P.R. Gokulakrishnan, J.
1. The third respondent in the writ petition is the appellant herein. The third respondent herein filed the writ petition for the issue of a writ of certiorari to quash the order of the Board o f Revenue in E.P. Rt. No. 2918(L) dated 20-6-1977, dismissing the appeal filed by the third respondent herein against the order of the Collector of Tiruchirapalli, passed in R.C. Dl, 20657/76 dated 22-3-1977 overruling the objections of the third respondent for renewal of a C Form licence for the cinema theatre known as Poongavanam Talkies in Lalgudi, Tiruchirapalli. District The third respondent 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 belong to the appellant and all other equipments belong to the third respondent herein. By a registered notice dated 20-2-1976, the third respondent terminated the tenancy of the appellant with effect from 31-3-1976. In May, 1976 the licence granted by the Collector of Tiruchi to the appellant under the Cinemas Regulation Act came up for renewal. The third respondent objected to the renewal of the C Form licence to the appellant on the ground that the lease had been terminated-that the appellant was not in lawful possession within the meaning of Rule 13 of the Cinematograph; Regulation Act and that the appellant had sub-leased the theatre to one O.P. Muthiah. It is further alleged by the third respondent that by taking of 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 overruling this 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, the third respondent herein as stated above, preferred an appeal to the Board of Revenue, almost recalling the same allegations as he had levelled while filing his objections to the renewal of the licence 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, the third respondent filed the writ petition for the abovesaid 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 licence 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 Section 5(6) of the Tamil Nadu Cinemas (Regulation) Act, 1955 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 licence to the partner concerned. For this proposition, the learned Judge mainly relied on the decision of our High Court in Viswanathan v. Nomakchand : AIR1955Mad536 which followed the Full Bench decision in Velu Padayachi v. Slvasooriam : 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 Benchdecision reported in Velu Padayachi v. Sivasooriam : 79ITR546(SC) submitted that the view expressed in the decision cited supra has been overruled by the decision of the Supreme Court in Jer & Company v. Commr of I T., U.P. : 79ITR546(SC) and as such the mere taking of a partner will not in any way amount to transfer of the licence. Mr. N.C. Raghayachari, learned Counsel appearing for the third respondent, on the other hand tried to distinguish the decision in Jer & Company v. C.I.T. UP on facts and submitted that the principle laid down in Velu Padayachi v. Stvasooriam : AIR1950Mad444 by the Full Bench of our High Court still holds good. In Velu Padyachi v. Sivasooriam I.L.R. : AIR1950Mad444 the Full Bench dealing with the Madras Abkari Act I of 1886) in respect of a suit by a partner for the 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 after wards, in that it either involves a transfer of the licence, which is prohibited under Rule 27 and punishable under Section 56 or a breach of Section 15 of the Abkari Act, punishable under Section 55, because the unlicensed partner, by himself or through his agent, the other partner, sells without a licence. If a partnership is lawful at its inception, because it is not intended to infringe any provision of the Contract Act it never the less 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 & Company v. Commissioner of In come-tax : 60ITR335(All) . In this case it is obes-rved :
'In the case of Velu Padayachi v. Sivasoariam : 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 a transfer of the licence which is prohibited under Rule 27 and punishable under Section 56, or a breach of Section 15... punishable under Section 55, because the unlicensed partner by himself or through his agent, the other partner, sells without a licence.
Following the Bench decision and also other decisions, it was further observed as follows:
In the result my finding is that the assessee-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 of transferred by him to the partnership against the provisions of the Excise Act and Rules. Thus 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 Section 29 of the Contract Act. As in the eye of law the assessee-partnership did not exist, it could not be registered.
This view expressed in Jer & Company v. Commr of I.T. : 60ITR335(All) which followed the decision in Velu Padayachi v. Sivasooriam Pillai : AIR1950Mad444 (F.B.) was reversed on appeal by the Supreme Court in Jer & Company v. Commr of Income Tax : 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 Rule 328 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 II 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 sub-let 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 Rule 322 of the Excise Manual applied. But that rule has no application here.
3. in A.V. Varadarajulu Naidu v. Thavasi 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 thepurchase 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 defendant, 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 (1950) 1 M.L.J. 315 : I.L.R. (1950) Mad. 987 : A.I.R. 1950 Mad. 444 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 abovesaid view of the Madras High Court in Varadarajulu Naidu's case (1963) 2 M.L.J. 20 : A.I.R. 1963 Mad. 413 was overruled by the Supreme Court in K.M. Viswanatha Pillai v. K.M Shanmugam Pillai : 2SCR896 wherein the Supreme Court has observed as follows:
There may be permit holders who own the vehicle 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 : 2SCR896 is erroneous In the light of the obovesaid 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 the third respondent in favour of his partners, but the third respondent has, by taking in Muthiah and Ors. 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 Tribunals below that the third respondent, 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 petitioners 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 the third respondent.
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 pronouncement of the Supreme Court. For all these reasons, the writ appeal is allowed, with the result, the writ petition is dismissed with costs. Counsel's fee Rs. 250/-.