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Partnership Act, 1932-Section 14-Property belonging to the firm-First partner claiming share in tenancy rights of second partner when partnership not in existence on the date of acquiring of the said premises by the second partner and no contribution by first partner towards acquisition of premises-Held: Premises acquired when partnership not in existence-No direct evidence that second partner brought the same as his investment in the partnership at the initial stage but it is evident that it was done later-Also in absence of deed of partnership, it cannot be held that the same had been originally brought in the stock of the firm-Agreement not being decisive, conduct of the parties assumes significance-Admission of second partner that the royalty received from the tenanted premises was being deposited in the partnership account thus, the property formed part of the assets of the partnership-Evidence Act, 1872-Section 58. The original tenant of the premises died in 1966 leaving behind him the assignors. The business as also the tenanted premises was assigned for valuable consideration. Appellant allegedly acquired the tenancy right in respect of the suit premises in terms of a deed of assignment. Appellant started business of DP Store in the said premises. He executed leave and licence agreement in relation to the self-same premises in favour of W in 1970. W was running a business in the said premises under the name and style of DP Store. Dispute arose between parities. W filed suit which was compromised. Appellant, respondent no 1 and one more entered into a partnership in the name of M/S Shreedhar Govind Kamerkar. Since appellant claimed full ownership in relation to tenanted premises as also in Shree Medicos, the same was dissolved in 1977. The deed of dissolution postulated that the said tenancy was a part of the assets of the partnership. Thereafter, appellant obtained possession of the premises in 1978. He started a business under the name and style of ‘Shree Medico’. Appellant refused to render accounts and started claiming partnership business and partnership premises as his own. Respondent no.1 filed suit claiming 1/3 share in suit business of Medical and General Store and also tenancy rights. Though in the suit respondent did not claim any relief in respect of the business of DP Store, but at the hearing, he claimed business running under the name and style of ‘Shree Medico’ and also interest in ‘DP Store’. Trial Judge dismissed the suit. Single Judge of High Court allowed the appeal holding that the respondent and appellant had 1/3rd share each in the business of DP Store carried in the premises and also equal tenancy rights in the premises where DP Store business was being carried out and that the partnership business of DP Store at the aforesaid premises stood dissolved from 1981. Hence the present appeal. =Dismissing the appeal, the Court HELD: 1.1. Although a claim was made by the respondent no. 1 that the tenancy had been acquired by the partnership from the beginning, from the deposition of the respondent no.1, the following facts have been elicited : (i) DP Store was not run by the partners; (ii) All licences of Shree Medico were standing in the name of appellant. Respondent no 1 had never signed on any document pertaining to Shree Medico; (iii) He had no source of income in 1966; (iv) There is no documentary evidence to show that the said premises were acquired out of the funds of partnership firm and that the business of partnership was carried out at the same premises; (vi) The property was under attachment from 1969 to 1978; (vii) The possession of the property was obtained in 1978; and (viii) respondent no. 1 claimed a share in the business which was running under the name and style of ‘Shree Medico’. Despite that it appears, a statement was made by respondent no. 1 which was recorded by trial court that he is not claiming any right in the business of ‘Shree Medico’ but is claiming the right only in respect of the business of ‘DP Store’ and the tenancy rights in respect of the shop premises. [760-H; 761-A-E] 1.2. Appellant may be right in his submission that in view the pleadings of the parties as also the statements of the respondent no. 1 in his deposition before the trial court, the respondent could not lay any claim in respect of any business which was being carried in the premises under the name and style of ‘DP Store’, but the same, may not be decisive to arrive at a conclusion that the right in respect of the tenanted premises in question never formed the part of the assets of the partnership. [761-F-H; 762-A] 1.3. The parties have entered into the deed of dissolution voluntarily. Appellant is not an illiterate. He has been carrying on business. He had acquired tenancy right on his own showing and in his own name and also been fighting litigation with W for a long time. [763-E-F] 1.4. From the preamble of the deed of dissolution, it is evident that the partnership had been carrying on business under the name and style of ‘M/s Shreedhar Govind Kamerkar’ at X place, a tobacco shop at Y place and a tobacco godown at Z place but also ‘DP Store’ at the disputed premises. Clause (1) of the deed also refers to ‘DP Store’. In clause (3) of the deed, royalty in relation to a hotel, was assigned to respondent No.2. In relation to the ‘DP Store’, it was categorically stated that the matter was pending in the court. Clause (4) of the deed of dissolution suggests that the parties intentionally left out division of their properties in respect of ‘DP Store’. [763-F-H; 764-A-B] 1.5. All properties of the owner may not be partnership property and each case, thus, must be determined on the basis of fact materials on record. The very fact that the parties had referred to the business carried out under the name and style of ‘DP Store’ which was not and could not be the subject-matter of the partnership as the same was entered into in the year 1971 and dissolved in 1977, the admission of the appellant that the royalty received from the said tenanted premises was being deposited in the partnership account assumes significance. If the said property was the exclusive property of the appellant, and he had been dealing therewith as the sole owner thereof, the question of any reference being made thereto in the deed of dissolution would not have arisen. It may be true that in absence of the original deed of partnership having been brought on records, it is difficult for the court to arrive at a finding that the same had been originally brought in the stock of the firm. There is also no direct evidence that the appellant had brought the same as his investment in the partnership at the initial stage thereof but it is evident that the same was done at a later point of time. What, formed ‘the assets’ of the partnership must be gathered from the admission of the parties as also the other materials available on records. The said agreement having been in dispute, it may not be decisive. In a case of this nature, the conduct of the parties assumes significance. Admission, as is well-known, is the best proof of a claim. Section 58 of Evidence Act states that the facts admitted need not be proved. The very fact that the royalty received in respect of the said premises was being deposited in the partnership account is a clear pointer to show that the same was the property of the partnership. [764-B-G] Dwijendra Nath Mullick and Anr. v. Rabindra Nath Chatterjee and Ors., AIR (1987) Cal 289; Jayalakshmi v. Shanmugham and Ors., AIR (1988) Ker 128 and Arm Group Enterprises Ltd. v. Waldorf Restaurant and Ors., [2003]] 6 SCC 423, referred to. ‘Lindley & Banks on Partnership’, 18th Edn., referred to. 2. Mere execution of deed of dissolution did not discharge the parties thereto from their rights and liabilities. The rights and liabilities of the partners in respect of the partnership property would be discharged only when the firm is finally wound up and the properties of the firm are distributed. The partner of a dissolved firm can not only exercise his right under section 50, he may also restrain the use of the firm’s name and firm’s property in terms of section 53 of the Partnership Act. Section 37 determines the rights of the outgoing partner in certain cases to avoid shares to subsequent profits. If the tenancy right was being subjected to any profit by one of the partners, the cause of action arose. Therefore, the cause of action for the suit did not perish with the execution of the deed of dissolution. [768-F-H; 769-A-B] 1.8. With regard to the applicability section 15 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, the instant case is not where a landlord has brought any suit for eviction of the tenant on the ground that he had wrongfully assigned his right, title and interest in the tenanted premises in contravention of Section 15 of the Bombay Act, thus, liable for eviction. Instant case is with regard to partnership. Assignment of tenancy having regard to the statutory provision would not attract section 23 of Contract Act. Even otherwise in a case of this nature, the said question does not arise. [765-C-F] Uday Lalit, Chinmoy Khaladkar, P.N. Patwardhan and S.K. Nandy for the Appellant. Shekhar Naphade, Shivraj M. Jadhav for the Respondents.,= 2006(10 )Suppl.SCR751 , 2006(13 )SCC481 , 2006(14 )SCALE174 ,

CASE NO.:
Bombay-market

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Appeal (civil) 5720 of 2006

PETITIONER:
Shreedhar Govind Kamerkar

RESPONDENT:
Yesahwant Govind Kamerkar and Anr

DATE OF JUDGMENT: 12/12/2006

BENCH:
S.B. Sinha & Markandey Katju

JUDGMENT:
J U D G M E N T
[Arising out of SLP (Civil) No.8368 of 2005]

S.B. SINHA, J :

 Leave granted.


 Parties herein are brothers. The dispute between them is tenancy right 
in respect of a premises known as 'Navalkar Building' situate at N.C. 
Kelkar Road, Dadar in the town of Mumbai. Appellant herein allegedly 
acquired the said tenancy right in terms of a deed of assignment entered into 
by and between him and one Saraswati Balkrishna Pawar and three others. 
One Krishna Tatoba Pawar alias Balkrishna Tatoba Pawar was the original 
tenant of the said premises. He was running a hair cutting saloon therein 
under the name and style of 'Anant Hair Dressing Saloon'. He died leaving 
behind him the assignors of the said deed of assignment dated 18.01.1966. 
The business as also the tenanted premises was assigned for valuable 
consideration. He was allegedly carrying on business therein. Leave and 
licence agreement was executed by him in relation to the self-same premises 
in favour of one Shri Walke on 01.02.1970. The said Walke was running a 
business in the said premises under the name and style of 'Deepak 
Provisional Store'. A dispute arose between the parties resulting in initiation 
of a proceeding under Section 145 of the Code of Criminal Procedure. The 
properties were attached. The said Walke also filed a suit. The said suit is 
said to have been compromised. Appellant herein is said to have obtained 
possession of the said premises on 23.03.1978, whereafter he started a 
business under the name and style of 'Shree Medico'. 

 The parties hereto i.e. the three brothers, entered into a partnership on 
01.04.1971. The same was dissolved on 31.03.1977, inter alia, on the 
premise that the appellant had been claiming full ownership in relation to the 
said tenanted premises as also the business in Shree Medico. A suit was 
filed by Respondent No.1 in the City Civil Court, Mumbai, which was 
registered as S.C. Suit No.5903 of 1981 wherein, inter alia, the following 
prayers were made :

(a) It be declared that the Plaintiff and the Defendants 
Nos. 1 and 2 have 1/3 shares in the suit business of 
Medical and General Store carried on Navalkar 
Building on the ground floor, N.C. Kelkar Road, 
Dadar, Bombay 400 028 as also the tenancy rights 
in the presmises as also the premises on the ground 
floor of Navalkar Building, N.C. Kelkar Road, 
Dadar, Bombay-400 028.

(b) It may be declared that the partnership business of 
Medical and General Stores carried on in Navalkar 
Building on the ground floor, N.C. Kelkar Road, 
Dadar, Bombay-400 028, stood dissolved as from 
the date of the suit or from such other date as this 
Hon'ble Court may deem fit.

(c) The accounts of the partnership business of 
Medical and General Stores be made up and the 
Plaintiff be awarded the amount found due to his 
share at the foot of the account."


 Although in the said suit allegedly no relief was claimed in respect of 
the business of the Deepak Provisional Store, at the hearing, the plaintiff 
made his claim in respect of the business running under the name and style 
of 'Shree Medico' and claimed interest in the said 'Deepak Provisional 
Store'. The appellant in his written statement did not raise any question as 
regards legality or otherwise of the said tenancy right in the partnership in 
terms of Section 15 of the Bombay Rents, Hotel and Lodging House Rates 
Control Act, 1947 (for short, 'the Bombay Act').

 In the said suit, inter alia, the following issues were framed :

"1. Whether the Plaintiff proves that the partnership 
 firm of M/s Shreedhar Govind Kamerkar was/is 
 registered under the Indian Partnership Act?
		
 2. Is the answer to the above issue is in the 
affirmative, whether the Plaintiff proves that the 
business known as Deepak Provision Centre and 
the shop premises on the Ground Floor, Navalkar 
Building, N.C. Kelkar Road, Dadar, Bombay-400 
028 ?

3. If the answer of the above issues in the affirmative, 
whether the Plaintiff proves that on 31st March, 
1977 the said business of Deepak Provision Centre 
was in existence ? 

4. If the answer to the above issues is in the 
affirmative, whether the Plaintiff proves that the 
said business of Deepak Provision Centre and the 
said premises were excluded from the dissolution 
of the said firm of M/s Shreedhar Govind 
Kamerkar ?

5. Whether the Plaintiff proves that the business of 
M/s Shree Medico carried on by the Defendant 
No.1 in the said premises is a partnership business 
of the parties to the suit ?

8. Whether the Plaintiff proves that he is entitled to 
1/3rd share in the said business of the 1st Defendant 
and in the tenancy rights in the said premises ?

9. Whether the Plaintiff proves that he is entitled to 
the dissolution and accounts of the said business of 
the 1st Defendant and the tenancy rights of the said 
premises ?"


 Issue Nos. 2, 8 and 9 were answered in the negative, whereas Issue 
Nos.3, 4 and 5 were held to be not surviving. The learned Trial Judge, inter 
alia, on the aforementioned findings dismissed the suit. On an appeal 
preferred by the respondents herein, a learned Single Judge of the High 
Court, however, allowed the appeal directing :

"a) It is declared that the plaintiff and defendant Nos.1 
 and 2 have 1/3rd share each in the business of 
 Deepak General Stores carried on the ground floor 
 in Navalkar building at N.C. Kelkar Road, Dadar, 
 Mumbai-400 028 and also equal tenancy rights in 
 the premises where Deepak General Stores 
 business was being carried out.

b) It is declared that partnership business of Deepak 
 General Stores at the aforesaid premises stood 
 dissolved as from July 1981.

c) The accounts of the partnership business of 
 Deepak General Stores shall be made and the 
 plaintiff and the defendants will be entitled to 
 amount found due to their share at the foot of the 
 account.

d) Partnership premises where Deepak General Stores 
 was being run shall be partitioned by metes and 
 bounds and they will be entitled to possession of 
 1/3rd share and will be placed in possession.

e) There will be an enquiry into the mesne profits 
 from the date of the suit till delivery of possession 
 in respect of Deepak General Stores and that of the 
 premises.

 Plaintiff will be entitled to costs of this suit as well 
 as of the Appeal."


 The High Court in its judgment, inter alia, relied upon the admission 
of the appellant herein that the royalty received in respect of the said 
tenanted premises used to be deposited in the partnership account. 

 The deed of dissolution dated 31.03.1977 clearly postulated that the 
said tenancy was a part of the assets of the partnership (Ex.P-3) and 
agreement dated 01.02.1977 (Ex. P-4), whereby and whereunder the parties 
thereto agreed that the partnership should be dissolved.

 Mr. U.U. Lalit, the learned Senior Counsel appearing on behalf of the 
appellant, would inter alia submit :

1) Having regard to the stand taken by the learned counsel for the 
 respondents before the City Civil Court as also before the High Court 
 to the effect that no share was being claimed in respect of the business 
 of 'Shree Medico', and the said claim having been kept confined only 
 to 'Deepak Provisional Store', the High Court committed a manifest 
 error in passing the impugned judgment.


2) Having regard to the finding of fact arrived at by the City Civil Court 
 that the tenancy right in respect of the premises in question had been 
 acquired by the appellant in his individual capacity and he having 
 obtained possession thereof from the licensee only in the year 1978, 
 prior whereto the partnership was dissolved, the question of the said 
 property being an asset of the partnership did not and could not arise.

3) The plaintiff-respondent, in his deposition having clearly admitted 
 that he had no concern with the said tenanted premises, the 
 impugned judgment cannot be sustained. 
	
4) In any event having regard to the provisions contained in Section 15 
 of the Bombay Act, the tenancy right could not have been assigned. 

5) Partnership having been dissolved on 31.03.1977 and the suit 
 having been filed on 16.10. 1981, the same was clearly barred by 
 limitation.

 Mr. Shekhar Napadhe, the learned Senior Counsel appearing on 
behalf of the respondents, on the other hand, would contend :
 	
1. It is not a fit case where this Court should exercise its discretionary 
jurisdiction under Article 136 of the Constitution of India.

2. Having regard to the provisions contained in Section 17 of the 
Partnership Act, the suit was not barred by limitation.

3. No question as regards applicability of Section 15 of the Bombay Act 
having been raised in the written statement, nor any issue having been 
framed in that behalf, the same should not be permitted to be raised 
for the first time before this Court.

 The deed of partnership admittedly has not been produced. The 
parties, however, had entered into a formal deed of partnership. Non 
production of the said document has, however, not been taken serious note 
of by the High Court. What was produced was extract from the certificate of 
registration issued by the Registrar of Firms. 

 In absence of the deed of partnership, it might not be possible for us 
to arrive at a finding that the partnership was originally brought in the stock 
of the firm. 

 We will, therefore, have to proceed to determine the said question on 
the basis of the materials which are available on records.

 We may at the outset notice the admission of the appellant in his 
deposition before the learned Civil Court, which is in the following terms :
	
"Q. You have stated that the business of M/s Shridhar 
 Govind Kamerkar was carried on at Navalkar 
 Bldg. So what was this premises at Navalkar 
 Bldg. used ?


Ans. The said premises were given for running the 
 business to one Shri Walke and the royalty was 
 received therefrom was credited to the accounts of 
 M/s Shridhar Govind Kamerkar a partnership firm.

Q. I put it to you that prior to giving the premises in 
 Navalkar Bldg. to Shri Walke Deepak Provision 
 Centre was being run therefrom. What have you to 
 say?

Ans. I started the said business of M/s Deepak Provision 
 Centre in the said premises."


 Indisputably, a deed of dissolution was entered into by and between 
the parties. The said instrument was executed on 31.03.1977, the relevant 
portions whereof are as under :

"WHEREAS the parties above named were partners in a 
partnership, a will for carrying on the business of Bidis, 
Tobacco, Cigarette and other sundry articles under the 
name and style of M/S SHREEDHAR GOVIND 
KAMERKAR, at 203/205, Haji Habib Chawl, N.M. 
Joshi Marg, Bombay 13 and the tobacco shop at 
Harharwala Building, Delisle Road, (N.M. Joshi Marg), 
Bombay and Deepak Provision Centre, Navalkar Bldg. 
N.C. Kelkar Road, Dadar, Bombay-28, and a tobacco 
godown at Rangari Chawl, Maidan, Patra Shed, N.M. 
Joshi Marg, Bombay 13, under the terms and the 
conditions of a deed of partnership duly executed on the 
day of January, 1971, Between the Party of First Part, 
Second Part & Third Part."

 xxx xxx xxx
1. The parties hereby agreed that the partnership 
between them to carry on the said business in the name 
and style of Messers SHREEDHAR, GOVIND 
KAMERKAR and other sundry articles at 203/205 Haji 
Babib Chawl, N.M. Joshi Marg, Bombay 13 and a 
tobacco shop at Harharwala Building, N.M. Joshi Marg, 
known as Ganesh Tea House and Deepak Provision 
Centre, Navalkar Building, N.C. Kelkar Road, Dadar, 
Bombay 28 and tobacco godown at Rangari Chawl 
Maidan, Patra Shed, N.M. Joshi Marg, Bombay 13 and 
Mor Brand Chuna (Lime) and the parties had agreed the 
terms under which the said partnership was dissolved on 
the further terms and conditions.

 xxx xxx xxx


3. In respect of Bidi shop at Harharwala Bldg., N.M. 
Joshi Marg, Bombay-13, known as Hotel Ganesh Tea 
House which is given on royalty shall remain with the 
party of the Third Part Shri P.G. Kamerkar and he shall 
be responsible to repay the deposit amount received.


4. In respect of Deepak Provision Centre at N.C. Kelkar 
Road, Dadar, Bombay 28 the case is pending in court of 
the said shop and after the court decision the decision 
will be taken with the mutual consent of all the partners. 
And secondly in respect of Mor Brand Chuna (Lime) the 
matter is under dispute with other parties and that matter 
will be decided with the mutual consent of these 
partners."


 Although the agreement dated 01.02.1977 is a disputed document, 
but having regard to the fact that the High Court had placed reliance 
thereupon, we may also notice clause 8 thereof which is in the following 
terms :

8) The closed shop viz. Deepak Provisional Stores 
with the room situated at Nawalkar Building, N.C. 
Kelkar Road, Dadar, Mumbai-400028 is of the 
ownership of all the three partners and all the three 
shall bear the expenditure to be incurred therefor. 
Further, all the three shall equally bear the entire 
expenditure viz. its rent etc."


We may also notice that although a claim was made by the plaintiff 
that the tenancy had been acquired by the partnership from the beginning, 
from the deposition of the plaintiff-respondent no.1, it appears that the 
following facts have been elicited : (i) Deepak Provisional Store (Centre) 
was not run by the partners (page 61); (ii) All licences of Shree Medico 
were standing in the name of defendant no.1. He had never signed on any 
document pertaining to Shree Medico (page 62); (iii) He had no source of 
income in 1966 (page 71); (iv) There is no documentary evidence to show 
that the said premises were acquired out of the funds of partnership firm 
(page 72); (v) No documentary evidence exists to show that the business of 
partnership was carried out at the same premises (page 82); (vi) The 
property was under attachment from 1969 to 1978 (page 82); (vii) The 
possession of the property was obtained in 1978 (page 84); and (viii) 
Plaintiff claimed a share in the business which was running under the name 
and style of 'Shree Medico' and not of 'Deepak Provisional Store' (page 
94).

However despite a claim having been made by the plaintiff in respect 
of 'Shree Medico', it appears, a statement was made at the Bar by the 
learned counsel for the plaintiff on 17.03.1994, which had been recorded by 
the learned Trial Judge as under :

"(1) That the Plaintiff is not claiming any right in the 
 business of 'Shree Medico'.

(2) The Plaintiff is claiming the right only in respect 
 of the business of 'Deepak Provision Centre".

(3) The tenancy rights in respect of the shop premises 
 being Shop No.1."


The High Court also in para 6 of its judgment noticed the said 
statements in the following terms :

"Counsel for the appellants however fairly conceded 
that the plaintiffs-appellants are not making any claim in 
respect of Shree Medico."
		

 The learned Senior Counsel appearing on behalf of the appellant may, 
thus, be right in his submission that keeping in view the pleadings of the 
parties as also the statements of the plaintiff in his deposition before the 
learned City Civil Court, the respondent could not lay any claim in respect 
of any business which was being carried in the premises in question under 
the name and style of 'Deepak Provisional Store, but the same, in our 
opinion, may not be decisive to arrive at a conclusion that the right in 
respect of the tenanted premises in question never formed the part of the 
assets of the partnership.

 We have noticed hereinbefore that either there was no deed of 
partnership, or in any event the same had not been produced. What, 
therefore, formed 'the assets' of the partnership must be gathered from the 
admission of the parties as also the other materials available on records. 
	
 What forms the property of the firm is stated in Section 14 of the 
Indian Partnership Act, 1932 (for short, 'the Act'). It reads as under :

"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 required 
for the firm."

 With a view to determine the said question, we may notice some 
other provisions of the Act as well.

"17. Rights and duties of partners. - Subject to contract 
between the partners -

after a change in the firm

(a) - where a change occurs in the constitution of a firm, 
the mutual rights and duties of the partners in the 
reconstituted firm remain the same as they were 
immediately before the change, as far as may be;

after the expiry of the term of the firm, and

(b) - where a firm constituted for a fixed term continues 
to carry on business after the expiry of that term, the 
mutual rights and duties of the partners remain the same 
as they were before the expiry, so far as they may be 
consistent with the incidents of partners at will; and

where additional undertakings are carried out,

(c) where a firm constituted to carry out one or more 
adventures or undertakings carries out other adventures 
or undertakings, the mutual rights and duties of the 
partners in respect of the other adventures or 
undertakings are the same as those in respect of the 
original adventures or undertakings."


"50. Personal profits earned after dissolution.- 
Subject to contract between the partners, the provisions 
of clause (a) of section 16 shall apply to transactions by 
any surviving partner or by the representatives of a 
deceased partner, undertaken after the firm is dissolved 
on account of the death of a partner and before its affairs 
have been completely wound up : 
 
 Provided that where any partner or his 
representative has bought the goodwill of the firm, 
nothing in this section shall affect his right to use the firm 
name."

 "53. Right to restrain from use of firm name or firm 
property.- After a firm is dissolved, every partner or his 
representative may, in the absence of a contract between 
the partners to the contrary, restrain any other partner or 
his representative from carrying on a similar business in 
the firm name or from using any of the property of the 
firm for his own benefit, until the affairs of the firm have 
been completely wound up :

 Provided that where any partner or his 
representative has bought the goodwill of the firm, 
nothing in this section shall affect his right to use the firm 
name."

 
 The parties have entered into the deed of dissolution voluntarily. The 
appellant herein is not an illiterate. He has been carrying on business. He 
had acquired tenancy right on his own showing. He had acquired the 
tenancy right in his own name. He had also been fighting litigation with the 
said Walke for a long time.

 We have also noticed hereinbefore clause (8) of the agreement dated 
01.02.1977. From the preamble of the deed of dissolution dated 31.03.1977, 
it is evident that the partnership had been carrying on business inter alia in 
Bidis, Tobacco, Cigarettes etc. under the name and style of 'M/s Shreedhar 
Govind Kamerkar' situated Haji Habib Chawl, N.M. Joshi Marg, Bombay 
and a tobacco shop at Harharwala Building, Delisle Road and a tobacco 
godown at Rangari Chawl, Maidan, Patra Shed, N.M. Joshi Marg, Bombay 
but also 'Deepak Provisional Store', Navalkar Building.

 Clause (1) of the said deed of dissolution also refers to 'Deepak 
Provisional Store'. In clause (3) of the said instrument, royalty in relation to 
a hotel, namely, Hotel Ganesh Tea House was assigned to P.G. Kamerkar, 
Respondent No.2 herein. In relation to the 'Deepak Provisional Store', it 
was categorically stated that the matter was pending in the court. Clause (4) 
of the said deed of dissolution suggests that the parties intentionally left out 
division of their properties in respect of 'Deepak Provisional Store' as also 
'Mor Brand Chuna (Lime)', as litigations were pending.

 The very fact that the parties had referred to the business carried out 
under the name and style of 'Deepak Provisional Centre' at N.C. Kelkar 
Road, Dadar, Mumbai, which was not and could not be the subject-matter of 
the partnership as the same was entered into in the year 1971 and dissolved 
in 1977, the admission of the appellant herein that the royalty received from 
the said tenanted premises was being deposited in the partnership account 
assumes significance. If the said property was the exclusive property of the 
appellant, and he had been dealing therewith as the sole owner thereof, the 
question of any reference being made thereto in the deed of dissolution 
would not have arisen. It may be true that in absence of the original deed of 
partnership dated 01.04.1971 having been brought on records, it is difficult 
for the court to arrive at a finding that the same had been originally brought 
in the stock of the firm. There is also no direct evidence that the appellant 
had brought the same as his investment in the partnership at the initial stage 
thereof but it is evident that the same was done at a latter point of time. An 
inference in relation thereto must be drawn for the other materials on 
records. The said agreement dated 01.04.1971 having been in dispute, we 
may not be decisive. In a case of this nature, the conduct of the parties 
assumes significance. Admission, as is well-known, is the best proof of a 
claim. Section 58 of the Indian Evidence Act states that the facts admitted 
need not be proved. The very fact that the royalty received in respect of the 
said premises was being deposited in the partnership account is a clear 
pointer to show that the same was the property of the partnership.

 We may at this juncture also consider the submission of Mr. Lalit, in 
regard to the applicability of the provisions of Section 15 of the Bombay 
Act, which reads as under :

 "In absence of contract to the contrary, tenant not 
to sub-let or transfer or to give on licence.

 (1) Notwithstanding anything contained in any law 
but subject to any contract to the contrary, it shall not be 
lawful after the coming into operation of this Act for any 
tenant to sub-let the whole or any part of the premises let 
to him or to assign or transfer in any other manner his 
interest therein and after the date of commencement of 
the Bombay Rents, Hotel and Lodging House Rates 
Control (Amendment) Act, 1973, for any tenant to give 
on licence the whole or part of such premises.

 Provided that the State Government may by 
notification in the Official Gazette, permit in any area the 
transfer of interest in premises held under such leases or 
class of leases or the giving on licence may premises or 
class of premises and no such extent as may be specified 
in the notification.

		
 It is not in dispute that the State of Maharashtra had issued a 
notification in terms of the proviso appended to Section 15 of the Bombay 
Act, in terms whereof assignment of a business together with tenancy right 
was permissible. Furthermore, Section 15 does not contain an absolute bar. 
It is subject to a contract to the contrary between the landlord and the tenant. 
A landlord may also in a given situation by reason of acceptance of rent or 
otherwise from the sub-tenant or assignee may acknowledge the sub-tenancy 
or assignment and thus accept him to be his tenant. It is not a case where a 
landlord has brought any suit for eviction of the tenant on the ground that he 
had wrongfully assigned his right, title and interest in the tenanted premises 
in contravention of Section 15 of the Bombay Act and, thus, liable for 
eviction. We are concerned with a partnership. Assisgnment of tenancy 
having regard to the statutory provision would not attract Section 23 of the 
Indian Contract Act. Even otherwise in a case of this nature, the said 
question does not arise.

 In any event, a transaction may be void so far as landlord is 
concerned. Such a void transaction may not have any effect on the 
application of the property towards partnership. To some extent, the point 
appears to have been covered by this Court in Arm Group Enterprises Ltd. v. 
Waldorf Restaurant and Others [(2003) 6 SCC 423], wherein this Court 
opined :

"Mere carrying on by the tenant a partnership business 
as partner in the leased premises, no doubt, does not per 
se amount to sub-letting unless it is shown that he 
withdrew his control of the leased premises and parted 
with the possession of the property and thereby 
surrendered his individual tenancy rights in favour of the 
partnership firm" 

 We may, in this connection, usefully notice that in 'Lindley & Banks 
on Partnership', 18th Edn., it is stated :

"8-13 Lord Lindley observed that "a partnership may be 
 illegal upon the general ground that it is formed for 
 a purpose forbidden by the current notions of 
 morality, religion, or public policy". On that 
 ground, he considered that a partnership formed 
 for the purpose of deriving profit from the sale of 
 obscene or blasphemous prints or books, or for the 
 procurement of marriages or of public offices of 
 trust, would be "undoubtedly illegal."

8-14 It has already been seen that a partnership between 
 a resident British citizen or a resident alien and an 
 alien enemy is illegal and incapable of creation or 
 continuation; on the same basis, a partnership 
 formed in order to trade with an enemy nation 
 would clearly be illegal. However, since a neutral 
 may lawfully trade with one of the belligerent 
 nations, a partnership formed for that purpose 
 would be unobjectionable."


8-16 Equally, although a statute may appear to prohibit 
 certain activities and impose a penalty for failure 
 to observe its provisions, it does not follow that 
 conduct which would attract the penalty is 
 necessarily illegal. If the statute can genuine be 
 classed as prohibitory, as will be the case if the 
 penalty is imposed for the protection of the public, 
 then such conduct will be illegal Per contra if, on 
 a true construction of the statute, the penalty 
 merely represents, as Lord Lindley put it, "the 
 price of a licence for doing that the statute 
 apparently forbids". Thus, in Brown v. Duncan, it 
 was held that a partnership of distillers was not 
 illegal, even though one partner carried on 
 business as a retail dealer in spirits within two 
 miles of the distillery (contrary to the Duties on 
 Sprits Act 1823, ss. 132, 133) and was not 
 registered as a member of the firm in the excise 
 books (as required by the Excise Licences Act 
 1825, s. 7). Lord Lindley did, however, doubt 
 whether the statutes in question were properly 
 construed by the court. 

 The following alphabetical list of businesses 
 and professions contains the most important 
 example of partnership whose legality is or may be 
 affected by statute."

8-31 By virtue of the Financial Services and Markets 
 Act 2000, no person may carry on, or purport to 
 carry on, a regulated activity in the United 
 Kingdom unless he is duly authorized so to do or is 
 exempt from the provisions of the Act in relation 
 to that activity. Contravention of this general 
 prohibition constitutes an offence and any 
 agreement made by a person whilst carrying on a 
 regulated activity in breach of the prohibition will 
 be unenforceable against the other party.

10.44 What is of greater importance is to ensure that the 
 occupation rights of the firm are clearly 
 established where the premises are to remain in the 
 sole ownership of one or more of the partners.

 If a lease in favour of the firm is to be 
 granted, then it must be in writing. The 
 termination of such a lease may, however, not be 
 without difficulty and its existence may 
 conceivably have adverse inheritance tax 
 consequences.

 If the agreement omits any reference to such 
 occupation rights then, in the absence of any other 
 evidence, it will not be assumed, merely because 
 the premises are indispensable to the partnership 
 business, that they belong to the firm or are subject 
 to the firm's right to (i) a lease or tenancy or, 
 where that is still relevant, (ii) an exclusive licence 
 to occupy within the meaning of the Agricultural 
 Holdings Act 1986. It will rather be inferred that 
 each individual partner who is not beneficially 
 interested in the premises has been granted a non-
 exclusive licence to enter them in order to carry on 
 the partnership business. Such licence would seem 
 to be contractual in nature and might, as a matter 
 of implication, not be terminable during the 
 currency of the partnership, particularly if it can be 
 shown that the partnership business can only be 
 carried on from those premises and that the 
 termination of the licences would strike at the 
 substratum of the partnership agreement. In such 
 circumstances the only effective way of 
 determining the licence would be to dissolve the 
 partnership but, even then, they would prima facie 
 continue until the winding up is complete." 


 We are not oblivious that all properties of the owner may not be 
partnership property and each case, thus, must be determined on the basis 
of fact materials on record. 

 In Dwijendra Nath Mullick and Another v. Rabindra Nath Chatterjee 
and Others [AIR 1987 Cal 289], it is stated :
"18. It is for the partners to determine by agreement 
amongst themselves what shall be the property of the 
firm and the quantum of their beneficial interests therein 
inter se and what shall be the separate property of one or 
more of them. If there is no express agreement, then the 
source from which the property was obtained, the 
purpose for which it was acquired, and the mode in 
which it has been dealt with, are to be considered to 
ascertain such intention."
	
 In Jayalakshmi v. Shanmugham and Others [AIR 1988 Ker 128], it is 
stated :

"It is not necessary that every partnership for the 
purpose of its business should own and utilize its own 
partnership property. Therefore mere user of a shop for 
the business will not make the shop or the tenancy right 
in it a partnership asset. Something more is required. It 
was so held by the Supreme Court in Arjun Kanoji 
Tankar v. Santaram Kanoji Tanker (1969) 3 SCC 555 
also." 

 We, however, in this case are of the opinion that as the usufruct of his 
lease hold was to be deposited in the partnership account, the same formed 
the part of the assets of the partnership.

 The question as to whether the suit was barred by limitation or not 
also must be judged from the aforementioned context. The cause of action 
for the suit was said to have been arisen, as stated by the plaintiff in his 
plaint in the following terms :

"The plaintiff says that the cause of action arose at the 
end of July, 1981 when the Defendant No.1 refused to 
render accounts and started claiming the partnership 
business and the partnership premises as his own."


 The question which would, therefore, arise is as to whether running of 
'Shree Medico' without complying with clause 4 of the deed of dissolution 
would give rise to a continuous cause of action. Mere execution of deed of 
dissolution did not discharge the parties thereto from their rights and 
liabilities. The rights and liabilities of the partners in respect of the 
partnership property would be discharged only when the firm is finally 
wound up and the properties of the firm are distributed. 

 Sections 50 and 53 of the Act indicate to the said effect. The partner 
of a dissolved firm can not only exercise his right under Section 50, he may 
also restrain the use of the firm's name and firm's property in terms of 
Section 53 of the Partnership Act. Section 37 of the Partnership Act 
determines the rights of the outgoing partner in certain cases to avoid shares 
to subsequent profits. If the tenancy right was being subjected to any profit 
by one of the partners, the cause of action arose. The cause of action for the 
suit, therefore, did not perish with the execution of the deed of dissolution on 
31.03.1977.

 For the reasons aforementioned, there is no merit in this appeal. It is 
dismissed accordingly. The parties shall pay and bear their own costs.

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