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Report No. 67

Chapter 42

Article 46

42.1. Article 46 levies duty on an instrument of partnership.

42.2. In the law of partnership a question which is often debated is whether there can be a partnership between two firms. In the Partnership Act a partnership is described in terms of relationship between "persons". According to the definition of "person" in section 3(42), General Clauses Act, a firm is not regarded as a person for the purposes of that Act.1 Hence, a firm as such is not entitled to enter into partnership with another firm, or with a Hindu undivided family or with an individual.2 It has been observed3 that "the real partnership is constituted not between the individual and the firm, but between the individual and the aggregate of the persons who constitute the firm".

On this point, no change is considered necessary.

1. (a) Basanti v. Babu Lal, AIR 1931 All 225;

(b) Jai Dayal (in re:), AIR 1933 All 77.

2. Dulichand v. I.T. Commissioner, AIR 1956 SC 354 (358), para. 15.

3. Chhotalal Devichand v. I.T. Commissioner, AIR 1959 Bom 152 (154) (per Chagla, C.J.).

42.3. The Supreme Court has, in Dulichand v. I.T. Commissioner, 1956 AIR SC 354, followed in AIR 1967 Mad 449 (451), para. 5 (DB), 1raced the history of the law of partnership in India, which is based on the English law and mercantile usages relating to a firm. Under the English common law, a firm, not being a legal entity, could not sue or be sued in the firm name, or sue or be sued by its own partner, for one cannot sure oneself. Later on, this rigid law of procedure, however, gave way to considerations of commercial convenience, and the law permitted a firm sue or be sued in the firm name, as if it were a corporate body.2 In the absence of such special provisions, the general rule that a firm is not a legal entity operates.

1. See also Bhagwanji v. Alembic Chemical Works, AIR 1948 PC 100.

2. Cf. order 30, rule 9, Code of Civil Procedure, 1908.

42.4. Question as to whether a deed is a conveyance or partnership deed.-

The second question under this article concerns conveyances. Questions sometimes arise whether an instrument is a conveyance or a partnership deed. In one case1 the Madras High Court has dealt with the difference between a partnership deed and a conveyance.2 In that case, the parties to a protracted partition suit, in which the assets of a trading joint Hindu family were involved, executed an instrument styled as a "partnership deed". By virtue of the decree in the suit, one of the parties to the litigation agreed to take over the assets on payment of a certain amount in court, and those assets were declared as properties of the partnership firm.

The court held that this instrument was not a "conveyance", but was a deed of partnership, and, therefore, there was no presumption that the partner "sold" his property to the partnership came into existence under the document. There were no words which expressly or by implication amounted to a transfer of interest as between the partner who threw his property in the partnership and the rest of the partners, and, therefore, there was no presumption that the partner "sold" his property to the partnership firm. The document was held to be an instrument of partnership.

1. State v. Chidambaram, AIR 1970 Mad 5.

2. Article 23.

42.5. Of course, the case does not call for an amendment of the law, since the question is one of applying the legal principle, which appears to be this-that a conveyance transfers assets from one person to another, while a partnership pools them together.

42.6. Present position to a duty.-

It may be noted that at present, under Article 46, an instrument of partnership is chargeable with a duty of two rupees eight annas if the capital of the partnership does not exceed rupees five hundred, and with ten rupees in any other case. A partnership between firms, if it does not fall under Article 46 because of the stricter view taken in the law of partnership, would fall solely under "agreement" [Article 5, clause (c)], for which the duty is eight annas. Of course, it is not our direct object to impose a higher duty as such on instruments of partnership. The principal object is to take note of business reality, for the limited purpose of the stamp law, and to state the position clearly so as to avoid controversies.

42.7. No change.- Article 46 therefore needs no change.



Indian Stamp Act, 1899 Back




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