Dismissed

Heather Luis v. Mrs.Nirene Dennis Luiz

Kerala HC4 Apr 2018RFA/568/2004

Case brief

AI extract

What is this about?

Appeal by the second defendant against a preliminary decree in a partition suit. She contended the suit properties belonged to a partnership firm running an engineering college and were therefore not partible. The court found no evidence that the immovable property of the co-owners had been brought into the stock of the firm, and dismissed the appeal.

What the court decided

AI extract

Heather Luis Vs Mrs.Nirene Dennis Luiz — Partition | Kerala HC (2018)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE & THE HONOURABLE MR. JUSTICE P.SOMARAJAN

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WEDNESDAY, THE 4TH DAY OF APRIL 2018 / 14TH CHAITHRA, 1940

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RFA.No. 568 of 2004

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AGAINST THE DECREE AND JUDGMENT IN OS 652/1995 of ADDL.SUB COURT, IRINJALAKUDA DATED 13-01-2004

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APPELLANT/2ND DEFENDANT

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HEATHER LUIZ, AGED 45, W/O GILROY, LUIZ ESTATE, KALAMASSERY, ERNAKULAM DISTRICT.

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BY ADVS.SRI.S.SREEKUMAR (SR)

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SRI.P.K.SOYUZ

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RESPONDENT(S)/PLAINTIFFS AND DEFENDANTS 3 TO 11:

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NIRENE DENNIS LUIZ, AGED 40, WIDOW OF LATE DENNIS STANLEY PAUL LUIZ,, RESIDING AT IV/150, SOUTHERN COLLEGE OF ENGINEERING, LUIZ NAGAR, CHALAKKUDY.

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MISS GENEVIEVE DARIS ANASTASIA LUIZ, AGED 23, D/O. DENNIS STANLEY PAUL LUIZ,, RESIDING AT IV/150, SOUTHERN COLLEGE OF ENGINEERING AND TECHNOLOGY, CHALAKKUDY.

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MISS.JUANITA MARIETTE LUIZ, AGED 20 D/O. LATE DENNIS STANLEY PAUL LUIZ, RESIDING, AT IV/150, SOUTHERN COLLEGE OF ENGINEERING AND TECHNOLOGY, CHALAKKUDY. 4. MISS.JACQUELINE NATALIA LUIZ, MINOR, AGED 10, D/O. LATE DENNIS STANLEY PAUL LUIZ, RESIDING AT IV/150, SOUTHERN COLLEGE OF ENGINEERING AND TECHNOLOGY, CHALAKKUDY.

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MRS.REGINA FERNANDEZ, D/O. LATE S.P.LUIZ LUIZ ESTATE, KALAMASSERY, ERNAKULAM DISTRICT. *6. MRS.GERALDINE LUIZ, WIDOW OF LATE EDWARD CHARLES LUIZ, SOUTHERN COLLEGE OF ENGINEERING AND TECHNOLOGY, LUIZ NAGAR,, CHALAKUDY. {*DIED, L.R.s RECORDED} 7. SHANE DOMINIC CHRISTAPHER LUIZ, AGED 30, S/O. LATE EDWARD C.W.LUIZ,, LUIZ NAGAR C/O. SOUTHERN COLLEGE OF ENGINEERING AND TECHNOLOGY, CHALAKKUDY - 680307.

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KATHERINE CARMIN MIRANDA LUIZ, AGED 26, S/O. LATE EDWARD C.W.LUIZ,, LUIZ NAGAR, C/O. SOUTHERN COLLEGE OF ENGINEERING AND TECHNOLOGY, CHALAKKUDY-680 307.

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RFA NO.568/04

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CESSANDRA MARY SHARMINE LUIZ, AGED 25, S/O. LATE EDWARD C.W.LUIZ, LUIZ NAGAR,, C/O. SOUTHERN COLLEGE OF ENGINEERING AND TECHNOLOGY, CHALAKKUDY 680 307. 10. MICHALE LUIZ D/O. EDWARD C.W.LUIZ, AND W/O. MICHAEL ESCARADOR MADONA VILLAGE, TITTANAN ROAD, YERCADU, SALEM DISTRICT, STATE OF TAMIL NADU, NOW RESIDING AT 264D, POCKET-1, 1ST FLOOR, MAYUR VIHAR, PHASE-1, NEW DELHI 110091.

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DOMINIC STANELY EDWARD LUIZ, AGED 28 S/O. EDWARD C.W.LUIZ, LUIZ NAGAR, C/O. SOUTHERN COLLEGE OF ENGINEERING AND TECHNOLOGY,, CHALAKKUDY-680 307. 12. MISS.CAROLINE MARIAN LUIZ, AGED 25, S/O. EDWARD C.W.LUIZ, LUIZ NAGAR, C/O. SOUTHERN COLLEGE OF ENGINEERING AND TECHNOLOGY, CHLAKKUDY-680 307. 13. MRS.CHERUBINA KENDALL, KENDALL NOOK, BROOKLANDS, UPPER COONOOR NILGIRIES DIST., TAMIL NADU. (*IT IS RECORDED THAT THE 6TH RESPONDENT IN THE APPEAL DIED ON 23.12.99 AND HER LEGAL HEIRS ARE ALREADY IN THE PARTY ARRAY AS RESPONDENTS 7 TO 12 VIDE ORDER DATED 31.3.2015 AS PER MEMO DATED 25.10.05 C NO.12324/05) R1-R4 BY ADV. SRI.MURALI PURUSHOTHAMAN BY ADV. SRI.P.M.BENZIR BY ADV. SRI.DEEPU LAL MOHAN R5 BY ADV. SRI.TOM JOSE R5 BY ADV. SMT.GEETHA JOB(OZHUKAYIL) R5,R 7 -R 9,R 11 BY ADV. SRI.M.R.RAJESH

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THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 19-03-2018, THE COURT ON 04-04-2018 DELIVERED THE FOLLOWING:

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“C.R.”

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A.M. SHAFFIQUE & P.SOMARAJAN, JJ.

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========================== RFA No. 568 of 2004

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====================

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Dated this, the 4^th day of April, 2018

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J U D G M E N T

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Shaffique, J.

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The second defendant in a suit for partition of the plaint schedule properties has preferred this appeal challenging the preliminary decree passed by the Court below as per judgment dated 13/1/2004 in OS No.652/95. The subject matter in issue in the appeal is only with reference to item Nos. 1 and 2 of plaint A schedule property.

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The property was originally purchased by Smt.Dorris Luiz as per Ext.A1 registered sale deed dated 3/8/1962. She died on 14/7/1973 leaving behind her husband S.P.Luiz and five children. S.P.Luiz expired on 25/5/1976. Their first son, Dennis Luiz died on 8/4/1992. Plaintiffs are the legal heirs of Dennis Luiz. The first defendant in the suit is the second son of S.P.Luiz and Dorris Luiz. Defendants 2 and 3 are the daughters. The first defendant died during the pendency of the suit and accordingly, his wife and

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children were impleaded as additional defendants 4 to 10. !1^th defendant who is impleaded subsequently is another daughter of the couple. The plaintiffs claimed 1/4^th share in the property being the legal heirs of the deceased who had on their death became the co-owners of the property.

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The 2^nd defendant filed a written statement inter alia contending that the plaint A schedule property belonged to M/s Southern College of Engineering and Technology, a partnership firm registered under the Indian Partnership Act. Since the plaintiffs and other defendants are not partners of the firm, they have no right in the management of the College or its assets. It is further contended that by virtue of a family arrangement, certain items of properties at Broadway, Ernakulam was set apart to the share of the 3^rd defendant and the Kalamassery property has been allotted to the second defendant. Reference is also made to a suit filed by defendants 2 and 3 as OS No.65/2000 seeking to restrain the legal heirs of Edward Luiz from interfering with the administration of the College. It is submitted that the suit was decreed by virtue of a compromise which has become final.

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The Court below having considered the respective

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contentions framed an issue as to whether the plaint schedule properties were to be partitioned.

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The main contention raised by the contesting defendants was that A schedule property is the property of a partnership firm. Court below after evaluating the evidence tendered by the plaintiff and defendants decreed the suit and a preliminary decree had been passed allowing plaintiffs to recover separate possession of 1/4^th share from the plaint schedule properties after its partition in metes and bounds and also the mesne profits.

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Sri.S.Sreekumar, learned senior counsel appearing for the appellant contended that Smt.Dorris was running an institute under the name and style “Southern College of Engineering and Technology” originally at Thevara. The said property was acquired by the Government and therefore, she purchased another item of property as per Ext.A1 sale deed and the institute was shifted to that place. Until her death, she was managing the affairs of the institute, and after her death, by her husband S.P.Luiz. After the death of S.P.Luiz, parties entered into a partnership and Ext.B9 dated 22/6/1976 is the partnership deed. It is argued that since the constitution of the partnership, the firm was running the

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Institute and late Sri.Dennis and defendants 1 and 2 were partners. The 3^rd defendant who was a minor was admitted to the benefits of the partnership. It is submitted that all along the institute was being conducted in the plaint A schedule property and it has been treated as the property of the firm. In that view of the matter, Court below was not justified in granting a decree as sought for.

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Learned counsel also placed reliance upon the following

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judgments of the Apex Court :-

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(i) Addanki Narayanappa v. Bhaskara Krishnappa (AIR 1966 SC 1300).

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(ii) Commissioner of Income Tax v. Juggilal Kamalapat (AIR 1967 SC 401).

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(iii) Sunil Siddharthbhai v. Commissioner of Income

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Tax [(1985) 4 SCC 519].

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(iv) S.V.Chandra Pandian and Others v. S.V.Sivalinga

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Nadar and Others [(1993) 1 SCC 589].

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(v) George v. George (2010 (2) KLT 692).

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On the other hand, learned counsel appearing for the

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respondents supported the stand taken by the court below and

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contended that the property was never treated as partnership property and it was not taken into the stock of the firm at any point of time. It is true that the college/institute was functioning in the said property. Nevertheless, no steps were taken to indicate at any point of time that the property is to be utilized for the purpose of the firm and there is no material to indicate so, to support the statement made in the written statement of the second defendant that the property is that of the firm and there is a family settlement allotting the same to her. There is absolutely no evidence to indicate that the property was taken on stock and there was no such understanding between the parties as well.

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The only point that requires consideration in this appeal

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is whether items 1 and 2 of plaint A schedule have been taken on stock by the firm.

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Before proceeding further, it would be useful to refer to the judgments cited by the counsel for appellant. In Addanki Narayanappa (supra), the Apex Court had occasion to consider a question as to whether a partnership which was dissolved in the year 1996 and the accounts which were settled between the two families, constituted a partnership. After evaluating the various

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principles relating to partnership property, the Apex Court held at paragraph 5 as under:-

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“5 . It seems to us that looking to the scheme of the Indian Act no other view can reasonably be taken. 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 in proportion to their share in the joint venture of the business of partnership. The person who brought it in would, therefore, not be able to claim or exercise any exclusive right over any property which he has brought in, much less over any other partnership property. He would not be able to exercise his right even to the extent of his share in the business of the partnership. As already stated his right during the subsistence of the partnership is to get his share of profits from time to time as may be agreed upon among the partners and after the dissolution of the partnership or with his retirement from partnership of the value of his share in the net partnership assets as on the date of dissolution or retirement after a deduction of liabilities and prior charges.”

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11. In Juggilal Kamalapat (supra), one of the questions

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was whether a deed of relinquishment executed by partners of a firm in respect of their share and interest in a firm required

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registration in case the firm owned immovable properties. It was held that since the deed of relinquishment was in respect of individual interest of three brothers in the assets of the partnership firm in favour of a trust, it did not require registration even if the assets of the partnership firm includes immovable property and was valid without registration and thereof all the assets.

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In Sunil Siddharthbhai (supra), the Supreme Court differentiated between the position arising in an instance when a personal asset is brought by a partner into the partnership firm as a contribution to the partnership capital. It was held at paragraphs 14 to 16 as under:-

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“14. Learned Counsel for the assessee has attempted to draw an analogy between the position arising when a personal asset is brought by a partner into a partnership as his contribution to the partnership capital and that which arises when on dissolution of the firm or on retirement a share in the partnership assets passes to the erstwhile partner. It has been held by this Court in CIT v. Dewas Cine Corp., CIT v. Bankey Lal Vaidya and recently in Malabar Fisheries Co. as well as by the Punjab and Haryana High Court in Kay Engineering Co. v. CIT, the Kerala High Court in CIT v. Nataraj Motor Service and the Gujarat High Court in CIT v. Mohanbhai Pamabhai that when a partner retires or the partnership is dissolved what the partner

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receives is his share in the partnership. What is contemplated here is a share of the partner qua the net assets of the partnership firm. On evaluation, that share in a particular case may be realised by the receipt of only one of all the assets. What happens here is that a shared interest in all the assets of the firm is replaced by an exclusive interest in an asset of equal value. That is why it has been held that there is no transfer. It is the realisation of a pre-existing right. The position is different, it seems to us, when a partner brings his personal asset into the partnership firm as his contribution to its capital. An individual asset is the sole subject of consideration. An exclusive interest in it before it enters the partnership is reduced on such entry into a shared interest.

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15. Our attention has also been invited to clause (b) of subsection (1) of Section 17 of the Registration Act which requires the registration of non-testamentary instruments which purport or operate “to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property,” and to the view taken by the courts in this country that when a person brings in even his immovable property as his contribution to the capital of the firm no written document or registration is required under that clause. That view was expressed in Firm Ram Sahay Mall Rameshwar Dayal v. Bishwanath Prasad. The learned Judges relied on the English law that the personal assets introduced by a partner into the firm as his contribution to its capital becomes the property of the firm by reason of the intention and agreement of the parties. The view does not spring from the consideration that there is no transfer. The view is that no document of transfer is

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required and that, therefore, registration is unnecessary. The Patna High Court reiterated that view in Sudhansu Kanta v. Manindra Nath.

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16. Accordingly we hold that when the assessee brought the shares of the limited companies into the partnership firm as his contribution to its capital there was a transfer of a capital asset within the terms of Section 45 of the Income Tax Act. In this view of the matter we agree with the conclusion reached by the Kerala High Court in A. Abdul Rahim, Travancore Confectionery Works v. CIT, the Karnataka High Court in Addl. CIT v. M.A.J. Vasanaik and by the Gujarat High Court in the judgment under appeal.”

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In S.V.Chandra Pandian (supra), the Apex Court held that when a dissolution of a partnership takes place and the residue is distributed among the partners after settlement of accounts, it does not amount to partition, transfer or extinguishment of interest attracting S.17 of the Registration Act. It was held at paragraph 16 as under:-

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“ 16. From the foregoing discussion it seems clear to us that regardless of its character the property brought into stock of the firm or acquired by the firm during its subsistence for the purposes and in the course of the business of the firm shall constitute the property of the firm unless the contract between the partners provides otherwise. On the dissolution of the firm each partner becomes entitled to his share in the profits, if any, after the accounts are settled in accordance with Section 48 of the Partnership Act. Thus in the entire

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asset of the firm all the partners have an interest albeit in proportion to their share and the residue, if any, after the settlement of accounts on dissolution would have to be divided among the partners in the same proportion in which they were entitled to a share in the profit. Thus during the subsistence of the partnership a partner would be entitled to a share in the profits and after its dissolution to a share in the residue, if any, on settlement of accounts. The mode of settlement of accounts set out in Section 48 clearly indicates that the partnership asset in its entirety must be converted into money and from the pool the disbursement has to be made as set out in clause (a) and sub-clauses (i), (ii) and (iii) of clause (b) and thereafter if there is any residue that has to be divided among the partners in the proportions in which they were entitled to a share in the profits of the firm. So viewed, it becomes obvious that the residue would in the eye of law be moveable property i.e. cash, and hence distribution of the residue among the partners in proportion to their shares in the profits would not attract Section 17 of the Registration Act. Viewed from another angle it must be realised that since a partnership is not a legal entity but is only a compendious name each and every partner has a beneficial interest in the property of the firm even though he cannot lay a claim on any earmarked portion thereof as the same cannot be predicated. Therefore, when any property is allocated to him from the residue it cannot be said that he had only a definite limited interest in that property and that there is a transfer of the remaining interest in his favour within the meaning of Section 17 of the Registration Act. Each and every partner of a firm has an undefined interest in each and every property

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of the firm and it is not possible to say unless the accounts are settled and the residue or surplus determined what would be the extent of the interest of each partner in the property. It is, however, clear that since no partner can claim a definite or earmarked interest in one or all of the properties of the firm because the interest is a fluctuating one depending on various factors, such as, the losses incurred by the firm, the advances made by the partners as distinguished from the capital brought in the firm, etc., it cannot be said, unless the accounts are settled in the manner indicated by Section 48 of the Partnership Act, what would be the residue which would ultimately be allocable to the partners. In that residue, which becomes divisible among the partners, every partner has an interest and when a particular property is allocated to a partner in proportion to his share in the profits of the firm, there is no partition or transfer taking place nor is there any extinguishment of interest of other partners in the allocated property in the sense of a transfer or extinguishment of interest under Section 17 of the Registration Act. Therefore, viewed from this angle also it seems clear to us that when a dissolution of the partnership takes place and the residue is distributed among the partners after settlement of accounts there is no partition, transfer or extinguishment of interest attracting Section 17 of the Registration Act.”

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In George (supra), a learned Judge of this Court had occasion to consider whether a deed of release of a share in partnership by a partner requires registration u/s 17(1)(b) of the Registration Act. After evaluating the case law on the point, it was

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held at paragraph 6 as under:-

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“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 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 Bom. 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

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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 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 & Ors. (AIR 1922 Nag.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 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

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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 Pat.221), Sudhansu v. Manindra Nath (AIR 1965 Pat. 144) and Sujan Suresh Sawant v. Kamalakant Shantaram Desa, supra). The Act does not prescribe any particular mode by which property 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 S.14 of the Act it becomes property of the partnership. Conversion takes place by operation of law under S.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 Mad.209) and L.J.J. Rebello v. Chief Controlling Revenue Authority in Mysore, (AIR 1971 Mys.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

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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 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. “

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On the other hand, learned counsel for the respondents relied upon the judgment of the Apex Court in M.V.Karunakaran v. Krishan [(2009) 17 SCC 334] wherein it was held that using of a premises for business purpose would not automatically lead to the conclusion that the premises belonged to the partnership firm. That was a case in which a partnership was constituted by three brothers and later on it stood dissolved on account of death of one of the partners. His legal heirs executed a registered document transferring the property in favour of another person. In the meantime, a third party filed a suit against the partnership firm for recovery of money which was decreed. The property was

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sold in auction in execution of the said decree which was purchased by the appellant. Sale was confirmed. He sought for delivery of possession which was obstructed by the respondent. Respondent filed an application for removing the obstruction which was dismissed by the Execution Court. The Executing Court further directed the respondent to deposit certain amount. It is found that on the death of one of the partners, the partnership became dissolved and therefore the legal heirs and representatives of the deceased partner could sell the property. Respondent therefore became the lawful owner of the property. The matter was taken in appeal which came to be dismissed. However, it was found that the Trial Court was not justified in directing respondent to deposit the amount. A second appeal preferred before the High Court was confirmed. The matter was taken up before the Apex Court and it was held at paragraph 11 as under:-

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“11. Herein we have to consider the case from altogether a different angle. It is not a case where the partners of the firm were not the owners of the property. It is also not a case where the property was owned by the partnership firm. The partners as preexisting co-owners had a definite share of the property.

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They merely applied their own property for running a business in partnership. On dissolution of the partnership, their right in the property revived. Using of a premises for business purpose would not automatically lead to the conclusion that the premises belonged to the partnership firm. The terms and conditions of the partnership agreement, in any event, are not known. It is also not the case where the partners ceased to be co-owners. If they continued to have undivided share in the property even during subsistence of partnership, question of their ceasing to have any interest therein on its automatic dissolution would not arise.”

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Coming to the facts of the case starting from the pleadings, it has to be verified whether there is pleading and evidence regarding taking on stock the immovable property as the property of the firm. In the plaint, it is stated that the plaintiff proceeded on the basis that the property originally belonged to Mrs.Dorris Luiz and on her death, it devolved on her husband S.P.Luiz and their children. Mrs.Dorris during her lifetime, and, after her death, Sri.S.P.Luiz was running the Southern College of Engineering and Technology. After their death, it was run by Mr.Dennis Luiz, husband of the first plaintiff and after his death, the first defendant became the Principal and he was looking after

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all the properties. Apparently, there is no mention about any partnership firm being constituted or any details regarding the same. In the written statement filed by the first defendant, he contended that the first plaintiff having remarried to a muslim, she is not entitled for any right to claim any shares. It is further contended that even during the lifetime of Luiz, except 10 acres of land, all other properties had been sold and since the death of S.P.Luiz and Dennis Luiz, first defendant is in possession of the property. He admits the fact that he became the Principal of the institution, Southern College of Engineering and Technology. It is contended that the plaintiffs are residing in an extent of 1 acre and 40 cents and a building thereon which forms part of the property in which the College is functioning.

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The defendants 2 and 3 had filed a joint written statement in which it is contended that plaint A schedule property belongs to M/s Southern College of Engineering and Technology and is not partible. It is further contended that property was purchased by the College represented by its proprietrix Mrs. Dorris Luiz as per document No.1724/1962 of Chalakkudy SRO. She was conducting the College until her death on 14/7/1973.

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Since then, her husband and children viz ., S.P.Luiz, Dennis S. Luiz, Edward C.W.Luiz, Mrs.Cherubina M.Kendall and Heather M.Luiz formed a partnership dated 10/10/1973. The name of the firm was “Southern College of Engineering and Technology” constituted with the object of conducting the College. Accordingly, plaint A schedule became the asset of the firm. Firm was reconstituted on 22/6/1976 by admitting Regina J. Luiz as well. The firm is registered with the Registrar of Firms, Thiruvananthapuram. It is further contended that in terms of Clause 12 of Partnership Deed, on the death of one of the partners, the firm shall not be dissolved and there is no necessity to admit the legal representatives of the deceased partner as partners of the firm. However, it shall be open for the surviving partners to take a decision in that regard. If they are not admitted as partners, their right is only to the assets and liabilities of the share of the deceased partner and shall not be entitled to claim the goodwill of the firm. On death of Dennis S.Luiz, his legal heirs were not admitted as partners of the firm. Sri.Edward C.W.Luiz, who became Managing Partner, died on 21/6/1999. After the death of Edward C.W.Luiz, the defendants, who are the remaining partners have not decided to admit his

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legal heirs to the firm. The defendants further denied that the properties in which the College is situated and the machineries thereon belonged to S.P.Luiz and Dorris Luiz. It is further contended that by virtue of a family settlement, the properties at Broadway Ernakulam was set apart to Regina Luiz and the property at Kalamassery known as Luiz Estate was allotted to the share of second defendant in a family arrangement even during the life time of S.P.Luiz and Dorris Luiz. They also denied the fact that Dennis Luiz has become the Principal of the College. Defendant contended that on the death of S.P.Luiz, Edward C.W.Luiz became the Managing Partner of the firm.

¶120

The 3^rd defendant filed an additional written statement retracting from the earlier written statement. She contended that 2^nd defendant does not have any right over the property at Chalakkudy except to manage the College. She contends that she was a minor during 1976 and her brothers and 2^nd defendant were managing her affairs. Two agreements dated 9/1/1977 and 26/1/1983 were executed by way of family settlement. She contended that she was under the impression that the suit was being prosecuted on the basis of the above agreements. But later

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she came to know that the defence set up was totally against the terms of agreement and exclusive rights had been claimed by the second defendant over Luiz Estate. She also contented that she was made to execute another agreement dated 26/10/2002 regarding Chalakkudy property in favour of the 2^nd defendant for getting Broadway properties. The Broadway properties were handed over to her pursuant to the said agreement. She also claims separate share in respect of B schedule properties.

¶124

The 11^th defendant filed a written statement. She is the eldest daughter of S.P.Luiz and Dorris Luiz. It is stated that though there was some understanding regarding the partition of the estate of Late Luiz, deed of partition could not be registered. She refers to an agreement dated 26/1/1983 whereby parties agreed to effect partition of the estate. It was decided that the Chalakkudy property will fall to the share of Dennis and Edward, Kalamassery estate to defendants 2 and 3 and Kavalangad estate was to be disposed of for satisfying Government dues. She contends that she does not claim any share in the suit properties. However, she is filing the written statement on account of the pitiable state of affairs and the degeneration brought about by the

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2^nd defendant and her husband. The 2^nd defendant had chosen to keep the 3^rd defendant under her wings. They were receiving fabulous amounts as deposits and rent for the building at Broadway Ernakulam and Kalamassery and nothing has been given to the others including the 3^rd defendant. She also contended that the 3^rd defendant was misled about everything by the 2^nd defendant and her husband. Her marriage was delayed deliberately and she was given in marriage only at the age of 32. It is after the marriage of the 3^rd defendant that she started demanding her share. Defendant therefore sought for partition as per agreement dated 26/1/1983.

¶128

The evidence in the case consists of oral testimony of PW1 and DWs 1, 2 and 3. DW1 is the contesting defendant Heather Luiz. DW2 is Cherubina Luiz Kendall, the 11^th defendant and DW3 is Regina Fernandez, the 3^rd defendant. The additional defendants 4 to 10 are the legal heirs of Edward Charles Luiz who died during the pendency of the suit. There is no dispute regarding partition of property except A schedule items 1 and 2. In respect of the aforesaid items of properties, the main contention urged by the 2^nd defendant is that the property is not

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partible as it is a property of the partnership firm. The first contention was that the property was purchased by Mrs. Dorris Luiz in the year 1962 as Proprietrix of M/s Southern College of Engineering and Technology. Ext.A1 is the sale deed dated 3/8/1962. Recitals of Ext.A1 show that the property was purchased by Dorris Luiz in her personal name, and not as Proprietrix of Southern College of Engineering and Technology. But it seems that her address is shown as Proprietrix of Southern College of Engineering and Technology. There is nothing to indicate that the property was purchased for the College. Even otherwise, the proprietary concern is not a legal entity and the ownership over the property vests in the proprietor. Therefore, we have to proceed on the basis that until the constitution of the firm, the property remained in the name of Dorris Luiz and after her death, the property devolved on the legal heirs, namely her husband and her children.

¶132

In the written statement of second defendant, contention is that a partnership was formed on 10/10/1973 which was again reconstituted as per deed dated 22/6/1976. The original deed of partnership is not seen produced in the case, whereas the

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reconstitution deed dated 22/6/1976 had been produced. Ext.B9 is the said deed of partnership. Ext.B9 indicates that Dennis S.Luiz, Edward C.W.Luiz, Cherubina M. Kendall and Miss.Heather Luiz were running the Southern College of Engineering and Technology in partnership with her father S.P.Luiz and the minor daughter Miss.Regina J.Luiz was admitted to the benefits of the partnership. S.P.Luiz died on 25/5/1976 and therefore the reconstitution deed is executed to be effective from 26/5/1976 and admitting the minor partner to the benefits of the partnership. Clause 5 of the partnership is relevant, which reads as under:-

¶136

“The capital of the firm for the time being shall be the amount standing in the capital account of the firm on the closing of the accounts on 25/5/1976, the date of death of Sri.S.P.Luiz. The capital may be altered according to the requirements of the partnership business and partners may subscribe such additional capital agreed upon by the partners from time to time.”

¶137

Despite the contention that property had been treated as

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partnership property, there is no indication in the re-constitution deed that this property had been treated as the capital asset of the firm. The 2^nd defendant had not produced any document to

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prove that the plaint A schedule properties have been treated as the property of the firm or had been brought to the stock of the firm's assets at any point of time. That apart, the 3^rd defendant was a minor at the relevant point of time and she was admitted to the benefits of the partnership.

¶142

S.14 of the Partnership Act reads as under:-

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“14. 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”.

¶144

In George (supra), a learned Single Judge of this Court after evaluating the entire case law on the subject held that the Partnership Act does not prescribe any particular mode by which property is to be brought into the common stock of the partnership. But the partners should have an intention that their individual property should become the property of the partnership by virtue of S.14 of the Act, in which event alone, it becomes the

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partnership property.

¶148

In Addanki Narayanappa (supra), reference has been made to the judgment of the House of Lords in Foster v. Hale [5 Ves 308]. That was a case in which a person attempted to obtain an account of the profits of a colliery on the ground that it was partnership property. The claim was objected stating that there was no agreement in writing. It was held that the subject being an agreement for land, the question is whether there was a resulting trust for that partnership by operation of law. If the facts and circumstances establish that those persons were partners in the colliery in which land was necessary to carry on the trade, the lease goes as an incident. It was therefore held that the partnership being established by evidence upon which a partnership may be found, the premises necessary for the purposes of the partnership are by operation of law held for the purposes of that partnership. But the argument in that case was that despite the fact that the said principle was carried to its extreme limit, in Dale v. Hamilton [5 Ha 369], it is to be treated as a binding authority. The Apex Court held that looking at the scheme of the Indian Act, no other view can be taken. Foster

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(supra) cannot have application to the facts of the case, in view of the fact that the firm's business itself was functioning of a colliery. Without colliery, the firm cannot function at all. We are not faced with such a situation. The College can function in any other premises.

¶152

In Addanki (supra), two joint Hindu families entered into a partnership for carrying on business and the capital of the partnership consisted of lands belonging to both the families. During the course of business of the partnership, some more lands were acquired by the partnership. Two members of one of the families sought for partition. In fact the question considered was whether the interest of a partner in partnerships assets comprising of movable as well as immovable property should be treated as movable or immovable property for the purposes of S.17(1) of the Registration Act, 1908. The Apex Court relied upon the judgment of the High Court of Andhra Pradesh, which held that there is no such requirement.

¶153

In Juggilal Kamalapat (supra) also, one of the questions was whether a deed of relinquishment executed by partners of a firm in respect of their share and interest in a firm

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required registration. It was held that no such registration was required.

¶157

In Sunil Siddharthbhai (supra), a contingency as to what happens when a personal asset is brought by a partner into a partnership as contribution to the partnership capital was considered.

¶158

In S.V.Chandra Pandian (supra), the question considered was when a dissolution of a partnership takes place and the residue is distributed among the partners after settlement of records, whether registration u/s 17 is required or not.

¶159

Therefore, what has to be considered is whether in terms of S.14 of the Partnership Act, the properties of the co-owners were contributed for the business of the firm. The statute clearly indicates that subject to the contract between the partners, the property of the firm includes the property originally brought into the stock of the firm or acquired or purchased by or for the firm and for the purpose and in the course of business of the firm. Since no registered document is required for bringing into the stock of the firm immovable property, as held in a long line of

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judgments, the question to be considered is whether actually it has been brought into the stock of the firm. In the written statement it is only stated that after the death of Dorris Luiz, a partnership was constituted on 10/10/1973 wherein the legal heirs had become partners of the firm and a minor was admitted to the benefits of the partnership firm and the object of the firm being to conduct Southern College of Engineering and Technology. Therefore, plaint A schedule property became the asset of the firm. But, there is no averment in the plaint to indicate that the property had been taken into the stock of the firm. In the evidence of DW1, it is stated that, on registration of the firm and on its reconstitution, A schedule property became the asset of the firm. In cross examination, DW1 admits that by partition deed No.3346/1978, B schedule property was set apart to the 11^th defendant and the remaining property viz., A schedule were set apart to defendants 1 to 3 and the plaintiff. The defendant No.11 executed a release deed No.894/1982 releasing her right in respect of C schedule property. Ext.B9 is the release deed. In cross examination she states that in 1973, even before the death of mother and father, Kalamassery property was allotted to her,

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however, there is no document. She also states that by a mutual understanding between the brothers and sisters, the property at Broadway was allotted to Regina, the 3^rd defendant. In cross examination she further states that plaint A schedule is not partible since it is purchased in the name of the firm. In further cross examination it is stated that “ There was no division of assets of college (?) Assets were belong to firm. Nobody contributed to the firm. When my father died, there was a running College. My mother and father contributed. I don't know whether any children contributed to College after 1976 ”. In further cross, she stated that share of Cherubina in Southern Engineering College is adjusted by giving property at Ootty. No others were given any share in Southern Engineering College so far. The 3^rd defendant relinquished the share. No share is given to Regina from Southern Engineering College. To another question as to whether the Engineering College's assets were valued, her answer was that she did not know and that she has not valued. She has not even calculated the amount. She also admits that accounts are available but has not been produced.

¶166

From the aforesaid evidence, it is rather clear that other

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than contending that the property was purchased for the firm, contesting defendant has no case that after the death of Dorris Luiz, the co-owners have contributed their property to the firm to be treated as partnership property. If the property is brought into the stock of the firm, necessarily, it will be borne out in the balance sheet of the firm. No such documents relating to accounts of the firm were produced to arrive at a conclusion that the immovable properties were brought into the stock of the firm.

¶170

There is yet another legal impediment to contribute the property to the firm. At the time of death of Dorris Luiz, the 3^rd defendant was a minor and she was admitted to the benefits of the partnership. After becoming a major, there is nothing on record to indicate that she was made a partner of the firm. When the minor is a partner, how her right in the property has been contributed to the firm is not borne out from the pleadings of the 2^nd defendant.

¶171

All these facts clearly indicate that the parties never intended that the plaint A schedule property has to be contributed to the firm for the business of the firm. It can only be assumed that the property was being utilized by the firm for carrying on its

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business activity viz., functioning of the College. Learned counsel for the contesting respondent has placed reliance on the judgment in M.V.Karunakaran (supra). That was a case in which it was admitted that the property was owned by the partnership firm and the partners were pre-existing co-owners who had definite share in the property. It was held that if they applied their own property for running a business in partnership, on dissolution of the partnership, their right in the property will revive. Further it is observed that “ using of a premises for business purpose would not automatically lead to the conclusion that the premises belonged to the partnership firm ”.

¶175

Though the judgment aforesaid does not squarely apply to the facts of the present case, still, we have no hesitation to hold that merely for the reason that a particular property is used for the business of the firm, despite the fact that it belongs to any of the partner or partners of the firm, one cannot presume that the property had been taken on stock as the firm's property unless there is evidence to prove the said fact. This position of law is well settled in Arjun Kanoji Tankar v. Santaram Kanoji Tankar [(1969) 3 SCC 555]. That was a case in which one of the

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questions was whether, whenever there is a partnership and the assets which originally belonged to one of the partners were used for the purpose of the partnership, they must be presumed to have become partnership assets. After referring to Miles v. Clarke [(1953) 1 All ER 779], it was held that when there is evidence that the plaintiff had, when entering into a partnership with the defendant, surrendered his individual interest in the assets brought by him into business, or had admitted that the defendant was to be the owner in equal share with him in all the assets brought into the partnership, it would not amount to partnership property. It was also held that “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.” The Apex Court had held that unless there is an agreement that the property which is used for the business of partnership is to become property of the partnership, either by an express or implied agreement, the property cannot be treated as the property of partnership.

¶179

When a partnership is running business and a property either movable or immovable is taken into the stock of the firm, it

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has to be borne out from the balance sheet and profit and loss account of the firm, which are audited from time to time. In other words, at least the books of account of the firm should disclose that the immovable property had been taken on stock as firm's property.

¶183

In the light of the aforesaid finding of ours, we do not think that the Court below had committed any error in passing a preliminary decree for partition. Since no grounds had been made out for interference, the appeal is dismissed. No costs.

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Sd/-

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A.M. SHAFFIQUE, JUDGE

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Sd/-

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P.SOMARAJAN, JUDGE

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Heather Luis v. Mrs.Nirene Dennis Luiz

Case brief

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What the court decided

Heather Luis v. Mrs.Nirene Dennis Luiz

Case brief

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