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IN
IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT:

THE HONOURABLE THE ACTING CHIEF JUSTICE MR.HRISHIKESH ROY

&
THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR

FRIDAY, THE 3RD DAY OF AUGUST 2018 / 12TH SRAVANA, 1940

WA.No. 1082 of 2018 IN WPC.No.31951/2017

AGAINST THE ORDER/JUDGMENT IN WP(C).No.31951/2017 of HIGH COURT OF KERALA

DATED 28-03-2018

APPELLANT(S)/RESPONDENTS 1 TO 4 IN W.P.(C):

1 STATE OF KERALA,
REPRESENTED BY SECRETARY, MINISTRY OF REVENUE,
SECRETARIAT, THIRUVANANTHAPURAM, PIN-695 001.

2 DISTRICT COLLECTOR, THRISSUR,

PIN-680 001.

3 TAHSILDAR, THRISSUR,
PIN-680 001.

4 VILLAGE OFFICER, THRISSUR,

PIN-680 001.

BY SRI.K.V.SOHAN, STATE ATTORNEY

RESPONDENT(S)/PETITIONER IN W.P.(C):

V.D. VINCENT,
S/O.DEVASSY, RESIDING AT VADAKKETHALA HOUSE,
KOORKKANCHERRY, THRISSUR DISTRICT-670 001.

R1 BY ADV. SRI.M.NARENDRA KUMAR

THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 31-07-2018 ALONG WITH
W.A.NOS.1083/2018, 1085/2018 AND 1099/2018, THE COURT ON 03-08-2018 DELIVERED
THE FOLLOWING:
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'C.R'

HRISHIKESH ROY, AG.C.J.

&
A.K. JAYASANKARAN NAMBIAR, J.
-------------------------------
W.A.NOS.1082, 1083, 1085 & 1099 OF 2018
-----------------------------------
Dated this the 3rd day of August, 2018

JUDGMENT

A.K. Jayasankaran Nambiar, J.

The State of Kerala and the Officials of its Revenue Department, who

were the respondents in the writ petitions, are the appellants before us in

these writ appeals. They are aggrieved by the common judgment dated

28.03.2018 of the learned Single Judge that finds that the writ petitioners,

who were partners in a Firm, were entitled to a transfer of registry of the

properties accruing to them consequent to the dissolution of the Firm, without

there being a registered document, transferring the interest of the partner,

who had the ownership of the property, prior to it being brought into the

stock of the Firm.

2. The writ petitioners were partners of a registered Firm named

“Universal Builders and Developers” that was constituted on 18.12.2010 but

registered only in 2015. The partners brought their individual properties into

the common stock of the Firm and, after carrying on business for a little over

five years, the Firm was dissolved by a Deed of dissolution dated 01.03.2016.

By the said deed, the properties of the Firm have been distributed among the

partners, and in the process, the properties brought in by the partners at the
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time of formation of the partnership, have been exchanged amongst them.

When the partners approached the revenue authorities, seeking a transfer of

the registry, of the property obtained by them consequent to dissolution of

the Firm, in their names, the same was refused stating that there was no

registered document executed in their favour evidencing a transfer of title in

the respective item of property, to them.

3. The learned Single Judge relied on the decisions reported in M/s.

Malabar Fisheries Co. v. The Commissioner of Income-tax, Kerala - [AIR 1980

SC 176] and N. Khadervali Saheb (Dead) By LRS. And Another v. N. Gudu

Sahib (Dead) And Others – [(2003) 3 SCC 229], to find that a partnership firm

is only a compendious personality of the partners, that is not distinct from the

persons who constitute it, and in terms of Section 14 of the Partnership Act,

the property of the Firm will have to be understood as the property belonging

to the partners for the exclusive purpose of business. It was thereafter held

that, inasmuch as this Court had in George V.J. and Others v. V.V. George and

Others - [2010 (2) KHC 674] and S.V. Chandra Pandian and Others v. S. V.

Sivalinga Nadar and Others - [1993 KHC 1150] held that when partners

convert individual property into the property of the Firm, no registration is

required in terms of the Registration Act, it followed, as a corollary, that such

registration was not required when the partnership is dissolved and the

properties distributed among the partners.

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4. The appellant State would contend that, the registered original

partnership deed dated 18.12.2010 was one in which one Joseph @ Ouseph

was a partner. He died on 20.02.2011. Thereafter, on 01.05.2015, the wife

of the deceased partner – Smt.Sabina – was inducted as a partner, and a

fresh partnership deed was executed on identical terms. This newly

constituted Firm was registered on 22.12.2015, and was dissolved through

the deed dated 01.03.2016. Thus, the Firm that was dissolved existed only

for 70 days. It is contended, based on Section 5 of the Transfer of Property

Act, that the term “living person” included a body of individuals, and in that

sense, a partnership is also recognized as a “ living person” for the purposes

of the Transfer of Property Act. Referring to Section 17 of the Registration

Act, it is contended that a non-testamentary instrument which purports or

operates to create, declare, assign, limit or extinguish, whether in present or

in future, any right, title or interest, whether vested or contingent, of the

value of one hundred rupees and upwards, to or in immovable property, has

to be compulsorily registered. It is pointed out, therefore, that the transfer of

property under the Transfer of Property Act can only be effected through a

registered deed which conveys the property, and not through a dissolution

deed. The distinction between Section 239 of the Contract Act, as it stood

prior to the enactment of the 1938 Partnership Act, and the provisions of the

latter Act is highlighted to suggest that, while under the erstwhile provisions
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of the Contract Act, a partnership contemplated the combination of property,

labour or skill of the partners in the conduct of business by the Firm, under

the provisions of the 1938 Act, the combination of property, labour or skill is

done away with, and it would suffice if the partners have an agreement to

share the profits of the business venture. The contention of the appellants is

essentially that, although the dissolution deed may indicate the rights of the

partners in the properties of the Firm, consequent to its dissolution, the

dissolution deed itself will not suffice to effect a transfer of title in the

property, from the erstwhile owner to the one who was allotted the property

under the dissolution deed.

5. We have heard Sri. K.V. Sohan, the learned State Attorney for the

appellants as also Sri. M. Narendra Kumar, the learned counsel for the

respondents in all the Writ appeals.

6. On a consideration of the facts and circumstances of the case as

also the submissions made across the bar, we find that the issue that arose

for consideration in the writ petitions was essentially as to whether the

petitioners, who were partners in a Firm, were entitled to a transfer of

registry in respect of the properties that were allotted to them under the deed

of dissolution of the Firm. The learned Single Judge found that, inasmuch as

no registration was required when the partners had converted their individual
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properties into the property of the Firm, no registration was required in terms

of the Registration Act when the partnership deed was dissolved and the

properties distributed among the partners. This view might perhaps have

received our approval had it been a case where the property, that was

originally brought in to the partnership by any particular partner had, upon

dissolution of the Firm, gone back to the same partner. That, however, is not

the case in these proceedings.

7. In the instant cases, the dissolution deed, while effecting a

distribution of the partnership assets, allotted particular items of immovable

property to partners other than those who had brought the property into the

partnership. In such a factual situation, one has to examine the nature of the

interest that is acquired by a partner ,consequent to the dissolution of the

partnership. In this regard, it would be apposite to notice the decisions of the

Supreme Court in Addanki Narayanappa and Another v. Bhaskara Krishtappa

and 13 Others - [AIR 1966 SC 1300] and in S.V. Chandra Pandian and Others

v. S.V. Sivalinga Nadar and Others - [(1993) 1 SCC 589] . In Addanki

Narayanappa's case (supra), speaking on the nature of the interest that is

acquired by a partner consequent to a dissolution of the Firm, it was observed

as follows in paragraph 7:

“7. …................ 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
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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 person who brought it in
would, therefore, not be able to claim or exercise any
exclusive right over any property which he has brought in,
much less over any other partnership property. He would
not be able to exercise his right even to the extent of his
share in the business of the partnership. As already stated,
his right during the subsistence of the partnership is to get
his share of profits from time to time as may be agreed
upon among the partners and after the dissolution of the
partnership or with his retirement from partnership of the
value of his share in the net partnership assets as on the
date of dissolution or retirement after a deduction of
liabilities and prior charges.”

8. It was also held, based on the facts in the said case, that the

agreement which recorded the fact of dissolution of the partnership business,

and the allotment of machines etc. to a particular partner, could not be said to

convey any immovable property to the partner either expressly or by

necessary implication. Similarly, in S.V. Chandra Pandian's case (supra),

where the court was called upon to decide the issue as to whether an

arbitration award, that directed dissolution of the partnership firm and

provided for distribution of residue or surplus properties of the dissolved firm

among partners after settlement of accounts, was required to be registered

under Section 17(1) of the Registration Act, while discussing the nature of the

rights obtained by partners pursuant to dissolution of the Firm, it observed as

follows at paragraph 16 of the judgment:

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“16. From the forgoing discussion it seems clear to

us that regardless of its character the property brought
into stock of the firm or acquired by the firm during its
subsistence for the purposes and in the course of the
business of the firm shall constitute the property of the
firm unless the contract between the partners provides
otherwise. On the dissolution of the firm each partner
becomes entitled to his share in the profits, if any, after the
accounts are settled in accordance with Section 48 of the
Partnership Act. Thus in the entire asset of the firm all the
partners have an interest albeit in proportion to their share
and the residue, if any, after the settlement of accounts on
dissolution would have to be divided among the partners in
the same proportion in which they were entitled to a share
in the profit. Thus during the subsistence of the
partnership a partner would be entitled to a share in the
profits and after its dissolution to a share in the residue, if
any, on settlement of accounts. The mode of settlement of
accounts set out in Section 48 clearly indicates that the
partnership asset in its entirety must be converted into
money and from the pool the disbursement has to be made
as set out in clause( a) and sub-clauses (i), (ii) and (iii) of
clause (b) and thereafter if there is any residue that has to
be divided among the partners in the proportions in which
they were entitled to a share in the profits of the partners
in the proportions in which they were entitled to a share in
the profits of the firm. So viewed, it becomes obvious that
the residue would in the eye of law be moveable property
i.e. cash, and hence distribution of the residue among the
partners in proportion to their shares in the profits would
not attract Section 17 of the Registration Act. Viewed from
another angle it must be realised that since a partnership is
not a legal entity but is only a compendious name each and
every partner has a beneficial interest in the property of
the firm even though he cannot lay a claim on any
earmarked portion thereof as the same cannot be
predicated. Therefore, when any property is allocated to
him from the residue it cannot be said that he had only a
definite limited interest in that property and that there is a
transfer of the remaining interest in his favour within the
meaning of Section 17 of the Registration Act. Each and
every partner of a firm has an undefined interest in each
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and every property of the firm and it is not possible to say

unless the accounts are settled and the residue or surplus
determined what would be the extent of the interest of
each partner in the property. It is, however, clear that since
no partner can claim a definite or earmarked interest in
one or all of the properties of the firm because the interest
is a fluctuating one depending on various factors, such as,
the losses incurred by the firm, the advances made by the
partners as distinguished from the capital brought in the
firm, etc., it cannot be said, unless the accounts are settled
in the manner indicated by Section 48 of the Partnership
Act, what would be the residue which would ultimately be
allocable to the partners. In that residue which becomes
divisible among the partners, every partner has an interest
and when a particular property is allocated to a partner in
proportion to his share in the profits of the firm, there is no
partition or transfer taking place nor is there any
extinguishment of interest of other partners in the
allocated property in the sense of a transfer or
extinguishment of interest under Section 17 of the
Registration Act. Therefore, viewed from this angle also it
seems clear to us that when a dissolution of the
partnership takes place and the residue is distributed
among the partners after settlement of accounts there is no
partition, transfer or extinguishment of interest attracting
Section 17 of the Registration Act.” (emphasis supplied)

9. It will be apparent from a reading of the aforesaid decisions that

the interest that a partner, who is allotted any item of immovable property

towards his share in the assets of the partnership firm, on its dissolution, is

only in the monetary value of the immovable property, which represents his

share in the assets of the partnership firm on its dissolution. The interest that

he obtains is to be treated as movable property, and not immovable property

since he does not get an absolute title to the immovable property. It is

therefore that it was held in the afore-cited cases that, the instrument of
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dissolution, which merely alloted items of immovable property to a partner in

proportion to his share in the assets of the firm, could not be seen as one

that conveyed the title in the immovable property, necessitating a registration

under the Registration Act, for its legal validity. As a matter of fact, in the

decision in Ratan Lal Sharma v. Purshottam Harit - [(1974) 1 SCC 671] , the

Supreme Court, while construing the terms of an award by which a

partnership firm was dissolved, took note of a specific clause therein which

indicated that consideration was to pass from one of the partners to another,

in respect of the properties that were exclusively allotted to the said partner,

who was also held absolutely entitled to the same under the award. Referring

to the nature of the interest obtained by the partner concerned, it was held

that the award did not merely transfer the share of the partnership firm to the

partner concerned but made an exclusive allotment of the partnership assets,

including the factory and liabilities, to the said partner. Emphasis was laid on

the phrase “absolutely entitled to the same in consideration of a sum of

Rs.17,000 plus half of the amount of Rs.1924.88 ” to find that the express

words of the award purported to create rights in immovable property worth

above Rs.100/-, in favour of the partner concerned. The court therefore

found that the said award, inasmuch as it created rights in immovable

property, was required to be registered under Section 17 of the Registration

Act.
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10. In the present cases, the dissolution deed merely allocates the

items of immovable property to the partners of the dissolved Firm. No doubt,

the dissolution deed recognizes the interest of the partner concerned in the

assets of the dissolved Firm, proportionate to his share as determined therein.

The said interest of the partner has, in the absence of any words indicating a

conveyance of title in immovable property, to be treated as “movable

property” for the purposes of Section 17(1) of the Registration Act as already

laid down in Addanki Narayanappa's case (supra) and S.V. Chandra Pandian's

case (supra). That being said, the partners in the instant cases, seek rights

which are superior to those that they have obtained through the allocation of

items of immovable property in the dissolution deed. They seek an absolute

title over the properties allocated to them in the dissolution deed. Going by

the express provisions of the Transfer of Property Act, as also the Transfer of

Registry Rules, their existing rights in relation to the immovable property in

question, as recorded in the dissolution deed, can mature into an absolute

title over the immovable property in question only if there is a formal

conveyance of the title in the immovable property to them either in the deed

of dissolution or through a deed of conveyance that is recognized in law. To

this extent, we agree with the submission of the learned State Attorney that

the registration of a valid deed of conveyance of immovable property would

be the medium through which the transfer of immovable property can be

effected to the individual partners of the dissolved Firm.

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11. A dissolution deed, that merely allocates items of immovable

properties to a partner proportionate to his share in the assets of the Firm

without conveying a title in the said property to him, does not, in our opinion,

confer on the said partner a right to obtain a mutation of the property in his

name, under the Transfer of Registry Rules. Consequently only a valid deed,

duly registered, can convey the title over immovable property to the writ

petitioners, and it is only thereafter that they can seek a transfer of registry in

respect of the said items of immovable property. We therefore set aside the

impugned judgment of the learned single judge and allow these writ appeals

by dismissing the writ petitions.

Sd/-
HRISHIKESH ROY
ACTING CHIEF JUSTICE

Sd/-
A.K.JAYASANKARAN NAMBIAR
JUDGE

prp/