1949 (12) TMI 38 - HC - Indian Laws

Summary

Issues Involved:
1. Legality of a partnership formed for vending arrack when only one partner holds a licence.
2. Applicability of the Madras Abkari Act provisions.
3. Interpretation of Rule 27 under the Abkari Act.
4. Public policy considerations regarding unlicensed partners.

Detailed Analysis:

1. Legality of a partnership formed for vending arrack when only one partner holds a licence:
The central issue in this case is whether a partnership formed for vending arrack is legal when only one partner holds the necessary licence under the Abkari Act. The court examined various precedents and found that such partnerships are generally considered void ab initio. The court noted that "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 them is void ab initio." This is because it either involves an illegal transfer of the licence or a breach of Section 15 of the Abkari Act, which prohibits the sale of liquor without a licence.

2. Applicability of the Madras Abkari Act provisions:
The court referenced Sections 15, 55, and 56 of the Madras Abkari Act, along with Rule 27 framed under the Act. Section 15 explicitly states, "No liquor or intoxicating drug shall be sold without a licence from the Collector." Section 55 makes punishable any "contravention of this Act, or of any rule or order made under this Act, or of any licence or permit obtained under this Act." Section 66 further makes punishable any contravention of the terms of a licence not covered by Section 55. Rule 27 prohibits the sale, transfer, or sub-renting of any privilege of supply or vend without the Collector's previous permission. The court concluded that these provisions collectively aim to ensure that only licensed individuals can vend liquor, thereby maintaining control and accountability.

3. Interpretation of Rule 27 under the Abkari Act:
The court discussed the interpretation of Rule 27, which states, "No privilege of supply or vend shall be sold, transferred or sub-rented without the Collector's previous permission." The court found that entering into a partnership where only one partner holds the licence effectively constitutes a transfer of that licence, which is prohibited. The court rejected the argument that Rule 27 lacks statutory effect, stating that "the clear policy of the Act is that no unlicensed person should vend arrack."

4. Public policy considerations regarding unlicensed partners:
The court emphasized that allowing unlicensed partners to participate in the vending of arrack would contravene public policy. The court cited previous rulings, stating that "every person carrying on abkari business as a principal must be licensed under the Act." This is to ensure that there is control over all individuals involved in the business. The court noted that such partnerships would enable unlicensed partners to evade the liabilities intended by the law, thereby undermining the regulatory framework established by the Abkari Act.

Conclusion:
The court concluded that the partnership in question was illegal and void ab initio. It held that "if a partnership is lawful at its inception, because it is not intended to infringe any provision of the Contract Act, it nevertheless becomes unlawful when it intends to conduct the business jointly on a licence granted to one only of the partners." The civil revision petition was allowed with costs throughout, reaffirming the principle that partnerships formed for vending arrack where only one partner holds a licence are illegal under the Madras Abkari Act.