S VENKATARATNAM Vs. YVENKATARATNAM

JUDGEMENT

(1.) This appeal arises out of a suit for settlement of accounts and for recovery of the plaintiff's one-fifth share. The appellant is defendant 1. He along with defendants 5 and 6, had obtained certain lands on lease from the Government on 11 September 1918 for a period of 25 years for the purpose of manufacturing salt. Subsequently, on 17 November 1918, there was an agreement between the plaintiff in the suit and defendant 1 under which it was agreed that the plaintiff should have one-fifth share out of the one-third share which defendant 1 had in the business, and subject to the terms of the lease deed and the conditions which the Government and its officers might lay. In accordance with the said agreement defendant 1 agreed that the profits and losses will be borne in the shares as stated above. Subsequently some of the lands demised under Ex. 1 were not suitable for the purpose for which the lease was taken and hence there was a subsequent lease under Ex. 2 for the unexpired portion of the lease term, viz., for a period of 22 years. It is the plaintiff's case that this lease was only a modification of the lease of 11 September 1918 and therefore he was entitled to the benefits of the same. He therefore sued for a settlement of accounts between himself and defendant 1. Defendants 2 to 4 are the sons of defendant 1. Various pleas were raised of which it is necessary to state only two. One was that the agreement between the plaintiff and defendant 1 was invalid as being illegal and opposed to public policy and that the plaintiff could not enforce any rights under the agreement. The second was that the agreement was enforceable if at all only in respect of the rights under Ex. 1 and therefore no claim could be made in respect of the rights conferred under the lease deed, Ex. 2. The issues relating to these two pleas were tried as preliminary issues and. the District Munsif dismissed the suit upholding the contention of defendant 1. On appeal the learned District Judge of Kistna disallowed both the pleas, found that the agreement was valid and legal and was enforceable and that the contract must be construed to relate to the subsequent lease under Ex. 2 also. He therefore allowed the appeal and remanded the suit for disposal on the other issues. Hence this appeal.

(2.) The only two points for consideration are : (1) whether the agreement evidenced by Ex. A is illegal and opposed to public policy and is not enforceable and (2) whether the plaintiff is entitled to enforce the agreement even in respect of the rights conferred under Ex. 2. Before dealing with the contentions of the appellant we should bear in mind what the legal relationship between the parties is. Exhibit 1 shows that defendants 1, 5 and 6 obtained a lease from the Government in respect of certain lands with all the salt pans and brine pans in them. The lease was for 25 years and the parties were at liberty to determine the cease after giving notice which will have effect at once and six months time was allowed for the removal of the salt by the lessees. The land was to be exclusively used for the manufacture, storage and sale of salt and works connected with it. The lessees were not to erect any dwelling houses nor remove brine in unmanufactured state. The lessees were to pay the land tax, assessment and all taxes. It was further stated that the lessees shall be granted a modified excise license for manufacturing salt and they should observe the terms of such license or any statutory modifications thereof which the Government of Madras might in its discretion make. There was another provision that the lessees shall not,/except with the written consent of the lessor assign, sublet or part with the possession of the leased land or any portion thereof and shall not transfer by sale or otherwise the powers granted to them. There was also a proviso that nothing contained therein shall prevent the lessees at any time from taking any partner or partners into the business carried on by them under the lease who may be approved by the commission. The lease itself was in connexion with partnership arrangement as between defendant 1 and defendants 5 and 6. Each of them was entitled to one-third share in it. Under the agreement evidenced by Ex. A it is only defendant 1 that took the plaintiff in partnership. It is therefore clearly a case of sub-partnership and that was what was urged for respondent 1 before me. As a matter of fact even in the appeal memorandum ground No. 2 the relationship is described as a sub-partnership.

(3.) Under Section 29, Partnership Act, "(1) A transfer by a partner of his interest in the firm, either absolute or by mortgage, or by the creation by him of a charge on such interest, does not entitle the transferee, during the continuance of the firm, to interfere in the conduct of the business, or to require accounts, or to inspect the books of the firm, but entitles the transferee only to receive the share of profits of the transferring partner, and the transferee shall accept the account of profits agreed to by the partners. (2) If the firm is dissolved or if the transferring partner ceases to be a partner, the transferee is entitled as-against the remaining partners, to receive the share of the assets of the firm to which the transferring partner is entitled, and, for the purpose of ascertaining that share, to an account as from the date of the dissolution." Thus it will be seen that a sub-partner like the plaintiff has got only a right to receive a share of the profits of the transferring partner. He has no right to interfere with the conduct of the business or even to inspect the accounts of the firm. In short he has nothing to do with the business except a claim to a share in the profits which his transferor will be entitled to. This has to be borne in mind in considering the pleas raised by defendant 1. Defendant 1's case is that under the terms of the leases Exs. 1 and 2 the lessees can take only a partner who is approved by the commissioner, and as no such approval had been obtained in this case the partnership agreement runs counter to one of the conditions provided in Clause (11) of the lease, and as by the transfer the plaintiff will have all the powers which defendant 1 has he would be exercising all the privileges of a licensee without getting one arid consequently such a transfer is illegal and opposed to public policy. The first Court held that as the terms of the lease directed the approval of the Commissioner before any partner is taken and as Ex. A the agreement in question was entered into subject to the conditions of the lease and the previous sanction or ratification has not been obtained the suit is not maintainable. The learned District Judge on appeal pointed out that all that the plaintiff did in this case was to advance money, that he had nothing to do with the manufacture of salt, that he did not interest himself in the manufacture, that defendant 1 himself as D. W. 1 did not say that the effect of Ex. A was to assign or sub-let the demised premises or to confer upon the plaintiff any control over the manufacture of the salt and that consequently Ex. A was not opposed to public policy and that it did not violate any terms of the lease. Thus it will be seen that from the nature of the agreement evidenced by Ex. A, viz., a sub-partnership and from what actually happened it was clear that the plaintiff had nothing to do with the business of the manufacture of salt and all that he did was to advance . money to defendant 1 for the business and that all that he sought was a share in the profits which defendant 1 will be entitled to get. As pointed out by the learned District Judge the inclusion of an unqualified person on a business or trade who is prohibited by the statutes from carrying on that particular business or trade would not be within the mischief of the statutes prohibiting such persons from carrying on the trade when such person has nothing more than a claim to a share in the profits arising from the trade or business : vide Lindley on Partnership, .Edn. 8, p. 114. As a matter of fact, in Champsay Dossil V/s. Gordhandas ( 17) 4 A.I.R. 1917 Bom. L.R. 250 it was pointed out that where a license prohibited the licensee from subletting the whole or part of the privilege a transfer of the lease or license under which the transferee had no right to manufacture or vend salt but is only entitled to share in the profits, it would not amount to subletting or alienation of the privilege. The case was taken up to the Privy Council in appeal and the ruling of the Bombay High Court was confirmed : vide Gordandas V/s. Champsey Dossa ( 21) 8 A.I.R. 1921 P.C. 137. Similarly, in Nazaralli V/s. Babamiya ( 15) 2 A.I.R. 1915 Bom. 244 which was a case in connexion with a license granted by a forest officer under the Forest Act, it was held that an agreement to share profits was valid even though the license issued by the forest officer prohibited assignments and subleases without the permission of that officer.