Sachin Jaiswal v. M/S Hotel Alka Raje & Other, (2025)

Introduction 

This is a landmark judgment which lays down that separate immovable property of a partner becomes firm property under Section 14 of the Indian Partnership Act, 1932, based on the partner's intention to contribute it to the firm. 

• The Judgment was delivered by the Supreme Court of India on February 27, 2025. 

Facts 

• The dispute involves a plot of land purchased by Bhairo Prasad Jaiswal through a registered sale deed in 1965. 
• In 1971, Bhairo Prasad entered into an oral partnership with his brother Hanuman Prasad Jaiswal, formalized through a Partnership Deed dated 11.10.1972, creating M/s Hotel Alka Raje (Respondent No. 1). 
• The two brothers jointly constructed a hotel building on this land to operate the business. 
• In 1983, Bhairo Prasad executed a registered Relinquishment Deed, releasing his rights over the land in favour of M/s Hotel Alka Raje, explicitly stating his legal heirs would have no claim to the property. 
• Despite relinquishing title, he continued as a partner until his death in 2005. 
• In 2018, the remaining partners and firm filed a civil suit for declaration of title and permanent injunction against the appellants (Bhairo Prasad's heirs), who attempted to claim the property. 
• The Trial Court ruled in favour of the firm, and the High Court clarified the decree should be read solely in favour of M/s Hotel Alka Raje. 
• Hence, the matter was before the Supreme Court. 

Issues Involved 

• Whether separate immovable property of a partner, brought into use for partnership business, automatically becomes 'property of the firm' under Section 14 of the Indian Partnership Act, 1932, regardless of formal documentation? 
• Whether the High Court erred by not adjudicating the appellant's contention that a relinquishment deed is insufficient for transferring property rights under the Transfer of Property Act, 1882? 
• Whether the High Court correctly clarified that the decree should be read solely in favour of the partnership firm (Respondent No. 1)? 

Court’s Observations 

• The Court held that the High Court correctly applied Section 14 of the Partnership Act, 1932, which governs partnership property matters rather than the Transfer of Property Act, 1882. 
• The Court emphasized that Section 14 stipulates property of the firm includes all property and rights brought into the firm's stock or acquired for business purposes. 
• The Court found it was an admitted fact that Bhairo Prasad contributed the property to the firm, and his act of jointly constructing the hotel after forming the partnership demonstrated clear "evidence of his intention" to contribute the land and building as his capital to the firm. 
• The Court relied on precedent from Addanki Narayanappa v. Bhaskara Krishnappa, establishing that once separate property is brought in as capital for a joint venture, it ceases to be the individual's asset and becomes partnership property. 
• The Court cited the Madras High Court Full Bench decision in The Chief Controlling Revenue Authority v. Chidambaram, confirming property can be contributed to partnership stock through evidence of intention without formal documentation. 
• The Court held there was "no occasion" to separately address the Relinquishment Deed's validity since the property had already legally converted to firm property when Bhairo Prasad contributed it and commenced business construction. 
• Conclusively, the law was laid down that a partner's separate property automatically becomes firm property under Section 14 based on the partner's intention to contribute it, regardless of formal transfer documentation. 

Conclusion 

The Court laid down in this case that separate immovable property of a partner automatically converts to firm property under Section 14 of the Indian Partnership Act, 1932, when there is clear evidence of the partner's intention to contribute it to the firm, and formal transfer documentation is not required for such conversion.