Kandasamy V. Kandiah Et Al.,

1954 Present : Gunasekara, J., and Fernando, A.J.

P. KANDASAMY, Appellant, and S. R. KANDIAH et al.,
Respondents

S. C. 53-D. C. Jaffna, 5,896/M

Contract-Prohibitory statute-Illegality-Construction-Excise Ordinance (Cap. 42) -Sections 17, 24, 43, 45.

Where an agreement does not expressly contemplate the commission of a breach of any statutory provision, it can be held to be unlawful only if its performance would necessarily involve such a breach or if extrinsic evidence indicates the intention or the need to commit such a breach.

The 1st and 2nd defendants who possessed exclusive and non-transferable licences for the sale of arrack entered into an agreement of " partnership " with the plaintiffandthe3rddefendant. The agreement did not envisage that any one but the actual licensees would be responsible for the sale of arrack at taverns, and the object of the partnership was only to contribute capital and to share the profits and losses. When the plaintiff sued for an accounting and to recover his share of the profits, the trial Judge dismissed the action on the preliminary issue that the agreement was illegal and contrary to public policy and could not therefore be enforced.

Held, that the contract did not contravene any relevant provision of the Excise Ordinance and was not illegal.

APPEAL from a judgment of the District Court, Jaffna.

H. V. Perera, Q.C., with C. Chellappah and Sivagurunathan, for the plaintiff appellant.

S. Nadesan, Q.C. with S. Sharvananda, for the 1st defendant respondent.

Cur. adv. vult.

September 28, 1954. FERNANDO, A.J.-

The 1st defendant in this action was the holder of the exclusive privilege (granted under the Excise Ordinance) of selling arrack by retail in taverns in a certain area during the period October 1948 to September 1949, and the 2nd defendant was the holder of a similar privilege in respect of taverns in certain other areas for the same period. The conditions for the exercise of the privilege which are laid down by virtue of powers conferred by s. 24 of the Ordinance, include the following :-Non transferability of Licence. Manager to be approved. No privilege of manufacture, supply or sale or any interest therein shall be sold, transferred or sub-rented without the Government Agent's previous permission nor if the G. A. so orders, shall any agent be appointed for the management of any such privilege without his previous approval.

Shortly after the privilege had been granted, those two defendants and the plaintiff and 3rd defendant entered into an agreement which commenced with a recital that the 1st and 2nd defendants " having taken " the plaintiff and 3rd defendant " as partners shareholders we are desirous of carrying on the said business of purchase and sale of arrack with a capital of Rs. 120,000/- ", and that each party would contribute a specified part of the amount.


The agreement itself contains provisions which are substantially as follows :-

(1) that each party would have certain shares (proportionate to his. contribution of capital) ;

(2) that moneys already deposited with the Government as security for certain purposes connected with the privileges would be regarded as being contributed by the parties according to their respective shares and that when the deposits became due for refund they would be divided proportionately between the parties ;

(3) that the 1st defendant and the 2nd defendant shall carry on and manage the said business and deposit monthly money due for arrack purchased (from the Government) and pay for all expenses ;

(4) that the 1st defendant and 2nd defendant shall keep proper accounts which shall be in the custody of the 1st defendant, and that moneys not actually required for the business shall be in the custody of the 1st defendant ;

(5) that the parties shall meet monthly and ascertain the correctness of the accounts, and that profits or losses shall be paid or bo

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