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Section 265: Sections 239 to 266 [Repealed by the Indian Partnership Act, 1932]

Indian Contract Act • Official Statutory Text & Practice Guide

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Act 1872
Section 75 All 266 Sections of Indian Contract Act Section 77

Legal Commentary & Landmark Judgments: Section 265

Section 265 historically conferred upon partners the right to apply to the court for winding up the business of the firm after dissolution and for the distribution of surplus assets, now reenacted as Section 46 of the Indian Partnership Act, 1932.

  • Partner's Statutory Equitable Lien: Every partner or his legal representative is entitled to have the property of the firm applied in payment of debts and liabilities of the firm, and to have the surplus distributed among partners according to their rights.
  • Right to Judicial Liquidation and Receiver: Provides the statutory basis for instituting a suit for winding up, appointment of a court commissioner or receiver, and the taking of final accounts under Order XX Rule 15 CPC.
  • Modern Reenactment in Section 46 IPA 1932: Repealed by Act 9 of 1932 and reenacted as Section 46 of the Indian Partnership Act, 1932, codifying the partner's lien over partnership property.
Key Landmark Precedents:
  • Addanki Narayanappa v. Bhaskara Krishtappa AIR 1966 SC 1300: A Constitution Bench held that Section 46 of IPA 1932 (former Section 265) embodies the equitable lien of partners over firm assets, which crystallizes upon dissolution into a right to have properties realized and debts paid.
  • Syers v. Syers (1876) 1 App Cas 174: The House of Lords established that upon dissolution, each partner has a prima facie right to have the partnership assets sold in open market to ascertain true value.
  • Firm Ram Sahay v. Bishwanath AIR 1963 Pat 221: The High Court affirmed that an erstwhile partner's suit under Section 46 of IPA 1932 is maintainable to enforce the statutory lien and compel the realization and distribution of firm assets.
Courtroom Practice & Strategic Litigation Guidance:

In a post-dissolution dispute where surviving or managing partners refuse to distribute assets, institute a suit under Section 46 of IPA 1932 read with Order XX Rule 15 CPC for taking accounts and winding up; apply for an injunction restraining any alienation of firm immovable property or bank withdrawals.

Section 75 All 266 Sections of Indian Contract Act Section 77