Complicated business 30 year old partnership some questions
Jayesh Shah
(Querist) 18 October 2010
This query is : Resolved
This may appear complicated but I will try my best to explain it in details. It should be easy for all the knowledgeable lawyers and legal experts on this site to respond.
In 1971 a partnership was formed between the following with 20% each and capital or Rs. 10,000 each in Pune:
1) Mr.A(HUF),
2) Mr.B(HUF) also son of Mr.A,
3) Mrs.C Individual and also wife of Mr.A,
4) Mr.D Individual and son of Mr.A and
5) Mrs.E Individual and wife of Mr.D.
The partnership firm continued doing business for years and have acquired plant, machinery, property and other assets both movable and immovable currently valued at about 3 crores. When Mr. A passed away in 2007, Mr.B being the eldest became the Karta of Mr.A(HUF).
Now it gets complicated-
Both Mr. B and Mr. D, sons of Mr. A have a daughter and a son each i.e. four grandkids of Mr. A and each of these grandchild has a daughter each, thus four great granddaughters of Mr. A all born before Mr.A's death but all great grand daughters are under 18 year of age.
The business cannot be divided in metes and bounds and it is impossible to sell part of the property.
Some Questions
Out of the four grand children of Mr.A, only one grandson who is son of Mr.B is interested in continuing to be actively involved of the business and the other three grandchildren would like to get their share from their Grandfather Mr. A's HUF share. Knowing the above situation, My understanding is Mr. A seems to have the following legal heirs, wife Mrs.C, sons Mr.B and Mr.D, two grandsons, two grand daughter and four great granddaughter. Total 11 members as legal heirs.
Question 1: Does the great granddaughters who are daughter of grand daughter also have equal share in Mr.A's HUF share?
Question 2: Can one Grandson of Mr.A, who is also son of Mr.B and is interested in continuing to participate in business ask for partition of Mr.A's HUF without effecting Mr.B's HUF share in the partnership? Or will Mr.B also be forced to dissolve his HUF?
Question 3: If answer to Question 1 is Yes, then every surviving legal heir will get 1/11 of HUF's 20% share. Is that correct?
Question 4: If the three grand children of Mr. A who don't want to participate in the activity of this business want to sell their share of 1/11 to Mr. B's son what is the best way for this transaction?
Question 5: What additional expense will have to be paid in terms of stamp duty, capital gain tax etc for any change in the partnership or by each grandchild who wants to sell his/her share?
Question 6: What are the steps the grandson who wants to continue participating in the business needs to take to make sure no future legal problems arise?
Question 7: Can anyone oppose dissolution of Mr.A's HUF and the share distributed to legal heirs?
R.Ramachandran
(Expert) 18 October 2010
Dear Mr. Shah,
Please indicate whether you are representing the partnership firm or any of the constituent partner?
Whether the partnership continues or not? If the partnership continues, why any one has to bother about the constituents/coparcenars of the HUF?
I am not getting you. In the first place, please tell us as to what is the circumstance under which all the above questions arise?
Jayesh Shah
(Querist) 19 October 2010
Dear Mr. Ramachandran,
I am the grandchild of Mr.A and the only person within the family actively involved in day to day working of the business as an employee drawing a salary. I am a coparcenar in both Mr.A(HUF) and Mr.B(HUF).
The other three grandchildren of Mr.A are settled in UK for last 10 or more years and have no plans of coming back to India except for visiting for few weeks. They don't participate in the business nor do they have any liking to be part of this business.
So the above questions arise because at some point in life we will have to settle this matter and me being the only one remaining in India in my generation I would like to get it done soon before I get too old so that I have time to pay some amount to buy share of other legal heirs one by one as I save money.
The partnership can continue with new partners (I would like to add my wife) and also I would like to have partnership without any HUFs moving forward.
Again, it will be impossible to break up the business and sell in parts because it won't sell for good amount hence this transition will have to take place over a few years as I pay one or two partners/coparcenars to get their share in the HUF of Mr.A
I hope this information helps.
