RAMA MOOPAN Vs. MUTHA MOOPAN

JUDGEMENT

(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, 2 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 2 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 plaintiff's 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 Collector's 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 Collector's 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 partnership, take a shop at auction in their joint names, get a joint licence and run the shop jointly. Provided that the revenue authorities have no objection to the joint licence, there is nothing objectionable in such a partnership. Secondly, there is the case in which B purchases the right to a licence in auction with funds supplied by A, agreeing to return to A the money advanced together with interest or a fixed share of the profits, A having no proprietary right in the business and no concern therein except the remuneration for the advance which he has made. In such a case A is not a partner, but a mere financier and there is no question of any transfer of a right to vend. Then there is the case in which A and B agree together that B shall bid for a shop and get a licence in his name but work it for the partnership of A and B who shall be joint proprietors of the shop and shall share profit and loss. It seems to me that in such a case even though the partnership be formed before the auction, the agreement necessarily implies a transfer of an interest in the right to vend from B to whom it has been granted by the Collector to the partnership of A and B and I cannot myself see how the fact that the partnership was formed before the bid for the shop makes any difference; for that which B gets is what has been granted to him and the proprietary right vests in the person to whom the grantor makes the grant; and if the right so vested by virtue of a private agreement becomes the property of two persons in partnership, there must necessarily be a transfer from the grantee to the partnership.