TMI Blog1950 (4) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... hares with a share capital of Rs. 600 per share. The latter was started on 6th September, 1923, and consisted of 37 persons owning 20 shares with a share capital of Rs. 600 per share. Some of the persons had shares in both the partnerships. There were changes in the partners from time to time. Though the two concerns were distinct, it is common ground that the profits of both the businesses were pooled together and divided among the total number of shareholders. The first plaintiff and his paternal grand-uncle Narayanan Chettiar were members of an undivided Hindu family which contributed a total capital of Rs. 1,800 to the two businesses and owned three shares therein. The total number of shares was 59 out of which the joint family owned three. At a partition between the first plaintiff and his grand-uncle, the first plaintiff got 1 shares and his grand uncle got 1 shares. The grand uncle Narayanan Chetty died in 1935 leaving behind him three daughters, plaintiffs 2 to 4, who became entitled to his shares. The plaintiffs' suit is based upon the ownership of three out of 59 shares in the two businesses. In 1929 one of the shareholders filed a suit for dissolution of the partnershi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond appeal arises against the new limited company as the fourth defendant and against the first defendant, one P.K. Narayanan Chetti, and defendants 2 and 3 as the legal representatives of one Muthuveeran Chetti on the ground that the first defendant and Muthuveeran Chetti were the persons who managed the businesses from 1935 onwards. Pending the suit, the first defendant died and defendants 5 to 8 were added as his legal representatives. The suit was for the following reliefs: "(1)A declaration that the plaintiffs are entitled to three out of fiftynine shares in the assets and properties of Sri Krishna Co. (Boiler) and the Krishna Co. (Rice Mill) now vesting in the fourth defendant and are entitled to a proportionate allotment of shares in the fourth defendant company. (2)A permanent injunction directing the fourth defendant company to issue shares in favour of the plaintiffs in respect of 3/59 of its assets and account for the dividends accrued or accruing on such shares and if that be not possible directing payment on the market value of the 3/59ths share on the assets with interest thereon. (3)A direction to defendants 2, 3 and 5 to 8, as legal representatives of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is well established that the consequence of the illegality of a partnership is that its members have no remedy against each other for contribution or apportionment in respect of partnership dealings and transactions. Lindley explains the reason of the rule thus ( vide page 137 of the 10th edition): "However ungracious and morally reprehensible it may be for a person who has been engaged with another in various dealings and transactions to set up their illegality as a defence to a claim by that other for an account and payment of his share of the profits made thereby, such a defence must be allowed to prevail in a court of justice; were it not so, those who ex hypothesi have been guilty of a breach of the law, would obtain the aid of the law in enforcing demands arising out of that very breach; and not only would all laws be infringed with impunity, but what is worse, their very infringement would become a ground for obtaining relief from those whose business it is to enforce them. For these reasons, therefore, and not from any greater favour to one party to an illegal transaction than to his companions, if proceedings are instituted by one member of an illegal partnership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut their joining together is not legalized. It is true that they have no legal existence as a company, association or co-partnership; but they are none the less beneficial owners of property. It does not follow that, because the club had no legal existence as a company, association, or co-partnership, the members had no legal existence as beneficial owners of property. It is untrue to say that they are not beneficial owners in fact.........It would be a very strong thing to hold that an association not expressly sanctioned by law, yet not criminal, is incapable of holding any property at all." Mathew, J., was also of the same opinion that the members of the club were clearly beneficial owners within the meaning of the section. There is another case which belongs to the same category as The Queen v. Tankard's case ( supra ) , though this case was not cited to us by Mr. Bhashyam Aiyangar, viz., Reg. v. Stained 89 LJMC 54 , in which it was held that a person could be convicted of stealing property belonging to an association in the nature of a trade union which was not legalised. These cases can take Mr. Bhashyam Aiyangar very little distance. It may be in this case if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subscribers by ordering an account." The learned Judge was, however, not certain what relief could be actually given to the plaintiffs after the account had been taken. He guarded himself by saying that he expressed no opinion as to what will take place thereafter and by what means, if any, the defendants might discharge themselves of the money they had received. The following remarks of Vice-Chancellor Wood in Butt v. Monteaux [1854] 69 E.R. 385 carry us no further: "...it would be very difficult to persuade me that the members of such an association (unregistered), although they could not do more, or stir a step further without registration, were not sufficiently qualified to be called a company, to have back their money.........and the land and other things acquired with that money, and to have an account from the promoters, whose duty it was to register, on the footing as between them and the promoters of its being in truth a company, and upon the principle that a man could not aver any wrong or omission of his own as an answer to a bill seeking such relief." Actually in the case before him the shareholders only prayed for a direction to have the partnership prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed have been laid out in the purchase of land and other things for the purpose of the company the subscribers are entitled to have that land and these things reconverted into money, and to have it applied as far as it will go in payment of the debts and liabilities of the concern, and then in repayment of the subscriptions. In such cases no illegal contract is sought to be enforced; on the contrary the continuance of what is illegal is sought to be prevented." In Mewa Ram v. Ram Gopal [1926] ILR 48 All 735 , the suit was in respect of a partnership concerned with the ginning factories. There were more than twenty partners and therefore the partnership was illegal. The plaintiff claiming an eighth share in the partnership brought a suit for a declaration that the partnership was invalid and prayed for a refund of the plaintiff's subscription out of the proceeds realised by an auction sale of the factories or in some other proper way or in the alternative for a division of the properties of the factories and, if proper, for an auction sale of the property and an award to the plaintiff of a one-eighth share in their sale proceeds. The case came up first before a Divison Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Po v. U Phyu [1930] ILR 7 Rang. 540 , the claim was well within the time though time began to run from the inception of the partnership. We agree with the decision in Ram Kumar v. Nem Chand [1921] 19 ALJ 836 that the starting point for computing limitation in a suit for the return of the share money contributed by a person to an unregistered association of more than twenty members would be the date on which the money was paid and there would be no recurring cause of action. As already mentioned, both the businesses were started in 1923 and the suit was brought in 1942. Treated as a suit for refund of share money, the suit was hopelessly barred. There is no basis on which the claim of the plaintiffs to any of the reliefs which they prayed for can be sustained. Defendants 2, 3 and 5 to 8 are sought to be made liable as the persons in management of the two businesses. But it is not alleged that they are in possession of any of the assets of the partnership. From the evidence it is clear that there had been a transfer of all the machinery and superstructure belonging to the partnerships to the fourth defendant. The sum realised was Rs. 5,000 and the District Munsif held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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