The Supreme Court holds that legal heirs of a deceased partner do not become liable for the liability of the partnership firm upon the partner’s death.

The Supreme Court has allowed an appeal filed by the legal heirs of a deceased partner in a partnership firm. The appeal assailed the correctness of the order of the National Consumer Disputes Redressal Commission whereby the revision filed by the appellants was dismissed and the order passed by the State Commission and the District Commission allowing the complaint of Respondent No.1 directing the appellants, the Opposite Parties No.1 to 5 therein, to be jointly and severally liable to pay Rs.5 lakhs along with simple interest @ 18% p.a. from 21.05.2002 to 20.05.2012 with further interest @ 6% p.a. from 21.05.2012 onwards till realisation. 

The Respondent No.1 filed a complaint before the District Commission, alleging that he had invested Rs. 5 Lakhs in the partnership firm M/s Annapurneshwari Cotton Co., Amargol, Hubli on 21.05.2002 which was repayable after 120 months with interest @ 18% per annum. The Respondent No.1 sought for premature payment but it was denied on the ground that the same would be paid upon maturity. The Respondent No.1 waited for the maturity and he again claimed but still the payment was not made compelling him to issue a notice on 12.02.2014 calling upon the opposite parties to make the payment. However, as the payment was not made, a complaint was filed before the District Commission alleging deficiency in service.  
 
The Supreme Court held thus:
 
We need not go into other details of the arguments raised by the parties. In our considered opinion, once there was a registered partnership deed dated 27.05.1996, there is no further document placed on record by the complainant-respondent No.1 regarding dissolution of the said registered deed which continued till the time when the investment was made by the complainant respondent No.1 on 21.05.2002 and hence the complainant respondent No.1 would be deemed to be partner of the firm. It is only upon the death of the Managing Partner Basavaraj Uppin in March 2003, that the status of the firm would cease to exist or would stand dissolved. Secondly, the investment made by the respondent No.1 complainant was for deriving benefit by getting an interest on the same at the rate of 18 % per annum, therefore, it would be an investment for profit/gain. It was a commercial transaction and therefore also SLP(C.) NO. 11757 OF 2022 Page 13 of 14 would be outside the purview of the 1986 Act. Commercial disputes cannot be decided in summary proceeding under the 1986 Act but the appropriate remedy for recovery of the said amount, if any, admissible to the complainant respondent No.1, would be before the Civil Court. The complaint was thus not maintainable. 

Thirdly, there was no evidence on record to show that a fresh partnership deed was executed reconstituting the firm in which the present appellants had become partners so as to take upon themselves the assets and liabilities of the firm. The law is well settled that legal heirs of a deceased partner do not become liable for any liability of the firm upon the death of the partner. 
The arguments of the respondents that the appellants had alternative remedy of approaching the High Court under Article 226 of the Constitution is of no avail in as much as this Court in Universal Sompo General Insurance (supra) has not issued any directions for the pending matters being either dismissed on this SLP(C.) NO. 11757 OF 2022 Page 14 of 14 ground or being transferred to the High Court. It would apply prospectively for fresh matters coming up before this Court after the said judgment. For all the reasons recorded above, we are of the view that the District Forum, the State and the National Commissions fell in error in allowing the complaint and upholding it in appeal and revision. The appeal is accordingly allowed. The impugned orders are set aside and the complaint is dismissed. 

Annapurna B. Uppin & Ors. Vs. Malsiddappa & Anr.