TMI Blog1953 (10) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... d to run the theatre in partnership. It is provided in Ex. P. 1 that the plaintiff was to obtain a registered lease deed for the premises and also a licence for running the theatre as a talkie house and that thereafter a regular partnership deed should be executed. The capital for the firm consisting of equipments and the furniture was fixed at ₹ 1,30,000 and the defendants paid the plaintiff a sum of ₹ 65,000 for their half share thereof. It was expressly provided in the agreement that the benefits of the lease and of the furniture and fittings and other equipments and machinery and goodwill of the theatre together with the benefits of the licences obtained therefore should be the properties of the partnership. On the same day the defendants agreed as per Ex. D. 7 to pay the plaintiff a further sum of ₹ 60,000 in consideration of all the pains and troubles taken and to be taken by him thereafter for the purposes of improving, equipping and furnishing the theatre . The plaintiff obtained a registered lease deed for the premises, Ex. P. 3 dated 19-5-1949 and a licence for running the talkie on 11-8-1949, both of them in his own name and a formal partnership d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ab initio' and that accordingly the licence might be renewed in his own name and it was also staled that the matter was sub judice. On 17-5-1950, the Commissioner of Police passed an order Ex. P. 10 cancelling the licence altogether. Thereupon the plaintiff instituted the suit out of which this appeal arises for a declaration that the partnership was illegal and void 'ab initio' as being in contravention of condition No. 7 of the licence and for an injunction restraining the defendants from interfering with the rights of the plaintiff as the sole proprietor of the business. The defendants resisted the suit on several grounds. They pleaded that the partnership was not illegal, that even if the partnership was illegal that did not affect their rights in the theatre premises furniture and fittings, that_ the declaration prayed for should be refused as the object of the plaint-tiff was to defraud the defendants of large sums of money paid for the purpose of the partnership and that in any event the grant of relief should be made conditional on the plaintiff repaying to the defendants all the sums paid by them with interest. 3. On these pleadings the following issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the decision of the Full Bench of this court in AIR1950Mad444 (A)'. . There four persons entered into partnership. The defendant was to obtain the licence for running an arrack shop and the profits were to be shared equally among the partners. The defendant obtained the requisite licence and the business was conducted by the partners for the period of the licence Accounts were then settled between them and the suit was by one of the partners for recovery of money due to him under that settlement. The suit-was contested on the ground that the partnership was in contravention of It. 27 which is as follows: No privilege of supply or vend shall be sold, transferred or subrented without the Collector's previous permission. There was a conflict of authority in this court as to whether a licence could be said to be transferred under this rule when there is first a partnership and then a licence obtained in the name of one of the partners. It was held by the Full Bench-to adopt the headnote, 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' whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granted to him on the express understanding that it was to be used by him and by him alone, its use by the partnership would involve a transfer in precisely the same way as it would if the partnership were entered into after the licence was issued. 'On the question of public policy it is difficult to see any difference between the object of a partnership entered into before the licence was granted and one entered into after it was granted. In either case, the partnership would be entered into for the purpose of bringing about a result prohibited by law, i.e., the vending of arrack by a person who had no licence to do so. 5. In coming to this conclusion, the learned Judges followed the decision of this court, in - Marudamuthu Pillai v. Rangaswami Moopan', 24 Mad 401 (B), where it was observed We should hold that the contract was invalid also On the ground that the licence in each case was to be obtained by only one of the partners. The provisions of the Abkari Act, as a whole, show clearly that every person carrying on abkari business as a principal must be licenced under the Act. The reason is obvious that, unless he were licensed, there could be no control ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of this Act or the rules made thereunder, or of the conditions and restrictions upon, or subject to which any licence has been granted under this Act, he shall be punishable with fine which may extend to one thousand rupees. Mr. C. Srinivasachari argues that on its true construction Section 8 has no application when the conditions of a licence are broken, that under Section 3 of the Act it is the premises that have to be licensed ;that under Section 8 it is the use of the premises, in contravention of the provisions of the Act or the rules that is made punishable and that a transfer of a licence in violation of Clause 7 is outside its purview. He relied on the following observations of Avory J., in -- 'Bruce v. Me Manus', 1915-3 KB 18 (F,), on the corresponding provision of the English Act: The section provides that two persons may be guilty of offence; first the owner of the apparatus if he allows it to be used in contravention of the provisions of the Act and secondly the occupier of the premises if he allows the premises to be used in contravention of the provisions of the Act. I think it was intended there to hit the occupier of the premises quite ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority to exercise control and as that amounts to conferring on a non-licensee the rights of an occupier, that would be a violation of Section 8(1) of the Act. In - 'Theatre De Luxe (Halifax) Ltd. v. Gledhill, 1915 2 KB 49 (F), it was observed by Rowlett J., at page 56 that the user prohibited by the section was not user by the public who are admitted for the shows but by the management. If that is so, the participation in the management by an unauthorised person would appear to be an offence under Section 8. But it is unnecessary to decide this point as we are of opinion that the partnership was illegal by reason of the prohibition contained in Clause 7 of the licence, even though it may not he punishable under Section 8. The assumption underlying the contention of the respondents is that it is not sufficient to render a transaction illegal, that it is in contravention of some provision of law or rule but that it must, further appear that it was the intention of the Legislature to prohibit the transaction altogether and that such an inference could be drawn when the contravention is made punishable but not otherwise. That, however, is not the correct position. The following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suance of an agreement of partnership, the defendant became the successful bidder at a Government auction of grass in nine forest coups and a licence was issued in his name. Rule 2 of the licence provided that without previously obtaining the permission of the Divisional Forest Officer this contract in whole or in part of it or any interest in it should not be sublet or assigned to any man. The question was whether the agreement of partnership entered into in breach of this rule was void under Section 23 of the Contract Act. In holding that it was not, the Court observed: We are unable to find any provision of statute law which makes it obligatory upon the parties to observe the conditions of the licence. Of course, the licence can be revoked by the Forest Officer if the licencee disregards the terms of it. It does not follow from this that an agreement to share profits which would contravene the terms of the licence as between the Forest Officer and the licensee is forbidden by law or would defeat the provisions of any law. 9. It will be seen that when the Government granted a licence for removing grass from their forests they were merely acting in management of their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l matters other than Exhibition of films such as acquisition of the lease, the furniture and other equipments, contracts with the Electricity department and so forth and that it was valid and subsisting as regards these matters. This contention was accepted by Balakrishna Aiyar J. who declared that the defendants would be entitled to the rights of the theatre premises and fittings and the furniture therein as partners. There can be no doubt that if the partnership consisted of several distinct matters, the illegality of some of them will not render it illegal with reference to the others. This is how the position is stated in Lindley on Partnership ( 11th Edn. at page 119) Neither' does it by any means follow that because one or more clauses in a contract of partnership are illegal the partnership is itself illegal. Vide also the observations of Willes J. in -- 'Picketing v. Ilfra -combe Railway', (1868) 3 CP 235 (I). If, therefore, the suit partnership comprised matters either than exhibition of films under the licence it will be valid to that extent. But what are these other matters? They are, it is claimed, the rights in respect of the lease, the furniture, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er were to be regarded solely from the standpoint of the plaintiff the relief should be refused. It is clear from the records that after having induced the defendants to invest large amounts in the business as partners under Exs. P. 1 and D. 7 the plaintiff wanted to back out of the agreement and the decision in AIR 1930 Mad 444 (A) furnished him with a convenient weapon to get rid of them. If his fear was that he might be proceeded against on account of the illegality of the agreement, Ex. P. 8 the memo from the Commissioner of Police gave him an excellent opportunity to set the matter right. He, however, declined to do so and commenced this action. In such circumstances, the court should properly refuse to grant what is an equitable relief to one who, having betrayed the confidence which his partners had placed in him, seeks the assistance of the court for defrauding them of their rights. But then we have to see what the consequence of the dismissal of the suit would be on the rights of the defendants. The partnership being illegal they cannot sue to work out their rights as partners. Apart from the deed of partnership, it is the plaintiff who has the legal title to the leaseh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys to the defendants all the amounts received from them on account of the partnership. This is a condition which we are entitled to impose before granting the declaration in favour of the plaintiff. If a suit is laid under Section 39 of the Specific Relief Act for cancellation of an instrument which is either void or voidable the court can require the plaintiff under Section 41 to make such compensation as the justice of the case may require, as part of the adjudication. The plaintiff in this case prays for a declaration that the partnership deed is void and for an injunction restraining the defendants from interfering with the rights of the plaintiff in the business as its sole proprietor. In substance the suit is for cancellation of the deed of partnership. In the interests of justice the plaintiff should be directed as part of the adjudication that the instrument is void, that he should repay all the amounts received by him from the defendants on account of the partnership. As the exact amount payable to the defendants has not been determined the matter will be re- milled to the Official Referee for ascertainment thereof. The defendants will be entitled to interest six per ce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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