Decided on July 06,1967



- (1.) THIS is an appeal from a decree dismissing a suit for dissolution of a partnership and for appointment of a receiver to wind up the affairs of the partnership.
(2.) THE defendant was plying a bus service on the route, taliparamba Cannanore, under the name and style of "peeyam transports". THE permit for the bus stood in the name of "peeyam transports". THE defendant took the plaintiff as a partner in the business under Ext. A-1 dated 31-5-196 1. He made over the bus to the partnership at a value of Rs. 35. 000, out of which rs. 17,500 was to be paid by the plaintiff to the defendant and that was to be his contribution to the capital of the partnership. THE defendant was to manage the affairs of the partnership and as remuneration be was to be paid Rs. 350/-per month. THE collections of the partnership have to be kept by the plaintiff and he was to keep the accounts. All appointments in the partnership business have to be made by the defendant with the consent of the plaintiff. THE profit or loss of the partnership should be divided or suffered equally between the parties. THEse, in substance, are the main terms of Ext. A-1. Alleging that differences of opinion have arisen between the parties and that it is impossible to carry on the business in partnership, the plaintiff has filed the suit. The defendant contended that the partnership was illegal, and so the suit was not maintainable. He also raised other contentions, which are not material for the purpose of disposing this appeal. The court below held that the agreement of partnership was illegal for the reason that 'the ownership of the bus was intended to be transferred to the partnership, thereby allowing the permit to be utilised by the partnership instead of by the defendant alone', and dismissed the suit.
(3.) THE question to be considered is whether the partnership agreement was forbidden by law, or was of such a nature that if permitted it would defeat the provisions of any law or was opposed to public policy. In order to show that the partnership is illegal, it is necessary to establish that the object of the partnership is one the attainment of which is contrary to law or that the object being legal, its attainment is sought in a manner which the law forbids. In Anderson Ltd, v. Daniel 1924-1 K. B. 138, Atkin L. J. , formulated the principle as follows: "the question of illegality in a contract generally arises in connexion with its formation, but it may also arise, as it does here, in connexion with its performance. In the former case, where the parties have agreed to something which is prohibited by Act of Parliament, it is indisputable that the contract is unenforceable by either party. And I think that it is equally unenforceable by the offending party where the illegality arises from the fact that the mode of performance adopted by the party performing it is in violation of some statute, even though the contract as agreed upon between the parties was capable of being performed in a perfectly legal manner. " THEre are two principles involved. THE first is that a contract which is entered into with the object of committing an illegal act is unenforceable. THE second is that a court will not enforce a contract which is expressly or impliedly prohibited by statute. THEre has been no transfer of the permit to the plaintiff or to the partnership under Ext. A-1 agreement. THE agreement did not provide for the transfer of the permit to the partnership. But in the plaint there is a statement that with the formation of the partnership the permit also became the property of the firm. That is a statement of the legal effect resulting from the transfer of the bus to the partnership and of agreement to run the business in partnership thereafter. We cannot go outside Ext. A-1 to find out the intention of the parties. If the inevitable effect of the transfer of the bus to the partnership was a transfer of the permit also, we would have thought that the intention of the parties was the doing of an act prohibited by law. We think that neither the formation of the partnership in the business of transport nor the transfer of the bus to the partnership had that effect. THE transfer of the bus to the partnership was not forbidden by law. S. 31 of the Motor Vehicles Act only requires that the transferor and the transferee should report the transfer to the registering authority. Persons may be partners in a business and yet the property by means of which the business is carried on may not be the property of the firm but the separate property of one or more of the partners. (See Fromont v. Coupland 130 E. R. 271 and Miles v, Clarke 1963-1 All. E. R. 779 ). A permit even if considered as a personal privilege and cannot be transferred without the consent of the transport authority, it was not necessary that there should have been a transfer of the permit in question to the partnership for the formation of the partnership. A partnership in the business of transport could have been constituted without a transfer of the permit, and we think that it was so constituted. THE fact that the parties did not provide for the transfer of the permit to the partnership and the fact that a partnership could be formed in the business without a transfer of the permit to the partnership should conclude the question that there was no intention to do a prohibited act in ext. A-1. Nor has a contract prohibited by law been made. In'lindley on partnership', 12th Edition, page 132, it is observed: "illegality is never presumed, but must always be proved by those who assert its existence; but if the illegality is either apparent on the face of the proceedings or appears in the course of the trial, the court will itself take cognizance of the illegality and act accordingly even though the illegality is not relied upon by either party. " In Manbharibai v. B. R. Mill AIR. 1956 Nagpur 225 the court said: "illegality is never presumed, but must always be proved by those who assert its existence". A'permit' is defined in the Motor Vehicles Act as follows: "'permit means the document issued by the commission or, a State or Regional Transport Authority authorising the use of a transport vehicle as a contract carriage, or stage carriage, or authorising the owner as a private carrier or public carrier to use such vehicle" (See S. 2 (20 ). The Supreme Court in Veerappa Pillai v. Raman and Raman ltd. AIR. 1952 S. C. 192 has observed that the ownership of vehicle is not necessary for obtaining a permit and that possession of the vehicle would suffice. But this court said in Vypeen Transport Corporation v. State Transport a. T. 1960 KLT. 1058 that the above decision was arrived at before the amendment to S. 60 (1) (c) of the Motor Vehicles Act, substituting the word 'own' for the word 'possess' in the sub-clause and therefore the ownership of the vehicle is a qualification for getting a permit. What the amendment has done is to give a discretion to the transport authority to cancel permit on the ground that the permit-holder has ceased to own the vehicle. From the definition of 'permit' in the Act it would appear that so far as a stage carriage is concerned, the ownership of the vehicle has not been made necessary for obtaining a permit. We do not find any other express provision to that effect. Whether that is the radiating effect of the amendment is doubtful. The Supreme Court said in veerappa Pillai v. Raman and Raman Ltd. AIR. 19:2 S. C. 192: 'an examination of the relevant sections of the Motor vehicles Act does not support the view that the issue of a permit for a bus which falls within the definition of a "state carriage" is necessarily, dependent on the ownership of the vehicle. All that is required for obtaining a permit is possession of the bus. As ownership is not a condition precedent for the grant of permits and as a person can get a permit provided he is in possession of a vehicle which satisfies the requirements of the statute or the rules framed thereunder, we have to hold that the parties and the authorities were labouring under a misconception if they entertained a contrary view It has been pointed out already that nowhere do we find in the Act anything to indicate that the issue of permits depends on ownership. " In Khalil-Ul-Rahman Khan v. S. T. A. Tribunal AIR. 1963 allahabad 383 the court said: "under S. 2 (20) a permit holder in respect of a stage carriage need not have any interest, proprietary or possessory, in the vehicle itself. Of course in order to use the vehicle he will have to be in control of it and that control may in most cases amount to possession. Cl. (c)of sub-section (1) of S. 60 also does not show that the permit holder should be the owner of the vehicle. That is only a permissible clause and the Transport authority has only been given a discretion to cancel the permit in that contingency. It may, or may not cancel it, even if the holder of the permit ceases to own the vehicle covered by it. But it is by no means necessary that clause (c) should be applicable to the case of every permit holder. There may be permit holders who own the vehicle covered by the permit and there may be permit holders who do not own the vehicle. This clause appears to apply only to the former case and not to the latter. The fact that prior to the pawing of Act 100 of 1956 the word used in clause (c) was 'possess' and now it is 'own' makes no difference. The change only shows that though formerly a permit could be cancelled on the ground that the permit holder had lost possession over the vehicle it cannot be cancelled now on that ground. Now, it may be cancelled only if it is proved that the permit holder his lost the ownership of the vehicle". (See the head note>.;

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