Madras High Court
RAMANUJAM,V.RAMASWAMI
P.N.Dorairaj - Appellant
Versus
N.G.Rajan - Respondent
Decided On : 07/12/1976
PARTNERSHIP - CINEMATOGRAPH ACT - ILLEGALITY - SHARE CAPITAL - RESTITUTION - S. 23, INDIAN CONTRACT ACT - S. 65, INDIAN CONTRACT ACT - Whether a partnership business can be carried on benami in the name of one of its partners and whether the partnership business can be carried on benami. Whether the plaintiff is entitled to claim the amount due under the promissory note as the amount represented his share capital given to the defendants.
Fact of the Case:
Plaintiff filed a suit for recovery of a sum of Rs. 11,048-26 on the foot of a promissory note dated 21-10-1966 executed by the defendants. The plaintiff and defendants 1 to 3 entered into a partnership to run a touring cinema under the name and style 'Shanthi Talkies'. The licence issued under the Madras Cinema (Regulation) Act 1955 was in the name of the second defendant. The plaintiff did not want to continue as a partner in the new camp and insisted that he should be allowed to get out of the partnership with his share of the partnership capital. The defendants agreed ultimately for the plaintiff getting out of the partnership and towards the share capital and other amounts due to the plaintiff the defendants executed a promissory note for a sum of Rs. 10,590.
Finding of the Court:
The trial court held that the evidence does not establish the existence of a partnership prior to the execution of the suit promissory note and that in any case it was not shown that they entered into the partnership with the full awareness of the illegality of the partnership. The trial court also held that the plaintiff was not to be blamed on any ground and that therefore he could not be denied the relief by the court on any ground of illegality of the partnership. It also held that the promissory note was not illegal or void.
Issues: 1. Whether the partnership was illegal and void ab initio? 2. Whether the plaintiff is entitled to claim the amount due under the promissory note as the amount represented his share capital given to the defendants?
Ratio Decidendi: 1. The court held that the partnership was illegal and void ab initio as it was entered into in contravention of the provisions of the Madras Cinemas (Regulation) Act 1955. 2. The court held that the plaintiff was entitled to claim the amount due under the promissory note as the amount represented his share capital given to the defendants, as the parties were not aware of the illegality of the partnership at the time of entering into the agreement and the plaintiff came to know of the illegality only after the defendants disputed their liability in their reply notice.
Final Decision: The court dismissed the appeal and confirmed the judgment and decree of the court below.
V. RAMASWAMI, J. :- Defendants are the appellants. The suit was filed by the respondent-plaintiff for recovery of a sum of Rs. 11,048-26 on the foot of a promissory note dated 21-10-1966 executed by the defendants. The facts leading to the execution of the promissory note are as follows. The plaintiff and defendants 1 to 3 entered into a partnership. But the terms of the partnership were not reduced to writing. The parties also had not let in any oral evidence to show as to what was the object of business of the partnership. But it is seen from the notices exchanged between the parties and the licences issued under the Cinematograph Act, they were running a touring cinema under the name and style 'Shanthi Talkies'. The licence issued under the Madras Cinema (Regulation) Act 1955 was in the name of the second defendant and is dated 11-2-1965 and the licence covered a period from 13-2-1965 to 18-2-1966. Though the licence is in the name of the second defendant the cinema business was run by the partnership consisting of the plaintiff and defendants. It appears that the parties carried on the business till the expiry of the period of the licence and they had to shift the camp to a different site and obtain a fresh licence. The licence for the new site was obtained on 15-6-1966 and the licence itself came into force on 19-9-1966. It appears the plaintiff did not want to continue as a partner in the new camp and insisted that he should be allowed to get out of the partnership with his share of the partnership capital. The defendants agreed ultimately for the plaintiff getting out of the partnership and towards the share capital and other amounts due to the plaintiff the defendants executed a promissory note for a sum of Rs. 10,590. The suit has been filed for this sum with interest due thereon, on default of the defendants to pay the principal and interest when demanded.
2. The defence was that the plaintiff procured the cinema licence in the name of the second defendant as sole proprietor of the business but caused the business, to be run in partnership consisting of the plaintiff and defendants 1 to 3. Such a partnership is illegal, opposed to public policy and would defeat and circumvent the provisions and the rules and regulations relating to touring cinema business. The promissory note was executed in respect of the amount alleged to be due to the plaintiff from the said illegal partnership towards his share of the business without any dissolution of the partnership or without looking into accounts and that therefore it was void and unenforceable under S. 23 of the Indian Contract Act. It was further contended by the defendants that they were not agreeable to the plaintiff getting out of the partnership before the end of the period of the subsequent licence, but they were forced and coerced to execute the promissory note on threat of legal proceedings without even looking into the accounts of the partnership. Since there was no dissolution of the partnership as such and the business was not wound up the plaintiff was not entitled to recover any amount recited in the promissory note.
3. The parties did not adduce any oral evidence and the only documents that were filed were the promissory note, the licence issued under the Cinematograph Act and the notices exchanged between the parties.
4. The trial court held that the evidence does not establish the existence of a partnership prior to the execution of the suit promissory note and that in any case it was not shown that they entered into the partnership with the full awareness of the illegality of the partnership. The trial court also held that the plaintiff was not to be blamed on any ground and that therefore he could not be denied the relief by the court on any ground of illegality of the partnership. It also held that the promissory note was not illegal or void. In the result, the suit was decreed as prayed for. Hence the present appeal by the defendants.
5. Before sett
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