• Partnership firm dissolution, takeover, etc.

My father ( I am daughter) had Partnership at will with my two brothers. Name of firm M/s ( Name of my father). On death of my father, two brothers created new Partnership deed without giving any notice to me .New Deed says Old firm is taken over ( all assets and liabilities of old firm ) by new firm with name Exactly same that is M/s (Name of my father) and Profit ratio equal between 2 brothers. They have not created any separate legal heir account.In the Capital clause they have mentioned Partners are free to increase/decrease their capital and no initial capital is mentioned in deed. Obviously No Goodwill has been accounted.They have produced forged Will in court in which this Partnership is not mentioned in my father's assets for which Probate case is contested by me. I have also put Partition case for all properties of my deceased father. I have submitted private Document Examiner report saying Signatures on will are forged. 
Rs 1 lac was transferred through RTGS to my son in law through Partnership account of OLD FIRM in name of my father..Cheque for this RTGS transfer was issued by one of my brother. My son in law has shown this 1 lac as Gift from my father in his Income tax return.
In retaliation to my Partition suit, My brothers have instituted false claim against my son in law through NEW FIRM saying loan of Rs 1 lac was taken by him on 12 percent interest. No correspondence on this transfer was ever exchanged by firm. They had just issued legal Notice for instituting this suit which was suitably replied by my son in law.An amount of Rs 1 lac had been deposited as cash in partnership bank account by my brother ( obviously on verbal instruction of my father) on same day before making this RTGS transfer when this RTGS transfer was made. They have manipulated accounts of OLD FIRM as my father died few days after this RTGS transfer and shown this amount as loan to my son in law . 
My questions are:
1. In my view New firm is not formed complying with legal provisions .If so, Under which clause/section of Partnership or Other act (like Indian Contract Act etc) my son in law should contest this claim.
2. New firm was not existent when RTGS transfer was made. Is this sufficient ground to pray for dismissal of suit on this ground.
3 Can a newly made firm take over liabilities and assets of another firm which gets dissolved on Death of partner without consent of all legal heirs of deceased partner. If not under which section case should be fought . In Old Partnership deed there is no clause which says business can be carried over by other partners in such eventuality. However it says disputes among partners shall be solved under arbitration act as per indian partnership act.
Asked 6 years ago in Business Law

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10 Answers

under Section 42 of the Partnership Act it is provided that "subject to contract between the partners, a firm is dissolved-(c) by death of a partner."

2) It is evident that this particular provision is .subject to the contract between the partners. Where the contract between the partners contemplates expressly or impliedly that the death of a partner would not result in dissolution of the partnership firm, the said term in the contract is to be given effect to superseding the provision contained in Section 42(c).

3) the value of the assets should be ascertained in order to reimburse the heirs of the deceased partner in the shape of money

4)to determine as to what share in money they are entitled the provisions of Section 48 of the Partnership A, have to be followed which prescribe at first for calculating the losses, deficiencies of capital and other liabilities and that is why it is almost a settled law that for making distribution of the assets between the partners of the dissolved firm or otherwise, the provisions of Section 48 must be followed.

5) Section 46 of the Partnership Act. lays down that on tile dissolution of a firm every partner or his representative is entitled as against alia other partners or their representatives to have the property of the firm applied in payment of the debts and liabilities of the firm and to have the surplus distributed among the partners or their representatives according to their rights. This provision has to be strictly followed when the firm is dissolved but the principle lying under this provision has also to be followed where the firm is not to be dissolved and share of the outgoing partner is to be determ,ined

6) in view of arbitration clause in partnership deed disputes between the legal heirs of deceased father have to be referred to arbitration

7)on dissolution of firm on father demise you are entitled to your share of surplus generated

8) as far as your son in law is concerned he should deny that any loan was taken at 12 per cent interest

9) there is no loan agreement signed by son in law nor any agreement to pay interest .

Ajay Sethi
Advocate, Mumbai
94518 Answers
7485 Consultations

5.0 on 5.0

Dear Cleitn,

SIL has no claim in ur father`s assets, So no locus standi to contest.

If any claims arise than it will be by old firms, and in the event of the death of a partner, his heirs or legal representatives or their duly authorized agents shall have a right of access to and to inspect and copy any of the books of the firm.

And acquisition by new firm (with all assets and liabilities of old firm) cannot be possible without introducing legal heirs of deceased partner or until deceased share not distributed to his legal heirs.

Yogendra Singh Rajawat
Advocate, Jaipur
22596 Answers
31 Consultations

4.4 on 5.0

As per S.17(a) of the act, the mutual rights and duties shall continue in the reconstituted firm.

As per S.32(c), where the partnership is at will by giving in writing notice to all the partners of his intention to retire.

S.43 pf the act describes dissolution by notice of partnership at will.

The answer to Q1 in reference to the above provisions seems the newly constituted firm without the consent of the active partner and expelling without notice itself is unsustainable. As you have locus standi, your son in law need not contest.

2. Based on the aforementioned provisions and authorities declared by HC & SC, the act of the partners can be declared as illegal. Your son in law is not at all connected with the affrairs of the firm, therefore, the partners have to explore legal remedy to recover the loan advanced to him and cannot claim that it has been compensated for your expulsion.

3. As per S.35 of the act, where under a contract, the firm is not dissolved, the estate of the deceased shall not be liable for any act of the firm.

Rajaganapathy Ganesan
Advocate, Chennai
2132 Answers
8 Consultations

4.9 on 5.0

First of all your husband has to prove his locus standi to contest a case. After death of partner his legal representatives have right to be inserted as partner of firm. Only legal representatives have right over assets and liabilities of the firm.

Swarnarka Chowdhury
Advocate, Mysore
1879 Answers
5 Consultations

5.0 on 5.0

Onus on them to prove, money given as loan and without any documentary proof, it cannot be considered as loan.

Also, for giving loan on interest, Lending license is required. On that basis also, i can not be considered as loan as unenforceable debt.

Yogendra Singh Rajawat
Advocate, Jaipur
22596 Answers
31 Consultations

4.4 on 5.0

Respected mam...

1-Takeover is a process wherein an acquirer takes over the control or management of a target company by acquiring the substantial quantity of shares or voting rights of such company. The concept of Takeover and the procedure for Takeovers have been enshrined in the Securities Exchange Board of India, (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

1-It involves appointment of a merchant

2- public announcement

3-Timing of the public announcement of offer

4-ecross account

5- letters of offer..

2...- yes we have right to make this ground but it's upto court weather court dismis on this ground or not

3-After dissolution of the firm, every partner in entitled to restrain any other partner or his representative from carrying on a similar business in the firm name or from using any of the property of the firm for his own benefits until the affairs are complete. It was held in a case that on dissolution of partnership, quota could not be divided as it was not an asset of partnership but a matter of privilege and the grant of its will lie with the concerned authority. Therefore, the quota, which is a license, cannot be divided on dissolution....

Thank you

Dinesh Sharawat
Advocate, Delhi
1263 Answers
12 Consultations

4.9 on 5.0

you have understood the line of action to be followed .

that should suffice

Ajay Sethi
Advocate, Mumbai
94518 Answers
7485 Consultations

5.0 on 5.0

And when it is shown as GIFT in returns, than u have good case.

Yogendra Singh Rajawat
Advocate, Jaipur
22596 Answers
31 Consultations

4.4 on 5.0

1. In my view New firm is not formed complying with legal provisions .If so, Under which clause/section of Partnership or Other act (like Indian Contract Act etc) my son in law should contest this claim.

How is your son in law entitled to any rights in the dissolved partnership firm?

You as a daughter of the deceased partner and on the basis of his one among the successors in interest can claim your share out of his movable and immovable assets out of the so called dissolved partnership firm and can drag the erstwhile partners whop swindled off the shares of the deceased partner in the company, which was dissolved upon his death.

You can file a criminal complaint with the police for misappropriation of funds, cheating you by not allotting you your legitimate share, breach of trust, embezzlement of accounts, high handedness and various other economic offences.

2. New firm was not existent when RTGS transfer was made. Is this sufficient ground to pray for dismissal of suit on this ground.

The new firm, if had taken over the assets and liabilities of the dissolved firm by an agreement, then it can make a claim from the debtors to return the loan borrowed from the previous firm, however you can look for any other ground while seeking dismissal of suit.

3 Can a newly made firm take over liabilities and assets of another firm which gets dissolved on Death of partner without consent of all legal heirs of deceased partner. If not under which section case should be fought . In Old Partnership deed there is no clause which says business can be carried over by other partners in such eventuality. However it says disputes among partners shall be solved under arbitration act as per indian partnership act.

When a partner dies, subject to any contract to the contrary, partnership is dissolved. Section 42 of the Indian Partnership Act, 1932 (“Act”) provides for dissolution of partnership on occurrence of certain contingencies which includes ‘death of the partner’ as one of those contingencies.

However, in cases where the terms of the partnership deed are silent on continuation of partnership’s business, a contract to continue the partnership after the death of a partner may be implied from the conduct of the parties. This means that where it is evident that such an intention was present, the nominee or legal representative of the deceased partner can take the place of deceased partner and business of the firm can be continued with the presumption that the partnership was never dissolved on the death of that partner. The above legal position is based on two assumptions- (a) there are more than two partners in the firm, and (b) the legal representatives are interested in taking forward the business of the firm.

Section 42(c) of the Partnership Act can appropriately be applied to a’ partnership where there are more than two partners. If one of them dies, the firm is dissolved; but if there is a contract to the contrary, the surviving partners will continue the firm.

You can sue the present firm on the basis of the illegal dissolution of the previous firm and fraudulently acquiring the assets of the previous firm and getting annexed to this new firm either before CLB or NCLAT.

T Kalaiselvan
Advocate, Vellore
84711 Answers
2172 Consultations

5.0 on 5.0

1. For my son in law .To contest this suit on Ground of

a Non availability of Money Lending License with firm,

Money lending license is not required if this is reflected in the books of accounts of the company.

b No contract /agreement between firm and him either written or oral

There has to be some evidence for advancing this loan amount to your son in law, or else they may bank upon the RTGS evidence to establish the same, in that event your son ion law has to look for strong and substantial evidence to defend his interests.

c Amount transferred as Gift by individual ( but received unknowingly through Partnership account) which is shown as Gift in his Income tax statement by individual ( Nana of his wife on occassion of marriage of his grandson( Pota)

Reflecting this amount as gift in his ITR will not be sufficient to defend himself, he may have to look for some other strong reason to rebut the charges.

d Cash deposit of gifted amount first made in firm account and immediately afterwards RTGS transfer made

This clearly indicates that the amount was transferred from the partnership firm only.

e Dissolution of firm which made RTGS transfer

It was transferred before dissolution hence it is a valid transfer, so when the assets were taken over by the new firm as it is then they can claim the same.

T Kalaiselvan
Advocate, Vellore
84711 Answers
2172 Consultations

5.0 on 5.0

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