Allowed

Manthan Corporation ( a Registered Partnership Firm ) v. State of Gujarat

Gujarat HC26 Aug 2019SCA/12958/2016

Case brief

AI extract

What is this about?

The High Court of Gujarat allowed the special civil application seeking to set aside orders imposing additional stamp duty. The Court held that since the partnership firm was not dissolved on the date of the sale deed and a formal dissolution deed was executed later, the initial sale could not be treated as an instrument of dissolution attracting Article 44(3)(a) of the Bombay Stamp Act.

What did the court decide?

Impugned orders dated 18.05.2012 and 13.04.2016 were quashed and set aside. Rule made absolute.

Manthan Corporation ( a Registered Partnership Firm )… — Banking and Recovery | Gujarat HC (2019)

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C/SCA/12958/2016 JUDGMENT

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

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R/SPECIAL CIVIL APPLICATION NO. 12958 of 2016

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FOR APPROVAL AND SIGNATURE:

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HONOURABLE MR.JUSTICE A.Y. KOGJE Sd/-

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======================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ?	========= No
2 To be referred to the Reporter or not ?	No
3 Whether their Lordships wish to see the fair copy of the judgment ?	No
4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?	No

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MANTHAN CORPORATION ( A REGISTERED PARTNERSHIP FIRM ) Versus

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STATE OF GUJARAT & 2 other(s)

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Appearance:

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MR HASIT DAVE(1321) for the Petitioner

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MR MEET THAKKAR, AGP for the Respondents

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CORAM: HONOURABLE MR.JUSTICE A.Y. KOGJE

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Date : 26/08/2019

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ORAL JUDGMENT

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1.RULE. Learned AGP Mr.Meet Thakkar waives

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service of Rule on behalf of the respondents.

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2.This petition under Article 226 of the
Constitution of India is filed for setting aside orders
dated 18.05.2012 and 13.04.2016 passed by respondent

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Page 1 of 9

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C/SCA/12958/2016 JUDGMENT

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Nos.3 and 2 respectively. The issue pertains to payment
of stamp duty on a document, which is a sale deed
executed by the partners of a partnership firm in favour
of the petitioner–partnership firm. The Department had

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come to conclusion that as only part of the land
belonging to the partnership firm was conveyed under the
sale deed by three out of four partners of the
partnership firm to the petitioner, the sale deed itself
is also a document of dissolution of partnership firm and
therefore, under Article 44(3), considering such
dissolution also to be a conveyance, additional stamp
duty was ordered to be paid.

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3.Learned Advocate for the petitioner submitted

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that the partnership was not dissolved on the date on
which the document of sale was executed. It is submitted
that out of the four partners, three partners had
conveyed their shares in the land belonging to the
partnership firm to the petitioner. Therefore, the
partnership, which cannot be treated to be a separate
entity than the partners, the document of sale deed
cannot be construed to be a deed of dissolution. It is
submitted that the impugned decision is based on audit
objection and the said objection is based on Article
44(3) of the Bombay Stamp Act and which has been read in
light of certain recitals in the deed of conveyance. It

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Page 2 of 9

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C/SCA/12958/2016 JUDGMENT

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is submitted that the recitals in the conveyance deed
only refer to notice of dissolution issued by a partner.
However, there was no actual dissolution. Moreover,
after the proceedings pursuant to audit objection, the
petitioner had brought on record of the authorities that
a suit also came to be filed for dissolution of
partnership firm. However, such suit was thereafter
disposed of and there was no dissolution of partnership
firm. Moreover, the fourth partner has also conveyed his
portion of share by a separate conveyance deed and that
too after the order by the Civil Court. It is submitted
that as a matter of fact, after the document of sale was
executed, later on deed of dissolution has been executed
and the authority, without taking this development into
consideration, has passed the impugned order.

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3.1Learned Advocate for the petitioner relied upon
judgment of Full Bench of this Court in case of Chief
Controller Revenue Authority Vs. Chaturbhuj And Bachubhai

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Tribhovandas Thakkar, reported in 1976 GLR, 898, where,
in identical set of circumstances, the Court has
construed that dissolution between the partners is not
deed or instrument of partition and therefore, not
chargeable under Article 46 of the Bombay Stamp Act.

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4.Learned AGP opposes grant of petition by
referring to the affidavit in reply. It is submitted

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Page 3 of 9

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C/SCA/12958/2016 JUDGMENT

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that in the year 2007, Auditor General, during audit, had
raised objection in connection with the document in
question and by referring to Article 44(3)(a), where
property is taken as a share of a partner upon
dissolution of partnership then the partner who has not
brought the property as his share or contribution to
partnership, stamp duty is chargeable on such dissolution
considering the same as conveyance. It is submitted that
Auditor General's objection was justified in view of the
chronology of events which took place in connection with
the present case.

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4.1It is submitted that the petitioner had also
filed SCA No.7815 of 2012, which came to be disposed of
by order dated 13.06.2012, pursuant to which appeal was
filed under Section 53(1) and in the decision of CCRA, it
is held that as per sale deed bearing N.2401/2007, the
property was purchased in the year 2003 by the vendor
firm by Index Nos.2425, 2426, 3299, 3300 and 3595. Thus,

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the property belonged to the ownership of partnership
firm and the immovable property is taken as a share of
each of the partners and upon dissolution, when the
partner leaves, the partner who has share of immovable
property in the partnership firm, it is to be construed
as conveyance under Article 20 and therefore, stamp duty

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as per the market value will have to be paid. The

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Page 4 of 9

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C/SCA/12958/2016 JUDGMENT

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decision of the CCRA was therefore legal and not required
to be interfered with.

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5.Having considered the rival submissions of
learned Advocates for the parties and having perused
documents on record, it appears that the issue pertains
to a document bearing No.2401, registered on 29.01.2007
with the office of Sub-registrar, Surat-2 for Udhna Zone.
Under the said document, land admeasuring 3870 sq. mtr.
was sought to be conveyed. The petitioner is purchaser
of the said land, which was purchased in July 2006 by SM
Corporation, consisting of four partners. Out of the
four partners, three partners executed an agreement to
sale on 05.07.2006 in favour of the petitioner with

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regard to 3/4th share of the land. The fourth partner
appears to issued notice of dissolution. Thereafter,
registered sale deed in question was executed on
29.01.2007. Accordingly, stamp duty of Rs.4,60,530/- was
paid for the conveyance. It appears that subsequently,

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an audit objection was raised based on Article 44(3)(a),
considering that the immovable property was taken as
share of each partner upon dissolution of the partnership
and the partners being other than the partners who got

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the property as their share or contribution to the
partnership, stamp duty is chargeable, considering the
same as conveyance under Article 20 of the Bombay Stamp

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Page 5 of 9

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C/SCA/12958/2016 JUDGMENT

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Act. On the basis of such objection, show cause notice
came to be issued upon the petitioner. In response to
the show cause notice, a stand was taken that the sale
deed cannot be treated as dissolution of partnership firm
and therefore, conveyance of the land in question under

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the sale deed cannot be treated as two separate sale
transactions. A stand was also taken that there was no
cause for considering the partnership to be dissolved.
As a matter of fact, the partnership was dissolved much
later. However, disregarding such stand, the Deputy
Collector passed an order by which the petitioner was
directed to pay deficit stamp duty of Rs.4,60,530/- and
penalty of Rs.5,000/-. It appears that a petition came

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to be filed against this order. However, on account of
provisions for appeal available to the petitioner, such
petition was disposed of with liberty to the petitioner

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to file appeal. The petitioner filed appeal under
Section 53(1) and paid 25% of the appeal deposit. By the
impugned order dated 06.04.2016, the CCRA also dismissed
the appeal, upholding the order of the Deputy Collector.
While doing so, the authorities have failed to consider
the aspect of dissolution of the partnership firm. The
objection was raised by the Auditor General under audit
report by considering recitals in the conveyance, more
particularly on page Nos.13 and 16 of the conveyance
deed. Page No.16 of the conveyance deed refers to one

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Page 6 of 9

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C/SCA/12958/2016 JUDGMENT

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notice date 21.08.2006 issued by partner Manoj Vasantlal

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Vaidhya, but the said recital does not establish the
factum of dissolution. It only refers to notice and also
refers to the fact that the partnership is continuing.
Civil Suit No.293 of 2006 is filed by said Manoj
Vasantlal Vaidhya against three partners for declaring
the partnership SM Corporation to be dissolved, which,
however, came to be withdrawn by a settlement pursis
filed by both sides. In the settlement pursis, document
bearing No.2401 dated 29.01.2007 is also referred to and
the said document has been executed by fourth partner
also. The Court thereafter refers to a document which is
in the nature of dissolution of partnership firm, which
is executed on 31.03.2012, a copy of which is produced on
record at page No.113.

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6.When the partnership has been dissolved by a
dissolution deed dated 31.03.2012, the Court is inclined
to hold that as on the date on which the document in
question was executed, the partnership was not dissolved.
Therefore, the authorities have erroneously deemed the
sale deed, which contains share of the partnership, to be
dissolution of the partnership firm. The remaining part
of the share of fourth partner is also conveyed in the

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year 2011 by separate sale deed, which is also
registered. This subsequent development also indicates

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Page 7 of 9

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C/SCA/12958/2016 JUDGMENT

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that there does not appear to be a dissolution of
partnership firm.

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7.Both the authorities have merely adopted the
reasoning in the report of the Auditor General, but have
not referred to subsequent development, which is on
record and is an independent development in the direction
of dissolution of partnership firm. By not considering
this fact, the respondent authorities have committed an
error.

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8.The judgment of the Full Bench of this Court in
case of Chaturbhuj And Bachubhai Tribhovandas Thakkar
(supra) has clearly opined that instrument of dissolution
between the partners is not a deed or instrument of
partition within the meaning of Section 2(m) and is not
therefore chargeable under Article 46 of Schedule-I of
the Bombay Stamp Act and the same has to be considered as
chargeable as instrument of dissolution of partnership.
Therefore, in the facts of this case, no occasion had
arisen for the authorities to construe the sale of part
of the partnership property by some of the partners of
the partnership firm to be a dissolution of partnership

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firm and therefore, attracting Article 44(3)(a). The
Court is of the opinion that in absence of the fact of
dissolution, Article 44(3)(a) cannot be attracted.

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Page 8 of 9

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C/SCA/12958/2016 JUDGMENT

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9.In view of the aforesaid, the petition stands
allowed. The impugned orders dated 18.05.2012 and
13.04.2016 passed by respondent Nos.3 and 2 respectively
are quashed and set aside. Rule is made absolute. No
order as to costs.

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Direct service is permitted.

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Sd/(A.Y. KOGJE, J)

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SHITOLE

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Page 9 of 9

Manthan Corporation ( a Registered Partnership Firm ) v. State of Gujarat

Case brief

What is this about?

What did the court decide?

Manthan Corporation ( a Registered Partnership Firm ) v. State of Gujarat

Case brief

What is this about?

What did the court decide?

What the court decided

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