1. The petitioner is the defendant . The Civil Revision Petition raises a question of construction regarding a certain agreement and also a receipt and the admissibility of those documents and the stamp duty payable in respect of those documents.
2. The relevant facts are that the plaintiff and the defendant ran a tea stall business under the name and style of 'Ramnath Tea stall'. There is a deed of partnership dated 6-4-1967. This partnership was shortlived and on 5-6-1968 the plaintiff took a sum off Rs. 10,000/- from the defendant and had retired from the partnership on that day : there was what is called an agreement executed by the plaintiff in favour of the defendant. On the same day there was a receipt for Rs. 10,000/- also passed by the plaintiff in favour of the defendant acknowledging the receipt for Rs. 10,000/-. The plaitiff has filed the present suit for dissolution of partnership.
3. After the trial commenced, the defendant had sought to put in evidence both the agreement and the receipt. It was objected to by the respondent on the ground that the agreement dated 5-4-1968 was a conveyance in the eye of law and that it was not a mere deed of dissolution and that it also required registration under Section 17(1)(d) of the Registration Act. So far as the receipt was concerned, its admissibility also was questioned on the ground that the stamp duty of 10 np. paid on the document was not sufficient. The court below pronounced an order on 18-11-1972 holding that neither the agreement nor the receipt was compulsorily registrable under Section 17(1)(d) of the Registration Act. But it was held by that Court that the agreement amounted to a conveyance and has to be stamped as such, under Section 2(10) of the stamp Act. It was contended by the petitioner that it was merely a deed of dissolution of partnership and he need only pay a penalty on the deficit stamp duty. It may be noticed that the agreement was only on four stamps of the value of Rs. 2-50. So far as the receipt was concerned, it was found by the Court that the revenue stamp of 10 np. affixed was sufficient and that it did not require any further stamp only in case the agreement is stamped as a conveyance under Art. 23 of Schedule I of the Indian Stamp Act.
4. In this revision petition by the defendant, the correctness of the conclusions of the Court below both regarding the agreement and the receipt are sought to be challenged. The agreement between the parties is to the following effect :--
This Agreement executed by :
1. Ramanath Gajanand, son of Gajanand, aged 58 years, Hindu, Ranjgunj, Secunderabad, herein after called the First Party :
In favour of
2. K. R. Mallesha son of Ramabharosa, aged 37, Hindu resident of 9/B, Gandhinagar, Secunderabad, hereinafter called the Second party.
Whereas the parties herein have been running a tea stall under the name and style of 'Ramanath Tea Stall' from 3-4-1967 under a partnership deed dated 6-4-1967:
Whereas the first party desired to retire from the partnership and entrust the entire business of the second party only by making him sole proprietor by taking his share of assets.
NOW THIS AGREEMENT WITNESSETH:
1. That the First Party hereby declares and assets that he has today received a total sum of Rs. 10,000/- (Rupees ten thousand) only as and towards his share or profit, adda, bardan and tenancy rights etc. and hereby retires from the partnership and the second party herein has become the 'sole proprietor' of the said tea stall opposite to mulgi No. 8552, Ranigunji, Jinwala Compound, Ranigunj, Secunderabad.
2. The first party hereby declares that he shall have no right, title, interest or claim of whatsoever nature either in the said tea stall or in the assets or liabilities of the said tea stall on and from today and that the Second Party had become the sole proprietor of the same from today.
3. The first party shall not be responsible of liable for any debts, assets or liabilities of the said stall from today and that the second party alone shall be liable and responsible.
4. The second party shall be entitled to run the said tea stall either in the same name or in any other name as he may desire.
Executed at Secunderabad on this the 5th day of June, 1968.
5. The receipt is as follows:--
'Received a sum of Rs. 10,000/- (Rupees ten thousand only) from Sri K. R. Mallesha, son of Ramabharosa, 9/B, Gandhinagar, Secunderabad being the amount payable to me as and towards my share of profit, claim and goodwill of the partnership business styled 'Ramnath Tea Stall' Ranigunj, Secunderabad, in full and final settlement. I have no claim whatsoever in the said business on and form today, including the tenancy rights, as per the agreement executed by me in his favour today the 5th day of June, 1968.
The agreement recites that the first party viz., the plaintiff had desired to retire from the partnership and entrust the entire business to the second party by making him the proprietor by taking his share of the assets. In clause 1 of the agreement, it was stated that the first party viz. the plaintiff herein declared and asserted that he had received a total sum of Rs. 10,000/- only towards his share of profit adda, bardan and tenancy rights etc., and thereby retired form the partnership and that the second party therein had become the sole proprietor of the said tea stall etc. No reference or relience was placed by either counsel or the other clause contained in this agreement.
6. Reliance was placed by the learned counsel for the petitioner upon a decision of the High Court of Gujarat reported in Velo Industries v. Collector. Bhavanagar : 80ITR291(Guj) . In that case, a partner had retired from the partnership after the following the procedure prescribed in the Partnership Act for ascertainment of his share. The question arose whether the document which was executed was a deed of conveyance requiring stamp duty on that footing or that the document should be treated as one of dissolution of partnership only requiring stamp duty payable in that behalf under the provisions of Bombay Stamp Act. Their Lordship rejected the connection of the revenue in that case that the instrument was a conveyance of a sale. The contention on behalf of the Department was that under the document there was a transfer of interest of the retired partners in the partnership assets to the continuing partners for a sum of money and that the transaction therefore satisfied the essential elements of a sale. Reliance was placed before the Bench of Gujart High Court upon a decision of the Mysore High Court reported in Venkatachalapathi v. State AIR 1966 Mys 323 (this was relied on before me by the learned counsel for the respondent). Their Lordships pointed out that the arguments based upon the Mysore High Court decision was not well-founded. They pointed out that it ignored the true nature of the transaction embodied in the document as a simple deed of retirement stating the terms and conditions on which the three partners retired firm. The effect of the retirement was that the partners undoubtedly ceased to have interest in the partnership assets and the partnership assets continued to belong to the firm consisting of continuing partners, but there was no transfer of interest from the retiring partners to the continuing partners in consideration of a sum of money. The retiring partners merely took money representing their respective shares. The petition becomes very clear from the nature of interest of a partner in a partnership and what happens to partnership when a partner retires from a firm is borne in mind. Reference was made to the revenant passages in Lindely on partnership and a decision of the Supreme Court in Narayanappa v. Bhaskara Krishnappa : 3SCR400 . It was ruled by the Bench that the three partners retired from the firm and that their respective shares in the partnership at the dates of retirement were ascertained on taking accounts and representing the share were credited in their respective accounts with the firm. The firm continued with the remaining partners and the partnership assets continued to belong to the firm composed of the continuing partners. There was clearly and indisputably no sale of interest in the partnership assets by the retiring partners to the continuing partners.
7. That it ought not to make any difference if the procedure prescribed by the partnership act for ascertaining the share of an out going partner is not followed is clear from a decision of the Allahabad High Court in N. B. Singh v. Chief Inspector of Stamps. : AIR1972All1 . In that case, their Lordships read the particular document evidencing dissolution of partnership and held that it can reasonably be construed only as recording a special mode of adjustment and settlement of accounts between the partners in accordance with their mutual agreement instead of following the rules mentioned in Section 48 of the partnership Act. Having regard to these decisions. It appears to me that the position in the instant case is very similar to the decisions referred to by me more particularly the decision reported in (1971) 80 ITR 2191 . The words used in the fact that the plaintiff intended to retire from the partnership and that he took money representing his share in the partnership and went out of the firm. It may be argued that in Velo Industries' case : 80ITR291(Guj) the partnership continued and in the instant case there were only two partners and if one goes out, there is no question of a continuing partnership and that fact distinguish the present case from the Gujarat case. But I do not think that it would make any difference when we are construing whether a particular document amounts to a conveyance or a deed of dissolution of partnership. This view receives support from the observations of the Supreme Court in E. F. D. Mehta v. M. F. D. Mehta : AIR1971SC1971 which are to the following effect :
'When the partnership consisted of only two partners and one partner agreed to retire there can be no doubt that the agreement that one of the partners will retire amounts to dissolution of the partnership.'
I have no hesitation in holding that the agreement in the instant case merely amounts to a deed of dissolution and not a conveyance as construed by the court below.
8. So far as the receipt is concerned, the Court below in its order stated :--
'A revenue stamp of 10 np. is affixed as a conveyance under Art. 23 of Schedule I of the Indian Stamp Act.'
Even without my holding that it is a conveyance, the qualification mentioned by the Court viz., that the 10 np. was sufficient in case the agreement was to be stamped as a conveyance. I think he is mixing up for of two things which are wholly unrelated for the purpose of the Stamp Act. But now that I have held that the agreement in question need be stamped only as a deed of dissolution of partnership, this portion from the order stands deleted.
9. The result is, I set aside the order of the Court and hold that the agreement dated 5-6-1968 should be stamped only as a deed of dissolution of partnership. I also hold that the 10 np. stamp paid on the receipt is quite sufficient and its admissibility should not be linked with the deed of agreement.
10. The revision petition is accordingly allowed with costs.
11. Revision allowed.