V. Anantha Raju & Anr. v. T.M. Narasimhan & Ors.
Background
A father and son (the plaintiffs) were partners in a building-and-development partnership firm in Bangalore that owned a commercial property earning substantial rent. Under a 1992 partnership deed, the father was entitled to a 50% profit share only if he contributed Rs. 50 lakh in capital by a deadline, failing which his share would drop to 10%. A later 1995 deed, admittedly executed by all partners, reconstituted the firm and expressly recorded the father and son as entitled to 25% each (50% together) with no such capital-contribution condition. After a falling-out in 2004 the other partners expelled the plaintiffs and claimed their true share was only 10%, alleging the 25%-each figures in the 1995 deed were a clerical "mistake." Both the trial court and the Karnataka High Court accepted this and held the plaintiffs entitled to only 10%.
Decision Breakdown
The Supreme Court held that the lower courts erred in law, applying Sections 91 and 92 of the Evidence Act to hold that once parties reduce their agreement to a written, deliberately negotiated document like the 1995 deed, that document's terms cannot be contradicted by oral claims of "mistake" without the defendants discharging the burden of proving the mistake, which they failed to do here, especially since the 1995 deed's profit/loss percentages were internally consistent and no correction was ever made between 1995 and 2004. The Court therefore declared the plaintiffs together entitled to 50% of the firm's profits and losses up to 18.6.2004, modifying the compensation finding, but upheld the separate finding that the plaintiffs were validly expelled from the firm from that date onward under the firm's expulsion clause.
Lesson Learnt
When partners deliberately reduce their agreement to a formal written deed, courts will hold them to its plain terms; a party who later claims the written document contained a "mistake" bears a heavy burden to prove it, and mere assertion, especially years of inaction without correcting an alleged error, will not suffice to override a clear written contract.