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Nalam Padmanabham Vs. Sait Badrinatt Sarda and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtChennai
Decided On
Reported in(1911)21MLJ425
AppellantNalam Padmanabham
RespondentSait Badrinatt Sarda and ors.
Cases ReferredGourishankar v. Mamtaz Ali Khan I.L.R.
Excerpt:
.....according to which 'the provisions of the abkari act as a whole show clearly that every person carrying on abkari business as a principal must be licensed' and according to which 'to hold that a person who has not got a license could still be a partner with one who has a license and as such partner carry on the business with or without the other would enable the unlicensed partner to evade the liabilities intended by the law to be cast on persons carrying on abkari business' it is well established that the provisions of the abkari and opium acts are not intended merely to protect the public revenue and that the prohibitions contained are based on public policy. ' we are not concerned in construing a statute like the opium act with the mere form of the transaction but with the substance.....1. the suit in this case is for the dissolution and winding up of a partnership relating to an opium business. defendants nos. 1 and 2 were farmers of opium revenue under government.2. they, through their agents, entered into an agreement with the plaintiff agreeing to take him as a partner in their business both with respect to their right to vend opium in the godavari district which they had already obtained, and with respect to any further right they might thereafter obtain in adjoining districts. the partnership existed for some years. the district judge has dismissed the suit on the ground that the agreement of partnership on which the suit is based was opposed to public policy and unenforceable in law. the plaintiff who preferred this appeal contends that the lower court's view as.....
Judgment:

1. The suit in this case is for the dissolution and winding up of a partnership relating to an opium business. Defendants Nos. 1 and 2 were farmers of opium revenue under Government.

2. They, through their agents, entered into an agreement with the plaintiff agreeing to take him as a partner in their business both with respect to their right to vend opium in the Godavari District which they had already obtained, and with respect to any further right they might thereafter obtain in adjoining districts. The partnership existed for some years. The District Judge has dismissed the suit on the ground that the agreement of partnership on which the suit is based was opposed to public policy and unenforceable in law. The plaintiff who preferred this appeal contends that the lower court's view as to the nature of the contract is incorrect.

3. The 1st and 2nd defendants alone obtained a license from the Collector for the sale of opium. Clause 26 of the conditions, subject to which license was given, provides that 'except with the permission of the Collector, you shall not sell, transfer or sub-rent your privilege. Nor shall you, if the Collector so orders, appoint any person as your agent for the management of your privilege without previously obtaining the Collector's approval of the agent.' It is admitted that the Collector's sanction was not obtained for the partnership agreement. The object and intention of the agreement undeniably were that the defendants and their partner, the plaintiff, should be enabled to carry on the opium business without any license being taken out by the plaintiff for the purpose. The question we have to decide is whether the partnership is not illegal and cannot therefore afford a cause of action to the plaintiff for any relief based on it.

4. We are of opinion that the conclusion arrived at by the lower court is right. Section 4 of the Opium Act (Act I of 1878) runs as follow : 'Except as permitted by this Act, or by any other enactment relating to opium for the time being in force, or by rules framed under this Act or under any such enactment no one shall-

(a) cultivate the poppy; (b) manufacture opium; (c) possess opium; (d) transport opium; (e) import or export opium; (f) sell opium.

5. Section 5 gives the Local Government power to make rules absolutely or subject to any conditions deemed desirable for all or any of the matters including '(f) the sale of opium and the form of duties leviable in the sale of opium by retail.' Section 9 makes it an offence on the part of any person to sell opium in contravention of the Act or rules made and notified under Section 5. Now a contract entered into with the object of doing any act which is unlawful because forbidden by law, is unlawful and void. The contract in this case was intended to enable the plaintiff to sell opium without a license - an act which is forbidden by Section 4 and made penal by Section 9. Mr. Ramachandra Aiyar for the appellant contends, that according to the terms of Exhibit A, the agreement between the parties, the actual sale was not to be made by the plaintiff as the management of the, business was left in the hands of the defendants, and that therefore it could not be said that any breach of Section 4 was intended. This argument cannot be accepted, because all the partners must be taken to be selling the opium, which belongs to the partnership as the sale is made by the managing partner as the agent and on behalf of all the partners. In Judoonath Shaha v. Nobin Chunder Shaha (1874) 21 W.R. 289, Couch C.J. and Glover J. held that an agreement whereby the holder of a license for keeping a wine shop let the shop and the use of the license for a fixed term receiving rent, was contrary to public policy, although there was in the statute or in the rules no express prohibition for the letting out of the shop. The agreement was held to be contrary to the prohibition of sale without a license. A. license, it need hardly be said, is a personal privilege - see the judgment of Sale], in Behari Lal Saha v. Jagaiish Chander Saha I.L.R. (1907) 31 C. 798 where that learned judge pronounced against the validity of an agreement under which a license-holder for the sale of liquor entered into an arrangement with another person whereby the business was to be carried on by the latter on his own responsibility but using the name of the plaintiff, and he was to pay the plaintiff a certain sum per month. He observes : 'Section 11 says no person shall sell any excisable article without the Collector's license. The plaintiff's object was to permit the defendant, Basante Kumar Saha, to sell articles without a license. I am of opinion, therefore, that the object of the agreement is to enable the defendant to carry on the business of vendor in liquor in contravention of the excise law.' See also Raghunath Laemine v. Nathu Hirjo Shate I.L.R. (1894) B. 626. Every partner is the agent of his co-partners, and it would be unreasonable to hold that the defendants continued to be the sole vendors of the opium when they made themselves the agents of the plaintiff by admitting him as a partner. The learned vakil for the appellant cites Natla Bapiraju v. Puranachute Rajajee (1916) M.W.N. 549 as supporting his contention. In that case Miller and Ktishnasawmi Aiyar JJ. held that Section 13 of the Abkari Act (Madras Act I of t886) 'does not prohibit a person who has no license from holding an interest in the manufacture or vending the liquor jointly with the manufacturer or vendor' but the provision of law referred to by the learned Judges does not include the sale of liquor amongst the acts prohibited by it. We may also point out that the language of Section 15 of the Abkari Act relating to the sale of liquor is 'no liquor shall be sold without license from the Collector, while, as ahead) pointed out Section 4 of the Opium Act enacts 'no one shall sell opium.' Having regard to the difference in the provisions contained in the two Acts it is unnecessary to consider that decision any further. We may point out, however, that the learned Judges observed that they did not feel compelled to decide otherwise by Marudamuthu Pillay v. Rangasawmi Moopan I.L.R. (1900) M. 401 according to which ' the provisions of the Abkari Act as a whole show clearly that every person carrying on Abkari business as a principal must be licensed' and according to which 'to hold that a person who has not got a license could still be a partner with one who has a license and as such partner carry on the business with or without the other would enable the unlicensed partner to evade the liabilities intended by the law to be cast on persons carrying on Abkari business' It is well established that the provisions of the Abkari and Opium Acts are not intended merely to protect the public revenue and that the prohibitions contained are based on public policy. See Thithi Pakurudasu v. Sheemudu I.L.R. (1902) M. 430 and Hommoji Motabhai v. Pestongi Dhanjibhai I.L.R. (1887) B. 422, Shikanbhai v. Hiralal I.L.R. (1900) B. 622 and Abdulla v. Mammood I.L.R. (1902) M. 156 are not in point. Two other cases cited on behalf of the appellant relate to contracts of ferry and the provisions against the transfer and sub-letting in those cases were not statutory prohibitions. We ought perhaps to mention that the appellant's vakil wishes to make out that his client did not really become a partner with the defendants but merely became entitled to a share of the profits of the business in consideration of financing it, but this contention is obviously contrary to the case set out in the plaint and we must decline to consider it.

6. We are also of opinion that the partnership in this case was illegal for another reason as it contravened the provisions of Clause 26 of the license, which prohibits the transfer of the right of sale granted to the defendants. It is contended for the appellant that the admission of the plaintiff to partnership with the defendants is not a transfer. We are opinion that it is. It is no doubt true that every contract of partnership is not necessarily a transfer, but it is equally clear that such a contract may in many cases involve a transfer. Thus if two persons agree to start a business in partnership and to contribute capital therefor, there is no transfer involved in the transaction. But if one person carrying on a trade and possessing stock and capital admits another into partnership with himself, making the stock and capital the joint property of both, it is impossible to contend that there is not a transfer in such a case. The word transfer, says James L.J. in Gathercole v. Smith (1881) 17 C.D. 1 is 'one of the widest terms that can be used' and, according to Lush L.J. in the same case, the word 'transferable' is a 'word of the widest import and includes every means by which the property may be passed from one person to another.' We are not concerned in construing a statute like the Opium Act with the mere form of the transaction but with the substance of it. The form may be more material in interpreting instruments under other statutes such as the Stamp Act or the Registration Act. Our view is in accordance with that laid down in Thithi Pukurudasu v. Sheemudu I.L.R. (1902) M. 430. Reliance was placed for the appellant on Gourishankar v. Mamtaz Ali Khan I.L.R. (1879) A. 411 where Oldfield and Spankie JJ. were apparently of opinion that the co-partnership in that case did not involve a transfer. The decision itself, however, did not proceed on that ground. The case was one relating to a ferry and according to Oldfield J. the statute relied on in the case did not prohibit a partnership. If the learned judges intended to lay down the broad proposition that no partnership can amount to a transfer, we are, with all deference, unable to agree with them. The combined effect of Sections 4, 5 and 9 of the Opium Act is to make a transfer in violation of the provision of clause 26 in the license, Exhibit I, illegal and the plaintiff could acquire no rights enforceable in law under Exhibit A.

7. It is contended that the form of the license used for Exhibit A was not sanctioned by the Revenue Board, and that the transfer is therefore not illegal. This objection was not raised in the District Court and the absence of sanction is not proved.

8. In the result we dismiss the appeal with costs of the 1st, 3rd and 4th respondents.


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