Delhi High Court on Validity of Sale of Partnership Property and Consent under Section 19(2)(g) of the Indian Partnership Act, 1932.

Headnote:

The Delhi High Court dismissed the appeal filed by the partners of M/s Gupta International challenging the sale of the firm’s only property. The Court held that when a partner signs the firm’s balance sheets showing the sale of property and later executes settlement and retirement deeds accepting all accounts, such actions amount to implied consent and ratification of the transaction under Section 19(2)(g) of the Indian Partnership Act, 1932. Therefore, the sale was valid and binding on all partners.

Background:

• The plaintiff-firm, M/s Gupta International, and its partners, Bimla Gupta and Om Prakash Gupta, filed a suit seeking possession, mesne profits, and cancellation of sale documents executed by defendant-partner Ashok Kumar Singhal in favour of another partner.

• The firm had purchased a property at Uttam Nagar, Delhi, in 1999 for ₹3.4 lakhs. In 2000, the active partner executed sale documents transferring the firm’s only asset for ₹3.7 lakhs allegedly without consent.

• The plaintiffs claimed they discovered the unauthorized sale in 2002 and alleged violation of Clause 9 of the partnership deed and Section 19(2)(g) of the Partnership Act, which restricts a partner from selling firm property without consent.

• The defendants contended that all partners were aware of and consented to the sale, as the firm’s balance sheets for 1999–2000 and 2000–2001, signed by the plaintiffs, reflected the sale and profits therefrom. A subsequent settlement and retirement deed also confirmed full and final settlement of all accounts.

Court’s Observations:

• The Court held that the plaintiffs’ signatures on the firm’s balance sheets acknowledging the sale of the property clearly established their knowledge and consent.

• No evidence was produced to show that the signatures were obtained without understanding or under misrepresentation.

• The subsequent Memorandum of Settlement and Retirement Deed (both in 2002) confirmed that the accounts, including the sale, had been accepted and finalized.

• Section 19(2)(g) prohibits a partner from transferring property without consent, but where consent is implied from conduct and ratification, the transfer stands validated.

• The appeal lacked merit, as the plaintiffs had acquiesced to the transaction through multiple acts indicating approval and final settlement.

Legal Provisions Discussed:

• Section 19(2)(g), Indian Partnership Act, 1932 – Restricts a partner’s implied authority to transfer firm property without the consent of other partners.

• Clause 9, Partnership Deed – Prohibited sale of firm assets without consent of all partners.

• Order VII Rule 11, Code of Civil Procedure, 1908 – Grounds for rejection of plaint.

• Article 226, Constitution of India – (Discussed contextually on jurisdictional limits of High Court appeals).

Citation: 2025:DHC:XXXXX

Case: M/s Gupta International & Ors. v. Ashok Kumar Singhal & Anr.

Court: High Court of Delhi at New Delhi

Coram: Justice Anil Kshetrapal & Justice Harish Vaidyanathan Shankar

Date of Decision: 29 October 2025

Regular First Appeal (Original Side) (Commercial) No.: RFA(OS)(COMM) 15/2018