Saligram Ruplal Khanna & Anr vs Kanwar Rajnath on 1 May 1974

Equivalent citations:

1974 AIR 1094, 1975 SCR (1) 358

Bench:

KHANNA, HANS RAJ

BEG, M. HAMEEDULLAH

CHANDRACHUD, Y.V.

Date Of Judgement:

01/05/1974

Act:

Indian Partnership Act. ss. 42 and 47,

Displaced Persons Claims Act, 1950

 Facts:

The appellants and the respondent formed a partnership and entered into a lease agreement with the Custodian of Evacuee Property for a mill, which they gained control of on August 31, 1952. The period of the partnership was for 5 years, being the period of the said lease. After failing to pay one rent installment, the Custodian served the partners with a show-cause notice on 12-2-54, requesting that they explain why the lease should not be terminated. On account of specific financial difficulties, the parties entered into a second agreement on February 24, 1954. Due to disagreements between the appellants and the respondent, the appellants filed a lawsuit on December 20, 1960, alleging that after the Custodian terminated the lease on May 25, 1954, the two appellants and the respondent orally agreed not to dissolve the partnership despite the lease termination. They requested a declaration that the partnership between them and the respondent continued to exist under the terms of the agreement as stipulated in the partnership document dated February 24, 1954, and also prayed for a rendition of the partnership accounts.

On the other hand, the respondent claimed that the parties had reached no oral agreement and that the claim for a rendition of accounts was precluded by limitation.

The trial court found that the appellants had failed to establish that the parties had reached an oral agreement and that the claim for a rendition of accounts was time-barred.

The High Court confirmed the trial court’s findings on appeal.

Thus, the appeal was dismissed.

Issue:

(i)Is the Tribunal correct in overturning the CITY’s decision under s. 263 based on the certitudes and incidents of the case? 

(ii) Whether the Tribunal was correct in ruling that there was nothing improper with the assessee valuing the closing stock at cost rather than market price based on the certitudes and incidents of the case?

(iii) Whether the Tribunal was legally correct in holding that the assessee-capital firm’s assets were not transferred to the partners, notwithstanding the fact that the assessee-firm was dissolved on December 18, 1987, based on the case’s certitudes and incidents?

Ratio Of The Case:

 Rai Bahadur Kanwar Raj Nath & Ors. v. Pramod C. Bhatt, Custodian of Evacuee Property. The Custodian has the power to cancel the lease under section 12 of the Administration of Evacuee Property Act, and the notification made by the Custodian was legitimate. The Court did not rule on the partnership’s eligibility to possess the mills under the lease agreement.

Sathappa Chetty & Ors. v. S. N. Subrahmanyan Chetty & Ors. The aforementioned case did not involve a firm formed for a specific period of time. No issue of a firm dissolving on the expiration of the defined term of partnership occurred.

Decision Of The Court:

The supreme court held observed the proposition could not be disputed. The partnership exists only to complete ongoing transactions, wind up the business, and adjust partners’ interests after dissolution. Unless a contract specifies otherwise, a firm formed for a specific period will be dissolved at the end of that period. 

Therefore, the appeal was dismissed, although without cost, due to the circumstances.

The case analysis has been done by Shruti Bose, a student at Christ (Deemed to be University), Lavasa.

The case analysis has been edited by Shubham Yadav, a student at Banasthali Vidyapith, Jaipur.

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