A) ABSTRACT / HEADNOTE

Sachin Jaiswal v. M/s Hotel Alka Raje & Other, [2025] 2 S.C.R. 1396 : 2025 INSC 275, examines whether immovable property originally owned by an individual partner becomes property of the firm under Section 14 of the Indian Partnership Act, 1932 when the partner, after formation of the partnership, uses the land to construct premises for the partnership business. The Supreme Court upheld the High Court’s conclusion that late Bhairo Prasad Jaiswal had, by conduct and clear intention, brought the land and the subsequently constructed hotel into the partnership stock, thereby making it partnership property.

The Court relied on principle that a partner may convert his separate property into partnership property by bringing it into the partnership—no formal transfer instrument is necessary where intention and conduct establish contribution to firm capital. Prior authorities, notably Addanki Narayanappa v. Bhaskara Krishnappa and the Full Bench decision in The Chief Controlling Revenue Authority v. Chidambaram (Thachanallur), were applied to show that immovable property, when contributed to partnership stock, ceases to be individual property during the subsistence of the partnership and vests as property of the firm under Section 14.

The Court further held that once the property was part of partnership assets, the High Court was correct to read the trial decree in favour of the firm alone, and there was no need to separately decide issues arising from a prior relinquishment deed. The appeal was dismissed.

Keywords: Section 14 Partnership Act; property of the firm; contribution to partnership stock; relinquishment deed; intention to include property in firm assets.

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

Bhairo Prasad Jaiswal purchased a plot in 1965. In 1971–72 he entered into partnership with his brother Hanuman Prasad Jaiswal and the partnership firm M/s Hotel Alka Raje was constituted (partnership deed dated 11.10.1972). The brothers jointly constructed a building on the 1965 land and ran a hotel business. Later partners were inducted (1982). In 1983 Bhairo Prasad executed a registered relinquishment deed purporting to release his rights in favour of the firm and barring heirs from claiming interest. Subsequent partnership deeds adjusted profit shares; Bhairo Prasad died in 2005. In 2018 respondents (the firm and its partners) filed a suit for declaration and permanent injunction after appellants (heirs of Bhairo Prasad) attempted to assert title based on their father’s original purchase.

The Trial Court decreed the suit in favour of the firm relying on the relinquishment deed. On appeal the High Court clarified that the decree should be read in favour of the firm alone and observed that the property (land and building) had been contributed by late Bhairo Prasad to the partnership stock and therefore became partnership property under Section 14. Appellant challenged this clarification and contended that transfer of title cannot be effected by a relinquishment deed and must follow modes under the Transfer of Property Act; the appellant also attacked the High Court’s interpretation of Section 14.

The Supreme Court granted leave and examined whether the High Court erred in treating the property as property of the firm and whether a relinquishment deed was a valid mode of transfer. The Court ultimately affirmed the High Court by holding that contribution and intention suffice under Section 14 to convert individual property into partnership property, and that the High Court rightly did not need to decide the relinquishment point separately.

D) FACTS OF THE CASE

In 1965 late Bhairo Prasad purchased a plot (4 bigha 10 biswa 5 biswansi) at Rikabganj, Faizabad by registered sale deed dated 01.10.1965. After forming a partnership with his brother in 1971 (reduced to writing by 11.10.1972), the two brothers jointly constructed a building on the said land to operate a hotel under the name ‘Hotel Alka Raje’. In 1982 two additional partners were admitted by deed dated 07.06.1982. On 09.03.1983 Bhairo Prasad executed a registered relinquishment deed that purported to release his rights and also barred his successors from claiming interest.

Despite executing the relinquishment, he continued to participate in the hotel business until his death on 30.05.2005. Partnership arrangements were further modified by deeds in 2000, 2005 and 2017 adjusting profit shares and recording retirements and inductions of partners. In October 2018 appellants (legal heirs) allegedly attempted to take possession claiming ownership; the firm filed suit on 22.11.2018 for declaration and injunction. Trial Court relied heavily on the registered relinquishment deed and decreed the suit on 22.12.2020 in favour of the plaintiffs (firm and partners).

High Court in FA No. 60/2021 allowed appeal with clarification that decree be read in favour of M/s Hotel Alka Raje alone and that the share of the late partner would devolve upon his heirs to the extent mentioned in last partnership deed. Appellants then approached this Court challenging the High Court’s clarification and its reliance on Section 14 to hold the property as partnership asset.

E) LEGAL ISSUES RAISED

i. Whether a partner’s separate immovable property becomes property of the firm under Section 14 when he brings it into partnership stock by contributing land and constructing a building for firm business?
ii. Whether a registered relinquishment deed alone can effect transfer of title to partnership property or is transfer restricted to modes under the Transfer of Property Act?
iii. Whether the Trial Court and High Court were justified in decreeing declaration and injunction in favour of respondents (firm) and reading the decree in favour of the firm alone?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsels for Petitioner / Appellant submitted that the High Court erred in holding that the property became partnership property under Section 14 without a formal transfer; they contended that ownership cannot be divested by a mere relinquishment and transfer of title must follow the modes prescribed under the Transfer of Property Act (sale, mortgage, exchange, gift).

Appellants urged that the Trial Court’s reliance on the registered relinquishment deed was appropriate and that the heirs retained proprietary rights unless a valid mode of transfer deprived them of title. They argued that mere construction of a building on one’s land after formation of partnership does not ipso facto convert proprietary rights into partnership assets absent clear, irrevocable transfer.

G) RESPONDENT’S ARGUMENTS

The counsels for Respondent submitted that late Bhairo Prasad had, by his conduct and intention, contributed the land and hotel building to partnership stock after the partnership was formed, thereby bringing the property within the definition of property of the firm under Section 14, Partnership Act, 1932. Respondents relied on the partnership deeds, joint construction and continuous running of the hotel as demonstrative acts of contribution.

They contended that no formal instrument is necessary to make separate property partnership property where intention and acts show the property was brought into stock. Reliance was placed on established precedents to show that partners may bring immovable property into partnership assets by agreement or conduct.

H) RELATED LEGAL PROVISIONS 

i. Section 14, Indian Partnership Act, 1932 definition of property of the firm (includes property originally brought into stock or acquired for the firm).
ii. Relevant precedent: Addanki Narayanappa v. Bhaskara Krishnappa (1966) principle that property brought into partnership stock becomes partnership property.
iii. Full Bench: The Chief Controlling Revenue Authority v. Chidambaram (Thachanallur Sugar Mills), AIR 1970 Mad 5 (FB) partner’s intention and conduct can convert his property into partnership property without formal instrument.

I) JUDGMENT 

The Supreme Court affirmed the High Court. The Court emphasised the language of Section 14 which treats as firm property anything originally brought into the stock of the firm or acquired for firm purposes. The record showed that Bhairo Prasad acquired the land in 1965 and after formation of the partnership in 1972 jointly constructed a hotel building with his brother for the partnership business. Those acts acquisition predating partnership but followed by active construction for the partnership and continuous operation within the partnership were found to be clear evidence of intention to bring the land and building into the partnership stock.

The Court observed established jurisprudence: once separate property is contributed at the inception or during partnership to partnership stock, it ceases to be the trading asset of the individual and becomes a partnership asset, yielding to partnership rights in accordance with the partners’ agreed shares. The Court specifically relied on Addanki Narayanappa to restate the principle that nothing in formality is required where contribution and intention are clear. The Full Bench of Madras in Thachanallur was also cited to show that Section 14 contemplates conversion by evidence of intention and conduct, and that no formal document is necessary.

Given the admitted contribution and the fact that building was erected for and run as the hotel business, the property became partnership property at the moment construction for the partnership began. Consequently, the High Court’s clarification that the decree be read in favour of the firm alone was appropriate. The Court further held that once the property was partnership asset by operation of Section 14, there was no necessity for the Supreme Court to separately consider the legal correctness of the relinquishment deed; the partnership conversion point was dispositive. The appeal was dismissed.

a. RATIO DECIDENDI

The operative ratio is that Section 14 of the Partnership Act contemplates that separate property of a partner may be converted into partnership property by being brought into the stock of the firm, and that evidence of intention and conduct (such as joining in construction of building for firm business and operating it as firm’s undertaking) suffices; no formal transfer instrument is necessary. Where such contribution is established, the property becomes partnership property from the moment it is brought into the stock of the firm, and the partner’s exclusive proprietary rights are extinguished in relation to that property during the continuance of the partnership, subject to his agreed share in partnership profits and assets on dissolution.

b. OBITER DICTA

The Court remarked obiter that reliance upon a registered relinquishment deed was unnecessary for the decision and that the High Court was justified in not separately adjudicating the contention concerning the legal efficacy of such deed because the partnership-contribution point resolved the dispute. The Court further reiterated that the character of property (immovable/ movable) does not preclude its being contributed to partnership stock and that established case law supports contribution by non-monetary assets.

c. GUIDELINES

i. When a partner brings his separate property into the partnership stock by overt acts and with clear intention (for example by jointly constructing and putting the property to partnership use), courts must treat such property as property of the firm under Section 14.
ii. Formal written transfer is not a prerequisite evidentiary focus should be on intention, conduct, partnership deeds and the nature of use.
iii. Once property is partnership property, claims by heirs based on prior ownership must be assessed in light of the conversion to partnership asset and the partner’s rights become contractual/proprietary in the partnership context (profit-share/ share in net assets on dissolution) rather than exclusive title to the asset.
iv. Where conversion to partnership property is established, resolution of ancillary contentions (like efficacy of a relinquishment deed) is unnecessary for determination of ownership between firm and heirs.

J) CONCLUSION & COMMENTS

The decision reaffirms long-standing principles of partnership law: contribution to partnership stock by way of bringing separate property into firm use, combined with evidence of intention, suffices to convert ownership for the purpose of partnership assets under Section 14. The Court’s treatment is faithful to precedent and practical commercial reality where capital contributions take non-monetary forms. The judgment sensibly prioritises substance (intention and conduct) over form (absence of formal transfer instrument) to secure commercial certainty and avoid technical defeats of partnerships when partners commit their property to firm enterprise.

Practitioners should note the evidentiary emphasis: documentary partnership records, contemporaneous conduct (construction, operation) and partnership deeds together will determine whether a property is partnership stock. While the Court declined to adjudicate the legal effect of the relinquishment deed, the judgment signals that such instruments are supplementary where conversion by conduct is manifest. The ruling offers clarity for disputes between heirs and surviving partners where pre-partnership acquisitions are deployed in partnership business and underscores that a partner’s recourse for his contribution is contractual (profit share/value on dissolution) rather than proprietary exclusivity over the particular asset during partnership existence.

K) REFERENCES

a. Important Cases Referred

i. Addanki Narayanappa v. Bhaskara Krishnappa, 1966 SCC OnLine SC 6.
ii. The Chief Controlling Revenue Authority v. Chidambaram, Partner, Thachanallur Sugar Mills and Distilleries and Ors., AIR 1970 Mad 5 (Full Bench).
iii. Sachin Jaiswal v. M/s Hotel Alka Raje & Other, [2025] 2 S.C.R. 1396 : 2025 INSC 275 (Supreme Court).

b. Important Statutes Referred

i. Indian Partnership Act, 1932, Section 14.