1991 (3) TMI 102 - HC - Benami Property

Summary

Issues:
Partnership dissolution and distribution of assets, Benami transactions, Applicability of Benami Transactions (Prohibition) Act, Liability of partners for debts, Interest on claimed amount.

Partnership Dissolution and Distribution of Assets:
The judgment involves the dissolution of a partnership firm, where assets were divided between the partners. The partnership firm, consisting of two partners, was dissolved through a deed of dissolution. The building and power connection went to one partner, while machinery, goodwill, assets, and liabilities except one item were allocated to the other partner. The exception of liability was specified to be met by one partner. Certain amounts invested in the names of plaintiffs were contested in separate suits. The trial court decreed the suits, but the lower appellate court dismissed them.

Benami Transactions and Applicability of Benami Transactions (Prohibition) Act:
The defendant-firm argued that the amounts invested in the names of the plaintiffs were actually owned by one partner and shown benami in the firm's accounts. The court held that the defendant could not use the defense of benami transactions due to the Benami Transactions (Prohibition) Act. Citing previous judgments, the court emphasized that the Act is retrospective and applies to pending cases. Therefore, the defendant's argument regarding the ownership of the amounts was dismissed.

Liability of Partners for Debts:
The question arose regarding which partner should be liable for the amounts due to the plaintiffs. The contention was whether the liability should fall on the partner specified in the dissolution deed or the partner in whose account the amounts were adjusted during dissolution. The court considered the arguments and held that the partner who received credit for the amounts during settlement should be liable. It was determined that the partner who was paid out of partnership funds should meet the claims of the plaintiffs.

Interest on Claimed Amount:
The appellants requested for interest on the claimed amount, citing Section 34 of the Civil Procedure Code. The court agreed and allowed future interest at the rate of 6% per annum from the date of the suit till realization.

In conclusion, the appeals were allowed, and the judgments of the lower appellate court were modified. The suits filed by the plaintiffs were decreed with 6% interest per annum against the partner who received credit for the amounts during the dissolution of the partnership.