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Firm Ram NaraIn Damodar Dass Malpani and ors. Vs. Trilokidas and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtRajasthan High Court
Decided On
Case NumberD.B. Spl. Civil Appeal No. 248 of 1970
Judge
Reported in1981WLN103
AppellantFirm Ram NaraIn Damodar Dass Malpani and ors.
RespondentTrilokidas and ors.
DispositionAppeal allowed
Cases ReferredMadho Ram v. G.C. Sett
Excerpt:
contract act - section 56--suit for rendition of accounts--declared 'enemy' after despatch of goods ordered by partners--held, contract of partenership is not frustrated.;the contract of partnership was not abrogated or frustrated under section 56 contract act, merely because, after he had already despatched the goods ordered by the partners, george lambercier was declared to be an enemy by the central government.;(b) contract act - section 23 and defence of india rules, 1939--suit for rendition of accounts--lawful agreement of partnership arrived at in july 1941--declared enemy in dec. 1941--held, declaration cannot relate back to july 1941 and partners could let partnership agreement run its course.;the object of the agreement of partnership was perfectly lawful when the agreement was.....k.s. sidhu j.1. this is a special appeal by the plaintiff against the decision of c. b. bhargawa j. whereby he reversed the judgment and decree of the district judge jaipur, in favour of the plaintiffs and, instead, dismissed the plaintiffs' suit with costs to the defendants throughout.2. the suit which was dismissed as aforesaid was brought by firm ram narain damodar and its proprietors, dwarka das and gordhan das, against the defendant, damodar das for dissolution of partnership and rendition of accounts on the avernments that in july 1941, the parties entered into an oral partnership thereby agreeing to share profits and bear losses of the business of import from george lambercier of geneva, switezerland, of rough sythetic stones, in the ratio of six annas and ten annas, respectively......
Judgment:

K.S. Sidhu J.

1. This is a special appeal by the plaintiff against the decision of C. B. Bhargawa J. whereby he reversed the judgment and decree of the District Judge Jaipur, in favour of the plaintiffs and, instead, dismissed the plaintiffs' suit with costs to the defendants throughout.

2. The suit which was dismissed as aforesaid was brought by firm Ram Narain Damodar and its proprietors, Dwarka Das and Gordhan Das, against the defendant, Damodar Das for dissolution of partnership and rendition of accounts on the avernments that in July 1941, the parties entered into an oral partnership thereby agreeing to share profits and bear losses of the business of import from George Lambercier of Geneva, Switezerland, of rough sythetic stones, in the ratio of six annas and ten annas, respectively. It was agreed that the defendant who was already in correspondence with George Lambercier for such import would inform the plaintiffs about the arrival of the consingment in India and thereupon the parties were to share the costs price of the goods in proportion to their respective shares. Acting on behalf of the partnership firm, the defendant placed an order with George Lambercier in July, 1941, for the supply of 10 lac carats of white stone and 1 lac carats of yellow stone. George Lambercier despatched from Geneva 9 lac carats of white stone in November 1941. The goods were despatched in three different wooden cases marked GL/11. GL/12, and GL/13. It appears that out of these three wooden cases, only one viz, GL/11 shipped on board SS Loch Dee, arrived in Bombay in February 1943. The defendant repudiated the partnership in April 1943, and refused to give the plaintiffs their share of six annas out of the white stones contained in this case. The plaintiffs referred, the dispute for settlement by the Jewellers Association Jaipur on May 19, 1943. The said Association expressed its inability to settle it on November 24, 1943. The plaintiffs filed the suit, giving rise to this special appeal, in the court of District Judge Jaipur on April 13, 1944. One of the reliefs they sought was a declaration to the effect that they were entitled to a six annas share in the semiprecious stones received by the defendant in the wooden case, marked GL/11. They also prayed for dissolution of partnership and rendition of accounts of this transaction.

3. The defendant contested the suit and filed a written statement in answer to it. He admitted that in July, 1941, he had agreed to give the pontiff, Gordhan Das, six annas share out of the semi-precious stones for which he had already placed an order with George Lambercier. He however pleaded that one of the conditions of this partnership with Gordhan Das was that the latter would give him 2000 toals of imitation stones imported by him at pre-war prices. He further pleaded that he had not imported any semi-precious stones from George Lambercier as alleged, and that the plaintiffs did not give him 2000 toals of imitation stones as promised. He also averred that George Lambercier was declared by the Central Government in 1941 to be an 'enemy' under the Defence of India Rules. 1939, and that therefore the partnership between the parties for importing semi precious stones from him had become unlawful and void. He pleaded that the suit based on the partnership in question which had become unlawful could not be maintained.

4. Learned District Judge tried the suit on the following issues:

1. Whether in July 1941 a partnership was formed between the parties in terms of para No. 2 of the Plaintiff?

2. Whether in pursuance of the contract and past correspondence, an order for 10 lakh carats white and one lakh carat of lemon colour imitation stones was placed with George Lambercier?

3. Whether case No. GL/11 imported by the defendant belonged to the partnership?

4. Whether the suit is not maintainable?

5. Whether in 1941 Georges Lambercier was declared enemy firm. and therefore no partnership could be formed for importing stones from that firm, nor a suit is maintainable on the basis of such a partnership?

6. Whether because the goods have been imported from outside the country, this court has no jurisdiction?

7. Relief?

5. By his judgment, dated, March 30, 1962 learned District Judge recorded his findings inter alia, as follows:

(i) The parties entered into a partnership in July, 1941, for the import of imitation stones, from George Lambercier The Plaintiffs' share in the said stones was fixed at six annas and the defendants' at ten annas.

(ii) Case marked GL/11 was received by the defendant m July, 1943. It was imported from George Lambercier and therefore belonged to the partnership. The plaintiffs were entitled to a six annas share in the said goods.

(iii) George Lambercier was not declared to be an 'enemy' by the then rules of Jaipur. Of course, he had been declared an 'enemy', by the Central Government of British India on December 22, 1941. A person declared to be an 'enemy' by the British Government could not ipso facto be deemed to be an 'enemy' qua the Jaipur Government.

6. It was on the basis of these findings that learned trial Judge passed a preliminary decree in favour of the plaintiffs declaring that they were entitled to a six annas share in the semi-precious stones received by the defendant in wooden case marked GL/11. He dissolved the partnership and appointed a Commissioner to go into the accounts of the transaction and report within a period of two months from the date of the preliminary decree.

7. On appeal by the defendant from the aforesaid decree, a Single Judge of this court by his Judgment, dated April 30, 1970, affirmed the finding of the trial court mentioned at Nos. (i) and (ii) above. The opinion of the learned Single Judge in respect of the points covered by the findings of the trial court enumerated at No. (iii) above may be summarised as follows:

(a) George Lambercier was not declared to be an enemy by His Highness Government of Jaipur State, as such.

(b) The Jaipur State was under the Paramountcy of the British Indian Government The subjects of Jaipur State could not therefore legacy carry on trade, with a person declared to be an 'enemy' by the central Government under Rule97(d), Defence of India Rules, 1939.

(c) All states, Sovereigns, individuals and corporations who were enemies of His Majesty, the King-Emperor of Great Britain and Dominions authomatically became enemies of the Ruler of Jaipur State at that time.

(d) George Lambercier who had been declared on December 22, 1941, to be 'enemy' by the Central Government of British India under Rule 97(d), defence of India Rules 1939, was also therefore, an 'enemy' within the meaning of that rule as applied to Jaipur State.

(e) Trading by the Subjects of Jaipur State with George Lambercier after December 22, 1941, when he was declared to be an 'enemy' by the Central Government became unlawful. It, therefore, follows that the contract of partnership between the parties for trading with George Lambercier became void and incapable of performance.

(f) The fact that the goods, which were first detained by the controller of enemy property, were subsequently released by him on payment of their value into a blocked account could not and did not have the effect of reviving the contract of partnership which had already become 'unlawful and void' on the declaration of George Lambercier as an 'enemy'

(g) The suit by the plaintiffs for dissolution of partnership and rendition of accounts aggainst the defendant necessarily involves the enforcement of a contract of partnership which had already become unlawful and void. A contract which is unlawful and void, cannot be legally enforced. The plaintiffs suit is therefore not maintainable.

8. The learned Single Judge therefore, allowed the defendants' appeal on his view that the contract of partnership between the parties had become unlawful and void on the declaration of George Lambercier to be an enemy by the Central Government of British India on December 22, 1941, and that therefore, the plaintiffs' suit which is based on a void contract is not maintainable. Consequently the learned Judge set aside the preliminary decree, passed by the trial court, in favour of the plaintiffs and instead dismissed their suit with costs to the defendant throughout.

9. As already stated, the plaintiffs have challenged the appellate decree of dismissal of their suit passed by the learned Single Judge.

10. A good deal of controversy was raised before us by counsel for the parties, as it seems to have been raised in the courte below also, as to whether or not George Lambercier who was declared by the Central Government to be an enemy under Rule 97(d), Defence of India Rules 1939 with effect from December 22, 1941, can be treated as such qua the subjects of the Jaipur State without that State declaring him to be an 'enemy' in accordance with the provisions of law applicable in that State. Mr. Bhargava learned Counsel for the plaintiff-appellants contended that the Defence of India Ordinance, 1939 (No. 5 of 1939) which purports to have been applied to the Jaipur Territory, subject to certain modifications, vide Defence Ordinance (No. 1 of 1939) passed by the Council of State, Jaipur, was not published in the Jaipur Gazette and therefore cannot be said to have been in force in the Jaipur territory at the material time. He drew our attention to the Defence ordinance (No. 1 of 1939) as published in the Jaipur Gazette Extraordinary, dated September 12, 1939, and pointed out that this publication is confined merely to the modifications made by the council of State, Jaipur, in the Defence of India Ordinance, 1939 (No. 5 of 1939). Publication of the modifications without publishing the full text of the Ordinance sought to be applied to the Jaipur territory is no publication in the eye of law. Mr. Bhargava cited Harla v. The State of Rajasthan : [1952]1SCR110 , in support of his argument to the effect that mere resolution of a council of Ministers in the Jaipur State without further publication or promulgation will not be sufficient to make a law operative. He argued that without the enforcement of the Defence of India Ordinance in the Jaipur territory George Lambercier could not be validly declared as an enemy in the Jaipur territory, that in fact he had not been declared to be an enemy by the Jaipur Government and that, in any case, no such declaration had ever been published in the Jaipur Gazette. According to Mr. Bhargawa, George Lambercier cannot therefore be treated to have been an 'enemy' at the material time in relation to the subjects of Jaipur State.

11. On the other hand, Mr. Rastogi learned Counsel for the defendent-respondent argued that the notification issued by the Central Government on December 22, 1941, declaring George Lambercier to be an 'enemy' under Rule 97(d), Defence of India Rules, 1939, is ipso facto applicable to the Jaipur territory, for, as counsel further argued, the Jaipur State was under the Paramountcy of the British Crown and, even otherwise, under the treaty relations, an enemy of the crown must be treated to have been an enemy of the Ruler of the Jaipur State at the material time.

12. On a careful consideration of the facts and circumstances of this case, we are of the view that it is not necessary for us to decide the question as to whether or not George Lambercier can be treated to have been declared an 'enemy' qua the subjects of Jaipur State at the relevant time. As we shall presently explain, it would, in the net result, make no difference whether George Lambercier was or was not an 'enemy' qua the Jaipur territory. Even assuming that he was an 'enemy' qua the Jaipur territory declared as such with effect from December 22, 1941, we are of opinion that it would not adversely affect the plaintiff's claim for rendition of accounts against the defendant in respect of the goods received by him in the consignment marked GL/11. Before we start giving reasons for this opinion, it will be useful, to restate here some of the material facts as follows.

13. The material facts, as proved on the record, and about which there is no longer any dispute, are that the parties entered into an oral partnership in July 1941, for the joint purchase of semi-precious stone (10 Lac. carats of white stone and 1 lac carats of yellow stone) from George Lambercier of Geneva for resale with a view to divide the profits with a six anna moiety for the plaintiffs and 10 anna for the defendant. Acting on behalf of this partnership, defendant Damodar Das Khandelwal placed an order with George Lambercier for the supply of one million carats of white stone and one lac carats of yellow stone in July-August, 1941. George Lambercier despatched, C.I.F. Bombay, three cases, including the one marked G/11, each containing three lac carats of white stone on November 7, 1941. George Lambercier was declared to be an enemy under Rule 97 (d) Defence of India Rules 1939, on December 22, 1941. The consignment, marked GL/11 shipped on board SS Lach Dee, arrived in January-February 1942. The consignment was detained by the Central Government and then sent to the Kings ware house in Bombay. Pursuant to the efforts made by Damodar Das Khandelwal and Other consignees in that behalf, the Controller of Enemy Trading Bombay informed the Imperial Bank of India Bombay (EX-C-3 dated June 28, 1943) that the Government of India 'have now been pleased to authorise the release of such cases....that are still under detention to the respective consignees against payment of their value into a Blocked Account.' The consignment marked GL/11 was thus released from detention by the Central Government and delivered to its consignee i.e., defendant Khandelwal, in July 1943.

14. Having restated the proven facts as above, we may, now proceed to give reasons for our opinion in this fact-situation, the contract of partnership, which is the basis of the plaintiffs' suit for rendition of accounts, is not abrogated or frustrated under Section 56 Contract Act. In our opinion, learned Single Judge was in error in holding that the contract of partnership is hit by the provisions of Section 56 and that it became unlawful, void and unenforceable immediately on the declaration of George Lambercier as an enemy on December 22, 1941. Section 56, in so far as it is material for our present purpose, reads:

56. An agreement to do an act impossible in itself is void.

A contract to do an act, which after the contract is made, becomes impossible, or by reason of some event which the promisor could not prevent, unlawful becomes void when the act becomes impossible or unlawful.

The key word in this section is 'agreement' which is defined in Section 2(e), Contract Act. Every Promise and every set of promises forming consideration of each other. An agreement necessarily requires two parties to enter into it at least one of whom, the promisor, makes a promise to the other, the promisee. Where a 'promise' is given for a specified performance or performance is tendered for a 'promise', this kind of situation would bring into existence what is generally known as a unilateral contract. Where reciprocal promises are exchanged so that there is at least one promise on one side, forming consideration for the promise or promises flowing from the other side, and vice versa, we have a contractual relation called a bilateral contract. Broadly speaking, a partnership is a bilaterial contract because it involves at least two persons who have agreed to share the profits of a business carried on by them or one of them acting for both, (see Section 4, Partnership Act., 1932 which defines the expression 'Partnership') An agreement of partnership necessarily implies one person giving a promise to the other, and in exchange receiving a promise from the latter, whereby both the promisers agree to share proportionately the liability to third parties arising out of the transaction of the business of the firm. Each partner in that sense is both a promisor as well as a promisee. He is the promisor when we are referring to him as the giver of the promise to be so liable to third parties. He is the promisee if we are referring to him as the recipient of such a promise from the other party to the contract.

15. The contract of partnership in the instant case may be construed to be a bilateral contract, between the plaintiff and the defendant, which the plaintiff, as promisor had given a reciprocal promise to the defendant, as promisee, to share to the extent of six annas in a rupee, the liability arising from the order placed in July, 1941, with George Lambercier of Geneva for the supply of 10 lac carats of white stone and 1 lac carats of yellow stone. Similarly, the defendant, as promisor had given a reciprocal promise to the plaintiff, as promisee, to share the said liability to the extent of ten annas in a rupee. It will be seen that, as at the time of forming this partnership in July 1941, none of the partners undertook to do any act impossible in itself. No impossibility could conceivably be involved in the mutual undertakings of the parties to share proportionately their future liability to George Lambercier. That being so, the first paragraph of Section 56 which says that 'an agreement to do an act impossible in itself is void' cannot possibly hit this partnership.

16. As for the second paragraph of Section 56, Contract Act, which enacts that 'a contract to do an act, which after the contract is made becomes impossible, or, by reasons of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.' This paragraph also, in our opinion does not hit the contract of partnership in the instant case. It is true that George Lambercier was declared to be an enemy with effect from December 22, 1941, and therefore, it becomes unlawful for the parties to trade with him from that day onwards. In other words, the event of declaration George Lambercier as an enemy which occurred on December 22, 1941, rendered the contract between George Lambercier on one side and the present partners on the other as void by reason of the fact that the promise given by the partners to George Lambercier to pay the agreed price of the semi-precious stones promised to be supplied by him (i.e., a contract to do an act' in the language of Section 56), became unlawful. This does not however mean that, by that token alone the other contract i.e., the contract of partnership between the parties, in which George Lambercier did not figure either as a promisor or as a promisee also became unlawful or void. The promises exchanged by the partners among themselves to proportionately share the liability, if, any, arising from their order placed with George Lambercier, could not and did not become illegal or impossible of preformance merely because they were forbidden by law from trading with George Lambercier. After all, they were not forbidden by law from apportioning among themselves such liability as law might have imposed on them relating to the order placed by them with George Lambercier in July, 1941. They could certainly apportion such liability among themselves in accordance with the contract of partnership without running into the teeth of the law forbidding them from having any commercial or financial intercourse or dealing with George Lambercier.

17. The word 'promisor' as used in the collocation of words 'a contract to do an act which....becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void. ...' in Section 56 Contract Act, necessarily subsumes a corresponding 'promisee' in relation to whom 'a contract to do an act' which subsequently became unlawful had been made As already explained each partner as promisor gave a promise (i.e. made a contract') to the other as promisee, to share the liability arising from their contract with George Lambercier. These reciprocal promises did not become unlawful at any time. Of course, the promise made by the partners to George Lambercier to pay the price of the goods to him did become unlawful and for that reason, void under Section 56, Contract Act. But this promise of the partners to George Lambercier which later on became unlawful cannot be considered to be a 'promise' given by one partner to the other in the formation of the contract of partnership between them. Section 56, Contract Act does not therefore hit the contract of partnership at all.

18. We have carefully studied all the seven rulings relied upon by the learned Single Judge in support of his opinion that, on the declaration of George Lambercier as an 'enemy', the contract of partnership between plaintiff Gordan Das and defendant Damodar Das became 'unlawful and void'. None of these rulings is, in our view, applicable to the facts of this case. All the three Madras rulings reported in P. Thiruvarangiah v. D. K. Benia & Co. AIR 1918 Mad 322 Banghy Abdul Razack v. Khandi Rao and Anr. AIR 1918 Mad 515 and Soorthingjee Sakalchand v. Mc homed Nasuruddin AIR 1918 Mad 1124 arose out of suits brought by the respective plaintiffs therein for breach of contract by the defendants. The facts in P. Thiruvarangiah were that before the outbreak of war, the plaintiff agreed to purchase from the defendant certain cases of Belgium glass, the contract being C.I.F. Madras. The goods were shipped on board a Gormaship at Antwerp. While the vessel was on her voyage, war broke out between Great Britain and Germany. The ship was condemened as a prize at Colombo, but she was allowed by the Government to proceed and discharge her cargo at her destination, the Government undertaking to give delivery to British subjects who were entitled to receive delivery of the cargo on board the ship. The defendant who received the delivery was thus in a position to hand over the goods to the plaintiff, but he did not. The plaintiff brought a suit for breach of contract by the defendant. It was held in the circumstances that on the outbreak of the war the tender of the bill of lading in a German ship to the buyer was bad because it was tantamount to force him to trade with an alien enemy which had become unlawful.

19. Similarly, Banghy Abdul Razack arose out of a suit for breach of contract entered into between the plaintiffs and defendants for import of German dyes after the outbreak of war. The defendants undertook to deliver the dyes from the lots to arrive. One of the ships which had left the German ports before the out-break of the war was captured along with its cargo as prize of war in October 1914. The vessel and cargo were condemned by the Prize Court in September 1915 and the condemnation related back to the date of seizure. The vessel was subsequently released and allowed to proceed to Colombo. The defendants were precluded from taking delivery of the goods unless they deposited a sum equal to twice the invoice value of the goods. The plaintiff sued the defendants for breach of contract. It was held that the defendants were not liable because as from the date of the seizure of the goods and the Promulgation of the Commercial Intercourse with Enemy Ordinance (No. 6 of 1914) further performance of the contract had become illegal.

20. In the third Madras case, i.e. Soorthingjee Sakalchand, also, the Madras High Court reiterated its earlier view that a buyer who had contracted for the supply of goods by an enemy firm before the war broke out under a c.i.f. contract cannot enforce its performance if before delivery of the documents to him, war had been declared and the contract had become impossible of performance and void by the combined operation of Section 56 of the Contract Act and the Proclamation of the 12th September 1914.

21. Reliance was also placed by the learned Single Judge on two Lower Burma cases reported in S.K.P. Cama & Co. V.K.K. Shah AIR 1916 Lower Burma 7 and J.G. Buchanan V.S.C. Mall. AIR 1918 Lower Burma 46 Like the three Madras cases discussed above, these two cases also arose out of suits for breach of contracts of sale of goods which were held to have become unlawful and void on the out-break of the war and the consequent legal prohibition on trading with enemy. It was held in these cases that if after a contract is made it becomes illegal to carry it out, it cannot be enforced.

22. Another case relied upon by the learned Single Judge is A.F. Ferguson & Co. v. Lalit Mohan AIR 1954 Pat 524. The Patna High Court also took the same view as the Madras High Court and lower Burma Court in the aforementioned cases and held that where due to out-break of war the performance of the contract by the insured by making payments of premium to the enemy insurance company with whom he was insured became impossible and illegal under Rule 104, Defence of India Rules, 1939, the contract became frustrated and void under Section 56 Contract Act.

23. The seventh and the last case of the series to have been relied upon by the learned Single Judge is reported in Madho Ram v. G.C. Sett AIR 1918 Cal. 830. This case also involved a c.i.f. contract under which the defendants sent out an order to Europe for supply of certain goods to the plaintiffs in Calcutta. The goods were shipped in a German Vessel which was on the high seas when the war broke out between England and Germany. The British Government captured the vessel and brought it before the Ceylon Court of Admirality. The ship was condemned as lawful prize, but the cargo was released on the condition that on its conveyance by the Crown to its destination the Crown would be enticed to recover certain expenses against the cargo released and delivered in Calcutta. On arrival of the goods in Calcutta, the defendants asked the plaintiffs to take delivery on payment of those expenses. On the plaintiffs' refusal, the defendants disposed of the goods in the market. The plaintiffs sued for recovery of damages. The Calcutta High Court dismissed the suit holding that the plaintiffs were not entitled to recover damages as the contract between them and defendants became void under Section 65, Contract Act inasmuch as by the out-break of the war, one of the essential elements of the contract, namely, the contract of affreightment became unlawful.

24. It will thus be seen that in all the seven cases relied upon by the learned Single Judge, the courts were dealing with similar contractual situations, i.e. c.i.f. contracts between buyers and severs in which the contract to do an act, i.e. delivery of valid documents to the buyer became impossible and illegal by the declaration of war and promulgation of law forbidding trade with alien enemies. In each of these cases, what was in question was the enforceability of the contract between the promisor and promisee of a particular contract in the context of the happening of an event which made unlawful the performance of the promise given by the promisor. These cases would have been relevant only if we had been dealing here with the performance of a promise arising out of the contract of sale between George Lambercier as vendor and the present partners as vendees. As already pointed out, we are, instead, dealing with the enforceability of the agreement of partnership itself in which George Lambercier does not figure as a promisor or promisee.

25. For all these reasons, we are of the considered opinion that the con-tract of partnership was not abrogated or frustrated under Section 56 Contract Act, merely because, after he had already despatched the goods ordered by the partners, George Lambercier was declared to be an enemy by the Central Government.

26. Some argument was also raised by the defendants' learned Counsel with reference to Section 23, Contract Act. We may read here Section 23:

23 The consideration or object of an agreement is lawful; unless it is forbidden by law; or is of such a nature that, if permitted it would defeat the provisions of any law; or is fardulent; or involves or implies injury to the person or property of another; or the court regards it as immoral or opposed to public policy.

In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.

The argument, in a nutshell, is that if not under Section 56, the agreement of partnership became void under Section 23 with effect from December 22, 1941, when George Lambercier was declared to be an enemy, because the object of the agreement, i.e., import of semi-precious stones from George Lambercier, was forbidden by law with effect from the even date, and, in any case, if the contract was carried out, it would have defeated the provisions of Rule 98, Defence of India Rules 1939. This argument cannot prevail for the simple reason that the object of the agreement of partnership was perfectly lawful when the agreement was arrived at in July 1941. The declaration of George Lambercier as an enemy in December 1941, prohibited trading with him from that day onwards. The declaration could not possibly relate back to July 1941, when the partnership between the plaintiff and the defendant came into being and when the goods were ordered. It may be mentioned here that the defendant himself admitted in his deposition that not only that the goods had been ordered but they had even been shipped before George Lambercier was declared to be an enemy. This means that the partners could legally afford to let the partnership agreement run its course so long as they did not take any such step as might have brought them within the mischief of Rule 98, Defence of India Rules, 1939. There is nothing in that rule which might be construed as a prohibition against their depositing with the Government the invoice of the goods and other expenses etc. as required by the Government as a condition precedent to the release of the goods in their favour. This is exactly what was done by them through the defendant. Dw M.G. Kothari or the Imperial Bank of India admitted that the amount deposited by the defendant in the Blocked Account was eventually released under the orders of the Central Government and remitted to George Lambercier in 1947. In other words the defendant was able to get the goods released and deposit their invoice value etc. without falling foul of any of the prohibitory provisions of the defence of India Rules, 1939. Rule 98 itself contains a proviso which says that a person shall not be deemed to have traded with the enemy by reason only that he has done any thing under an authority given generally or specifically by or by any person authorised in that behalf by the Central Government under the circumstances, it is not possible to hold that the object of the partnership became illegal, ipso facto, with the declaration of George Lambercier as an enemy. After all, it was a one venture partnership and the said venture was through in the sense that in order to complete it the partners did not have to have commercial, financial or any other intercourse with George Lambercier.

27. The argument based on Section 23, Contract act also, therefore, fails.

28. Assuming for the sake of argument that it still required the partners to have commercial or financial intercourse with George Lambercier in order to carry on the business of the partnership, i.e., to receive delivery of the documents against payment of the invoice price to him, the effect of such a situation would be to bring about compulsory dissolution of the partnership under Section 41, Partnership Act, 1932, with effect from December 22, 1941, because from that date onwards, it became unlawful for the partners to trade with George Lambercier. The compulsory dissolution of the firm under Section 41 does not, however, bar a suit for rendition of accounts by one partner against the other in respect of an old business transaction engaged in prior to the compulsory dissolution.

29. Section 9, Partnership Act, which deals with the general duties of the partners enacts that partners are bound to carry on the business of the firm to the greatest common advantage, to be just and faithful to each other and to render true accounts and information of all things effecting the firm to any partner. The law thus requires of a partner unto the other a standard of conduct which is not only legal but also consistent with the highest standards of honour. Law will not permit a partner to benefit himself at the expense of the partnership in respect of a transaction arising out of a contract entered into by the partnership with a third party before the partnership was compulsorily dissolved. Section 16, Partnership Act makes the position further clear that partner shall not obtain private advantage at the expense of the firm. It lays down in terms that if a partner derives any profit for himself from any transaction of the firm or business connection of the firm, he shall account for that profit and pay it to the firm.

30. On the basis of certain rulings, Lord Lindley (See Treatise on the law of Partnership by Lord Lindley, Eleventh Edition, pages 149-50) sums up the position saying that if an illegal act has been performed in carrying on the business of a legal partnership, and gain has accured to the partnership from such an act and the money representing the gain has been actually paid to one of the partners, he cannot set up the illegality of the Act from which gain has accured as an answer to a demand by the other partner for his share of what he has received.

31. For all these reasons, we allow this appeal, set aside the judgment and decree passed by the learned Single Judge and instead decree the plaintiff's suit for dissolution of partnership and rendition of accounts against the defendant with costs to the plaintiff throughout. The plaintiffs are entitled to a six annas in the goods contained in the case marked GL/11, received by the defendant in or about July 1943. The defendant shall render accounts to the plaintiffs in respect of the profit, if any, derived by him from business in those goods. The preliminary decree in the suit shall be drawn up accordingly. The trial court shall appoint some suitable person as Commissioner to go into the accounts and submit his report to that court.


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