V. Sumitra Reddy & Anr. Vs K. Ranganadha Reddy & Ors. (Supreme Court of India)
Accounts Stop on Dissolution, Not the Partner’s Right in the Unsold Assets: Share in the Unliquidated Residue Survives Until Actual Settlement – Sections 43, 46 & 48 of the Partnership Act.
Summary: The dispute concerned the share of a partner in the assets of M/s Viraj Constructions, a partnership at will, which owned valuable land measuring Ac. 3.27 guntas at Begumpet, Hyderabad. The original plaintiff held a 25% share in the firm.
The plaintiff had initially sought to retire from the firm in 1970 against payment of ₹22,500. However, his suit for recovery of that amount was dismissed on the stand taken by the other partners themselves that the firm had not been dissolved and that the plaintiff continued to remain a partner. That decision attained finality.
Thereafter, the plaintiff issued a notice seeking dissolution of the firm and rendition of accounts. Since it was a partnership at will, the High Court ultimately held that the firm stood dissolved on 18.10.1983, when the notice of dissolution was communicated. The plaintiff was declared entitled to 25% of the partnership assets, after settlement of liabilities.
The real controversy arose during the final decree proceedings. The remaining partners contended that the plaintiff’s entitlement in the land should be calculated with reference to its value as on 18.10.1983, being the date of dissolution. According to them, the plaintiff had not participated in the firm’s affairs thereafter and, therefore, could not claim the benefit of the enormous appreciation in the land’s value over the succeeding decades.
