Khushal Khemgar Shah & Ors. v. Khorshed Banu Dadiba Boatwalla & Anr.
1970 SCR (3) 689
(whether goodwill asset or not)
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, claiming for the payment of the amount determined to be due to D at the time of his death.
Issue: Whether good-will of a firm an asset or not?
High Court (single judge): Ordered a decree for the account till Feb 20, 1957.
Division Bench: On appeal modified the decree holding that the respondents were entitled only to interest at 6 % p.a. on the amount of D’s share in the assets of the partnership, including good-will.
Contention (Appellants): 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.
A.N. Grover, J.C. Shah and K.S.Hegde, JJ.(Dismissed the appeal)
- The good-will of a firm is an asset of the firm. In case of partnership business continued by the surviving partners after the death of a partner, the Court can award to the legal representatives of the deceased partner a share in the goodwill in the absence of an express stipulation to the contrary.
- 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, 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.
- There is no indication in s. 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 representatives 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 ss. 39, 42 and 46 of the Act support such a contention.