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Vasant Sheshrao Vs. Deviprasad Mahadeo - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMumbai High Court
Decided On
Case Number Second Appeal No. 218 of 1960
Judge
Reported in(1970)72BOMLR333; 1969MhLJ577
AppellantVasant Sheshrao
RespondentDeviprasad Mahadeo
DispositionAppeal dismissed
Excerpt:
indian contract act (x of 1872), section 23--licensee under statute prohibited from transferring licence-licensee talcing partner to carry on business on strength of such licence--whether partnership illegal.;where the relevant statute regulating business conducted under a licence issued thereunder does not prohibit the licensee from taking a partner but simply prohibits the transfer of the licence, then the partnership business can be carried on, on the strength of a licence held by a partner, and in such a case by the formation of a partnership itself or by the conduct of its business there is no transfer of a licence held by a partner, which could render the partnership illegal.;gordhandas kessowji v. champsey dossa [1921] a.i.r. p.c. 137 and champsey dossa v. gordhandas kessowji.....chandurkar, j.1. this is an appeal by the heirs of the original defendant against a decree for dissolution of partnership and for accounts in favour of the original plaintiff mahadeo, who is now represented by his heirs the respondents. sheshrao, the original defendant, who shall hereafter be referred to as the defendant, and mahadeo, the original plaintiff, who will hereafter be referred to as the plaintiff, entered into an agreement on december 5, 1949, which is styled as an agreement of partnership for running a cloth shop at yeotmal in a building owned by the plaintiff. the plaintiff and the defendant had their own cloth business. the plaintiff was dealing in handloom cloth for which no licence who necessary, while the defendant was dealing in mill made cloth for which business a.....
Judgment:

Chandurkar, J.

1. This is an appeal by the heirs of the original defendant against a decree for dissolution of partnership and for accounts in favour of the original plaintiff Mahadeo, who is now represented by his heirs the respondents. Sheshrao, the original defendant, who shall hereafter be referred to as the defendant, and Mahadeo, the original plaintiff, who will hereafter be referred to as the plaintiff, entered into an agreement on December 5, 1949, which is styled as an agreement of partnership for running a cloth shop at Yeotmal in a building owned by the plaintiff. The plaintiff and the defendant had their own cloth business. The plaintiff was dealing in handloom cloth for which no licence who necessary, while the defendant was dealing in mill made cloth for which business a licence was required under the Cotton Cloth Trade Regulation Order, 1948, which was issued by the then Government of Central Provinces and Berar in exercise of the powers conferred by Section 3 of the Essential Supplies (Temporary Powers) Act. 1946. According to the agreement dated December 5, 1949, the plaintiff was to contribute Us, 6,000 on account of capital and the defendant was to contribute Rs. 3,000 as capital. It was agreed that the business was to be run in the name of 'Sheshrao Marotirao Dhole', which was the name of the defendant, who was a licence holder. It was also agreed that if possible an attempt should be made to get the name of the plaintiff included in the licence. It appears from the record that this was not done and the licence continued in the name of Sheshrao Marotirao Dhole and business was also carried on after the date of the agreement of partnership in the same name as it was originally carried on by the defendant. Under the terms of the agreement, the entire business was to be looked after by the defendant as the managing partner and each of the parties were to have 8 annas share in the profits of the partnership, subject to a minimum of Ks. 900 to be paid to the plaintiff on account of profits. One of the terms of the partnership was that even if there was loss in the business Rs. 900 were to be paid to the plaintiff on account of profits and the entire responsibility of keeping accounts was of the defendant. The amount of Rs. 6,000 which was the contribution of the plaintiff towards the capital of the partnership consisted of hand-loom cloth worth about Rs, 3,000 and a cash amount of Ks. 3,000. This business which the defendant was to carry on was not only in mill made cloth, but also in hand-loom cloth. Another important term of the agreement was that the defendant was not to get any remuneration for the management of the business which has to be carried on in the house owned by the plaintiff.

2. According to the plaintiff, sometime in May 1955 the defendant removed the cloth shop from the plaintiff's building and carried on business till about Diwali 1956 in his own premises when the business was closed. As disputes arose between the plaintiff and the defendant regarding the settlement of accounts the plaintiff filed a suit out of which this appeal arises on October 27, 1959, for dissolution of partnership, for winding up its affairs and also for taking accounts.

3. The plaintiff's claim was resisted by the defendant on several grounds. The first ground was that the plaintiff's suit for accounts was barred under Section 69 of the Partnership Act because the partnership was not registered and the second ground was that the agreement of partnership had the effect of transferring the licence held in the name of the defendant to the partnership and that this transfer was illegal as being contrary to Clause 8 of the Central Provinces and Berar Cotton Cloth Trade Regulation Order, 1948, hereafter called the Order, and therefore, the partnership itself was illegal. According to the defendant, the plaintiff being in pari delicto with the defendant he could not maintain a suit for accounts of this illegal partnership. The defendant had raised a further plea that the plaintiff's claim was barred by limitation, because the partnership was already dissolved by mutual consent on August 17, 1955, and therefore, the suit filed by the plaintiff on October 27, 1959, after 3 years of dissolution was barred under Article 106 of the Indian Limitation Act, 1908.

4. The trial Court negatived the defendant's case that the partnership stood dissolved by a mutual agreement in August 1955 and found that the defendant had carried on partnership business in his own premises till Diwali of 1'956, and therefore, the claim was not barred by limitation. The trial Court also found that the plaintiff's suit was not barred by the provisions of Section 69 of the Partnership Act and that the partnership was not illegal, as alleged by the defendant. The trial Court, therefore, by its judgment dated April 15, 1963, declared that the partnership between the plaintiff and the defendant was dissolved with effect from that date and directed that accounts of partnership be taken and accordingly a preliminary decree for accounts was passed and a Receiver of the partnership assets was appointed. The Receiver was also appointed a Commissioner to take accounts of the partnership.

5. Against this judgment and decree the defendant appealed. During the pendency of the appeal before the lower appellate Court, the original defendant died and the present appellants were brought on record as his legal representatives. Before the lower appellate Court the same contentions were agitated. The lower appellate Court, confirmed the finding of the trial Court that there was no dissolution of partnership in August 1955, as alleged by the defendant. He also confirmed the finding that the partnership was not dissolved till the date of suit although the business was stopped from Diwali 1956, and therefore, the lower appellate Court, took the view that the suit was not barred by limitation. The lower appellate Court also negatived the contention of the defendant that the suit was barred by Section 69 of the Partnership Act. On the important question whether the partnership was illegal, as alleged by the defendant, the lower appellate Court held that the agreement dated December 5, 1949, did not bring about a transfer of the licence, and therefore, there was no violation of Clause 8 of the 1948 Order. The lower appellate Court chose to follow the view of this Court reported in Champsey Dossa v. Gordhandas Kessowji (1917) 19 Bom. L.R. 881 A.I.R. [1917] Bom. 250 as affirmed by the Privy Council in Gordhandas Kessowji v. Champsey Dossa A.I.R. [1921] P.C. 137 in preference to the view of the Andhra Pradesh High Court in Basavayya v. Kottayya : AIR1964AP145 . The result was that the defendant's appeal was dismissed. The appellants have now come up in second appeal against the decision of the lower appellate Court.

6. The first question raised by the learned Counsel for the appellants was that the partnership between the plaintiff and the defendant was an illegal partnership and the plaintiff's suit for accounts of such an illegal partnership was not maintainable. The illegality, according to the learned Counsel, lay in transferring the licence held by the defendant alone in his own name in favour of the partnership, as, according to him, the effect of creating a partnership was that the licence, which stood in the name of the defendant, stood transferred to the new partnership between the plaintiff and the defendant in express violation of the provisions of Clause 8 of the Order. He placed great reliance on the decision of the Andhra Pradesh High Court referred to above, which, according to him, concluded the matter especially in view of the fact that the decision of the Andhra Pradesh High Court is based on an unreported decision of the Supreme Court which the Andhra Pradesh High Court has cited in para. 26 of the judgment relied on by the learned Counsel. The challenge on the ground of illegality of the partnership is based on the provisions of Section 23 of the Indian Contract Act and according to the learned Counsel, the transfer of the licence which was held by the defendant alone was such as was forbidden by law, or was of such nature that if permitted, it would defeat the provisions of law and was opposed to public policy.

7. The principle which has to be borne in mind when a contract is challenged as being immoral or illegal is stated by Lord Mansfield in Holm an v. Johnson (1775) 1 Cowp. 341 in the following- words (p. 343) :

The objection, that a contract is immoral or illegal as between plaintiff and defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident, if I may so say. The principle of public policy is this; ex dolo malo non oritur actio. No Court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If, from the plaintiff's own stating or otherwise, the cause of action appears to arise ex turpi cause, or the transgression of a positive law of this country, there the court says he has no right to be assisted. It is upon that ground the court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff.

8. Clause 8 of the Cotton Cloth Trade Regulation Order, 1948, under which the licence in question was issued is as follows:

8. No licence granted under this Order shall be transferred without the previous permission in writing of the licensing authority.

If in a given case there is a transfer of such a licence by the licence holder to another person, be it an individual or an association of individuals, then that transfer will be in violation of clause 8 of the Order if previous permission of the licensing authority is not obtained. A breach of this Order is also made punishable and is an offence under Section 7 of the Essential Supplies (Temporary Powers) Act, 1946, under which this 1948 Order has been issued. The licence in the instant case is exhibited as exh. 35 and the name of the licensee in that licence is shown as 'Sheshrao Marotrao Dhole of Yeotmal town', that is, the defendant. The premises in which business under this licence was eon-ducted are also mentioned in clause 7. Originally the address of the place where the business was to be conducted was shown as a shop in Ward No. 10, House No. 54, Yeotmal town, Balaji Mandir Road. This was changed and there is an endorsement and a new slip has been pasted on the licence which shows that the address where the business was to be conducted was a shop in Ward No. 9, House No. 139 and the endorsement shows that this change was made vide order dated November 7, 1950. This licence continued to be valid till February 14, 1956. It must be stated that there are no recitals in the terms of the agreement dated December 5, 1949, on the basis of which it could be said that there is any transfer of this licence by the defendant to the partnership of the plaintiff and the defendant. It has also not been contended on behalf of the defendant that there are any recitals in this agreement of partnership which can reasonably be construed as indicating a voluntary transfer of the licence of the defendant in favour of the partnership.

9. The learned Counsel, however, argues that as held by the Andhra Pradesh High Court in Basavayya v. Kottayya where a licence is issued in the name of one person and that licence holder enters into partnership with another, who is a non-licence holder, and the business which the licence holder was alone entitled to carry on was carried on by new partnership as the partnership business that partnership becomes illegal. As the learned Counsel placed great reliance on the decision of the Andhra Pradesh High Court, it is necessary to analyse that decision.

10. At the outset it must be stated that the decision of the Andhra Pradesh High Court in Basavayyu's case is based on an earlier decision of the Madras High Court in Velu Padayachi v. Sivasooriam : AIR1950Mad444 . This is a Full Bench decision on which the Division Bench has relied in Basavayya's case and held that it was binding upon the Division Bench. The observations in para, 20 of the judgment in Basavayya's case are as follows (p. 150) :.The Full Bench decision of the Madras High Court in Vein, Padayachi v. Sivasooriam that partnership's conducting a business under a licence which stood in the name of one of the partners is opposed to public policy for the purpose of S, 23 of the Contract Act is binding on this Court.

I shall have occasion to refer to the Full Bench decision of the Madras High Court, which forms the basis of the decision in Basavayya's case and a close study of an earlier Madras decision and the decision in Basavayya's case will make it clear that an earlier decision of this Court in Champsey Dossa v. Gordhandas as affirmed by the Privy Council in Gordhandas Kessowji v. Champsey Dossa have not even been referred to in both these decisions. There are other points of distinction which I shall presently point out, in view of which I am unable to accept the contention of the learned Counsel for the appellants;, that it must be held that in each case a partnership, as in the instant case, must be declared to be illegal. The facts in Basavayya's case now need to be looked into.

11. The relevant terms regarding the nature of the business for which a licence was issued in Basavayya's case has been reproduced in para. 4 of the judgment. The business was described as follows:

6. Nature of business for which licence Retail business in mill-made cloth on his ownhas been issued. account.(Italics are mine)

One of the terms of the licence, therefore, was very specific that the business in respect of which the licence was granted was to be carried on by the licensee on his own account. The further facts are that the licence was in favour of the plaintiff who was supposed to carry on business on his own account and he entered into an agreement of partnership with the defendant. Now it was not the plaintiff who was in charge of the business of the partnership, but it was the defendant who was in the management of the partnership business. On these facts the plaintiff brought a suit for dissolution and accounts of the partnership. It is obvious that when the defendant was carrying on business, he was not carrying it on only on account of the plaintiff but that was a business which was being carried on on account of the partnership and again the person who was actually carrying on the business was not a person, who held a licence. There are relevant observations in para. 15 of that judgment from which it can be inferred that the Court would have taken a different view if the business was actually carried on by the plaintiff himself. In para. 15 of the judgment the Division Bench has observed (p. 148): .Shri Bapi Raju argues that operation of licence by the partnership was not in conflict with Clause 4 and that it can be reconciled ,with Clause 4 as being in conformity with it. He contends that the defendant as partner and also the plaintiff as partner carried business only in accordance with the terms and conditions of the licence (Ex. A-l). It is true that the business if done by the plaintiff alone would have been in accordance with the terms and conditions of the licence (Ex. A-l). But that fact does not mean that it was done in conformity with Clause 4 when the defendant as partner, in effect, did the business.

The whole decision seems to have turned on the fact that the licence was held by the plaintiff in his own name for carrying on business on his own account, while the person who actually carried on business was the defendant. The Division Bench no doubt has taken the view in that case that a licence was a personal privilege granted to the plaintiff to deal in cloth and that if it was used by the partnership there was, in substance and in effect, a transfer of the licence to the partners other than the plaintiff and dealing under the licence by the partnership would amount to those partners, in addition to the plaintiff, also dealing under that licence. But as I shall presently show this view is contrary to the decision of this Court in Champsey Dossa's case which view was upheld by the Privy Council. Whether in such a case a transfer of the licence is brought about or not was not decided by the Supreme Court in Govindrao' v. Nathmal (1962) Civil Appeal No. 30 of 1960, decided on April 11 1962 (Supreme Court) on which reliance was; placed by the Division Bench in Basavayya's case and also by the learned Counsel for the appellants before me. No doubt in support of the view, which the Division Bench has taken, that an agreement to carry on partnership business where the licence is in the name of one of the partners, results in an illegal partnership, reliance was placed by the Court on the unreported decision of the Supreme Court. But if the facts of the Supreme Court case are perused, it will be noticed that the transactions which were the subject matter of the suit in that case were wholly in contravention of the provisions of the relevant Order because none of the parties who had entered into the agreement of partnership held any licence which could authorise any one of the partners to deal in respect of those transactions. The decision in Govindrao's case, which is referred to by the Andhra Pradesh High Court, was an appeal from the decision of this Court which is reported in Govindrao v. Nathmal [1937] N.L.J. 214. The facts as can be gathered from the decision of the Supreme Court and the above referred decision of this Court are that the plaintiff possessed a licence for carrying on business of a wholesale dealer only in Nagpur district and the licence was issued under Foodgrains Control Order, T945. The plaintiff entered into an agreement with the defendant, who carried on business at Rajnandgaon, which was an erstwhile Princely State outside the Central Provinces and Berar and the object of the partnership business was that foodgrains should be purchased at different places in C.P. and Berar and should be exported outside the province. Only two transactions were the subject matter of the suit which was instituted by the plaintiff. One of the transactions was that the defendant had purchased 1000 bags of lakh dal at Durg, which was sold at Dudhni in Bombay Presidency and other places. According to the plaintiff, the defendants had realised the price of the dal sold by them towards the end of January 1947, The second transaction was in respect of 400 bags of lakh dal purchased at Seoni and despatched to Rajnandgaon to the defendants. The price of this dal was paid by the plaintiff. It was in respect of these two transactions that the plaintiff brought a suit for accounts and dissolution of partnership. The suit was contested by the defendants and one of the grounds raised by them was that the agreement between the parties was for doing a business which was prohibited by law and it was not open to the plaintiff to obtain any relief in a Court of law. It is apparent from the facts of that case that the plaintiff only held a limited licence for carrying on business within the Nagpur district, while the business which was actually carried on by the partnership was to deal in and export food-grains not only outside Nagpur district, but even outside the Central Provinces and Berar. The partnership was clearly illegal as one intended to carry on business in breach of the provisions of the Foodgrains Control Order. The suit of the plaintiff was dismissed by the trial Court. The judgment of the trial Court was lip-held in appeal by this Court in the reported decision cited above and that view has been upheld by the Supreme Court. From the decision of the Supreme Court (Govindrao v. Nathmal) it does not appear that the question, whether a partnership between a licence holder and a non-licence holder results in a transfer of the licence, was raised before the Supreme Court.

12. If we go to the Full Bench decision in Velu Padayachi v. Sivasooriam it is clear that the facts on which that decision is based were also different inasmuch as the actual business of selling arrack or toddy was carried on by persons other than those who held a licence. Though the report of the decision does not give full facts, the basis on which that decision proceeds is to be found in para. 2 of the judgment, which is as follows (p. 444) :.The disposal of this civil revision petition must proceed on the footing that the parties to the partnership agreement sold arrack themselves or through other partners as their agents, on a licence granted to the defendant alone, in. which there was a term prohibiting him from transferring his rights.

These observations make it clear that the suit brought in that case was by plaintiffs who had actually carried on the business without there being a licence in their favour, but the claim made was that one of the defendants, who was a partner had a licence and it was on these facts that the Full Bench came to the conclusion that in such a case an agreement of partnership is illegal. The fact that the actual business was carried on by persons who did not hold licence cannot be lost sight of in both the decisions, that is, of the Full Bench of the Madras High Court and the decision of the Andhra Pradesh High Court in Basavayya's case. A contrary view, however, has been taken in a decision of this Court in Champsey Dossa's case. The licence concerned in that case was a licence to manufacture salt. The relevant clause in the licence which restricted the right to sub-let, sell or alienate the privilege granted by the licence was worded as follows:

Clause (5) : That he, the licensee, shall not, without the written permission of myself, (i.e. the Collector of Salt Revenue) or of my successor in office for the time being, sub-let, sell, mortgage or otherwise alienate whole or in part the privilege granted by this license of manufacturing salt on the land within the aforesaid limits.

The licence was held by defendant No. 1, who entered into a partnership with the plaintiffs. The plaintiffs brought a suit that the defendants should be restrained by an injunction from excluding' the plaintiffs from their share in the partnership in the suit, or in the alternative that the partnership might be dissolved from the date of the suit and the affairs should be wound up. The contention of the contesting defendant was that the agreements of partnership were illegal, and therefore, the plaintiffs cannot sue under them for a partnership account and this Court held that (p. 385) :.The admission of partners to share in the profits cannot be considered as a sub-letting or alienation of a part of the privilege unless there has been a document directly transferring to the partners or attempting to transfer to the partners a part of the right to manufacture or vend.

In that case it was found on evidence that Gordhandas who held the licence was the man who superintended manufacture of salt and that none of the partners, except Gordhandas, had any part in the manufacture of salt and the Court, therefore, held that it could not be said that the effect of these agreements was to infringe either the provisions of the licence or of Section 11 of the Salt Act (Act No. 2 of 1890). It was ruled that defendant No. 1 was not entitled to exclude his partners from sharing the profits in the business and there must be a dissolution of partnership and accounts taken not from the date of the suit, but from the time the partnership came to an end in September 1916 under the agreement. An appeal against this decision was taken to the Privy Council and the decision was upheld. The Privy Council decision is reported in Cordhmidas Kessowji v. Champsey Dossa in which it has been held that

A licensee of salt manufacture cannot be said to contravene the terms of his license whereby he is prohibited from alienating the interest, simply because he admits members of his family and others as partners, who however do not actually take part in the manufacture, nor is there any document directly transferring the right of manufacture to such partners.

13. There is an earlier Division Bench decision of this Court which is reported in Karsan v. Gatlu (1912) 15 Bom. L.R. 227 Indian Cases 442 in which also a similar question arose. The licence in that case was a licence to sell liquor under the provisions of the Bombay Abkari Act. There was a clause in that licence which provided that the licensee shall not sell, transfer to any person or sub-let his right to sell country liquor obtained under the license, and shall enter into no kabulayat or agreement for the exercise of the said right which, in the opinion of the Collector, was in the nature of the sub-lease. The licence holder took a partner in the business and the partners sued the licence holder for an account of the partnership and for recovery of what might be found due to him and it was held that the contract of partnership was not forbidden by law or opposed to the policy of the Excise Act.

14. None of the two decisions, namely, the Full Bench decision of the Madras High Court and the decision in Basavayya's case have referred to the decision of this Court in Ghampsey Dossa's case and the decision of the Privy Council cited above. These decisions are clear authority for the proposition that where a licence holder carries on business under the licence and shares the profits of the business with others in accordance with an agreement of partnership, there is no transfer or assignment of any privilege which is granted to the licence holder under the licence. It is true that the decision of this Court was a Single Bench decision, but it was affirmed by the Privy Council and that decision is binding on me. I would, therefore, prefer to follow the decision of the Privy Council, and with respect, I am unable to accede to the line of reasoning advanced by the learned Counsel for the appellants on the basis of the decision of the Andhra Pradesh High Court.

15. The decision of this Court in Chanpsey's case was followed by the Punjab High Court in a recent decision in Shiv Dayal v. Firm Bishan Dass . In this case a licensee held a licence under the Opium Act. He entered into a partnership with a third person, who was a non-licensee to share the profits and losses of his business in consideration of the latter's contribution towards the capital of the business. It was contended that such an agreement amounts to a transfer or sub-lease of the licence. This contention was negatived and it was held that such an agreement does not involve the transfer or sub-lease of the licence and the licensee alone remained personally responsible to the Government and is liable for the performance of the contract and the conditions under which the licence is granted to him.

16. A decision of the Madhya Pradesh High Court may also be usefully referred to. In Dayabhai & Co. v. I.-T. Commr. : [1966]59ITR364(MP) . a question about the legality of a partnership to carry on motor transport business on the strength of a permit obtained by a partner with a vehicle belonging to him was raised. Provisions of Section 31 of the Motor Vehicles Act were considered in that case and it was held that there is nothing in the Motor Vehicles Act laying down that transport business in partnership can only be done on permits issued and obtained by the firm itself and with vehicles of which the firm is the owner. In that case the permits were in the name of one brother Dayabhai who admitted his brother Chhotabhai as a partner in the business and the question was whether such a partnership was illegal and could not be registered by the Income-tax authorities under Section 26A of the Income-tax Act, 1922, and the Division Bench held that there being no violation of any provision of the Motor Vehicles Act, the partnership firm cannot be regarded as illegal in such a case and such a partnership agreement is not also void as against public policy. It was further held that it did not fall under the well settled classes of contracts which have been ruled by authorities as contrary to public policy and it cannot be declared to be a contract opposed to public policy by inventing a new head of public policy. The decision of this Court in Champsey's case and the subsequent decision of the Privy Council were relied upon and reliance was also placed on a decision of the Supreme Court in Umacharan Shaw & Bros. v Commr. of Inc.-Tax : [1959]37ITR271(SC) . The Supreme Court decision was relied on as an authority for the proposition that partnership business can be carried on with property which does not belong to the firm but belongs to a partner; and that when the relevant statute regulating business conducted under a licence issued thereunder does not prohibit the licensee from taking a partner but simply prohibits the transfer or sub-lease of the licence, then the partnership business can be carried on on the strength of a licence held by a partner and that in such a case by the formation of partnership itself or by the conduct of its business there is no transfer or sub-lease of a licence held by a partner.

17. I respectfully agree with the view taken by the Madhya Pradesh High Court and the construction placed by that Court on the decision in Umacharan Shaw's case.

18. It will be clear from the facts of the present case that neither the licence nor the 1948 Order prohibited the licensee from taking any partner. There is abundant authority for the proposition as cited above that merely because a licence-holder agrees to share profits of his business with another person who supplies capital to him, but the business is actually carried on only by the licence holder such an agreement of partnership does not amount either to sub-leasing' or transferring- the privilege under the licence. As: I have already stated, there is nothing in the document of the partnership in this case on the basis of which it could be urged that there was a transfer of the licence itself. The defendant held a licence, he himself carried on the business, the plaintiff had financed him and in such a case I am unable to subscribe to the view that such an agreement of partnership resulted in any violation of any provisions of law or that it militated against any public policy. The agreement of partnership between the plaintiff and the defendant was, therefore, not in any way illegal and the alleged illegality could not, therefore, bar his right to institute the suit out of which this appeal arises.

19. The only other contention raised before me is one of limitation. The learned Counsel contends that the partnership itself stood dissolved on August 17, 1955. In any case, according to him, the licence was to expire on February 14, 1956 and it could not be said that the partnership business continued after February 14, 1956. Another limb of the same argument was that the goods belonging to the partnership were sold for the last time on February 21, 1956. According to him, the suit was barred by the provisions of Article 106 of the Indian Limitation Act, 1908. Article 106 of the Limitation Act provides for a limitation of three years for a suit for account and a share of the profits of a dissolved partnership and the limitation under that article commences from the date of the dissolution. There is a concurrent finding of fact in this case that there was no agreement of dissolution on August 17, 1955, as alleged by the defendant. Therefore, the plea that dissolution has already taken place on August 17, 1955, must be negatived. The defendant, however, says that the dissolution must be said to have taken place at least on February 14, 1956, when the licence was due to expire. This question has been considered by the lower appellate Court and the lower appellate Court has given a finding that the business which was intended to be carried on was not in respect of mill-made cloth, but it was also in respect of hand-loom cloth. Therefore, according to the lower appellate Court, even assuming that the partnership was not entitled to carry on business for mill made cloth after February 14, 1956, there is nothing on record to show that no business was carried on even in respect of hand-loom cloth for which no licence was necessary. The learned Counsel further urged on the basis of a plea in para. No. 31 of the written-statement that the vacating of the premises of the plaintiff in the middle of August 1955 amounted to dissolution by contract under Section 40 of the Partnership Act. Section 40 of the Act provides that a firm may be dissolved with the consent of all the partners or in accordance with the contract between the partners. In other words, the dissolution must be the result of a contract between the partners or must be with the consent of the partners. The plea which is raised by the defendant is as follows:

The vacating of the premises of Mahadeo in the middle of August 1955 also amounted to dissolution by contract under section 40 of the Act.

It is difficult to read into this plea either a plea of consent by the plaintiff or a plea of a contract between the plaintiff and the defendant. It is difficult to understand how by merely shifting of the premises from one place to another a contract of partnership can come to an end unless that shifting of the business is in pursuance of an agreement as contemplated by Section 40 of the Act. I am unable to read this plea as' amounting to a plea of dissolution of the partnership in terms of Section 40 of the Partnership Act.

20. The fact found against the defendant is that the business was closed in December 1956 and not in August 1955. On the finding that there has' been no agreement of dissolution, Article 106 of the Limitation Act is not at all attracted. The only other article which will govern the suit is Article 120 and it is not disputed that if that article is applied the suit will be within limitation. The findings of the Courts below that the suit is not governed by Article 106 of the Limitation Act and is not barred by limitation will, therefore, have to be upheld.

21. The result therefore, is that the judgment and decree of the Court below if affirmed and the appeal of the appellants is dismissed with costs.


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