Puvvada Venkata Subbayya vs Attar Sheik Mastan

Happell, J.—The appellant filed the suit, from which this Letters Patent Appeal arises, for the recovery of a sum of Rs. 2,196-10-0 from the

defendants. The first defendant has, however, throughout been the only contesting defendant. The learned Principal District Munsif of Ongole who

tried the suit gave the appellant a decree for Rs. 1,227 and an appeal by the first defendant was dismissed by the Subordinate Judge of Bapatla.

The first defendant then filed an appeal in this Court which was allowed by Shahabuddin, J., on the ground that the agreement on which the

respondent''s claim was based was unlawful and so void ab initio. Shahabuddin, J., however, gave leave to the plaintiff in this suit, the present

appellant, to appeal from his decision.

It appears from a perusal of the plaint that the foundation of the suit ciaim is that three toddy shops bought in the name of the first defendant and

four shops in the name of the second defendant in the Ongole Taluk for the year 1st October, 1937 to 30th September, 1938 were in fact bought

for the plaintiff with money advanced by him subject to an agreement with the defendants that the plaintiff should manage the shops and enjoy the

profits from them. Thereafter, the plaint recites, the plaintiff did manage the shops and take the profits until March, 1938. When, however, the

plaintiff called on the defendants to transfer the shops in his name, the first defendant refused to execute a deed of transfer in respect of the three

shops in his name and from the 11th March, 1938, ejected the plaintiff from them. At the end of the plaint the plaintiff prayed for a decree directing

the defendants to pay to the plaintiff a sum of Rs. 2,196-10-0 as mentioned in the schedule filed with the plaint. The schedule when looked at

causes some surprise. The body of the plaint would appear to be laying a foundation for a claim for damages for breach of the agreement based on

the loss of profits from March 1938 to the termination of the lease. The schedule, however, discloses no such claim. There are 11 items of claim.

The first four are in respect of deposits made as security for payments of the monthly rent for the shops and the other major items, although by no

means explaining themselves, appear to be claims for damages for loss occasioned by the first defendant''s interference with the tree-tapping leases

and for loss of profits due to the first defendant''s occupation of the shops from 11th March 1938 to 31st March 1938. The precise legal basis for

these claims is by no means clear. But the plaintiff seems to have limited his claim to loss or damage suffered only upto 31st March, 1938, because

he paid the cist for the shops up to the end of March, and not thereafter; and he appears to have asked for the return of deposits on the footing

that they were made with money advanced by him in pursuance of an agreement which had been broken by the first defendant.

Both the lower Courts were of opinion that the agreement between the appellant and the defendants was not illegal, but except for the amounts

deposited and certain admitted amounts they negatived the balance of the claim on the ground that the evidence was insufficient to assess the extent

of the damage. In our opinion, apart from the question whether the arrangement was or was not illegal and so unenforceable, it may seriously be

doubted on the facts whether a decree should have been given for any part of the claim. The suit was filed in July, 1938 and it is difficult to see

how on that date the appellant was entitled in any event to recover the deposits made by him in the first defendant''s name when the first defendant

himself could not have been repaid the deposits until the lease of the shops expired, viz., on the 1st October, 1938. But, however, that may be, we

can have no doubt that the view taken by Shahabuddin, J., that the agreement between the appellant and the defendants was illegal and not

enforceable so that the appellant was not entitled to recover anything from the defendants is correct.

In the plaint it is made perfectly clear that the allegation was that the sale of the shops was to the first and second defendants benami for the

plaintiff-appellant according- to an arrangement previously entered into between them, it has been argued by learned Counsel for the appellant that

there was nothing illegal in the agreement between the parties that the shops should be transferred by the first defendant to the appellant as,

according to the rules made under the Act, the transfer could be made with the permission of the Collector; and, in the present case, the permission

of the Collector was sought and only refused for the reason that the first defendant himself was unwilling to agree that the transfer should be made.

The suit, however, was not based on an agreement that the defendants should transfer the shops to the plaintiff when called upon to do so. It was

based on the allegation that the sale of the shops to the defendants was benami for the plaintiff. The question of the transfer of the shops was

merely consequential on the benami character of the sale of the shops, and the point at issue is not whether an agreement to transfer the shops is

illegal but whether an agreement that the shops should be bought by the defendants benami for the plaintiff is illegal.

Learned Counsel for the appellant argues that an agreement to buy the shops in the name of one person for, another is not in contravention of

the Abkari Act and that, in any case, even if the agreement is in contravention of the Act, and so void, he is entitled to recover the money used by

the defendants for their benefit u/s 65 of the Contract Act. With regard to the first part of the arguments we can have no doubt that the

arrangement for the purchase of the shops in the names of the first and second defendants benami for the appellant was in contravention of the

Abkari Act. Learned Counsel has referred us to cases of an agreement among partners for the purchase of shops in the name of one of them, and

contends that it has been held that an agreement of this kind prior to the sale is not illegal. We do not think that these cases are on all fours with a

benami transaction like the present case. Moreover, Horwill, J., has dissented from the view that a prior agreement among partners for a shop to

be bought in the name of one of them is legal (Chennayya v. Janikamma (1944) 1 M.L.J. 434)and his view seems to be supported by the decision

of a Bench of this Court in Italia v. Cowasjee (1944) 1 M.L.J. 97. As was pointed out in the case of Nalam Padmanabham Vs. Sait Badrinatt

Sarda and Others, where the question related to a licence for the sale of opium, a licence is a personal privilege. The licensee must be known to

and approved by the licensing authority, and it is manifest that a licence cannot be held by one person to whom it is granted for another who is

unknown to the licensing authority. Section 15 of the Madras Abkari Act provides that ""no liquor or intoxicating drug shall be sold without a

licence from the Collector"", and Section 55 provides the penalty for any person who sells liquor or any intoxicating drug in contravention of the

Act. It is clear that the agreement relied on by the appellant that he should manage the shops in respect of which the defendants held the licence

was in contravention of the Act, and that by himself managing the shops which he admits in the plaint that he did, he rendered himself liable u/s 55

of the Act. The agreement, in short, was illegal.

The second part of the argument that the appellant is entitled in any case to recover the money paid to the defendants under the provisions of

Section 85 of the Contract Act was not put forward either in the trial Court or in the first or second appellate Courts. We are clear in any case that

this argument cannot be accepted. The argument in effect is that, notwithstanding the fact that the agreement is void for any of the reasons stated in

Section 23 of the Contract Act, any party to the agreement is bound to restore any advantage which he has received under it, or to make

compensation for it. No doubt it has been held that Section 65 of the Contract Act may apply even though an agreement is void as initio and even

when it is unenforceable for want of fulfilment of a statutory requirement. In Thangammal Ayiyar Vs. Krishnan and Another, for instance it was held

that a pleader could recover fees from his client u/s 65 of the Contract Act on the basis of ""quantum meruit"" although the requirements of Section

28 of the Legal Practitioners Act had not been complied with. But this was a case of the kind referred to by Abdur Rahman, J., in Madura

Municipality v. Alagirisam ILR (1939) Mad. 928 where agreements are held to be unenforceable on account of a failure to comply with certain

forms or for want of giving expression to them in the manner prescribed by law. The present is in the other category of cases referred to by Abdur

Rahman, J., which being inherently illegal andopposed to public policy the parties being in pari delicto the Courts can render no assistance in

enforcing them. In our opinion, therefore, the decision of Shahabuddin, J., is correct; and, in that view, the appeal is dismissed with costs.