Case: Khushal Khemgar Shah &amp; Ors Vs. Khorshed Banu Dadiba Boatwalla And Anr

1. Dadiba Hormusji Boatwalla was one of the eight partners of Messrs Meghji Thobhan and Company - a firm of Muccadams and cotton brokers. Boatwalla died on February 20, 1957. By virtue of clause 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 up to February 20, 1957. Against that decree the defendants appealed under Clause 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 Boatwallss 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.2. 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 this interest in the goodwill shall cease on his death and the business shall be continued by the surviving partners. The defendants do not challenge the decree of the High Court awarding to the plaintiffs Boatwallas share in the assets of the firm other than goodwill, they contend that in the goodwill of the firm the plaintiffs had no share.

Court's reasoning:
7. 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 of 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.