Supreme Court: Once Property Is Brought Into A Partnership As Capital, It Ceases To Be Trading Asset Of Individual & Becomes An Asset Of The Firm
The Supreme Court dismissed an Appeal challenging the decision of the Allahabad High Court in the exercise of the jurisdiction under Article 136 of the Constitution.
The Supreme Court reiterated that once property is contributed as capital in a partnership, it ceases to be the trading asset of the individual partner and becomes the trading asset of the firm, with all partners holding interest in proportion to their share in the joint venture.
The Court dismissed an Appeal filed by the Appellant against the Judgment of the Allahabad High Court which had upheld the decision of the Trial Court declaring that the Property in dispute was solely owned by the partnership firm and its present partners, and not the deceased partner, who had brought it in the property, but had relinquished his rights from the partnership.
A Bench of Justice Sudhanshu Dhulia and Justice Ahsanuddin Amanullah reiterated that “irrespective of the character of the property, when it is brought in by the partner when the partnership is formed, it becomes a property of the partnership firm, by virtue of Section 14 of Partnership Act.”
Advocate Vasudha Banka appeared for the Appellant, while the matter remained uncontested from the side of the Respondents.
Brief Facts
The Appellant contended that deceased father had originally purchased the land in 1965 and constructed a building on it. The dispute arose when the appellant attempted to take possession of the property, claiming rights as a legal heir. The Trial Court, relying on the registered relinquishment deed, stated that neither the deceased father nor his legal heirs would have any right, title, or interest in the property.
The High Court, while dismissing the first Appeal, clarified that the decree should be interpreted solely in favor of the firm and not its individual partners.
Court’s Reasoning
The Supreme Court noted that the deceased ex-partner had entered into a partnership with his brother in 1972 and subsequently executed a relinquishment deed in 1983, transferring all his rights to the firm.
The Court, in agreement with the High Court’s findings, emphasised that property brought into a firm becomes its perpetual property of the firm under Section 14 of the Indian Partnership Act, 1932.
The Court referred to its decision in Addanki Narayanappa v. Bhaskara Krishnappa (1966) wherein it was held, “The whole concept of partnership is to embark upon a joint venture and for that purpose to bring in as capital money or even property including immovable property. Once that is done whatever is brought in would cease to be the trading asset 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 Bench remarked, “This leaves no room for any doubt that late Bhairo Prasad had brought the property in question to the stock of the partnership firm as his contribution to the same…The evidence of his intention to contribute the land and the building of Hotel Alka Raje is quite clear.”
Consequently, the Court held, “We therefore see no reason to take a view different from that of the High Court in this regard. There is absolutely no scope for our interference with the order of the High Court dated 09.03.2022 in the exercise of our jurisdiction under Article 136 of the Constitution of India.”
Accordingly, the Supreme Court dismissed the Appeal.
Cause Title: Sachin Jaiswal v. M/S Hotel Alka Raje & Ors. (Neutral Citation: 2025 INSC 275)
Appearance:
Appellant: Advocates Vasudha Banka and Kushagra Kaul; AOR Kabir Dixit
