FERNANDO v. RAMANATHAN et al

088-NLR-NLR-V-16-FERNANDO-v.-RAMANATHAN-et-al.pdf


( 387 )
[Full Bench.]
Present: Wood Benton A.C.J., Pereira and Ennis JJ.FERNANDO v. RAMANATHAN et al.
118—D. C. Colombo, 33,487.
Opium Ordinance, No. 5 of 1899—Partnership for the sale of opium by the
licensee with an unlicensed person—Action for share of profits.
Per Pbbbtra J. and Ennis J.—Where an issue is once framed in acase, the Court has no power to strike it out on the motion of eitherparty. The issue must be retained to be eventually decided.
A Court can always ex mero motu suo raise a question in a caseas to the legality of a contract sued upon or sought to be enforced.
Full Bench : Per Pereira.. J. and Ennis J.—A deed is not invalidon the ground of illegality because it is contrary to what may betermed the policy of an Ordinance. It would be invalid forillegality if it contravened some specific provision of the Ordinance.Oral evidence not contradictory of or inconsistent with the expressterms of a deed may be admitted to show that it is invalid onthe ground of illegality.
Per Pereira J.—Public policy, unless it is based on well-estab-lished and clearly recognized principles, should not be made theground of judicial decision.
Wood Renton J.—Although a contract or act may be madeillegal by a statute passed for the protection of revenue alone, thepresumption of illegality will be greater where the statute is oneembracing other important objects of public policy as well, andwhere it contains prohibitory language, besides imposing a penalty.The history of the opium legislation in the country and the languageand scope of Ordinance No. 5 of 1899 show conclusively that theLegislature'intended, not merely or chiefly to protect the revenue,but to prohibit the sale of opium, except under conditions prescribedby itself, and that the law, as declared by Ordinance No. 6 of 1899,requires that no person shall sell opium as a principal unless he hasbeen duly licensed to sell it at the particular shop or shops to whichthe license relates.
I
N this case the plaintiff sought to recover from the originaldefendants, the managers of a certain business, his share of
the profits of the said business, which the defendants expresslyagreed by deed D 1 to account for.
The portions of the agreement material to this report are asfollows:—
Whereas the parties of the first part or one or more of them havepurchased the license for the sale of opium at the places enumeratedin the first schedule hereunder written for the period of six months
1918*
21
IMS.
Fernando v.
Ramanathan
( 338 )
from the first day of January, 19X0 : And whereas the parties of thesecond part or one or more of them have purchased the licenses to sellopium at the places enumerated in the second schedule hereunderwritten for the period of six months from the first day of January, 1910 :
And whereas the said parties of the first part have agreed with thesaid parties of the second part to carry on in partnership the businessof selling opium at the said places enumerated in the first and secondschedules hereto, and at other places at which they shall thereafterduring the continuance of this agreement acquire the right to sellopium : Now this agreement witnesseth as follows :—
(1) The parties of the first part shall carry on in partnership withthe parties of the second part at the places aforesaid thetrade or business of selling opium.
(4) The management of the said business shall be in the hands of thesaid S. S. N. Ramanathan Chetty and M. K. M. P. R.Letchimanan Chetty, who shall carry on the said businessto the satisfaction of the partners.
The parties, of the first part and the parties of the second partshall be entitled to the property and assets of the partnershipand the profits thereof, and shall bear all losses, &o.
The learned District Judge (L. Maartensz, Esq.) dismissed theaction, relying on Meyappa Chetty v. Ramanathan,l on the groundthat the agreement was illegal.
The case was reserved for a Full Bench by Pereira J. and Ennis J.by the following judgment:—
Pereira J.—
In this case, as between the plaintiff and the original defendants, sixissues were at first framed. Among them were the two following:(1) Was plaintiff a licensee under Government for the sale of opium?and (2) If not, can plaintiff maintain this action? At a later stageof the action these issues, as the record shows, were not “ pressed ”by the defendants, and the District Judge accordingly made orderstriking them out. Later still he framed the issue “ Is the agree-ment sued upon contrary to the policy of the Opium Ordinance of1899 and therefore illegal? ” And having decided this issue in theaffirmative, the District Judge dismissed the plaintiff's claim. Theframing of the issue was moved for'by the original defendants andsome of the added defendants. Counsel for appellant now contends(1) that this issue is practically tantamount to the two issues struckout, and that having struck out those issues, the District Judge hadno power to restore them in another form; and (2) that the issuedid not arise as between the plaintiff and the added defendant^Of course, the striking off of the two issues mentioned above wasdone when the added defendants were not parties to the suit, andit was competent to the plaintiff and the added defendants to agreeto the framing of this issue. They did not, however, so agree, and,
i (1013) 16 N. L. R. 33.
( 839 )
as between the plaintiff and the added defendants, the District
Judge had no right to frame the issue, because, dearly, the issue was Fernando e.
not one that arose as between these parties. In support of the other Ramanathan
contention of the appellant’s counsel, namely, that as between the
plaintiff and the original defendants, the issue or its equivalent had
been framed but struck out, and the Judge had therefore no right to
re-frame it, he cited a case from the Indian Law Reports (vol. 4,
Calcutta Series, p. 572), in which it was held that when the Court hadonce decided, as between the parties, that an issue did not arise andrefused to frame it, it could not subsequently frame the same issue.
That case has no application to the present. Here the issue had beenframed, but on the motion of the defendants the Judge struck it out,
Now, there is no provision in our Code for striking out issues onceframed. While the Indian Code of Civil Procedure has such aprovision, our Code curiously has provision only for amendingissues and the framing of fresh issues. Clearly, under our Code anissue once framed must remain until decided. If the point involvedin the issue is not pressed by either party, the fact may be noted andtaken into consideration in the judgment, or if the issue goes to theroot of the case, it may be decided and judgment entered accordingly;but the issue cannot be struck out. So that the two issues referredto above must be deemed to have remained to be decided. More-over, the new issue framed by the Judge raises the question as tothe legality of the agreement sued upon. I think that a Court canalways ex mero motu euo raise such a question. No Court is boundto give judgment upholding a contract which, owing to its beingagainst public policy or good morals or for some such reason, isillegal. I would for these reasons over-rule the appellant’s objec-tions to the issue framed by the District Judge as to the illegality. of the contract sued upon. Now, the decision of the issue is, to mymind, likely to involve the solution of questions of some doubt anddifficulty, and, possibly, as urged by the appellant’s counsel, are-consideration of the judgment in the case of Meyappa Chetty v.Ramanathan.1 I therefore think that the District Judge’s judgmenton the issue should be dealt with in appeal by a fuller Bench, and I'would suggest that the case be referred to a Bench of three Judges.
Ennis J.—I concur.
F. J. de Saram, for the plaintiff, appellant.—The District Judgeis wrong in holding without evidence that the effect of the agreement. -D 1 is the same as that of the agreement in the case of MeyappaChetty v. Ramanathan.1 On its face D 1 is not illegal, and containsno illegal conditions. It is not contrary to the policy of the Opium
1 (IMS) 16 N. L. R. 33.
1918*
Fernando v.
Bamanathan
( 840 )
Ordinance. A deed should not be lightly presumed to be illegal.Where two constructions are possible, a construction that favoursthe validity of the agreement should be given to the deed {Chittyon Contracts, 15th ed:t p. 644). The interpretation of what isthe public policy of the Ordinance should be done with care.Richardson v. MeUish,1 Davies v. Davies3 Jamson v. DriefonteinConsolidated Mines, Ltd.3 We must look to the preamble and theprovisions of an Ordinance to discover its policy {Maxwell, 5th ed,,p. 635). The Ordinance in question provides for certain checkson the accounts and methods of sale, which enable the Governmentto obtain information as to the profits for the purposes of revenue.The terms of D 1 are consistent with carrying on of the businessaccording to the provisions of the Ordinance, and merely providefor the pooling of the profits and losses by the partners. This isonly a form of insurance against loss; it is not illegal.
Meyappa Chetty v. Bamanathan 4 cannot be applied to this case.The facts found there do not exist here. Further, it was decidedon the authority of Padmanabhan v. Sarda,5 which was decidedon the Indian Opium Act, which differs from our Ordinance. InPadmanabhan v. Sarda 5 and in the cases cited in it (MarudamuthuPillaiv. Rangasamy Mooppan* Shahav. Shaha 7) itis clear', that therewas either a direct breach of the provisions of the act or of the rulesunder it, or of the conditions of the licenses. There is no suchbreach here, and the conditions of the license issued under theOrdinance are in our favour. There is no prohibition againsttransfer; a partnership does not necessarily involve a transfer{Shankar v. Khan3). Further, in the working of our Ordinanceassignments of rights by licensees have been recognized by theGovernment, and are not considered contrary to its provisions.The policy of our Ordinance is to see that no opium is sold exceptunder the control of a licensed person. The policy of the Ordinanceis not to prohibit the sale of opium by unlicensed persons under thecontrol of licensed persons. In the present case each shop is underthe direct control of the licensee, and the profits of all the shopsare massed together for dividing the profits.
The agreement in Meyappa Chetty v. Bamanathan 4 is not illegal,and that decision is not wrong. The difference between our Ordi-nance and the Indian Act was not pointed out in that case. Counselalso cited Brown v. Duncan,* Hyams v. Stuart King.13
H. A. Jayewardene (with him Elliott), for the first defendant,respondent.—The deed in question contains an agreement to carryon the business of selling opium in partnership. It is not merely
2 Bing. 262.
36 Ch. D. 364.
(1902) A. C. 484.
{1918) 16 N. L. R. 33.
86 Mad. 682.
24 Mad. 401.
1 (1874) 21 W. R. 289.
(1879) 2 All. 411.
(1829) 10 B. S C. 92.
(1908) 2 K. B. 696, at pp. 727, 728.
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an agreement to share the profits. Each of the partners was aprincipal, and carried on the entire business actively. The agreementin question is against the spirit of the Ordinance. Even an agree-ment to share in the profits would be contrary to the policy of theOrdinance. But here the property was vested in all the partners.They were to manage the entire business, and the books were* to beunder the joint control of all. There is nothing to distinguish thiscase from Padmanabhan v. Sarda1 and Meyappa Oketty v. Rama*nathan,2 There is an implied provision against transfer in theOrdinance.
Counsel also referred to Peris v. Fernando2
H. J. C. Pereira, for the second defendant, respondent.
F. M. de Saram, for the third, fourth, seventh, and eighth addeddefendants, respondents.
F. /. de Saram, in reply.
Cur. adn. vult.
July 8, 1918. Wood Benton A.C.J.—
The point of law with which alone 1 am concerned in the presentcase is raised by the following issue: “ Is the agreement sued oncontrary to the policy of the Opium Ordinance, 1899, and, therefore,illegal? ”
The learned District Judge, following the decision in MeyappaChetty v. Ramanathan 2 answered this question in the affirmative,and has dismissed the plaintiff’s action with costs.
Although the first defendant-respondent was examined as awitness, and a few questions were put to the plaintiff by the DistrictJudge himself with a view to determining his position under theagreement, the case has not been tried on evidence in the DistrictCourt. The District Judge recorded no finding on the evidence ofthe first defendant, but has disposed of the issue as to the legality ofthe agreement- in suit on a construction of the language and scopeof the agreement itself, possibly keeping the plaintiff’s admissionsto the Court in view. I propose in this respect to follow his example,with a reference, however, to the pleadings in the action for thepurpose of ascertaining what the parties themselves understood theagreement to mean.
The agreement in question is a deed of partnership in the opiumtrade between the plaintiff, the defendants, and certain otherparties. “ The plaintiff,” says the learned District Judge, ” is alicensee with regard to some places only, and the effect of the *partnership deed is to centralize in the hands of the members of thepartnership the management of all the opium licenses granted toi 35 Mad. 582.* (3913) iff . L. R. 33.
1913.
Fernando 0.Ramanathan
2 (1935) 1 Bal. 199.
1918*
( 842 )
Wood
Rbntoh
A.O.J,
Fernando «.Bamanathan
different persons. The expenses of all the opium shops are to hedefrayed from partnership funds. The management of the differentshops is placed in the hands of Letchimanan (the second defendant),who, according to the deed (D 1), had only some licenses, and Bama-nathan (the first defendant), who was not a partner and held nolicense."
The District Judge has, I think, interpreted the agreement cor-rectly. it recites that " the parties of the first part ’’ have purchasedthe opium licenses for the places specified in schedule I., and “ theparties of the second part " those for the places specified in scheduleII. The agreement is " to carry on the business of selling opium "at the places enumerated in these schedules. " The businessalready done at the places aforesaid" is "to be deemed and taken tohave been done on account of the partnership. The managementof the said business shall be in the hands of the said BamanathanChetty and Letchimanan Chetty, who shall carry on the said businessto the satisfaction of the partners." The necessary funds are to becontributed, the expenses borne, and the profits divided, in certainspecified proportions. " None of the partners shall, during thecontinuance of this agreement, be engaged or interested directly orindirectly in the business of selling opium, except under this agree-ment, and if any of the said partners shall be guilty of a breach ofthe provisions in this clause contained he shall pay to the saidmanagers for the benefit of the partnership the sum of rupees onethousand (Bs. 1,000)." The pleadings and the issues make matters,if possible, clearer. The plaint sets out the effect of the deed bywhich the parties " agreed to carry on the business of selling opium,"alleges that " the management of the said business and all itsproperty, including all books of account, have always been in thecustody and under the control of the defendants," and claims anaccount on that basis. The first and second defendants admit thepartnership, but deny that they were managers of the business orin control of its property. One of the issues framed embodied thequestion, raised by these pleadings, whether the first and seconddefendants were managers of the business or not, and, apart fromthe brief examination of the plaintiff by the Court, the only evidencerecorded in the case related to that issue.
The agreement sued on. was, in my opinion, a partnership in thebusiness of opium selling between persons, some of whom bad, whileothers had not, licenses applicable to the places at which under theagreement the opium was to be sold. It is scarcely necessary tosay that, for the purposes of such an agreement, each partner wasengaged in “ selling " opium, whether he did so directly or through *the agency of a co-partner. If Meyappa Chetty v. Ramanatihan 1was rightly decided, the agreement with which we are here con-cerned was contrary to the policy of the Opium Ordinance, 1899
i (1913)16 N. L. R. 33.
IMS.
( 848 )
(No. 5 of 1899), and, therefore, illegal. .The effect of MeyappaChetty v. Ramanathan 1 is not to be whittled away by arguing thatthe-case turned on the particular deed which the Court had tointerpret. The ratio decidendi was this: “ Section 6 of the OpiumOrdinance, 1899 (No. 5 of 1899), is sufficient to stamp with illegalityand render unenforceable rights arising under a. partnership in theopium business when an unlicensed person claiming to have beena partner has been engaged as such in furthering its interests.”Was then Meyappa Chetty v. Ramanathan 1 rightly decided? Iwill deal with this question first apart from, and then upon, theauthorities.
The principle that has to be kept in view is clear. “If it beshown,” said Parke B. in Smith v. Mawhood* “ that the Legislatureintended to prohibit any contract, then, whether this were for thepurpose of revenue or not, the contract is illegal and void, and noright of action can arise out of it.” ** The question is,” saidAlderson B. in the same case (ubi supra, at page 464), “ does theLegislature mean to prohibit the act done or not? If it does,whether it be for the purpose of revenue or otherwise, then thedoing of the act is a breach of the law, and no right of action canarise out of it.” Whether in any enactment the Legislature hasprohibited a particular contract or act is a problem that has to besolved in the light of the letter and the spirit of the provisions ofthat enactment viewed as a whole. Although a contract or actmay be made illegal by a statute passed for the protection ofrevenue alone (Smith v. Mawhood *), the presumption of illegalitywill be greater where the statute is one embracing other importantobjects of public policy as well (see Boistub Chum Naun v. WoomaChum Sen *), and where it contains prohibitory language, besidesimposing a penalty. The history of opium legislation in thiscountry, and the language and scope of Ordinance No. 5 of 1899,under which the present case has to be decided, show conclusivelythat the Legislature intended, not merely or chiefiy to protectthe revenue, but to prohibit the sale of opium, except underconditions prescribed by itself, and that the law, as declared byOrdinance No. 5 of 1899, requires that no person shall sellopium as a principal unless he has been duly licensed to sell itat the particular shop or shops to which the license relates. Theearliest enactment relative to the subject in Ceylon is OrdinanceNo. 19 of 1867, the short title of which describes it as “ An Ordi-nance to restrict the use of Opium and Bhang,” while the preamblerecited that “ it is expedient to restrict the use of opium and to pro-hibit the sale thereof except by duly licensed persons.” Section 3accordingly, combining the effect of the provisions of sections 5 and 6of Ordinance No. 5 of 1899, provides that “ it shall not be lawful for
i (1919) 16 N. L. B. 83.* (1843) 14 M. A W„ at page 463.
* (1889) I. L. R. 16 Cal. 436.
Wood
Rknton
A.C.J.
Fernando e.Ramanathan
( 844 )
lMfc
Wood
Hhnton
A.C.J.
Fernando o.Samanathan
any person in any place (to which the Ordinance applies) to possessopium in any quantity beyond two pounds in weight, or to sell bywholesale or retail, or to oSer or expose for sale or to suffer or permitto be sold, opium ” without a license. The license may be revokedwhenever the proper authority deems it expedient to do so (section
, and a penalty is prescribed in case of breach of any of the pro-visions of the Ordinance (section 6). The form of the license to sellopium given in the schedule embodies an express statement of theparticular shop at which the sale of opium is authorized under thelicense. This Ordinance was amended in details by OrdinancesNo. 4 of 1878, No. 9 of 1889, No. 2 of 1893, and No. 9 of 1897.These enactments were in turn repealed by Ordinance No. 5 of 1899,the preamble of which states that “ it is expedient to consolidate andamend the law relating to the possession and sale of opium.” Savethat it does not reproduce the language of the preamble of OrdinanceNo. 19 of 1876, Ordinance No. 5 of 1899 re-enacts the substance ofthe entire body of provisions contained in that enactment and inthe amending Ordinances. It declares unlawful the possession ofopium exceeding a certain weight, or the sale, either by wholesaleor retail, of any quantity of opium, without a license (sections 5 and
. It constitutes a ” proper authority ” by which licenses may begranted (sections 4 and 7), and empowers the proper authority torefuse to grant any license at discretion, or to annex to the grant anyconditions, prescribing certain conditions which, in any event, mustbe incorporated in the license (section 15 (1)). The license may berevoked by the proper authority for the breach of any of its condi-tions or ‘‘for any reason whatever” (section 15 (2)). Sales of opiumare to be for ready money (section 16 (1)), and penalties are providedfor breaches of the requirements of the Ordinance. Reproducingalmost in terms a provision which will be found in Ordinance No. 19of 1876 and its amending legislation, it excludes, from the generalprohibition of possession or sale without a license, opium bona fiderequired for medical purposes—“the burden of proving whereof shalllie on the person alleging the same in his defence ”—by any medicalpractitioner, chemist, or druggist (section 19). The insertion in theOrdinance of such an exception adds force to the view that but forits presence such possession or sale would be illegal. The form oflicensfe given in the schedule to Ordinance No. 5 of 1899 provides forthe particular shop to which the license relates being specified.Although licenses for the sale of opium have been granted from 1867downwards, not a single instance has been given to us of the grantof Buch a license to a syndicate as such, or of its being held that thegrant of a license to one member of such a syndicate would legalizethe sale of opium by its other unlicensed members. The terms ofthe license granted under Ordinance No. 5 of 1899, a form of whichhas been supplied to us, point to the conclusion that the license isintended to be, and is, a purely personal privilege. Although, in
1918.
( 345 )
those clauses which deal with such matters as their internal condi-tion a reference is made to the “ premises licensed "—a provisionnatural enough in view of the fact that the license is confined to theparticular premises which it specifies—it is “ the licensee ,v who has” to see that all receipts and disposals of opium ar9 regularly enteredin the stock book immediately the transaction takes place, all thecolumns in the book being correctly filled in, and the quantity instock at the beginning and end of the day being clearly shown.’1It is 44 the licensee ” who has to submit to ** the proper authority ”ior approval the names of the persons whom he proposes to employat the licensed premises. It is ” the licensee ” who has “ to makean entry in a book to be kept for that purpose, giving the full nameand address of the purchaser and giving the quantity sold to him,and the date of sale, whenever opium exceeding four drachms inweight is sold at any one time.” Conditions of this charactersurely indicate—and others might have been cited to the sameeffect—an intention that each license shall relate to a specified shop,and that the business of selling opium at that shop shall be carriedon, with such properly regulated assistance as may be necessary, by“ the licensee ” and by him alone.
It is argued, however, that the words ” suffer or permit to besold ” in section 6 of Ordinance No. 5 of 1899 make a difference, andenable by implication “ the licensee ” to authorize an unqualifiedperson to act for him as principal. I am wholly unable to agree.The words in question occur, as I have shown, in Ordinance No. 19of 1867, the avowed object of which was to prohibit the sale of opium“except by duly licensed persons.” Instead of restricting theprohibition contained in section 6 of Ordinance No. 5 of 1899, theyenlarge its scope. The expression is one almost of commonform in legislation of this character, and merely means that thelicensee cannot shelter himself against a charge of having effecteda prohibited sale by alleging that it was not his personal act whereit took place by his permission or sufferance.
I come now to the authorities. Padmanabhan v. Sarda1 isdirectly in point. The only points in regard to which the appel-lant’s counsel sought to distinguish the Indian Opium Act—Act I.of 1878—from Ordinance No. 5 of 1899 were the absence in theformer of the words “ suffer or permit to be used,” and the absencein the latter of any prohibition of transfer. I have already dealt withthe phrase—to which such mystic force is sought to be attached—“ suffer or permit to be used,” and have nothing further to sayabout it. There is no prohibition of transfer in the Indian OpiumAct. The prohibition referred to in Padmanabhan v, Sarda 1 wascontained in the license. But the question of the.transfer was onlyone of the points raised in the case. Padmanabhan v, Sarda 1 wasexpressly decided on the ground that the provisions of the Opiumi (1912) 21 Mad, L. J, 425,
Wood
Renton
A.C.J.
Fernando v.Ramanathan
1M8.
Wood
Benton
A.C.J.
Fernando 9.Ramanaihan
( 846 )
Act, like those of the Abkari Act, 44 as a whole show clearly thatevery person carrying on (the business) as a principal must belicensed,1’ and that, 44 to hold that a person who has not got a licensecan still be a partner with one who has a license, and as such partnercarry on the business with or without the other, would enable theunlicensed partner to evade the liabilities intended by the law to becast on persons carrying on (that) business.” 44 We ought perhaps,to mention,” the judgment proceeds, 44 that the appellant’s vakilwishes to make out that his client did not really become a partnerwith the defendants, but merely became entitled to a share of theprofits of the business in consideration of financing it, but thiscontention is obviously contrary to the case set out in the plaint,and we must decline to consider it.” The plaint and the evidenceof the plaintiff himself at the trial make these observations equallyapplicable to the present case. The decision of the High Court ofMadras in Padmcnabhan v. Sarda 1 is supported by a large body ofanalogous authorities. I will give two illustrations only. InShaha v. Shaha,2 Sir Richard Couch C.J. and Glover J. heldthat an agreement whereby the holder of a license for keepinga wine shop let the shop and the use of the license for a fixedterm, receiving rent, was contrary to the policy of the law asdeclared in the Bengal Act II. of 1866, and therefore illegal. Theappellant’s counsel sought to distinguish this case by contendingthat it turned on the fact that there had been a direct contraventionof the law. But that is not so. I have examined Act II. of 1866.It contains no direct prohibition of sub-letting. The report of thecase shows that no such prohibition was. contained in the license.The ratio decidendi is thus expressed: 44 The person to be licensedis the keeper of the shop, and it is intended that it shall be kept bythe person who had the license. Keeping a shop is not letting itout to another person and receiving a rent for it. ' A man who letshis house or shop to another cannot properly be said to keep it;and when the law speaks of the keepers of these houses or places ofentertainment, it must mean the persons who really keep them,that is, the persons who dwell in, and have the management andcontrol of, them. This is what must be understood by keeping ahouse of entertainment.”
And, again, 44 It is clear that what is intended is that the personwho has the license shall keep the shop or place of entertainment,and shall be liable for the acts of his servant or the person who' maybe in charge of it. A contract of this kind, by which he lets the shopand the use of the license for a fixed term, receiving rsnt, is contraryto the policy of the law. It is in fact a contract to do that whichthe law intended should not be done, and it appears to us to comeclearly within the rule tha,t a contract to do that which is illegal,or is contrary to public policy, cannot be enforced.”
1 {1911) 21 Mad. h. J. 425.* (1874} 21W. R. 289.
( 847 )
In Marudajnuthu Pillai v. Rangasamy Moopap. 1 the plaintiffentered into an agreement with the defendant that they should bepartners in the business of vending arrack and toddy, the plaintiffhaving a license for toddy and the defendant having a license forarrack. At the time this contract was entered into it was a rule ofthe Government, under the Abkari Act, that no person having atoddy license should be interested in an arrack business, and vice■vend. Subrahmania Ayyar and Davies JJ. held that the contractwas void under the rule, but added, “ apart from this, we shouldhold that the contract was invalid also on the ground that thelicense in eaoh case was to be obtained by only one of the partners.The provision's of the Abkari Act, as a whole, -show clearly thatevery person carrying on abkari business as a principal must belicensed under the Act. The reason is obvious that, unless he werelicensed, there could be no control over him.” The case of Jamsonv. Driefontein Consolidated Mines, Ltd.,2 to which I called the atten-tion of counsel during the argument, only shows that the grounds of” public policy " at common law should not be extended by Courtsof justice. It is no authority against the creation of statutorygrounds of “ public policy,” and the cases that I have examined orcited in the course of this judgment, which might be multipliedindefinitely, prove that these may be created by the Legislatureeither expressly or by necessary implication.
In my opinion, the decision of the District Judge is right, andthis appeal should, on the authority of Meyappa Chetty v. Rama-nathan,* have been dismissed with costs by the Bench before whichit originally came.
IMS.
Wood
Bhnton
A.O.J.
Fernando e.Bamanathan
Pereira J.—
«
The plaintiff in this case is one of the parties to partnership deedNo. 3,080 dated March 3, 1910 (D 1). The two defendants are alsoparties to that deed, and in addition to being members of thepartnership constituted thereby, the defendants were the managers(appointed by means of the same deed) of the business of thepartnership. The partnership has now been dissolved by effluxionof time, and the plaintiff sues the defendants for an account-of theirmanagement and of the affairs of the partnership, and for therecovery of what may be found to be due to the plaintiff thereon.The added defendants are the other members of the partnershipconstituted by deed D 1. After issues were framed some evidencewas taken by the District Judge, and, on February 19, 1913, he madeorder as follows: “ The deed sued on was very similar in terms todeed held to be illegal in case No. 31,882, and I framed the followingissue: ‘ Is the agreement sued on contrary to the policy of theOpium Ordinance, 1899, and therefore illegal? ’ ” And he eventually
1 (1900) I. L. B. 24 Mad. 401.2 (1902) A. C. 484.
* (1918) 16 N. L. B. 33.
1913.
Pbbsuia J.
Fernando «.Ramanathan
( 348 )
held that the agreement in question was illegal, and dismissed theplaintiff’s claim. This Court has already pronounced upon theright qI the District Judge to frame, at the stage of the case at whichhe did, the issue mentioned above, and the question now for con-sideration is whether that issue has been rightly decided. I confessI find it difficult to Bay where one should look to discover the“ policy of an Ordinance.” The preamble is perhaps the safest,and is certainly the most inviting, direction to look in, and the policyto be gathered from the preamble of the Ordinance in question,namely, Ordinance No. 5 of 1899, is the “ consolidation and amend-ment of the law relating to the possession and sale of opium.” Ifthis is the policy that we are to concern ourselves with, I have nohesitation in Baying that in deed D 1 there is absolutely nothingcontrary to this policy. Of course we are now dealing with arepealed Ordinance, and if the District Judge had in view theOrdinance as regards the possession and sale of opium now in force,which, however, has no application to this case, the policy to begathered from the preamble of that Ordinance (Ordinance No. 5 of1910) is, it will be seen, the “ restriction of the consumption of opiumin Ceylon.” Whatever the policy of the Legislature may have beenin passing either Ordinance, the District Judge apparently thinksthat the deed in question contravenes some “ public policy,”because at the very commencement of his order of February 19,1913, he says, “ The terms of the deed'of partnership indicate thatthe agreement is contrary to public policy.” If the policy of theone Ordinance or the other can be brought under that designation—“ public policy ”—and the deed is found to be contrary to thatpolicy, there can be no question that it must then be pronouncedto be null and void. But how axe we to ascertain what the " publicpolicy ” is in respect of the possession, sale, or consumption ofopium? Public policy, according to an eminent Judge, “ is a veryunruly horse, and when once you get astride of it, you never knowwhere it will carry you ” (see Richardson v. Mellish 1). It has alsobeen observed that public policy “ does not admit of definition, andis not easily explained. It is a variable quantity, and it must varywith the habits, capacities, and opportunities of the public ” (perKekewick J. in Davies v. Davies 2). There are certain time-honouredpurposes which Courts have always regarded as matters of publicpolicy, such as the encouragement of trade, the repression of vice,immorality, and lawlessness, &c., but in the presence of such con-flicting opinions as now exist on questions as to what is best for thepublic good, what can be our guide in an attempt to discover newmatters and things that can be said to be matters of public policy?“ To allow this ” (public policy), said Parke B. in a judgment citedwith great approval by the Lord Chancellor in Jatnson v. Driefon-tein Consolidated Mines, Ltd.,9 “to be a ground of judicial decisioni 2 Sing. 262.* 86 Ch. D. 864.3 (1903) A. C. 496.
• ( 849 )
would lead to the greatest uncertainty and confusidn.” The issueas framed can therefore, in my opinion, admit of only one answer,namely, an answer in the negative. If the alleged illegality of theagreement is to depend entirely upon its being contrary to theso-called policy of the Ordinance, I do not think there is much to besaid against the validity of the agreement. But I think that thereal question involved is whether the agreement " has been made foror about any matter or thing which is prohibited and made unlawfulby Ordinance.” Maxwell, in his work on the Interpretation ofStatutes, citing numerous cases, clearly lays down the rule withregard to the invalidity of agreements of which the terms contravenethe provisions of legislative enactments. He says (p. 635, 5th ed.),“ It is, and has always been, an established rule of law that no actioncan be maintained on a contract made for or about any matter orthing which is prohibited and made unlawful by statute; such acontract is void.” But he also says, “ When the object of the actis sufficiently attained without giving the prohibition so stringentan effect, and where it is also collateral to or independent of thecontract, the statute is understood as not affecting the validity ofthe contract.” It is needless to consider whether agreement D 1falls within this exception. In my opinion it does not come withinthe rule at all. If given a reasonable construction, there is no partof the agreement D 1 that contravenes any provision of the OpiumOrdinance of 1899. The case of Meyappa Ghetty v. Ramanathan 1has been cited against this view. I do not think that I should lookoutside the four corners of the judgment if I am to treat the case asan authority on a question of law. Some of the terms of the deedin question in that case cited by His Lordship the Chief Justice donot appear in the present deed. Each case must depend upon itsown facts and circumstances; and dealing with the deed in questionin the present case, it seems to me that there is no part of it that canbe taken objection to as being contrary to the provisions of theOpium Ordinance. The parties to the agreement are all personswho held iicenses to sell opium at different places! They agree,in general terms, to carry on in partnership the trade or business ofselling opium. This is covenant No. 1. The only other covenantthat need be noticed is No. 3, by which it is provided that themanagement of the'business is to be in the hands of the presentdefendants, ” who shall carry on the said business to the satisfactionof the parties.” Clearly, the duties and liabilities of the licensees• with respect to their own respective licenses remain untouched. Theagreement is no more than one to pool' the profits, and there is nostipulation whatever allowing or requiring a partner to do anythingthat is forbidden by the Ordinance. That is the most importantfeature of the agreement. In the case of Davies v. Makuna,1 aqualified medical practitioner agreed to serve an unqualified medical1 (1918) 16 N. L. A. 33.* 29 Ch. D. 686.
1913.
Pbbbiba J'.
Fernando v.Ramanathan
( 850 )
IMS.practitioner as assistant in his profession as a medical' practitioner.
PmnmnPractice by a person in the position of the latter as a medical practi-
J ^ tioner was actually prohibited by Act 55, Geo. 8, c. 194, apparentlyRamavnthn” i11 the interests of the public; and inasmuch as the agreementinvolved practice by him, it was held to be illegal. But the Judgeswho constituted the Court were^ of opinion that if the agreementdid not involve actual practice by the unqualified practitioner itwould be valid.
For the reasons given above, I am of opinion that agreement D 1is a valid agreement.
Since writing the above I have seen the judgment of my brotherEnnis, and 1 may say that I am in entire agreement with him. Ofcourse my decision is that the agreement is ex jade valid. Thereis nothing in its terms that can be Said to contravene any provisionof the law, but, as my brother Ennis has pointed out to me, evidenceis admissible under proviso 1 to section 92 of the Evidence Ordinanceto prove any fact which would invalidate an agreement on theground of illegality. I have carefully considered this proviso, and1 find that it is largely based on the authority of the case of CoUine v.Blantem,1 where it was, in effect, held that, in the case of a deed,while, as a general rule, you cannot plead any matter dehors thedeed itself, you may, in order to establish illegality, prove anymatter not inconsistent with, or contradictory of, the express termsof the deed. The nature of the illegality provable in the presentcase I have already decided upon. I therefore agree to the orderproposed by my learned brother, and would set aside the orderappealed from with costs, and remit the case to the District Courtfor the trial of the other issues framed and of the question whether,in the execution of deed D 1, it was the intention of the partiesto take the-sale of opium out of the hands of the licensees of therespective shops.
Ennis J.—
This case was reserved for consideration by a Full Court onthe decision of the learned District Judge on the issue whetherthe agreement sued upon is contrary to the policy of the OpiumOrdinance, and therefore illegal.
The District Judge found that the agreement in this case containedprovisions similar to the provisions of fEe agreement in the case of,Meyappa Chetty v. Ramanathan,* and, following that case, held thepresent agreement to be illegal.
It is urged on appeal that the agreements are not similar. It waspointed out that in the former case some of the parties were noti 8 Wilson K. B. 847.* (1913) 16 N. L. B. 33.
( 351 )
licensees, and further, that in that case the parties' took an activeinterest in the management of the several opium shops; while inthe present case all. the parties are licensees of one or other at theshops, and it is alleged that the partnership did not interfere withthe management of the licensees in their respective shops, but onlypooled the profits and losses.
I can see nothing in the terms of the agreement in this case indi-cating that it is against any public policy known to the common law,and there remains only the question whether it is illegal as beingin contravention of any express prohibition of law or a prohibitionimplied by the imposition of a penalty.
Seotion 6 of the Opium Ordinance, 1899, prescribes that it shall
not be lawful for “ any person to sellor suffer or permit to be
sold, either by wholesale or retail, opium without a license author-izing such sale,” and section 16 prescribes the penalty for thecontravention of this provision. Seotion 15 provides that condi-tions may be attached to the license, and it appears that one of theconditions attached to the opium licenses is that the names of allpersons employed on the licensed premises shall be endorsed on thelicense.
Nothing in the terms of the Ordinance or in the conditions of thelicense prohibit, in my opinion, a person carrying on the businessof selling opium through persons duly licensed to sell; and theobject of the Ordinance, which is to control the possession and saleof opium, would, it seems to me, be attained without extending theprohibition on sale contained in section 6 to the partners in abusiness carried on through duly licensed persons who have thecontrol and management of the shops.
In the case of Meyappa Chetty v. Ramanathan 1 the judgments,indicate that the agreement was such that the licensees had nodirect control over the partnership shops for which they had acquiredlicenses, and that unlicensed persons were directly engaged inthe management of the shops, and it was held that there was acontravention of the prohibition on sale contained in section 6 ofthe Ordinance.
In the Indian cases which were cited, it would seem that a breachof some express provision of the Indian Act, or of rules thereunder,or of the conditions of the license, was found.
Tn Padmanabhan v. Sarda, 2 there was a condition in the licensewhich prohibited the transfer of the right of the sale granted to thedefendants, although in this case this was not the only ground of thedecision.
Tn Marudamuthu PiUai v. Rangasamy Mooppan * there was a rule'under the Act that “ no person having a toddy license should beinterested in an arrack business, and vice vend."
i (2913) 18 N. L. B. 33.2 36 Mad. 682.
* 24 Mai. 401.
IMS.
Ennis J.
Fernanda «.Bamanathan
1813.
Ennis J.
Fernando v.Ramanathm
( 352 )
In Shdha v. Shaha 1 there was an agreement whereby the holderof a license for keeping a wine shop let the shop and the use of thelicense, and this was held to be contrary to the prohibition of salewithout a license, as it was the intention of the Act that the shopshould be kept by the person who had the license, although therewas no express prohibition of letting either in the Act or rules.
The present case differs, in my opinion from Meyappa Chetty v.Ramanathan,2 in that the agreement does not contain any provisionwhich shows that non-licensed persons were to conduct the sales,and from the Indian cases, in that there is no prohibition againstdealing with the license or any inference that the shops are to be“ kept ” by persons other than the licensees.
Whether the agreement is illegal on the ground that it was theintention of the parties to take the sale of opium out of the handsof the licensees of the respective shops can be decided only whenall the evidence has been taken.
I would send the case back for further evidence and for decisionon the facts and the other issues raised.
Sent back.
♦
i (1874) 31 W. R. 389.
* (1913) 16 N. L. B. 88.