H
...
756 SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R.

A (c) The accounts of the partnership business of Medical and General
Stores be made up and the Plaintiff be awarded the amount found
due to his share at the foot of the account."

Although in the said suit allegedly no relief was claimed in respect of
the business of the Deepak Provisional Store, at the hearing, the plaintiff
B made his claim in respect of the business running under the name and style
of 'Shree Medico' and claimed interest in the said 'Deepak Provisional Store'.
The app~llant in his written statement did not raise any question as regards
legality or otherwise of the said tenancy right in the partnership in tenns of
Section 15 of the Bombay Rents, Hotel and Lodging House Rates Control
C Act, 1947 (for short, 'the Bombay Act').

In the said suit, inter a/ia, the following issues were framed :

"I. Whether the Plaintiff proves that the partnership finn of M/s
Shreedhar Govind Kamerkar was/is registered under the Indian
Partnership Act?
D
2. Is the answer to the above issue is in the affirmative, whether the
Plaintiff proves that the business known as Deepak Provision
Centre and the shop premises on the Ground Floor, Navalkar / ·',;._
Building, N.C. Kelkar Road, Dadar, Bombay-400 028 ?

E 3. If the answer of the above issues in the affinnative, whether the
Plaintiff proves that on 31st March, 1977 the said business of·
i
Deepak Provision Centre was in existence ?
4. If the answer to the above issues is in the affinnative, whether
' ~

the Plaintiff proves -that the said business of Deepak Provision (
F Centre and the said premises were excluded from the dissolution
of the said finn of M/s Shreedhar Govind Kamerkar ? .,,__
5. Whether the Plaintiff proves that the business of Mis Shree
Medico carried 011 by the Defendant No. I in the said premises
is a partnership business of the parties to the suit ?
G 8. Whether the Plaintiff proves that he is entitled to I/3rd share in
the said business of the I st Defendant and in the tenancy rights
in the said premises ?

9. Whether the Plaintiff proves tha.t he is entitled to the dissolution
and accounts of the said business of the I st Defendant and the
H tenancy rights of the said premises ?"
-- SHREEDHARGOVIND KAMERKAR v. YESAHWANT GOVIND KAMERKAR [S.B. SINHA, J.J 757

Issue Nos. 2, 8 and 9 were answered in the negative, whereas Issue A
Nos.3, 4 and 5 were held to be not surviving. The learned Trial Judge, inter
alia, on the aforementioned findings dismissed the suit. On an appeal
preferred by the respondents herein, a learned Single Judge of the High Court,
however, allowed the appeal directing :

"(a) It is declared that the plaintiff and defendant Nos. I and 2 have B
I/3rd share each in the business of Deepak General Stores carried
on the ground floor in Navalkar building at N.C. Kelkar Road,
Dadar, Mumbai-400 028 and also equal tenancy rights in the
premises where Deepak General Stores business was being carried
out.
c
(b) It is declared that partnership business of Deepak General Stores
at the aforesaid premises stood dissolved as from July 1981.
(c) The accounts of the partnership business of Deepak General
Stores shall be made and the plaintiff and the defendants will be
entitled to amount found due to their share at the foot of the D
account.
(d) Partnership premises where Deepak General Stores was being run
shall be partitioned by metes and bounds and they will be entitled
to possession of l/3rd share and will be placed in possession.
(e) There will be an enquiry into the mesne profits from the date of E
the suit till delivery of possession in respect of Deepak General
Stores and that of the premises.

Plaintiff will be entitled to costs of this suit as well as of the
Appeal."
F
The High Court in its judgment, inter alia, relied upon the admission
of the appellant herein that the royalty received in respect of the said tenanted
premises used to be deposited in the partnership account.

The deed of dissolution dated 31.03.1977 clearly postulated that the
said tenancy was a part of the assets of the partnership (Ex.P-3) and agreement G
dated 01.02.1977 (Ex. P-4), whereby and whereunder the parties thereto agreed
that the partnership should be dissolved.

Mr. U. U. Lalit, the learned Senior Counsel appearing on behalf of the
appellant, would inter alia submit :
H
758 SUPREME COURT REPORTS [2006) SUPP. 10 S.C.R.

A (I) Having regard to the stand taken by the learned counsel for the
respondents before the City Civil Court as also before the High
Court to the effect that no share was being claimed in respect of
the business of 'Shree Medico', and the said claim having been
kept confined only to 'Deepak Provisional Store', the High Court
committed a manifest error in passing the impugned judgment.
B
(2) Having regard to the finding of fact arrived at by the City Civil
Court that the tenancy right in respect of the premises in question
had been acquired by the appellant in his individual capacity and
he having obtained possession thereof from the licensee only
in the year 1978, prior whereto the partnership was dissolved,
c the question of the said property being an asset of the partnership
did not and could not atise.
(3) The plaintiff-respondent, in his deposition having clearly admitted
that he had no concern with the said tenanted premises, the
impugned judgment cannot be sustained.
D
(4) In any event having regard to the provisions contained in Section
15 of the Bombay Act, the tenancy right could not have been
assigned.
(5) Partnership having been dissolved on 31.03.1977 and the suit
E having been filed on 16.10. 1981, the same was clearly barred by
limitation.

Mr. Shekhar Napadhe, the learned Senior Counsel appearing on behalf
of the respondents, on the other hand, would contend :

l. It is not a fit case where this Court should exercise its discretionary
F jurisdiction under Article 136 of the Constitution of India.
2 Having regard to the provisions contained in Section 17 of the
Partnership Act, the suit was not barred by limitation.
3. No question as regards applicability of Section 15 of the Bombay
G Act having been raised in the written statement, nor any issue
having been framed in that behalf, the same should not be
permitted to be raised for the first time before this Court.

The deed of partnership admittedly has not been produced. The parties,
however, had entered into a formal deed of pari~ership:' Non production of
H the said document has, however, not been taken serious note of by the High
.... SHREEDHAR GOVIND KAMERKAR v. YESAHWANTGOVIND KAMERKAR [S.B. SINHA, J.[l 59

Court. What was produced was extract from the certificate of registration A
issued by the Registrar of Firms.

In absence of the deed of partnership, it might not be possible for us
to arrive at a finding that the partnership was originally brought in the stock
of the firm.
B
We will, therefore, have to proceed to determine the said question on
the basis of the materials which are available on records.

We may at the outset notice the admission of the appellant in his
deposition before the learned Civil Court, which is in the following terms :
c
"Q. You have stated that the business of M/s Shridhar Govind
Kamerkar was carried on at Navalkar Bldg. So what was this
premises at Navalkar Bldg. used ?
Ans. The said premises were given for running the business to one
Shri Walke and the royalty was received therefrom was credited D
to the accounts of Mis Shridhar Govind Kamerkar a partnership
firm.
Q. I put it to you that prior to giving the premises in Navalkar Bldg.
to Shri Walke Deepak Provision Centre was being run therefrom.
What have you to say? E
Ans. I started the said business of Mis Deepak Provision Centre in the
said premises."

Indisputably, a deed of dissolution was entered into by and between
the parties. The said instrument was executed on 31.03.1977, the relevant
portions whereof are as under : F
"WHEREAS the parties above named were partners in a partnership,
a will for carrying on the business of Bidis, Tobacco, Cigarette and
other sundry articles under the name and style ofM/S SHREEDHAR
GOVIND KAMERKAR, at 203/205, Haji Habib Chawl, N.M. Joshi
Marg, Bombay 13 and the tobacco shop at Harharwala Building, G
Delisle Road, (N.M. Joshi Marg), Bombay and Deepak Provision
Centre, Navalkar Bldg. N.C. Kelkar Road, Dadar, Bombay-28, and a
tobacco godown at Rangari Chaw!, Maidan, Patra Shed, N.M. Joshi
Marg, Bombay 13, under the terms and the conditions of a deed of
partnership duly executed on the day of January, 1971, Between the H
760 SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R.

A Party of First Part, Second Part & Third Part."

xxx xxx xxx

1. The parties hereby agreed that the partnership between them to
carry on the said business in the name and style of Messers
B SHREEDHAR, GOVIND KAMERKAR and other sundry articles at
203/205 Haji Babib Chawl, N.M. Joshi Marg, Bombay 13 and a tobacco
shop at Harharwala Building, N.M. Joshi Marg, known as Ganesh tea
House and Deepak Provision Centre, Navalkar Building, N.C. Kelkar
Road, Dadar, Bombay 28 and tobacco godown at Rangari Chawl
Maidan, Patra Shed, N.M. Joshi Marg, Bombay 13 and Mor Brand
c Chun a (Lime) and the parties had agreed the terms under which the
said partnership was dissolved on the further terms and conditions.

xxx xxx xxx

3. In respect of Bidi shop at Harharwala Bldg., N.M. Joshi Marg,
D Bombay-13, known as Hotel Ganesh Tea House which is given on
royalty shall remain with the party of the Third Part Shri P.G. Kamerkar
and he shall be responsible to repay the deposit amount received.

4. In respect of Deepak Provision Centre at N .C. Kelkar Road, Dadar,
Bombay 28 the case is pending in court of the said shop and after the
..
E court decision the decision will be taken with the mutual consent of
all the partners. And secondly in respect of Mor Brand Chuna (Lime)
the matter is under dispute with other parties and that matter will be
decided with the mutual consent of these partners."

Although the agreement dated 0 l. 02.1977 is a disputed document, but
F having regard to the fact that the High Court had placed reliance thereupon,
we may also notice clause 8 thereof which is in the following terms :

(8) The closed shop viz. Deepak Provisional Stores with the room
situated at Nawalkar Building, N.C. Kelkar Road, Dadar, Mumbai-
400028 is of the ownership of all the three partners and all the
G three shall bear the expenditure to be incurred therefor. Further,
all the three shall equally bear the entire expenditure viz. its rent
etc."

We may also notice that although a claim was made by the plaintiff that
the tenancy had been acquired by the partnership from the beginning, from
H the deposition of the plaintiff-respondent no.1, it appears that the following
SHREEDHARGOVIND KAMERKAR v. YESAHWANT GO VIND KAMERKAR [S.B. SINHA, J.]761

facts have been elicited : (i) Deepak Provisional Store (Centre) was not run A
by the partners (page 61 ); (ii) All licences of Sh:-ee Medico were standing
in the name of defendant no. I. He had never signed on any document
pertaining to Shree Medico (page 62); (iii) He had no source of income in
1966 (page 71); (iv) There is no documentary evidence to show that the said
premises were acquired out of the funds of partnership firm (page 72); (v) B
No documentary evidence exists to show that the business of partnership
was carried out at the same premises (page 82); (vi) The property was under
attachment from 1969 to 1978 (page 82); (vii) The possession of the property
was obtained in 1978 (page 84); and (viii) Plaintiff claimed a share in the
business which was running under the name and style of 'Shree Medico' and
not of 'Deepak Provisional Store' (page 94). C
However despite a claim having been made by the plaintiff in respect
of' Shree Medico', it appears, a statement was made at the Bar by the learned
counsel for the plaintiff on 17.03.1994, which had been recorded by the
learned Trial Judge as under :
D
"(1) That the Plaintiff is not claiming any right in the business of
'Shree Medico'.

(2) The Plaintiff is claiming the right only in respect of the business
of 'Deepak Provision Centre".

(3) The tenancy rights in respect of the shop premises Leing Shop E
No.I."

The High Court also in para 6 of its judgment noticed the said statements
in the following terms . :

" .... Counsel for the appellants however fairly conceded that the F
plaintiffs-appellants are not making any claim in respect of Shree
Medico."

The learned Senior Counsel appearing on behalf of the appellant may,
thus, be right in his submission that keeping in view the pleadings of the
parties as also the statements of the plaintiff in his deposition before the G
learned City Civil Court, the respondent could not lay any claim in respect
of any business which was being carried in the premises in question under
the name and style of 'Deepak Provisional Store, but the same, in our opinion,
may not be decisive to arrive at a conclusion that the right in respect of the
tenanted premises in question never formed the part of the assets of the H
762 SUPREME COURT REPORTS [2006) SUPP. 10 S.C.R.

A partnership.
We have noticed hereinbefore that either there was no deed of
partnership, or in any event the same had not been produced. What, therefore,
fonned 'the assets' of the partnership must be gathered from the admission
of the parties as also the other materials available on records.
B
What forms the property of the finn is ~tated in Secticm 14 of the Indian
Partnership Act, 1932 (for short, 'the Act'). It reads as under :

"14. The property 9f the firm.- Subject to contract between the
partners, the property of the firm includes all property and rights and
c 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
D interests in property acqui~ed with money belonging to the firm are
deemed to have been required for the finn."

With a view to detennine the said question, we may notice some other
provisions of the Act as well.

E "17. Rights and duties of partners.-Subject to contract between the
partners -

after a change in the firm

(a) where a change occurs in the constitution of a firm, the mutual
F rights and duties of the partners in the reconstituted firm remain the
same as they were immediately before the change, as far as may be;

after the expiry of the term of the firm, and

(b) where a finn constituted for a fixed term continues to carry on
business after the expiry of that tenn, the mutual rights and duties of
G the partners remain the same as they were before the expiry, so far as
they may be consistent with the incidents of partners at will; and

where additional undertakings are carried out,

(c) where a firm constituted to carry out one or more adventures or
H undertakings carries out other adventures or undertakings, the mutual
SHREEDHARGOVIND KAMERI<AR v. YESAHWANTGOVIND KAMERKAR [S.B. SINHA, J.]763

rights and duties of the partners in respect of the other adventures A
or undertakings are the same as those in respect of the original
adventures or undertakings."

"50. Personal profits earned after dissolution.- Subject to contract
between the partners, the provisions of clause (a) of section 16 shall
apply to transactions by any surviving partner or by the B
representatives of a deceased partner, undertaken after the firm is
dissolved on account of the death of a partner and before its affairs
have been completely wound up :

Provided that where any partner or his representative has bought
the goodwill of the finn, nothing in this section shall affect his right C
to use the finn name."

"53. Right to restrain from use offirm name or firm property.- After
a firm is dissolved, every partner or his representative may, in the
absence of a contract between the partners to the contrary, restrain
any other partner or his representative from carrying on a similar D
business in the firm name or from using any of the property of the
firm for his own benefit, until the affairs of the firm have been
completely wound up :

Provided that where any partner or his representative has bought
the goodwill of the finn, nothing in this section shall affect his right E
to use the finn name."

The parties have entered into the deed of dissolution voluntarily. The
appellant herein is not an illiterate. He has been carrying on business. He
had acquired tenancy right on his own showing. He had acquired the
tenancy right in his own name. He had also been fighting litigation with the F
said Walke for a long time.

We have also noticed hereinbefore clause (8) of the agreement dated
01.02.1977. From the preamble of the deed of dissolution dated 31.03.1977,
it is evident that the partnership had been carrying on business inter alia in G
Bidis, Tobacco, Cigarettes etc. under the name and style of 'M/s Shreedhar
Govind Kamerkar' situated Haji Habib Chawl, N.M. Joshi Marg, Bombay and
a tobacco shop at Harharwala Building, Delisle Road and a tobacco godown
at Rangari Chawl, Maidan, Patra Shed, N.M. Joshi Marg, Bombay but also
'Deepak Provisional Store', Navalkar Building.
H
764 SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R.

A Clause (1) of the said deed of dissolution also refers to 'Deepak
Provisional Store'. In clause (3) of the said instrument, royalty in relation to
a hotel, namely, Hotel Ganesh Tea House was assigned to P.G. Kamerkar,
Respondent No.2 herein. In relation to the 'Deepak Provisional Store', it was
categorically stated th'at the matter was pending in the court. Clause (4) of
B the said deed of dissolution suggests that the parties intentionally left out
division of their properties in respect of 'Deepak Provisional Store' as also
'Mor Brand Chuna (Lime)', as litigations were pending.

The very fact that the parties had referred to the business carried out
under the name and style of 'Deepak Provisional Centre' at N.C. Kelkar Road,
C Dadar, Mumbai, which was not and could not be the subject-matter of the
partnership as the same was entered into in the 'year 1971 and dissolved in
1977, the admission of the appellant herein that the royalty received from the
said tenanted premises was being deposited in the partnership account
assumes significance. If the said property was the exclusive property of the
appellant, and he had been dealing therewith as the sole owner thereof, the
D question of any reference being made thereto in the deed of dissolution
would not have arisen. It may be true that in absence of the original deed
of partnership dated 1.4.1971 having been brought on records, it is difficult
for the court to arrive at a finding that the same had been originally brought
in the stock of the firm. There is also no direct evidence that the appellant
E had brought the same as his investment in the partnership at the initial stage
thereof but it is evident that the same was done .at a latter point of time. An
inference in relation thereto must be drawn for the other materials on records.
The said agreement dated 1.4.1971 having been in dispute, we may not be
decisive. In a case of this nature, the conduct of the parties assumes
significance. Admission, as is well-known, is the best proof of a claim.
F Section 58 of the Indian Evidence Act states that the facts admitted need not
be proved. The very fact that the royalty received in respect of the said
premises was being deposited in the partnership account is a clear pointer to
show that the same was the property of the partnership.

We may at this juncture also consider the submission of Mr. Lalit, in
G regard to the applicability of the provisions of Section 15 of the Bombay Act,
which reads as under :

"In absence of contract to the contrary, tenant not to sub-let or
transfer or to give on licence.

H (1) Notwithstanding anything contained in any law but subject to
SHREEDHARGOVIND KAMERKAR v. YESAHWANTGOVINDKAMERKAR[S.B. SINHA,J.J765

any contract to the contrary, it shall not be lawful after the coming A
into operation of this Act for any tenant to sub-let the whole or any
part of the premises let to him or to assign or transfer in any other
manner his interest therein and after the date of commencement of the
Bombay Rents, Hotel and Lodging House Rates Control (Amendment)
Act, 1973, for any tenant to give on licence the whole or part of such B
premises.

Provided that the State Government may by notification in the
Official Gazette, permit in any area the transfer of interest in premises
held under such leases or class of leases or the giving on licence may
premises or class of premises and no such extent as may be specified C
in the notification.

It is not in dispute that the State of Maharashtra had issued a notification
in terms of the proviso appended to Section 15 of the Bombay Act, in terms
whereof assignment of a business together with tenancy right was permissible.
Furthermore, Section 15 does not contain an absolute bar. It is subject to D
a contract to the contrary between the landlord and the tenant. A landlord
may also in a given situation by reason of acceptance of rent or otherwise
from the sub-tenant or assignee may acknowledge the sub-tenancy or
assignment and thus accept him to be his tenant. It is not a case where a
landlord has brought any suit for eviction of the tenant on the ground that
he had wrongfully assigned his right, title and interest in the tenanted premises E
in contravention of Section 15 of the Bombay Act and, thus, liable for
eviction. We are concerned with a partnership. Assisgnment of tenancy
having regard to the statutory provision would not attract Section 23 of the ·
Indian Contract Act. Even. otherwise in a case of this nature, the said
question does not arise.
F
In any event, a transaction may be void so far as landlord is concerned.
Such a void transaction may not have any effect on the application of the
property towards partnership. To some extent, the point appears to have
been covered by this Court in Arm Group Enterprises Ltd. v. Waldorf
Restaurant and Ors., [2003] 6 SCC 423, wherein this Court opined : G
" .... Mere carrying on by the tenant a partnership business as partner
in the leased premises, no doubt, does not per se amount to sub-
letting unless it is shown that he withdrew his control of the leased
premises and parted with the possession of the property and thereby
surrendered his individual tenancy rights in favour of the partnership H
766 SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R.

A finn ..."

We may, in this connection, usefully notice that in 'Lindley & Banks
on Partnership', 18th Edn., it is stated :

"8-13 Lord Lindley observed that "a partnership may be illegal upon
B the general ground that it is formed for a purpose forbidden by
the current notions of morality, religion, or public policy". On
that ground, he considered that a partnership formed for the
purpose of deriving profit from the sale of obscene or blasphemous
prints or books, or for the procurement of marriages or of public
offices of trust, would be "undoubtedly illegal."
c 8-14 It has already been seen that a partnership between a resident
British citizen or a resident alien and an alien enemy is illegal and
incapable of creation or continuation; on the same basis, a
partnership formed in order to trade with an enemy nation would
clearly be illegal. However, since a neutral may lawfully trade
D with one of the belligerent nations, a partnership formed for that
purpose would be unobjectionable."
8-16 Equally, although a statute may appear to prohibit certain activities
and impose a penalty for failure to observe its provisions, it does
not follow that conduct which would attract the penalty is
E necessarily illegal. If the statute can genuine be classed as
prohibitory, as will be the case if the penalty is imposed for the
protection of the public, then such conduct will be illegal Per
contra if, on a true construction of the statute, the penalty merely
represents, as Lord Lindley put it, "the price of a licence for
doing that the statute apparently forbids". Thus, in Brown v.
F Duncan, it was held that a partnership of distillers was not illegal,
even though one partner carried on business as a retail dealer in
spirits within two miles of the distillery (contrary to the Duties
on Sprits Act 1823, ss. 132, 133) and was not registered as a
member of the firm in the excise books (as required by the Excise
G Licences Act 1825, s. 7). Lord Lindley did, however, doubt
whether the statutes in question were properly construed by the
court.

The following alphabetical list of businesses and professions
contains the most important example of partnership whose legality is
H or may be affected by statute."
SHREEDHARGOVINDKAMERKARv.YESAHWANTGOVINDKAMERKAR[S.B.SINHA,J.J767

8-31 By virtue of the Financial Services and Markets Act 2000, no A
person may carry on, or purport to carry on, a regulated activity
in the United Kingdom unless he is duly authorized so to do or
is exempt from the provisions of the Act in relation to that
activity. Contravention of this general prohibition constitutes an
offence and any agreement made by a person whilst carrying on
a regulated activity •in breach of the prohibition will be B
unenforceable against the other party.

10.44 What is of greater importance is to ensure that the occupation
rights of the firm are clearly established where the premises are
to remain in the sole ownership of one or more of the partners. C
If a lease in favour of the firm is to be granted, then it must be
in writing. The termination of such a lease may, however, not be
without difficulty and its existence may conceivably have adverse
inheritance tax consequences.

If the agreement omits any reference to such occupation rights D
then, in the absence of any other evidence, it will not be assumed,
merely because the premises are indispensable to the partnership
business, that they belong to the firm or are subject to the firm's right
to (i) a lease or tenancy or, where that is still relevant, (ii) an exclusive
licence to occupy within the meaning of the Agricultural Holdings
Act, 1986. It will rather be inferred that each individual partner who E
is not beneficially interested in the premises has been granted a non-
exclusive licence to enter them in order to carry on the partnership
business. Such licence would seem to be contractual in nature and
might, as a matter of implication, not be terminable during the currency
of the partnership, particularly if it can be shown that the partnership F
business can only be carried on from those premises and that the
termination of the licences would strike at the substratum of the
partnership agreement. In such .circumstances the only effective way
of determining the licence would be to dissolve the partnership but,
· even then, they would prima facie continue until the winding up is
complete." G
We are not oblivious that all properties of the owner may not be
partnership property and each case, thus, must be determined on the basis
of fact materials on record.
In Dwijendra Nath Mullick and Anr. v. ·Rabindra Nath Chatterjee and H
768 . SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R.

A Ors., AIR (1987) Cal 289, it is stated :

"18. It is for the partners to determine by agreement amongst themselves
what shall be the property of the firm and the quantum of their
beneficial interests therein inter se and what shall be the separate
property of one or more of them. If there is no express agreement, then
B the source from which the property was obtained, the purpose for
which it was acquired, and the mode in which it has been dealt with,
are to be con-;idercd to ascertain such intention."

In Jayalakshmi v. Shanmugham and Ors., AIR.(1988) Ker 128, it is
stated:
c
" .... It is not necessary that every partnership for the purpose of its
business should own and utilize its own partnership property.
Therefore mere user of a shop for the business will not make the shop
or the tenancy right in it a partnership asset. Something more is
required. It was so held by the Supreme Court in Arjun Kanoji Tankar
D v. SantaramKanoji Tanker, [1969] 3 SCC 555 also."
We, however, in this case are of the opinion that as the usufruct of his
lease hold was to be deposited in the partnership account, the same formed
the part of the assets of the partnership.
E The question as to whether the suit was barred by limitation or not also
must be judged from the aforementioned context. The cause of action for the
suit was said to have been arisen, as stated by the plaintiff in his plaint in
the following terms :
"The plaintiff says that the cause of action arose at the e.nd of July,
1981 when the Defendant No. l refused to render accounts and started
F claiming the partnership business and the partnership premises as his
own."
The qu.estion which would, therefore, arise is as to whether running of
'Shree Medico' without complying with clause 4 of the deed of dissolution
would give rise to a continuous cause of action. Mere execution of deed of
G dissolution did not discharge the parties thereto from their rights and liabilities.
The rights and liabilities of the partners in respect of the partnership property
would be discharged only when the firm is finally wound up and the properties
of the firm are distributed.
Sections 50 and 53 of the Act indicate to the said effect. The partner
H of a dissolved firm can not only exercise his right under Section 50, he may
SHREEDHARGOVIND KAMERKAR v. YESAHWANTGOVINDKAMERKAR[S.B. SINHA, J.J 769

also restrain the use of the firm's name and firm's property in terms of A
Section 53 of the Partnership Act. Section 37 of the Partnership Act determines
the rights of the outgoing partner in certain cases to avoid shares to subsequent
profits. If the tenancy right was being subjected to any profit by one of the
partners, the cause of action arose. The cause of action for the suit, therefore,
did not perish with the execution of the deed of dissolution on 31.3.1977. B

For the reasons aforementioned, there is no merit in this appeal. It is
dismissed accordingly. The parties shall pay and bear their own costs.

N.J. Appeal dismissed.

c