1. The plaintiff is the appellant herein, the Second Appeal arises out of a suit filed for enforcing the transfer of a route permit of a Bus (A.D.S. 471) plying on the route line from Vizianagaram to Chodavaram, pursuant to an agreement in that behalf entered into by the plaintiff and the first defendant on 3-12-1955. The suit was dismissed by the Courts below and that is how the appeal arises. The following are the undisputed, facts which require to be noticed here to appreciate the point Involved in this case, viz., the enforceability of such an agreement to transfer a route permit in respect of the Bus. (A.D.S. 471).
2. The plaintiff (hereinafter referred to as the appellant) and the first defendant (hereinafter referred to as the respondent) were partners In the business of running stage' carriage under the name and style of 'Sri Sad guru Bus Service'. The respondent held the route permit. A.D.S. 471 was one of the buses forming partnership property. While so, a creditor of the respondent filed ' suit against him and attached the buses. That suit was compromised. Subsequent thereto, the partnership of running the stage carriages came to be dissolved by a deed of dissolution dated 3-12-1955, Ex. A-4. Under the terms of the said deed of dissolution, the appellant shall be the owner of the bus in question and run the said bus on the route line from Vizianagaram to Chodavaram Via. Saroalkot with all rights thereto, and the respondent shall have no right thereto.
The deed recites that the appellant has taken possession of the bus, A.D.S. 471. Contemporaneously, the respondent executed a letter, Ex. A-5, in favour of the appellant. what is termed a letter of agreement or undertaking stating 'inter alia' that Inasmuch as the route permit and the registration certificate pertaining to the Bus (A.D.S. 471) was standing in the respondent's came, he would execute the document which has to, for effecting the transfer of the permit and the registration certificate on demand by the appellant. The transfers not having been effected as undertaken by the respondent, the appellant brought this action to enforce the transfer undertaken by the respondent. In the suit he prayed for a mandatory injunction, directing the respondent to sign the applications for transfer of the permit and the registration certificate relating to the Bus, A.D.S. 471.
3. The respondent raised various pleas in defence, but the one which found favour with the Courts below was that the agreement was void and unenforceable as contravening Section 59 (1) of the Motor Vehicles Act (Act IV of 1939) and the rules made thereunder.
4. The trial Court held that the agreement entered into for the transfer of the permit was true, but void. The finding was affirmed by the first appellate Court.
5. The Second Appeal came on for hearing before SeshaehaJapathi, J. and he appears to have thought that there was a conflict of judicial opinion and so referred the case to a Bench.
6. We would now proceed to examine the question of enforceability of the agreement to transfer the route permit to the plaintiff (appellant), as it has been held by the Courts below concurrently that the agreement was void as offending Section 59 (1) of the Motor Vehicles Act and the Rules thereunder. It is undisputed that the appellant and the respondent were partners in the business of running stage carriages under permit and that the permit itself was issued to the respondent. We would at the outset notice the relevant provisions of the Motor Vehicles Act of 1939 (hereinafter referred to as the Act).
'Section 59 (1) save as provided In Section 61, 3 permit shall not be transferable from one person to another except with the permission of the transport authority which granted the permit and shall not without such permission operate to confer on any person to whom a vehicle covered by the permit is transferred any right to use that vehicle in the manner authorized by the permit'
7. The rest of the provisions are not necessary for purposes of this appeal. Section 61 Is a case of transfer of permit on the death of the holder which provision has no relevancy In the instant case.
3. We pause to notice here that the language of the section is mandatory that the permission of the transport Authority is a pre-requisite for the transfer of the permit. Without such permission, every if the stage carriage covered by the permit is transferred, It cannot be used.
9. Rules 196 to 200 refer to the procedure for effecting a transfer of the permit. Rule 196 contemplates a joint application in writing to the Transport Authority, by the holder of the permit who desires to transfer the permit and the proposed transferee. Rules 197 to 199 prescribe an enquiry to be made by the Transport Authority. Rule 199 states in particular that the Transport Authority may, if it deems fit, deal with the application as if it were an application for a permit. Under Rule 200, if the Transport Authority Is satisfied that the transfer of a permit may properly be made, it shall call upon the parties to furnish parts A and But the permit and the certificate of registration of the vehicle with the particulars of the transfer of ownership of the vehicle stated thereon. The important aspect of this matter is that the Transport Authority deals with the application for transfer as if it was an application for a permit and the authority shall, in deciding whether to grant or to refuse a permit, consider certain matters specified.
10. Section 47 deals with the matters which are taken into account by the authority. They are inter alia, (a) the interest of the public generally; and (b) the advantages to the public of the service to be provided, etc. Thus it emerges that the authority issues the permit taking into account the interest of the public generally and the advantage to the public of the service to be provided, that is to say, matters of public interest front a major consideration and it is certainly not a matter of mere routine or a mechanical formula.
11. So, It is apparent that the prohibition against the transfer of a permit enacted In Section 59 has relation to matters of public interest. If the transfer is-mutually agreed to disregarding this provision, it is fundamental that Courts would not enforce such an agreement as its object is forbidden by law or Is of such, a nature that, if permitted, it would defeat the provisions j of the law, within the meaning of Section 23 of the] Indian Contract Act. This aspect of the matter does not admit of any equivocation.
12. While so, Sri Reddy Pantulu has argued that there is no absolute prohibition of transfer as a transfer of permit was contemplated by the Act and the rules, or alternatively, we might view the agreement between the parties as one to obtain a transfer in the manner provided by the Act and the rules made thereunder. We do not consider that the express Interdiction enacted In the statute on grounds of public policy could be whittled down to a matter of routine and form awl construe the statutory prohibition as permitting such transfers. Further, reading Ex. A-4 dated 3-12-1955, deed of dissolution of partnership and Ex. A-5 dated 3-12-1955, the letter of agreement or undertaking and all allegations In the plaint, we cannot accede to the preposition that what all was contemplated by the partly was to lake steps pursuant to the relevant Act. The statements made in the above are sufficiently clear to reject the contention,
13. Ex. A-4, the deed of dissolution of partnership embodies these statements:
'As per the partnership deeds entered into by us on 3-1-1950 and on 25-6-1954 in respect of M.D.V. 1754 (A.D.S. 543) and M.D.V. 1738 (A.D.V. 2227) we have carried on the business in buses. Apart from the aforesaid buses beating the said numbers we have carried on business jointly in respect of bus M.D.V. 1835 (A.D.S. 471) as 'per the partnership deed entered into 3-12-1951 with right to equal share and enjoyment in the business under the name and style of 'Sri Sadguru Bus Service.' (Para 2).
It is settled that the 2nd individual shall himself be the sole owner of the said bus and run the said bus on the route line from Vizianagaram to Chodavaram Via. Samalkot with all rights thereto, and that without the 1st individual having any right whatsoever thereon, the 2nd individual shall himself enjoy with all absolute rights thereto.' (para 3). In Ex. A-5, it is slated thus:
'It is settled that inasmuch as bus A. 0. S, 471 is in your possession and enjoyment from now onwards and as I have no concern whatever with it, you shall yourself pay the income-tax payable for the said bus.'
'further if per chance bus A. D. S. 471 is stopped without being run on the route line due to my acts and laches I shall pay by way of damages at the rate of Rs. 15/- per day for the period so stopped without the buses being run on the route.'
14. The said statements clearly bring out the fact that the bus A.D.S. 471 has been put in possession of the appellant and that the bus was being run on the route authorised by the permit issued in favour of the respondent. In effect, the parties have shared the partnership property and the plaintiff is running the bus Without the permit, This reflects a situation where the partnership itself was such as violated the provisions of the Act. If so, the further agreement in relation to the partnership would also be offending the provisions of law.
15. The plaint embodies these recitals:
'Para 3. (a).
It maybe stated here that the 1st defendant informed the Registar of Firms on 25-2-1956 and the Income-tax Officer, Vizianagaram, subsequently that he had no interest in the A.D.S. 471 and that the plaintiff is in possession and ownership of the bus plying it in its own route.' The cause of action para makes reference to Ex. A-4 and the information alleged to have been given by the 1st defendant to the Registrar of Firms. Relief was prayed for en the footing that the respondent did not implement the agreement of transfer as embodied in Ex. A4, the deed of dissolution of partnership. Even the memo of grounds of second appeal sets out that there was every intention to transfer the permit. All this material does not manifestly support the argument of the learned counsel.
16. We may In this context appropriately refer to the exposition of the point Involved in this case by Polock in his work 'Principles of Contract', 10th edition.
At page 329 it is plated thus:
'(a) When a transaction is forbidden, the grounds of the prohibition are immaterial. Courts of justice cannot take note of any difference between mala prohibit (that is things which if not forbidden by positive law would not be immoral) and mala in se (that is things which-are so forbidden as being immoral)
(b) The imposition of a penalty by the legislature on any specific act or omission is prima facie equivalent to an express prohibition.'
At page 331 occur these relevant statements:
'When conditions are prescribed by statute for the conduct of any particular business or profession and such conditions are not observed, agreements made in the course-of such business or profession:
are void if it appears by the context that the object of the legislature in imposing the condition was the maintenance of public order or safety or the protection of the persons dealing with those on whom the condition is imposed:
are valid if no specific penalty is attached to the specific transaction and if it appears that the condition was imposed for merely administrative purposes, e.g., the convenient collection of the revenue.' These expressions of the author with reference to the cases on the subject have been adopted by a Bench of the Madras High Court in J. D. Italia v. D. Cowasjee, (1944) 1 Mad U 97 : (AIR 1944 Mad 295).
17. Halsbury has said much to the same effect thus: (Reference is to Halsbury's Laws of England, Simonds Edition, 8th Volume, page 141):
'Where a penalty is imposed by statute upon any person who does a particular act, this may or may not imply a prohibition of that act. It is a question of construction in each case whether the Legislature intended to prohibit the doing of the act altogether, or merely to make the person who did it liable 1o pay the penalty. If the penalty is recurrent, that is to say, if it is imposed not merely once for all but as often as the act is done, this amounts to a prohibition. Where the object of the Legislature in imposing the penalty is merely the protection of the revenue the statute will not be construed as prohibiting the act in respect of which the penalty is imposed.'
18. We pause to notice here that the instant case falls within the express prohibition enacted In Section 59(1) of the Contract Act (sic) and that a penalty is imposed for any contravention thereof under Section 112 of the Motor Vehicles Act, 1939. Section 112 says:
'Whoever contravenes any provision of this Act or of any rule made thereunder shall, If no other penalty is provided for the offence, be punishable with fine which may extend to twenty rupees, or, if having been previously convicted of any offence under this Act he is again convicted of an offence under this Act, with fine which may extend to one hundred rupees.'
19. The conclusion reached by us against the enforceability of the agreement on the scrutiny of the relevant provisions of the statute is also consistent with judicial pronouncements relative to this question.
20. In Maniam Hiria Gowder v. Naga Maistry, : AIR1957Mad620 a partnership formed for a lorry business which involved a transfer of permit was held to be illegal and void as Section 59(1) of the Motor Vehicles Act expressly prohibits transfer of a permit except with the permission of the Transport Authority. The learned Judges observed that the principle underlying the Full Bench case Velu Padayachi v. Siva-sooriam, : AIR1950Mad444 (FB) and Viswanathan v. Namakehand Gupta, (S) : AIR1955Mad536 applied, the principle being that an agreement of partnership, which will entail a transfer of a licence or permit granted by the Government when there is an express provision prohibiting such a transfer is illegal and void ab initio.
The following is the relevant discussion at p. 265 (of Mad U) : (at p. 620 of AIR) -
'The case in (S) : AIR1955Mad536 , related to an agreement of partnership in respect of cinema business and the decision in : AIR1950Mad444 (FB) arose under the Abkari Act. The doctrine on which these rulings are based is thus explained in 1954-2 Mad U 782 (787) = ((S) AIR 1955-Mad 536 (539)). When a penalty is imposad for contravention of a provision of law, that can be taken as an indication that the transaction which involves such a contravention is prohibited and is therefore illegal; but when there is no imposition of a penalty, the question whether the contract is illegal should be determined on a consideration of the purpose behind the legislation. If the provisions are enacted for the purpose of revenue and in the interests of administration, no question of illegality will arise; but when the provisions are enacted in the interests of the public and promotion of its welfare the contravention of such provision must be held to be illegal. In the present case Section 59(1) of the Motor Vehicles Act expressly prohibits transfer of a permit except with the permission of the transport authority. A partnership in respect of a lorry business which involves a transfer of permit will therefore be illegal and void.'
The same view has been restated in Varadarajulu Naidu v. K. V. Thavasi Nadar, : AIR1963Mad413 . In that case a partnership was formed for the purchase of a lorry and to run it as a transport vehicle on permit, the partners being the plaintiff in the suit and the 2nd defendant. As the said partnership was dissolved and it was settled that the 2nd defendant should take over the business with all assets and liabilities and the plaintiff should be given Rs. 5,000/- in full quit of his share and claims, the suit was laid to recover the said amount. The enforceability of the claim was questioned. It was held that the partnership involved a contravention of the Motor Vehicles Act inasmuch as the user of the lorry by the owner, viz., the partnership had no licence in its name. In the view that the partnership was illegal, the suit claim, which arose out of the settlement of accounts of the partnership, was rejected as illegal and unenforceable. Thus, it is seen that where there is an agreement which contravenes Section 59 (1) of the Motor Vehicles Act, such an agreement could not be enforced.
21. While so, our learned brother Seshachalapathi J. appears to have been of the view that the observations of two Division Benches of this Court in P. Bhushayya v. K. Chinnappa Reddi, (1959) 2 Andh WR 550 : (AIR I960 Andh-Pra. 39) and K. Venkatadri v. K. Govindaraju, (1960J 2 Andh WR 151 probably differed in the view.
22. In the first case, the question for consideration was whether a partnership formed for the purchase and sale of tobacco was illegal under Section 6 of the Central Excises and Salt Act, 1944 (I of 1944) and the relevant rules made thereunder. Section 6 provided inter alia that no person without a licence can do any wholesale purchase or sale (whether as a broker or commission agent) or store any excisable goods specified in Part A of the II Schedule, of which tobacco is one of the items. Rule 178(4) provides that:
'If the holder of a licence enters into partnership in regard to the business covered by the licence he shall report the fact to the] licensing authority within thirty days of his entering into such partnership and shall get his licence suitably amended. Where a partnership is entered into, the partner as well as the original holder of the licence shall be bound by the conditions of that licence.'
A breach of the rules is punishable with fine. The learned judges held that such a partnership was not illegal. The main ground of distinction is stated in the judgment at page 553 (of Andh WR) : (at p. 41 of AIR) thus:
'...... Cases under the Abkari, Opium or Forest Acts have no application in determining the validity of partnerships made in contravention of the provisions of the Central Excises and Salt Act, as the prohibition is for protection or convenient collection ofrevenue'.
and further thus:
'It is unnecessary to deal with the Abkari and Opium Acts where the Courts have held on the provisions of those Acts that they were designed in furtherance of a public policy and the prohibitions contained therein would have the effect of declaring contracts or partnerships made in contravention of the provisions illegal and void.'
23. It is therefore abundantly clear that the learned Judges examined the exact scope of the statutory prohibition and held that the prohibition involved was for revenue purposes only. The decision cannot therefoie be understood as indicating a view inconsistent with the view adumbrated in the cases referred to supra.
24. The second is also a case of a partnership for purchase and sale of tobacco where one of the partners only had a licence under the Central Excises and Salt Act, 1944 (1 of 1944). It was held that such a partnership was rot illegal, as the said Act was designed for the protection of revenue and the conditions as to licence were imposed only for administrative purposes and there was no question of offending any public policy there. The learned Judges based their decision on that broad distinction quoting from Halsbury's Laws of England. It may be noted that this distinction was stated in : AIR1957Mad620 . Thus, the principle underlying these decisions is quite different. The observations in the judgments are quite clear emphasizing the well-settled distinction.
25. We have not noticed so far any divergence of judicial opinion with regard to the prohibition enacted under Section 59(1) of the Motor Vehicles Act. Elsewhere we have discussed fully the question and given the reasons for our view that the prohibition was enacted in public Interest and as a matter of public policy.
26. For the said reasons, we agree with the finding of the courts below that the agreement in question is unenforceable as it is forbidden by law within the meaning of Section 23 of the Indian Contract Act. The Second Appeal, therefore, fails and is dismissed with costs.
27. The learned counsel for the 1st respondent represents that his client has, however, no objection to transfer the 'C' certificate in respect of the bus A. D. S. 471 to the appellant. He may do so,
28. This decision of ours does not in any way affect the rights which the appellant, may possess under any enactment.