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TMI Blog1961 (2) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... these contracts, the three defendants, namely, Shiv Dayal, Chaman Lal and Devi Das, entered into a secret agreement of partnership and obtained the contracts in different names for different places, that according to the rules of the Excise Department they had to deposit in the treasury a part of the contract money for which they required funds, that with a view to procure funds the defendants made a representation to the plaintiffs that they would get their names entered along with them as contractors in the official papers of the Excise Department and would later on duly execute a partnership deed, that on the basis of the said representation the plaintiffs in suit No. 23 of 1954 paid a sum of ₹ 16,505/6/6 and the plaintiffs in suit No. 22 of 1954 paid ₹ 16,500/- to the defendants on various dates beginning from the 22nd March, 1951, that the defendants neither got the names of the plaintiffs entered in the official papers of the Excise Department as contractors along with item nor were they entitled to get the same done according to law, that they even failed to put in an application for the purpose to the Excise Department or get the partnership deed referred to abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e formed but so far as the contracts of Tehsils Garhshankar and Dasuya were concerned, the persons in whose names the auction for any contract was not concluded or other persons should be made to join as parties in the business along with the aforesaid general partnership in order to avoid competition, that accordingly a general partnership was formed under which one partnership in respect of the business at Tehsil Dasuya and another partnership in respect of the business at Tehsil Garhshankar were formed, that it was neither agreed that the names of the plaintiffs would be got entered in the official papers of the Excise Department, nor was it agreed that any partnership deed would be executed nor could their names be added in the business according to law that the plaintiffs did not give the various amounts to the defendants on the basis of the alleged representations made in the plaints, but these amounts were paid as capital money as partners for the purposes of business, that after some time the partners thought that it would be better if writings were made in respect of all the partnerships and accordingly stamp papers for all the three partnerships were purchased and drafts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were made by the plaintiffs, that all the partners had to invest money in the partnership, that after the end of the term the goods left over were distributed amongst the various partners, that all the partners had been taking part in the partnership, that when the partnership ended loss was found to be due from the various partners, that the Oral agreement regarding the partnership was entered into in February, 1951, but the business had commenced from the 1st April. 1951, and it had to end on the 31st March, 1952 and that stamp paper was purchased for writing the partnership deeds three or four months later but those deeds were not written because there were too many partners. 6. Shankar Das plaintiff stated that an oral talk took place that partnership would be entered into but this did not materialise that the various amounts were paid not as loan but as partnership money which was taken in order to make them partners, that no agreement was entered into to pay interest but the same was being charged as their money had been used by the defendants, that Devi Das defendant had sent to him 12 bags of poppy seeds, but these bags did not include any share of Dawarka Nath, and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 23 of the Indian. Contract Act and the various Rules framed under the Opium Act, No, 1 of 1878. In the second place, he contended that there could not be a valid partnership of such a kind under the provisions of the Indian Partnership Act. 30. As regards the first objection our attention was invited to the provisions of Section 23 of the Indian Contract Act and to the various Rules made by the Governor of Punjab under Section 5 of the Opium Act No. 1 of 1878. These Rules are called the Punjab Opium Orders, 1956. Particular reference was made to Order 59, the relevant portion of which runs as under: 59 (1) Any license, permit or pass granted under these orders may, at any time be forthwith revoked, cancelled or suspended by the Deputy Excise Taxation Commissioner (a) if it is transferred or sublet by the holder thereof without the permission of the Deputy Excise and Taxation Commissioner : or * * * 31. Learned counsel for the respondent submitted that the contract being in the name of the defendants as licencees they could not make the plaintiffs partners by getting money from them and permitting them to share the profit and loss in this business. Such a partnership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not seem to us to be either a 'transfer' or a 'sublease' of the licence. The alleged contract would not entitle the plaintiff to sell any goods of any sort or description covered by the licence. As between Government and the defendants, the latter would remain solely liable for the non-performance of the contract and the conditions under which the licence was granted. 34. Shiam Bihari Lal's case, ILR 39 All 107: (AIR 1917 All 54 ) was followed by another Division Bench of the Allahabad High Court in Radhey Shiyam v. Mewa Lal, AIR 1929 All 210, in which it was observed as under : Where an agreement is entered into between the licensee and a third person in consideration of money, contributed by the latter, and the former agrees to give him certain benefits in the share of the profits arising from the business and the latter also takes upon himself the liability arising from losses accruing from the said business it cannot be said that the transaction amounts to a transfer or sub-lease of the liquor contract. It was further held that such an agreement does not contravene the provisions of Rule 82 of the Rules framed under the United Provinces Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not provide that the licensee alone shall personally attend to the sale. Indeed Clause 7 of the license clearly contemplates the employment of servants or agents in the business. ....The taking of a partner in the business is not very different in its effects from the employment of a servant, who is to be remunerated, by a share of the profits. I do not think it amounts to a transfer of the license as forbidden by the rules. . . . .This agreement cannot per se be regarded as opposed to public policy, in the sense that it is in itself immoral or improper. The only way of bringing it under that clause of Section 23 of the Indian Contract Act would be to show that it directly infringes some positive rule of law or is calculated to defeat its provisions, see Jai Narain v. Sultan Muhammad Khan, 96 PR 1902. There is nothing, so far as I am aware, in the Excise Act of 1896, the license itself, or the condition under which it was granted to prohibit such an agreement. ....... The result of the rulings appears to be that where there is some express prohibition by law, or rule having the force of law, against the action of the contracting parties, the contract will be held void, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved: ''The crucial test is whether or not the partners would be guilty of an offence under the Excise Act if they had carried on the business in partnership with the licensee. If the answer is in affirmative it establishes the illegality of the partnership. 41. In the instant case the non-licensee-partners would not be guilty of any offence under the Opium Act because they themselves were not doing anything in contravention of the provisions of the Act or the Rules made thereunder. 42. He then referred to a Single Bench decision of Gruer, J., in Nandlal Khajanmal Chhatri v. Thomas, J. William, AIR 1937 Nag 250. But in that authority an agreement of partnership was clearly prohibited by Rule 6 made under Section 62 of the Central provinces Excise Act No. 2 of 1915. There is, however, no such prohibition in the Punjab Rules. 43. Learned counsel for the respondents then relied on two authorities reported as Ram Lal Misra v. Rajendra Nath Sanyal, AIR 1993 Oudh 124 and Parduman Chand v. Bawa Kashmira Singh, AIR 1943 Lah 100, for the proposition that an agreement between persons not to bid against one another at an auction sale is unlawful as being opposed to public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in the instant case. The partnership in question was the result of an agreement between several persons including the parties to this litigation to share the profits of the business, which had to be carried on by the licencee-partners (defendants) acting for all the other partners including the plaintiffs. It may be noted, that the plaintiffs, who did not possess any licence, were not carrying on the business in the present case. On the other hand, the defendants, who had a regular licence in their favour, were carrying on the business of the partnership on behalf of the other partners. Had the plaintiffs been carrying on the business, then perhaps an argument could have been raised that being non-licencees they could not do so and could not act as agents of the defendants and other partners. I would, therefore, hold that the partnership in question was valid under the Indian Partnership Act. 48. After hearing the learned counsel for the parties I am of the view that it has not been shown in the present case that the partnership in question offended the provisions of any Act or statutory rules or any term and condition of the licence. The same was, therefore, valid. 49. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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