Thottoli Raman vs Moosa

T.S. Krishnamoorthy Iyer J.

The plaintiff who is the appellant is a wholesale dealer in tobacco in Badagara having obtained the necessary license for the purpose. The suit is for recovery of the amount due to him towards the price of tobacco supplied to the trade which according to the plaintiff was jointly conducted by defendants 1 to 3.

The first defendant denied having any connection in the trade of defendants 2 and 3 and further denied having purchased tobacco from the plaintiff.

The trial court decreed the suit against defendants 1 to 3. But in the appeal filed by the first defendant, the learned Subordinate Judge vacated the decree against the 1st defendant and allowed the appeal. The Second Appeal is directed against the decree and judgment of the lower appellate court.

The learned Appellate Judge assumed for the purpose of his discussion that defendants 2 and 3 were having a partnership trade, that they had obtained license in their names for purchasing tobacco, that the 1st defendant was subsequently admitted into the partnership, and since no license was taken in the name of the 1st defendant as well under the Central Excise and Salt Act, 1944 ( 1 of 1944), the transaction of the plaintiff with the first defendant is illegal and therefore the plaintiff is not entitled to get a decree against the first defendant.

If the view taken by the learned Judge that the alleged transaction between the plaintiff and the first defendant is illegal cannot be sustained, the case has to remanded to him for a decision on the other contentions raised by the first defendant. Section 6 of the Central Excises and Salt Act (1 of 1944) reads:

Certain operations to be subject to license.- -

The Central Government may, by notification in the official Gazette, provide that from such date as may be specified in the notification, no person shall, except under the authority and in accordance with the terms and conditions of a license granted under this Act, engage in-

(a) the production or manufacture or any process of the production or manufacture of any specified goods included in the First Schedule or of saltpetre or of any specified component parts or ingredients or such goods or of specified containers of such goods, or

(b) the wholesale purchase or sale (whether on his own account or as a broker or commission agent) or the storage of any specified goods included in the First Schedule.

Section 7 of the Act prescribes the form and conditions of license issued u/s 6. Section 8 provides for restriction regarding possession of excisable goods. The Central Government is empowered u/s 37 of the Act to make rules to carry into effect the purposes of the Act. Part A of the Second Schedule of the Act specifies "tobacco" in item No. 1 as an excisable commodity for the purposes of Section 6. Rule 178 (4) and Rule 210 of the Central Excise Rules, 1944, are relevant, and I shall therefore reproduce them:

Rule 178(4)

If the holder of a license enters into partnership in regard to the Business covered by the license he shall report the fact to the licensing authority within thirty days of his entering into such partnership and shall get his license suitably amended. Where a partnership is entered into, the partner as well as the original holder of the license shall be bound by the condition of that license.

Rule 210

General penalty- A breach of these Rules shall, where no other penalty is provided herein (or in the Act), be punished with a penalty which may extend to one thousand rupees and with confiscation of the goods in respect of which the offence is committed.

As already stated, the learned Judge has assumed for the purpose of his discussion that the license necessary was in the names of defendants 1 and 2 and the admission of the 1st defendant as partner in the trade was not reported as required by Rule 178 (4) and the transaction with the 1st defendant is therefore illegal. Rule 178 (4) of the Central Excise Rules does not prohibit a licensee from entering into any partnership with strangers. It only declares that the terms and conditions of the license already issued will also be binding upon the person admitted in the partnership. Section 23 of the Indian Contract Act reads:-

The consideration or subject of an agreement is lawful, unless-

it is forbidden by law; or

is of such a nature that, if permitted, it would defeat the provisions of any law; or

is fraudulent; or.

involves or implies injury to the person or property of another: or ''the Court regards it as immoral, or opposed to public policy.

In each of these cases, the consideration or object of an agreement of which the object or consideration is unlawful, is void.

The question whether any violation of Rule 178 (4) will make the contract illegal within the meaning of Section 23 of the Contract Act should mainly depend upon the object of the Central Excises and Salt Act, 1944. This Act, is only a fiscal statute and it cannot be said that there is any public policy behind the Act- Some of the decisions relied on by the learned Judge are decisions based upon the Abkari Act the policy of which is entirely different. It had a public purpose unlike the Excises and Salt Act, any violation of Rule 178 (4) cannot make the transaction between the plaintiff and the first defendant, if it is a fact, illegal. It is therefore necessary to set aside the decision of the learned appellate Judge and remand the case to him for disposal on the merits. The Judgment and decree of the lower appellate court are set aside and he is directed to take back the appeal to his file and dispose of the same in accordance with law and in the light of the observations made above. The Second Appeal is allowed. The costs of this Court will be costs in the cause and will be provided for in the decree to be passed by the appellate Judge.