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Andhra Pradesh High Court
Judges : ANANTA NARAYANA AYYAR, BASI REDDI
V.Basavayya - Appellant
Versus
N.Kottayya - Respondent
Decided On : 07-05-63
PARTNERSHIP - SUIT FOR DISSOLUTION - MAINTAINABILITY - PARTNERSHIP FORMED FOR CARRYING ON BUSINESS OF DEALING IN CLOTH UNDER LICENCE ISSUED TO ONE OF THE PARTNERS - LICENCE PERSONAL PRIVILEGE - TRANSFER OF RIGHTS UNDER LICENCE BY LICENSEE TO PARTNERS - PARTNERSHIP ILLEGAL - SUIT NOT MAINTAINABLE.
Fact of the Case:
Plaintiff and defendant were partners in a partnership formed in 1944 for carrying on business in sundry articles and cloth. In 1948, the plaintiff obtained a license under the Madras Cloth (Dealers) Control Order, 1944, which mentioned the plaintiff as the licensee and gave his father's name. The license described the business as retail business in mill-made cloth on his own account. The plaintiff alleged that the defendant was in management of the partnership business from 1946 up to the end of 1950. The plaintiff filed a suit for dissolution of partnership and accounts.
Finding of the Court:
The court held that the partnership was illegal and that the suit was not maintainable. The court found that the license issued to the plaintiff was a personal privilege granted to him to deal in cloth and that if it was used by the partnership there was in substance and in effect, a transfer of the license to the partners other than the plaintiff and dealing under the license by the partnership would amount to those partners, in addition to the plaintiff, also dealing under that license. The court also found that the formation of the partnership involved transfer of rights under the license by the plaintiff to the defendant who was a partner but was not a licensee tinder Ex. A-1. The court further found that the partnership conducting the business amounted to transfer of rights under the license by the plaintiff to the defendant who was a partner but was not a licensee tinder Ex. A-1.
Issues: 1. Whether the suit partnership is void? 2. Whether the suit is not maintainable on that ground?
Ratio Decidendi: The court held that the partnership was illegal and that the suit was not maintainable on the following grounds: 1. The license issued to the plaintiff was a personal privilege granted to him to deal in cloth and that if it was used by the partnership there was in substance and in effect, a transfer of the license to the partners other than the plaintiff and dealing under the license by the partnership would amount to those partners, in addition to the plaintiff, also dealing under that license. 2. The formation of the partnership involved transfer of rights under the license by the plaintiff to the defendant who was a partner but was not a licensee tinder Ex. A-1. 3. The partnership conducting the business amounted to transfer of rights under the license by the plaintiff to the defendant who was a partner but was not a licensee tinder Ex. A-1.
Final Decision: The court dismissed the second appeal with costs.
( 1 ) VEGUNTHA Basavayya, as sole plaintiff, filed O. S. No. 209 of 1952 in the Court of the Principal District Munsif, Eluru, for a dissolution of partnership business carried on between him (plaintiff) and the defendant and for accounts. The case of the plaintiff was that he and the defendant were partners of a partnership firm and did business from 1944 to 1947 in sundry articles and cloth. The defendant contested the suit raising various contentions which result ed in various issues. Of them, Additional Issue No. 1 framed on 31-7-1954 was: "whether the suit is not maintainable by reason of the suit partnership being void"? The learned Principal District Munsif heard this as a preliminary issue and held that the suit partnership was illegal, void and unenforceable and that the suit was not main tainable. Accordingly he dismissed the suit 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 decislcn in Pisupati Rama Rao v. Tadepalli Papayya, 1954-2 MLJ (Andh) 103 : (AIR 1954 Andh 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) AIR 1957 Cal 336, has been brought to my notice which, while dealing with the terms of the Bengal Silk Control Order of 1945, held that forming a partnership for running the licensed business is neither illegal nor opposed to public policy. In view of the importance of question and the large number of similar cases that may arise, I direct that this Second Appeal may be posted before a Bench. "accordingly, this appeal has come up before this Bench.
( 3 ) THE points which arise are: (1) Whether the suit partnership is void? And (2) Whether the suit is not maintainable on that ground?
( 4 ) THE relevant facts of the case are as follows: The partnership is alleged to have been formed in 1944 for carrying on business in sundry articles and cloth. On 26-10-1948, the plaintiff obtained a licence (Ex. A-1) under the Madras Cloth (Dealers) Control Order, 1944. The licence mentions the plaintiff as the licensee and gives his fathers name. It describes the business as follows:"6. Nature of business for Retail business in which licence has mill-made doth on been issued. his own account. "it also elves the exact description and boundary of the premises where the business was to be carried on as in his own house at Dharmajigudem. The plaintiff alleged that the defendant was in management of the partnership business, from 1946 up to the end of 1950 which means that the defendant was the managing partner from prior to the obtaining of the licence.
( 5 ) SECTION 81 (2) of the Defence of India Rules runs as follows:"the Central Government or the Provincial Government so far as appears to it to be necessary or expedient for securing the defence of British India or the efficient prosecution of the war or for maintaining supplies and services essential to the life of the community may by order provide (a) for regulating or prohibiting the production, treatment, keeping, storage, movement, transport, distribution, disposal, acquisition, use or consumption of articles of any description whatsoever and in
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