Decided on October 23,1953



Venkatarama Aiyar J. - (1.) This is an appeal by the plaintiff against the judgment of Balakrishmt Aiyar J., dismissing his suit C. Section No. 29 of 1931 on the file of the original side of this court. The plaintiff is a person with considerable experience in cinema business. Sometime prior to 26-2-1949 he entered into an agreement with the owner of a theatre called the Chitra Talkies in Komaleswaranpet, Madras, for taking it on lease for a period of four years with an option to renew the same for a further period of four years. In pursuance of this agreement he actually entered into possession of the theatre on 1-4-1949 and equipped it with the talkie Machinery, electric fittings, furniture and so forth so as to make it suitable for exhibiting films. Meantime on 26-2-1949 the plaintiff and the defendants had entered into a contract, Ex. P. 1 whereby they agreed to run the theatre in partnership. It is provided in Ex. P. 1 that the plaintiff was to obtain a registered lease deed for the premises and also a licence for running the theatre as a talkie house and that thereafter a regular partnership deed should be executed. The capital for the firm consisting of equipments and the furniture was fixed at Rs. 1,30,000 and the defendants paid the plaintiff a sum of Rs. 65,000 for their half share thereof. It was expressly provided in the agreement that "the benefits of the lease and of the furniture and fittings and other equipments and machinery and goodwill of the theatre together with the benefits of the licences obtained therefor should be the properties of the partnership." On the the same day the defendants agreed as per Ex. D. 7 to pay the plaintiff a further sum of Rs. 60,000 -in consideration of "all the pains and troubles taken and to be taken by him thereafter for the purposes of improving, equipping and furnishing the theatre". The plaintiff obtained a registered lease deed for the premises, Ex. P. 3 dated 19-5-1949 and a licence for running the talkie on 11-8-1949, both of them in his own name and a formal partnership deed, Ex. P. 2, was also executed on 5-9-1949.
(2.) As appears from paragraph 5 of the plaint and paragraphs 6 and 8 of the written statement, the affairs of the partnership did not progress smoothly. On 1612- 1949 it was decided by this court in --'Velu Padayachi v. Sivasooriain', (FB) (A), that a term of the licence that it should not be assigned or transferred or sub-let would be violated if the licencee entered into partnership with reference to the subject-matter of 'the licence and that such a partnership would be illegal and void. This decision was reported in the unoificial journals sometime in March 1950. Vide '1950-1 Mad LJ 315 and 63 Mad LW 234 (A).' It is suggested by the defendants that taking advantage of this decision and the fact that the licence stood in his name, the plaintiff was anxious to throw up the partnership. On 4-4-1950 the plaintiff received a notice from the Income-tax Department Ex. P. 4 that the partnership with reference to Chitra Talkies was illegal and void 'ab initio' under the Full Bench decision in '', and the plaintiff would alone he considered as the sole proprietor of the concern. The defendants contend not without reason that the plaintiff himself must have manoeuvoured to get this notice with the object of repudiating the partnership. Armed with Ex. P. 4 the plaintiff sent on 7-4-1950, a notice to the defendants, Ex. P. 5 that as there could be no transfer of the licence relating to Chitra Talkies the partnership was void 'ab initio' and that the plaintiff was the sole proprietor of it. The defendants maintained in their reply Ex. P. 7 dated 20-4-1950 that the partnership was not illegal, that it continued to subsist and that the plaintiff could not claim exclusive rights in the business. They also applied to the Commissioner of Police by Ex. P. 6, dated 19-4-1950 that the licence might be renewed in the name of the partnership. On 24-4-1950 the Commissioner of Police sent a memo, Ex. P. 8 to the plaintiff drawing his attention to the fact that by taking a partner he had broken condition No. 7 of the licence, and calling upon him to show cause why the licence should not be cancelled or in the alternative why it should not be renewed in the name of the partnership; The plaintiff replied on 27-4-1950 by Ex. P. 9 that the partnership was illegal and void 'ab initio' and that accordingly the licence might be renewed in his own name and it was also staled that the matter was sub judice. On 17-5-1950, the Commissioner of Police passed an order Ex. P. 10 cancelling the licence altogether. Thereupon the plaintiff instituted the suit out of which this appeal arises for a declaration that the partnership was illegal and void 'ab initio' as being in contravention of condition No. 7 of the licence and for an injunction restraining the defendants from interfering with the rights of the plaintiff as the sole proprietor of the business. The defendants resisted the suit on several grounds. They pleaded that the partnership was not illegal, that even if the partnership was illegal that did not affect their rights in the theatre premises furniture and fittings, that_ the declaration prayed for should be refused as the object of the plaint-tiff was to defraud the defendants of large sums of money paid for the purpose of the partnership and that in any event the grant of relief should be made conditional on the plaintiff repaying to the defendants all the sums paid by them with interest.
(3.) On these pleadings the following issues were framed: 1. Is the partnership deed dated 5-9-1949 entered into between the plaintiff and defendants illegal and void 'ab initio'? 2. Is the plaintiff disentitled to claim any relief on the footing of the illegality at or invalidity of his own deed? 3. Are the defendants entitled in any event to the Theatre premises and the fittings and furniture therein? 4. Are the defendants entitled to claim reimbursement of all monies paid by them with interest before any relief could be granted to the plain-tiff? 5. To what relief are the parties entitled? The suit was tried by Balakrishna Aiyar J. He held on issues 1 and 3 that the partnership in so far as it related to carrying on of the business of exhibiting films was in contravention of condition No. 7 of the licence and was therefore void; that the partnership was legal in respect of other matters comprised in Ex. P. 2, such as the lease of the premises, the furniture and the equipment and the contracts with the Electricity Department and the Commercial Credit Corporation and so forth. Under issue No. 2, he held that as the grant of declaration was a matter of discretion with the court we should refuse the same to the plaintiff as his action was fraudulent. On issue No. 4 he held that if the plaintiff was to get declaration it can only be on condition-that he repays all the monies received from the defendant on account of the partnership, and that as the parties were not agreed on the figure the matter would have to be referred to the Official Referee for its ascertainment. But in the view which he took on issue No. 2 he did not consider it necessary to refer the matter to the Official Referee and he dismissed the suit with costs. The plaintiff appeals and contends that on the finding that the partnership in so far as it related to carrying on of the cinema business under the licence was illegal it should have been held to bo illegal in its entirety and that the declaration ought to have been granted as prayed for. In support of the decision, the respondents questioned the correctness of the finding on issue No. 1 that the partnership was illegal with reference to the business covered by the licence.;

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