IN THE HIGH COURT OF KERALA AT ERNAKULAM
SA.No. 339 of 2001()
1. V.J.GEORGE
... Petitioner
Vs
1. V.V.GEORGE
... Respondent
For Petitioner :SRI.S.V.BALAKRISHNA IYER (SR.)
For Respondent :SRI.T.KRISHNAN UNNI (SR.)
The Hon'ble MR. Justice THOMAS P.JOSEPH
Dated :09/04/2010
O R D E R
"C.R."
THOMAS P.JOSEPH, J.
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S.A. Nos.339 & 429 of 2001
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Dated this the 9th day of April, 2010
J U D G M E N T
The substantial questions of law framed for a decision are:
i. On a true construction of Ext.B2,
was not the suit property and other items
included in Annexures I to III thereof thrown
into the firm by the retiring partners with an
intention to henceforth treat the same as
property of the partnership as newly
constituted and in view of Section 14 of the
Indian Partnership Act (for short, “the Act”) is
the said document compulsorily registerable
under the Indian Registration Act (for short,
“the Registration Act”)?
ii. Is not a mere intention to treat
individual properties as partnership properties
sufficient to treat such properties as having
been transferred to the partnership firm and is
it legally necessary to execute any formal
conveyance?
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iii. Are not the covenants in
Ext.B2 to execute conveyances, powers of
attorney or to subscribe signatures by the
retiring partners at some future point of
time as and when called upon to do so by
the continuing partners by way of
abundans cautela non nocet, so as to
ensure utilization of individual properties
of the outgoing partners for purposes of
the business of the firm, represented by
the continuing partners?
2. M/s.V.O.Vakkan & Sons (for short, “the firm”) is a
registered partnership firm which was engaged in the business
of manufacturing, buying, selling and exporting coir, coir fibre,
coir products, etc. While so as per Ext.B2, unregistered deed
dated 08.09.1967 three of its partners – M/s.V.V.Antony,
V.V.George and V.V.Job retired from the partnership with effect
from that day and while making arrangements regarding
liability of the retiring partners, made certain arrangements
with respect to a few items of immovable properties (referred to
in Annexures I to III of Ext.B2) which belonged to the retiring
partners. In accordance with that arrangement the said
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properties were put in the possession of M/s.V.V.Joseph and
V.J.George who continued as partners of the said firm. The said
V.V.Joseph and V.J.George were authorised to deal with the said
properties and if necessary encumber the same provided, no
personal liability was created on the retiring partners.
Accordingly, the said properties were subjected to an equitable
mortgage in favour of the Syndicate Bank, Alappuzha (for short,
“the Bank”) on 16.10.1968 for a loan availed by the firm. The
Bank filed O.S.No.120 of 1972 in the Sub Court, Kochi against
the firm, its then partners, M/s.V.V.Antony, V.V.George, V.V.Job
and others for realisation of money by sale of the mortgaged
properties. The Bank obtained a decree in its favour. In the
course of execution of that decree the executing court
permitted Shri V.V.Joseph to effect private sale of the said
properties and liquidate the decree debt. Certain items of the
said properties were sold and liability of the Bank was
discharged. Shri V.V.Joseph and V.V.George applied to the
executing court to direct the Bank to deliver to them Ext.B2 and
the title deeds relating to the immovable properties subjected to
the equitable mortgage. There were counter claims also for
custody of the title deeds. The executing court as per order
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dated 17.06.1989 directed that the title deeds and Ext.B2 be
delivered to the firm and its partners, Shri V.V. Joseph and V.J.
George making it clear that dispute regarding title to the
properties shall be decided in appropriate proceeding. On
08.05.1992 Shri V.V. Joseph filed O.S. No.120 of 1992 in the
vacation court (District Court, Ernakulam to be filed in the Sub
Court, Kochi) against Shri V.V. George (one of the partners who
retired from the firm as per Ext.B2 dated 08.09.1962) seeking a
decree for prohibitory injunction against alienation of the suit
property (which is included in Annexures I to III of Ext.B2),
inducting strangers or disturbing peaceful enjoyment of the said
property claiming title and possession of the said property.
Shri V.V.George filed O.S. No.282 of 1992 in the Sub Court,
Kochi against Shri V.V. Joseph, V.J George and others for
recovery of possession of the said property and for mandatory
injunction on the strength of title claimed by him. Both the suits
were tried jointly. Trial court allowed O.S. No.282 of 1992 while
O.S. No.120 of 1992 ended in dismissal. Trial court took the
view that title to the suit property remained with Shri V.V.
George as Ext.B2, dated 08.09.1967 involved only an agreement
to transfer the suit property in favour of Shri V.V.Joseph and Shri
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V.J. George and that plea of Shri V.V. Joseph and others that they
are entitled to protect their possession under Section 53A of the
Transfer of Property Act (for short, “the TP Act”) and at any rate
perfected title by adverse possession and law of limitation
cannot be sustained. Shri V.V.Joseph and others took up the
matter in appeal. In the meantime Shri V.V. Joseph expired and
his legal heirs were impleaded. First appellate court observed
that Ext.B2 cannot convey title over immovable properties
without obtaining a formal sale deed, hence Shri V.V. Joseph
could not become absolute owner of the suit property, and
confirmed other findings, judgment and decree of the trial court.
Hence these appeals.
3. Shri S.V. Balakrishnan Iyer, learned Senior Advocate
appearing for appellants argued that finding of the courts below
that Ext.B2 did not confer title of the suit property in favour of
the late V.V.Joseph is not sustainable in law or on facts.
According to the learned Senior Advocate it is a case where the
suit property was brought into the partnership at a time when
Shri V.V. George (referred to hereinafter as the respondent) and
the two others continued to be its partner and hence it became
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property of partnership as understood in Sec.14 of the Act.
Learned Senior Advocate would contend that when property,
moveable or immovable is brought into the common stock of
the partnership and converted as its property, it did not
require registration under the Registration Act. Learned Senior
Advocate, Shri T.Krishnanunni appearing for respondent would
contend that Ext.B2 only created an agreement for sale of the
suit property in favour of the late V.V. Joseph and Shri V.J.
George (appellant No.1) in their individual capacity and not
even as partners of the firm. According to the learned Senior
Advocate Ext.B2 cannot be taken as a conveyance of the suit
property in favour of said V.V. Joseph and V.J. George. Any rate,
even if it is assumed that Ext.B2 is a conveyance in favour of
the said persons so far the property is not brought into the
common stock of the partnership consisting of respondent
also question of treating the said property as partnership
property under Sec.14 of the Act did not arise and hence since
Ext.B2 is not registered as required under the Registration Act it
cannot affect right, title and interest of respondent in the suit
property.
S.A. Nos.339 & 429 of 2001
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4. Section 14 of the Act reads,
“The property of the firm.-Subject
to contract between the partners, the
property of the firm includes all property
and rights and interests in 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 business of the firm, and
includes also the goodwill of the business.
Unless the contrary intention
appears, property and rights and interests
in property acquired with money belonging
to the firm are deemed to have been
acquired for the firm.”
Lindley on “The Law of Partnership”, 14th Edition at page 444
states as under:
“The expressions partnership
property, partnership stock, partnership
assets, joint stock, and joint estate, are
used indiscriminately to denote everything
to which the firm, or in the other words all
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the partners composing it, can be
considered to be entitled as such. The
qualification “as such” is important; for
persons may be entitled jointly or in
common to property, and the same persons
may be partners, and yet that property may
not be partnership property; e.g. if several
persons are partners in trade, and land is
devised or a legacy is bequeathed to them
jointly or in common, it will not necessarily
become partnership property and form part
of the common stock in which they are
interested as partners. Whether it does so
or does not, depends upon circumstances
which will be examined hereafter.”
At page 445 it is stated,
“it is competent for partners by
agreement amongst themselves to convert
what is the joint property of all into the
separate property of some one or more of
them and, vice versa. It is also stated that
whatever at the commencement of a
partnership is thrown into the common stock
and whatever has from time to time during
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the continuance of the partnership been
added thereto or obtained by means thereof
can be treated as partnership property.
At page 457 it is stated,
"It is competent for partners by
agreement amongst themselves to
convert that which was partnership
property into the separate property of an
individual, or vice versa. And the nature of
the property may be thus altered by any
agreement to that effect; for neither a
deed nor (save where the property consists
of land) even writing is absolutely
necessary. Thus where an asset the title
to which is vested solely in one partner is
shown in the balance-sheet as an asset of
the partnership, this would be evidence to
show an agreement to treat that asset as
partnership property. However, so long as
an agreement is dependent upon the
unperformed condition, the ownership of
the property will remain unchanged.”
At page 458 the Author states,
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“conversion of joint property into
separate property or vice versa most
frequently takes place when a firm and one
of its partners carry on distinct trades; or
when a change occurs in a firm either by
retirement of some or one of its members
or by introduction of a new partner”.
5. Halsbury’s “Laws of India” (Volume 4) at page 214
states,
“the property of the firm, subject to
contract between the partners, 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
purpose and in the course of the business
of the firm and includes also the goodwill of
the business. Partners may convert that
which was partnership property into the
separate property of an individual partner
or vice versa by agreement, express or
implied”.
S.A. Nos.339 & 429 of 2001
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S.T.Desai’s “The Law of Partnership in India” (7th Edition)at page
123 states,
“that the expression property of the
firm also referred to as partnership
property, partnership assets, joint stock,
common stock or joint estate denotes all
property rights and interests to which the
firm, i.e. all the partners as such, may be
said to be entitled and that Section 14
furnishes a useful guide in determining and
what is and what is not property of the firm
but, the question must ultimately depend
on the real intention and agreement of the
partners”.
At page 124 the Author states,
“the general rule stated in the Section
(Section 14) is applicable subject to
contract between the partners. It is open to
the partners to agree themselves as to
what is to be treated as the property of the
firm and what is to be the separate
property of one or more of the partners.
S.A. Nos.339 & 429 of 2001
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Such an agreement need not be express
but may be implied from the facts and
circumstances of the case”.
At page 125 it is stated,
"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 immovable
property. Once that is done whatever is
brought in would cease to be the exclusive
property of the person who brought it in. It
would be the trading asset of the
partnership in which all the partners would
have interest”.
6. The Property of the partnership includes all
property, rights and interests in property originally brought into
the stock of the partnership or acquired by purchase or
otherwise by or for the partnership or for its purposes in the
course of its business. When a partner brings in his personal
asset into the partnership as his contribution to the capital, an
asset which till then was subject to the absolute ownership of
that partner becomes subject to the rights of all the partners in
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the firm to share the profits of that asset and at the time of
winding up of the partnership to sell the asset and claim share in
the resultant asset if any (See Sujan Suresh Sawant v.
Kamalakant Shantaram Desa, AIR 2004 Bombay 446).
Partners may convert which was property of the partnership,
moveable or immovable into separate property of the individual
partner or property of the individual partners into property of the
firm by agreement which may be express or implied. What is
relevant is the intention of the partners. For such conversion
no document, registered or otherwise is necessary. There must
be some evidence to prove that intention. Such intention may
even be proved by a course of conduct, for eg., by entries in the
partnership books. The term ‘partnership property’ is generally
used to denote everything to which the firm, i.e., all the partners
qua the partners can be considered to be entitled. The partners
may be entitled jointly or in common to some property, and the
same persons may happen to be partners, yet the property may
not be partnership property. In Morris v. Barret (1829) 148
E.R. 1228) it is stated that a legacy may be made in favour of
persons who are partners in a business, those persons are jointly
entitled to the legacy but the legacy will not on that account
S.A. Nos.339 & 429 of 2001
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become partnership property. There should be some evidence of
an intention to treat the property as part of the capital of the
business. In Exparte Ruffin (See Vesey’s report, Vol. VI. Page
119) in June 1797, Thomas Cooper took James Cooper into the
partnership. It was dissolved on November 3rd, 1798. Thomas
Cooper assigned the buildings, premises, stock in trade, debts
and effects to James Cooper. Lord Chancellor was of the opinion
that joint creditors had no equity attaching upon partnership
effects remaining in specie (The Nagpur High Court in
Jamnadas v. Ramadtar and Others, AIR 1922 Nagpur
70 has also taken the view that any disposition of the
(partnership) property by agreement of partners is effective
unless made with a view to defraud the creditors). In Exparte
John Owen – In Re John Bowers (See De Gex And Smale’s
(Vol.IV) 1850-51 at Page 351) a sole trader, possessed of stock
in trade and household furniture took two partners without any
agreement that they were to participate in the profits of the
concern. They brought in no capital and paid no premium. No
deed or agreement was also executed. The firm became
bankrupt. Question arose whether the properties were of the
partnership. The Vice Chancellor held that the just inference is
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that there was an agreement between the three, express or
implied that all the stock in trade should become property of the
three. In Pilling v. Pilling (See De Gex Jones and Smith’s
Reports, Page 162) a father took his two sons into partnership
under articles by which it was agreed that the business should
be carried on with the father’s capital which should remain his
and that yearly stock taking should be made. The partnership
lasted for ten years. It was held that the mode of keeping the
accounts and division of profits according to it evidenced a new
agreement between the parties and that the account must be
taken on that footing and not on the footing of the articles. The
properties were treated as property of the partnership. But
property belonging to a partner as his personal property in the
absence of any agreement does not ipso facto become property
of the partnership for the mere reason that it was used for
business of the partnership (See Firm Ram Sahay v.
Bishwanath, AIR 1963 Patna 221, Sudhansu v.
Manindra Nath, AIR 1965 Patna 144 and Sujan Suresh
Sawant v. Kamalakant Shantaram Desa, supra). The Act
does not prescribe any particular mode by which property
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whether moveable or immovable is to be brought into the
common stock of the partnership. As soon as the partners
intend that their individual property should become property of
the partnership and that property is treated as property of the
partnership, then, by virtue of Sec.14 of the Act it becomes
property of the partnership. Conversion takes place by
operation of law under Sec.14 of the Act once the intention is
expressed and the property is treated as such. The same view is
taken in Sahaya Nidhi (Virudha Nagar Ltd. v.
Subramania Nadar, AIR 1951 Madras 209 and L.J.J.
Rebello v. Chief Controlling Revenue Authority in
Mysore, AIR 1971 Mysore 318. The Supreme Court in Sunil
v. I.T. Commr, Ahmedabad (AIR 1986 SC 368) has
stated that there is no ‘transfer’ in the general sense of that
item when a partner brings his personal asset into the firm as his
contribution to its capital (i.e., to the common stock). When a
partner brings in his personal asset into the capital of the
partnership firm as his contribution to the partnership he
reduces his exclusive rights in the asset to shared rights in it
with the other partners of the firm. While he does not lose his
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rights in the asset altogether what he enjoys is an abridged right
which cannot be identified with the fullness of the right which he
enjoyed in the asset before it was brought into the partnership.
What was the exclusive interest of a partner in his personal asset
is, upon its introduction into the partnership firm as his share to
the partnership capital transformed into a shared interest with
the other partners in that asset.
7. Even when conversion of individual immovable
property of the partner into property of the partnership is made
as per a written instrument, it does not require registration
compulsorily. A deed of release of his share in the partnership
by a partner even though the partnership owns immovable
property is not required to be registered as an instrument under
Sec.17(1)(b) of the Registration Act. That is because even
though a partner may be a co-owner of partnership property, he
has no right to ask for a share in that property, but only that the
partnership business be wound up including sale of the
immovable property and to ask for his share in the resultant
assets. That interest of a partner in the partnership assets, of
moveable or immovable property is not a right, title or interest in
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immovable property within the meaning of Sec.17(1)(b) of the
Registration Act. The Madras High Court took that view in
Venkataram v. Subba Rao, (1949) 49 Madras 738 which
has been approved by the Supreme Court in Narayanappa
v. Bhaskara Krishnappa, AIR 1966 SC 1300. The
Supreme Court in Commissioner of Income-tax, West
Bengal, Calcutta v. Juggilal Kamalapat, AIR 1967 SC
401 held that when partners relinquished their individual
interest in moveable or immovable assets of partnership in
favour of new partners by a deed of relinquishment it did not
require registration as an instrument under Sec.17(1)(b) of the
Registration Act. In Gangadhar Madhavrao Bidwal v.
Hanmantrao Vyankatrao Mungale (1995) 3 SCC 205)
there was an unregistered deed of dissolution of partnership
which indicated that land was in joint ownership of both the
partners. On facts it was held that property at the time of
dissolution of partnership was partnership property and hence
the deed of dissolution was not required to be registered and the
recital in the document is admissible in evidence even in the
absence of registration.
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8. It is within the power of partners to bring their
individual property, moveable or immovable into the partnership
and convert it into the common stock either at the time of
formation of the partnership or during the continuance of that
partnership and for the said purpose it is not necessary that
there must be a written instrument. What is relevant is the
intention of partners which could be proved even by a course of
conduct. If the partners intended that property which hitherto
was individual property of the partners be brought into the
partnership as its asset so that individual right of partners qua
partners over the property is lost and it becomes shared rights of
the partners and the property is treated as such, then such
property becomes partnership property as understood in Sec.14
of the Act. Even if such conversion is made by a written
instrument it does not require compulsory registration as an
instrument under Sec.17(1)(b) of the Registration Act. When
some of the partners relinquish their interest qua partners in
moveable or immovable property of the partnership in favour of
the remaining partners also, a written instrument registered or
otherwise is not necessary, what is relevant being the intention
of the partners and that the property is treated as such proved
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by some evidence including a course of conduct.
9. Could such conversion happen at the time one or
more of the partners retire from the partnership? Lindley says
(See Page 458 of “The Law of Partnership”, 14th Edn.) that
conversion of joint property (of the firm) into separate property
(of the partners) or vice-versa most frequently takes place when
a firm and one of its partners carry on distinct trades; or when
a change occurs in a firm either by retirement of some or one
of its members or by introduction of a new partner. It is not the
requirement of Sec.14 of the Act that to become property of the
partnership it must have been brought into the common stock
at the time of its formation. That could happen during the
continuance of the partnership or when a change occurs in the
partnership by introduction of new partners or by the
retirement of some or one of its members. But as the
expression “partnership property” indicates when individual
property of the partner is brought into the partnership at the
eve of retirement of one or some of the partners, all the
partners (including those who retire and bring in the property)
qua partners should have the shared interest, i.e., shedding the
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individual interest which the retiring partner who owned the
property had till then, he should share common interest over
that property with other partners, a right to share the profits of
that property and to seek winding up of the partnership including
sale of the said property and demand a share in the resultant
asset. Relinquishment by the retiring partners in favour of the
continuing partners to attract operation of law under Sec.14 of
the Act and avoid necessity of registration as an instrument
under Sec.17(1)(b) of the Registration Act should be of their right
or interest in the asset of the partnership of which they have
only a right to share the profits or ask for winding up of the
partnership including sale of the property and ask for share in
the resultant asset. If on the other hand one or more of the
retiring partners convey their individual immovable property to
the partnership or the continuing partners in their individual
capacity, such conveyance cannot attract operation of law under
Sec.14 of the Act; it will be a conveyance of immovable property
which does not come under Sec.14 of the Act and would require
registration depending on value of the property under Sec17(1)
(b) of the Registration Act.
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10. The above being the legal position next question is
whether in this case the suit property which belonged to the
respondent was converted as partnership property and the right
of respondent qua partner was relinquished in favour of the late
V.V.Josesph (plaintiff in O.S. No.120 of 1992) and Shri V.J.George
(appellant No.1) who continued as partners of the firm as per
Ext.B2, unregistered deed dated 08.09.1967. Shri S.V.
Balakrishan Iyer, learned Senior Advocate appearing for the
appellants would contend that Ext.B2 is a composite deed as
per which respondent and two other partners retired from the
partnership, simultaneously brought in their individual
properties into the common stock of the partnership and
relinquished their right qua partners in favour of the continuing
partners. To decide that question a reference to the relevant
clauses in Ext.B2 is necessary. In Ext.B2, the retiring partners
including respondent are parties of the first part and
continuing partners (the late V.V. Joseph, predecessor-in-
interest of appellants and Shri V.J.George (appellant No.1) are
parties of the second part. The deed states in clause (1) that
parties of the first part thereby declared that they have retired
from the partnership from the 8th day of September, 1967 and
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that the said partnership shall since then be continued by the
parties of the second part including the late V.V. Joseph. Clause
(2) states that in consideration of the sum of Rs.1,00,000/- paid
to the parties of the first part (including respondent) and in
consideration of Rs.2,00,000/- “agreed to be paid by the parties
of the second part” to the parties of the first part in the
proportion stated therein on or before the 30th day of June,
1969 (the date, 31st June stated in Ext.B2 is obviously a mistake)
with interest at the rate of 9% per annum for which separate
promissory notes (Ext.A1 is that promissory note what was later
renewed – Ext.A2) are executed by the parties of the second
part, parties of the first part confirmed having assigned to the
parties of the second part their interest in the partnership
property described in Annexure IV to Ext.B2. So far as
Annexures I to III, individual immovable properties (which
includes the suit property) of the retiring partners (parties of
first part) including the respondent is concerned what is stated
in Ext.B2 is that parties of the first part “agreed to execute the
deed of conveyance in respect of their individual properties
described more particularly in the schedule given in Annexures I
to III to this deed at any time when called upon to do so but at
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the costs and expenses of the parties of the second part”.
Clause (2) further states that “for obtaining such conveyances
from the parties of the first part in respect of the said properties,
no further amount shall be payable by the parties of the second
part and that parties of the first part shall execute the said
conveyance as and when called upon by the parties of the
second part”. Clause (3) states that parties of the second part
are put in possession of immovable properties of retiring
partners (Annexures I to III of Ext.B2) who were entitled to
“possess, enjoy, deal with or take income from the said
properties mentioned in Annexures I to III in any manner the
said parties of the second part may deem fit”. Clause (4) states
that “to enable the parties of the second part to sell or otherwise
deal with the properties referred to in Annexures I to III parties
of the first part shall also execute Power of Attorney in favour of
the parties of the second part if called for to do so by the parties
of the second part”. Under clause (9) parties of the first part
agreed that “parties of the second part shall be entitled on their
own and without the junction of the parties of the first part to
pledge, hypothecate, mortgage, charge or in any way encumber
or alienate any of the properties of the firm or the immovable
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properties and/or the immovable property described in
Annexures I to IV of this deed; for the purpose of raising money
for any purpose whatsoever as desired by the parties of the
second part. It is however made clear by way of abundant
caution that if the parties of the second part required
concurrence or authority of the parties of the first part for any of
the purposes aforementioned parties of the first part shall join in
such document or act necessary for the above purpose or give
letters or execute deeds or other documents expressing their
consent to the proposals of the parties of the second part for
raising money provided that the partis of the first part shall not
be bound to meet any obligation personally in respect of such
transaction”.
11. Learned Senior Advocate for appellants would argue
that though at the time a change occurred in the partnership by
retirement of respondent and two others (parties of the first part
in Ext.B2), their individual properties including the suit property
were brought into the common stock of the partnership, and
their interest in that property of the partnership was relinquished
in favour of the parties of the second part. According to the
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learned Senior Advocate this is evident from the fact that
payment of Rs.2,00,000/- to the retiring partners was made by
demand promissory notes which created a chose in action and
amounted to payment itself. Reliance is placed on clauses 2, 3
and 9 of Ext.B2. According to the learned Senior Advocate
execution of deed of conveyance as referred to in clause (2) or
Power of Attorney referred to in clause (4) of Ext.B2 was only
optional and as may be desired by parties of the second part.
Learned Senior Advocate argued that it is pursuant to the
power conferred on parties of the second part that they created
equitable mortgage over Annexures I to III properties in Ext.B2
including the suit property in favour of the Bank. In response
learned Senior Advocate for respondent would contend that even
if Ext.B2 is accepted as such, it would not show that Annexures
I to III properties including the suit property were being brought
into the common stock of the partnership whereby the only
right parties of the first part had, was to claim share in the
profits of the said properties or to seek winding up of the
partnership including sale of the said properties and claim share
in the resultant asset. On the other hand Ext.B2 is only an
agreement to convey the said properties in favour of the parties
S.A. Nos.339 & 429 of 2001
-: 27 :-
of the second part. Concededly no deed of conveyance was
executed in respect of the suit property and the sale
consideration agreed to be paid was also was not paid and hence
title remained with the respondent. According to the learned
Senior Advocate it is accepting the said factual and legal
position that the late V.V. Joseph though alternatively claimed
protection of Sec.53A of the TP Act but failed to show that he
was ready and willing to perform his part of the contract.
12. It is settled principle regarding interpretation of
deeds that the question is not what the parties to the deed may
have intended to do by entering into the deed but, what is the
meaning of the words used in the deed. Courts are to
understand the true intent of the deed by the words used in it. If
the terms of the deed are ambiguous extrinsic evidence can be
let in to prove the real intention. Exhibit A2 is the release deed
executed by the parties of the first part including the respondent
on 08.09.1967 in favour of parties of the second part including
the late V.V. Joseph as per which their right over Annexure IV
properties were assigned or relinquished in favour of parties of
the second part including the said V.V. Joseph. Clause (2) of
S.A. Nos.339 & 429 of 2001
-: 28 :-
Ext.B2 relating to the assets of the partnership dealt with as per
Ext.A2 states that parties of the first part “hereby confirm having
assigned to the parties of the second part all that share and
interest of the said parties of the first part” in the said properties
thereby indicating that there was an outright assignment or
relinquishment of right and interest of the parties of the first
part in Annexure IV properties which were property of the
partnership as per Ext.A2 and which they confirmed as per
Ext.B2. But as regards Annexures I to III properties including
the suit property which admittedly were individual properties of
the retiring partners what is stated in Ext.B2 is that parties of
the first part “agree to execute the deed of conveyance in
respect of their individual properties…….. at any time when
called upon to do so” at the cost and expense of the parties of
the second part. There is a conscious distinction made so far
as the properties of the firm referred to in Annexure IV and the
individual properties of parties of the first part referred to in
Annexures 1 to III are concerned in that in the former case
parties of the first part assigned or relinquished their right over it
as per Ext.A2 and confirmed the same as per Ext.B2 but in the
case of their individual properties (Annexures I to III) they
S.A. Nos.339 & 429 of 2001
-: 29 :-
agreed to execute deed of conveyance as and when called
upon to do so by the parties of the second part. This is further
clear from the latter part of clause (2) of Ext.B2 which states
that for the purpose of obtaining such deeds of conveyance
executed by parties of the first part, no further amount shall be
payable by parties of the second part. Thus parties
contemplated execution of a deed of conveyance in respect of
Annexures 1 to III properties including the suit property to
convey title. It is true that Annexures I to III properties were put
in possession of parties of the second part which is admitted by
the respondent also and parties of the second part were
permitted to possess, enjoy, take income or deal with the said
properties. Clause (4) of Ext.B2 specifically requires parties of
the first part when called upon by parties of the second part to
execute Power of Attorney in their favour to enable them sell or
otherwise deal with the said properties obviously because of title
of the said properties remained with parties of the first part
including the respondent. True as per clause (9) of Ext.B2
right was conferred on parties of the second part to sell, pledge,
hypothecate, mortgage the said properties and if parties of the
second part required the concurrence or authority of the parties
S.A. Nos.339 & 429 of 2001
-: 30 :-
of the first part for any such purpose, the latter were to join
such document or act necessary for the said purpose or give
letters or execute deeds as is found necessary. According to
the appellants provision for execution of deed of conveyance
was only as a matter of abundant caution and junction of
parties of the first part was only optional as it was open to the
parties of the second part to sell, pledge, hypothecate,
mortgage, etc., the properties on their own as if it belonged to
them. I am afraid, such an interpretation cannot be given to
clause (9) of Ext.B2. That clause alone cannot be culled out of
context but has to be read along with clauses 2 and 4 of Ext.B2
which required parties of the first part to execute deeds of
conveyance as and when required and (in the meantime)
execute Power of Attorney in favour of parties of the second
part to enable them deal with the said properties including its
sale. I must also bear in mind that Ext.B2 was executed on
08.09.1967 and time for payment of consideration of Rs.Two
lakhs was till the end of June, 1969. Reading clauses (2), (4) and
(9) together what could be discerned is that parties of the first
part were to execute Power of Attorney in favour of the parties of
the second part to enable them to sell or otherwise deal with the
S.A. Nos.339 & 429 of 2001
-: 31 :-
property and it was open to the parties of second part to enter
into transactions including sale on the strength of the Power of
Attorney before the deed of conveyance was executed and if for
any reason junction of parties of the first part was required
(before execution of the deed of conveyance) the latter shall
join such document, give consent letter or execute the deeds (in
favour of an assignee, in the case of an arranged by parties of
the second part).
13. It is not disputed that properties referred to in
Annexures 1 to III of Ext.B2 were subjected to an equitable
mortgage in favour of the Bank which in turn filed O.S. No. 120
of 1972 against the partnership, parties of the first and second
parts in Ext.B2 and others for realisation of money by sale of
he said properties and obtained a decree. Exhibit A4 is the copy
of plaint in that case. According to the appellants equitable
mortgage over Annexures 1 to III was created by parties of the
second part in Ext.B2. Respondent would contend that himself
and other retiring partners (parties of the first part in Ext.B2)
deposited title deeds of their respective properties. In Exhibit
A4 what is pleaded by the Bank is that equitable mortgage was
S.A. Nos.339 & 429 of 2001
-: 32 :-
created by defendant Nos.2 to 6 therein (who are parties of the
first and second parts in Ext.B2) on 16.10.1968. Thus as per
Ext.A4, the parties of first part including the respondent also
had joined in creating equitable mortgage over Annexures I to III
properties referred to in Ext.B2. There is no contra evidence.
On the contrary, it is interesting to see from paragraph 9 of the
plaint in O.S. No.120 of 1992 (filed by the late V.V.Joseph) that
what is stated is that “as can be seen from the terms in the
retirement-cum-release deed the defendant joined the
memorandum of deposit of title deeds only to show his formal
concurrence and not by virtue of any rights”. This statement in
paragraph 9 is consistent with the plea of the Bank in O.S.
No.120 of 1972 (See Ext.A4) that equitable mortgage over the
immovable properties including suit property referred to in
Annexures 1 to III of Ext.B2 was created by the respondent as
well. It is also relevant to note that nowhere in Ext.B2 it is
stated that title deeds in respect of the properties in Annexures
1 to III were handed over to the parties of the second part.
Exhibit A6 is the copy of affidavit filed by the respondent in O.S.
No.120 of 1972 filed by the Bank. In paragraph 1 of Ext.A6 he
claimed that he deposited title deed of the suit property with
S.A. Nos.339 & 429 of 2001
-: 33 :-
the Alappuzha branch of the Bank. Thus going by the evidence
on record it is a case where deposit of title deed in respect of the
suit property with the Bank was made by or, at any rate with the
junction of the respondent which also indicate that title of the
suit property remained with the respondent. Reading Ext.B2 and
going through the evidence on record I am unable to accept the
contention of learned Senior Advocate for the appellants that the
suit property was brought into the common stock of the
partnership at the time respondent retired from the partnership
as per Ext.B2 and right and interest of respondent qua partner
in the said property, i.e., a right to share profits of the said
property and demand winding up of the partnership including
sale of the suit property and claim share in the resulting asset
was conveyed to the continuing partners. Exhibit B2 can only be
taken as a deed whereby respondent retired from the
partnership and in consideration, among other things, of
payment of Rs.3,00,000/- (of which Rs.One lakh was paid and
Rs.Two lakhs was to be paid by the last day of June, 1969 in the
proportion stated in Ext.B2) agreed to convey his right in the
suit property referred to in Annexures I to III in favour of the
late V.V. Joseph and his son (appellant No.1). It is not disputed
S.A. Nos.339 & 429 of 2001
-: 34 :-
that respondent has not executed any deed of conveyance in
favour of the late V.V. Joseph or anybody else.
14. Assuming that Ext.B2 amounts to a conveyance, next
question is whether it required registration. To say that
registration is not required, Sec.14 of the Act should apply. For
Sec.14 to apply, property had to be brought into the common
stock of partnership with retiring partners foregoing their
individual right in the said property and agreeing to share profits
of the said property along with the continuing partners qua
partners. Here, while parties of the first part retired from the
partnership they (as claimed by the appellants) conveyed their
right in the property to the late V.V.Joseph and Shri V.J.George
(appellant No.1), the continuing partners of the firm. I do not
find any plea either in the plaint in O.S. No.120 of 1992 or in the
written statement in O.S. No.282 of 1992 that the property was
brought into the common stock of the partnership. On the other
hand contention throughout is that property was conveyed to
the late V.V.Joseph and Shri V.J.George. In paragraph 3 of plaint
in O.S. No.120 of 1992 after referring to Ext.B2, retirement deed
dated 08.09.1967 as a composite document executed in relation
S.A. Nos.339 & 429 of 2001
-: 35 :-
to the retirement of the parties of the first part from the
partnership firm it is stated that retiring partners released all
their right, title and interest over their personal properties
respectively mentioned in Annexures 1 to III in Ext.B2 “in
favour of the plaintiff and his son, V.J. George”. In paragraph 4
it is stated that respondent (and others) “relinquished,
abandoned and released all his rights, title and interest over the
schedule properties unto and in favour of the plaintiff and his
son V.J.George”. In paragraph 10 it is pleaded alternatively that
“in any event the plaintiff has perfected his title to the properties
by principles of adverse possession and limitation the properties
having been in their possession and enjoyment openly,
continuously and uninterruptedly for over 12 years and more”.
Similar contentions are raised in the written statement filed by
the late V.V.Joseph and Shri V.J. George (appellant No.1) and
others in O.S. No.282 of 1992. There, in paragraph 13 it is
contended that Ext.B2 is a composite document as per which the
parties of the first part (including respondent) retired from the
partnership and “release by them in respect of the right, title
and interest over the personal properties respectively mentioned
as Annexures 1 to III in favour of these defendants”. It is further
S.A. Nos.339 & 429 of 2001
-: 36 :-
stated in the same paragraph that as per Ext.B2 “plaintiff and
brothers V.V. Job and V.V.Antony relinquished, abandoned and
released all their right, title and interest over the properties
thereto in favour of these defendants. By virtue thereof these
defendants had been in exclusive enjoyment and possession of
the properties in their own rights as co-owners thereto”. Similar
contentions are raised in paragraph 14 also. Thus going by the
pleadings in the plaint in O.S. No.120 of 1992 and written
statement of the late V.V.Joseph and Shri V.J.George (appellant
No.1) in O.S. No.282 of 1992 it is not a case of the appellants
contending that as per Ext.B2 right, title and interest of
respondent in the suit property was brought into the common
stock of the partnership as understood in Sec.14 of the Act.
Instead, contention is that the alleged conveyance of suit
property was in favour of the late V.V.Joseph and V.J.George
(appellant No.1) personally and accordingly they are co-owners
of the said property. The conveyance if any (as per Ext.B2),
being in favour of Shri V.V.Joseph and Shri V.J.George
(appellant No.1), Ext.B2 cannot affect the right, title and interest
of the respondent over the suit property as that document
required registration but has not been registered.
S.A. Nos.339 & 429 of 2001
-: 37 :-
15. The substantial questions of law framed are
answered in the above lines.
Resultantly, these appeals fail and are dismissed. But I
direct the parties to suffer their respective costs.
Civil Miscellaneous Petition No.781 of 2001 shall stand
dismissed.
THOMAS P.JOSEPH, JUDGE.
vsv
S.A. Nos.339 & 429 of 2001
-: 38 :-
“C.R.”
THOMAS P.JOSEPH, J.
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S.A. Nos.339 & 429 of 2001
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J U D G M E N T
9TH APRIL, 2010