FIRM MUKAND LAL VEER KUMAR & ANR. versus SRI PURUSHOTTAM SINGH & ORS.

Citation: [1968] 2 S.C.R. 862 · Decided: 31-01-1968 · Supreme Court of India · Bench: J.C. SHAH, V. RAMASWAMI · Disposal: Dismissed

Judgment (excerpt)

FIRM MUKAND LAL \'EER KUMAR & ANR. 
v. 
SRI PlJRUSHOTl'A\'I SINGH & ORS. 
January 31, 1968 
[J. C. SHAH AND V. RAMASWAMI, JJ.) 
Ptorincial /11soh·ency Act (5 of 1920), s. 9(l)(c)-Trv.11sfer of pro. 
perry by Dl'ed-All<'1-:ed act "-' insolvcucy-Threr 1non1hs pt'Tiod start.t 
w11etlzer frnnz• execution or rl'gistrlltion-Whethcr finn can be adjudicated 
irnolvent-P<1rtners when can he adjudicated i1no/l•ent. 
M a p;.1nncr of. a firn1 cxccurcJ a dccJ of gif1 in Octob.;r, 1957 of 
a property. \\hich v•as not partnl'r..,hip property. 
·rhe deed of gifts v.·as 
rcgi>tcrcd in March 1958. 
In April, ~lay, 1958 and January 1959, peli-
rions \\'ere tiled alleging thar the firn1 and its l\l/O p<irlncrs had comn1i1te<l 
acts of in1,olvcncy <11HI therefore, thl!y shoulU he declared in~olv·~nts. The 
lo\\·cr court<; .a<ljudic;11ed lhe firm and 
rh-~ partner-; insolven!. 
'fhl! High 
C."ourr, in revision. confinncd th1.? adjudica1ion of insolvency \\'ith rcgan.J 
to lhc firn1 and \I. hut set a.;,idc \\'ilh regard 10 the other partner. In 
11ppeal to thi_.; Couri it \\'3\ conrendeJ lhJt (i) the siarling point of the 
three n1onth"' period 
pr·~scrihcd under s. 9(i) (c) of the Provincial Jn-
.!,Q)vcnc)' Ac1 .... hould he lhc d;ite of execu· i0n of the Jeed of gifr and not 
the date of rcgisrration; (ii) no order of ;tdjudication could be made agains1 
;1 firm hut it could only be n1aUc 
agJin~I the parlners individually; and 
(iii) the Jirn1 should no~ have hecn d·2clarcU 
in~olvcnt n1ercly because of 
1hc deed of g1fl cx·,culed hy \1. 
llELD: (il Scciion 49 of the Indian Rcgi!:>lra1ion Act implies thal a 
do..:umcnt by rc<i<.On of ih c:xecution·alone cannot h;ivc lhc effect of lr'1n.;;-
fcrring the properly. 
The deed of gift cxccut-:!d by f\f, could not be con-
sidered 10 he an acr of in:-.olvcncy unless a v<1lid tr<1nsf·.!r of properly \\'as 
n1adc hv I hat Uocun1cn1 and such ;1 valid t r;.insfer could he said to hu\-e 
been m;de only when the docun1cnt \Vas registered. J866 D-FJ 
.J.akh111i Cliond v. Kt·\110 R.t1111. 1.L.R. 16 L<1h, 735. Sar~·atl1adu /)h'lJ-
r"yya' v. K uruba Suhh11n11a, I. L. R. 5 8 \.fad. J 66 and /)istril·I Bua rd Bij11or 
v. A1 uht1111n1t1d A hdul S:do111, I. l. R, J 94 7 AIL 624, approve<l. 
U ()11 M~11u1g v. ,\fa1111,1,• Shwc //paung, A.l.R. 1937 Rangoon 446, <lis-
approve<l. 
(ii) An ord1·r of adjuJicarion could be made 
again~r the 
firm 
in 
rhc prc~cnt case if the proper condition . .;; \\'ere sa1isfied. Seclion 79(2) (c) 
of the Act provides for rules to he ma<lc bv the High Court as to the 
procedure to he follo\1.-'Cd \\'h-.!11 :he debtor is a firn1. 
'rhis section, there-
fore. ;1ssumc) rhat ;ut adjudication order can 
he n1ade 
under !he Act 
againsr 1hc firm in the firm·s name. [~67 G-l~] 
J:'x ptirlt' /llc1i11 (1879)12 Ch. D. 5~2. rcrcrred to. 
(iii) Jn order to support an adjudication again5t a firm ihcrl' n1ust be 
proof thal c;1ch of the partners h;1~ committed some act Of insol\'cncy. If, 
ho"·ever, a joint acr ol insoh·ency iS relied upon it must be shoy.·n to be 
the aL"t of <111 rhe 
parln~rs. 1\n or<lcr for adjudication can also be made 
<1J!ains1 a firn1 if 1hcrc v.--;is an ac 1 of insolvency by an agent of 1he firm 
"·hich W<tS !luch :is n1us1 ncccs\arily he in1ru1ed to lhC firm. 
·rh~ cxpla.-
n:i!il1n ro s. 6 of the Acr docs nor by do\\·n !hat an act of insolvency of 
• 
A 
II 
c 
D 
E 
F 
G 
II .. 
A 
B 
c 
D 
E 
F 
G 
H 
FIRM MUKAND LAL v. PURUSHOTAM (Ramaswami, J.) 
863 
the agent shall. be attributed to the principal but that it ma~ .. ~e treated as-
thc Act of the principal. [868 E, F] 
· 
rfhe on.Jer of the lower court, so far it adjudicated the registered firm 
as insolvent. rnu~t be· set aside. 
The property of which M made gift 
was not a partnership property an<l 
ther·~ was no collective act of insol· 
vcncy allcgc<l on behalf of all the ·partners <;Jf the firm. 
Re : lvlvhanuul Hasan1 & Co. 24 Born. l.R. 861 and Gopal Naidu v. 
Mohan/al Kan'yafol, LL.R. Mad. 189. referred to. 
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1167 to 
1169 of 1965. 
Appeals by special leave from the fµdgment and order dated 
November 1, 1961 of the Allahabad High Cnurt in Civil Revision 
Nos. 310 to 312 of 1960. 
A. K. Sen and J. P. Goyal, for the appelhmts 
(in all the· 
appeals). 
B. C. Misra, M. V. Goswami and R. H. Dhebar, for re~j:lon­
dcnts Nos. 1 and 2 (in C.As. Nos. 1167 and 116~ of 1965). 
S. S. Shukla, for respondent No. 3 (in C.As. Nos. 1167 and 
1168of1965) and respondent No. 2 (i

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