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Chava Ramanayudu Vs. Suryadevara Seetharamayya and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial;Civil
CourtChennai
Decided On
Reported inAIR1935Mad440; 155Ind.Cas.544; (1935)68MLJ570
AppellantChava Ramanayudu
RespondentSuryadevara Seetharamayya and ors.
Cases ReferredNanna Vashmumi Mudali v. Nathamuni
Excerpt:
- - 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 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. 5. one thing, therefore, is perfectly clear, namely, that an illegal partnership was actually being carried on; in fact no such license was ever asked for nor was the permission of the collector obtained and the fair inference is that the object of the partnership was to do that which it did in fact do, namely, carry on the business in contravention..........privilege without his previous approval.3. this condition is one of those which is set out in the abkari license. clause 37, provides for the penalties to be inflicted on the infraction of any of the conditions of the license by a licensee or by any person in his employment. the effect of clause 27 is that a partnership in an abkari business is prohibited unless the previous permission of the collector has been obtained. in nalain padmanabham v. salt badrinadh sarda i.l.r. (1911)mad. 582 : 21 m.l.j. 425 the facts were that a and b were farmers of opium revenue under government. they obtained a license from the collector for the sale of opium subject to the condition, among others, that they should not sell, transfer or sub-rent their privileges without the permission of the collector.....
Judgment:

Horace Owen Compton Beasley, Kt., C.J.

1. This was a suit on a promissory note.; The plaintiff was one Chava Ramanayudu and there were four defendants. The amount claimed was Rs. 907-13-0. The first defendant admitted the claim but pleaded non-liability on the ground that the plaintiff exonerated him. The third defendant was ex parte. Defendants 2 and 4 pleaded that the suit promissory note was for advances to be made by the plaintiff for carrying on a toddy shop which they (the defendants and the plaintiff) agreed to work as partners after the first defendant had already become the successful bidder for the year 1927-1928 and that the partnership was an illegal partnership. The learned Subordinate Judge finds as a fact that the promissory note was executed for advances to be made by the plaintiff for the partnership, that the plaintiff was a partner and that the first defendant who obtained the license was not shown to have obtained the Collector's permission to work the shop in partnership. In view of these findings he dismissed the suit.

2. The question before the learned Subordinate Judge was and before us is whether the partnership was formed for the purpose of doing something which was either illegal or opposed to public policy. The General Sales Notification issued annually by the Commissioner of Excise under the Abkari Act laying down the general conditions applicable to all abkari and opium licenses by Clause 27, provides:

No privilege of supply or vend shall be sold, transferred or sub-rented without the Collector's previous permission. Nor, if the Collector so orders, shall any agent be appointed for the management of any such privilege without his previous approval.

3. This condition is one of those which is set out in the abkari license. Clause 37, provides for the penalties to be inflicted on the infraction of any of the conditions of the license by a licensee or by any person in his employment. The effect of Clause 27 is that a partnership in an abkari business is prohibited unless the previous permission of the Collector has been obtained. In Nalain Padmanabham v. Salt Badrinadh Sarda I.L.R. (1911)Mad. 582 : 21 M.L.J. 425 the facts were that A and B were farmers of opium revenue under Government. They obtained a license from the Collector for the sale of opium subject to the condition, among others, that they should not sell, transfer or sub-rent their privileges without the permission of the Collector (similar to Clause 27 in this case). A and B, without the sanction of the Collector, entered into an agreement with C, by which they admitted him. as a partner in the opium business. C having brought a suit for dissolution and winding up of the business, it was held that the agreement was void and the suit was not maintainable,, the effect of the agreement between A and B on the one hand and C on the other being to enable C to sell Opium without a license, an act directly forbidden by the opium Act and made penal by it, that the contract being intended to enable C to do-what was forbidden by law was unlawful and void, that the provisions of the Abkari and Opium Acts are not intended, merely to protect public revenue but the prohibitions contained in them are based on public policy and that the agreement was also illegal as it amounted to a transfer by A and B of their privilege to C in violation of the condition against transfer subject to which the license was granted. In the course of the judgment reference was made to Marudamuthu Pillai v. Rangasami Mooppan I.L.R. (1901)Mad. 401 where it was said:

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

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.

4. Other cases in point are Behari Lall Shaha v. Jagodisk Chunder Shaha I.L.R. (1904) Cal. 798 and Raghunath Lalwian v. Nathu Hirji Bhate I.L.R. (1894)Bom. 626. For the petitioner, however, reliance was placed upon the following cases, viz., Appadurai Mudali v. Murugappa Mudali (1925) 23 L.W. 709, Nanna Vashmumi Mudali v. Nathamuni (1929) 122 I.C. 342 and Narayana-murthi v. Subrahmanyam (1928) 114 I.C. 655. In the first case, which is a decision! of Odgers and Madhavan Nair, JJ., plaintiff lent a sum of money on a promissory note to a partnership. The partnership consisted of defendants 1 to 3 and took a contract of sale of arrack in certain shops and borrowed money from the plaintiff for the purpose of that business. First of all, in the opinion of Odgers, J., the business was not an illegal one on the ground that there was no sufficient material for the Court to so decide E and even on the supposition that the condition of the license was that all the names of the licensees or persons concerned in that particular business by way of partnership must appear on the face of the license it was a question whether on the evidence of the plaintiff he could be said to be particeps criminis in the carrying on of the illegal trade because, assuming that there was a prohibition in the terms of the license, there was no evidence that the plaintiff ever knew of it. The important distinguishing feature in that case is that the plaintiff was not a member of the partnership but was a stranger lending money to it. In the present case, the plaintiff was a partner and, if the partnership had for its object the carrying on of an illegal business, the plaintiff as a member of that partnership cannot be heard to deny that he had guilty knowledge. In the second case, which is a decision of Anantakrishna Aiyar, J., the plaintiff was a partner and sued for the taking of the partnership accounts between him and defendants 1 and 2 and for the recovery of the amount to be found due to him on the taking of the accounts. The suit was decreed but on appeal the Subordinate Judge reversed that decree and remanded the suit to the District Munsif for a fresh trial and whilst doing so suggested that the District Munsif might at the retrial consider a new ground pressed before him, namely, that the partnership was illegal. At the retrial, the first defendant put in an additional written statement contending that the partnership in question was illegal and opposed to public policy. The District Munsif found that the contract of partnership was illegal and opposed to public policy. The District Judge on appeal reversed the decision and the case came up on second appeal before Anantakrishna Aiyar, J. The facts were that the first defendant held a license to sell toddy in a shop and according to him took the plaintiff as a partner in respect of that business. The license was not produced by the first defendant. The District Judge held that since the license relating to the year in question had not been produced, there were no grounds for saying that the contract of partnership was illegal. The license, however, was produced in second appeal and was sought to be admitted in evidence* but Anantakrishna Aiyar, J. refused to allow it to be admitted in evidence at that stage. Anantakrishna Aiyar, J, held that it was essential that the license granted to the first defendant should be produced and that the view of the District Judge was correct in stating that at the time the partnership was formed the first defendant had not begun to trade in toddy and had no stock which he made the joint property of all the three partners. In this view the partnership could not be held to be illegal as there was nothing prima facie illegal in such a partnership under the Abkari Act. The decision in this case appears to me to have turned on the absence of proof that the partnership was entered into for an illegal purpose. In the last case, which is a decision of Reilly, J. it was held that although a partnership entered into in contravention of a. license or of any rule under the Abkari Act is void and the licensee of a toddy or arrack shop cannot legally take a partner without sanction, yet it is not illegal for several persons to' enter into a partnership for the purposes of bidding at a toddy shop auction and if successful in the auction of obtaining a. license and of carrying on a toddy shop business. Reilly, J. holds, that it is not illegal for persons to enter into a partnership for the purpose of carrying on a toddy shop business or one for which they hope at a future date to obtain a license-That is quite true if it is intended at a future date to get a license in the names of all the partners. That is not the fact here as a few dates will show. The first defendant was a successful bidder at the auction on 30th July, 1927 and it was in his name that the license was issued on 1st October, 1927. The promissory note is dated 17th August, 1927 and the money was therefore lent to the partnership after the first defendant had become the successful bidder at the auction and was the person in whose name the license would be issued. The first defendant in his evidence said that the two months' deposit of Rs. 140 was paid by him about the 20th August. After the license was-issued it is plain from the evidence that the partnership carried on the business. The permission of the Collector required by Clause 27 of the General Sales Notification was neither obtained nor applied for and there is evidence that the plaintiff himself was collecting the money of the business and keeping accounts.

5. One thing, therefore, is perfectly clear, namely, that an illegal partnership was actually being carried on; but it is contended that at the date of the commencement of the partnership it has not been shown that it was formed for an illegal purpose. The plaintiff in his evidence did not say that it was intended to apply for the Collector's permission for. a transfer of the license or to carry on the business in partnership nor was there any cross-examination of the defence witness with regard to this point. The question is whether the learned trial Judge was right in drawing the inference from the facts that it was the intention of the partnership to carry on the business in the name of the first defendant alone. In my view, that is the only fair inference. The partnership was formed after the first defendant had become the successful bidder. The license would, therefore, be issued in his name. No application had been made for the issue of the license in the names of the partners. In fact no such license was ever asked for nor was the permission of the Collector obtained and the fair inference is that the object of the partnership was to do that which it did in fact do, namely, carry on the business in contravention of Clause 27. On the facts of this case, I am satisfied that the District Munsif properly decided this case; and in the result this Civil Revision Petition must be dismissed with costs.

Ramesam, J.

6. I agree.

King, J.

7. I agree.


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