Partnerships in contravention of statutory provisions may be deemed illegal and void under the Contract Act, and the intention of the legislature to prohibit certain acts, as evidenced by punishment for contravention, determines the legality of contracts related to such acts.

1. The facts leading to the question referred to this court, which question has been argued with ability by the Counsel of the assessee, may be shortly stated. Twelve persons have formed a partnership under a deed of August 23, 1949. Some of these partners had earlier obtained several tobacco licences for the year 1125 at the auction conducted by the then Cochin Government, and the partnership had been formed to exploit the licences obtained by the partners; as well as two licences held by the strangers. Para 2 of the partnership deed provides that the shops, for which the licences were held, should be run under the trade name of "Union Tobacco Company, Ernakulam" and in accordance with the terms and conditions of the deed. The document further provides that the business should be owned by the partners in four equal

shares; one share to be held by a group consisting of three partners another by a group comprising of two; the third by another group of two partners; and the fourth share by five partners. Para 4 of the deed also provides that the profits or losses of the partnership should be divided among the 12 partners in the manner mentioned therein. Para 8 states that the closing stocks of tobacco, beedi leaves etc. held by the partners on 31-12-1124 should be taken over by the firm's Head Office either as outright purchase or for commission sales; and the cost of such goods be credited in the accounts of the partners who held them. The other relevant provisions of the partnership deed are that the daily collections' of each shop are to be sent to the Head Office on the same day, or thrice a week; are to be credited to the respective shops; and certain persons are to manage and to attend full time to the firm's business. The details concerning the shops and which partner held what licence can best be described by giving the following extract from Para.4 of the statement of case to this court:

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2. At this stage it would be of advantage to quote the relevant sections of the enactment and part of the notification thereunder concerning sales of stocking of tobacco. These are S.4, 5 and 6 of the Cochin Tobacco Act, VII of 1084.

"4. Except as permitted by this Act or by rules framed hereunder, no one shall

a. possess tobacco for the purpose of sale,

b. transport tobacco,

c. import or export tobacco,

d. sell tobacco, or

e. cultivate tobacco.

5. The Diwan may, from time to time, after previous publication, make rules consistent with this Act, to permit absolutely or subject to any conditions, and regulate all or any of the following matters:

a. the possession of tobacco for the purpose of sale.

b. the transport of tobacco,

c. the import or export of tobacco,

d. the sale of tobacco and the form of duty leviable on the sale of tobacco by retail.

e. cultivation of tobacco, and

f. the forfeiture,

x x x x

All such rules shall be published in the Cochin Government Gazette and shall then have the force of law.

6. Whoever in contravention of this Act, or of any rule or order made under this Act, or of any licence or permit obtained under this Act,

a. possesses tobacco for the purpose of sale, or

b. transports tobacco, or

c. imports or exports tobacco, or

d. sells tobacco, or

e. cultivates tobacco, shall on conviction before a Magistrate, be punished for each such offence with fine which may extend to five hundred rupees."

3. We should now give the relevant parts of the Notifications that were applicable for the auctions, at which the partners had obtained the licenses. It is notification N. D. No. 148 and is dated May 20,1948. The relevant parts are the following: -

1. The "A" class licensees will have the right of import and sale to "B" class licensees as provided for under the rules. They may also purchase tobacco from any of the stockist licensees, or from another A class licensee in the State.

"B" class licensees will have the privilege of sale only to consumers and to the C class licensees in accordance with the conditions of such license