Teegula Babiah vs Mohammad Abdus Subhan Khan

Palnitkar, J.—An interesting question of law as to whether the contract relied on in the suit is void due to its being against the provisions of Section 14 Hyderabad Abkari (Excise) Act has arisen in this first appeal.

The facts of the case are: that the Plaintiff-Respondent Abdus Subhan, filed a suit in the Court below for the recovery of Rs. 2,000/- and stated that the Abkari contract for the period from 1st Azur, 1353F., to end of Aban 1353F. (7-10-1943 to 5-10-1944) was sanctioned by the State Abkari (Excise) Department in his name for Rs. 400/- per mensem on 13th Meher, 1352 F. (20-8-1943); that the Defendant-Appellants who are "Kalals" and who were then present in the office of the Abkari Commissioner offered that they (Defendants) would carry on the contract as his servants, would spend their own money, would also furnish the money to be deposited under the contract; that they would get all the records with respect to the contract; that they would be responsible to him (Plaintiff) for all the accounts; that on the termination of the business accounts would be explained to him for the profits that have accrued; that in return for their services they would be entitled to a half share of profits; that the other half will be paid to the Plaintiff; that Plaintiff accepted the offer and executed a Mukhtarnama (General Power of Attorney) dated 22nd Meher, 1352 P. (29-8-1943) that on the basis of that Mukhtarnama the Defendants carried on the business have earned profits; that neither during the period of the contract nor on its termination the Defendants have performed their obligation of giving half share of the profits to the Plaintiff nor have they explained the accounts to him and hence the suit.

The Defendants in their written statement denied the allegations in the plaint and stated that they were not servants or agents of the Plaintiff; but that they conducted the business as their own; deposited amounts in the department from their own funds and invested their money in the business; that the Plaintiff being a man of influence the Defendants approached him stating that it would be easy for him to get the contract in his name, they would not bid in the auction, it was their business to tap Sendhi trees and do the Abkari contracts and Plaintiff did a good turn to them; that it did not create any obligation upon the Defendants to pay the profits of the contract and that as requested by the Plaintiff Defendants have executed a document in favour of the Plaintiff stating that the Plaintiff will not be put to any loss or be liable for any damages due to the contract being sanctioned in his name. They also raised some legal pleas.

The trial Court framed issue No. 2 with respect to the contract entered into by the Plaintiff and as to whether it was legally valid. Issue No. 3 was whether the Plaintiff was entitled to a half share in the profits in case the contract was valid. The trial Judge after recording the statements of the parties came to the conclusion that the contract was valid and decreed the suit. Against the decree the present first appeal has been filed.

The facts disclosed during the trial are that the contract was sanctioned by the Excise Commissioner in the name of the Plaintiff and the licence for the toddy shop at Malakunta, Hyderabad-Deccan, was issued in the Plaintiff''s name who was to carry on the business of the shop as per terms and rules prescribed for the purpose. Rule 23, Abkari (Excise) Rules clearly lays down that the licence for the said sale of Sendhi and other intoxicating drinks cannot be transferred to some other person without the permission of the Collector of the District or the Deputy Excise Commissioner nor will any partner be permitted to be taken for running the shop licensed. Now the relationship of the parties as disclosed by the evidence seems to be that the Plaintiff was a sleeping partner and the Defendants were working partners of the business for which Plaintiff had obtained the licence. (His Lordship referred to the evidence and proceeded).

6-7. The first question therefore is whether there was an agreement of service between the parties or the transaction amounted to a transfer of licence or partnership.

It is evident that the master should be in full control of the business & the servant should carry on the particular instructions given by the Master, in consonance with the terms of the service. In the case before us, as disclosed by the evidence, it is clear that the Plaintiff, who alleges himself to be the master, had no control whatsoever over the business. The business was to be carried on by the Defendants. They had to use their own capital and were not bound to carry out the instructions the Plaintiff chose to give.

Then the responsibility for the conduct of the Sendhi business was wholly that of the Defendants and there was no agreement as to who would bear the loss. The only liability of the Defendants, according to the Plaintiff''s allegations, is that at the termination of the licence period accounts will be gone into and the Plaintiff will be paid a half share of the profits. It is clear that under the circumstances Plaintiff cannot be called the master and owner of the business. According to "The Law of Master and Servant" by A.S. Diamond (Second Edition): "The relation of Master and Servant exists between two persons where by agreement between them, express or implied, the one (called the servant'') is under the control of the other (called ''the master'')". "A person is under the control of another if he is bound to obey the orders of that other not only as to the work which he shall execute, but also as to the details of the work and the manner of its execution." Applying the above principles to the facts of this case, it is clear that the Plaintiff cannot be called the master nor the Defendants the servants, as the Defendants were not bound to obey the orders of the Plaintiff nor were they responsible to or bound to obey the orders of the Plaintiff as to the details of the work of running the Sendhi Shop or the manner of its running. That was completely to be done at the will and pleasure of the Defendants. The only agreement referred to between the parties in the evidence is that at the termination of the business, Plaintiff was to get a half share in the profits. The Defendants, according to Plaintiff, did not consent to submit themselves to the control of the Plaintiff for carrying on the business. Thus it is clear that the Defendants are not the servants of the Plaintiff.

With respect to the relation of principal and agent, it is clear that an agent is not under the control of the principal whereas a servant is under the control of his master. We will now examine the question of partnership. Partnership generally speaking is the relation which subsists between persons carrying on a business in common with a view of profits and the question whether a person is a partner of another depends upon whether the business is being carried on by both of them. Section 4, Indian Partnership Act 9 of 1932 defines Partnership as follows:

Partnership is the relation between persons who have agreed to share the profits of business carried on by all or any of them acting for all.

Persons who have entered into partnership with one another are called individual partners. Thus if according to the allegation of the Plaintiff, viz., that the transfer of the licence and business to the Defendants was ultimately to share the profits of the business is to be believed, it can, at the most, mean that the Defendants were partners with him. On the contrary, the Defendants claim that the licence was really acquired by Plaintiff benami for them and was subsequently transferred by the Plaintiff to them and therefore it should be regarded as their own business--Plaintiff having nothing to do with the same.

The question that falls to be decided therefore is whether the contract of partnership as alleged by the Plaintiff or the transfer of licence as alleged by the Defendants could be regarded as valid under the various provisions of the Hyderabad Abkari Act and the Rules framed thereunder. Section 14, Hyderabad Abkari Act lays down that no lessee or licensee shall except with the permission of the Government contract with any person to be a Shiktmdar or partner and that such Shikmidar or partner shall not be competent to act as such until he has obtained a licence to that effect from the Talukadar or any other competent Officer.

It is clear from the facts of the case that the Defendants (assuming them to be partners) did not obtain the permission of the Government to become partners with the Plaintiff, the licensee, and that in spite of the prohibition in the Section not to act, they carried on the business without obtaining a licence from the Talukdar or other competent Officer. Thus the transaction carried on was in clear contravention of the said Section 14, Hyderabad Abkari Act.

Section 12 of the Act is also contravened. That Section prohibits the sale by any person of any liquor or Sendhi without obtaining a licence therefore from the Talukdar or any other officer empowered by the Government for the purpose of issuing a licence. Defendants carried on the business of selling the Sendhi without obtaining any such licence; the licence was in the name of the Plaintiff who never carried on the business. There has been a contravention of Rule 23 of the Rules framed under the Act as stated above. The question, therefore, is to decide as to how far such a contract is valid under the provisions of the Contract Act.

In this connection we have also to consider whether the intention of the Legislature in enacting Sections 14, 15 and the other prohibitory provisions of the Hyderabad Abkari Act is to prevent certain things from being done or the conditions with respect of permission to partnership, etc. are of collateral nature imposed for reasons of administrative convenience.

In Pollock and Mulla''s Indian Contract Act (7th Edition page 139) it is observed as follows It is possible for a statute to attach a penalty:

To making a particular kind of agreement, and at the same time to provide that such an agreement, if made, shall not be, therefore void.

* * * *

Cases under this head have arisen principally in connection with Excise Acts, and they have almost all been decided with reference to English Law. The principles may be stated thus; ''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 con-text 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 condition was imposed for merely administrative purposes, e.g., the convenient collection of the revenue''.

In our opinion the conditions in the Hyderabad bkari Act have been imposed for the purposes of maintaining public order. The purpose in imposing conditions under Sections 14 and 15, Hyderabad Abkari Act is not merely for the convenient collection of revenue but also to control the sale of liquor and Sendhi, inasmuch as the Rules prescribe the conditions and the manner in which the Shop licensed is to be run. The transaction in question, in our opinion, is against public policy and violative of the provisions of Section 23, Indian Contract Act and therefore void. Plaintiff cannot get a decree upon a void contract. Plaintiff''s suit must be dismissed with costs throughout. We set aside the judgment and decree of the Court below; allow this appeal and dismiss the Plaintiff suit. Defendants will get costs of both the Courts as stated above.