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Issues Involved:
1. Whether the suit claim arose out of the settlement of the accounts of a partnership, which was illegal and opposed to public policy, and consequently is the suit claim not enforceable? 2. In any event, will the plaintiff be entitled to get back the amount advanced by him, even if the partnership agreement with the second defendant, is found to be void? 3. On the concurrent findings of both the Courts, that the second defendant was the principal debtor on the suit promissory note and defendants 1, 3, and 4 were only sureties for payment of the debt, can the plaintiff enforce his liabilities against defendants 1, 3, and 4, in the event of the liability of the second defendant becoming unenforceable, for the reasons above mentioned? Detailed Analysis: Point 1: Illegality of the Partnership and Enforceability of the Suit Claim The plaintiff and the second defendant were engaged in a partnership business in lorry service. Due to differences, the plaintiff wanted to retire, and it was mediated that the second defendant would take over the business, agreeing to pay Rs. 5000 to the plaintiff. Defendants 1, 3, and 4 joined as sureties, executing a promissory note for Rs. 5000. The defendants argued that the partnership was illegal as it contravened the Motor Vehicles Act, making the suit claim unenforceable. The trial court found the partnership illegal and the promissory note unenforceable. On appeal, the learned judge found the suit was for the recovery of the amount paid by the plaintiff for the lorry purchase, not tainted by illegality. However, the appellate court's finding was contrary to the plaintiff's own averments and evidence, confirming the trial court's finding that the promissory note represented the settlement of the partnership accounts. The court concluded that the partnership was illegal as it contravened Sections 42 and 59 of the Motor Vehicles Act, making the suit claim arising out of the settlement of the partnership accounts also illegal and unenforceable. Point 2: Entitlement to Recover the Advanced Amount The plaintiff argued for equitable relief to recover the amount advanced, even if the partnership was void. The learned judge initially granted this relief, relying on previous decisions where equitable relief was provided despite the illegality of the partnership. However, the court noted that the plaintiff did not seek a declaration under Section 39 of the Specific Relief Act, and the partnership was formed with full awareness of its illegality. The capital had been utilized in the business, and no equity could be worked out to grant the plaintiff relief. The court distinguished the present case from others cited by the plaintiff's counsel, where the facts and circumstances were different. The court concluded that the plaintiff could not be granted any relief for recovering the amount advanced to the illegal partnership. Point 3: Liability of the Sureties The trial court and the appellate court found that defendants 1, 3, and 4 were sureties for the payment of the debt by the second defendant. The appellate court held that the sureties were liable even if the principal debtor's liability was unenforceable. The court examined the distinction between a contract of indemnity and a contract of guarantee, noting that the liability of a surety is co-extensive with that of the principal debtor. Following the view in Kelappan Nambiar v. Kunhiraman, the court held that in the absence of special circumstances, the liability of the surety rests on a valid obligation of the principal debtor. The court concluded that since the principal debtor's liability was unenforceable due to the illegality of the contract, the sureties could not be made liable. This finding of the appellate court was reversed. Conclusion: The appeal was allowed, and the decree of the trial court was restored, with costs awarded to the appellant.
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