1. This is plaintiffs' revision against the order of the Munsiff, Jammu dated 21-7-1971 whereby a preliminary issue was decided in favour of respondent No. 1.

2. The facts giving rise to the present petition are that the plaintiffs, who had entered into a partnership with the defendants to run a business as a dealer in radios and sewing machines in the name and style of India Radios, having fallen out, had filed a suit for dissolution of partnership and rendition of accounts. The defendants filed a written statement admitting the partnership between the parties and almost agreed that the partnership may be dissolved and account should be taken. The only point of contest raised was that the partnership business was carried on in a shop belonging to Khukhran Bradari, Jammu, situated on Rai Tilak Road, Jammu, and defendant No. 1 claimed that the shop had been taken on rent by him so at the time of dissolution the shop and its tenancy should revert back to him. On this dispute between the parties the only issue in the nature of a preliminary issue was raised which is as follows:—

Whether Abnash Chander defendant, is the sole tenant of the suit shop? O.P.D

3. The trial court by its order dated 23-11-. 1970 decided this issue in favour of the defendant respondent No. 1 and ultimately passed a preliminary decree on 26-12-1970. The plaintiffs went up in appeal against that preliminary decree before the Appellate Court of the Sub Judge (CJM) Jammu who by his order dated 27-2-1971 remanded the case to the trial court with a direction that defendant No. 2 who was the appellant before him should be given an opportunity to lead evidence in the case and the matter could be decided afresh.

4. Pursuant to the above direction the parties led evidence and the Munsiff vide the impugned order again decided the said issue in favour of defendant-respondent No. 1. It is against that order that the present revision has been filed by the plaintiffs.

5. At the time of the hearing Mr. Thakur appearing for respondent No. 1 raised a preliminary objection and contended that the impugned order amounts to passing of the final decree and the revision was not competent. The plaintiff should have filed an appeal before the Sub Judge (C.J.M), Jammu as they previously did.

6. Mr. Kotwal, appearing for the petitioners, controverted this position and contended that rightly or wrongly the Munsiff followed the procedure that he decided the issue as a preliminary issue and then passed a preliminary decree previously by a separate order. This time also in a similar manner he has decided the preliminary issue and he has to pass a preliminary decree separately. He further contended that the reason given by the Munsiff that the previous order dated 26-12-1970 still stands is also not correct, because the appellate court had set aside the preliminary decree and the said orders.

7. I have considered the respective contentions and I am of the opinion that Mr. Kotwal is right in saving that the Munsiff has decided the preliminary issue only and had to Pass a preliminary decree as he previously passed by a separate order and the revision was under the circumstances maintainable. In fact after this discussion at the Bar Mr. Thakur also almost withdrew this objection and agreed that the revision should be heard on merits, and decided and so did the counsel for the parties argue this revision on merits at length.

8. The main attack of Mr. Kotwal against the finding of the trial court was that in the instant case the parties agreed by the partnership deed that the tenancy of the shop in question was of the partnership firm and the rent had also to be paid by the partnership firm. As such even if the tenancy rights had at some time been granted to respondent No. 1 the said rights were thrown into the partnership assets and henceforth they became the partnership property. He further contended that according to Section 14 all the property and assets of the firm belong to the firm and they include all the property brought into the firm assets by any partner or acquired with the partnership funds and also the goodwill of the firm is included in the property of the firm. All these assets are to be valued and then distributed at the time of the final decree.

9. Mr. Thakur in reply to the above contentions vehemently argued that as the tenancy rights originally belonged to the respondent No. 1, he could not transfer the same in favour of the firm nor can the original owner allow these rights to be transferred to any person so the tenancy rights and the shop could revert back to respondent No. 1. He further contended that even during the pendency of the partnership the tenancy was renewed in the name of respondent No. 1 which clearly shows that the tenancy rights belong to respondent No. 1 and should revert back to him. He also contended that the tenancy rights can neither be valued nor can they form part of the goodwill.

10. I have given my anxious consideration to the respective contentions of the learned counsel for the parties and am of the opinion that the contentions of Mr. Kotwal have great force and should Prevail.

11. In order to decide this point it is necessary to go into the facts of this case a little in detail. The parties in this case entered into a partnership with effect from 28-3-1967 vide the partnership deed Ex. P1 of the above said date and registered on 26-6-1967. The study of the terms and conditions of the said deed clearly shows that in clause 4 of the said deed it states that the partnership business will be carried on in the shop belonging to Khukharan Bradari. Jammu situated at Rai Tilak Road, Jammu the tenancy of which is joint of all the partners and will be deemed to be so. The rent of the said shop will be paid from the joint account. Apart from this there is no other condition laid down as to whom shall the tenancy rights or the shop go at the time of the dissolution of the partnership. The only term laid down in condition No. 15 is that in case a partner wants to retire from the partnership he can after settling accounts take the share of profits or loss etc. and can then retire. It is further agreed therein that if a partner sells his share to a stranger then the possession of the shop will remain, with the remaining or the continuing partners. This is admitted between the parties that the rent had always been paid from the joint account of the firm. While leading evidence the plaintiffs have proved receipts Ex. P1/1 to Ex. P. 1/6. These receipts pertain to the payment of rent and all these receipts say that the payment has been made by Shri Abnash Chander through India Radios. So these receipts also go to prove that the rent was being paid by the firm from the funds of the firm. Although the rent deed being in the name of respondent No. 1, the receipts were issued as stated above. In rebuttal to this evidence the defendant respondent has also produced and proved certain receipts which are Ex. D1/1 to Ex. D1/7 and which have been issued only in the name of respondent No. 1. He has tried to prove by these receipts that the rent has been paid by him alone. A comparative study of these receipts shows that the receipts Ex. P. 1/1 to Ex. P. 1/6 have been issued uptill 14-2-1969 and it appears that dispute between the parties arose after February 1969 and the receipts Ex. D1/1 to Ex. D1/5 are from 20-6-1969 to 7-3-1970 and Ex. D1/6 and Ex. D.1/7 pertain to the period prior to the parties entered into the partnership. So from the partnership deed and from the receipts Ex. P. 1/1 to Ex. P1/6 it is amply proved that the tenancy of the shop had become the property of the partnership and the parties had specifically contracted for the same.

12. Another document which is pertinent to be noticed is Ex. DA, rent deed, executed by the respondent on 17-4-1969 which was stated to have taken effect from 1-4-1969. This in fact is a renewal of the old rent deed in the name of the respondent. As stated earlier this has also been executed at a time when the disputes had arisen between the parties. The plaint which was filed on 7-1-1970 states that the defendant respondent had locked the shop since four months before filing of the suit. The notice served by defendant respondent No. 1 through Mr. D.D Thakur. Advocate, is dated 4-8-1969 and is on the file also shows that the defendant respondent served this notice and asked the other partners that the partnership has been dissolved from the data of the receipt of that notice.

13. From the above narration of facts it is fully established that although the tenancy vested in respondent No. 1 before entering into partnership the said rights were thrown into the partnership assets specifically by the terms of the partnership deed Ex. P1. The conduct of the parties further proves that the said rights were the Partnership property.

14. On these established facts we have to see as to what is the position of the parties with regard to the tenancy rights. In order to appreciate this point Section 14 of the Partnership Act is necessary to be considered. The said section runs as under:—

“14. Subject to contract between the partners, the property of the firm includes all property and rights and interest in property originally brought into the stock of the firm, or acquired by purchases or otherwise, by or for the firm, or for the purposes and in the course of the business of the firm, and includes also the goodwill of the business.

Unless the contrary intention appears, property and rights and interests in property acquired with money belonging to the firm are deemed to have been acquired for the firm.”

15. According to this section the property of the firm includes all property and rights and interest in property originally brought into the stock of the firm or acquired by purchase or otherwise by or for the firm or for the purposes and in the course of the business of the firm and includes also the goodwill of the business. The facts of the present case fully come within the four corners of this section. As stated earlier the tenancy rights were brought into the stock of the firm by means of the partnership deed. By the further conduct of the parties it has all along remained the property of the firm. The renewal of the lease by the defendant respondent vide Ex-DA does not alter the position. As long as the Partnership is not dissolved the property remains that of the firm and even if the renewal of the lease is secured in the name of one of the partners still the property remains that of the firm. I am supported in this view by a Division Bench judgment in Devi Parshad v. Jai Ram Dass, AIR 1952 Punj 284. Dealing with the similar proposition Harnam singh, J. who spoke for the court held as under:—

“Land bought, in the name of one partner, and paid for by the firm out of he profits of the partnership business, is partnership property unless a contrary intention appears.”

16. The learned Judge has further held as under:—

“If one partner obtains in his name, either during the partnership or before its assets have been sold, a renewal of a lease of the partnership property, he will not be allowed to treat the renewed lease as his own and as one in which his co-partners have no interest.”

17. So the tenancy rights in the shop will be deemed to be the partnership property and will be liable to be dealt with as other property of the partnership at the time of passing of the final decree.

18. Another aspect of this case to be considered is that the property of the firm at the time of the dissolution includes the goodwill of the firm. The term ‘goodwill’ has not been defined in the Partnership Act but different Judicial pronouncements have tried to define it. An important decision in which an effort has been made to define the term ‘goodwill’ is the judgment of Lord Macriaghten in Inland Revenue Commrs. v. Muller and Co.'s Margarine, Ltd., (1901 AC 217 at p. 223). The learned Judge held that the term ‘goodwill’ is a thing very easy to describe but very difficult to define. Another leading case in which the term ‘goodwill’ has been defined in more detail is Trego v. Hunt (1896 AC 7). In this case goodwill was described as advantage which is acquired by business beyond the mere value of the capital stock, fund or property employed therein in consequence of general public patronage and encouragement which it receives from constant or habitual customers. It was further held that it is composed of a variety of elements and is bound to differ in its composition in different trades and different businesses in the same trade. The goodwill can be an advantage connected with the premises in which the business was previously carried on. This aspect has been very nicely dealt with by Wood V.C in Churton v. Douglas (1859 John 174 at p. 188) also in Ginesi v. Cooper, 1880-14 Ch. D. 5961. Wood V.C stated the Deposition as under:

“Goodwill I apprehend must mean every advantage, every positive advantage, if I may so express it, as contrasted with the negative advantage of the late partner not carrying on the business himself that has been acquired by the old firm in carrying on its business, whether connected with the premises in which the business was previously carried on, or with the name of the late firm or with any other matter carrying with it the benefit of the business.”

19. The benefit of tenancy rights may also form part of the goodwill. In the absence of any stipulation to the contrary or circumstances indicative of a different intention, the goodwill of the business would include the benefit of the tenancy rights of a business. One of the important elements which comprised a business is its reputation. Business reputation can be a complex of personal reputation, local reputation and objective reputation of the products of the business. Often it is the local reputation or the attribute of locality which from the content of the goodwill. Specially is the attribute of locality the most important consideration in the business of an ordinary trader or dealer consisting of buying or selling goods. This Point has been very clearly brought out in Dulaldas Mullick v. Ganesh Dass, AIR 1957 Cal 280. Dealing with the above point Hon'ble Justice P.B Mukharji. (as His Lordship then was) has held as under;

“The law of goodwill is often misunderstood because I think Jurisprudence not infrequently treats it as an abstract notion, which in fact it is not. Goodwill must always be understood in relation to facts. Goodwill in jurisprudence is not the abstract quality which the grammarian means by that expression but a very concrete notion of great practical import. What the goodwill of a business is depends a good deal on the facts and circumstances of the particular business. Goodwill represents business reputation. Business reputation in my view is a complex of personal reputation, local reputation and objective reputation of the products of the business. Which one of these elements, will predominate will depend on the facts and circumstances of each case. Except where the reputation of a business and where the product of the business more than its properietor have won widespread popularity and universal approval and except in the case of well-known patents and manufacturing processes in which even the personal and objective reputations predominate, it is the local reputation or the attribute of locality which forms the largest content of goodwill in almost every other business. Specially is the attribute of locality the most important consideration in the business of an ordinary trader or a dealer as in the present case. In my opinion there can be no hard and fast rule, no simple formula and no inflexible and rigid definition of the term “goodwill” but in each case it is necessary to see the entire nexus of facts connected, with the business whose goodwill is to be determined.”.

20. The word “goodwill” has been defined in Black's Law Dictionary. Among others the meanings assigned are as under:

“It means every advantage every positive advantage that has been acquired by a proprietor in carrying on his business whether connected with the premises in which the business is conducted or with the name under which it is managed or with any other matter carrying with it the benefit of the business.”

21. This part of the description of the word “goodwill” has been based on Glen and Hall Co. v. Hall, 61 NY 226.

22. Corpus Juris Secundum Volume 38 at page 953 defines the word “Goodwill” in connection with the property as under:—

“Business corporations may have a goodwill connected with their property, business or other rights.”

23. From the above discussion it is manifest that the tenancy rights of the shop in the instant case also form a Part of the goodwill which is the property of the firm and is liable to be taken into account while settling the accounts.

24. For the above reasons the finding of the trial court was not correct and the tenancy right will be treated to be part of the goodwill and belonged to the firm. The same will have to be valued along with the goodwill and taken into account at the final settlement of the accounts while passing a final decree.

25. I, therefore, accept this revision and set aside the impugned order.

26. The case is sent back to the Munsiff 1st Class. Jammu, who will pass a preliminary decree according to law and keeping in view the observations made above, take further proceedings according to law. The parties are directed to appear before the trial court on 5-6-1972.

27. Revision accepted.