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A. Muthukumaran Vs. Commissioner of Land Revenue, Board of Revenue, Madras and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtChennai High Court
Decided On
Case NumberW.A. No. 485 of 1979
Judge
Reported inAIR1985Mad160
ActsTamil Nadu Cinemas (Regulation) Act, 1955 - Sections 5(6)
AppellantA. Muthukumaran
RespondentCommissioner of Land Revenue, Board of Revenue, Madras and ors.
Appellant AdvocateP. Chidambaran, Adv.
Respondent AdvocateGovt. Pleader and ;N.C. Raghavachari, Adv.
Cases ReferredK. M. Viswanatha Pillai v. K.
Excerpt:
.....partners to exploit license to run theater in question - as per law pronounced by supreme court there cannot be any illegality in taking in partner to exploit license - held, appellant by taking in partners for exploiting license has not contravened any condition of license in view of recent pronouncement of supreme court - appeal allowed. - - sivasooriam, air 1950 ma4 by the full bench of our high court still holds good. the second defendant was a partner, and as a partner, he became an agent of the partnership as well as of the other partner, and the running of the lorry with the permit of the second defendants, involved a contravention of the motor vehicles act, namely, the user of the lorry by the owner namely the partnership, who had no licence in its name. the view in velu..........respondent 3 terminated the tenancy of the appellant with effect from 31-81976. in may 1976 the licence granted by the collector of tiruchi to the appellant under the cinemas regulation act came up for renewal. respondent 3 objected to the renewal of the c form licence to the appellant on the ground that the lease has been terminated, that the appellant was not in lawful possession within the meaning of r. 13, cinematographic regulation act, and that the appellant has sub-leased the theatre to one o. p. muthiah. it is further alleged by respondent 3 that by taking o. p. muthiah as the partner, the partnership violates the conditions of licensing, as it amounts to transfer of benefit of the licence to a partner. the collector of tiruchirapalli over mulling the objection granted renewal.....
Judgment:

Gokulakrishnan, J.

1. Respondent 3 in the writ petition is the ~appellant herein. Respondent3 herein filed the writ petition for the issue of a writ of certiorari to quash the order of the Board old Revenue in B.P. RT.No. 2918. (L) dt. 20-6-1977 dismissing appeal filed by respondent 3 herein against the order of the Collector of Tiruchirapalli passed in RC.IH. 20657/76, dt.22-3-1977, overruling the objections of respondent 3 for renewal of a C Form Licence for the cinema theatre known as Poongavanam talkies in Lalgudi, Tiruchirapalli district. Respondent 3 herein is the owner of the building and land comprising the said Poongavanam talkies together with furniture, electrical fittings, etc. The said theatre was leased out to the appellant herein on a monthly rental of Rs. 600. The projector and the screen alone belongs to the appellant and all other equipments belong to' respondent 3 herein. By a registered notice dt. 20-2-1976, respondent 3 terminated the tenancy of the appellant with effect from 31-81976. In May 1976 the licence granted by the Collector of Tiruchi to the appellant under the Cinemas Regulation Act came up for renewal. Respondent 3 objected to the renewal of the C Form licence to the appellant on the ground that the lease has been terminated, that the appellant was not in lawful possession within the meaning of R. 13, Cinematographic Regulation Act, and that the appellant has sub-leased the theatre to one O. P. Muthiah. It is further alleged by respondent 3 that by taking O. P. Muthiah as the partner, the partnership violates the conditions of licensing, as it amounts to transfer of benefit of the licence to a partner. The Collector of Tiruchirapalli over mulling the objection granted renewal of licence to the appellant herein subject to his satisfying the requirements of all other rules. As against the order of the Collector of Tiruchirapalli, respondent 3 herein, as stated above, preferred an appeal to the Board of Revenue, almost leveling the same allegations as he has leveled while filing his objections to the renewal of the license before the Collector of Tiruchirapalli. The Board of Revenue confirmed the order of the Collector and upheld the renewal of the C form licence in favour of the appellant herein. Aggrieved against the said order, respondent 3 filed the writ petition for the above said reliefs. The learned single Judge of our High Court allowed the writ petition on the ground that taking in a partner amounts to transfer of the licence and such an act by the appellant violates the condition 12 in the C form license for the exhibition of film under the Tamil Nadu Cinemas (Regulation) Act, 1955. While allowing the writ petition the learned Judge also observed that under S. 5(6), Tamil Nadu Cinemas (Regulation) Act, 1955, that every licence issued under the Act shall be personal to the person to whom it is granted and that by taking a partner, the appellant has transferred or assigned his licen6e to the partner concerned. For proposition, the learned Judge mainly relied on the decision of our High Court in Viswanathan v. Namakchand : AIR1955Mad536 , which followed the Full Bench decision in Velu Padayachi v. Sivasooriam : AIR1950Mad444 . As against this order, the appellant has preferred the above appeal.

2. Mr. P. Chidambaram, learned counsel appearing for the appellant, after taking us through the various decisions including the Full Bench decision reported in Velu Padayachi v. Sivasooriam : AIR1950Mad444 , submitted that the view expressed in the decision cited supra has been overruled by the decision of the Supreme Court in Jer & Co. v. C.I.T., U.P. : [1971]79ITR546(SC) , and as such the mere taking up of a partner will not in any way amount to transfer of the licence. Mr. N. C. Raghavachari, learned counsel appearing for respondent 3, on the other hand, tried to distinguish the decision in Jer & Co. v.C.I.T. U. P. : [1971]79ITR546(SC) , on facts and submitted that the principle laid down in Velu Padyachi v. Sivasooriam, AIR 1950 Ma4 by the Full Bench of our High Court still holds good. In Velu Padayachi v. Sivasooriam, : AIR1950Mad444 , the Full Bench dealing with the Madras Abkari Act, (Act I of 1886) in respect of a suit by a partner for balance due on settlement of accounts held: -

'A partnership entered into for the purpose of conducting a business in arrack or toddy on a licence granted or to be granted to only one of the partners is void ab initio whether the contract was entered into before the licence was granted or afterwards, in that it either involves a transfer of the licence, which is prohibited under R. 27 and punishable under S. 56, or a breach of S. 15 Abkari Act, punishable under S. 55 because the unlicensed partner, by himself or through his agent, the other partner, sells without a licensee If a partnership is lawful at its inception, because it is not intended to infringe any provision of the Contract Act, i; nevertheless becomes unlawful when it intends to conduct the business jointly on a licence granted to one only of the partners. Hence, a partner in a partnership entered into for the purpose of vending arrack cannot file a suit for the balance due on settlement of accounts when only one of the partners has obtained a licence under the Abkari Act for the vending of arrack'.

This decision of our High Court is followed in Jer & Co. v. Commr. of Income-tax : [1966]60ITR335(All) . In this case, it is observed

'In the case of Valu Padayachi v. Sivassoriam : AIR1950Mad444 the High Court of Madras had to deal with the Madras Excise Act and Rules having similar provisions to our Excise Act and Rules and Horwill J. observed at page 324: ....'Partnership entered into for the purpose of conducting a business in arrack or toddy on a licence granted to only one of them is void ab initio.... in that it either involves transfer of licence, which is prohibited under R. 27 and punishable under S. 56 or a, breach of S.15 punishable under S. 55 because the unlicensed partner, by himself or through his agent, the other partner sells without a licence'.

Following this Bench decision and also other decisions, it -was further observed as follows -

'In the result my finding is that the assessed partnership was invalid because it was formed with the avowed object of carrying on the business of wholesale vend in foreign liquor without a licence in its favour. The object of the partnership was to carry on the business on the authority of the licence issued in the name of Dady and transferred by him to the partnership against the provisions of the Excise Act and Rules. Thug, it was to carry on the business against the provisions of the Excise Act and Rules and consequently the contract of partnership was void under S. 29 of the Contract Act. As in the eye of law the assessed partnership did not exist, it could not be registered.'

This view expressed in Jer & Co. v. Comma of Income-tax : [1966]60ITR335(All) , which followed the decision in Velu Padayachi v. Sivasooriarn Pillai : AIR1950Mad444 , was reversed on appeal by the Supreme Court in Jer and Co. v. Corner of Income-tax, U. P. : [1971]79ITR546(SC) . In that decision, the Supreme Court held as follows -

'The Commissioner and the High Court proceeded on the footing that the licence was governed by R. 322 which prohibited the holder of the licence from entering into a partnership with another person. But the licence, it is clear from the record, was in form FL 11 issued under the U.P. Excise Manual. The licence does not prohibit the holder from entering into partnership by the holder of the licence; it merely provides that the-licence shall not be sublet or transferred. Since there is no prohibition against entry by the holder of the licence into a partnership the question whether the partnership was illegal does not arise. The firm was entitled on that account to registration. It is somewhat unfortunate that the attention of the Commissioner and the High Court was not invited to the form in which the licence was issued by the excise authorities. They proceeded to decide the case on the footing that R. 332 Excise Manual, applied. But that rule has no application here.'

In A. V. Varadarajulu Naidu v. K. V. Thavari Nadar : AIR1963Mad413 , a Bench of this Court while dealing with the effect of partnership in respect of a permit obtained by the individual partner, observed as follows -

'The crux of the matter in this case is that the partnership was formed for the purchase of the lorry and therefore to own it, and thereafter to run the lorry for a lorry transport service with the permit in the second defendant's name. The partnership fully carried out the above scheme. The second defendant was a partner, and as a partner, he became an agent of the partnership as well as of the other partner, and the running of the lorry with the permit of the second defendants, involved a contravention of the Motor Vehicles Act, namely, the user of the lorry by the owner namely the partnership, who had no licence in its name. The view in Velu Padayachi's case : AIR1950Mad444 (FB) is still good law, and therefore, we are of the opinion that the partnership in this case was an illegal one and, therefore, the suit claim which arose out of the settlement of the accounts of the partnership is also illegal and cannot be enforced.'

The above said view of the Madras High Court in Varadarajalu Naidu's case, : AIR1963Mad413 , was overruled by the Supreme Court in K. M. Viswanatha Pillai v. K., M. Shanmugham Pillai : [1969]2SCR896 , wherein the Supreme Court has observed as follows -

'There may be permit holders who own the vehicles covered by the permit and there may be permit holders who do not own the vehicle. This clause appears to apply only to the former case and not to the latter. On its basis, therefore, it cannot be held to be a requirement of the Act that in each case the person in whose favour a permit has been issued should necessarily be the owner of the vehicle covered by it.'

After observing so, the Supreme Court held that the contrary view of the Madras High Court in Varadarajulu Naidu's case : AIR1963Mad413 , is erroneous. In the light of the above said pronouncement of the Supreme Court, we are afraid that we cannot uphold the following observation of the learned single Judge of this Court, who disposed of the writ petition -

'There may be no direct transfer of the licence as such by respondent 3 in favour of his partners, but respondent 3 has, by taking in Muthiah and others as partners for exploiting the licence during the period of the currency of the licence, allowed those persons to exhibit films in the licensed premises. Therefore, it is not possible to agree with the Tribunal's below that respondent 3, by taking in Muthiah and others as partners, for exploiting the licence, has not contravened any of the conditions of the licence. I find that condition No. 12 of the C form licence has been contravened and it is open to the petitioner, the owner of the building when the cinema is to be run in pursuance of that licence, to object that there is no valid grant of licence in favour of respondent 3'.

3. There is absolutely no transfer or assignment of the licence in favour of the partner involved in the present case. The partners who entered into the partnership are interested only in sharing the profits and it has nothing to do with the licence as such. Thus as the law stands as on date, pronounced by the Supreme Court, there cannot be any illegality in taking in a partner to exploit a licence. In this case, the appellant has taken a partner to exploit the licence to run the theatre in question, which cannot be held to be illegal in view of the recent pronouncements of the Supreme Court.

4. For all these reasons, the writ appeal is allowed, with the result, the writ petition is dismissed with costs. Counsel's fee Rs. 250/-

5. Appeal allowed.


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