9911796707
TMI Blog1949 (12) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... Rao J. who in view of a conflict of opinion referred the matter to a Bench. When the matter came before Satyanarayana Rao and Govinda Menon JJ., many cases other than those cited before Subba Rao J. were referred to, some of them being Bench decisions; and so they referred the matter to a Full Bench. 2. After the question of law that arises in this civil revision petition had been fully discussed, Mr. S. Ramachandra Aiyar for the plain, tiff contended that the licence granted to the defendant had not been produced and that there was no evidence to show either that those partners who had not been granted a licence were partners not only for the sharing of the profits but for the vending of arrack also or that the licence issued to the defendant contained conditions similar to those found in Rule 27 of the Rules framed under the Abkari Act. If that had been so, these matters should have been brought to the attention of Subba Rao J. who, if satisfied that important questions of fact necessary four the proper disposal of the civil revision petition had not been decided, would have called for findings. Nothing seems to have been said either before him, or before the Bench, which sugge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Narasimhalu Naidu v. Nagareddi AIR1941Mad64 , Ifalia v. Cowasjee AIR1944Mad295 , Chinnayya v. Janikamma AIR1944Mad415 and Venkatasubbayya v. Attar Sheik, 1948 2 M. L. J. 1981 A.I.R. 1949 Mad. 252. The earliest of these cases is the important, because it dealt with a case where, as in the present case, a partnership was formed before the licences were granted. Two persons entered into a contract for the sale of toddy and arrack. One partner took a licence in toddy and the other in arrack, and by conducting the two businesses in partnership they contravened the rule that an arrack vendor should not have an interest in toddy and vice versa. It was held that the suit based on the partnership would not lie for two reasons, that the partnership was void ab initio, because it offended against public policy, and secondly that the partnership was illegal because it purported to carry on business by non licensees, which was against the spirit of the Act. The principle laid down in this decision has never, as far as we have seen, been departed from; and it will be useful to state the principle there laid down in the words of the learned Judges: "..... we should hold that the contract wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conducting of the business by both the partners. It was held that the partnership was an illegal one and that therefore no suit lay on the promissory note executed by the defendant for the money lent by the plaintiff. Mr. Ramachandra Iyer contends that the case dealt with by the Full Bench must be classified amongst those cases where the partnership is entered into after the licence is granted and which should be distinguished, it is said from the category of cases where the partnership comes into existence before the licence is granted; for, it is contended the issue of a licence to the auction purchaser is a mere formality. We cannot agree that the issue of a licence is a formality. If the Collector had considered that the highest bidder was an undesirable person to hold a licence, he would undoubtedly have refused to grant, him a licence. However, the discussion of the principles of law involved showed that the learned Judges considered it immaterial whether the partnership was entered into before or after the licence was issued. 4. After the Full Bench decision, the question was prominently raised whether any distinction could be drawn between a partnership entered into bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision is important; because the partnership was held to be valid at its inception and became invalid only when the partnership decided to do something forbidden by law, i.e., to vend toddy on a licence granted to one of them only. Venkatasubbayya v. Attar Sheik (1948)2MLJ198 was a Letters Patent Appeal against the judgment of Shahabuddin J. affirming it and following Italia v. Cowasjee AIR1944Mad295 . 5. The general argument of Mr. Ramachandra Iyer is that where a partnership is entered into before the licence is granted, no transfer is involved; because in accordance with the principle underlying Section 88 Trusts Act, the licence becomes the property of the partnership as soon as it is acquired. We do not however agree; for this equitable principle merely requires that the partner acquiring the asset should hold it for the partnership. Even when Immovable property is acquired, the legal ownership would be in the partner who had purchased the property, though equity would require that he should hold it on behalf of the partnership. A fortiori, when a licence, which is a personal privilege to vend, is acquired by one partner, it is certainly his licence and not the licence of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J. 837 : 5 I. C. 466, in which it appears to have been held that Section 18, Abkari Act does not prohibit a person having no licence from holding an interest in the manufacture or vend of liquor jointly with a Hennaed manufacturer or vendor. In Padmanabhan v Badrinath, 35 Mad. 582 : 10 I. C. 126, the learned Judges clearly did not wish to discuss the earlier case in detail; and so found it convenient to distinguish it as dealing with the effect of Section 13, Abkari Act, in which the wording was different from that found in Section 9, Opium Act. We cannot read into the judgments in Padmanabhan v. Badrinath, 35 Mad. 582: 10 I. C. 126 an expression of opinion that the wording of Section 15, Abkari Act did not prohibit the sale of intoxicating liquor by an unlicensed person. 7. The earliest case relied on by the learned advocate for the respondent is Jayanti Bhimappa v. Seshanna, 3 I. C. 951 : 6 M. L. T. 340. There, when the question of legality of a partnership was raised, it was pointed out that one of the conditions of the licence had not been legally introduced, and that its infringement did not therefore render the partnership unlawful. Natla Bapiraju v. Achuta Rajajee, 20 M. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the plaintiff had notice of the illegality of the partnership. Madhavan Nair J. in a separate judgment said with regard to the question of the illegality of the partnership only this : 'Prima facie there is nothing illegal in such a partnership under the Abkari Act, and no rule issued under the Act has been brought to our notice to show that the arrangement is illegal. The decision In Brahmayya, v. Ramiah, 43 Mad. 141 : A. I. R. 1920 Mad. 270 as regards the illegal nature of the partnership in the case depended on the terms of the licence issued to the parties." He then went to say : "I do not think that the plaintiff can be said to have known about the illegality of the contract when he lent the money." Such remarks as may be found in this judgment supporting the argument of the respondent must therefore be regarded as obiter. In Gangadhara v. Swaminadha AIR1926Mad218 , Srinivasa Aiyangar J. was considering the case of a partnership entered into in the Mysore State for the vending of intoxicating liquor. During the course of his judgment, he expressed an opinion that the observations found in Marudamuthu v. Rangasami, 24 Mad. 401, were obiter and disapprov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectness of that finding was questioned before the learned Judges. No principle was laid down in that case, except that the illegality of contracts has to be affirmatively proved. Reilly J, in Narayanamurthi v. Subramanyam AIR1928Mad1197 said that Marudamuthu v. Bangaswami 24 Mad. 401; Thithi Pakuridasu v. Bhimudu, 26 Mad. 430 and Brahmayya v. Ramiah, 43 Mad. 141 : A. I. R. 1920 Mad. 270 laid down the principle that a partnership entered into in contravention of a licence or any rule under the Abkari Act is void and that a licences of a toddy or arrack shop cannot legally take a partner without sanction, but that these decisions did not go so far as to hold that it was illegal for persons to enter into a partnership for the purpose of carrying on a toddy shop business; for which they hoped at a future date to obtain a licence. There is nothing in this statement to which objection can be taken provided, as pointed out by the learned Chief Justice in the Full Bench decision, Ramanayudu v. Seetharamayya, 58 Mad. 727 : A. I. R. 1935 Mad. 440 that "it is intended at a future date to get a licence in the names of all the partners." Much reliance has been placed by Mr. Ramachand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge was correct in stating that at the time the partnership was formed defendant 1 had not begun to trade in toddy and had no stock which he made the joint property of all the three partners. In this view, the partnership could not be held to be illegal as there was nothing prima facie illegal in such a partnership under the Abkari Act. The decision in this case appears to me to have turned on the absence of proof that the partnership was entered into for an illegal purpose." This cannot be regarded as an approval of the obiter dictum of Ananthakrishna Aiyar J. with regard to the views of the District Judge. On the question whether there was a transfer of the licence, Venkatasubba Rao J. cited a passage from Padmanabhan v. Badrinath. 35 Mad. 582: 10 I. C. 126 to the effect that if two persons agree to start a business in partnership and to contribute capital therefor, there is no transfer, and then went on to say that adopting that test no transfer was involved in the partnership under consideration. He then added : "The facts here disclose that the persons concerned first entered into the partnership with the object of acquiring the right and that the plaintiff on the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n are doubtless due to the difficulty of envisaging the legal consequences of the use by a partnership of a licence issued in the name of one only of the partners. If the licensee holds his licence for the partnership or by an act of volition shares his licence with his partner, then there is a transfer which offends Rule 27. If it be found that the licensee does not hold the licence for the partnership, because it is illegal for him to do so, or because for any other reason the non-licensed partner does not purport to sell, by himself or through his partner, under his partner's licence, then there is no transfer; but the non-licensed partner would then commit a breach of Section 15 of the Act. In either case, a punishable offence would be committed; and a partnership formed that would lead to a breach of these provisions would be illegal, either because an offence would necessarily be committed or because it would be against the general public policy underlying the enactment that only approved persons, specifically licensed, should be allowed to sell liquor.
11. The civil revision petition is therefore allowed with costs throughout. X X X X Extracts X X X X X X X X Extracts X X X X
|
