9911796707
TMI Blog1934 (7) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... The contract was for a period of 5 years. Defendant No. 1 was to work his factory for the first 2½ years and defendant No. 3 for the next 2½ years. The plaintiff and defendant No. 2 had the option of working their factories or not as they pleased, but if they worked the factories, they were bound to share profits with other parties to the contract according to the terms thereof. The parties who worked their factories, were bound to submit their accounts of the earnings to the other parties. The plaintiff alleged that defendants Nos. 1 to 3 were working their factories, but had refused to render accounts after the dates specified in the plaint and to give him his share of the profits. The defendants admitted the execution of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of Order 30 of the Civil Procedure Code, relating to suits by and against 'firms.' But those provisions evidently assume that the so-called 'firm' is legally constituted and do not seem to have any bearing on the question of the maintainability of a suit against an 'illegal' association. Section 4 of the Indian Companies Act is mandatory and lays down inter alia that no partnership consisting of more than 20 persons shall be formed for the purpose carrying on any business other than banking unless it is registered as a company under that Act. There is ample authority for the proposition that any company, partnership, or association formed in violation of the provisions of Section 4 is an 'illegal' body and its existence cannot therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contract between the parties. The main question for consideration is whether the four parties to the contract formed any 'partnership' or 'association' for 'carrying on business' within the meaning of Section 4 of the Indian Companies Act. Now it is true that the deed speaks of the parties to the contract as 'partners'; but this fact by itself is of little or no significance; for what we have to see is the legal effect of the terms of the deed and this cannot obviously be affected by the loose phraseology used in the document. Section 4 of the Indian Partnership Act defines 'partnership' as a relation between persons who have agreed to share the profits of a ' business carried on by all or any of them acting for all'. In the present in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contract even if they did not constitute a 'partnership' in law, might be looked upon at least as an 'association' within the meaning of Section 4. But this will not help the appellants to any extent for Section 4 of the Indian Companies Act is as follows:- "(1)No company, association or partnership consisting of more than ten persons shall be formed for the purpose of carrying on the business of banking, unless it is registered as a company under this Act, or is formed in pursuance of an Act of Parliament or some other Act of the Governor-General in Council, or of Royal Charter or Letters Patent. (2)No company, association or partnership consisting of more than twenty persons shall be formed for the purpose of carrying on any other bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the suit by the plaintiff, as against defendants Nos. 1 and 3. The next point urged by the learned counsel for the defendants-appellants was that as the suit could not proceed against the 'Om Press', it was not maintainable against the other defendants also as the suit was one for an account and the rights and liabilities of the parties in respect of that account were inter-dependent. But his contention seems to be devoid of force. The agreement between the parties no doubt provides for the sharing of the total profits in certain proportions but this division does not seem to be necessarily dependant on the profits of all the factories being brought together. It is important to bear in mind in this connection that the agreement does not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Om Press' is admittedly an illegal association. The contract was with the 'Om Press' as an association and it does not give the names of the members of the association when the contract was entered into. The members of the association have been fluctuating and it would be a matter for consideration whether members, who joined subsequently could be held liable. Lastly although a suit by a third party against the members of an illegal association is maintainable in certain circumstances, it has been held that it would not be maintainable if the plaintiff knew of the illegal character of the association and was himself a particeps criminis ( vide Lindley on Partnership, 9th edition, page 140). It will therefore be necessary to see if the plai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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