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TMI Blog1963 (7) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... t with costs. The plaintiff filed A.S. No. 36 of 1955 before the learned Subordinate Judge, Eluru. The latter framed 3 single point for decision, namely, Whether the suit is maintainable or not . He agreed with the trial Court and dismissed the appeal. Thereupon the plaintiff filed this second appeal. 2. When the second appeal originally came up for hearing before our learned brother, Seshachalapathi, J. he passed an order dated 3-8-1961 as follows : The two Courts below have relied upon the decision in Pisupati Rama Rao v. Tadepalli Papayya 19542 MLJ 103 : (AIR 1954 AP 51). That decision had been rendered on the language of an express prohibition erected under Sections 13 and 16 of the Rice Rationing Order of 1943. It is not in dispute that the Madras Cloth (Dealers) Control Order of 1948 does not in express terms contain a prohibition analogous to Sections 13 and 16 of the Rice Rationing Order of 1943 referred to above. The question is bereft of any direct authority of this Court. A decision of the Calcutta High Court in Matizuddin Khan Choudhury v. Habibuddin Sheikn, (S) AIR1957Cal336 , has been brought to my notice which, while dealing with the terms of the Bengal Silk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se imposed on such prices or rates. Rule 81 (4) runs as follows: If any person contravenes any order made under this rule, he shall be punishable with imprisonment for a term, which may extend to three years or with fine or with both. The Government of Madras, in exercise of the powers conferred by Rule 81 (2) (b), made the Madras Cloth (Dealers) Control Order (hereinafter referred to for convenience as the M.C.D.C. Order) in 1944. Both sides have placed before us the above Order of 1944 and proceeded on the basis that the provisions of that Order were substantially in force during the relevant period concerned in this case and were substantially the provisions under which the licence (Ex. A-1) was issued. We also proceed accordingly. Clause 3(c) of the M.C.D.C. Order defines a 'dealer' as follows: dealer means a person carrying on the Business, whether on his own account or as commission agent, or selling or storing for sale cloth, whether wholesale of re tail, and whether or not in conjunction, with any other business and includes a hawker. Clause 4 reads: , Save as hereinafter provided, no person shall carry on business as a dealer or hawker or store ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lving the transfer of a ration document not only contravenes the express prohibition' contained in Section 13 of the Order 'but also relates to an act which is made an offence punishable' under the Defence of India Rules. Such a contract would be void under Section 23 of the Contract Act as the object of that contract involves something illegal or contrary to public policy. The learned Judge relied on the decision in Nalan Padmanabhan v. Badrinath Sarda 21 Mad LJ 425 and the decision of the Full Bench in Velu Padayachi v. Slvasoariam Pillai, AIR1950Mad444 and observed as follows: at p. 111 (of Mad LJ (Andh)) : (at p. 53 of AIR): In my view, the principles laid down in the aforesaid decisions equally apply to the facts of the instant case. The partnership business of buying rice and selling the, same in the retail shop was carried on with the aid of a licence in favour of the 1st defendant. When the licence was issued to the 1st defendant, it was intended that he should and none else (should) use that for doing Business. Instead, the plaintiff and other partners, who had no ration card along with the 1st. defendant bought and sold rice. 'It certainly was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere form of the transaction but with the substance of it. 9. It has been held in In Re Manu Iyer, AIR1954Mad485 also that the licence issued to a person under Clause 4(1) of the M.C.D.C. Order was personal to the licences and would not enure for the benefit of his heirs after his death. 10. Thus, it is clear that the licence (Ex. A-l) was a personal privilege granted to the plaintiff to deal in cloth and that if it was used by the partnership there was in substance and in effect, a transfer of the licence to the partners other than the plaintiff and dealing under the licence by the partnership would amount to those partners, in addition to the plaintiff, also dealing under that licence. 11. Both the lower Courts proceeded on the basis that the decision in 19542 MLJ 103 : (AIR 1954 AP 51), which related to the Madras Rationing Order 1943, also applied to the present case. In the judgment of the trial Court, it is observed that a licence issued under the provisions of Cloth Dealers' control Order comes within the definition of a 'ration document' under Section 2 (9) of the Rationing Order and that, therefore, Sections 13 and 16 of the Madras Rationing Order dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent issued to himself. It is beyond doubt or dispute that there is no clause in the M.C.D.C. Order laying down express prohibition of transfer of a licence like Ex. A-l, corresponding to Section 16 of the Madras Rationing Order. As seen above, the partnership conducting the business amounted to transfer of rights under the licence by the plaintiff to the defendant who was a partner but was not a licensee tinder Ex. A-l. The question is whether the absence of any such express prohibition by a clause in the M.C.D.C. Order makes a material difference. 15. Shri Bapi Raju contends that there is no clause in the M.C.D.C. Order corresponding to Section 13 of the Madras Rationing Order and that, therefore, the operation by me partnership of the licence which was issued in the name of the plaintiff was not illegal. It is true that though there is no clause in the M.C.D.C. order which is exactly in terms of Section 13 of the Madras Rationing Order, there is Clause 4 which we have already extracted earlier in this judgment. Shri Bapi Raju argues that operation of licence by the partnership was not in conflict with Clause 4 and that it can be reconciled with Clause 4 as being in confor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from this, 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 .....To hold that a person who has not got a licence could still be partner with one who has a licence and as such partner carry on the business with or without the other would enable the unlicensed partner to evade the liabilities intended by the law to be cast on persons carrying on abkari business. In the present case also, it is clear that the M.C.D.C. Order was passed not merely for the protection of reveres but also in the interests of the public. The ground mentioned in the above passage holds good independent of the rule under the Abkari Act and applies to the present case. 17. In ILR 35 Mad 582, which was under the Opium Act, the learned Judges of the Division Bench held that the contract of partnership was void and the suit vas not maintainable on two main grounds: (1) that the transfer without sanction of the collector was prohibited; and (2) that there was contravention of provisions of Clause 20 of the licence which prohibited the transfer of the right. In this case, the conditions of the licence do no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r ran as follows: He liquor or intoxicating drug shall be sold without a licence from the Collector . (20) In (S) AIR1957Cal336 the learned Judges of the Division Bench of the Calcutta High Court discussed the above decision in AIR 1935 Mad 440 In para 50 and observed as follows: at p. 341 The Madras High Court applied R. 27 framed undo1 the Madras Abkari Act and strictly enforced the same. The strict provisions of R, 27 may be so interpreted, but we do not think that the rules of public policy which were attempted to be applied or introduced were properly applied in that case AIR 1935 Mad 440.... Suffice it to say for the present that, in our view, the consideration of an object of agreement will not be deemed to be forbidden by law unless in the circumstances related above there is a specific provision forbidding transfer or sale of a right made under a license . On an interpretation of the facts of that case including the relevant provision of the Silk Control Order, which did not prohibit the formation of any partnership for the starting of a filature or for carrying on silk business and only required that the owners of a filature should get themselves registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions of the licence, it did not appear that the intention of the rule was to declare such partnership as illegal or invalid. They also observed as follows: at p. 553 (or Andh WR) : (at p. 41 of AIR): Apart from the fact that under the rule there is a clear distinction, cases under the Abkari, Opium and Forest Acts have no application in determining the validity of partnerships made in contravention of the provisions of the Central Excises and Salt Act, as the prohibition is for the protection or convenient collection of revenue (but not in furtherance of a public policy as in the Abkari and Opium Acts). Where, therefore, a statute merely imposes a penalty without declaring it to be illegal or void, the imposition of penalty by itself does not in our view have the effect of making any contract made in contravention of a specific provision of the statute -- illegal or void. It must further be seen whether 'he statute was designed as a whole to further a public policy . They relied on a passage in Anson's Law of Contract as follows: The effect in such a case depends on the proper construction of the particular statute. But where the words of the statute leav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of another; (v) or the Court regards it as (a) immoral, or (b) opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. For purposes of convenience of reference, we have given numbers (i) to (v) and letters (a), (b) to the various portions in the above section. In this case, we are concerned only with items (ii) and (v) (b). The question as to whether a contract of partnership is valid or not depends on whether it comes under category (ii) or (v) (b). A licence, such as is concerned in the present case namely, a licence issued to a person under the M.C.D.C. Older, is a personal privilege given to the licensee (See AIR1950Mad444 (FB)). The privilege granted under it cannot extend to any persons with whom the licensee chooses to form a partnership Vide AIR1954Mad485 . M.C.D.C. Order was designed not merely for the protection of public revenue but in furtherance of a public policy. This is clear from the nature of the provisions in We order, formation of a partnership in effect amounts to transfer of rights under the licence by the license ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout a licence and that in either case, an offence would be committed and that, therefore formation of partnership was illegal because an offence would be committed or it would be against the general public policy underlying the enactment that only approved persons specifically licensed should be allowed to do business under the license. In the present case also, it is clear that the public policy underlying the enactment especially as seen from Clause 4 of the M.C.D.C. Order is that only approved persons specifically licensed should be allowed to do the cloth business under the licence and the formation of partnership would be against that general public policy and would, if permitted, defeat the implied provisions of the M.C.D.C. Order especially Clause 4. So, me formation of partnership is illegal. The provisions of the M.C.D.C. Order show that by implication though not by express terms in the Order, the formation and working of partnership by a licensee with non-licensees was prohibited and amounted to a violation of the conditions of the licence (Ex. A-1). 26. In an unreported judgment of the supreme Court in Govinda Rao v. Nathmal, (unreported judgment of the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealing in food-grains in quantities above a certain weight. 28. Their Lordships of the Supreme Court observed as follows: Without going into the pleas of the defendants, it is quite clear that the appellant (plaintiff) was making it easy for the respondents to trade in food-grains in Central Provinces and Berar without holding a licence, thus abetting an offence of the contravention of the Food Grains Control Order by the respondents. If not committing an offence himself. The definition of the phrase 'deal in food grains' which we have quoted above, clearly shows that every person who dealt in food-grains in a place where the Order applied, had to possess a licence. The word 'person' in Section 3(1) must include a group or association of persons like a firm of partners. A licence in the name of one of the partners was not enough. The partnership thus was an illegal one, because the object of the partnership was illegal. ..... What we have to find out is whether the partnership was legal, because the suit was for accounts of that dissolved partnership. If the partnership was illegal or was for an unlawful purpose, then the Court will give no assistance to a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corresponding provisions of the C.P. and Berar Food-Grains Control Order on which those grounds are based by the Supreme Court. Consequently the decision of the Supreme Court applies directly to the present case and is sufficient to decide it, being ample authority of the highest court in the land, in particular, the decision of the Supreme Court does not rely upon any express prohibition of transfer such as contained in Section 13 and Section 16 of the Madras Rationing Order 1943. The decision shows that the illegality of the partnership does not depend on there being an express prohibition such as contemplated in Sections 13 and 16 . That question, as to whether the absence of such express term affected the illegality of a partnership such as concerns in the present case was bereft of direct authority of this Court when our learned brother, Seshachalapathl, J., made the reference on 3-8-1961, But, subsequently, direct authority of the highest Court has come into existence on this question when the Supreme Court passed judgment on 11-4-1962. Their Lordships of the Supreme Court did not consider the question as to whether the C.P. and Berar Food-Grains Control Order and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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