Skip to content


Mohrilal Vs. Shri Ballabh and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtRajasthan High Court
Decided On
Case NumberSecond Appeal No. 326 of 1961
Judge
Reported inAIR1967Raj280
ActsCode of Civil Procedure (CPC) , 1908 - Order 20, Rule 15; Partnership Act, 1932 - Sections 4; Central Excises and Salt Act, 1944 - Sections 6 and 9; Central Excises and Salt Rules - Rule 178(2) and 178(4)
AppellantMohrilal
RespondentShri Ballabh and anr.
Appellant Advocate Roshanlal Maheshwari, Adv.
Respondent Advocate Prakash Chander Mathur, Adv.
DispositionAppeal allowed
Cases ReferredGordhandas Kessowji v. Champsey Dossa
Excerpt:
.....to the licencing authority within 30 days of his entering into such partnership and shall get his licence suitably amended, and that where a partnership is thus entered into, a partner as well as the original holder of the licence shall be bound by that licence. basing his argument on this view learned counsel raised a powerful argument before me that the business in the present case of purchasing or selling tobacco on a wholesale basis had been admittedly assigned by the parties to the defendant alone and. the facts of that case were very strong. it seems to have been contended before their lordships that both the plaintiff-appellant and the defendant-respondents were acting within the limits of their authority which was available to them under the respective licences held by them for..........that the plaintiffs were content to leave this business to be done by the defendant as the latter held a licence in his own name and such business could not be done unless one was a licence holder for the same.it is admitted by the plaintiffs that the partnership account between the parties with reference to all other articles had been settled except in the case of tobacco account. they called upon the defendant to render it to them but without any purpose, and, therefore, they have been compelled to file the suit, out of which this appeal arises, for the dissolution of partnership and rendition of accounts in respect of the tobacco business.3. defendant admitted that he had entered into partnership with the plaintiffs by means of the agreement ex. 1 but pleaded that inasmuch as the.....
Judgment:

I.N. Modi, J.

1. This is a civil regular second appeal by the defendant Mohrilal in a suit for dissolution of partnership and rendition of accounts, which was dismissed by the trial court but on appeal that decision was reversed and the case was remanded back with a direction that a preliminary decree for the taking of the accounts be passed and the suit be decided according to law. The material facts are these:

2. The plaintiff Shri Ballabh and his brother Ram Raghunath carried on business in the name and style of Shri Ballabh Ram Raghunath at Sambhar. The defendant Mohrilal also carried on business in the name of Shivnarain Mohrilal in the same town. On Jeth Sudi 6 Smt. 2006 equivalent to the 13th May, 1950, the plaintiffs and the defendant entered into a partnership agreement by which they agreed to carry on the business of sale and purchase of gur, sugar, potatoes, tobacco, etc.

It is unnecessary for the purposes of the present appeal to set out all the conditions agreed to between the parties at the time of the agreement, and it should suffice to mention that the partnership business was to consist of the sale and purchase of tobacco among other articles referred to above and that such business shall be conducted in the name of the partnership which was agreed to be styled as Ramavatar Company. The agreement of partnership is Ex. 1. It may be pointed out at this place that it seems to have been agreed between the parties that the work of sale and purchase of the various commodities was to be conducted by the defendants and that they would maintain the day to day accounts in a Kachhi Rokar from which the same will be entered every evening in a Pacci Rokar to be maintained by the plaintiffs.

According to the plaintiffs as they held no licence for doing wholesale business in the sale and purchase of tobacco, the business in that commodity was carried on by the defendant under a licence dated the 16th February, 1951, which he held for the purpose under the Central Excises and Salt Act, 1944 and further that the plaintiffs were content to leave this business to be done by the defendant as the latter held a licence in his own name and such business could not be done unless one was a licence holder for the same.

It is admitted by the plaintiffs that the partnership account between the parties with reference to all other articles had been settled except in the case of tobacco account. They called upon the defendant to render it to them but without any purpose, and, therefore, they have been compelled to file the suit, out of which this appeal arises, for the dissolution of partnership and rendition of accounts in respect of the tobacco business.

3. Defendant admitted that he had entered into partnership with the plaintiffs by means of the agreement Ex. 1 but pleaded that inasmuch as the partnership did not have or take any licence for dealing in the wholesale sale and purchase of tobacco, business in that commodity was not carried on in partnership but belonged to him exclusively. He raised some other pleas also but with those we are not concerned for the purpose of the present appeal.

4. Both the Courts below have held that the tobacco business was part and parcel of the partnership business of the parties. The trial Court came to the conclusion that as the said business had been done by the partnership without a licence in the name of the partnership firm, this was in contravention of the provisions of the Central Excises and Salt Act, 1944 and the rules made thereunder and, consequently, it was unlawful, and, in this view of the matter, dismissed the plaintiffs suit with costs.

On appeal the learned District Judge, Jaipur District, Jaipur, reversed that decision and remanded the suit with a direction that a preliminary decree be passed for rendition of accounts and for further proceedings according to law. The learned Judge felt persuaded to come to that conclusion as in his opinion the tobacco business was not conducted jointly by the partnership and that the real effect of the partnership was nothing more and nothing LOSS than pooling the profit & loss of the said business and sharing it between the parties.

In this view of the matter the learned Judge held that the contract of partnership did not contravene title provisions of the Act of 1944. Aggrieved by this decision the defendant has come up in appeal to this Court.

5. The contention of the learned counsel for the defendant is that the learned District Judge had made out an entirely a new case in appeal for the plaintiffs which he was not competent to do and for which there was no sufficient justification on the record, and that the learned Judge's view that the agreement between the parties was only to pool together the profit and loss of the tobacco business and to share the same between them was an oversimplification of the true position between the parties. On the other hand, learned counsel strongly contended that the business with which we are concerned in this case being one in a commodity regulated by the Act of 1944 and having been carried on by the partnership in the absence of a licence thereunder was entirely illegal and that the Courts of law could not countenance such a business and order its dissolution or direct rendition of accounts with respect to it.

In support of this submission reliance was placed on a Bench decision of this Court in Brij Mohan v. N. V. Vakharia, ILR (1965) 15 Raj 496 = (AIR 1965 Raj 172). That was a case under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, and appears to me to be parallel to the case before me. In that case also a partnership was set up between the parties for the manufacture of medicinal and toilet preparations. One of the partner Vakharia had a licence under the rules framed under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, and this licence was neither got amended in the name of the partnership, nor was a fresh licence obtained in its name for the carrying on of the business in question. One of the partners Mohan Das then brought a suit for dissolution of partnership and rendition of accounts.

Defendant Vakharia resisted this suit on the ground that partnership was illegal and therefore no decree for dissolution and rendition of accounts with respect to such business could be passed. It was held that a business like the one which the parties were carrying in that case could not be lawfully carried on without a proper licence in the name of the partnership in accordance with the provisions of Section 6 of the Act, and Rule 85 (4) of the Rules made thereunder, and that if the same was being carried on in disregard of such a requirement that amounted to an offence under Section 7 of the Act and consequently a suit for dissolution and accounts of a partnership which was illegal could not possibly be maintained. In coming to this conclusion the Court placed reliance on a decision of the Supreme Court in Govind Rao v. Nathmal, Civil Appeal No. 30 of 1960, D/-11-4-1962 (SC), which is an unreported case.

6. I have no doubt that on the view taken in Vakharla's case, ILR (1985) 15 Raj 496 = (AIR 1965 Raj 172) (supra) the plaintiffs' suit cannot but be dismissed. The position to my mind is simple enough. Here was a partnership formed for carrying on wholesale business in the sale and purchase of tobacco between the parries to the suit amongst certain other commodities also. The defendant Mohrilal alone held a licence from competent authority for carrying on such a business. The partnership Company did not hold such a licence.

According to Section 6 of the Act of 1944, read with Schedule 1 thereof, wholesale business in the purchase or sale of tobacco could not be carried on except under a licence, obtained under the Act, from such date as may be specified in a notification issued by the Central Government in this behalf. It is not disputed before me that such a notification was issued long before the time with which we are concerned in this case. Section 9 of the Act then inter alia provides that whoever contravenes any of the provisions of a notification issued under Section 6 shall be guilty of an offence which shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to two thousand rupees or with both.

Reference may also be made in this connection to Rule 178 of the Rules made under the Act. Sub-rule (2) thereof lays down that every licence shall be deemed to have been granted or renewed personally to the licencee. Sub-rule (4) further lays down that if the holder of a licence enters into partnership in regard to the business covered by a licence he shall report the fact to the licencing authority within 30 days of his entering Into such partnership and shall get his licence suitably amended, and that where a partnership is thus entered into, a partner as well as the original holder of the licence shall be bound by that licence. Reading all these provisions collectively in the light of the circumstances of the case which I have adverted to above, I have no hesitation in coming to the conclusion that the partnership in this case was illegal and, therefore, it is not for the Courts of law to order a dissolution or rendition of accounts with respect to such partnership.

7. To dissuade from the conclusion to which I have felt disposed to come, learned counsel strenuously contended that the business of purchasing and selling tobacco as indeed the rest of the business in the various other commodities, in connection with which the partnership between the parties had been formed, had been left entirely to the defendant who held a licence for the purpose, and, that so far as the plaintiffs were concerned, they were to all intents and purposes financing partners and, consequently, the present case was taken out of the purview of Vakharia's case and was distinguishable from it and, therefore, the decree passed by the Court below was correct.

In support of his submission learned counsel drew my attention to Champsey Dossa v. Gordhandas Kessowji, AIR 1917 Bom 250, and the decision of their Lordships of the Privy Council in the same case on appeal in Gordhandas Kessowji v. Champsey Dossa, AIR 1921 PC 137. It has been held in this case that where a licencee under Section 11 of the Bombay Salt Act, who is prohibited by the terms of his license, from sub-letting the whole or a part of the privilege, admits some members of his family and others as partners in the business to share the profits, such partners thus not having taken any part in the manufacture of salt, the arrangement did not infringe the provisions either of the licence or of Section 11 of the Act. Basing his argument on this view learned counsel raised a powerful argument before me that the business in the present case of purchasing or selling tobacco on a wholesale basis had been admittedly assigned by the parties to the defendant alone and. therefore, the correct position with reference to this part of the business was that the parties were merely to share the profits and losses in that connection.

On having given my careful and anxious consideration to this submission, I have not fell persuaded to accept it as sound. The principal reason which induced me to come to this conclusion is that the facts in Champsey Dossa's case were substantially different inasmuch as the agreements of partnership in that case said nothing about the sub-letting or alienation of the rights which the licensee had obtained to manufacture salt, and the only agreement was that the parties shall share in the profits of certain shops in certain proportions. In these circumstances the only question that arose for decision in that case was whether the partner holding a licence having admitted certain other persons to share in the profits which he derived from the manufacture and sale of salt, thereby sub-let, sold, mortgaged or otherwise alienated whole or in part the privilege granted by the licence for manufacturing salt on the land within the limits mentioned in the licence, and this question was answered in the negative.

The ratio of the decision was that the admission of partners to share in the profits cannot be considered as a sub-letting or alienation of the privilege or a part thereof 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. Tin's decision on appeal was upheld by their Lordships of the Privy Council in a very short judgment wherein they merely said that although the ease had been fully argued before them, there were no reasons adduced which would enable their Lordships to doubt the correctness of the judgment appealed from.

8. Now so far as I am able to think, the present case is radically different on facts. The plaintiffs themselves have laid their ease in the plaint from which it is impossible to draw any other conclusion than this that the partnership that had been set up between the parties was, amongst other commodities, to carry on the wholesale trade in tobacco also.

Reference may be made in this connection to paragraph 2 of the plaint. The same impression is confirmed by a perusal of the agreement Ex. 1. Both the plaintiff Shri Ballabh and the defendant Mohrilal when they were examined under Order X Rule 1 of the Code of Civil Procedure accepted that the actual business of purchasing and selling tobacco was left to the defendant obviously because it was he who held the licence for that purpose, and without such licence no such business could possibly be carried on, but it is further accepted by them that the entire business was to be carried out in the name of the partnership, viz. Ramavatar and Co.

That being so, it seems to me to be futile to contend that the partnership in the present case was confined more or less to the sharing of the profits and losses in connection with the tobacco business and did not extend to the carrying on of that business by the partnership itself. It was here that the real point of distinction lies between the present case and Dossa's case referred to above, and if once I come to the conclusion that in its essence and substance that was the object of the partnership, then there is no escape from the conclusion that such a partnership was illegal. It is true that the defendant was actually left to conduct the tobacco business, but If that business was to be conducted on behalf of the partnership and, in its name, then the defendant was merely an agent of the partnership and of the other partners, and further such a partnership could not be saved from the taint of unlawfulness because it held no licence in its name.

It seems to me that the decision of their Lordships of the Supreme Court in Govind Rao's case adverted to above, on which reliance was placed in Vakharia's case is very instructive for the decision of the controversy raised in the present ease. The facts of that case were very strong. The plaintiff brought a suit for dissolution of a partnership and rendition of accounts on the allegation that there was a partnership between him and the respondent to any on trade in food-grains. The plaintiff held a licence under the Central Provinces and Berar Food Grains Control Order, 1945, for dealing as a wholesale dealer in Nagpur District. The defendants also held a licence in the name of their joint family in Rajnandgaon, which was a princely State at that time, under the law in force in that State for dealing in food grains there.

The plaintiff admitted in his plaint that the partnership was formed for the specific purpose of exporting foodgrains to places outside the Province of Nagpur because the defendants were not registered as dealers in the Province and could not get permits for export from the Province and it had been agreed between the parties that the plaintiff shall arrange to secure the necessary permits for export and the defendants were to supply the capital for purchase and also to arrange for purchase, despatch and sale of goods. In these circumstances the question arose whether the partnership was not illegal in view of Section 3 of the Central Provinces and Berar Food Grains Control Order, 1945, which prohibited that no person shall deal in foodgrains as a wholesale dealer except tinder and in accordance with the licence, issued by the Deputy Commissioner of the District. This question was answered against the plaintiff.

It seems to have been contended before their Lordships that both the plaintiff-appellant and the defendant-respondents were acting within the limits of their authority which was available to them under the respective licences held by them for trading in foodgrains within their respective areas and, therefore, the partnership business was perfectly legal. In repelling this contention their Lordships made the following observations which with all respect, if I may say so, are very instructive for the decision of the case before me :--

'What the learned counsel for the appellant seeks to do is to break up each transaction into certain component parts, each part, according to him, being a separate transaction. The argument runs something like this: The appellant had a permit for dealing in food grains in the Nagpur District. The first purchase was made through an arhatiya, who was also licensed. The appellant had also an export permit in his own name, and the respondents had a licence for dealing in food grains in Rajnandgaon. The matter, however, cannot be looked at in this way at all. What we have to find out is whether the partnership was legal, because the suit was for accounts of the dissolved partnership. If the partnership was illegal or was for an unlawful purpose, then the Court will give no assistance to a plaintiff in such a case. It is obvious that the partnership was not licenced as a partnership. Therefore, the partnership could not deal in food grains in Central Provinces and Berar. The licence in the name of the appellant was not one in favour of the partnership, and the whole of the transaction by the partnership was in contravention of the Food Grains Control Order. A Court would not enforce any claim arising from this illegal partnership'.

9. Applying the law as laid down by their Lordships to the case before me, the conclusion to my mind seems irresistible that as the partnership in the present case was not licensed it could not deal in the wholesale trade of tobacco and the licence in the name of the defendant could not be accepted to be in favour of the partnership and, consequently, the whole of the tobacco business which according to the plaintiffs belonged to the partnership was unlawful, and a suit for dissolution of such a partnership and rendition of accounts could not be maintained in any Court of law.

10. For the aforesaid reasons I allow this appeal, set aside the judgment and the decree of the Court below and dismiss the plaintiffs' suit, but without any order as to costs. Any further proceedings that might have been taken by the trial Court in pursuance of the decree of the learned District Judge must fall as under. The leave to appeal is refused.


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