In a dispute over a partnership at will (M/s Viraj Constructions, a railway-construction firm formed in 1964), the Supreme Court held that an outgoing partner's proportionate share in the dissolved firm's assets must be valued close to the date of actual settlement or sale, not frozen at the historical date of dissolution. The Court also held that a reconstituted firm has no right to use the dissolved firm's assets in the interim without first settling accounts with the outgoing partner, upholding a 25% share in the present value of the property and ordering a public auction where the partners fail to settle accounts themselves.
Legal Background
Under the Indian Partnership Act, 1932, accounts are settled on dissolution under Section 48, and Section 37 deals with the position of an outgoing partner whose share is not paid out when the remaining partners continue the business. The outgoing partner can claim a share of profits attributable to the use of the share, or interest. Disputes arise over the date at which a partner's share is valued, particularly where dissolution and settlement are many years apart. The ruling reported here addresses that valuation date, and the judgment should be read for its reasoning.