A partnership formed to carry on business in violation of statutory prohibitions and offenses is illegal and void ab initio, and no suit for dissolution or settlement of accounts of such a partnership can be maintained.

Maddi Narayanam and Bro. a Firm at Gudivada Vs. Kanumuri Subbaraju, proprietor, Sri Dhanalakshmi Rice Mill, a firm at Razole

SUBBA RAO, CJ.

( 1 ) THIS is a Letters Patent Appeal against the Judgment of Chandra Reddy, J. , dismissing the Second Appeal filed against the decree and Judgment of the Subordinate Judge of Amalapuram, confirming that of the District Munsif, razole, in O. S. No. 2 of 1945, a suit filed by the appellants for dissolution of the partnership and for settlement of accounts of the suit firm.

( 2 ) PLAINTIFFS 2 and 3 are brothers and members of a trading family carrying on business in partnership with the 5th defendant under the name and style of Maddi narayanam and brother. Defendants 2 to 4 are brothers and members of another trading family carrying on business at Tekisettipalem under the name and style of Sri Dhanalakshmi Rice Mill, proprietor Kanumuri Subbaraju. The former firm is the ist plaintiff and the latter the ist defendant. Defendants 1 to 4 owned a mill at Tekisettipalem but they were not able to work it properly for want of funds. They, therefore, entered into a partnership with the plaintiffs and the 5th defendant for working the rice mill under the name and style of Sri Dhanalakshmi Rice Mill contractors Maddi Narayanam and brother (hereinafter referred to as the joint firm ). For the purpose of carrying out the partnership business, the 2nd defendant representing the Sri Dhanalakshmi Rice Mill executed a lease-deed on 1st June, 1943, in favour of the 1st plaintiff-firm whereunder it was agreed that; the rent should be paid to the 1st defendant-firm from and out of the joint firm s funds. The parties embodied the terms of the joint firm in a resolution. As they were not able to get a licence under the Foodgrains Control Order, 1942, paddy was purchased under the licence already issued in the name of the 1st defendant-firm. The books of the new firm were opened on 27th June, 1943 and the paddy purchased by defendants 2 to 4 for the firm was duly brought to account in the books of the firm. It is not disputed that all the transactions carried on by the joint firm related only to the paddy purchased on the basis of the licence issued in favour of the 1st defendant- firm. As the defendants denied their liability, the plaintiffs filed O. S. No. 2 of 1945 on the file of the Court of the District Munsif, Razole, for dissolution of the partnership of the joint firm, for accounts and for other incidental reliefs. The defendants, among other pleas, denied that they carried on any joint business with the plaintiff-firm. They also pleaded that even if the suit partnership was true, the business carried on by the suit partnership was contrary to the provisions of the Foodgrains Control Order and the Madras rice Mills Licensing Order.

( 3 ) THE learned District Munsif, held, on the evidence, that the plaintiffs and the defendants, were partners in the suit firm but that the partnership business having teen carried on in contravention of the Foodgrains Control Order and the Rice mills Licensing Order was unlawful. In the result, he dismissed the suit. On appeal the learned Subordinate Judge accepted the finding of the first Court and dismissed the appeal. In the Second Appeal preferred against that decree, Chandra Reddy, J. , also agreed with the Courts below and held that the suit partnership was void ab initio and that the plaintiff were not entitled to any of the reliefs asked for by them. But the learned Judge gave leave and the plaintiffs have preferred this Letters Patent appeal against his Judgment : mr. B. V. Subramaniam, learned counsel for the appellants, raised before us two points : (i) The joint firm at its inception was constituted with a valid object and the fact that subsequently they carried on business on the basis of licence issued to the 1st defendant would not make the partnership illegal, and (ii) The constitution of the joint firm was only to take over the management of the mill which

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