Delhi District Court
Geeta Sharma And Anr vs Pawan Lakhotia And Ors on 30 April, 2026
IN THE COURT OF MS. KIRAN BANSAL:
DISTRICT JUDGE (COMMERCIAL COURT-02
SHAHDARA DISTRICT
KARKARDOOMA COURTS : DELHI
INDEX
Sl. No. HEADINGS Page Nos.
1 Memo of Parties 2
2 Brief Description of Case 4-5
3 Procedings under Order XX Rule 15 5
CPC
4 Report of the CA/Court Commissioner 5 - 11
5 Objections of defendant no. 1 to report 11 - 19
filed by Court Commissioner
6 Reply on behalf of plaintiff to the 19 - 22
objections of defendant.
7 Analysis and adjudication of objection 22 - 36
raised by defendant no.1
8 Adjudication of the final shares of the 36 - 46
plaintiff/LRs of deceased partner
9 Relief 47
Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.1 of 47
Digitally signed
KIRAN by KIRAN
BANSAL
BANSAL Date: 2026.04.30
15:29:26 +0530
Civil Suit (Comm) No. 127/2022
In the matter of
1. Smt. Geeta Sharma,
Wife of Late Shri Narender Sharma,
Resident of 116, Ground Floor, Gali No.13,
R S Block, Bhola Nath Nagar, Shahdara,
Delhi - 110092
2. Ms. Aanya Sharma (Minor)
Daughter of Late Shri Narender Sharma
Through her Natural Guardian Smt. Geeta
Sharma,
Resident of 116, Ground Floor, Gali No.13,
R S Block, Bhola Nath Nagar, Shahdara,
Delhi - 110092
....Plaintiffs
Vs.
1. Mr. Pawan Lakhotia
Son of Sh. Drarka Prasad Lakhotia,
Resident of E-93, Prem Kutir Apartments,
Sector - 9, Rohini, Delhi - 110085
Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.2 of 47
Digitally signed
KIRAN by KIRAN
BANSAL
BANSAL Date: 2026.04.30
15:29:34 +0530
2. M/s Frienz Fashion,
Through its Partner (s)
271/5A (Old) New No.X-93, Partap Gali,
Mohalla Ram Nagar, Gandhi Nagar, Delhi
3. Mrs. Bhagwati Devi
Wife of Late Shri Shankar Lal Sharma,
Resident of 26/86, Floor 3, Shakti Nagar,
Malka Ganj, Delhi - 110007
....Defendants
Date of Institution :15.02.2021
Date of final arguments : 28.04.2026 & 30.04.2026
Date of conclusion :30.04.2026
JUDGEMENT
1. The present suit for the rendition of partnership accounts, payment/ recovery of amount and permanent injunction against the defendant(s) is filed by the plaintiff, a widow left to navigate life after the untimely demise of her husband, finding herself in a position of deep vulnerability, bearing the sole responsibility of raising her minor daughter. With limited means and little knowledge of the intricate business affairs once managed by her late husband, she has approached this Court seeking a fair and transparent rendition of accounts of the partnership firm in which her husband was a partner. It is both disheartening and unjust that the defendants, instead of acting with fairness and integrity, have chosen to continue business under the same name through a separate firm, thereby raising serious concerns regarding Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.3 of 47 Digitally signed KIRAN by KIRAN BANSAL BANSAL Date: 2026.04.30 15:29:40 +0530 the concealment of assets and profits rightfully belonging to the deceased's estate. In these difficult circumstances, the plaintiff seeks not only her lawful entitlement but also the protection of her and her child's future, which now rests upon the equitable intervention of this Court.
BRIEF DESCRIPTION OF THE CASE
2. In a nutshell, it is stated that the late husband of plaintiff no. 1, Sh. Narender Sharma, came into partnership with Defendant no. 1, Pawan Lakhotia, under the name and style of M/s Frienz fashion and jointly purchased a property bearing no. 271/5- A (Old) New No. X-93 Pratap Gali, Mohalla Ram Nagar, Gandhi Nagar, Delhi- 110031. However, Sh. Narender Sharma expired on 17.02.2018.
3. It is stated that defendant no.1 after the death of Sh. Narender Sharma has used the entire property and in lieu of that he promised to pay Rs. 80,000/- per month to the plaintiff. But he did not pay anything to the plaintiff. Moreover, the defendant no. 1 has converted the business and assets of the partnership business into his own proprietorship firm's business under the same name and style of M/s Frienz Fashion. Hence, the present suit.
4. The WS was filed by the defendant, however, the defendant had not filed the affidavit of admission/ denial of the documents, thus, the WS was taken off the record vide order dated 02.04.2025. Issues were framed vide Order dated 07.04.2025 and matter was posted for recording of evidence.
5. During the plaintiff's evidence, the plaintiff has recorded the testimony of 3 witness. Since the WS of the defendant was taken off the record, there was no Defendant's evidence.
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6. Vide order dated 22.11.2025, a preliminary decree was passed in favour of the plaintiff and against the defendant under Order XX Rule 15 CPC for rendition of accounts and the matter was posted further for inquiry under Order XX Rule 15 CPC. The facts, proceedings and the evidence have been discussed therein elaborately while passing preliminary decree and thus, are not repeated herein for sake of brevity.
PROCEEDINGS UNDER ORDER XX RULE 15 CPC
7. Vide order dated 28.11.2025, CA Pulkit Jain was appointed as court commissioner for the purpose of checking of accounts of firm(s) M/s Frienz Fashion in compliance of Order dated 22.11.2025 and was directed to file its report in this regard. The detailed report of the CA was filed on 22.01.2026.
REPORT OF THE CA/ COURT COMMISSIONER
8. The 28 pages report of CA, comprises of detailed study of the accounts of the firm and his conclusion in this regard. The report consists of the following parts:
Appointment and Authority: In this part, the court commissioner sets out the details about his appointment i.e. by order of this court dated 28.11.2025 and states that he was directed to examine the books of accounts and financial records of the parties, ascertain receipts, payments, profits, assets and liabilities of the partnership business or any other business in name of M/s Frienz Fashion. Scope of Rendition of Accounts: It has been stated by the ld. court commissioner that the scope of the examination was confined to (a) Period of Accounts i.e. from 01.04.2014 till 17.02.2018 and examination of profits as per Section 37 of Partnership Act; and (b) the examination was of two Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.5 of 47 Digitally signed KIRAN by KIRAN BANSAL BANSAL Date: 2026.04.30 15:29:55 +0530 entities i.e. Partnership firm M/s Frienz Fashion and proprietorship concern of defendant no. 1 using the same trade name M/s Frienz Fashion.
Proceedings before the commissioner: It is submitted that the plaintiff appeared before the court commissioner on 06.12.2025 and submitted a certified copy of the order passed by the court appointing him as court commissioner and submitted documents i.e. Partnership Deed dated 02.06.2009, certified bank statements and PAN cards of M/s Frienz Fashion (Partnership Firm) and its partners i.e. late Sh. Narender Sharma and Mr. Pawan Kumar among other documents.
Thereafter, it is stated that the first notice was issued on 08.12.2025 to all concerned parties, calling upon them to appear before him and to produce complete books of accounts, balance sheets, audit reports, income tax returns, indirect tax returns, bank statements, vouchers and other financial records pertaining to M/s Frienz Fashion (Partnerhsip firm) as well as any business carried under same name as proprietorship concern and it was informed that 11.12.2025 was fixed for examination of accounts.
On 11.12.2025, it is stated that documents were produced by the defendant, including limited balance sheets, audit reports and indirect tax returns. However, upon examination, it was observed that several material records were either not produced or were unsupported by vouchers, thereby impeding the effective rendition of accounts. In view of deficiencies, the commissioner issued a second notice dated 13.12.2025 calling upon defendant to produce the missing partnership ITRs, audit reports for earlier Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.6 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:30:27 +0530 financial years, complete bank statements of proprietorship accounts, income tax login credentials and to provide written clarifications regarding serious discrepancies observed in financial statements, including non reflection of stock amounting to Rs. 56,16,055/- and absence of figures relating to sundry debtors and Sundry Creditors despite active bank transactions. The next date was fixed as 16.12.2025 at 11:30 AM for examination of accounts.
Even thereafter, it is submitted that discrepancies persisted and critical issues remained unresolved and therefore, a third notice dated 03.01.2026 was issued calling upon the parties to produce specific balance sheets, audit reports, income tax returns, bank account statements of Canara bank account of proprietorship concern and parties were further directed to clarify about the existence of two audited balance sheets for FY 2014-15, in writing and date was fixed as 05.01.2026 at 12:30 PM for further examination.
Documents Examined: The commissioner examined and produced the documents from time to time and on the basis of the documents produced, the present report has been field. The CA has given detailed list of the documents examined and the same is not repeated here for sake of brevity.
Note on Non-production/ Incomplete Production of Records: It is pertinent to mention here that the CA has noted that despite issuance of the notices, certain books of accounts and supporting documents were not produced/ were produced incompletely before the CA and the said documents are as follows:
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1. Bank statement of Canara Bank having account no.
1974214000060 of M/s Frienz Fashion (proprietorship firm) and that it has been confirmed by the bank vide written communication that as the said account has been closed dated 01.02.2023, they are unable to generate the account statement for the said period i.e. from 01.04.2015 to till date.
2. DVAT returns of M/s Frienz Fashion (Partnerhsip Firm) for the verification of goods sold subsequent to 31.03.2015.
Issues Observed During Examination: In this part, the court commissioner has elaborately discussed various discrepancies and issues. A brief discussion of the said is as follows:
1. Firstly, the commissioner has pointed out the discrepancy in the audited balance sheets for the partnership firm for FY 2014-15 placed before him at different stages which had variations in figures, however, it is stated that a revised balance sheet dated 30.09.2015 was later produced but the verification of the revised sheet could not take place as it was not supported by any documents.
2. Secondly, it was observed by the court commissioner that no stock registers or inventory records, including opening and closing stock statement or supporting sale documentation was produced and, thus, the submission of the defendant no. 1 that closing stock lying with partnership firm on 31.03.2015 was sold for the purpose of repayment of creditors, could not Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.8 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:30:41 +0530 be verified or corroborated during the course of examination/ rendition.
3. Thirdly, it is submitted that the submission of the defendant no. 1 that outstanding of the creditors of the partnership firm were paid out of sale of closing stock lying with the firm, could not be verified as no documentary proof such as cash book entries or bank entries evidencing realization of such stock and utilization of proceeds towards creditor repayment was produced before the commissioner and further due to partial disclosure of bank statement and absence of cash flow records, reconciliation of creditor balances with actual repayment remained constrained and manner of repayment was recorded as stated, without independent corroboration.
4. Fourthly, it was submitted that segregation of pre and post dissolution transactions could not be conclusively established due to incomplete records.
5. Lastly, it is stated that owing to incomplete accounting data and absence of stock and expense records, precise computation of profits attributable to deceased partner's share under Section 37 of The Partnership Act, 1932 and that cumulative effect of above issues resulted in limitations on exhaustive verification and rendition of accounts has therefore, been carried out on the basis of records produced and without drawing adverse inference beyond factual reporting.
Findings on Rendition Period and Applicability of Section 37: It is submitted that all the profits earned upto Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.9 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:30:48 +0530 18.02.2018, including those reflected in the proprietorship of Defendant no. 1 have been considered as profits of the partnership firm for the purpose of rendition and distribution as per partnership deed. Further after dissolution of firm on 18.02.2018, and LRs of the deceased partner expressing no intention to continue the said business, provisions of Section 37 became applicable and profits earned thereafter have been examined to determine the entitlement of deceased partner's estate arising from use of partnership assets and goodwill and post dissolution profits are not treated as partnership profits for distribution.
Methodology: The commissioner verified the opening balances and capital accounts; examined bank transactions and cash flows; scrutinized receipts, payments and available vouchers; identified pre- and post- dissolution transactions and prepared summarized statements. Moreover, it is stated that no independent audit or third-party confirmation was undertaken beyond the mandate.
Statement of Rendition of Accounts: It has been stated that profits earned upto 18.02.2018, profits earned from the business, including those reflected in the proprietorship of Defendant no. 1have been considered as profits of the partnership firm and rendered accordingly for the purpose of distribution as per partnership deed and for the period after 18.02.2018, profits earned by defendant no. 1 in proprietorship concern have been examined only for the limited purpose of determining the entitlement of deceased partner's estate u/s 37 of Partnership Act.
Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.10 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:30:55 +0530 Observation on Section 37 and Goodwill: It is stated that business was continued by defendant no. 1 using the assets, trade name and goodwill of the erstwhile partnership firm without final settlement of accounts with deceased partner's estate and accordingly, profits earned after 18.02.2018 have been examined to determine the benefit derived from use of deceased partner's share in firm property and entitlement of deceased partner's share has been computed as per Section 37 in Annexure A r/w Annexure C and Goodwill being a partnership asset has been computed as on 18.02.2018 and deceased partner's share in such goodwill has been considered for the purpose of rendition as per Annexure C. Concluding the report, it has been stated that the present report is not a statutory audit and has been prepared strictly in pursuance of the directions of this court under Order XXVI CPC and rendition of accounts has been carried out solely on the basis of the documents and information produced and it is also pertinent to mention here that the commissioner has taken note of the fact that certain records and supporting documents were either not produced or were produced incomplete due to which exhaustive verification could not take place.
The report is accompanied with 4 annexures, Notices issued to the parties and Canara Bank's reply and other submissions of the commissioner.
OBJECTIONS OF THE DEFENDANT NO. 1 TO THE REPORT FILED BY THE COURT COMMISSIONER
9. The defendant no. 1 filed a detailed set of objections to the report dated 21.01.2026 filed by the court commissioner. The objections to the report is enumerated as under:
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2026.04.30 15:31:04 +0530 That the defendant no. 1 is aggrieved of the report of court commissioner as the same suffers from serious legal and factual infirmities and report is neither fair nor prepared assiduously and it is to be looked upon with disfavour and the report is wrong, vague, evasive and unacceptable. It is further submitted that the court commissioner was apprised of the fact that partnership firm "Frienz Fashion" was dissolved on 14.03.2015 and the accounts were duly settled but it is stated that court commissioner ignored this fact. It is submitted that the partnership firm 'Frienz Fashion' was constituted between the two partners, namely Late Sh. Narender Sharma and Sh. Pawan Lakhotia having 1/2 share each in the profits of the firm. It is further submitted that the said firm was never registered with registrar of firms u/s 69 of The Partnership Act, as allegedly averred by the plaintiff in the replication and that the plaintiffs are overpowered by greed to harass the defendant no. 1 so that he might pay money under duress. It is averred that the court commissioner did not meticulously examine the record pertaining to the account of partnership firm thereby rendering the report unacceptable and it requires to be re-examined by another chartered accountant from Institute of Chartered Accountant. It has been submitted that the partnership firm was dissolved on 14.03.2015 and the accounts were settled and there was no sale/ purchase of goods by the partnership firm after 14.03.2015. It is further averred that the erstwhile partnership firm had opened account in HDFC Bank and there had been no transaction after 02.12.2015 and it is submitted that the firm used to purchase/ sell the goods on Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.12 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:31:11 +0530 credit basis and whatever amount was received by the firm after 14.03.2015 was paid to the sellers from whom the firm had purchased goods on credit and it is submitted that the report of the commissioner is silent upon this aspect which is a serious lacunae.
It is further averred that after the dissolution of the partnership firm, Sh. Narender Sharma started doing similar business of sale/ purchase of readymade garments under name and style of 'Fly Fashion' which was a proprietorship concern and Late Sh. Narender Sharma got the said trade name registered with Department of Trade and Taxes and its registration bears no. 07257167999 dated 13.12.2016. Similarly, it is stated that defendant no. 1 also started doing similar business of sale/ purchase of ready made garments under the name and style 'Frienz Fashion' which was trade name of erstwhile 'Partnership Firm' and for that he paid Rs. 25,000/- to Sh. Narender Sharma for retaining the name of dissolved firm. Moreover, defendant no. 1 opened account in Canara Bank and ICICI Bank of the said proprietorship concern and account was also opened by Sh. Narender Sharma in the name of Fly Fashion. It is submitted that both the deceased partner and the defendant no. 1 registered their business in different name and the same is sufficient to show that the partnership was dissolved on 14.03.2015.
It is submitted that the defendant no. 1 has been doing business under the name and style 'Frienz Fashion' after dissolution of partnership firm with the consent of the other partner namely Sh. Narender Sharma against a payment of Rs. 25,000/- for using the said name. Moreover, it is Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.13 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:31:19 +0530 submitted that Narender Sharma did not show any anguish or made any complaint in this regard before any forum restraining him from using the name 'Frienz Fashion' and thus, it can be said that there was no discord between Narender Sharma and Defendant no. 1with respect to using the trade name, therefore, claim made by the plaintiffs with respect to goodwill of erstwhile firm is untenable. It is further averred that the court commissioner committed grave error by computing the value of the goodwill which is an intangible asset. Moreover, it is stated that the Defendant no. 1 took O.D. Loan facility of Rs. 1,00,00,000/- from ICICI Bank, Kailash Nagar Branch and invested money in his said business 'Frienz Fashion' in the year 2018 and used his skill and labour to earn profit from said proprietorship concern and that plaintiffs are not entitled for any amount towards 'Goodwill' and thus, the calculations towards goodwill are feigned, arbitrary and without any basis. It is further averred that the partnership firm was dissolved on 14.03.2015 and the present suit was filed in February 2021, thus, it is stated to be hit by Art. 5 of Limitation Act. Moreso, it is submitted that report deserves to be rejected at the threshold as the commissioner treated the profit earned by the proprietorship firm as profit of the partnership firm and that it is also pertinent to state that the partnership firm filed ITR till 2015 and thereafter, no ITR was filed because the firm stood dissolved as it is mandatory for every firm to file ITR but as no ITR was filed by the firm it indicates that firm ceased to exist.
It is furthermore, stated that Sh. Narender Sharma started doing the business under name and style of 'Fly Fashion' Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.14 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:31:28 +0530 after dissolution of partnership firm in the year 2015 and after death of Sh. Narender Sharma on 17.02.2018, the plaintiff no. 1 authorised Sh. Manoj Sharma to dispose of the stock in trade of proprietorship concern 'Fly Fashion' and the said stock in trade was disposed by Sh. Manoj Sharma who after disposing it rendered true accounts of it. However, being dissatisfied by it, the plaintiff no. 1 filed a suit for rendition of accounts which is also pending adjudication and thus, it can be said that no partnership firm was in existence before the death of Sh. Narender Sharma and it is stated that despite bringing this fact into knowledge of court commissioner, he did not take steps to refer it in his report. Moreso, it is stated that the commissioner committed serious error to examine the record from the year 2015 to 2018 of the proprietorship concern of defendant no. 1 which is out of time and wrongly treated the profit earned by proprietorship concern as profit of partnership firm and thus, the report is far away from reality as the commissioner allowed 50% share in profits earned by defendant no. 1 under the name and style of 'Frienz fashion' who is alien to the business being carried by defendant no. 1 under the name and style of 'M/s Frienz Fashion'. Moreoso, it is stated that the commissioner did not carefully examined the statement of account of HDFC Bank in respect of partnership firm as the amount lying to the credit of the partnership firm in HDFC Bank was zero on 15.06.2017 which shows that the firm was not in existence during the life time of Late Sh. Narender Sharma.
Furthermore, it has been averred that the court commissioner wrongly presumed that the partnership firm Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.15 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:31:35 +0530 continued to subsist till 18.02.2018, being the date of death of late Shri Narender Sharma, however, the partnership business had already ceased operations much prior and no documentary evidence has been produced to establish active partnership business after financial year 2014-15 and no ITRs, audited balance sheets etc. exist beyond said date and thus, treating business to be subsisting till 18.02.2018 is factually incorrect and legally unsustainable. It is furthermore averred that the trade name 'Frienz Fashion' was being used by defendant no. 1 in his individual capacity and at no point of time during his lifetime late Sh. Narender Sharma raised any objection to issue any legal notice, initiate any proceedings or disputed the use of said trade name. Thus, it establishes acquiescence and implied consent and since, it is a settled principle of law that party having knowledge of fact, if remains silent, amounts to acquiescence and operates as estoppel against subsequent challenge.
It is submitted that the legal representatives of the deceased partner can not claim a higher right than the deceased himself and if the deceased partner did not object to use of trade name then his legal heirs are estopped from alleging wrongful use of goodwill or claiming post-dissolution profit solely on that ground. It is stated that mere use of a similar trade name does not automatically establish misuse of partnership goodwill and goodwill being a intangible asset has to be proved to exist as transferable and commercially valuable property of the firm at the time of dissolution and in this case, no independent valuation report, no expert Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.16 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:31:43 +0530 evidence and no proof of saleable goodwill has been produced.
It is stated that the assets standing in the name of proprietorship concern are the exclusive property of proprietor and do not form part of the assets of the erstwhile partnership firm. A proprietorship concern has no independent entity than his proprietor and thus, the asset in the name of the proprietorship concern are the assets of the proprietor unless specifically proved to be derived from the partnership property and that once the partnership business ceased and the business was carried on as proprietorship concern, any asset subsequently acquired were acquired from funds and creditworthiness of the proprietor and such assets can not be retrospectively characterized as partnership property merely because the trade name was similar.
Moreover, it is submitted that valuation of the partnership firm, including computation of goodwill and share value, cannot in law be calculated on the basis of profits earned after the death of partner. Thus, the calculation of the goodwill and share value by the commissioner by taking into account the profits from 01.04.2018 to 31.03.2025 is legally flawed as valuation must be done as on the date of the dissolution and not on basis of future uncertain profits as future profits are contingent upon the skill, labour, management etc of the continuing proprietor. It is submitted that if the estate of deceased partner seeks entitlement to alleged post-dissolution profits, then the natural and legal corollary is whether the said estate is equally liable to losses as the principle of partnership does Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.17 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:31:50 +0530 not permit selective appropriation of profits without corresponding exposure to losses. Moreover, it is submitted that if hypothetically the business had suffered substantial losses after the death of Late Sh. Narender Sharma, there is no legal basis on which LRs of the deceased would have contributed towards such losses and thus, in absence of any risk participation, capital contribution or management control, the estate can not assert a unilateral right to profits alone.
It is submitted by the defendant that the entire calculation made by the commissioner is contrary to provision of Income tax Act and Indian Partnership Act and, thus, it can not be relied upon by the court. Moreover, the commissioner has taken the total profit as reflected in proprietorship books as partnership profit and that it is settled accounting principles, that gross book profit can not be treated as distributable partnership profit without mandatory deductions.
Lastly, it is submitted that the court commissioner did not comply with Section 40(b) of the Income Tax Act as per which Interest on capital and remuneration to partners are allowable deductions before determining taxable income of firm and as per the defendant, the total distributable profits after all the deductions is Rs. 7,17,141/- and thus, it is stated that commissioner has wrongly computed Rs. 34,87,529/-.
Prayer has been made to reject the report of the commissioner.
Alongwith the objections, the defendant has filed the following documents:
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2026.04.30 15:32:02 +0530 GST registration Certificate of M/s Frienz Fashion (Proprietorship) of Defendant no. 1 (Pawan Kumar) Bank Account Statement of the 'Frienz fashion' bearing account no. 197421400060 maintained at Canara Bank Account details letter issued by the Canara Bank to the 'M/s Frienz fashion' (Proprietor) Tax Information Exchange System for the Date of Registration of firm Frienz Fashion under CST Act Provisional Certificate of Registration of the firm Fly Fashion dated 13.12.2016 GST Registration 'M/s Fly Fashion' proprietorship firm of Narender Sharma Letter dated 18.08.2022 issued by HDFC Bank.
REPLY, ON BEHALF OF THE PLAINTIFF, TO THE OBJECTIONS OF THE DEFENDANT
10. The plaintiff has filed the reply to the objections of the defendant to the report of the court commissioner and has contended as follows:
That the WS of the defendant was struck off and objections are merely a backdoor attempt to plead a defence and thus, now, defendant can not use objections to the commissioner's report as a backdoor to smuggle in unpleaded factual defences such as an alleged Rs. 1 Cr OD Loan, Fictitious tax deductions or alleged payments for trade names and therefore, these objections must be dismissed at the threshold as legally barred. It is furthermore submitted that the present objections are a de facto appeal against the preliminary decree and Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.19 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:32:10 +0530 defendant no. 1 is unlawfully attempting to re-litigate settled issues.
It is submitted that the defendant no. 1 has no standing to challenge the estimations because he is guilty of withholding the crucial financial records as according to defendant accounts were settled in 2015 yet the commissioner noted a glaring discrepancy i.e. stock worth Rs. 56,16,055/- was missing from 2014-15 balance sheet and no stock registers were produced by the defendant to explain it and that the defendant deliberately closed the Canara Bank account on 01.02.2023 (during the pendency of the present suit), cutting off a vital financial trail and, thus, it is submitted that a party who deliberately suppresses the evidence can not be permitted to challenge the logical financial inferences drawn from the limited records, which defendant selectively disclosed.
It is further submitted that the defendant's attempt to artificially deflate the computed profits by retroactively claiming deductions u/s 40(b) of The Income Tax Act is legally absurd and that by defendant's own admissions in his objections, the defendant deliberately stopped filling partnership ITRs after 2015 so now he can not apply these deductions in 2026 for those years.
On merits, it is submitted that the defendant's assertion that the firm was dissolved on 14.03.2015 is contemptuous as it is stated that the court has already noted in its judgement that the joint purchase of property by the partners on 29.08.2016 destroys the defendant's false claim of a 2015 dissolution and that a zero balance in HDFC Bank account Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.20 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:32:18 +0530 on 15.06.2017 does not legally equate to the legal dissolution of the firm.
Moreover, it is submitted that whether late Sh. Narender Sharma operated another entity 'M/s Fly Fashion' has no bearing on the defendant's legal liability to account for the usurped assets and goodwill of M/s Frienz Fashion and it is stated that the claim of defendant having been paid Rs. 25,000/- for the trade name was already rejected as being afterthought by the present court.
Furthermore, it is stated that the commissioner calculated the goodwill transparently, based on established accounting principles using the actual post dissolution profits earned by the defendant and the defendant's unpleaded claim of an alleged Rs. 1 Cr OD Loan can not be raised now as his WS has been struck off.
It is submitted that the defendant's arguments regarding "acquiescence" and "implied consent" is legally frivolous and clause 14 of the partnership deed mandates that no partner shall use the firm's name or goodwill for personal benefit without the consent of the other partner and that no such written or valid consents exists and this court has already ruled against the defendant regarding this unauthorized conduct.
Moreover, it is stated that the defendant fundamentally misinterprets the law regarding the sharing of losses and that section 37 of Partnership Act grants the estate of the deceased partner the statutory right and option to claim either a share of post-dissolution profits or 6% interest. It is stated that the protection specifically protects the right of the legal heirs against the surviving partners who unlawfully Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.21 of 47 Digitally signed KIRAN by KIRAN BANSAL BANSAL Date: 2026.04.30 15:32:26 +0530 continue the business with firm assets and it does not impose a reciprocal obligation on the widow and minor child to absorb the potential losses of a clandestine proprietorship run solely by the surviving partner at his own risk.
Prayer has been made to dismiss the objections filed by the Defendant no. 1; accept the report of Court Commissioner dated 21.01.2026 in its entirety and Pass a final decree in favour of the plaintiffs and against the defendants directing the payment of the amounts computed in Annexure-D of the commissioner's report.
ANALYSIS AND ADJUDICATION OF THE OBJECTIONS RAISED BY THE DEFENDANT NO. 1
11. At the outset, it is pertinent to mention here that a preliminary decree was drawn on 22.11.2025 pursuant to the judgement of the present court thereby determining the rights and liabilities of the parties. Thus, it would be relevant to refer to judgement of Hon'ble SC in the case of Abdul Rejak Laskar vs Mafizur Rahman & Ors Civil Appeal no. 14805 of 2024 decided on 20.12.2024. In the said case, the Hon'ble SC had explained the concept of the preliminary decree and final decree. Though, the Hon'ble SC in the said case was dealing with suit for partition of immovable property, however, the observation and the law relating to preliminary decree and final decree would be equally applicable in the present case. The Hon'ble SC has observed as follows:
"45. This Court in Venkata Reddy & Ors. v. Pethi Reddy reported in AIR 1963 SC 992 held thus:
"... A preliminary decree passed, whether it is in a mortgage suit or a partition suit, is not a Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.22 of 47 Digitally signed by KIRAN KIRAN BANSAL Date:
BANSAL 2026.04.30 15:32:33 +0530 tentative decree but must, in so far as the matters dealt with by it are concerned, be regarded as conclusive. No doubt, in suits which contemplate the making of two decrees, a preliminary decree and a final decree, the decree which would be executable would be the final decree. But the finality of a decree or a decision does not necessarily depend upon its being executable. The legislature in its wisdom has thought that suits of certain types should be decided in stages and though the suit in such cases can be regarded as fully and completely decided only after a final decree is made, the decision of the court arrived at the earlier stage also has a finality attached to it. ..."
.....
48. A preliminary decree is a stage where the rights of the parties are worked out which are then to be finally adjudicated by passing of a final decree. This Court in Venkata Reddy (supra) explained the concept of "preliminary decree" and "final decree"
in detail and observed thus:
"... A decision is said to be final when so far as the court rendering it is concerned, it is unalterable except by resort to such provisions of the code of Civil Procedure as permit its reversal, modification or amendment. Similarly, a final decision Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.23 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:32:44 +0530 would mean a decision which would operate as res judicata between the parties if it is not sought to be modified or reversed by preferring an appeal or a revision or a review application as is permitted by the Code. A preliminary decree passed, whether it is in a mortgage suit or a partition suit, is not a tentative decree but must, in so far as the matters dealt with by it are concerned, be regarded as conclusive. No doubt, in suits which contemplate the making of two decrees, a preliminary decree and a final decree, the decree which would be executable would be the final decree. But the finality of a decree or a decision does not necessarily depend upon its being executable. The legislature in its wisdom has thought that suits of certain types should be decided in stages and though the suit in such cases can be regarded as fully and completely decided only after a final decree is made, the decision of the court arrived at the earlier stage also has a finality attached to it. It would be relevant to refer to Section 97 of the Code of Civil Procedure which provides that where a party aggrieved by a preliminary decree does not appeal from it, he is precluded from disputing its correctness in any appeal which may be preferred from the final decree. This provision thus clearly indicates that as to the Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.24 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:32:55 +0530 matters covered by it, a preliminary decree is regarded as embodying the final decision of the court passing that decree."
49. A final decree is one which completely disposes of the suit and finally settles all the questions in controversy between the parties and nothing further remains to be decided thereafter. A preliminary decree in a partition suit merely determines and declares the rights of the parties in the properties and the extent to which they are entitled. It is the final decree which ultimately divides the properties by metes and bounds and awards separate possession of the properties to the claimants. The function of the final decree is to restate and apply what the preliminary decree has ordered. A final decree is thus based upon and controlled by preliminary decree. It is settled legal position that final decree proceedings are in continuation of preliminary decree proceedings and there is no executable decree unless the final decree is passed. The final decree does not originate itself, but flows from preliminary decree already passed in a suit determining and declaring the rights and interests of the parties in the suit. The final decree is not a decree in execution of preliminary decree but decree in a suit. It is the final decree which is to be enforced.
50. The Privy Council in Guran Ditta L. v. TR. Ditta reported in AIR 1935 PC 12 observed that a final decree neither relates to any substantive rights Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.25 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:33:04 +0530 of the parties nor decides or declares title to the property or shares of the parties to the partition suit and till the final decree is passed, there is no executable decree as envisaged by Order XX Rule 18 of CPC. This Court in Muthangi Ayyana v.
Muthangi Jaggarao & Ors. reported in (1977) 1 SCC 241 held that a final decree cannot go behind, amend or alter the preliminary decree."
12. It is also a settled law that the final decree can not go beyond the preliminary decree and the final decree neither relates to the substantive rights of the parties and it does not originate in itself rather it flows from preliminary decree passed in the suit which determines the rights/ shares of the parties. Thus, once the preliminary decree has not been challenged, it remains the source of the final decree and the final decree will be drawn as per the rights adjudicated by way of preliminary decree.
13. The defendant had to plead all the defences available to him before the preliminary decree and the defendant now cannot adduce new factual defence which the defendant should have raised during trial and before passing of the preliminary decree.
14. Now dealing with the objections of the defendant serial wise. Firstly, it has been contended that court commissioner was informed of the fact that partnership was dissolved on 14.03.2015 and the accounts were duly settled, however, the commissioner ignored this fact. In this regard, it is pertinent to mention here that by way of the preliminary decree this submission of the defendant was discarded and merely reiterating this submission and denying the report would not make the submission Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.26 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:33:14 +0530 of the defendant correct and therefore, this objection of the defendant is misconceived and liable to be rejected.
15. Another objection raised by the defendant is that the commissioner did not meticulously examined the record pertaining to the firm and it requires to be examined again by the Chartered Accountant from the Institute of Chartered Accountant. It is reiterated by the defendant that the partnership firm was dissolved on 14.03.2015 and the accounts were duly settled and there has been no sale/purchase after it and moreover, there has been no transaction in the bank account of the partnership firm opened with HDFC Bank after 02.12.2015 and it is stated that the whatever amount was received by the dissolved firm after 14.03.2015 from the parties who purchased the goods on credit was paid to the sellers, from whom the firm had purchased the goods on credit and this fact is ignored in the report.
15.1. In this regard, it is pertinent to mention here that the defendant has reiterated in this objection also that the partnership was dissolved on 14.03.2015, however, at the cost of repetition it is pertinent to mention here that the partnership was dissolved on the death of the partner, Late Sh. Narender Sharma and not on any such date as alleged by the defendant. As far as the contention regarding the bank account statement is concerned, it is pertinent to mention here that even a zero balance does not lead to a conclusive proof of the fact that the partnership came to an end or it was dissolved. Moreover, just by simply stating that the accounts were settled in 2015 would not make it a gospel truth, especially in absence of any documentary proof. Even if for the sake of arguments, it is accepted that the partnership was dissolved, then it is for the defendant to show that any intimation Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.27 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:33:22 +0530 was given to the registrar of the firms as per Section 63 of The Partnership Act. Section 63 is as follows:
"63. Recording of changes in and dissolution of a firm. Recording of withdrawal of a minor.--(1) When a change occurs in the constitution of a registered firm any incoming, continuing or outgoing partner, and when a registered firm is dissolved any person who was a partner immediately before the dissolution, or the agent of any such partner or person specially authorised in this behalf, may give notice to the Registrar of such change or dissolution, specifying the date thereof; and the Registrar shall make a record of the notice in the entry relating to the firm in the Register of Firms, and shall file the notice along with the statement relating to the firm filed under section 59....."
15.2. However, there is nothing on the record to show that the defendant has anytime given such intimation to the registrar and therefore, this contention of the defendant is without any substance and is merely an afterthought to evade the liability and to say that partnership has been dissolved solely on the ground of balance in the bank account is not correct as bank balance is not the parameter to decide whether a partnership has been created or dissolved.
16. Another objection raised by the defendant is that deceased partner, Late Sh. Narender Sharma, after the (alleged) dissolution of the firm started doing similar business under the name and style of 'M/s Fly fashion' which was a proprietorship Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.28 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:33:30 +0530 concern and the same was also registered with the Department of Trade and Taxes and thereafter, a new GST no. was allotted to him. However, this objection of the defendant is liable to be rejected at the threshold as merely if one person who is a partner of a firm had also opened a proprietorship firm, is no conclusive proof of the fact that partnership firm has been dissolved as there is no legal prohibition in one person being a partner of the partnership firm and proprietor of a proprietorship firm at the same time. Thus, even this objection of the defendant is devoid of merits.
17. The defendant also objected to the report of the commissioner on the ground that the defendant no. 1 started his separate business as proprietorship firm under the name and style of 'Frienz Fashion' which is a proprietorship firm and that the defendant had paid a sum of Rs. 25,000/- to Sh. Narender Sharma for retaining the name of the dissolved firm and opened up two separate accounts in the name of the said firm. It is also stated that Late Sh. Narender Sharma did not take any step during his life time for enforcing his right for the settlement of the alleged assets of the firm.
17.1. In this regard, it is pertinent to mention here that this contention has already been decided against the defendant in the judgement dated 22.11.2025. However, at the cost of the repetition it is pertinent to mention here that the fact of alleged payment of Rs. 25,000 seems to be an afterthought as the defendant himself in the reply to the legal notice sent by the plaintiff has clearly rejected the fact of there being any partnership firm between the plaintiff and defendant. Moreover, during the course of the proceedings, the defendant stated that the accounts have been settled in 2015. Thus, these pleas are contradictory in itself and are clearly an afterthought to evade the liability of the defendant. Furthermore, Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.29 of 47 Digitally signed by KIRAN KIRAN BANSAL Date:
BANSAL 2026.04.30 15:33:39 +0530 with respect to the averment that Late Sh. Narender Sharma has never taken any action to enforce his rights to settle the accounts is also vague and devoid of merits in as much as the firstly, when the partnership firm was dissolved upon the death of the partner then how could he seek rendition of account before; secondly, just because deceased partner has not sought any action against it, it would not forfeit the right of his legal heirs to share in estate of deceased partner in the partnership. This contention of the defendant is also liable to be rejected as the question of the objecting to the use of firm name would arise only if the deceased partner had knowledge regarding the same. On record there is no proof that the deceased partner had knowledge that his co-partner had used the name of partnership firm un-authorisedly. On the other hand, the deceased partner was ill and was not keeping up with the business of the partnership firm, thus, on basis of the trust, Late Sh. Narender Sharma relied upon the defendant no. 1 for continuing the partnership business but the defendant no. 1 clearly usurped the business of the partnership and started running the same as his proprietorship business in the same name.
18. The defendant has also contended that the report of the commissioner is erroneous as profit by proprietorship firm are treated as profit of the partnership firm and it is stated that no ITR has been filed by the partnership firm after 2015 which means that the partnership firm had ceased to exist. However, this contention of the defendant is also liable to be rejected as the commissioner has prepared his report as per the preliminary decree and thus, by this objection, the defendant cannot raise challenge to the preliminary decree which he otherwise could not do. Moreover, mere non filing of the ITR can not be said to be proof of the fact that the partnership was dissolved, as if it is not filed it would have Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.30 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:33:46 +0530 its separate consequences under the concerned law, but it can not be taken to mean that the partnership was dissolved and thus, this objection is misconceived.
19. Another objection raised by the defendant is that Sh. Narender Sharma started doing business of sale/purchase of readymade garments under name and style of 'Fly Fashion' and after his death, plaintiff authorised Sh. Manoj Sharma (elder brother of the Narender Sharma) to dispose of the stock in trade of the proprietorship concern 'Fly Fashion' and being dissatisfied by the accounts, plaintiff no. 1 filed suit for rendition of accounts before Ld. ADJ which clearly shows that no partnership firm was in existence before the death of Sh. Narender Sharma. However, at this stage, it is relevant to mention here that even if Late Sh. Narender Sharma was operating his proprietorship firm M/s Fly Fashion the said fact is not sufficient in itself to show that partnership firm was dissolved as there is no bar on any individual to carry on business as proprietorship firm in addition to partnership firm. Moreover, if there is any suit pending in any court for Proprietorship firm it has to be limited for the purpose of the proprietorship firm and it has nothing to do with the present case which is concerned with the accounts for the partnership firm. At this stage, it is pertinent to mention here that the defendant through these objections is repeatedly raising only one plea that the partnership firm was dissolved in 2015, however, this aspect is specifically dealt in the preliminary decree wherein it was concluded that the same was dissolved on the death of the partner and thus, the defendant can not raise such objections which are in nature of the challenging the preliminary decree.
20. Another contention raised by the defendant is that the commissioner erroneously presumed the fact that the Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.31 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:33:55 +0530 partnership firm subsisted till 18.02.2018, as the partnership firm was dissolved in 2014-15 as no partnership income tax returns, no audited balance sheets and no operational records of the partnership firm exist beyond that period. Moreover, it was contended that the legal representatives of the deceased partner can not claim a higher right than deceased himself and since the deceased did not object to the use of said name during his lifetime, his legal heirs are also estopped from alleging wrongful use of goodwill or claiming post-dissolution profit solely on that ground.
20.1. Firstly, it is pertinent to mention here that the defendant's objection to the commissioner treating 18.02.2018 as date of dissolution is as per the preliminary decree and the commissioner had accordingly treated it as the date of dissolution and, therefore, it can not be said that the commissioner has wrongly assumed the partnership to be subsisting till 18.02.2018.
If the defendant was of the view that the partnership firm was dissolved much prior thereto, it should has challenged the preliminary decree which have not been done so far and, therefore, defendant cannot now raise such pleas in the nature of objection to the commissioner's report. As to the contention of the defendant that the heirs of the deceased are now estopped from raising the plea of unauthorised use of trade name is also equally untenable as even if no action was taken by the deceased, it can not be said to forfeit the right of the LR of the deceased.
21. The defendant has also objected to the fact that the asset of the proprietorship business of the defendant is separate property of the defendant and it can not be considered as partnership property merely because the trade name was similar Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.32 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:34:02 +0530 and thus, the commissioner's report is erroneous and thus, it should be rejected.
However, this contention of the defendant is not legally sustainable as commissioner has considered the profit of the proprietorship firm as that of the partnership firm as per preliminary decree issued by the court and if the defendant is aggrieved by the said preliminary decree then the defendant can challenge the said decree but it cannot raise a challenge to the preliminary decree under the garb of the objections to the report of the commissioner.
22. It is also pertinent to mention here that counsel for defendant during further submissions today morning has orally stated that defendant had not challenged the preliminary decree as there was no illegality or infirmity in the said order. However, despite making the above submissions and the fact that all the issues have been dealt with at the stage of passing of preliminary decree, the same issues are being re-agitated again and again by the defendant no.1 in the name of objections to the report of Court Commissioner. The defendant no.1 has also stated that the present suit is hit by Article 5 of the Limitation Act, however, during the passing of preliminary decree, it is already been observed that the suit filed by the plaintiff is within limitation.
23. It is further contended that if the estate of the deceased partner seeks entitlement to post-dissolution profits, the natural and legal corollary would be whether such estate is equally liable to contribute towards losses in the event the business had suffered losses, as the principles of partnership do not permit selective appropriation of profits without corresponding exposure to losses. However, this contention of the defendant is liable to be Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.33 of 47 Digitally signed KIRAN by KIRAN BANSAL BANSAL Date: 2026.04.30 15:34:13 +0530 rejected as the same is premised on a hypothetical situation of incurring losses by the business. The court cannot decide a issue on the basis of the imagination as the court decides the issues on the basis of evidence and record. Moreover, there is no provision which bound the LRs of the deceased partner to contribute to the losses incurred by the partnership firm. Thus, the contention of the defendant is liable to be rejected at the threshold.
24. Lastly, it has been objected that the ld. court commissioner has taken total net profits of Rs. 34,87,529/- for FY 2015-2016, 2016-2017 and 2017-18 as reflected in the proprietorship books and treated the same as partnership profits and it is stated that the said approach is wrong because as per settled accounting principles, gross book profit can not be treated as distributable profit without mandatory deductions and has submitted that court commissioner / CA did not comply with Section 40(b) of The Income Tax Act, as per which interest on capital and remuneration to partners are allowable deductions before determining taxable income of a firm. The defendant has given his own calculation, as per which total actual distributable profit is Rs. 7,17,141/-"
25. On the basis of the above calculation, it is stated that the commissioner has wrongly adopted Rs. 34,87,529/- whereas the distributable profit is only Rs. 7,17,141/- and therefore, the report of the commissioner inflates the profits five times.
26. The defendant has given the said calculation assuming that the Rs. 34,87,529 is the gross profit of the partnership firm. However, this is contrary to the report of the commissioner as in Annexure B of the report of the commissioner in B.3 and B.4, it is clearly stated that it is the profit earned from the business operated under Proprietorship in the name of M/s Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.34 of 47 Digitally signed KIRAN by KIRAN BANSAL BANSAL Date: 2026.04.30 15:34:21 +0530 Frienz fashion and that it is being considered as net profits of the partnership firm. Therefore, when the ld. Commissioner has opined the same to be net profits, then the objection of the defendant assuming the same to be gross profits is misconceived. However, it is also pertinent to mention here that there are observation of the ld. Commissioner that the defendant had failed to provide certain relevant documents and that the findings of the Ld. commissioner are based on those limited documents which were provided. As the defendant has not produced proper documents before the court commissioner, thus, now defendant can not be allowed to take advantage of his own wrongs by filing misconceived objections.
27. It is also pertinent to mention here that though the defendant at one place has stated that the he has not filed any ITRs for the said period and now he is also seeking to have the benefit of tax, so that the amount to which the plaintiff is entitled is reduced.
28. It has also been contended by the defendant that the commissioner committed grave error in calculating the 'goodwill' which is an intangible asset and it is submitted that the defendant no. 1 took OD loan of Rs. 1,00,00,000/- from ICICI Bank and invested the money in his business 'Freinz fashion' and used his skill and labour to earn profit from the said proprietorship concern and therefore, the plaintiffs are not entitled to any amount towards the goodwill.
29. In this regard, it is pertinent to mention here that this objection of the defendant is liable to be rejected at the threshold. At this stage, it is necessary to refer that the defendant has not pleaded any such fact during the entire proceedings and neither any document was placed on record in this regard. Moreover, the Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.35 of 47 Digitally signed KIRAN by KIRAN BANSAL BANSAL Date: 2026.04.30 15:34:29 +0530 defendant might have availed the OD loan but that has no concern in calculation of goodwill of the business and that the defendant has unlawfully used the name of the partnership firm as his proprietorship concern which was against the terms of the partnership deed i.e. clause 14(a) which specifically prohibits the use of the name/ goodwill of the partnership firm for his/her personal benefit. Therefore, the ld. Court Commissioner has considered the data of the proprietorship firm and has conducted the proceedings as per preliminary decree passed by this court. Therefore, this objection of the defendant is not sustainable.
30. It is also pertinent to mention here that the defendant has repeatedly raised same objections at various stages in the present case which were dismissed and have also been dismissed by the Hon'ble SC. Still, the defendant has again raised all these objections and is also trying to introduce new factual defences after the passing of the preliminary decree.
31. The court agrees with the submission of the counsel of the plaintiff that the objections filed by the defendant are in nature of appeal against the preliminary decree and the defendant is reagitating the issues already decided in Preliminary Decree.
The objections of the defendants being devoid of merit stands disposed off accordingly.
ADJUDICATION OF THE FINAL SHARES OF THE PLAINTIFF/ LR's OF THE DECEASED PARTNER
32. Before adjudicating the final shares, this Court deems it appropriate to observe that the plaintiff, a widow, would not have been constrained to litigate for over five years, had the defendants voluntarily granted her and her minor daughter what was rightfully due to them. The present case sheds light on the Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.36 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:34:36 +0530 plight of such widows, who are often left to fend for themselves after enduring one of the most difficult phases of their lives.
33. A widow, who devoted her life to her husband and his family, naturally looked towards her in-laws and on those she had reposed trust in for support was met not only with indifference but also with a complete evasion of legal obligations, let alone moral responsibility. In a country like India, litigation is by no means a luxury, particularly for a litigant such as the plaintiff, for whom the ordeal of prolonged legal proceedings is both emotionally and financially burdensome. It is difficult to adequately capture the hardship endured by the plaintiff as she awaited, for years, the realization of her lawful entitlements. In such circumstances, the defendants ought to have, at the very least, extended support by ensuring that the plaintiff received what was legally and rightfully hers. However, the defendant no. 1 taking undue advantage of his partner's illness as well as abusing the trust of his ill partner, usurped the business of his deceased partner and opened in proprietorship business in similar name in deceit and continued to enjoy the profits of the business.
34. In order to determine the final adjudication of the shares, it would be pertinent to refer to Section 37 of the Partnership Act which is as follows:
"37. Right of outgoing partner in certain cases to share subsequent profits.--Where any member of a firm has died or otherwise ceased to be a partner, and the surviving or continuing partners carry on the business of the firm with the property of the firm without any final settlement of accounts as between them and the outgoing partner Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.37 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:34:46 +0530 or his estate, then, in the absence of a contract to the contrary, the outgoing partner or his estate is entitled at the option of himself or his representatives to such share of the profits made since he ceased to be a partner as may be attributable to the use of his share of the property of the firm or to interest at the rate of six per cent. per annum on the amount of his share in the property of the firm:
Provided that whereby contract between the partners an option is given to surviving or continuing partners to purchase the interest of a deceased or outgoing partner, and that option is duly exercised, the estate of the deceased partner, or the outgoing partner or his estate, as the case may be, is not entitled to any further or other share of profits; but if any partner assuming to act in exercise of the option does not in all material respects comply with the terms thereof, he is liable to account under the foregoing provisions of this section."
35. As per Section 37, the LRs of the deceased partner are entitled to exercise a choice between (i) such share of the profits made since he ceased to be a partner as may be attributable to the use of his share of the property of the firm or (ii) to interest at the rate of six per cent. per annum on the amount of his share in the property of the firm.
Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.38 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:34:55 +0530 Vide separate statement of the plaintiff recorded in this regard, the plaintiff i.e. LR of the deceased partner has exercised the choice of claiming the Option A.
36. Moreover, Clause 18 of the partnership deed provides for the dissolution of partnership and the mode of settling the accounts which is as follows:
"18. Whereas on taking the decision of the firm, the final accounts shall be prepared till the date of termination or dissolution after taking into account the liabilities and accruals of income/ receipt till that date and the same shall be divided between the parties in their profit sharing ratio."
37. The ld. Court commissioner has laid down the detailed calculation in 4 annexures appended to his report details of which is as follows:
Annexure A- Statement of Profit Attribution Under Section 37 of The Indian Partnership Act, 1932 Annexure B- Share in the Profits of the Partnership Firm under Section 16 of The Indian Partnership Act, 1932.
Annexure C- Statement of Goodwill of the Partnership Firm M/s Frienz Fashion Annexure D- Statement of Amount Payable to the Estate of Late Mr. Narender Sharma.
Each of these Annexures have been discussed in details hereinafter.
ANNEXURE B
38. The ld. commissioner has calculated Rs. 34,87,529.04/- as profits earned from the business operated under Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.39 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:35:02 +0530 Proprietorship in name of M/s Freinz fashion and the same is net profit which is considered as profit of the partnership firm and share of late Sh. Narender Sharma (Deceased partner) and Share of Defendant no. 1 is calculated as Rs. 17,43,764.52.
ANNEXURE C
39. In this annexure, the ld. Court commissioner has laid down exhaustive framework for the calculation of the goodwill of the partnership firm. Ld. Commissioner has considered the period from 18.02.2018 till 31.03.2025 for the computation of the goodwill and the ld. Commissioner has specifically stated that the valuation of goodwill using the post-dissolution profits is undertaken solely for the purpose of determining the value of deceased partner's share as on the date of dissolution and it does not grant double benefit in addition to the entitlement u/s 37.
40. The ld. Commissioner has specifically stated that he has adopted a profits based approach by reference to the average annual profits earned after dissolution and the commissioner has taken the year purchase factor of 3 (Three) being a multiplier commonly adopted in the valuation of the small business. After calculation, the ld. Commissioner has computed Rs. 39,51,000.00/-.
ANNEXURE A
41. In this part, on the basis of the calculations made in the Annexures C and B and the capital balance of the deceased partner, ld. Commissioner has assessed the value of the deceased partner's estate to be Rs. 40,61,140.02 and for the entitlement under Section 37 of the Partnership Act, the Court Commissioner has further elaborated the calculations as Option A (Profit Attribution) as per which profit attributable to deceased partner's Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.40 of 47 Digitally signed by KIRAN KIRAN BANSAL Date:
BANSAL 2026.04.30 15:35:11 +0530 share is Rs. 46,10,416.28 and as Option B (statutory interest) as per which the amount is Rs. 17,05,000/-.
ANNEXURE D
42. In this Annexure, the commissioner has laid down the final share of the deceased partner as follows:
As per Option A (Profit Attribution) Particulars Amount (In Rs) Capital Balance of Late Mr. Narender Sharma as on 3,41,875.50 31.03.2015 Statement of Share in profits of the Partnership Firm 17,43,764.52 (Annexure-B) 50% share in post dissolution profits (01.04.2018- 46,10,416.28 31.03.2015) (Annexure- A and Annexure- C) Total Amount Payable (Option A) 66,96,056.30 In this calculation, the commissioner has specifically pointed out that the goodwill is not separately added as the deceased partner's entitlement is satisfied by attribution of post dissolution profits in terms of Section 37.
As per Option B (Statutory Interest) Particulars Amount (In Rs) Capital Balance of late Mr. Narender Sharma as on 3,41,875.50 31.03.2015 Statement of Share in profits of the Partnership Firm 17,43,764.52 (Annexure-B) Share in goodwill (Annexure-C) 19,75,500.00 Interest @ 6% p.a. on share value (Annexure- A) 17,05,000.00 Total amount payable (Option B) 57,66,140.02 Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.41 of 47 KIRAN Digitally signed by KIRAN BANSAL BANSAL 15:35:21 +0530 Date: 2026.04.30
43. Since the LRs of the deceased partner has exercised option to choose Option A i.e. Profit Attribution, thus, the amount to which the LRs of the deceased partner would be entitled to is Rs. 66,96,056.30 (rounded upto Rs. 66,96,056/-). Since deceased partner has left behind three class- I legal heirs i.e. his wife (plaintiff no. 1), his daughter (plaintiff no. 2) and his mother (defendant no. 3), the amount of Rs. 66,96,056/- would be divided into three equal parts. Thus, each of the LR of the deceased partner would be entitled to Rs. 22,32,018.66 as their share in the deceased partner's share in the partnership firm. Thus, the plaintiff no. 1, 2 and Defendant no. 3 would be entitled to Rs. 22,32,018.66 each as their share in the partnership firm.
44. It is worthwhile to note here that perusal of the report of CA reveals that the defendant has partially not produced the record which was asked by the Ld. Court Commissioner. Thus, there is every likelihood that had the defendant no. 1 produced the entire set of record, the share of the plaintiff would have increased. However, since the defendant has not produced the entire record, the court has no option but to determine the share of the LRs of late Sh. Narender Sharma on the basis of the report of CA which has been prepared on the basis of the limited record produced by the defendant no.1.
45. Moreover, the perusal of the plaint reveals that the plaintiff has also prayed for interest @ 24% pa on the share of the plaintiff till its realization. At the outset, it is pertinent to mention here that interest can not be awarded at such an exorbitant rate of 24% p.a. on the said amount. However, it is also a settled law that the since the plaintiff are entitled to their share in the deceased partner's estate they are also entitled to the interest on the said amount at reasonable rate. Moreover, the ld. Court commissioner Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.42 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:35:31 +0530 has calculated the shares by taking into consideration the data available till 31.03.2025, so the plaintiff(s) would be entitled to interest @ 9% pa from 01.04.2025 till its realization.
46. It is also pertinent to mention here that the defendant is still continuing his business as a proprietorship firm under the name of M/s Freinz Fashion and is even currently using the goodwill of the partnership firm. However, as per report of Ld. Court Commissioner, the usage of goodwill is considered till 2025. Since the value of the goodwill is calculated upto 2025, the plaintiff would still be at liberty avail separate legal remedy for any such future unauthorised use of the name 'Freinz Fashion' by the defendant in his business.
47. As far as the costs are concerned, the law regarding the imposition of the costs has been contained in Section 35, 35A and 35B of CPC. It is pertinent to mention here that Section 35A (2) CPC provided for the limit of Rs. 3000/- as compensatory costs, however, the application of this sub section has been omitted by the Commercial Courts Act for the Commercial Courts, thus, now there is no limit of Rs. 3,000/- for the costs to be imposed on the party.
48. In this regard, it would be relevant to refer to the judgement of Hon'ble SC in Sanjeev Kumar Jain vs Raghubir Saran Charitable Trust Civil Appeal No. 8610 of 2011 decided on 12.10.2011 wherein the Hon'ble SC has observed as follows:
"7.1) In Salem Advocates Bar Association, this Court held:
"Judicial notice can be taken of the fact that many unscrupulous parties take advantage of the fact that either the costs are not awarded or nominal costs Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.43 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30
15:35:37 +0530
are awarded on the unsuccessful party.
Unfortunately, it has become a practice to direct parties to bear their own costs. In large number of cases, such an order is passed despite Section 35(2) of the Code. Such a practice also encourages filing of frivolous suits. It also leads to taking up of frivolous defences. Further wherever costs are awarded, ordinarily the same are not realistic and are nominal. When Section 35(2) provides for cost to follow the event, it is implicit that the costs have to be those which are reasonably incurred by a successful party except in those cases where the Court in its discretion may direct otherwise by recording reasons thereof. The costs have to be actual reasonable costs including the cost of the time spent by the successful party, the transportation and lodging, if any, or any other incidental cost besides the payment of the court fee, lawyer's fee, typing and other cost in relation to the litigation. It is for the High Courts to examine these aspects and wherever necessary make requisite rules, regulations or practice direction so as to provide appropriate guidelines for the subordinate courts to follow."
.....
"7.3) In Vinod Seth, this Court observed as under:
"48. The provision for costs is intended to achieve the following goals: (a) It should act as a deterrent to vexatious, frivolous and speculative litigations or defences. The spectre of being made liable to Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.44 of 47 Digitally signed KIRAN by KIRAN BANSAL BANSAL Date: 2026.04.30 15:35:45 +0530 pay actual costs should be such, as to make every litigant think twice before putting forth a vexatious, frivolous or speculative claim or defence. (b) Costs should ensure that the provisions of the Code, Evidence Act and other laws governing procedure are scrupulously and strictly complied with and that parties do not adopt delaying tactics or mislead the court. (c) Costs should provide adequate indemnity to the successful litigant for the expenditure incurred by him for the litigation. This necessitates the award of actual costs of litigation as contrasted from nominal or fixed or unrealistic costs. (d) The provision for costs should be an incentive for each litigant to adopt alternative dispute resolution (ADR) processes and arrive at a settlement before the trial commences in most of the cases. In many other jurisdictions, in view of the existence of appropriate and adequate provisions for costs, the litigants are persuaded to settle nearly 90% of the civil suits before they come up to trial. (e) The provisions relating to costs should not however obstruct access to courts and justice. Under no circumstances the costs should be a deterrent, to a citizen with a genuine or bonafide claim, or to any person belonging to the weaker sections whose rights have been affected, from approaching the courts.
At present these goals are sought to be achieved mainly by sections 35,35A and 35B read with the Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.45 of 47 Digitally signed KIRAN by KIRAN BANSAL BANSAL Date: 2026.04.30 15:35:53 +0530 relevant civil rules of practice relating to taxing of costs.
49. Thus, on the basis of the above judgement, it is clear that the cost awarded should be realistic costs and not only the nominal costs. Thus, while awarding the costs to the successful party what has to be considered is the cost incurred by the successful party in conducting this case and all the incidental costs incurred in this regard. Therefore, in the present case, a cost of Rs. 4,00,000/- (including the remuneration paid to the CA/ Court Commissioner) is imposed on the defendant payable to the plaintiff being realistic cost incurred by the plaintiff in conducting the present legal proceedings and incidental thereto.
50. Before parting with the case, it is also important to mention here that the present case is one amongst the numerous cases pending before the courts where the women are struggling to secure their right, as a wife or as a daughter or as a sister; the rights which are essential to their survival and fundamental to their existence and dignified life. But the situation remains same that those who are entrusted for the welfare and maintenance of the women litigants and for whom the women leave their maiden home and even change their identities by way of changing surname, still have to live their life at their mercy and subject to their whims and fancies. However, since it is well established that all human lives are equal but what is more important is that it is ensured that all human lives are treated equally and, therefore, the courts have the bounden duty to uphold the dignity of the lives of the sufferer.
51. Women should not be dependent on anyone and should be standing on their own legs so that they are not subject of Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.46 of 47 Digitally signed by KIRAN KIRAN BANSAL BANSAL Date:
2026.04.30 15:36:00 +0530 anyone's control rather they should be a pilot of their own lives so that they can make their decision and lead a dignified life and that can only be done if the women are empowered, educated and are given equal opportunities in the field of education, health, societal status and health so that the ideal of Justice, Liberty, Equality and Fraternity as enshrined in the preamble of the constitution of India will be implemented in its actual spirit.
Relief
52. In view of the above discussion and reasons, the objections of the defendants being devoid of merit stands dismissed and the final decree is passed in following terms:
Both the plaintiffs are entitled to Rs.22,32,018.66/- each, payable by the defendant no.1;
Defendant no. 3 is also entitled to Rs. 22,32,018.66/-, payable by the defendant no.1;
Plaintiffs are also entitled to cost to the extent of court fees and Rs. 4,00,000/- as litigation costs (inclusive of the remuneration paid to the CA/ Court Commissioner), payable by the defendant no.1;
Plaintiffs are also entitled to pendente lite and future interest @ 9% p.a. on the above said amount from 01.04.2025 till its realization, payable by the defendant no.1.
The plaintiff, at the time of instituting the suit, had valued the suit at Rs.10,00,000/- for which the plaintiff had paid appropriate court fees. Now after the examination of the records, since the plaintiff(s) are entitled to more than what was initially valued by them, thus, the plaintiff(s) are directed to pay appropri- ate court fees upon the additional amount awarded within 4 weeks from today and only on deposit of the court fees, the decree will be executable. Final decree be drawn accordingly. Digitally signed by KIRAN File be consigned to Record Room. KIRAN BANSAL Date:
BANSAL 2026.04.30 15:36:08 +0530 Announced in the open court (Kiran Bansal) on 30.04.2026 District Judge, Commercial Court-02 Shahdara, Karkardooma Delhi/30.04.2026 Civil Suit (Comm) No. 127/2022 Smt. Geeta Sharma Vs. Mr. Pawan Lakhotia Page No.47 of 47