SACHIN JAISWAL [APPELLANT] Vs. M/s HOTEL ALKA RAJE & OTHER [RESPONDENTS]
CIVIL APPEAL NOS. OF 2025 (ARISING OUT OF SLP (C) NO. 18717 OF 2022)
(2JB, SUDHANSHU DHULIA and AHSANUDDIN AMANULLAH JJ., delivered by SUDHANSHU DHULIA, J.)
The Supreme Court of India reaffirmed the legal principle that once a property is introduced as capital into a partnership firm, it ceases to be a personal trading asset of the individual partner and becomes an asset of the firm. The ruling came in an appeal challenging the decision of the Allahabad High Court, which had upheld a Trial Court’s decision declaring that the disputed property belonged solely to the partnership firm and its current partners, rather than the deceased partner who had originally contributed it.
A Bench comprising Justice Sudhanshu Dhulia and Justice Ahsanuddin Amanullah emphasized that, under Section 14 of the Indian Partnership Act, 1932, any property brought into a partnership, regardless of its initial ownership, becomes the firm’s asset. This means that all partners hold an interest in the property in proportion to their shares in the firm.
The case revolved around a property originally purchased in 1965 by the appellant’s deceased father, who later constructed a building on it. In 1972, he entered into a partnership with his brother, and in 1983, he executed a registered relinquishment deed, formally transferring all his rights to the firm. The legal dispute arose when the appellant, as a legal heir, attempted to claim ownership of the property after his father’s demise. The Trial Court ruled against the appellant, relying on the relinquishment deed, which clearly stated that neither the deceased father nor his heirs retained any rights in the property. The Allahabad High Court dismissed the first appeal, affirming that the decree favored the firm rather than its individual partners.
The Supreme Court upheld the previous rulings, emphasizing that once an asset is contributed to a partnership, it loses its individual ownership status and becomes an integral part of the firm’s assets. The Court referenced the landmark decision in Addanki Narayanappa v. Bhaskara Krishnappa (1966), which established that property introduced into a partnership ceases to be the exclusive property of the contributing partner and instead becomes a shared asset of the firm.
The Court reiterated that the deceased partner, Bhairo Prasad, had clearly intended to contribute both the land and the hotel building to the partnership, making it evident that the property was no longer his personal asset. As a result, the appellant had no claim over it as a legal heir. The Supreme Court found no merit in the appellant’s arguments and concluded that there was no justification for interfering with the High Court’s decision. The Supreme Court’s ruling reinforces the principle that once an asset is transferred into a partnership, its ownership structure fundamentally changes. This decision serves as a crucial precedent for partnership disputes, highlighting the legal implications of contributing property to a firm.
