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Issues: Whether a partnership between the karta of a Hindu undivided family and two undivided sons was valid where the sons contributed their separate earnings or gifted amounts as capital and the family remained joint, so as to entitle the firm to registration.
Analysis: Partnership is founded on contract and not on status. There is no legal bar to members of a Hindu undivided family entering into a partnership with the karta in respect of their separate and individual property, even while retaining the family status intact. The decisive consideration is whether the coparceners invested only their self-acquired or separately held funds, unconnected with joint family assets. On the facts found, the sons contributed capital from their own earnings and gifts received by them, while the karta contributed from joint family funds. The governing principle permits such a contractual arrangement without disrupting the joint family, and the earlier authorities support the validity of a partnership formed on that basis, whether for a new business or an existing family business.
Conclusion: The partnership was validly constituted and the firm was entitled to registration; the question was answered in the affirmative and against the Revenue.
Ratio Decidendi: A karta of a Hindu undivided family may validly enter into a partnership with coparceners in their individual capacity if they contribute their separate property or self-acquired funds and the joint family relationship is not disrupted.
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