Is a partner's right on dissolution of a firm two-fold: to settle accounts and to share the liquidated residue under Section 48 of the Indian Partnership Act, 1932?

Paragraph 57After considering the materials on record and the rival contentions, the High Court held that the right of each partner on dissolution of the partnership firm is two-fold: (1) right to settle the account as on the date of dissolution; and (2) right to share the residue in the assets of the partnership following liquidation of the assets after satisfying the liabilities set out in Section 48. High Court concluded that liquidation of the assets of the partnership firm is, therefore, a necessary step towards payment of the shares of each partner in the partnership assets. 57.1. The High Court also held that the right of the partner on the dissolution of the partnership firm is to receive the profits till dissolution and to receive the value of the assets in proportion to his share after settlement of accounts. The preliminary decree passed by the trial court as modified by the High Court needs to be understood accordingly. The profits or losses in the business of the partnership firm should be ascertained as on 18.10.1983. The significance of referring to this date is limited to ascertainment of profits and losses alone and it has no relevance to the right of the partners to receive the value in the residue of the assets. 57.2. With the dissolution of the partnership firm, all its assets have to be necessarily liquidated unless any one or more partners of the dissolved firm come forward to pay the market value of the share of the remaining partners/all partners in lieu of liquidation with the consent of the remaining partner or partners. The reconstituted firm has no right whatsoever to utilize the assets of the dissolved firm unless all the partners of the dissolved firm reach an agreement to settle the accounts and to pay the outgoing partner his share in the value of the assets. However, if such an agreement is not reached, there is no option other than liquidation of the assets and distribution of the value realized from such liquidation in proportion to their shares amongst all partners. 57.3. After referring to the previous judgment and order of the High Court dated 30.01.2009 whereby the order passed by the City Civil Court dated 26.04.2004 allowing the review petition of the defendants by recalling its previous order dated 25.11.2002 was set aside, the High Court was of the view that by its aforesaid earlier judgment and order it had unequivocally rejected the stand of the defendants that there was no need for the advocate Commissioner to take over possession of the partnership property for sale. Though the High Court did not render a finding as to the date on which the value of the property should be determined, a reading of the said judgment and order in its entirety would leave no room for any doubt that what the High Court had meant was that the property should be valued by the advocate Commissioner as on the date when he assesses the value of the property. This order is in consonance with the settled legal position. The preliminary decree had not limited the right of the plaintiff to receive the value of his share as on 18.10.1983 in the assets of the dissolved partnership and that his right will exist till passing of the final decree.