Smt. Shanti Bai Agrawal & Ors vs. Smt. Uma Bai Agarwal & Ors AIR 2015 Chhattisgarh 80
The undisputed facts were that a house was recorded in name of M/s. Gajadhar Prasad Kashi Prasad, a partnership firm. The firm had four partners including the plaintiff. The said property was in name of the firm M/s. Gajadhar Prasad Kashi Prasad and the plaintiff was residing in the said property from the year 1943. The partnership firm was dissolved on 02.11.1956. After dissolution of the firm, the plaintiff, who was a partner continued to reside in the house and was in possession thereof . The house also had also a shop in a portion thereof. It was case of the plaintiff that he was/in exclusive possession of the suit property for last 12 years after the dissolution, as the suit was filed in the month of September, 1994. The plaintiff/appellant pleaded that by ouster of the title of the defendants after dissolution, the plaintiff was in possession and therefore had acquired the right and title over the suit property by way of adverse possession. It was therefore for such reason, the title of the plaintiff was denied as the plaintiff had acquired the title over the suit land by way of adverse possession. Consequently, the suit for declaration and permanent injunction was filed.
The substantial question of law was thus framed as under: “Whether, the immovable property brought into partnership by partners, on dissolution, remained to continue to be immovable property in the hands of the partners ?”
The Hon’ble Court observed that on reading of section 46 it was clear that on dissolution of a firm, first the property of the firm was to be applied for payment of debts and liabilities of the firm and the surplus to be distributed among the partners according to their rights. Section 47 provides that the authority of the partners will continue only so far “as it may be necessary to wind up” the affair of the firm and to complete transactions begun but unfinished at the time of the dissolution, “but not otherwise”.
The Supreme Court in (AIR 1996 1300) Addanki Narayanappa & Another vs. Bhaskara Krishnappa & Others, had an occasion to interpret the share of the partner and the nature thereof. It is stated that the share of a partner is nothing more than his proportion of the partnership assets after they have been turned into money and applied in liquidation of the partnership, whether its property consists of land or not. Further, on dissolution the debts and liabilities should first be met out of the firm property and thereafter assets should be applied in rateable payment to each partner of what is due to him firstly on account of advances as distinguished from capital and, secondly on amount of capital, the residue, if any, being divided rateably among all the partners. It is obvious that the Act contemplates complete liquidation of the assets of the partnership as a preliminary to the settlement of accounts between partners upon dissolution of the firm.
The Court further observed that it is well settled that the firm is not a legal entity, it has no legal existence, it is merely a compendious name and hence the partnership property would vest in all the partners of the firm. Accordingly, each and every partner of the firm would have an interest in the property or asset of the firm but during its subsistence no partner can deal with any portion of the property as belonging to him, nor can he assign his interest in any specific item thereof to anyone.
Therefore, according to section 47 of the Indian Partnership Act, 1932, after the dissolution of a firm, the authority of each partner to bind the firm, and the other mutual rights and obligations of the partners continue notwithstanding the dissolution, “so far as may be necessary to wind up the affair of the firm” and further to complete transactions begun but unfinished at the time of the dissolution, “but not otherwise”. In this case the dissolution is not in dispute, therefore, the partners had only inter se right between them in terms of section 47 and 48(b)(iv) of the Indian Partnership Act to claim for the right as per the provisions of the said section.
Therefore, in view of the aforesaid discussion, it is held that after dissolution of the property, the immovable property i.e. the subject suit land which was of a partnership firm became “a movable assets” in the hand of the partners inter se of M/s. Gajadhar Prasad Kashi Prasad. The partners have their inter se right in terms of section 48 of the Indian Partnership Act which could have been enforced by filing a suit to claim a share of dissolved partnership firm. Further, as per Article 5 of the Indian Limitation Act, the suit could have been filed by either of the partners within three years of the dissolution.
Admittedly the dissolution happened on 02.11.1956, therefore, by application of (Article 106 of the Limitation Act, 1908) Article 5 of the Limitation Act, 1963, the defendants having not claimed any right for settlement of account and share in the partnership, it would be barred as the period of three years has lapsed. Taking into consideration the totality of the facts, the immovable property of firm M/s. Gajadhar Prasad Kashi Prasad, was a property of the firm and the firm having been dissolved on 02.11.1956 as per the Partnership Act, it fell into shares of the partners as a movable assets for which the partners could have sued for their part of share after the discharge of dues and other settlement within a period of three years from the date of dissolution. Having not done so, the right to sue for account and the share in the partnership property became barred by limitation
The Court dismissed the suit on ground that a suit is not maintainable on the basis of adverse possession, it can be used as a shield/defence.
