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1980 Supreme(Goa) 7
Goa High Court
K. M. MISHRA, ADDL. J. C.
Silvestre Loiola Fernandes - Appellant
Versus
Victor Manuel Fernandes - Respondents
First Civil Appeal No. 90 of 1977
Decided On : 18 June 1980
S.K. Kakodkar, for Appellant; M.S. Usgaonkar, for Respondent.
An agreement that involves the transfer of a liquor licence without the permission of the competent authority is void under Section 23 of the Indian Contract Act, 1872, as it is contrary to law.
Headnote:
CONTRACT - TRANSFER OF LIQUOR LICENCE - VOID AGREEMENT - GOA, DAMAN AND DIU EXCISE DUTY ACT, 1964 - SECTION 9, RULE 104(2) - INDIAN CONTRACT ACT, 1872 - SECTION 23 - TRANSFER OF MANAGEMENT VS. TRANSFER OF BUSINESS - CONTROL OVER BUSINESS - PUBLIC POLICY.
Fact of the Case:
Plaintiff, a liquor licence holder, entered into an agreement with the defendant to manage his commercial establishment, including the bar and wholesale and retail businesses, for seven years in exchange for compensation. The defendant failed to pay the compensation, leading to a suit by the plaintiff for possession of the premises and payment of the outstanding amount.
Finding of the Court:
The court held that the agreement was void under Section 23 of the Indian Contract Act, 1872, as it amounted to a transfer of the liquor licence without the permission of the competent authority, which is prohibited under Section 9 of the Goa, Daman and Diu Excise Duty Act, 1964, and Rule 104(2) of the rules framed thereunder. The court found that the agreement was not a mere transfer of management but a transfer of the business itself, as the plaintiff had relinquished control over the business to the defendant.
Issues: 1. Whether the agreement between the plaintiff and the defendant was a transfer of management or a transfer of the liquor licence. 2. Whether the agreement was void under Section 23 of the Indian Contract Act, 1872, for being contrary to law.
Ratio Decidendi: The court relied on several precedents, including Krishna Menon v. Narayana Ayyar (AIR 1962 Ker 21), which held that agreements that allow persons to do business in contravention of Abkari Rules are void. The court found that the agreement in the present case was not a mere transfer of management but a transfer of the business itself, as the plaintiff had relinquished control over the business to the defendant. This was in contravention of Section 9 of the Goa, Daman and Diu Excise Duty Act, 1964, and Rule 104(2) of the rules framed thereunder, which prohibit the transfer of a liquor licence without the permission of the competent authority.
Final Decision: The court allowed the appeal, set aside the judgment and decree of the trial court, and held that the agreement was void and unenforceable.
2. The plaintiffs case is that he is the owner of a commercial establishment known as "Elite Agencies" situated at Mapusa in the premises of Dr. Constancio Mascarenhas. In the said premises he was carrying on business in wines, spirits, alcohol and provision, being the holder of import licence including drug licence, wholesale licence, retail licence and bonded warehouse licence. He was also running a bar there. Due to illhealth he decided to entrust the management of the said establishment to a person experienced in that line. The defendant represented that he had enough experience in the trade. Accordingly they entered into a contract whereby the plaintiff entrusted the defendant with the management of the establishment including running of the bar, wholesale business and retail business for a period of seven years from 1-6-1968 to 31-5-1975 on payment of Rs. 1,332,00 as yearly compensation payable in two equal instalments. As the defendant failed to pay the six monthly compensation of Rs. 666, he was compelled to file on 18-11-1971 the suit to recover possession of the premises and for payment of an amount of Rs. 6340.36 on account of breach of condition of the agreement after failure of an amicable settlement.
3. The defendant contested the suit saying that the contract was obtained by misrepresentation. He was not liable to pay any compensation. The plaintiff had no right to forfeit the security as he had not committed any breach of contract. The suit was not maintainable as the contract is prohibited by the Goa, Daman and Diu Excise Duty Act, 1964. According to him it was a real transfer of business of the "Elite Agencies" in his favour. As the same had been done without the permission of the competent authority the contract was void and illegal and consequently unenforceable in terms of Section 23 of the Indian Contract Act.
4. On the aforesaid pleadings the Trial Court framed as many as sixteen issues and on a consideration of the evidence decreed the suit. By the aforesaid decision the Trial Court ordered forfeiture of the bond amount of Rs. 5,000 (furnished by the defendant) and the defendant was further directed to pay Rs. 6340.36 to the plaintiff together with costs of Rs. 1,000.
5. Mr. Kakodkar, learned advocate for the appellant, raised the following two points for consideration; (1) The whole transaction being void in the eye of law, the plaintiff could not come to Court on the basis of such an agreement and as such the decision of the Trial Court awarding the compensation is liable to be set aside; and (2) the decision of the Court below ordering forfeiture of the bond amount of Rs. 5,000 is not legal. But in the course of argument the second point was given up. So only the first point remains to be considered in this appeal.
6. The following facts are not in dispute :-
The plaintiff had a licence for sale of liquor. The defendant had no licence but he carried on the business with the licence of the plaintiff. Position is well settled that under Section 9 of the Goa, Daman and Diu Excise Duty Act, 1964, to be hereinafter called as "the Act" for the sake of brevity, no liquor shall be sold except under the authority of a licence issued under the Act. Further under Rule 104(2) no licence for sale of liquor shall be transferred by the licensee to other person unless under the permission granted by the Commissioner.
7. The contention of Mr. Kakodkar is that in the instant case there has been actual transfer of licence. To this the reply of Mr. Usgaonkar, learned advocate for the respondent is that there is no prohibition in the Act or the Rules framed thereunder to entrust the management of any establishment for sale of liquor with another person. Accordin
