Rajagopala Ayyangar, J.
1. This is an appeal by the plaintiff against the decree in O.S. No. 9 of 1951, Sub-Court, Dindigul, dismissing his suit for the taking of the accounts of a dissolved partnership, for dealing in tobacco. The learned Subordinate Judge has dismissed the suit on the ground that the partnership put forward by the plaintiff was illegal as being prohibited by the Central Excises Act and the Rules framed thereunder.
2. The plaintiff's case was that in or about 1945 he and the defendants (two in number) formed a partnership for trading in tobacco in Jakkamanayakkanpatti under the terms of which the plaintiff undertook to furnish the necessary finance, these advances carrying interest at 6 per cent, per annum, while the defendants were to be in charge of the day-to-day management of the business maintaining true and regular accounts, and that the profit and loss should be shared one half by the plaintiff, the two defendants together taking the other half. The agreement which resulted in these arrangements was stated to be oral but that subsequently there was some writing evidencing slight variations of these terms. The plaintiff went on to state that the partnership which was at will was carried on for sometime but had become dissolved by notice of dissolution by him, dated 18th September, 1950 and that the accounts had not been taken. The suit, theretore, prayed for the taking of an account of this dissolved partnership from August, 1945 and the usual decree after the accounts were taken.
3. The 1st defendant filed a written statement which was adopted by the 2nd defendant, raising primarily two defences. The first was that there was no partnership relationship between the plaintiff on the one hand and the defendants on the other but that the latter was merely working under the direction and control of the plaintiff, the plaintiff being in possession of all the accounts. It was, therefore, pleaded that there was no basis for any claim against them. The second defence was that the plaintiff traded in tobacco under a licence granted to him under the Central Excises and Salt Act (Act I of 1944 ) and under the provisions of that Act and the rules made thereunder the plaintiff could not validly enter into any partnership with the defendants and that consequently the suit partnership, if the Court should hold that there was any such, was illegal. The learned Subordinate Judge has upheld this second defence and dismissed the suit. This conclusion is canvassed in this appeal.
4. Mr. Seshagiri Sastri, learned Counsel for the appellant, urged two contentions in this appeal. The first was that the Subordinate Judge was in error in considering that the suit partnership was illegal by reason of the provisions of the Central Excises and Salt Act (Act I of 1944), the argument being that this enactment was primarily concerned with revenue and that the Court should not construe the suit partnership to be illegal as prohibited merely because penalties were levied for the violation of the conditions of the licence one of such conditions being directed against licensees entering into partnership. The second line of attack on the judgment of the Court below was that as the defendants had in their written statement put forward a case that they were agents of the plaintiff, this constituted an admission of their occupying an accountable relationship to the appellant which the Court should have accepted and passed a decree for the taking of accounts.
5. I shall now consider these two contentions in that order. Section 6 of the Central Excises and Salt Act enacts:
The Central Government may, by notification in the official gazette, provide that, from such date as may be specified in the notification, no person shall, except under the authority and in accordance with the terms and conditions of a licence granted under this Act engage in (to mention only the relevant clause)...(b) the wholesale purchase or sale (whether on his own account or as a broker or commission agent) or the storage of any excisable goods specified in this behalf in Part A of the Second Schedule....
Part A of the Second Schedule specifies as item No. 1 'tobacco' as excisable goods for the purposes of Section 6. Sections 7 to 9 are the other sections of the Excise Act which are relevant in the present context. Section 7 enacts:
Every, licence under Section 6 shall be granted for such area, if any, for such period, subject to such restrictions and conditions, and in such form and containing such particulars as may be prescribed.
Section 8 runs thus:
From such date as may be specified in this behalf by the Central Government by notification in the official gazette, no person shall except as provided by rules made under this Act, have in his possession any excisable goods specified in this behalf in Part B of the Second Schedule in excess of such quantity as may be prescribed for the purposes of this section as the maximum amount of such goods or any variety of such goods which may be possessed at any one time by such a person.
In accordance with the provisions of Sections 7 and 8 the plaintiff obtained a licence in his own name on 22nd December, 1941. This licence authorises the plaintiff to carry on wholesale trade in tobacco during the year ending 31st December, 1945, in the premises named in it subject to the provisions of the rules and this has been renewed from time to time by endorsements on the licence. One of the rules subject to which the licence must be taken to have been granted is rule 178 of the Central Excise Rules, 1944, which is in these terms:
178. (1) Every licence granted or renewed under these rules shall be in such one of the proper forms of licence as may be appropriate, shall have reference only to the premises, if any, described in the licence, and shall be for a period not exceeding one year and shall expire on the date specified therein.
(2) Every licence shall be deemed to have been granted or renewed personally to the licensee and no licence shall be sold or transferred.
(3) Where a licensee transfers his business to another person, the transferee shall obtain a fresh licence under these Rules but it should be granted free of fee for the residue of the period covered by the original licence.
(4) If the holder of a licence enters into partnership in regard to the business covered by the licence he shall report the fact to the licensing authority within thirty days of his entering into such partnership and shall get his licence suitably amended. Where a partnership is entered into, the partner as well as the original holder of the licence shall be bound by the conditions of that licence.
(5) If a partnership is dissolved every person who was a partner shall send a report of the dissolution to the licensing authority within ten days of such dissolution.
The penalty for the breach of the the conditions of the licence is to be found in Section 9. This provides:
Section 9. - Whoever commits any of the following offences, namely-
(a) contravenes any of the provisions of a notification issued under Section 6 or Section 8...shall, for every such offence 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.
6. The following would appear to be clear from the provisions extracted above. (1) A licence under the Act is necessary before a person engages in the tobacco trade and there is no dispute that the business put forward in the plaint to carry on which the partnership was formed was one which fell within Section 6 of the Act. The defendants, therefore, could not engage in that business without a licence and would be liable for penalties if they did so. (2) The licences which are issued are to be in statutory form and to contain the prescribed particulars and to be subject to rules framed under the Act. (3) One of such rules specifically provided that the licence was personal to the grantee and that if he should admit others as partners into the licenced business he must intimate to the authorities this fact and have the licence duly amended. The breach of this rule is visited with the penalties specified in Section 9.
7. Prima facie it would be seen that the formation of the partnership by a licensee without reporting it to the authorities within 30 days and having the licence amended by the inclusion of the names of the partners would be a contravention of the Act and the rules with the consequence that after the expiry of the 30 days the licensee could be proceeded against for violating the term of his licence and the newly added partners for engaging in a business in tobacco contrary to Sections 6 and 8. Viewed thus the action of the plaintiff as well as that of the defendants would clearly appear to be 'prohibited by law' so as to preclude any action between them of the type now before the Court. It needs little argument to prove that if there was a partnership as stated in the plaint, the defendants could not file any suit for accounts since their participation in the business would be prohibited by Sections 6 and 8 of the Act and conversely a suit by the plaintiff cannot stand on any better footing.
8. Learned Counsel for the appellant sought to resist this conclusion by pointing out that there was no specific provision prohibiting the formation of partnerships by licensees and that taken in conjunction with the primary purpose of the enactment being fiscal and designed for the securing of revenue, the mere imposition of penalties should not be read as rendering contracts of partnership illegal. Learned Counsel strongly relied upon the short title to the Act which runs : 'An Act to consolidate and amend the law relating to central duties of excise and to salt' and the Preamble reading : 'Whereas it is : expedient to consolidate and amend the law relating to central duties of excise on goods manufactured or produced in certain parts of India and to salt' for this purpose. In support of this the counsel relied particularly upon three decisions Johnson v. Hudson (1809) 11 East. 180 : 103 E.R. 973, Brown v. Duncan (1829) 10 B. & C. 93 : 109 E.R. 385, and Smith v. Mawhood (1845) 14 M. & W. 452 : 153 E.R. 552, and on a passage in 8 Halsbury's Laws of England (Simonds Edition) where these decisions are cited without disapproval. I am clearly of the opinion that these authorities do not when properly understood go the length for which they were cited.
9. Johnson v. Hudson (1809) 11 East. 180 : 103 E.R. 973, is the earliest of these being of the year 1809. This was an action to recover the value of tobacco-segars sold and delivered by the plaintiff to the defendant. Section 70 of 29 Geo. III, Ch. 68, required dealers in tobacco to take out licences under the Act for which duties were payable and penalties were imposed for failure to do so. The plaintiff was not a licenced dealer and the defendant resisted the action for the price on the ground that the plaintiff was committing an offence in dealing in the commodity and so no action could be maintained. The suit came on in the first instance before Lord Ellenborough who thought the action maintainable. The defendant obtained a rule to set aside the verdict. The report states that the Court felt a doubt whether the plaintiff was a dealer at all within the Act. When the rule nisi came on for hearing, defendant's counsel was not present to support the rule. Lord Ellenborough is stated to have said that they had considered the question and were satisfied that their decision was unexceptionable. Of course on any view, the defendant was not prohibited from buying. No doubt the proposition that where the object of the legislation in imposing the penalty is merely the protection of the revenue, the statute will not be construed as prohibiting the Act in respect of which the penalty is imposed is formulated but this has to be understood as the construction by the learned Judges of the statute they had to consider. In this connection I cannot do better than refer to a passage in Craies on Statutes, where the position is summarised thus (Craies on Statutes, 5th Edition, page 524):
And in considering the effect of a statutory prohibition on a contract, it is always necessary to decide whether the penalty imposed for breach of the statute is meant as a compensation to the person aggrieved or as a penal sanction. In the former case, the statute in effect permits the contract on payment of the penalty, i.e., it only makes it expensive; in the other, it forbids it in toto.
10. Brown v. Duncan (1829) 10 B. & C. 93 : 109 E.R. 385, was concerned with a case where the defendant had guaranteed the payment of the price of whisky which should be consigned by five plaintiffs to a particular individual for sale as the plaintiffs' agent. The plaintiffs had violated the terms of the enactment which required that in the case of a distiller who was a retailer and who carried on a business within two miles from the distillery such fact ought to be intimated to the authorities by reason of one of the five plaintiffs not being named in the retail licence. The observations in Johnson v. Hudson (1890) 11 East 180 : 103 E.R. 973, were followed and the Court drew a distinction between Acts of Parliament which were passed as a protection to the public and those where the enactment was a protection of the revenue to the State and it was held that in the latter class of cases so long as the revenue was protected exactions of penalties should not be construed to invalidate transactions with third persons. In regard to Brown v. Duncan (1829) 10 B. & C. 93 : 109 E.R. 385, it is sufficient to refer to the comment on it in Lindley on Partnership. The learned authour says:
It may be doubted whether the statutes in question were properly construed by the Court. (11th Edition, page 125).
The last of the cases Smith v. Mawhood (1845) 14 M. & W. 452 : 153 E.R. 552, was concerned with the Excise Licence Act 6, Geo. IV, Ch. 81, which required every manufacturer or dealer in tobacco to take out a licence on pain of penalty for failure to do so. The plaintiff brought an action for the price of tobacco sold and the defence was that the plaintiff did not hold a licence which would authorise him to manufacture and sell the goods to the defendant. This defence was repelled and the suit was decreed following Johnson v. Hudson (1809) 11 East 180 : 103 E.R. 973. That this decision proceeded merely on a construction of the operative provisions of the enactment and not on any distinction between the effect of a provision in a revenue Act and that in any other Act is made clear by a passage in the judgment of Alderson, B., where the learned Judge says:
Does the legislature mean to prohibit the act done or not? If it does whether it be for the purposes of revenue or otherwise then the doing of the act is a breach of the law and no right of action can arise out of it.
The passage in Simonds Edition of Halsbury's Laws of England (8th Volume) is not more favourable to the appellant. The relevant passage at page 141 runs:
Where a penalty is imposed by statute upon any person who does a particular act, this may or may not imply, a prohibition of that act. It is a question of construction in each case where the legislature intended to prohibit the doing of the act altogether, or merely to make the person who did it liable to pay the penalty. If the penalty is recurrent, that is to say, if it is imposed not merely once for all but as often as the act is done, this amounts to a prohibition. Where the object of the Legislature in imposing the penalty is merely the protection of the revenue the statute will not be construed as prohibiting the act in respect of which the penalty is imposed.
11. In my opinion the question really turns on whether on the proper construction of the statute the contract in dispute was or was not forbidden. If what is done, as Lord Ellenborough said in Langton v. Hughes (1813) 1 M. & Selwyn 593 , is in contravention of the provisions of Act of Parliament, it cannot be made the subject of an action. As is stated in Craies:
The sole question in either case is whether the statute means to prohibit the contract so as to make a contract infringing the prohibition invalid. 'If it does so, whether it be for purposes of revenue or otherwise, then the doing of the act is a breach of the law, and no right of action can arise out of it'. In Mellis v. Shirley Local Board (1885) L.R. 16 Q.B.D. 446, the surveyor of a local board was sued, jointly with another person, for a sum alleged to be due under a contract between them and the board for the execution of certain drainage works. The action was held not to be maintainable, on the ground that Section 193 of the Public Health Act, 1875, had the effect of making the contract illegal. Lord Esher, M.R., stated the rule as follows:
Although a statute contains no express words making void a contract which it prohibits, yet' when it inflicts a penalty for the breach of the prohibition, you must consider the whole Act as well as the particular enactment in question, and come to a decision, either from the context or the subject-matter, whether the penalty is imposed with intent merely to deter persons from entering into the contract, or for the purposes of revenue, or whether it is intended that the contract shall not be entered into so as to be valid at law'. Brown, L.J., said : 'We have to find out upon the construction of the Act whether it was intended by the Legislature to prohibit the doing of a certain act altogether or whether it was only intended to say that, if the act was done, certain penalties should follow as a consequence. If you can find out that the act is prohibited, then the principle is that no man can recover in an action founded on that which is a breach of the provisions of the statute. It seems to me plain, from the language of Section 193, that there is a prohibition on that which has been done. I think no language could be plainer, and the mere fact that certain consequences are, by the latter part of the section, attached to the illegal act does not, in my opinion, render the previous language less clear'. So too, the Judicial Committee in Musgrove v. Chung Teeong Toy (1891) A.C. 272, held that the infliction of a penalty for bringing by sea more than a certain number of Chinese involved a prohibition, not only upon the shipowner, but upon the immigrants. (Graies on Statutes, 5th Edition, page 234).
Judged in the light of these considerations one text appears to me to be crucial, viz., whether or not the defendants would be guilty of an offence under the Excise Act if they had carried on the business in partnership with the plaintiff. The answer to this has to be unhesitatingly in the affirmative and that in my opinion establishes the illegality of the partnership.
12. Looked at from the point of view of the plaintiff alone and applying the test formulated by Alderson, B., which I have extracted, it is clear that in the present case the action of the plaintiff in not intimating the formation of the partnership within 30 days was in contravention of Rule 178 which I have set out already (paragraph 2 of the rule emphasising the personal character of the licence) and the continuance of the business beyond 30 days from the commencement of the partnership was also illegal. The action of the plaintiff constituted a contravention of the enactment bringing him within the scope of Section 9 of the Act. I feel, therefore, no hesitation in holding that this partnership was prohibitied by the Central Excises and Salt Act, 1944 and the rules framed under it and was therefore illegal. In my opinion, there is no distinction between the present case and the Abkari Act which this Court had to consider in Velu Padayachi v. Sivasuryam Pillai (1950) 1 M.L.J. 315, notwithstanding that in the latter case besides the element of revenue, the regulation of the sale of liquor in public interest was involved.
13. The other point raised by learned Counsel for the appellant does not merit any serious consideration. The entire case of the plaintiff was rested on the existence of a partnership relationship between himself and the defendants. No doubt the existence of that relationship was denied by the defendants and they had also stated that they were the agents of the plaintiff to carry out his orders. It is clear law that the plaintiff cannot be allowed to abandon his own case adopt that of the defendants and claim relief on that footing. If the plaintiff had put forward the case of agency, it is possible that there might be other defences open to the defendants. It is sufficient in this connection to refer to the decision in Ramdoyal v. Junmenjoy Coondoo I.L.R.(1887) Cal. 791 , where their Lordships have held:
It would certainly be an unsual thing to allow a plaintiff, who has alleged one state of facts as against the defendant who has denied that case and alleged another state of facts, to turn round and ask to be allowed to carry on the suit and claim relief on the ground that the defendant's statement of facts was true and his own false.
14. In this view, the plaintiff cannot be granted any relief except on the basis of a partnership and as this was illegal, his suit must fail. The dismissal of the suit is therefore correct.
15. The appeal is dismissed with costs.