The Supreme Court has dismissed an appeal concerning the valuation of a partner’s share in the assets of a dissolved partnership firm, holding that the value of the partnership property cannot be frozen at the date of dissolution when the assets remain to be liquidated.
A Bench of Justice Ujjal Bhuyan and Justice Vipul M. Pancholi upheld the Andhra Pradesh High Court’s direction concerning the assets of M/s Viraj Constructions and the 25% share claimed by the legal representative of an erstwhile partner.
The judgment was delivered on September 9, 2026, in V. Sumitra Reddy & Anr. v. K. Ranganadha Reddy & Ors., Civil Appeal No. 8167 of 2017.
Background of the Case
M/s Viraj Constructions was formed in 1964 and was engaged mainly in construction work for the Railways. The partnership was a “partnership at will”, meaning that any partner could bring it to an end by giving written notice to the other partners.
Kasireddy Lakshmi Narayana Reddy was one of the partners and held a 25% share under the 1968 partnership deed. The firm later acquired around 3.27 acres of land at Begumpet, Hyderabad, which became the central asset in the dispute.
In October 1983, Lakshmi Narayana Reddy issued notice seeking dissolution of the partnership. The High Court subsequently held that the firm stood dissolved on October 18, 1983, and directed that accounts be settled up to that date.
The dispute later shifted to how his 25% share in the partnership property was to be calculated. The defendants argued that the property should be valued as it stood on October 18, 1983. The legal representative of the original plaintiff maintained that the property should be dealt with at its value when the asset was actually assessed and liquidated.
Supreme Court’s Observation
The Supreme Court examined Sections 46 and 48 of the Indian Partnership Act, 1932. Section 46 provides that after dissolution, partnership property is first used to discharge the firm’s debts and liabilities, with the remaining surplus distributed among the partners according to their rights. Section 48 sets out the order in which the accounts are to be settled.
The Court distinguished between calculating the firm’s profits and determining a partner’s share in the remaining assets. It held that October 18, 1983 was relevant for determining the profits and losses up to dissolution, but that this date did not restrict the partner’s right to receive his proportionate share in the residue of the partnership assets.
"With the dissolution of the partnership firm, all its assets have to be necessarily liquidated unless any one or more partners of the dissolved firm come forward to pay the market value of the share of the remaining partners/all partners in lieu of liquidation."
The Court further held that the reconstituted firm could not simply continue using the assets of the earlier dissolved partnership. The property could have been retained by the new partnership only if it had purchased the property from the erstwhile firm, which had not happened.
Court’s Decision
The Supreme Court found no error in the High Court’s 2012 judgment. It held that valuing the property at its 1983 value would cause serious prejudice to the plaintiff and would be impractical.
The Court therefore dismissed the civil appeal, vacated the interim stay orders, and directed the parties and the advocate Commissioner to comply with the High Court’s directions.
It also ordered that there would be no order as to costs.
Case Details
Case Title: V. Sumitra Reddy & Anr. v. K. Ranganadha Reddy & Ors.
Case Number: Civil Appeal No. 8167 of 2017
Judges: Justice Ujjal Bhuyan and Justice Vipul M. Pancholi
Decision Date: September 9, 2026
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