Diwan Advocates

Partnership and Specific Relief Practice

Two partners run a firm for fifteen years. One begins diverting clients and refuses to render accounts. The other wants dissolution and a true account of what has been taken. The partnership deed is silent on many of the questions that now matter most.

A buyer signs an agreement to purchase land for a specific price. The seller, finding a better offer, refuses to complete. The buyer wants the land, not damages. Whether the court will compel the seller to perform depends on the nature of the property and the conduct of both parties.

Partnership disputes and specific relief claims are among the most fact-intensive matters in Indian civil litigation. At Diwan Advocates, we advise and represent clients across both before trial courts, high courts, and in arbitration.

The Indian Partnership Act, 1932

The Indian Partnership Act, 1932 governs the relationship between partners, the firm’s liability to third parties, and the rights of partners against each other and against the firm. A partnership is defined as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Registration of a firm is optional but unregistered firms cannot sue to enforce rights arising from the partnership contract or to claim a set-off in certain proceedings.

Rights and Duties of Partners

Partners owe each other duties of good faith and are bound to render true accounts and full information. Each partner is an agent of the firm and of the other partners for acts done in the ordinary course of the firm’s business. Partners are jointly and severally liable for the firm’s wrongful acts and jointly liable for its contractual debts. A partner who competes with the firm, diverts its business, or misapplies its assets is accountable to the other partners. The Act provides default rules on profit sharing, interest on capital, and remuneration, all of which the partnership deed may modify.

Dissolution and Winding Up

Dissolution may occur by agreement, expiry of term, completion of the venture for which the partnership was formed, death or insolvency of a partner, or by court order. The court may dissolve a firm on grounds including a partner’s misconduct affecting the business, persistent breach of the partnership agreement, or where it is just and equitable to do so. On dissolution, the assets are applied first to discharge liabilities to third parties, then to repay partners’ advances and capital. A partner who has been wrongfully excluded has a right to accounts and a share of profits accruing after dissolution.

Partnership Disputes in Practice

Partnership disputes commonly involve disputes over the existence or terms of the partnership, allegations of diversion of firm business, disputes over accounts and profit share, claims of wrongful expulsion, and deadlock on dissolution. Suits for accounts, dissolution, and rendition of accounts lie before the civil court. Where the deed provides for arbitration, disputes go to the tribunal, though courts retain jurisdiction to appoint receivers and grant interim injunctions. We advise on partnership documentation, represent parties in pre-litigation strategy, and conduct proceedings before trial courts and high courts.

The Specific Relief Act, 1963

The Specific Relief Act, 1963 provides remedies where monetary compensation is an inadequate substitute for what was promised. The 2018 amendments significantly changed the landscape: specific performance of contracts for construction and immovable property is now ordinarily granted as a matter of course, removing the discretion the court previously had to substitute damages. The Act also governs the recovery of possession of movable and immovable property, rectification and cancellation of instruments, and declaratory relief.

Specific Performance

A court will grant specific performance of a contract where the plaintiff is ready and willing to perform their own obligations and the defendant has failed or refused to perform theirs. Post the 2018 amendment, specific performance is the rule rather than the exception for contracts involving immovable property: the court must grant it unless doing so would be impossible, inequitable, or contrary to public policy. The plaintiff must have been ready and willing from the date of the contract and must approach the court within the limitation period. Delay and acquiescence remain relevant to the court’s exercise of discretion on ancillary matters even after the amendment.

Injunctions

The Act provides for perpetual and temporary injunctions. A temporary injunction is granted where the plaintiff establishes a prima facie case, demonstrates that the balance of convenience favours the grant, and shows that non-grant would cause irreparable harm. A mandatory injunction compelling a party to do a positive act is granted only where the court is satisfied that the harm from non-performance would be such that compensation in money is not an adequate remedy. The Act expressly prohibits injunctions to restrain a party from prosecuting a judicial proceeding and to prevent a breach of contract where monetary damages would suffice.

Rectification and Cancellation of Instruments

Where a written contract or instrument does not reflect the true intention of the parties due to fraud or mutual mistake, the court may order rectification. Where an instrument is void or voidable, and a party reasonably apprehends that it may cause serious injury if left outstanding, the court may order its cancellation or delivery up for cancellation. These remedies are particularly relevant in property transactions where sale deeds, mortgages, or conveyances have been executed under misrepresentation or by mistake.

Why Diwan Advocates?

Legislative Reference Index

Partnership disputes and specific relief claims move on the facts. The time to act is before the limitation period expires.

Diwan Advocates is ready.

Diwan Advocates  |  Delhi, India