Vanshika Bhalla
On February 27, 2025 the Supreme Court reaffirmed that any contribution by a partner to a partnership firm becomes the firm’s property under Section 14 of the Partnership Act, 1932. Legal heirs have no exclusive rights over such property after the partner’s death or retirement, except for their share in profit.
A Bench of Justices Sudhanshu Dhulia and Ahsanuddin Amanullah ruled in a case where legal heirs claimed ownership of a hotel that was partnership property. The Court emphasized that once a property is brought into the firm, it becomes firm property unless proven otherwise. No formal document is required for transfer, though a relinquishment deed can be executed for formalization.
The Court cited Addanki Narayanappa v. Bhaskara Krishnappa (1966) and The Chief Controlling Revenue Authority v. Chidambaram (1970) to reinforce that intent alone can convert personal property into partnership property.
Observing that Bhairo Prasad Jaiswal, a founding partner, contributed land and constructed a hotel for the partnership, the Court ruled that his legal heirs had no claim over it. He acquired the property in 1965 and, after forming the partnership in 1972, developed it with his brother Hanuman Prasad Jaiswal to run as a hotel. His actions clearly showed his intent to transfer ownership to the firm. The appeal was dismissed, reinforcing partnership law principles.
Case Name: Sachin Jaiswal v. M/S Hotel Alka Raje & other
Case Number: 2025 (SC) 258
Bench: Justices Sudhanshu Dhulia and Ahsanuddin Amanullah