The formation of a partnership in regard to the business conducted under a licence granted under the Central Excise and Salt Act, 1944 is not illegal and does not attract the provisions of Section 29 of the Indian Contract Act.

( 1 ) 1. This dispute is primarily between two firms of traders in tobacco at Guntur. Plaintiff-firm asks for a settlement of accounts of a partnership entered into on 21-4-1951 with the first defendant firm for a period of one year, or in the alternative, for a dissolution of the said partnership and for settlement of accounts. The business of the partnership consisted in purchasing tobacco chura from I. L, T. D. Company. The first defendant, Lal and Co. , whose financing partner is the second defendant and the managing partner, the third defendant, had entered into a contract on 20-4-1951 with the I. L. T. D. Company for the purchase of tobacco chura. The first defendant had a licence from the Government foe dealing in tobacco. The next day, that is, on 21-4-1951 the partnership was entered into. The terms were, inter alia, that the plaintiff firm should finance the joint venture to the extent required except in a sum of Rs. 10,000 which obviously the other partner, namely, the first defendant undertook to contribute and that the profits should be shared by the two partners equally. The plaintiff alleges that it advanced a sum of Rs. 1,000 on the date of the formation of the partnership and Rs. 7,125 subsequently and that business was carried on and yielded good profits. 2. The first defendant firm with its two partners, the second and third defendants, admitted the formation of the partnership and the terms but pleaded that the plaintiff failed to keep its promise of contributing all funds necessary, that when a sum of Rs. 20,000 was found essential for the purchase of stocks from the I. L. T. D. Company, plaintiff failed to furnish the funds with the result that the contribution of capital which that firm had made was refunded to it and all accounts settled. It was further pleaded that the partnership was not registered and was, at any rate, illegal in view of the plaintiff not having taken a licence for the business under the Central Excises and Salt Act, 1944 and the plaintiff cannot have any relief in a Court of law. 3. The lower Court dealt with the question of illegality of the partnership and found it against the plaintiff in view of a fresh licence not having been obtained after the formation of the partnership. The suit was dismissed even without the need for traversing the other questions raised in the suit. The plaintiff has, therefore, preferred this appeal. 4. The question for determination is whether the plaintiffs participation in the tobacco business as a partner is illegal and the rights arising out of the said partnership contract are unenforceable in a Court of law. 5. The argument for the defendants is that the object of the agreement, of partnership is illegal under Section 23 of the Indian Contract Act inasmuch as it is forbidden by law. A prohibition may be express or may be inferredd from the penalties. In regard to the wholesale purchase or sale of tobacco as in the present case, there is not only an express prohibition embodied in Section 6 of the Central Excises and Salt Act, 1944, but any act which infringes the said provision is visited with penalties under Section 9. Anticipating an objection by the plaintiff firm that it is entitled to the benefit of the licence taken undoubtedly by the first defendant, stress is laid by the defence on another prohibition embodied in Rule 178 (2) against the sale or transfer of a licence. I shall now examine the contention of the defendants in some detail. 6. Under the Central Excises and Salt Act, 1944 aforementioned (which will hereinafter be referred to as the Act) a number of rules were framed. Section 6 on the wording of which much emphasis has been laid by the defence provides) thus:"6. Certain operations to be subject to licence. The Central Government may, by notification in the Official Gazette, provide that, from such date as may be specified in the notification, no person shall, except under the authority and in accordance with the terms