ORDER
S. Padmanabhan, J.
1. Plaintiff is the revision petitioner and the matter arises from final decree proceedings. Defendants 1 and 2 are the brother and sister of plaintiff’s deceased husband. The suit is one for dissolution of a partnership business in plastic goods conducted in a shop at Tellicherry and for settlement of accounts. Though plaintiff claimed that herself and defendants 1 and 2 are the partners, both defendants denied the partnership. First defendant claimed the business to be exclusively his. Second defendant denied having anything to do with the business except advancing a loan of Rs. 5,000/- to the first defendant. Trial court accepted plaintiff’s case and passed a preliminary decree for dissolution and held that each is entitled to 1/3 share in the capital and profits of the business. In the final decree proceedings, on the application of the defendants, the trial court ordered the tenancy right in the shop building, in which the business is conducted, also to be sold by the receiver as a capital asset of the business. Revision is directed against that order.
2. The first contention of the revision petitioner was that the trial court exceeded its powers and went against the provisions of the preliminary decree. Order 20, Rule 15 of
the Civil P. C. provides for passing of a preliminary decree in a suit for dissolution of partnership of taking of partnership accounts. The preliminary decree has to declare the proportionate shares of the parties and direct accounts to be taken and other acts to be done, as it thinks fit. Passing of a preliminary decree is only discretionary. That means a preliminary decree need be passed only in cases when it is necessary. When there is no dispute to be gone into and decided in a final decree, the decree in the first instance could be a final decree. Anyhow that contingency has not arisen here and the decree passed is a preliminary decree. So far as matters decided in the preliminary decree are concerned, it is final and conclusive between the parties subject to the result of appeal, if any. In that respect there cannot be any dispute. The principle evolved in the doctrine of res judicata Section 11 of the Code could be applied not only in independent cases but also between different stages of some litigation. Otherwise there cannot be finalities to decisions which are binding on parties. When a dispute is finally settled by the preliminary decree, the final decree cannot amend or go behind the preliminary decree in that respect. It can decide only such other matters directed to be decided by the preliminary decree accepting the findings in the preliminary decree as the basis. If at all any authority is required for this position, it could be had from M. Ayyana v. M. Jaggarao, AIR 1977 SC 292.
3. But the question is whether such a contention is available in this case. The preliminary decree only said that plaintiff and defendants 1 and 2 are entitled to 1/3 in the capital as well as profits of the business. What is the ‘capital’ that has to be divided in the process of settlement of accounts is not decided by the preliminary decree. Now the contention is that the tenancy right of the shop room in which the business is conducted is also a capital asset of the partnership. That is not an aspect on which the preliminary decree has rendered a verdict. Therefore it is well within the competence of the court to decide in the final decree proceedings as to what all items will constitute the capital assets to be taken into account in rendering accounts. Otherwise it may not be possible to
pass an effective final decree in terms of the preliminary decree. Items constituting the capital assets of the business was not a matter in controversy between the parties in the preliminary decree proceedings. The fact that in the judgment dismissing the appeal against the preliminary decree it was stated that the building belongs to the plaintiff under possessory mortgage cannot be taken as a finding that the tenancy right in the building does not belong to the partnership. In the preliminary decree proceedings the only dispute between the parties was whether the business is a partnership of the individual concern of the first defendant. That alone was solved by the preliminary decree. Therefore it cannot be said that the court went against the preliminary decree.
4. The building belonged to a Muslim family. One Manual took the same on lease and was conducting a business in it. As evidenced by Exts. A1 to A5 the business along with the tenancy right was got assigned by the plaintiff from the widow of the lessee Manual after his death. Plaintiff continued that business. It was thereafter that defendants were taken in as partners and the business continued in the same premises as a partnership concern. From the jenmi family, plaintiff has taken a possessory mortgage also. Equity of redemption is also claimed to have been purchased by the plaintiff from the jenmi family. The title of the plaintiff to the building is not seen disputed. But that fact is not having any relevance in deciding whether the tenancy right is also a capital asset of the partnership,
5. In order to resolve the controversy the court has to decide what are the properties of
the firm. According to Section 14 of the Partnership Act that is a matter depending upon contract between the parties. Subject to such contract the property of the firm includes all property and rights and interests in the property originally brought into the stock of the firm, or acquired, by purchase or otherwise, by or for the firm, or for the purposes and in the course of the business of the firm, and includes also the goodwill of the business. Unless a contrary intention appears, property and rights and interests in the property acquired with the money belonging
to the firm are deemed to have been acquired for the firm. In this case the contention of the defendants is that the running business along with the tenancy right in the building was purchased by the plaintiff for Rs. 15,000/-and when they were inducted as partners they contributed Rs. 5,000/- each towards their 1/3 share. That is a contention which has to be gone into on the merits in the final decree proceedings in order to decide whether the tenancy right is also a capital asset of the firm. If actually the tenancy right is also part of the capital asset of the firm, its non-inclusion in the capital assets will seriously prejudice the defendants because stripped of the tenancy right what remains to he divided is probably only the plastic goods and money if any including the other assets and liabilities.
6. In deciding whether the tenancy right is also a capital asset of the firm the following aspects will have to be borne in mind. Property belonging to the partners, or to one of them, does not become the property of the firm merely by being used for the purpose of the business. Rights depend upon the terms of the agreement of partnership. There is no rule that whatever is brought by a partner in the partnership and is continued to be used by the members is presumed to have become the property of the partnership. It will become so only if the partners show an intention to make it so. There must be an agreement, express or implied, that the property is to be treated as the property of the partnership. Under Section 14 it must have been brought into the stock of the firm originally when the partnership was formed or acquired subsequently by the firm. (See B. N. Murthy & Sons v. V. V. Suguna, AIR 1978 Andh Pra 257). It is not necessary that every partnership for the purpose of its business should own and utilise its own partnership property. Therefore mere user of a shop for the business will not make the shop or the tenancy right in it a partnership asset. Something more is required. It was so held by the Supreme Court in Arjun Kanoji Tankar v. Santaram Kanoji Tankar (1969) 3 SCC 555 also.
7. Under Section 14 of the Partnership Act ‘goodwill’ of the business is also property of the firm. Goodwill can be an advantage
connected with the premises in which the business is carried on. The benefits of tenancy rights can also form part of the goodwill in the absence of any stipulation to the contrary (See Ganpat Rai v. Abnash Chander, AIR 1973 J & K 74). ‘Goodwill’ is a thing which is very easy to describe but very difficult to define. It is an advantage which is acquired by business beyond the mere value of the capital stock, fund or property employed therein, in consequence of general public patronage and encouragement which it receives from constant or habitual customers. It is composed of a variety of element s and is an advantage connected with the premises in which the business was previously carried on. The benefit of a tenancy right in the premises may also form part of the goodwill without which the business may some times be of no use and value. This aspect has also to be borne in mind in considering whether the parties agreed that the tenancy right is also part of the capital asset.
8. User of the premises by the partnership with an added indication that the partners were dealing as if the tenancy right is also in the common hotchpot is sufficient to treat the tenancy right as part of the property of the firm. All joint properties of partners need not necessarily be partnership properties. Principles of co-ownership cannot attach to such properties. Only properties answering the descriptions in Section 14 of the Partnership Act will be partnership properties. Bearing these principles in mind the court has to decide, on the materials made available in the light of the contentions and the previous, conduct of parties, whether the tenancy right is a property of the firm or whether it was so intended and treated. I do not think that there is any merit in the contention of the revision petitioner that respondents are approbating and reprobating in the sense that they are now taking a stand which is inconsistent with the one taken earlier. The earlier contention of the first defendant was that the business belongs to him exclusively and he is running the business as a tenant of the plaintiff in the said premises. That contention was found against and the business was found to be partnership concern. Such a contention or the decision cannot go against the present claim.
9. In the way in which I am going to decide the case, I am not expressing any opinion as to whether the tenancy right is the property of the firm or not. That has to be decided by the trial court. The order under challenge was without considering all the aspects including the contentions and materials on record and without giving opportunities to tender evidence. The matter has to be decided afresh on the merits after allowing evidence, if any, also.
The C.R.P. is allowed and the order is set aside. The matter is sent back to the court below in order to decide the dispute on the merits in the final decree proceedings in the light of what is stated above. No costs.
