TMI Blog1959 (8) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... is, on 21-4-1951 the partnership was entered into. The terms were, inter alia, that the plaintiff firm should finance the joint venture to the extent required except in a sum of ₹ 10,000 which obviously the other partner, namely, the first defendant undertook to contribute and that the profits should be shared by the two partners equally. The plaintiff alleges that it advanced a sum of ₹ 1,000 on the date of the formation of the partnership and ₹ 7,125 subsequently and that business was carried on and yielded good profits. 2. The first defendant firm with its two partners, the second and third defendants, admitted the formation of the partnership and the terms but pleaded that the plaintiff failed to keep its promise of contributing all funds necessary, that when a sum of ₹ 20,000 was found essential for the purchase of stocks from the I.L.T.D. Company, plaintiff failed to furnish the funds with the result that the contribution of capital which that firm had made was refunded to it and all accounts settled. It was further pleaded that the partnership was not registered and was, at any rate, illegal in view of the plaintiff not having taken a licence for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation referred to above is not available but I am asked by the parties to take it that a Notification must have been issued in tune with Section 6. The consequences of infringing the provisions of the Notification are provided under Section 9, thus: 9. Offences and penalties. -- Whoever commits any of the following offences, namely: (a) contravenes any of the provisions of a notification issued under Section 6 or of Section 8, or of a Rule made under Clause (iii) of Sub-section (2) of Section 37; (b) xx xx x (c) xx xx x (d) xx xx x xx shall, for every such offence be punishable with im prisonment, for a term which may extend to six months, or with fine which may extend to two thousand rupees, or with both. It is argued by the defendants that, inasmuch as the plaintiff has not taken out a licence under the Act under Section 6, he is liable to pay a penalty under Section 9 and that, apart from the express prohibition embodied in Section 6, the omission makes the object and act of the plaintiff forbidden in law and, there fore, illegal, under Section 23 of the Contract Act. Again there is Rule 174 reiterating the prohibition of Section 6 in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner shall send a report of the dissolution to the licensing authority within ten days of such dissolution. 6. If during the currency of a licence the licensee desires to transfer his business to new premises, he shall intimate his intention to the licensing authority at least fifteen days in advance, specifying the address of the new premises, and get his licence suitably amended. The licence shall, thereupon, hold good in respect of the new premises. One tiling is clear from the above rule that a partner need not take out a fresh licence after he joins the original licensee under an agreement of a partnership. All that is required under Sub-rule (4) is that the licensee who is the original proprietor shall report the fact to the licensing authority within thirty days of his entering into such partnership and shall get his licence suitably amended. The duty of reporting is made to rest unilaterally on the original licensee. There is no similar burden placed on the incoming partner. The requirement of the Act and the rules would be sufficiently met if the original licensee intimates the fact of his taking in a partner to the licensing authority within thirty days. The new par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut anything more, there may perhaps be some plausibility in urging that the taking in a partner by a licensed virtually amounts to a transfer of the licence itself on the authority of the aforesaid decision of the Full Bench. But we have in Rule 178 special provisions in regard to a partnership namely Rules 4 and 5. Rule 4 provides : If the holder of a licence enters into partnership in regard to the business covered by the licence he shall report ....... Rule 5 states ; If a partnership is dissolved every person who was a partner shall send a report of the dissolution ...... No rule framed under the Abkari Act has been brought to my notice which provides for the special case of a partnership. It may be noticed that quite in contradistinction to the absolute prohibition against a transfer embodied in Sub-rule (2) of Rule 178, we have in Rule 4 the liberty given to a licensee to enter into a partnership with another without the need for him or for the other partner to take a fresh licence. There is only one thing insisted on, namely, that the original licensee should report the matter to the authorities and get the licence suitably amended. It is clear that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... handas Kessowji v. Champsey Dossa AIR 1921 PC 137 . In the case I am dealing with too, there is no document of transfer of the licence. In Kalyanasundaram Pillai v. Chockalingam Chettiar, AIR1952Mad293 the effect of a compulsory sale in execution had to be considered. The right of manufacture, excavation, collection or removal of salt was sold. The Madras High Court had to interpret Rules 102 to 104 of the very set of rules of which Rule 178 is now under discussion. Rule 104 provided that the licence shall he transferable and may he relinquished subject only to the condition that they shall have no effect against a Collector unless registered. It was held that there was no prohibition against a transfer. Similar must be the line of reasoning when the liberty to transfer is not conceded directly but can be inferred from a cumulative reading of Sub-rules (2) and (4) of Rule 178. In Gopalakrishnayya v. Hanumayya (Decision of this Court dated 2-12-55 in S. A. No. 675 of 1952 and the Memorandum of Cross Objections), my learned brother had to consider these two sub-rules and expressed : The rule docs not prohibit the licensee from entering into a partnership as under the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. What is connoted by the expression 'transfer' under Sub-rule (2) is an absolute assignment where the licensee reserves no interest in himself and puts in his place another person. When there is such wholesale and absolute transfer, taking of a fresh licence is incumbent on the transferee as provided under Section 6 of the Act. (c) Again, a licence is essential if the original licensee dies. The licence becomes automatically terminated. The legal representative shall have to obtain a fresh licence. This is provided for under Sub-rule (3-A). The above two categories exhaust the conditions under which the original licence becomes ineffective by reason of its non-transferability and non-survival, but the case is different in the case of a fresh partner as he is allowed to avail himself of the old licence. (d) The policy underlying the concession made to a partnership appears to be based on the fact that the Central Excises and Sail Act, unlike the Opium or Abkari Acts is a pure fiscal statute. The object of the State is to secure the dues under a licence as effectively and expeditiously as possible. If the licensee, through any act contributes to see and facilitate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he one hand and the liability of the incoming partner on the other have no relation to each other, would be manifest from the link which has been deliberately provided in Sub-rule (8) between its two successive passages : (6) If during the currency of a licence the licensee desires to transfer his business to new premises, he shall intimate his intention to the licensing authority at least fifteen days in advance, specifying the address of the new premises, and get his licence suitably amended. The licence shall, thereupon, hold good in respect of the new premises. Here, too, a report has to be sent of the change of premises. But the original licence would hold good thereupon. The omission of a correlative of this kind between the two provisions in Sub-rule (4) cannot but be viewed as particularly significant. The rule-making authority has deliberately omitted the link in Sub-rule (4) while it has provided in sub-rule 6. The intention is that if the licensee brings to the notice of the authorities the liability of a virtual guarantor for the dues, well and good. Even otherwise if such entry and participation by a partner comes to their notice aliundi, they should be in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules. Neither the holder of the licence can be charged with an infringement of Section 6 because he, in fact, holds a licence granted under the Act; nor can the incoming partner be charged with an infraction of Section 6 because he is nowhere required to ask for the grant of a licence under the Act. Similar is the position under Section 8 which deals with possession of excisable goods. 15. Again, the aforesaid decision Is clearly distinguishable because it was the holder of the licence who filed the suit without complying with the requirements of the first part of Sub-rule (4) that is, of reporting to the authorities the fact or his taking the defendant as a partner. It was he that could be proceeded against for infringement, not of course, of Section 6 or Section 8 but of Rule 178(4). As a plaintiff he may not be able to seek relief in view of his own fault; but in the case with which we are concerned here, plaintiff is the new entrant who under no section of the Act or the Rules is called upon even to bring his entry to the notice of the authorities. His Is a passive role. The active part of intimation has to be performed only by the holder of the licence, that is, the o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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