ivil Appeal No 1201 of 1966
Appeal by special leave from the judgment and order dated June 24 1965 of the Bombay High Court in Appeal No 79 of 1963
F section Nariman K D Mehta and 1
N Shroff for the appellants
M C Chagla and A K Verma for the respondents
The Judgment of the Court was delivered by Shah J
Dadiba Hormusji Boatwalla was one of the eight partners of Messrs Meghji Thobhan  Company a firm of Muccadams and cotton brokers
Boatwalla died on February 20 1957
By virtue of cl 8 of the deed of partnership the business of the firm was continued by the surviving partners
Khorshed and Nariman widow and son respectively of Boatwalla obtained letters of administration to the estate of Boatwalla and commenced an action in the High Court of Bombay for an account of the partnership between Boatwalla and the surviving partners and for an order paying to the plaintiffs the amount determined to be due to Boatwalla at the time of his death
The suit was resisted by the surviving partners who will hereinafter be called  the defendants 
Tarkunde J passed a preliminary decree declaring that qua Boatwalla the partnership stood dissolved on February 20 1957 but not in respect of the surviving partners and directed that an account be taken of the partnership upto February 20 1957
Against that decree the defendants appealed under cl 15 of the Letters Patent
In appeal the High Court modified the decree
The learned Judges held that the plaintiffs were not entitled to an account in the profits and losses of the firm after the death of Boatwalla nor to exercise an option under section 37 of the Partnership Act but that the plaintiffs were entitled only to interest at six per cent
per annum on the amount found due as Boatwalla s share in the assets of the partnership including the goodwill
They further declared that the interest of Boatwalla in the firm ceased on February 20 1957 and deleted the direction with regard to the dissolution of the firm as between Boatwalla and the defendants
With special leave this appeal has been filed by the defendants
The defendants contend that the plaintiffs as legal representatives of Boatwalla were not entitled to a share in the value of the goodwill of the firm because the goodwill of a firm may be taken into account only when there is a dissolution of the firm and in any event because Boatwalla had agreed that his interest in the goodwill shall cease on his death and the business shall 691 be continued by the surviving partners
The defendants do not challenge the decree of the High Court awarding to the plaintiffs Boatwalla s share in the assets of the firm other than goodwill icy contend that in the goodwill of the firm the plaintiffs had to share
By section 14 of the Partnership Act 1932 it is enacted that Subject to contract between the partners the property of the firm includes all property and rights and interest in property originally brought into the stock of the firm or acquired by purchase or otherwise by or for the firm or for the purposes and in the course of the business of the firm and includes also the goodwill of the business
 Goodwill of the firm is expressly declared to be the property of he firm
Counsel for the defendants relied upon section 55 of the Partnership Act which makes a provision with regard to sale of goodwill after dissolution
It is provided by sub section
1 of section 55 that  In settling the accounts of a firm after dissolution the goodwill shall subject to contract between the partners be included in the assets and it may be sold either separately or along with other property of the firm
But it is not enacted thereby that goodwill may be taken into account only when there is a general dissolution of the firm and not when the representatives of a partner claim his share in the firm which by express stipulation is to continue notwithstanding the death of a partner
Nor do sections 39 42 and 46 which were relied upon by counsel for the defendants support that contention
Under section 39 the dissolution of partnership between all the partners of a firm is called the dissolution of the firm and by section 42 a firm is said to be dissolved subject to the contract between the partners on the happening of certain contingencies
Section 46 provides that on the dissolution of a firm every partner or his representative is entitled as against all the other partners or their representatives to have the property of the firm applied in payment of the debts and liabilities of the firm and to have the surplus distributed among the partners or their representatives according to their rights
These provisions deal with the concept and consequences of dissolution of the firm  they do not either abrogate the terms of the contract between the partners relating to the consequences to ensue in the event of the death of a partner when the firm is not to stand dissolved by 692 such death nor to the right which the partner has in the assets an property of the firm
The Partnership Act does not operate to extinguish the right in the assets of the firm of a partner who dies when the partnership agreement provides that on death the partnership is to continue
In the absence of a term in the deed Of partnership to that effect it cannot be inferred that a term that the partnership shall continue notwithstanding the death of a partner will operate to extinguish his proprietary right in the assets of the firm
Clause 8 of the deed of partnership reads as follows This partnership shall not be dissolved or determined by the death of any of _the parties hereto but the same shall be continued as between the surviving partners on the same terms and conditions but with such shares as shall then be determined
 Mr Nariman says that goodwill is nothing but the right to the name the place of business and the reputation of the firm and when all these components of the right by express agreement between the partners devolve upon the surviving partners 
it follows that the share of the deceased partner in the goodwill of the firm devolves upon the surviving partners and not upon his legal representatives
The goodwill of a business is however an intangible asset being the whole advantage of the reputation and connections formed with the customers together with the circumstances which make the connection durable
It is that component of the total value of the undertaking which is attributable to the ability of the concern to earn profits over a course of years because of its reputation location and other features
An agreement between the partners that the name the place of business and the reputation of the firm are to be utilised by the surviving partners will not necessarily warrant an inference that it was intended that the heirs of the deceased partner will not be entitled to a s hare in the goodwill
Our attention was invited to Hunter vs Dowling  Smith vs Nelson2 and Bachubai and L A Watkins vs Shamji Jadowji3The first two cases proceed upon the interpretation Of certain clauses in partnership Agreements It was inferred in those cases from the terms of the agreement that the right in the goodwill of a partner in a firm dying or retiring shall not survive to  his legal representatives
Bachubai and L A Watkin s case arose out of a case in which in the partnership agreement it was provided that 1 2 96 Law Times Reports
3 1
L R 9 Bom 
536 694 the firm shall be the agents of a company carrying on business as a manufacturer of cotton textiles so long as the firm carries on business in Bombay or until the firm should resign
The firm were appointed the agents of the Corn any and continued to act as agents
One of the partners died and a representative of the partner filed a suit
claiming a certain share in the assets of the firm including the goodwill
It was observed by Sargent c
Jin rejecting the claim of the plaintiff to a share in the goodwill of the business as an asset of the firm that Assuming_ which may well be doubted that the term goodwill is applicable to a business of this nature it is plain that it is attached to the name of the firm which by the partnership agreement itself is to be used by the surviving partners or partner for their own benefit
Such an arrangement between the partners must take away all value from the goodwill even if it be not as Mr Justice Lindley in his Treatise on Par tnership p 887 3rd ed considers it to be inconsistent
with its being an asset at all The learned Chief Justice expressed a doubt presumably relying upon old
English decisions that the goodwill of a firm may not be an asset at all
These observations do not set out any rule of interpretation of a deed of partnership
But the question is now settled by statutory enactment
Under the Partnership Act 1932 it is expressly declared that the goodwill of a business is  an asset
Whether the goodwill has any substantial value may be determined on the facts of each case
We are unable to agree with Mr Nariman that in interpreting a deed of partnership business whereof it is stipulated shall be continued by the surviving partners after the death of a partner the Court will not award to the legal representatives of the deceased partner a share in the goodwill in the absence of an express stipulation to the contrary
The goodwill of a firm is an asset
In interpreting the deed of partnership the Court will insist upon some indication that the right to a share in the assets is by virtue of the agreement that the surviving partners are entitled to carry on the business on the death of the partner to be extinguished
In the absence of a provision expressly made or clearly implied the normal rule
that the share of a partner in the assets devolves upon his legal representatives will apply to the goodwill as well as to other assets
The appeal therefore fails and is dismissed with costs
Appeal dismissed


Summary:
D who was one of eight partners in a firm died on February 20 1957
By virtue of a provision in the partnership deed the business of the firm was continued by the surviving partners
The respondents being the widow and son of D commenced an action for an account of the partnership between D and the surviving partners praying for an order for the payment of the amount determined to be due to D at the time of his death
A single judge of the High Court passed a preliminary decree directing that an account be taken of the partnership as on February 20 1957
A Division Bench in appeal modified the decree holding that the respondents were entitled only to interest at 6  pa on
the amount of D s share in the assets of the partnership including good will
In appeal to this Court it was contended on behalf of the appellants that the respondents as legal representatives of D were not entitled to a share in the value of the good will of the firm because good will may be taken into account only when there is a dissolution and not otherwise and
furthermore because D had agreed that his interest in the good will would cease after his death and the business shall be continued by the _surviving partners
HELD  Dismissing the appeal It could not be held that in interpreting a deed of partnership business
whereof it is stipulated shall be continued by the surviving I partners after the death of a partner the Court will not award to the legal representatives of the deceased partner a share in the goodwill in the absence of an express stipulation to the contrary
The good will of a firm is an
asset of the firm
In interpreting the deed of partnership the Court will insist upon some indication that the right to a share in the assets is by virtue of the agreement that the surviving partners are entitled to carry on the business on the death of the partner to be extinguished
In the absence of a provision expressly made or clearly implied the normal rule that the share of a partner in the assets devolves upon his legal representatives will apply to the good will as well as to other assets
693 F H There is no indication in section 55 of the Partnership Act that goodwill may be taken into account only when there is a general dissolution of the firm
and not when the reprensentatives of a partner claim his share in the firm which by express stipulations is to continue not with standing the death of a partner
Nor do sections 39 42 and 46 of the Act support such a contention691 F Hunter vs Dowling 18951  Smith vs Nelson 96 Law Times Reports 313 Bachubai and L A Watkins vs Shamji Jadowji ILR  referred to
Cl70 14 690