Fakirchand vs Bansilal

Palnitkar, J.—This second appeal has been referred to the Full Bench for the decision of an interesting question of law as to the validity of a contract entered in contravention of the provisions of the Hyderabad Abkari (Excise) Act.

The brief facts of the case are that the plaintiff-appellant filed a suit for the possession of a liquor shop in Narayanguda bearing Abkari Licence No. 8, and for accounts stating that he had obtained the licence of the shop in the name of the defendant; that the contract between the plaintiff and defendant related to the defendant''s supervising the sales of liquor in the shop and maintaining its accounts for which the defendant would be entitled to a salary of Rs. 100 per mensem; that the defendant was neither paying any profits nor was rendering any accounts and therefore he be dispossessed. Plaintiff also prayed for a declaration that he is the owner of the shop in dispute and that the defendant is a benamidar and servant. He further asked that after the accounts have been rendered the plaintiff be given a decree for whatever profits may have actually accrued.

In his written statement the defendant denied the plaintiff''s title and stated that the plaintiff had nothing to do with the shop nor was there any contract as alleged in the plaint, nor was the defendant a servant of the plaintiff. He further claimed that in 1349 Fasli (1939-40) the licence of the liquor shop was originally given to one Jacob Fernandez who had entered into a partnership with the defendant; that subsequently the Abkari Department of the Government granted the licence of the shop to the defendant in 1350 Fasli (1940-41), and since then the defendant has been the licensee owner of the shop and has been carrying on the business. It was also urged that Government had the sole authority to grant licences and that the licence having been granted to the defendant, a suit for the possession of such cannot lie.

The trial Court framed several issues in the case and on Aban 30, 1353 Fasli (October 5, 1944) it proceeded to decide five of the issues. The first was with respect to court-fees; the second related to limitation; the eleventh whether the Abkari Department should be impleaded as a party to the suit; the thirteenth whether the Court had jurisdiction to entertain the suit and the fourteenth whether the relief claimed by the plaintiff amounts to the cancellation of the orders by the Excise Department and whether the Court could grant such a relief.

Though the issues were not happily worded, the last issue raises indirectly the question as to the validity of the contract set up by the plaintiff. The trial Court held that the contract was illegal and against public policy and therefore the reliefs clamed by the plaintiff could not be granted. It also relied on two circulars of the High Court and the Revenue Department which it is necessary to discuss here. On appeal the learned Judge of the First Appellate Court upheld the decree dismissing the suit.

The question that falls to be decided in this second appeal is how far the contract as alleged by the plaintiff is valid under the provisions of the Hyderabad Abkari Act.

It is conceded on behalf of the plaintiff-appellant that the licence of the liquor shop is in the name of the defendant-respondent and such licences are given under S. 15, Hyderabad Abkari (Excise) Act, which empowers the Talukdar or any other officer authorised by the Government to grant a licence under the provisions of the Act. It is also conceded that such a licence granted under the rules framed under the Abkari Act cannot be transferred without the permission of the Collector or Deputy Excise Commissioner. Indeed, R. 23 of the Rules framed by Government in 1353 Fasli (1943-44) expressly forbids such transfer.

Then S. 14 of the Act lays down that a lessee or licensee will not be entitled to take any person as a partner without the permission of the Government. Thus the plaintiff cannot succeed unless he can successfully establish that the contract contravening the above provisions of the Abkari Act is legally enforceable especially when the contraventions of the above provisions of the Abkari Act have been made punishable under S. 33 of the Act, sub-ss. (2) and (3) whereof provide that if a holder of a licence acts in contravention of the conditions of the licence or wilfully contravenes any of the rules framed under S. 3, he shall be punished with fine which may extend to Rs. 200, or with imprisonment for a term which may extend to two months or with both.

It was argued by the learned advocate for the appellant that the provisions in the Abkari Act prohibiting the transfer of licence or entering into partnership without the permission of the Government have been enacted for the protection of the revenue and that the contract entered into in contravention should not be regarded as being forbidden under S. 23, Contract Act, which lays down that:

Every agreement of which the object or consideration is unlawful is void.

Now, the avoidance of contracts under the aforesaid section may arise because:

its consideration or object is immoral;

it is opposed to public policy; or

its consideration or object is illegal.

There is nothing in the contract as set up by the plaintiff to show that it is immoral. We have, therefore, to consider the question of its being contrary to public policy in some detail and to see what was the object of the Legislature in enacting the prohibitory sections of the Hyderabad Abkari (Excise) Act. Whether the prohibitory sections are intended mainly for the protection of the revenue or the object of the Legislature in enacting them is to prohibit commission of certain acts as opposed to public policy.

To begin with, the contravention of the provisions stated above has been penalised by S. 33 of the Abkari Act and it has not been made merely expensive. It is thus evident that the prohibitions contained in the Abkari Act have been enacted for the protection of the public and not merely for the protection of the State revenue. Then granting of a licence under the Abkari Act depends among other things also e.g., on consideration of the character of the licensee. Therefore, to allow any sub-letting or transfer without permission will not be expedient in the public interest. The principle of law on this point has been stated by Pollock and Mulla tersely as follows:

When conditions are prescribed by statute for the conduct of any particular business or profession and such conditions are not observed, agreements made in the course of such business or profession are void if it appears by the context that the object of the Legislature in imposing the condition was the maintenance of public order or safety or the protection of the persons dealing with those on whom the condition is imposed; but they are valid if no specific penalty is attached to the specific transaction and if it appears that the conditions were imposed for merely administrative purposes, e.g., the convenient collection of revenue. (Pollock Si Mulla''s Contract Act:--p. 139).

The above quotation makes it clear that the object of the Legislature should be found out by interpreting various sections and Rules under any particular enactment.

According to the rules framed under the Hyderabad Abkari (Excise) Act besides the prohibition of transfer of licence, there are several conditions imposed which are clearly for the maintenance of public order. For instance, R. 7 prescribes that the liquor shop should be closed if any regiment or police force passes by it or encamps near it. Rule 7 also prescribes that only such measures and weights should be used as are approved by Government. Rule 11 lays down as to who should be the persons that are employed in the shop. It further prohibits the employment of any person who has been punished under any of the provisions of the Penal Code or has leprosy or any other contagious disease.

There are other provisions with regard to the time of opening and closing the liquor shops. All these provisions are for the maintenance of public order and for the benefit of the public. That being the intention of the Act and the Rules, their observance must be strictly enforced and contracts made in contravention of these provisions are invalid. In our opinion it is clear that the conditions imposed in the Hyderabad Abkari Act are not merely for the protection of the State revenue or for convenience of revenue collection, but are also for the protection of the public and as such the provisions of the Act should be observed and cannot be allowed to be contravened.

We will now refer to certain authorities of other High Courts construing similar provisions of the Excise or Opium Acts. In -- Chava Ramanayudu Vs. Suryadevara Seetharamayya and Others, it has been held that the, provisions of the Madras Abkari and Opium Acts are not intended merely to protect public revenue but the prohibitions contained in them are based on public policy. The facts of the case were that money was advanced on a pronote to carry on the business of partnership in contravention of Cl. 27 of the General Notification under the Madras Act. The partnership consisted of a person in whose name the licence was issued and of another person who became a partner without getting the permission of the Collector for the same as required by Cl. 27 of the General Notification. It was held that the partnership being in contravention of the provisions of that clause, was illegal & that the object of the partnership was to do business in contravention of Cl. 27; hence the return of the money advanced for such illegal partnership could not be decreed.

Similar view was taken in -- ''Nalan Padmanabhan v. Badrinath'', 35 Mad 582 (B), in which the partnership was entered for the purpose of carrying on opium business in contravention of Cl. 27 and without taking permission from the Collector for that purpose. In -- ''Boisteb Churn Naun v. Wooma Churn Sen'', 16 Cal 436 (C), the suit was for the price of some liquor sold to the defendant. The defendant contended that the contract was void under S. 23, Contract Act, as the plaintiffs had sold the goods without obtaining a licence under the Excise Act. It was held that the Act was not framed solely for the protection of revenue; but was embracing other important objects of public policy as well and, therefore, the agreement entered into by a person who had not obtained a licence under the Act was void and money cannot be recovered under it.

In -- ''Behari Lall v. Jogodish Chandra'', 31 Cal 798 (D), it was again held that the prohibition by the Excise Act of the sale of liquor without a licence is based upon the principle of public policy and on moral grounds and that the purpose of the Act is not confined to the protection of the revenue alone.

In -- ''Ismailji Yusufali v. Raghunath Lachiram'', 33 Bom 636 (E), the question for consideration was with respect to the provisions of the Salt Act. The facts of the case were that the defendant''s father had obtained from the Government a lease of certain salt pans to manufacture salt under licence and one of the conditions of the lease was that the lessee should not sub-let the salt pans without the written permission of the Collector. The father of the defendant without any such permission sub-let the pans to R, who as security for the performance of the conditions of the sub-lease deposited a sum of Rs. 1,000/-. The sub-lease was acted upon and after its expiration, the sub-lessee brought a suit for the recovery of the deposit from his son. The latter denied the right to recover the deposit on the ground that it formed the consideration for an agreement which having been forbidden by law was illegal. The plea of the defendant prevailed and it was held that the real object and the necessary effect of the sub-lease was to enable the plaintiff to manufacture salt without a licence in the guise of a sublease although that was forbidden by law and by the terms of the licence.

In -- Hadibandhu Behera Vs. Gopal Sahu and Others, ), it was laid down that an agreement by a liquor contractor whereby the entire charge of the liquor shop was given to a third person on the latter agreeing to pay the former the advance licence fee amounted to a transfer and was void being contrary to R. 143 framed under S. 89, and hence the plaintiff cannot claim a refund of the advance licence fee and price of the stocks. See also -- ''Raghunath Lalman v. Nathu Hirji'', 19 Bom 626 (G); -- ''Ritchie v. Smith'', (1848) 136 ER 1329 (H) and -- ''90 ER 160''(?), which were also cited before us.

In the English cases it has been laid down that if both the parties to the contract were found to be ''pari delicto'' in procuring the illegality then neither of the parties will be entitled to claim any benefit, the contract being illegal.

It was then argued that the authorities of the Hyderabad High Court (of the pre-Constitution days) are different and a number of Deccan Law Reports and Ain-e-Deccan Reports were cited before us. We are indebted to the learned advocates of the parties for the learning and industry displayed in searching for those authorities. The Hyderabad authorities may be classified into two groups. The older authorities followed the view which has been taken by the several High Courts in the cases which we have cited above. Thus in -- ''1 Ain-e-Deccah 313 (I)'', it was held that the Abkari Contractor cannot transfer his contract without the permission of the Government. See also -- ''6 Ain-e-Deccan 165 (J)''. In -- ''Lachma Gowd v. Vadala Potanna'', 7 Ain-e-Deccan 105 (K), it was laid down that a contractor taking a partner (Shikimidar) without the permission of the Abkari Department cannot enforce such a contract and the same was void. However, there is no discussion as to why the contract was regarded as void and the judgment is a short one.

In -- ''Yenkayya v. Ramayya'', 7 Ain-e-Deccan. 325 (L), the question was whether a suit based on a partnership in Abkari contract could properly be filed without mentioning that the partnership, was with the permission of Government and it was held that the suit could not lie unless such a permission was mentioned in the plaint. The judgment covers only a few lines and there is no discussion. Then in -- ''Mohanlal v. Manilal'', 8 Ain-e-Deccan 259 (M), it was held that an Abkari Contractor was not entitled to take any one into partnership without the permission of the Government, and a suit for profits based on a partnership for which no permission of the Government was taken should be dismissed. Again there is no discussion in the case with respect to any of the provisions of the Contract Act. It was simply held that such a contract and contravention of the provisions of the Act was opposed to jurisprudence and SHARA (Muslim Law).

In -- ''Gundayya Kala v. Venugopala Naidu'', 8 Ain-e-Deccan 398 (N), it was held that a partnership in an Abkari contract without the permission of the Government was void. The reasoning given is that such a partnership was against public policy and that it affected the interests of the Government inasmuch as it was possible for persons to conspire by entering into such partnerships and bid at auction sales of Abkari so as to put the Government to loss. In -- ''Rajasahib v. Avan Gowda'', 9 Ain-e-Deccan 57 (O), the same view was again expressed that a partnership in Abkari contract without the proper permission was void. The view was expressed that if such partnerships were allowed it would facilitate conspiracy by persons, which may result in reduction or loss of money to the Government at the time of auction sale of the contract.

In -- ''Erappa v. Hussain Sahib'', 9 Ain-e-Deccan 278 (P), the view was expressed that if an Abkari Contractor enters into a sub-lease with some other persons without the permission of the Government such a sub-lease would not be valid if it is denied by the Contractor. In -- ''Kamayya v. Venugopal'', 9 Ain-e-Deccan 530 (Q), a Pull Bench held that contracts of partnership or sub-lease by an Abkari Contractor from Government without the permission of the Government are void as they are against public policy. The learned Judges examined a number of cases contained in the Ain-e-Deccan and Mukkanina Deccan and came to the conclusion that such agreement of partnership or sub-lease were contrary to law and void. That was a judgment passed in 1311 F. (1901-1902 A.D.), about fifty years ago.

In -- ''Venkataraju Bai v. Paddam Ramayya'', 13 Ain-e-Deccan 624 (R), the facts were that a contract Shikmi (partnership) Abkari was entered into by the Abkari Contractor without the permission of the Government. The suit was for the profits arising out of the partnership and it was held that the contract being illegal, the suit could not be decreed. Similar views were expressed in -- ''15 Ain-e-Deccan 418 (S). In -- ''Mohammed Hussain v. Chennappa'', 16 Ain-e-Deccan 57 (T), the learned Judges of the Division Bench considered a number of earlier authorities and held that they found no reason to disagree with the series of cases in which it has been held that an Abkari partnership with an Abkari Contractor without the permission of the Government was illegal; that it was so because it was against the interests of the Government and involving the loss of income to Government.

Against the aforesaid authorities, the High Court took a different view in -- ''Abdul Karim v. Din Shahji'', 39 Deccan LR 243 (U). A Division Bench held that a partnership entered into without the permission of the Government may not be enforceable as against the Government, but it can be enforceable between the partners themselves. There is no discussion of the Pull Bench case reported in -- ''9 Ain-e-Deccan 530 (Q)'' cited above, nor is there any discussion as to any of the provisions of the Contract Act or the previous rulings holding such a contract to be contrary to public policy nor have any reasons been given as to why those decisions ought not to be followed, nor has the object of the Legislature in enacting the prohibitory provisions in the Hyderabad Abkari (Excise) Act been examined. This case was followed in the case of -- ''Dinshah Italia v. Macherla Bhoomayya'', 39 Deccan LR 80 (V). There is no discussion in this case also of the Pull Bench case referred to above. The learned Judges entertained a doubt as to whether they should refer the case to a Pull Bench. They, however, relied upon a ruling of the Judicial Committee in -- ''Pestonji v. Ramji'', 2 FJC 703 (W).

We have examined the said case of the Judicial Committee. It does not refer to contracts under the Abkari Act but refers to certain provisions of the Hyderabad Factories Act and it was held therein that a partnership entered into by an owner of a factory without informing Government of the same could not be said to be invalid nor do any of the provisions of the Company Act prohibit such a partnership. In the case cited above nothing has been said about the intention of the Legislature and the object with which the prohibitory provisions have been incorporated. We are of the opinion that the Judicial Committee ruling has no application to the case before us. The case of -- ''Moolchand v. Mir Raizuddin'', 40 Deccan LR 35 (X), was one dealing with the interpretation of the Government Servants Conduct Rules and its effect upon a contract entered into by Government servants in contravention of those rules. This ruling is clearly inapplicable to the facts of this case. Then in --''Haji Mohamed Hussain v. Kadlappa'', 17 Deccan LR 8 (Y), the question for consideration was whether on a consideration of the provisions of the Factories Act, the partnership entered into without intimation to the Government is valid. Following the earlier Judicial Committee ruling, it was held that such a partnership was not invalid. It may be observed that during the course of their opinion their Lordships of the State Judicial Committee distinguished the case with that arising under an Abkari Act and held that the provisions of the Abkari Act were altogether on a different footing and were not in ''pari materia'' with the provisions of the Factories Act. It will therefore be seen that the aforesaid decision is not in any way against the view held by the other Indian Union High Courts.

After carefully considering the views ex-pressed in the aforesaid two sets of authorities reported in the Urdu Law Reports, one thing is clear that the first set of rulings followed the line taken by the former British Indian High Courts and that a Full Bench of the pre-Constitution High Court of the State has also expressed similar view in -- ''9 Ain-e-Deccan 530 (Q)'': as against this the later set of cases so far as the Abkari Act is concerned are decisions by Division Benches, which did not consider the Pull Bench ruling referred to above which was evidently not brought to their Lordships'' notice.

We are, therefore, of the opinion that the prohibitory provisions of the Abkari Act have been enacted as a matter of public order and any contravention of the said provisions will vitiate the contract, or agreement which may be calculated to defeat its provisions. In the case before us admittedly the defendant is the licensee and has obtained it in his own name from the Government. If the plaintiff''s suit is decreed or possession of the shop is directed to be given to him, it could only be on the footing that the plaintiff is the owner of the licenced shop. This would amount to declaring him a licensee without there being a licence in his name and would authorise him to sell liquor without the said licence. The plaintiff could, therefore, only succeed if he was able to prove that the defendant transferred the licence to him with the Government''s permission. Such a transfer has not been alleged in this case. Further to hold the defendant to be the servant would again be to declare him as a licensee whose name does not appear in the licence which is also a contravention of the rules cited above. The plaintiff''s claim is based on an agreement, which contravenes the rules under the aforementioned section of the Hyderabad Abkari Act, which being against public policy is illegal and should not be decreed. We are, therefore, clearly of the opinion that the agreement mentioned in the plaint having contravened the provisions of the Abkari Act is illegal and void and the plaintiff''s suit has been rightly dismissed by the lower Courts. We dismiss this appeal with costs.