The Supreme Court on Thursday (February 27) reaffirmed that any contribution
made by a partner to a partnership firm becomes the firm’s property under
Section 14 of the Partnership Act, 1932. The Court ruled that neither the
partner nor their legal heirs hold exclusive rights over the firm's property
after the partner’s death or retirement, except for their share in the firm's
profits in proportion to their contribution.
A bench comprising Justices Sudhanshu Dhulia and Ahsanuddin Amanullah ruled
on a case where the legal heirs of a deceased partner claimed ownership of a
hotel (a partnership asset), arguing that it was acquired by their father and
should not have been transferred to the firm. The Trial Court decreed in favor
of the partnership firm, a decision upheld by the High Court. The legal heirs
then appealed to the Supreme Court.
The Supreme Court held that once property is contributed to a partnership,
it becomes the firm’s asset unless proven otherwise. The Court emphasized that
no formal transfer document is required; a partner’s intention to contribute
the property to the firm is sufficient. The judgment cited Addanki
Narayanappa v. Bhaskara Krishnappa (1966) and The Chief
Controlling Revenue Authority v. Chidambaram (1970) to affirm that
partnership property cannot be claimed by an individual partner’s heirs.
The Court concluded that Bhairo Prasad Jaiswal’s contribution
of land and building to the partnership firm, along with the hotel’s
construction, clearly established his intent to transfer ownership to the firm.
Rejecting the appellant’s claims, the Court ruled that the property belonged
solely to the firm, dismissing the appeal.
Case Title: Sachin Jaiswal v. M/s Hotel Alka Raje &
Others
