The first petitioner is a partnership firm established in the year 1970 with 15 partners. Over the period, 12 of them retired up to 25-06-2004. It is stated that on 27-08-2009, the 3rd petitioner joined as a partner and a fresh deed of partnership was executed. On the next day i.e., 28-08- 2009, two existing partners i.e., respondents 4 and 5 retired, by receiving a sum of Rs. 4,00,00,000/- each. A deed of retirement executed on that day was presented for registration before the 1st respondent. It is stated that the stamp duty, as provided for under Article 41-C of Schedule I-A to the Indian Stamp Act, 1899 (for short ‘the Act’) was paid. However, the 1st respondent took the view that the document is the one of conveyance and stamp duty under Article 20 of Schedule 1-A to the Act must be paid. The petitioners state that the stamp duty of Rs. 30,00,000/- was paid under protest. The 1st respondent sought opinion of the 2nd respondent. Through letter dated 23- 02-2010, the 2nd respondent informed that notices be issued to the petitioners requiring them to pay the stamp duty as per Article 20 read with Article 47-A of Schedule I-A to the Act and that the reply obtained from them be forwarded to him for further steps. Accordingly, the 1st respondent issued notice dated 26-02-2010 to the petitioners.
The petitioners filed a writ before the court and contended that the view taken by the 2nd respondent that the deed of retirement is to be treated as a deed of conveyance; is contrary to law. According to them, the consequences that flow from the retirement of partners cannot be equated to those of conveyance and that there was no justification for respondents 1 and 2 in demanding the stamp duty on that basis.
The 1st respondent stated that the recitals in the document in question clearly discloses that the rights of the retiring partners were transferred by receiving the consideration and that the same amounts to a transaction of sale. He submits that the relevant provisions of law were applied and that the petitioners cannot be said to have suffered any detriment. It is also stated that the petitioners can avail the other remedies, provided for under law.
The Court observed that the very concept of partnership contemplates two or more persons coming together, to carry out a common objective Though the firm so constituted does not acquire an independent legal character, the contributions made by the partners be it in the form of capital or property, become the common property of the firm. The entitlement of each partner vis-a-vis the property held by the firm is determined, in terms of shares, stipulated in the partnership deed. In a given case, the share of a partner may reflect the actual contribution made by him and in other cases, it may not be so. For instance, if the partners of a firm comprise of some who have invested skill and knowledge and others that have arranged capital, land etc., the former are also allotted shares, notwithstanding the fact that they did not contribute any capital or tangible assets. Obviously on account of this typical characteristic of a firm, the Courts held that the interest of a partner in a firm deserves to be treated as movable property notwithstanding the content thereof. It is also common that the share of a partner keeps on changing, with the addition or departure of the partners from time to time.
The change in the nature of rights of a partner vis-a-vis the firm, either when he joins or leaves the firm, cannot be equated to sale or purchase simplicitor. It is so, even with the accrual or loss of interest of such partner is vis-a-vis the immovable property held by the firm. It is for this reason, that the Legislature has provided for a totally different legal regime, in the context of execution and registration of deeds of partnership, retirement or dissolution pertaining to a firm, compared to the one of transfer or conveyance of properties.
In Board of Revenue, Hyderabad vs. Valivety Rama Krishnaiah (AIR 1973 Andhra Pradesh 275), it was held that a deed of release executed by a coowner in favour of another, or a deed, evidencing retirement of partner from a firm, for consideration, cannot be treated as deed of conveyance. However, different results would ensue, in case such release or retirement is favour of one or few out of many co-owners or partners.
Similarly, in Board of Revenue U.P., vs. M/s. Auto Sales, Allahabad, AIR 1979 Allahabad 312 a Division Bench of the Court held that the retirement of a partner, even while his share is determined and consideration is paid, does not amount to transfer of property, and cannot be treated as a deed of conveyance as defined u/s.s. (10) of Section 2 of the Act.
The possibility or occasion for applying the principle underlying Section 6 of the Act would arise, if only a document is capable of being treated under two different provisions. The document in question is the one of retirement from partnership and it is specifically dealt with under Article 41-C of Schedule 1-A to the Act. It cannot at all be treated as conveyance. Therefore, there does not exist any possibility to apply the principle underlying Section 6 of the Act.
Hence, the writ petition was allowed.
M/s. Kamal Wineries & Ors vs. Sub-Register of Assurance & Ors. AIR 2013 AP 36
