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S.V. CHANDRA PANDIAN V. S.V. SIVALINGA NADAR (1993)1SCC589

S.V. CHANDRA PANDIAN V. S.V. SIVALINGA NADAR (1993)1SCC589

FACTS

  • The case involves four appellants and two respondents who are brothers.
  • Disputes arose among the brothers regarding the partnership businesses and properties.
  • To resolve these disputes, they entered into an arbitration agreement on October 8, 1981.
  • The agreement referred to various disputes among them related to business concerns, immovable and movable properties, and other relatives.
  • The 3-arbitrators accepted the reference, heard the parties, and circulated a draft award.
  • After considering responses from the disputants, they made their final award on July 9, 1984.
  • The award detailed the properties belonging to or claimed by the two firms and included a residuary clause for assets not covered in the award.
  • It also addressed the use of firm names, claims of relatives, and properties held by the father of the disputants.
  • The award was challenged through various legal proceedings: O.P. No. 230 of 1984 was filed for direction to file the award in court, and Miscellaneous Application No. 3503 of 1984 sought a decree in terms of the award.
  • Meanwhile, under the proceeding of sec 30 for setting aside an award, The learned Single Judge of HC held that the award was stamped and submitted for registration, so there was no impediment for it to be made a rule of the Court and a decree passed accordingly.
  • However, one of the disputants, Sivalinga Nadar, obstructed the registration process, claiming that the High Court had granted a stay against the operation of the award.
  • The matter was appealed to a Division Bench of the High Court, which reversed the decision of the learned Single Judge held that the award required registration under Section 17(1) of the Registration Act and, as it was not registered, could not be made the rule of the Court.
  • The appeals were filed against this decision of the Division Bench.

ISSUE

  • Whether the arbitration award, involving the distribution of partnership assets upon dissolution, required registration under Section 17(1) of the Registration Act?

RULE

  • A partnership firm is not a distinct legal entity but a compendious name, and each partner has a beneficial interest in partnership assets. Therefore, the distribution of assets upon dissolution constitutes a mutual adjustment of rights between partners rather than a sale or transfer of property. As a result, the distribution of partnership assets, including immovable properties, does not attract the provisions of Section 17(1) of the Registration Act, and registration is not required for such distribution

HELD

  • The Court held that the award did not require registration under Section 17(1) of the Registration Act.
  • The Court emphasized that the essence of the award was the distribution of surplus properties belonging to the dissolved firms.
  • CIT v. Dewas Cine Corporation: Addressed the treatment of partnership assets upon dissolution, emphasizing mutual adjustment of rights between partners. The decision highlighted that upon dissolution, each partner's interest in the assets is adjusted, but no sale or transfer occursThe Court emphasized that a partnership firm, being a compendious name and not a distinct legal entity, does not possess separate rights in partnership assets.
  • It reaffirmed that a partner's share in partnership assets, including immovable properties, is moveable property and does not require registration upon distribution.
  • Ratan Lal Sharma v. Purshottam Harit: Examined the requirement of registration in the context of an arbitration award involving exclusive allotment of partnership assets. The decision concluded that when an award involves exclusive allotment of partnership assets, registration is required.
  • Lachhman Dass v. Ram Lal: Addressed a dispute involving transfer of ownership between brothers, not directly related to partnership dissolution. The decision held that since the award involved transfer of ownership, registration was required due to the value of the assets exceeding Rs 100.
  • The Court distinguished cases where registration was required due to specific circumstances involving assignment or transfer of rights.
  • It directed the matters back to the Division Bench to address other contentions not decided due to the registration issue.
  • Additionally, the Court instructed that the award pending registration should be registered by the Sub-Registrar despite objections if the only reason for withholding registration was the objection of one of the partners.