2019 (11) TMI 1 - SC - Indian Laws

Privity of contract - Whether the decree obtained by the predecessor of the appellants, can be executed against the appellants or not? HELD THAT - In the case on hand, as much as there were only two partners, the partnership itself stand dissolved, in view of death of a partner - It is true that as per the deed of partnership, the partners have agreed, in the event of death of either party, their respective legal representatives shall automatically become partners in the partnership firm and they shall continue to act as partners of the firm, till the venture envisaged under said partnership is completed and such legal representatives who become partners shall have the same rights and shall be subject to same liabilities and responsibilities, as the deceased partner. The executable decree depend on the rights litigated by the parties. In the case on hand, the original decree was obtained against the predecessor of the respondents, who was party to partnership deed. In view of death of one of the partners, the partnership itself stands dissolved statutorily, by operation of law, in view of provision under Section 42(c) of the Indian Partnership Act, 1932. When the respondents are not parties to the partnership firm, they are not bound by the decree obtained by the predecessor of the appellant. More so, when it is a case of the respondents that they have not derived any assets and liabilities arising out of the partnership firm, decree obtained by the original plaintiff is not executable against the respondents. The respondents were not parties to the partnership deed and that the partnership stands dissolved, in view of death of one of the partners, the respondents have not derived the benefit of assets of the partnership firm, the decree obtained by the predecessor of the appellants, is not executable against the respondents herein. The Trial Court has rightly allowed the application filed by the respondents under Section 47 of C.P.C. and there is no error committed by the High Court, in confirming such order by dismissing the Civil Revision Petition filed by the appellants herein - Appeal dismissed.

Summary

Issues Involved:
1. Executability of the decree against legal representatives of a deceased partner.
2. Dissolution of partnership upon the death of a partner.
3. Validity of clauses in the partnership deed against statutory provisions.

Issue-wise Detailed Analysis:

1. Executability of the Decree Against Legal Representatives of a Deceased Partner:
The appellants, legal heirs of late Sri Jai Narayan Misra, argued that the decree obtained by their predecessor should be executable against the respondents, legal heirs of late Smt. Hashmatunnisa Begum, based on the partnership deed's clause that legal representatives automatically become partners upon a partner's death. The decree, obtained in O.S. No. 580 of 1988, permanently restrained the defendant from developing and selling the property and directed the defendant to sign necessary documents for layout plan submission.

However, the respondents contended that the partnership dissolved upon the death of a partner as per Section 42(c) of the Partnership Act, 1932, making the decree non-executable against them. The Court held that since the partnership dissolved by operation of law upon the death of a partner, the decree obtained against the deceased partner could not bind the legal representatives. The principle of "Privity of Contract" was cited, emphasizing that only parties to the contract are bound by it.

2. Dissolution of Partnership Upon the Death of a Partner:
The Court examined Section 42 of the Partnership Act, 1932, which stipulates that a partnership dissolves upon the death of a partner unless otherwise agreed. Despite the partnership deed's clause that legal representatives would continue as partners, the Court found that the partnership dissolved upon the death of one of the two partners, making the partnership non-existent and the decree unenforceable against the legal heirs.

3. Validity of Clauses in the Partnership Deed Against Statutory Provisions:
The Court scrutinized the partnership deed's clause that legal representatives would automatically become partners and found it contrary to Section 42(c) of the Partnership Act, 1932. It held that such clauses, which run contrary to statutory provisions, are void and unenforceable. The Court emphasized that any contract clauses against third parties, who are not original partners, would not bind them and are opposed to public policy.

Conclusion:
The Court concluded that the decree obtained by late Sri Jai Narayan Misra was not executable against the respondents, as the partnership dissolved upon the death of one of the partners. The legal representatives of late Smt. Hashmatunnisa Begum were not bound by the decree as they were not parties to the original partnership deed. The appeal was dismissed, affirming the decisions of the Trial Court and the High Court, which had held that the decree was void and un-executable against the respondents.