Petrol-Pump Investor’s 49% Partnership With Vishal Sharma Upheld; P&H HC Leaves HPCL Dealership Rights Untouched

M/s. Sharma Service Station operated a petrol-pump dealership.

Gurprit Singh claimed that Vishal Sharma had agreed to induct him as a partner with a 49% share.

Singh relied on a proposed partnership deed and related documents, his alleged investment of ₹20 lakh, the mortgage of his Feed Factory to secure a cash-credit facility, and the operation of the Firm’s bank account through his brother.

The defendants disputed that a partnership had been formed; HPCL had not approved a change in the dealership’s constitution.

The trial court dismissed the suit, but the First Appellate Court declared Singh a 49% partner, while declining relief against HPCL and the bank.

Vishal Sharma and the other appellants challenged that decision in this regular second appeal.

Sections 4 and 6 of the Indian Partnership Act, 1932 provide that partnership depends on an agreement to share the profits of a business carried on by all, or any of them acting for all; its existence and the status of a person as partner are determined from the real relationship shown by all relevant facts taken together.

Under K.D. Kamath & Co. v. Commissioner of Income Tax, (1971) 2 SCC 873, the essential requirements include an agreement to share profits and a business carried on by the partners, or any of them, acting for all.

Section 69(1) bars specified suits brought by a person suing as a partner to enforce contractual or statutory rights against the firm or an alleged partner where the registration requirements are unmet; a claim seeking a declaration that the claimant is a partner is not, on that account alone, barred, as explained in Mukund Balkrishna Kulkarni v. Kulkarni Powder Metallurgical Industries, (2004) 13 SCC 750.

The court also invoked the doctrine against approbating and reprobating, citing R.N. Gosain v. Yashpal Dhir, (1992) 4 SCC 683.

Finally, the parties’ internal arrangement could not override HPCL’s contractual requirement of prior approval for reconstitution of the dealership.

Applying Sections 4 and 6, the Court considered the proposed deed alongside the parties’ contemporaneous documents and conduct.

It found that Singh’s investment, mortgage-backed credit support, and the operation of the Firm’s bank account over an extended period showed that the arrangement had been acted upon and that the parties’ relationship satisfied the requirements of partnership.

The deed’s “proposed” label did not determine the issue, and the appellate court had recognised an existing relationship rather than created a contract.

The Court further held that Singh’s claim for a declaration of his individual status as a partner was not barred by Section 69.

However, the finding of partnership governed only the parties’ inter se rights and did not compel HPCL to recognise a change in the dealership without its approval.

Finding no illegality, perversity, or error of law in the First Appellate Court’s decision, the Court dismissed the regular second appeal, affirmed the declaration of Singh’s 49% share inter se the parties, made no order as to costs, and disposed of any pending applications.