Skip to content


Dinshawji (Died) and ors. Vs. Abdul Rasool Khan - Court Judgment

LegalCrystal Citation
SubjectContract
CourtAndhra Pradesh High Court
Decided On
Case NumberAppeal No. 35 of 1960
Judge
Reported inAIR1967AP119
ActsIndian Contract Act, 1872 - Sections 23; Hyderabad Akbari Act, 1316 - Sections 14; Hyderabad Abkari Rules, 1353 - Rule 23
AppellantDinshawji (Died) and ors.
RespondentAbdul Rasool Khan
Appellant AdvocateJaleel Ahmed, Adv.
Respondent AdvocateK. Madhava Reddy, Adv.
Excerpt:
.....are therefore, satisfied that the contract as was entered into between the parties was a conclude contract of partnership although it was entered into prior to the grant of licence in favour of the defendant and that such a contract is void being opposed to section 14 of the act and rule 23 of the rules made there under. assuming that the character of the contract was like that, even then we do not think that the plaintiff would be entitled to succeed in this suit. if the defendant failed to appeal under section 14 of the act, what must follow is that no contract of partnership came into existence. it does not necessarily flow from the breach of the agreement by the defendant inasmuch as he failed to file an application under section 14 of the act there is no proof of any laws actually..........that both the plaintiff and the defendant should submit separate tenders, that in case the tender submitted by the defendant was accepted, the parties would work out the lease on the basis of partnership between them and that each would be entitled to a half share in the profits. it was further agreed that after the tender was accepted, an application should be filed for inclaintiff's name as a partner and a partnership deed should duly be got executed. the tender submitted by the defendant was accepted. in spite of demand from the plaintiff, the defendant refused to file an application for the inclusion of the plaintiff's name as a partner. he also refused to execute the partnership deed. it was therefore, contended that the defendant committed breach of contract as a.....
Judgment:

Ekbote, J.

(1) This is an appeal from the judgment and decree of the First Additional Judge, City Civil Court, Hyderabad in Case No. 105 of 1958 given on 21st December, 1959 whereby he dismissed the plaintiff's suit for damages for breach of a contract.

(2) The essential facts of the case are that the plaintiff alleged that he was the contractor for supply of liquor to Bidar and Osmanabad districts for the fasli years 1346 to 1357. The plaintiff wanted to get the contract for the fasli year 1358. On learning that the defendant was also attempting to get the licence for that year, on 15th Amardad 1357 Fasli the parties reached an agreement that both the plaintiff and the defendant should submit separate tenders, that in case the tender submitted by the defendant was accepted, the parties would work out the lease on the basis of partnership between them and that each would be entitled to a half share in the profits. It was further agreed that after the tender was accepted, an application should be filed for inclaintiff's name as a partner and a partnership deed should duly be got executed. The tender submitted by the defendant was accepted. In spite of demand from the plaintiff, the defendant refused to file an application for the inclusion of the plaintiff's name as a partner. He also refused to execute the partnership deed. It was therefore, contended that the defendant committed breach of contract as a consequence of which the plaintiff suffered a loss of Rs. 50,000. It was therefore, prayed that a decree for Rs. 50,000 be passed against the defendant, and if after taking the accounts of the said contract, some more amount was found due towards the half share of the plaintiff a decree for the same may also be passed.

(3) In his written statement the defendant denied any such agreement between the parties. He contended that he submitted the tender for himself. After the tender was accepted, it was not obligatory on the part of the defendant to file any application for the inclusion of the plaintiff's name as a partner. He had never agreed to execute any partnership deed in favour of the plaintiff. He also denied that he committed breach of contract and disputed the correctness of the claim for damages.

(4) Upon these pleadings, the learned Judge framed the following issues:-

1. Whether the suit of plaintiff is tenable?

2. Whether it was agreed upon in between the parties on 15th Amardad 1357 Fasli (corresponding to 15th June, 1948)that in the contract for the supply of liquor to Bidar and Osmanabad for the year 1358 Fasli the plaintiff would be given a half share and that after the acceptance of the tender a deed of partnership would be executed and sanction of the Excise Department for it should be obtained; and that if such contract was entered into by the parties, was it lawful?

3. Whether on account for defendant's failure to carry out the alleged contract of 15th June, 1948, the plaintiff was put to a loss of Rs. 50,000, and he is entitled to recover the same.

4. Whether an action for accoorrespondingoined to a suit for damages?

5. To what relief is the plaintiff entitled?

(5) After recording the evidence adduced by the parties, the learned Judge found on issue No.1 that the plaintiff's suit is not maintainable. On second part of issue No.2, he found that the contract entered into between the parties is unlawful. In regard to issue No.3, his finding is that on account of the defendant's failure to carry out the alleged contract of 15th June, 1948, the plaintiff was not put to a loss of Rs. 50,000 and as such he is not entitled to recover the same from the defendant. On issue No. 4, he held that in an action for damages accounts cannot be asked for. Consequently, he dismissed the plaintiff's suit with costs.

(6) In this appeal by the plaintiff, the principal contention of Mr. Jalil Ahmed, the learned counsel for the plaintiff, is that what was agreed to between the parties on 15th June, 1948 was that they would enter into a partnership at a future date viz., after the tender of the defendant was accepted by the concerned authority. Such a contract, he contends, is not vilative of section 14 of the Hyderabad Abkari Act, hereinafter referred to as 'the Act', and therefore, not illegal under section 23 of the Contract Act.

(7) In order to appreciate this contention, it is necessary to read section 14 of the Act as it stood when the contract was entered into. The Act is in Urdu. The translation of section 14 runs as follows:-

'No lessee is entitled to lease out or take any partner without the permission of the Government. Such a lessee or the partner would not come in possession unless he obtains permit from the Collector or any other officer empowered in this behalf'.

It is common ground that rule 23 of the rules made under the Act prohibits the transfer or sub-lease of the rights under the licence granted under the Act without the prior pergranted under the Act without the prior permission of the Collector in the districts. It is in the light of these provisions that we have to determine m 23,xactly was the nature of the contract between the parties alleged to have been entered into on 15th June, 1948. In paragraph 2 of the plaint, it is averred that:

'On the 15th day of Amardad, 1357 Fasli before submitting the tenders, an agreement was entered into between the parties to the effect that the tender be prepared with the advice of the plaintiff, that the tender be submitted in the name of the defendant in the Excise Department; that in this contract the plaintiff and the defendant would be half share holders; that after the sanction of the contract an application would be submitted in the Excise Department for the said shares; that a partnership deed would be reduced in writing; and that the management of the said contract would be jointly done by the plaintiff and the defendant.'

In his deposition, the plaintiff as P.W. 1 stated in the examination-in-chief that the lease from the Government was taken in partnership with Abdul Rasool Khan Saheb, who is the defendant. He further stated that it was agreed then that if the contract was sanctioned, then an application would be submitted to the Commissioner of Excise and his name would be included in the contract. He further stated that the tender submitted by them was sanctioned. He admitted that he had separately submitted a tender which he did in consultation with the defendant. This device was adopted in order to ward off any suspicion that there was a partnership, in regard to the tender submitted by the defendant, between the parties. He admitted more than once in his deposition that all the terms and conditions of partnership were settled on that date.

(8) Similarly, a reading of Exhibits P-1 to P-3 would reveal that the plaintiff himself admitted in these letters that there was a concluded contract of partnership between the parties before the tender was submitted by the defendant. In view of the allegations in the plaint, the admissions made in the deposition and the said letters, it is difficult to agree with the submission made e of which wed counsel for the plaintiff that there was only an agreement between the parties to enter into a future partnership after the tender submitted by the defendant was accepted by the Department. At no stage of the trial this case was set up in the trial Court. It is no doubt true that a Bench of this Court, in its judgment in F.A. No. 16/1 of 1951-52, dated 8th October, 1957 (AP), differing with the view of the trial Court held that the contract set up by the plaintiff was proved holding thereby that the first portion of issue No.2 relating to the truth of the contract was established. The Bench however, did not say that it was merely an agreement to enter into a future contract of partnership. That decision therefore, does not finally determine as to what exactly was the nature of the contract of 15th June, 1948. We find therefore, no difficulty in holding that there was a concluded contract of partnership between the parties before the tender was submitted by the defendant. We therefore do not find any hesitation in rejecting the contention of the learned counsel.

(9) The next question which immediately arises for our consideration is whether such a contract entered into prior to the submission of the tender and the grant of licence after the acceptance of such a tender and the grant of licence to the defendant is violative of section 14 of the Act and thus comes within the mischief of section 23 of the Indian Contract Act. It cannot now be in doubt that a licence under the Akbari Act is a personal privilege to vend or supply liquor. Even if it is therefore, acquired by one partner, it cannot be said that the licence is granted in favour of any partnership. The licence in such a case is certainly the licence of the person in whose name it is issued and not the licence of the partnership. Since it was granted to him on the express understanding that it was to be used by him and by him alone, its use by the partnership the same way as it would if the partnership were entered into after the licence wase time limitsee no reason to make any material distinction between a contract of partnership entered into before the licence is issued in the name of any person and the partnership entered into after the licence is granted under the Act in this case.

On the showing of the plaintiff himself, the contract of partnership was entered into only to supply liquor to the districts of Bidar and Osmanabad after the licence was granted to the defendant. Such a contract therefore, is to run the lease granted in the name of the defendant by the partnership consisting of the parties and it is plain to us that if the licence is held by the defendant and if the same licence is used by the partnership or by an act of volition the plaintiff is permitted to share the licence as his partner, it is a clear case of transfer falling within the mischief of section 14 of the Act and rule 23 of the rules made thereunder.

(10) That this is the correct position of law gathers support from a Full Bench decision of the Madras High Court. In Velu Padavachi v. Sivasooriam Pillai, : AIR1950Mad444 , (FB),. The Full Bench held:

'From the above discussion it is evident that there is a long and consistent body of opinion of this High Court from Marudamuthu v. Rangasami, (1901) ILR 24 Mad 401, onwards with which we agree that a partnership entered into for the purpose of conducting a business in arrack or toddy on a licence granted or to be granted to only one of them is void ab initio, whether the contract was entered into before the licence was granted or afterwards, in that it either involves a transfer of the licence, which is prohibited under R. 27 and punishable under section 56, or a breach of section 5, Abkari Act, punishable under S. 55, because the unlicensed partner, by himself or through his agent, the other partner, sells without a licence. If a partnership is lawful at its inception, because it is not intended to infringe any provision of the Contract Act, it nevertheless becomes unlawful when it intends to conduct the business jonder sectionicence granted to one only of the partners'. We are therefore, satisfied that the contract as was entered into between the parties was a conclude contract of partnership although it was entered into prior to the grant of licence in favour of the defendant and that such a contract is void being opposed to section 14 of the Act and rule 23 of the rules made there under. We therefore, find no reason to differ with the opinion of the Court below that the said contract is unlawful and no question of any breach of such contract can arise.

(11) In the view which we have taken, it is unnecessary to discuss as to what would be the position in case there was an agreement between the parties to enter into future contract of partnership. Assuming that the character of the contract was like that, even then we do not think that the plaintiff would be entitled to succeed in this suit. Assuming that it was merely an agreement as is submitted by the learned counsel, even then before this agreement matures in to a valid contract of partnership, permission under section 14 of the Act was necessary. If the defendant failed to appeal under section 14 of the Act, what must follow is that no contract of partnership came into existence. The only complaint which the plaintiff can make in such a case is that the defendant did not comply with the obligation cast upon him as agreed to by him. The plaintiff because of that hardly would be entitled to claim by way of damages half a share of the profits which the defendant is alleged to have made under the licence granted to him. It is pertinent in this connection to note that it was not definitely stated by the plaintiff that it was obligatory on the part of the defendant to file such an application seeking permission under section 14 of the Act. The plaint is silent in this behalf. It does not mention that the contract would come into existence only when the permission under section 14 is obtained on an application filed by the defendant.

The plaintiff himself seems to have farginal noteication on 27th of Isfandar, 1358 Fasli with the Excise Commissioner asking his name to be included as a share-holder in the contract in question. This prayer of his was based on the same facts as he alleges in paragraph 2 of the plaint. The Excise Commissioner refused to include his name and directed him to adopt such legal proceedings as may be open to him. When once this order is treated to be a refusal to include his name as a partner, it is obvious that even if the plaintiff's version is accepted the contract of partnership which was to come into being in case sanction was obtained did not come into existence. There can therefore, be no question of any breach of any such contract. Moreover, it is a mistake to assume that in case the defendant files an application under section 14 of the Act, it will automatically result in securing sanction under section 14 and rule 23 of the rules made thereunder.

(12) Although it is unnecessary to discuss about the damages in view of the findings recorded above, in deference to the arguments advanced before us we will briefly state our opinion. If, as is contended by the learned counsel for the plaintiff, there was merely an agreement to enter in future into a contract would not necessarily entail loss to the plaintiff of the profit which the partnership would have earned under the licence granted to the defendant. It does not necessarily flow from the breach of the agreement by the defendant inasmuch as he failed to file an application under section 14 of the Act There is no proof of any laws actually suffered by the plaintiff. It is doubtful whether the profits, which he could not have made if his name was included as a partner after obtaining necessary sanction under section 14 of the Act can be considered as damages suffered by the plaintiff.

(13) Apart from this result being too remote, there is no satisfactory evidence to hold that the defendant did actually make any profit in pursuance of the licence granted to him. The only evidence adduced by the he report ofnsists of Exhibits P-17to P-19 and the oral evidence of P.W. 2. Exhibits P-17 to P-19 only show the liquor obtained by the defendant and supplied to the districts of Bidar and Osmanabad. What commission would have become due to the defendant on these supplies can at best be worked out on the basis of these documents. Admittedly however they do not represent the profit made by the defendant. Admittedly, there is no evidence to show what expenses were incurred by the defendant in transporting and making arrangements to supply the liquor to the districts. It is not possible to even approximately fix the expenditure which the defendant might have incurs on the strength of the evidence given by P.W. 2. In order the claim damages it was for the plaintiff to prove what quantum of damages he is entitled to recover and in order to do that it was necessary to show what profit the defendant could reasonably be said to have made.

P.W. 2's evidence is not sufficient to arrive at any conclusion in that behalf. It is also evident from the evidence that for a few months in the beginning of the contract, disorder prevailed in these two districts immediately after the police action in Aban, 1357 F. According to the evidence of P.W. 5, as a consequence of this disorder, shops belonging to the defendant were looted and destroyed and the transport of liquor of these districts became difficult. Although, there is no clear and good evidence as to what exactly was the loss suffered by the defendant, it can safely be said that the because of the disorder and disturbances in the localities which followed the police action, the supply of liquor was not continuous and as the shops were looted or destroyed, the defendant did suffer some loss. It will thus be clear that the plaintiff has failed to prove that the defendant made any profit. There is evidence to show that because of the disorder the defendant made any profit. There is evidence to show that because of the disorder the defendant suffered some loss at least for a few Civil Rulese is no satisfactory evidence on the record to find out as to whether the defendant ultimately made any profit or suffered loss in pursuance of the licence. As stated earlier, it was for the plaintiff to prove that the defendant had made profits and that he is entitled to a share in those profits. As neither of these is proved, we find no difficulty in agreeing with the conclusion of the Court below in that respect.

(14) For the aforesaid reasons, the appeal must fail and is dismissed with costs.

(15) Appeal dismissed.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //