Partnership agreements implying a transfer of the right to vend, even if formed before the auction, are illegal under Rule 27 of the Sales Notification.

Wadsworth, J.

1. This appeal arises out of a contract connected with a toddy shop lease. The plaintiff, who is appellant here, bases his suit on allegations that he along with the defendant and one Senniandi entered into an agreement that one or more shops should be taken in auction in 1932-33, that the defendant having experience should manage all the affairs relating to the sale and maintain the accounts, that he should render account to his partners, who should obey his directions and that out of the profits each partner should get a share proportionate to their investments. It is alleged that the plaintiff subscribed Rs. 400, Senniandi Rs. 200 and the defendant Rs. 500 and the defendant held the money. In pursuance of this agreement the defendant took a shop in auction and the licence was obtained in his name and the shop was run in partnership. Shortly afterwards Senniandi withdrew and on the date when he withdrew, 2nd November 1932, the plaintiff signed a memorandum of the agreement in the shop account. The plaint alleges that the defendant had failed to account for the profits and that in accordance with the terms of the agreement the plaintiff is entitled to the return of his capital and the fixed sum of Rs. 100 specified in the agreement or alternatively to an account of the profits of the business. The written statement of the defendant alleges that the defendant took the shop in auction for himself only, that there had been no definite partnership agreement before the sale, that the partnership came into being a month after the sale and that the agreement was that the plaintiff himself should manage the shop and keep the accounts. The defendant pleads ignorance of the memorandum of 2nd November 1932 and alleges that the partnership is illegal being opposed to the Abkari Rules. The trial Court decreed the suit. The learned Subordinate Judge has held that the partnership is illegal as being opposed to Rule 27 of the Sales Notification. He has also found that the date of the partnership agreement must have been either the date of the actual auction or shortly thereafter, that both the plaintiff and the defendant took part in the management of the shop, that the plaintiff must be held responsible for the suppression of accounts and that the partnership ended in a loss. He therefore dismissed the plaintiffs suit. The important question is whether the partnership, the existence of which both sides admit, was illegal. Rule 27 of the General Sales Notification says:

No privilege of supply or vend shall be sold, transferred or subrented without the Collectors previous permission.

2. It is common ground in this case that the bid at the auction and the licence granted in pursuance thereof were both in the name of the defendant alone, that the Collectors permission for a transfer was not obtained and that the capital with which the shop was run was provided by three partners, the plaintiff, defendant and Senniandi, who after a while withdrew. The finding of fact by the Subordinate Judge as to the date of the partnership agreement binds me in second appeal. I may observe that to my mind it makes no difference whether the partnership agreement was entered into before the bid at the auction or after the bid at the auction, provided that the bid was not made in the names of the partners as and for the partnership. I am aware that this view is somewhat at variance with that expressed in certain cases to which I shall refer. But the position seems to me to be this. When there is a partnership for running a toddy shop capital is required substantially for two main purposes. One is to make the deposit of advance rentals required by the Government and the other is to make the advances necessary to the owners of the tree and the tappers who are to supply the toddy.

3. There are, I think, four likely ways in which persons may be associated for the purpose of financing such a trade. There is the simple case in which A and B form a part