MOHD. LAIQUIDDIN AND ANR.versusKAMALA DEVI MISRA (DEAD) BY LRS. AND ORS.

                     [2010] 1 S.C.R. 873


               MOHD. LAIQUIDDIN AND ANR.                            A
                               v.
    KAMALA DEVI MISRA (DEAD) BY LRS. AND ORS.
          (Civil Appeal Nos. 6933-34 of 2002)

                      JANUARY 5, 2010
                                                                    B
  [TARUN CHATTERJEE AND V.S. SIRPURKAR, JJ.]

     Indian Partnership Act, 1932:

     ss.42 and 4 - Deemed dissolution of firm - Two partner5        c
- Death of one partner - LRs of deceased partner not
interested in continuing the firm or in constituting a fresh firm
- Effect of - Held: Since there were only two partners
constituting the partnership firm, on death of one of them,
there was deemed dissolution of the firm, despite existence         D
of a clause in the partnership deed which said otherwise - A
partnership is a contract between partners - There cannot be
any contract unilaterally without acceptance by the other
partner - LRs of the deceased partner could not be asked to
continue the partnership, as there was no legal obligation upon     E
them to do so, as partnership is not a matter of heritable status
but purely one of contract, which is also clear from definition
of partnership under s.4.

    ss. 14 and 48 - Property of firm - Partnership firm,
constituted for construction of a cinema theatre, consisted of F
two partners - While the first partner offered her land for
construction of cinema theatre, the second partner
constructed cinema theatre and other allied constructions by
procuring funds - Deemed dissolution of the firm in view of
death of the first partner - Distribution of residual property G
amongst the partners - Held: On facts, there was no intention
from either partner to treat the land, building, structures etc.
as properties of the firm - As the partnership got dissolved
on death of a partner, it would be reasonable to allow both the
                               873                               H
    874    SUPREME COURT REPORTS               (2010) 1 S.C.R.

A parties to take their respective properties - First partner
  entitled to exclusive possession of the land while second
  partner entitled to take away the movables and recover the
  value of buildings and structure embedded to the land.

         Appeal - Second appeal - New plea - Question of law,
8
    based on pleadings and evidence on record, not raised before
    lower courts - Held: Such question of law can be permitted
    for the first time before the High Court.
      Constitution of India, 1950 - Article 136 - Powers under
C - Not to be exercised, until grave injustice is shown to be
  caused to the aggrieved party by way of the impugned order.
      The partnership firm in question, constituted for
  construction of a cinema theatre, consisted of two
0 partners. One of the partners filed suit for dissolution of
  the partnership firm alleging that the other partner
  mismanaged the business of the firm, manipulated the
  account books and stopped payment of the minimum
  guarantee profit, as envisaged under the partnership
E deed, to the plaintiff-partner.

       In terms of the partnership deed, the plalntlff-partner
  offered her land for construction of the cinema theatre,
  while the defendant-partner constructed the cinema
  theatre and other allied constructions by procuring
F necessary funds.

       During pendency of the suit, the plaintiff-partner died
  and her legal representatives, i.e. the appellants, were
  brought on record. The trial court held that there was
G deemed dissolution of the partnership firm due to death
  of the plaintiff-partner, and since the appellants were not
  agreeable to enter into partnership with the defendant-
  partner, they were entitled for rendition of accounts and
  to be handed over the entire cinema theatre with allied
H structures as per the deed of partnership. Meanwhile the
  MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI             875
            MISRA (DEAD) BY LRS.

defendant-partner also died, and his legal .A
representatives, i.e. the rospondents were brought on '
record before the First App~llate Court, which confirmed
the decree passed by the trial court.

      The respondents filec:t appeal before the High Court,
                                                            8
which also held that the partnership firm stood dissolved
on account of death of ono of the partners, but permitted
the respondents to take away the movables from the
cinema theatre and recovor the value of the byllding and
structures embedded to tho land. On a combined reading
of the terms of the partnership deed, the High Court held C
that the land and the cinema were not the properties of
the firm but were propertioa of the respective pnrties, and
thus the appellants were ontitled to exclusive possession
of. the land and the respondents were entitled to take
away the projectors and other machineries, the furnitures D
and all other items, which can be safely removed from
their place and that tho appellants should pay the
respondents the value of the remaining portions of the
structures which could m>t be removed without any
damage, after proper valuation of the same.                 E
     In appeal to this Court, the questions which arose for
consideration were: 1) whether the High Court erred in
permitting the respondent$ in raising a question for the
first time in second appeal, which was not in the             F
pleadings before the Trial Court or the First Appellate
Court; 2) whether the High Court erred in holding that
there had been dissolution of the partnership firm on
account of death of a partner and 3) whether the High
Court also erred in permitting the Respondents to remove      G
the movables from the cinema theatre.

    Dismissing the appealJ, the Court
    HELD: 1. The contention that the High Court erred
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    876      SUPREME COURT REPORTS               [2010] 1 S.C.R.


A in permitting the respondents to raise a new plea for the
  first time in the second appeal has no substance. The
  new plea which was allegedly raised before the High
  Court for the first time was that all assets of the firm
  including the land and building is to be dealt with under
B Section 48 of the Partnership Act, 1932 and the proceeds
  is to be disbursed to the two partners in accordance with
  the respective shares as per the partnership deed. The
  High Court had dismissed this plea. The Respondents
  did not appeal against the said finding of the High Court.
c That apart, when a question of law is raised on the basis
  of the pleadings and evidence on record which might not
  have been raised before the courts below, it is difficult to
  hold that such question of law cannot be permitted for
  the first time before .the High Court. Therefore, one fails
  to see how the Appellants are aggrieved by this finding
0
  of the High Court even assuming the High Court had
  formulated a new question of law, which was not raised
  before the Courts below. There is thus no scope for
  exercise of powers by this Court under Article 136 of the
E Constitution. [Paras 17 and 19) [889-G-H; 890-A-C; 891-
  A-B]

          Santakumari & Ors. v. Lakshmi Amma Janaki Amma (DJ
    By Lrs. & Ors. (2000) 7 sec 60, relied on.

F      Hardaya/ Gir v. Sohna Ram 1970 (3) SCC 635 and
    Chandra Singh v. State of Rajasthan (2003) 6 SCC 545,
    referred to.

      2.1. Dissolution of a partnership firm on account of
  death of one of the partners is subject to the contract
G entered into by the parties. Though Clause 22 of the
  Partnership deed herein reads that "the partnership deed
  shall be in force for a period of 42 years certain from this
  date and the death of any partner shall not have the effect
  of dissolving the firm", this clause clearly states that
H death of any partner shall not have the effect of
   MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI            877
             MISRA (DEAD) BY LRS.

 dissolving the firm. However, in the facts and              A
 circumstances of the case, absolute effect to this clause
 cannot be given. [Paras 22 and 23] [892-A-D]

       2.2. When there are only two partners constituting the
  partnership firm, on the death of one of them, the firm is 8
  deemed to be dissolved despite the existence of a clause
  which says otherwise. A partnership is a contract
  between the partners. There cannot be any contract
  unilaterally without the acceptance by the other partner.
  The appellants, the legal representatives of the deceased C
  partner were not at all interested in continuing the firm
  or constitute a fresh firm and they cannot be asked to
  continue the partnership, as there is no legal obligation
  upon them to do so as partnership is not a matter of
  heritable status but purely one of contract, which is also
  clear from the definition of partnership under Section 4 D
  ofthe Partnership Act, 1932. Therefore, the trial court was
  justified _in holding that the firm dissolved by virtue of
. death of one of the partners and the first appellate court
  as well as the High Court have taken the correct view in
  upholding the same. [Para 26] (893-D-F]                     E
     Smt. S. Parvathamma/ v. CIT 1987 Income Tax Reports
 161, approved.

     3. As to the issue related to removing the movables F
from the Cinema and allowing the Respondents to
recover the value of the building and structures
embedded to the land, from the appellants, it is true that
there was no intention from either of the parties to treat
these properties as the properties of the firm. A careful
perusal of Clause 24 of the Partnership Deed clearly G
indicates that the land as well as the building with the
fixtures etc., to be vested with the plaintiff-partner (since
deceased), after the expiry of term of 42 years. It is also
true that directing the delivery of the entire property to the
                                                             H
    878      SUPREME COURT REPORTS                 [2010) 1 S.C.R.


A appellants would cause prejudice to the rights of the
  Respondents and would put him to loss. As the
  partnership got dissolved on the death of the plaintiff.
  partner, it would be reasonable to allow both the parties
  to take their respective properties. The appellants are
B entitled to the exclusive possession of the land and the
  respondents are entitled to take away the movables from
  the property and recover the value of the buildings and
  structure embedded to the land. It has to be assessed by
  the technically qualified person. The appellants are liable
c to pay the value of the remaining structures after
  adjusting the amount if any due to the appellants. [Paras
  27 and 41) [893-G; 897-H; 898-A-D]

      Arjun Kanoji Tankar v. Santaram Kanoji Tankar (1969)
  3 SCC 555; Arm Group Enterprises Ltd. v. Waldorf
D Restaurant (2003) 6 SCC 432; Commissioner of Income Tax,
  Madhya Pradesh v. Dewas Cine Corporation (1968) 2 SCR
  173; Narayanappa v. Krishtappa (1966) 3 SCR 400; Malabar
  Fisheries Co. Calicut v. CIT (1979) 4 SCC 766 and S. V.
  Chandra Pandian v. S. V. Sivalinga Nadar (1993) 1 SCC 589,
E referred to.

          Mills v. Clarke 1953 (1) AER 779, referred to.

          Halsbury's Law of England, 4th Edition, referred to.
F                        Case Law Reference:
          AIR 1978 AP 257           referred to            Para 4
          1910 (3) sec 635          referred· to           Para 18

G         (2003) 6 sec 545          referred to            Para 19
          (2000) 1 sec 60           relied on              Para 19
          1987 ITR 161              approved               Para 25
          (1969) 3 sec 556          referred to            Para 31
H
   MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI                   879
             MISRA (DEAD) BY LRS.

     (2003) 6 sec 432             referred to            Para 32      A

     1953 (1) AER 779             referred to        1   Para 34

     (1968) 2 SCR 173             referred to            Para 36l-.
     (1966) 3 SCR 400             referred to            Para 38      B
     (1979) 4 sec 766             referred to            Para 39

     (1993) 1 sec 589             referred to            Para 39

    CIVIL APPELLATE JURISDICTION : Civil Appeal
No.6933-6934 of 2002.                                                 c
    From the Judgment & Order dated 9.4.2002 of the High
Court of Judicature, Andhra Pradesh at Hyderabad in AS. Nos.
1048 & 1050 of 2001.
                                                                      D
                              WITH

C.A. Nos. 4411-4412 of 2002.

    Dr. K. Parasaran, Rakesh Dwivedi, R.F. Nariman, A.D.N.
Rao, A. Subba Rao, Roy Abraham, Kishore Rai, Seema Jain,              E
Anant Prakash, Shantanu Krishna, Mukti Choudhary, Preetika
Dwivedi, Rahul Dua, Himinder Lal for the appearing parties.

    The Judgment of the Court was delivered by

     TARUN CHATTERJEE, J. 1. These four appeals are                   F
directed against the judgment and order dated 9th of April, 2002
passed in second appeal Nos. 1048 & 1050 of 2001 of the High
Court of Andhra Pradesh at Hyderabad, by which the High Court
had partly allowed the appeals and modified the order dated           1

17th of October, 2001 of the First Appellate Court, which             G
affirmed the order of the Trial Court decreeing the suit for
dissolution of partnership firm and other relief filed by the
appellants who are appellants in C.A.Nos.6933-34 of 2002.

   ·. 2. It may be mentioned that during the pendency of the suit,    H
    880      SUPREME COURT REPORTS                  [2010] 1 S.C.R.


A   the original plaintiff died and her legal representatives were
    substituted as plaintiffs before the trial court. The original
    defendant also died before the filing of the first appeal, and his
    legal representatives were brought on record as Appellant Nos.
    2 to 6 before the first Appellate Court. For the sake of
B   convenience, the Plaintiffs would be referred to as the
    'Appellants' and the Defendants would be referred to as 'the
    Respondents'.

        3. The case made out by the original plaintiff (since
C   deceased) in her plaint was as follows:

          Shri Jai Narayan Mishra, original defendant (since
     deceased) made a proposal to constitute a firm for construction
     of a cinema theatre on the land of the original plaintiff (since
     deceased) and on acceptance of the said proposal by her, they
D    executed a deed of partnership dated 26th of June, 1977.
     Clause 4 of the partnership deed envisaged that the plaintiff's
     share in the profits would be 2 annas in a rupee. The original
     plaintiff (since deceased) was receiving Rs. 2,000/- per month
    from the original defendant (since deceased) in pursuance of
E   Clause 13, which guaranteed that the minimum profit of Rs.
    2,000/- per month would be paid to her. The defendant never
    disclosed to the plaintiff as to what amount was due to her on
    settling the annual accounts of the firm. The defendant never
    furnished the statement of accounts to the plaintiff. He never
F   disclosed the amount of profit payable to her towards her two
    anna share in the business. The defendant mismanaged the
    business of the firm and manipulated the account books. There
    was mutual irretrievable distrust between the plaintiff and the
    defendant and hence it was impossible to get along with the
G   defendant in the business of the firm. The defendant stopped
    payment of the minimum guarantee profit to the plaintiff with a
    motive to strain her financial resources. The gravity of distrust
    assumed such proportions that the plaintiff could not continue
    as a partner in the firm. The defendant is also guilty of non-
H   furnishing of annual accounts to the plaintiff and hence the suit.
  MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI   881
 MISRA (DEAD) BY LRS. [TARUN CHATTERJEE, J.]

The original defendant (since deceased) entered appearance             A
and contested the suit by filing a written statement. In the written
statement, it was, inter alia, alleged as follows:-

     "The value of the land·given by the plaintiff for construction
     of the cinema theatre was only Rs. 70/- per sq.yard in the 8
     year 1977. The defendant invested more than Rs. 25 lakhs
     for the construction of the theatre. He has been maintaining
     accounts day-to-day in respect of the business of cinema-
     theatre and no transaction relating to the said business
     had been concealed from the plaintiff. An extent of 1000 C
     sq.yds. had been acquired by the Government for widening
     the road out of the total extent of 6808 sq. mts. of the site
     given by the plaintiff for construction of the cinema theatre
     and only the remaining land was available for the business
     of cinema-theatre. The duration of the partnership as per
     Clause 2 of the partnership deed was 42 years but D
     subsequently it was agreed to give option to the defendant
    for another period of 20 years. The terms and conditions
    of the partnership deed were onerous to the defendant.
     Irrespective of whether the business made profit or not the
    plaintiff was guaranteed a minimum income of Rs. 2,000/ E
    - per month whereas the plaintiff suffered no loss on
    account of the business running losses. The defendant had
    been maintaining regular accounts of the firm and after the
    scrutiny and approval of the plaintiff those accounts were
    submitted to the Income Tax Department. At the instance F
    of the second son and the General Power of Attorney
    (GPA) holder of the plaintiff, the defendant stopped
    payment of minimum profit of Rs. 2,000/-per month to the
    plaintiff till the clearance of the amount due to Income Tax
    Department. The defendant had always been ready and G
    willing to pay the amount due to the plaintiff as and when
    the plaintiff obtained clearance from the Income Tax
    Department. The plaintiff never whispered any doubt about
    the correctness of the accounts. The Plaintiff No.2 who is
    the GPA holder of the original plaintiff (since deceased) H
    882          SUPREME COU~T REPORTS                 [2010) 1 S.C.R.


A         had been acting in a highly irresponsible manner
          detrimental to the interest of the parties. The alleged gravity
          of distrust is a result of the willful actions on part of the
          G.P.A holder of the plaintiff who sought to take advantage
          of the deteriorating mental and physical condition of the
B         plaintiff. The plaintiff had not laaued any notice alleging any
          contravention of the terms and conditions of the partnership
          deed and the business was made for a specific period
          subject to the option of the defendant. The present suit was
          frivolous and misconceived and therefore was liable to be
c         dismissed with costs."

       4. By the judgment and order dated 18th of January, 1999,
  the Vllth Senior Civil Judge, City Civil Court, Hyderabad,
  decreed the suit and passed a preliminary decree of
  dissolution and for rendition of accounts. The defendant was
D further directed to hand over the entire property with allied
  structure and other materials to the plaintiff.

          The trial court framed the following issues for trial:

E          (a)     Whether the plaintiffs are entitled for dissolution of
                   the partnership firm as prayed for?

           (b)     To what relief?

         5. After examining the oral and documentary evidence
F   adduced by both the parties, and after verifying the relevant
    provisions of the Partnership Act the Trial Court, inter alia,
    arrived at the following findings:

  "The Partnership firm stood dissolved by the death of the
G original plaintiff (since deceased) on 17th of May, 1996. Since·
  there was no mutual confidence between the parties and as
  there had been severe disputes since 1988, carrying on the
  business of the firm became practically impossible. It was
  further held that since the legal representatives of the original
  plaintiff (since deceased), the appellants before us, were not
H
   MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI                    883
  MISRA (DEAD) BY LRS. [TARUN CHATIERJEE, J.]

agreeable to enter into partnership with the defendant and in A
 view of the dissolution of the pa1tnership due to the death of
the original plaintiff, the necessary consequence was rendering ·
of accounts and complying with the other terms of the
partnership deed. It was ultimately held that there was deemed
dissolution of the partnership firm with effect from 17th of May, B
1996 due to the death of the original plaintiff (since deceased)
and consequently the appellants, her legal representatives,
were entitled for rendition of accounts and to be handed over
the entire cinema theatre with allied structures as per Clause
24 of the deed of partnership within three months from the date c
of the judgment. But the Trial Court recorded a finding that there
was no mismanagement by the defendant as alleged in the
plaint."

     6. As noted herein earlier, after the suit was decreed and
before an appeal was preferred from the same, the defendant           D
in the said suit died and his legal representatives were brought
on record before the First Appellate Court.
      7. Feeling aggrieved by the order of the Vllth Senior Civil
Judge, City Civil Court, Hyderabad, the respondents, the legal        E
 representatives of the defendant, preferred an appeal before
the Xlllth Addi. Chief Judge, (Fast Track Court), City Civil Court,
Hyderabad. The appellants also filed cross objections praying
that it should be held there was dissolution of the firm on
account of mis'management. The First Appellate Court, by an           F
order dated 17th of October, 2001, dismissed the appeal
confirming the judgment and decree of the trial court and
allowed the cross objections filed l;>y the Appellants. The issue
framed by the First Appellate Court was as follows:
      (a)   Whether the plaintiffs are entitled for the dissolution   G
            of partnership firm?
    8. The Appellate Court, on the question of dissolution of
the partnership firm, concurred with the findings of the Trial
Court, holding that since there were only two partners in the         H
    884       SUPREME COURT REPORTS                   [2010] 1 S.C.R.


A   partnership firm and as one of the partner died there was no
    scope and possibility to continue the partnership firm. The
    appellate court further held that the Respondents could not rely
    upon clause 24 of the Partnership Deed which stipulated that
    after the expiry of 42 years the land as well as the building with
s   the fixtures etc., would be vested with the original plaintiff (since
    deceased).

        9. On the question of mismanagement of the accounts of
  the firm, the Appellate Court had allowed the cross objections
C preferred by the appellants. The respondents did not disclose
  the accounts and they were ignorant of the amounts and the
  profits to which appellants were entitled to. The respondents
  also did not produce the corresponding ledger and cash books.
  In the light of these findings it was held that the management
  of the account was not proper.
D
         10. Aggrievecj by the order of the First Appellate Court
    dated 17th of October, 2001, the Respondents took an appeal
    before the High Court of Andhra Pradesh at Hyderabad. The
    High Court, by its judgment and order dated 9th of April, 2006,
E   allowed the appeal in part and substantially modified the
    judgment and decree of the trial court.

        11. The issues that were raised for consideration of the
    High Court were as follows:

F         ( 1) Whether the partnership firm stood dissolved by virtue
          of Section 42 (c) of the Indian Partnership Act on account
          of the death of the plaintiff No.1 ?

        (2) Whether there was mismanagement of the business of
G       the partnership firm by the defendant No.1 as he failed to
        maintain proper accounts?

        (3) Whether the partnership can be treated as a license
        as contended by the defendant-appellants ?

H       (4) Whether the land given by the plaintiff No.1 and the
  MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI   885
 MISRA (DEAD) BY LRS. [TARUN CHATTERJEE, J.)

     theatre constructed by the defendant No.1 was the              A
     properties of the firm liable to be shared as per the shares
     of the respective ·partners?

    (5) Whether the Courts below were justified in directing
    delivery of the land along with the structures, machineries     8
    and equipments to the plaintiff on account of the dissolution
    of the partnership firm?                              ,,.

    (6) Whether the plaintiff was entitled for rendition of
    accounts from the date of commencement of the firm till
    the date of dissolution?                                        C

    12. The findings of the High Court as to these issues raised
were as follows.

      (1)   As to the point of the dissolution of the firm, the E>
             respondents submitted that since the parties
             agreed that in spite of the death of any of the
            partners, the firms shall continue for 42 years
            irrespective of the death of the original plaintiff
            (since deceased) in respect of the partnership
            deed after examining the relevant provision of the E
            Partnership Act, the Court concurred with the
            findings of the Trial Court and the First Appellate
            Court. To reach this conclusion, the High Court had·
            placed reliance on the following decisions of this
            Court, namely, CIT v. Suraj Bhan Omprakash, F
            [1986 ITR 833) and Smt. S. Parvathammal v. CIT,
            [1987 ITR 161).

     (2)    On the question of mismanagement of the firm, the
            High Court held that the First Appellate Court was      G
            right in holding that there was mismanagement on
            the grounds of (i) non production of the account
            books for the verification of the original plaintiff
            (since deceased); (ii) the non inclusion of the
            certain amounts received by way of income in the        H
    886         SUPREME COURT REPORTS                 [2010) 1 S.C.R.


A                 accounts, (iii) the non submission of correct
                  accounts to the income tax department and (iv) the
                  failure of the original defendant(since deceased)
                  apprising the original plaintiff(since deceased)
                  about the profits and losses of the firm.
B
          (3)     The Respondents pleaded that in the event the court
                  comes to a conclusion that the firm stood dissolved,
                  the partnership deed was to be treated in the nature
                  of license. The High Court held that the respondent
                  could not deny their liability under the other terms
c                 of Partnership deed, at the same time, seeking
                  benefit from the same. The respondents laid undue
                  stress on Clause 20 of the partnership deed, which
                  showed that the deed was one of partnership and
                  that both parties had acted upon it. Once the issue
D                 of dissolution was already decided against him on
                  the basis of Section 42 of the Act and also Clause
                  20, he could not urge the Court to construe the
                  same as a license, since both these pleas were
                  irreconcilable with each other.
E
          (4)    In relation to the question of property of the
                 partnership firm, the Court examined Section 14 of
                 the Partnership Act, 1932, the legal position and the
                 terms of the contract between the parties. Section
F                14 defines what a property of the firm is. It is subject
                 to the contract between the parties. According to
                 this section, the property of the firm includes all
                 properties and rights and interests in property
                 originally brought into the stock of the firm or
G                acquired by purchase or otherwise by or for the firm
                 or for the purposes and in the course of the
                 business of the firm and includes also the goodwill
                 of the business. The general rule laid down in the
                 section "subject to contract between the parties"
                 makes it clear that the partners may agree between
H
      MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI                     887
     MISRA (DEAD) BY LRS. [TARUN CHATIERJEE, J.]

              themselves to change the general rule and such an            A
              agreement may be expressed or implied.

              In the partnership deed, it was clearly mentioned
              that the "1st party" (original plaintiff) offered her land
              towards her two-anna share capital for the                   B
              construction of cinema theatre and other allied

..            constructions for running a cinema business. The
              "2nd party" (Origina~ defendant) agreed to construct
              cinema theatre and other allied constructions by
              procuring the necessary funds. It was agreed that            C
              the 1st party would not be bound to contribute any
              amount towards such constructions. In the light of
              Section 14 of the Act and in the light of the decision
              of Boda Narayana Murthy & Sons v. Valluri
              Venkata Suguna, [AIR 1978 AP 257), the High
              Court held that the land and the cinema were not             D
              the properties of the firm and they were the
              properties of the respective parties.

        (5)   In relation to the question of directing delivery of the
              land along with the structures, machi11eries and             E
              equipments to the appellants on account of the
              dissolution of the partnership firm, the High Court
              came to a conclusion that the direction for delivery
              of the entire property to the Appellants would cause
              prejudice to the rights of the Respondents and               F
              would put them to loss. Since the partnership got
              dissolved on account of the death of the original
              plaintiff (since deceased), it would be just and
              reasonable if each party is directed to take their
              respective properties. But, in view of the                   G
              embedding of the walls, the flooring, pillars etc., to
              the land of the original plaintiff (since deceased), it
              may not be possible for the Respondents to realize
              the value of the entire building. Further, the High
              Court held that the appellants were entitled to have         H.
    888          SUPREME COURT REPORTS                 [201 O] 1 S.C.R.


A                 exclusive possession of the land and respondents
                  were entitled to take away the projectors and the
                  other machineries, the furnitures and all other items,
                  which can be safely removed from their place and
                  the Appellants should pay the Respondents the
B                 value of the remaining portions of the structures
                  which could not be removed without any damage,
                  after proper valuation of the same.

                  As the First Appellate court held that the
                                                                           ..
                  management of the account of the firm was not
c                 proper, with which the High Court was also in
                  agreement, the High Court noted that the amount,
                  if any, due to the Appellants after rendition of the
                  account of the firm shall be determined. It was
                  observed that the trial court also asked for rendition
D                 of accounts on the dissolution of the firm.

           (6)    As for the rendition of accounts, the High Court
                  concurred with the findings of the Courts below.

E         13. The High Court finally concluded that:

          "The defendants are permitted to take away the
          machineries, the equipments, the furnitures and all other
          items including the material of the structure to the extent
          possible and deliver possession of the land with the
F         remains of the structure which could not be removed on
          account of impossibility due to embedding of those
          structures to the land. The defendants are entitled to get
          the value of such remaining structures assessed through
          a qualified technical expert and are entitled to get the value
G         of such structures from the plaintiffs after adjustment of the
          amount, if any, found due to the plaintiffs after finalisation
          of the accounts which are going to be rendered by them.
          If the amount due to the 1st plaintiff towards profit of the
          business to the extent of her share, is more than the value
H         of the remaining structures, the plaintiffs are entitled to
                                                            ..   (   '


    MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI ·.·$39
   MISRA (DEAD) BY LRS. [TARUN CHATTERJEE, J.]

      recover the same from the defendants."                             A

       14. Feeling aggrieved by the order of the High Court, the
 Appellants and Respondents filed the present special leave
 petitions, which on grant of le9ve, were heard in the presence
 of the learned counsel for the parties.
                                                                         B
      15. Before us the pivotal issues which were raised by the
 parties are as follows:

       (a)   Whether the High Court was justified in permitting
             the Respondents in raising a question for the first         c
             time in second appeal, which was not in the
             pleading before the Trial Court or the First Appellate
             Court?

       (b)   Whether the High Court was justified in holding that        D
             there had been dissolution of the partnership firm
             on account of death of a partner?

      . (c) .·Whether the High Court was justified in permitting
              the Respondents to remove the movables from the
              disputed property, contrary to the deed of                 E
              partnership entered into between the original
              plaintiff and the original defendant?

      16. We have heard the learned senior counsel for .the
 parties and examined the impugned judgment and the                      F
 materials on record.

       17. As to the issue raised by the Appellants that the High
  Court was not justified in permitting the Respondents to raise
  a new plea for the first time in the second appeal, we may at
  the outset note that we do not find any substance in this · G
  contention raised by the learned counsel for the appellants.
  They contended that the High Court committed an error of law
  in considering a new ground of challenge without any plea or
· factual background neither before the Trial Court nor the first
  appellate court. The new plea which was allegedly raised H
    890      SUPREME COURT REPORTS                 [2010] 1 S,C.R.

A before the High Court for the first time was that all assets of
  the firm including the land and building shall be dealt with under
  Section 48 of the Act and the proceeds shall be disbursed to
  the two partners in accordance with the respective shares as
  per the partnership deed. The High Court as can be seen from
B the record had dismissed this plea. The Respondents have not
  appealed against the said finding of the High Court. That apart,
  when a question of law is raised on the basis of the pleadings
  and evidence on record which might not have been raised
  before the courts below, it is difficult to hold that such question
c of law cannot be permitted for the first time before the High
  Court. Therefore, we do not see how the Appellants are
  aggrieved by this finding of the High Court even assuming the
  High Court had formulated a new question of law, which was
  not raised before the Courts below.
D       18. In the case of Hardaya/ Gir v. Sohna Ram, [1970 (3)
  SCC 635], this Court had set aside the judgment of the High
  Court which allowed the plaintiff to raise a plea of
  misrepresentation, raised for the first time in the second appeal.
  In that case, however, the High Court held that the contract had
E become unenforceable on account of the plea of
  misrepresentation. Hence, the defendant in that case was
  indeed aggrieved as the High Court had allowed a plea which
  he could not have defended properly. In the case at hand, the
  plea in question, assuming it had been raised for the first time,
F had been rejected by the High Court, and there had been no
  appeal from the said finding.

        19. The Respondents relied on the following decisions:
  Chandra Singh v. State of Rajasthan [(2003) 6 SCC 545], in
G which case this Court enunciated the principles governing the
  exercise of its jurisdiction under Article 136 of the Constitution
  of India; and Santakumari & Ors. v. Lakshmi Amma Janaki
  Amma (D) By Lrs. & Ors., [(2000) 7 SCC 60) in which decision
  this Court, after examining the orders of the Courts below
H arrived at a conclusion that the Second Appellate Court had
  MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI 891
 MISRA (DEAD) BY LRS. [TARUN CHATIERJEE, J.]
not made out a new plea by merely interpreting the documents A
and by putting a form to the nature of transactions in question.
In the light of our views expressed hereinabove on this issue,
we do not find it necessary to further delve into this matter.
Suffice it to say that as held in the case of Santakumari (supra),
this Court would not exercise its powers under Article 136 of B
the Constitution, until grave injustice is shown to be caused to
the party by way of the impugned order.
     20. The sole issue raised by the Respondents in this
appeal, who are the appellants in Appeal No. 4411-4412 /2002,
is whether the finding of the Courts below that the Partnership C
firm stood dissolved on account of death of one of the partners
was correct in the light of the express provisions of the
Partnership Act, namely, Section 42 (c) of the same. Before we
proceed to examine the correctness of this concurrent findings
arrived at by the Courts below, it is necessary to examine the D
relevant provisions of the Partnership Act, 1923 and the relevant
clauses of the partnership deed entered between the original
plaintiff and the original defendant.
    "Partnership" is defined under Section 4 of the Act which E
reads as under:
    "Partnership is the relation between persons who have
    agreed to share the profits of a business carried on by
    all or any of them acting for alt."
                                                                      F
    21. Section 42 of the Act reads as under:
   . "Dissolution on the happening of certain contingencies:-
     Subject to contract between the partners a firm is
     dissolved-                                               G
    (a) if constituted for a fixed term, by the expiry of the term;
    (b) if constituted to carry out one or. more adventures or
    undertakings, by the completion thereof;
                                                                      H
    892       SUPREME COURT REPORTS                    (201 O] 1 S.C.R.


A         (c) by the death of a partner; and

          (d) by the adjudication of a partner as an insolvent."

         22. Dissolution of a partnership firm on account of death
    of one of the partners is subject to the contract entered into by
8   the parties. In this context, it is pertinent to refer to the terms of
    the deed of partnership.
                                   .
          23. Clause 22 of the Partnership deed reads as follows:

c          "The partnership shall be in force for a period of 42 years
          certain from this date and the death of any partner shall
          not have the effect of dissolving the firm."

       This clause clearly states that death of any partner shall
  not have the effect of dissolvinr the firm. However, in the facts
D and circumstances of the case, we are not in a position to give
  absolute effect to this clause of the deed of partnership.

       24. The learned counsel for the Respondents contended
  that since the parties agreed that in spite of the death of any
E of the partners, the firm shall continue for 42 years irrespective
  of the death of the original plaintiff (since deceased). They
  further, argued that it clearly contemplates that the ler:ial
  representative of the partner, who dies, would be under a duty
  to enter into a fresh deed of partnership. The legal
F representatives were precluded from claiming benefits if they
  deny entering into a fresh partnership agreement.

       25. In order to arrive at the conclusion that the partnership
  firm stood dissolved on account of death of one of the partners,
  the High Court had rightly ; :iced reliance on Smt. S.
G Parvathammal v. C/T(1987 lncorne Tax Reports 161), wherein
  this Court held that in a firm consisting of two partners on
  account of death of one of the partners, the firm automatically
  dissolved and observed as follows:

H         "A partnership normally dissolves on the death of the
   MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI 893
  MISRA (DEAD) BY LRS. [TARUN CHATTERJEE, J.]

      partner unless there was an agreement in the Original A
      partnership deed. Even assuming that there was such an ·
      agreement in a partnership consisting of two partners on
      the death of one of them the partnership automatically
      comes to an end and. there is no partnership which
      survives and into which a thirc;J party can be introduced. B
      Hence on the death of S, the original partnership was
    . dissolved. The subsequent taking in of the assessee as
      a partner was only as a result of entering into of a new
     partnership between R and the assessee. Partnership
      was not a matter of heritable status but purely one of      c
      contract."

      26. In the light of aforementioned case, it is clear that when
there are only two partners constituting the partnership firm, .on
 the death of one of them, the firm is deemed to be dissolved
 despite the existence of a clause which says otherwise. A D
 partnership is a contract between the partners. There cannot
 be any contract unilaterally without the acceptance by the other
 partner. The Appellants, the legal representatives of original .
plaintiff (since deceased) was not at all interested in continuing
the firm or constitute a fresh firm and they cannot be asked tc E
continue the partnership, as there is ·no legal obligation upon
them to do so as partnership is not a matter of heritable status
but purely one of contract, which is also clear from the definition
of partnership under Section 4. Therefore, the trial court was
justified in holding that the firm dissolved by virtue of death of F
one of the partners and the first appellate court as well as the
High Court have taken the correct view in upholding the same.

     27. As to the issue related to removing the movables from
Anand Cinema and allowing the Respondents to recover the          G
value of the building and structures embedded to the land, from
the appellants, we should examine the relevant provision of the
Act and the relevant clause of the partnership deed .

   . 28. Section 14 of the Partnership Act talks about the
property of.the firm. It reads as follows:   ·                    H
    894       SUPREME COURT REPORTS                   [2010) 1 S.C.R.


A         "Subject to contract between the partners, the property of
          the firm includes all property and rights and interest in
          property originally brought into the stock of the firm, or
          acquired, by purchase or otherwise, by or for the firm for
          the purposes and in the course of the business of the firm,
B         and includes also the goodwill of the business.

                 Unless the contrary intention appears, property and
          rights and interest in prqperty acquired with money
          belonging to the firm are deemed to have been acquired
          for the firm."
c
         29. In addition to this, it is necessary to examine the certain
    clauses of the Partnership deed, which were entered between
    the original plaintiff and the original defendants.

D         Clause 24 -

          •rhe Party of the Second Part hereby declares,
          covenants and agrees that at the end of the period of forty
          two (42) years, this partnership shall automatically come
          to an end and thereafter the entire properly, that is land,
E         buildings, constructions, machineries, equipment,
          furniture, fixture, fittings etc., shall automatically vest in
          the party of the first part in "As is where is" condition.
          Neither party shall be entitled to remove any item or
          property except for replacement by the firm during the
F         subsistence of this Partnership Firm"

        30. The learned counsel for the Appellants contended that
  the High Court was in error in allowing the Respondents to
  remove the movables from Anand Cinema and in holding that
G they are entitled to the value of the building and structures
  embedded to the land, from the Appellants. Further, he argued
  that the High Court had concurrently found that the partnership
  is dissolved by operation of law and mismanagement by the
  Respondents and therefore by virtue of Clause 24 of the deed,
H
   MOHD. LAIQUIDDIN AND ANR. v. KAMALA DEVI 895
  MISRA (DEAD) BY LRS. [TARUN CHATIERJEE, J.]
the Appellant was entitled to get the entire Anand cinema hall, A
which was admitted by the Respondent during his examination.

     31. The learned counsel for the appellants on the question
of the partnership property relied on various cases of this Court.
In the case of Arjun Kanoji Tankar v. Santaram Kanoji Tankar 8
[(1969) 3 SCC 555), this Court held that "the property belonging
to a person, in the absence of an agreement to the contrary
does not, on the person entering into a partnership with others,
become the property of the partnership merely because it is
used for the business for partnership. It will become property C
of the partnership only if there is an agreement express or
implied at the property was, under the agreement of
partnership, to be treated as the property of the partnership. n
[Emphasis supplied]

    32. The same view has been reiterated in the case of Arm D
Group Enterprises Ltd. v. Waldorf Restaurant, [(2003) 6 SCC
432).
     33. The learned counsel for the Appellant placed reliance
on Halsbury's Law of England, to determine how to construe a E
partnership agreement. Paragraph 39 of the Halsbury's Law of
England (4th Edition) states as follows:

     "Partnership agreements, like any other agreements, will
     be construed according to normal canon of construction,
     so that a court will construe a partnership agreement in       F
     the light of partners objectives, and terms may be implied
     by the Court to give the agreement business efficacy."

      34. In the case of Mills v. Clarke, [1953 {1} AER 779] the
defendant started the business of a photographer and then G
admitted the plaintiff- a successful freelance photographer as
a partner. The leasehold premises, furniture and studio
belonged to the defendant. It was intended to record the terms
of partnership into a formal agreement, but no terms were ever
settled, except that the partners were to share the profits equally. H
    896     SUPREME COURT REPORTS                  [2010] 1 S.C.R.


A   On dissolution of the partnership it was held that no terms ought
    to be implied except such as were essential to business efficacy
    and that only consumable items of stock-in-trade were to be
    regarded as assets of the partnership, and the lease of the
    property, equipment and personal goodwill were to be treated
B   as being the property of the partners who brought them into
    business.

        35. The learned counsel for the Respondents contended
   that as per clauses 11 and 13 of the deed, the land, the
C building and the machinery became the property of the firm and
   the said property has to be treated as the property of the firm
   under Clause 21 and learned counsel for the respondents
   further submitted that as the plaintiffs share was only 2 anna
   as per clause 4, the value of the above properties of the firm
  .shall be distributed in the ratio of 2:14 between them.
D
        36. The learned counsel for the respondents relied on
  various cases of this court. In the case of Commissioner of
   Income Tax, Madhya Pradesh v. Dewas Cine Corporation,
  [(1968) 2 SCR 173], this Court held that "a partner may, it is
E true, in an action for dissolution insist that the assets of the
  partnership be realised by sale of its assets, but where in
  satisfaction of the claim of the partner to his share in the value
  of the residue determined on the footing of an actual or notional
  sale property is allotted, the property so allotted to him cannot
F be deemed in law to be sold to him.

         37. Under the Partnership Act, 1932, property which is
    brought into the partnership by the partners when it is formed
    or which may be acquired in the course of the business
    becomes the property of the partnership and a partner is,
G   subject to any special agreement between the partners, entitled
    upon dissolution to a share in the money representing the value
    of the property."

       38. In the case of Narayanappa v. Krishtappa, [(1966) 3
H   SCR 400], the issue was whether on relinquishment of rights
   MOHD. LAIQUIDDIN AND ANR.. v. KAMALA DEVI · 897
  MISRA (DEAD) BY LRS. [TARUN CHATTERJEE, J.]

by partners of an erstwhile partnership, there was a transfer of · A
immovable property, which required to be registered to
constitute a valid transfer. This Court observed:

     "No doubt, since a firm has no legal existence, the
     partnership property will vest in all the partners and in that B
     sense every partner has an interest in the property of the
     partnership. During the subsistence of the partnership, ·
     however, no partner can deal with any portion of the
     property as his own ... His right is to obtain such profits, if
     any, as fall to his share from time to time and upon ·.
     dissolution of the firm to share in the assets of the firm C
     which remain after satisfying the liabilities set out in SAS.
     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 ... The
     person who brought it in would, therefore, not be able to D
     claim any exclusive right over any property which he has
     brought in, much less over any other partnership property."

    39. This principle was reiterated in the case of Malabar
Fisheries Co. Calicut v. CIT, [(1979) 4 SCC 766].                    E

   40. In the case of S. V. Chandra Pandian v. S. V. Sivalinga
Nadar [(1993) 1 SCC 589], this Court held that:

    "In th~ entire asset of the firm all the partners have an
    interest albeit in proportion to their share arid the residue,   F·
    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 ... The mode of settlement of accounts set out in
    Section 48 clearly indicates that the partnership asset in       G
   ·its entirety must be converted into money from the pool
    disbursement has to be made.:."

    41. In the light of the argument advanced by the learned ·
counsel for the parties, the relevant provisions of the Act and
                                                                     H
    898      SUPREME COURT REPORTS                  [2010) 1 S.C.R.

A the clauses of the deed, we do not find any infirmity in the
  reasoning given by the learned Judge of the High Court. It is
  true that there was no intention from either of the parties to treat
  these properties as the properties of the firm. A careful perusal
  of Clause 24 clearly indicates that the land as well as the
B building with the fixtures etc., to be vested with the original
  plaintiff (since deceased), after the expiry of term of 42 years.
  It is also true that directing the delivery of the entire property to
  the appellant would cause prejudice to the rights of the
  Respondents and would put him to loss. As noted hereinabove,
c the partnership got dissolved on the death of the original plaintiff
  (since deceased), it would be reasonable to allow both the
  parties to take their respective properties. The Appellants are
  entitled to the exclusive possession of the land and the
  Respondents are entitled to take away the movables from the
  property and recover the value of the buildings and structure
0
  embedded to the land. It has to be assessed by the technically
  qualified person. The Appellants are liable to pay the value of
  the remaining structures after adjusting the amount if any due
  to the Appellants.
E         42. Accordingly, we do not find any merit in these appeals
    and the appeals are thus dismissed. There will be no order as
    to costs.
    B.B.B.                                      Appeals dismissed.