009-NLR-NLR-V-16-MEYAPPA-CHETTY-v.-RAMANATHAN-et-al.pdf
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Present: Lascelles C.J. and Wood Benton J.MEYAPPA CHETTY v. BAMANATHAN et al.
168—D. C. Colombo, 31,882.
Opium Ordinance, No. 5 of 1899—-Partnership for the sale of opium by
the licensee with an unlicensed person—Action for share of profits.
By a partnership deed P 3 the two defendants'and three othersentered into partnership for acquiring the whole of the opiumlicenses and thus to secure the monopoly of the opium trafficthroughout the Island. The members of the syndicate bought intheir individual names practically all the opium licenses for theyears 1908 and 1909. The plaintiff, who was not one of theoriginal partners, and who had bought the licenses for Matara andHambantota, sued the defendants for an eighth share of theirprofits, averring that the defendants had by a verbal agreement ofpartnership between plaintiff and defendants agreed to give himan eighth share of their profits.
Held, that the plaintiff’s action was not maintainable, as it wasfounded on a partnership which was illegal, as being contrary tothe policy of the Opium Ordinance of 1899.
Lascelles C.J.—The Ordinance contemplates each opium shopbeing under the control of an individual licensed for that purposeby the proper authority and personally bound to observe theconditions of the license. During the continuance of the partner-ship the control and management of all these shops were underthe deed P 3 vested, not in the hands of the persons who.werelicensed in that behalf by the several licensing authorities, but inthe hands of a syndicate, of whose existence the licensing author-ities were presumably unaware, and to whom, if they did their duty,they would have refused to issue licenses. It is no answer to saythat the members of the partnership were themselves licensees orassignees from licensees, for under the deed these persons had nodirect personal control over the particular shops for which theyhad acquired licenses.
T
HE facts are set out in the judgment of Wood Benton J. asfollows:—
In this action Meyappa Chetty, the appellant, sues BamanathanChetty, the first, and Sinnetamby, the second, respondent, claiminga one-eight share, which he values at Bs. 71,000, of the profits of■ah alleged informal agreement of partnership between him and themin the business of opium renters for the years 1908. and 1909. Therespondents deny the alleged- agreement for a partnership, andcontend further that even if it* were established it would be rendered
Von. XVI.3
8-
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. 1913.
1913.
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MegappaChatty v.Ramanathan
A. Jayewardcne, for first defendant, respondent.—The agree-ment relied on by the plaintifi is one made in contravention of theprovisions of the Opium Ordinance, and it is therefore illegal.[Ordinance No. 5 of 1899, sections 4, 16 (2).]
[Wood Benton J.—Do you say that the agreement is illegal asto the Colombo rent or to the Matara and Hambantota rent?] Itis illegal as to both. The fact that plaintiff had a license in his ownname for the Matara and Hambantota rent does not make anydifference, as the partnership agreement on which he relies is illegal.He is not entitled to any profits under the agreement whether hehad a license or not .
The plaintiff alleges that he was in partnership with the defendantsfor the sale of opium. There was no license in favour of the personsforming the partnership. Plaintiff is asking for profits from thesale. He is, therefore, claiming a benefit arising from a businessconducted without a license—an illegal partnership.
The illegality of an agreement of the kind which the plaintiffseeks to prove may arise either from a contravention of the termsof the license or of the provisions of the Ordinance (Padmanabhan v.flcrda1). Here the illegality arises from a contravention of the. terms of the Ordinance itself. Where an unlicensed person wastaken into partnership for the sale of opium it was held that theagreement was illegal (Marudamuttu v. Mooppan2).
illegal and incapable of supplying a valid cause of action by the pro-visions of section 6 of the Opium Ordinance, 1899 (No. 5 of 1899),inasmuch as the appellant was not the licensee under Governmentof the rents for a share in the profits of which he sues.
The learned District Judge has not dealt with this latter point*But in his original judgment he came to a strong conclusion on themerits in the respondents’ favour, and dismissed the appellant’saction with costs. On the fourth day of the argument before uswe sent the case back to the District Court to give the appellantan opportunity of producing and proving certain letters which, itwas alleged, were not in hiB possession at the time of the originaltrial, and which, in our opinion, had a material bearing on thequestion whether or not there had been a partnership. We per-mitted either side to adduce in the District Court any furtherevidence relevant to the meaning and effect of those letters, andinvited the learned District- Judge, in returning the record to theSupreme Court, to inform us whether, and if so, to what extent,the fresh evidence so placed before him had affected his originalview of the case. The District Judge stated that if the letters inquestion had been before him at the trial he would have held thatthe alleged partnership had been proved.
» (1911) 36 Mad. 682.
a (1901) 2 Mad. 401.
1913.
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[Lascelles C.J.—Does the plaintiff claim to be a partner in theopium venture or does he say he was entitled by agreement to somebenefit aa a consideration for his services?] His case is that he wastaken on as a partner. Plaintiff claims a share of the profits as oneof the vendors. He had no right to sell. He cannot, therefore,maintain this action for the proceeds of the sale. An unlicensedperson who joins a person licensed to sell opiuin must be heldto sell opium himself within the meaning of the Ordinance.
Whether the plaintiff was entitled to sue for the Matara andHambantota sale or not must be decided according to the samerule. He entered into an illegal agreement with the defendant.Whether the plaintiff had no license or the defendant had nolicense it is immaterial; if one of them had not a license the actioncannot be maintained. It makes no difference whether the licensefor Matara and Hambantota was in the plaintiff’s name or not.Counsel cited Shaba v, Shaba,1 Scott v. Brown,? Shaba v. Shaba,*Peris v. Fernando,4 Ritchie v. Smith.6
van Langenberg, K.C., Acting A.-G. (with him Samarawickramaand Hayley), tor the plaintiff, appellant.—This case may be dis-tinguished from all the cases cited by the counsel for the appellant.Where a person enters into a partnership dealing with the sale ofthings allowed only by license and actively takes a part in the salesuch a contract cannot be enforced. Here the plaintiff was not apartner. He had not the right to inspect the books, exceptRamanathan’s books. But plaintiff had no claim against thefirm (Ramanathan, De Mel A Co.). Plaintiff had no right ofpartnership as regards the firm. The only right to which plaintiffwas entitled was a share of the -profits made by Ramanathan.Plaintiff could not interfere with the management, could not takeany active part in the business, and; it is such interference that isprohibited. Counsel cited Lindley on Partnership, 7th ed., pp. 108,109; Shaba v. Shaba;* Shaba v. Shaba.1
MeyappaChatty v.Bamanathan
Jayewardene, in reply.
Elliott (with him AUan Drieberg), for the first defendant,respondent.
De Sampayo, K.G. (with him Bawa, K.C., and Sandrasegra), forthe second defendant, respondent.
Cur. adv. vult.
January 15, 1913. Lascelles C.J.—
During the course of the trial an additional issue.was framed,which raised the question of law whether the plaintiff could maintainthis action inasmuch as be was not a licensee under Government,
i (1074) 91 W. B. 909.* (1904) 01 Cel. 798.
3(2090)00. B. 794, at page 788.« (1904) 1 BoL 199.
* 18 L. J. C. P. 9.
1913*
IM60BLLB8
C.J.
MeyappaChetty v.Ramanathan
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except in respect of the Matara and Hambantota rents. Thisquestion is not dealt with in the judgment of the learned DistrictJudge.
We have referred to the authorities collected in Lindley on Partner-ship, and also to the case of Padmanabhan v. Sarda,1 a decision on asimilar question under the Indian Opium Act of 1876, in which theIndian authorities are reviewed.
The true question, it seems to me, is whether the partnership deedP 3 between the defendants and the Sinhalese partners is illegal, asbeing in contravention of the policy of the Opium Ordinance of 1889.
If this deed is contrary to public policy, it is clear that the presentaction, which is for an interest under that deed, is not maintainable.
This Ordinance prohibits any person other than a duly licensedwholesale or retail dealer from being in possession of more than 150grains of opium without a license, and makes provision for the issueof licenses by the “ proper authority ” to possess opium and to sellthe drug by wholesale or by retail. The license may be offered forsale by the proper authority either by public auction or tender, butthe proper authority has a discretionary power to refuse to issue alicense to the highest bidder. Licensees are liable to penalties fortransgression of the conditions attached to the licenses. Theseconditions require the licensees personally to conform to a numberof regulations with regard to the sale of opium and the conduct ofthe licensed shop.
It is, I think, apparent, in the first place, that this Ordinance wasnot enacted merely for the purpose of levying a duty on the sale ofopium, but that it is founded on “ considerations of public policy,**and was intended to regulate and restrict dealings in a deleteriousdrug; in the next place, it is clear that the licenses issued by theproper authority are personal licenses. The privilege of dealing inopium is given by the licensing authority to approved persons, tosuch individuals only as the proper authority considers can; betrusted to observe the provisions of the Ordinance. On referenceto the partnership deed P 3 it will be found that the provisions ofthis deed are wholly repugnant to the policy of the Ordinance.
The effect of the partnership deed is to centralize in .the handsof the members of the partnership the management of all theopium licenses granted by the different licensing authorities todifferent individuals. The deed provides that all the opium mustbe bought through the first defendant, who had the monopoly ofimporting opium from Calcutta ; the expenses of all the opiumshops in the Island are defrayed from the general partnership funds,the cheques being signed by the first defendant on behalf of the firm.The arrangements for the management of the different shops arespecially noteworthy. The shops are by Schedule B of the deeddivided into two categories, namely, Part I. comprising shops underi (1911) 21 Mad. L. J. 425.
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the management of the two defendants, and Part II. comprisingstops under the management of Cooray and De Mel. The businesswas to begin by the two defendants having the management of theshops in Part I., and De Mel and Cooray the management of theshops in Part II.; at the end of each quarter each set of partnersmakes up his accounts, and the management of the. two groups isexchanged, the two defendants taking over the shops in Part II.,and De Mel and Cooray the shops in Part I., of the schedule.
In my opinion these provisions are in direct contravention of thepolicy of the Ordinance. The Ordinance contemplates each opiumshop in the Island being under the control of an individual licensedfor that purpose by the proper authority and personally bound toobserve the conditions of the license. The partnership deed pro-vides that the control and management of all these shops shouldbe vested in the members of the syndicate.
During the continuance of the deed the control and managementof the opium shops in Ceylon were not in the hands of the personswho were licensed in that behalf by the Several- licensing authoritiesin the Island, but in the hands of a syndicate, of whose existence thelicensing authorities were presumably unaware, and to whom, ifthey did their duty, they would have refused to issue licenses. Itis no answer to say that the members of the partnership werethemselves licensee's or assignees from licensees, for under the deedthese persons had no direct personal control over the partnershipshops for which they had acquired licences. All the shops comprisedin the deed were under the same management ; 'they were under themanagement of the syndicate in which the first defendant had acontrolling influence. The deed, in my opinion, is clearly contraryto the policy of the Opium Ordinance, and as such is illegal. It is,therefore, the duty of the Court to refuse its assistance to anyperson claiming an interest under the provisions of that deed. Inmy opinion it matters very little that the plaintiff was not a licensee,except as regards the Hambantota and Matara licenses. He canbe in no better position than the parties to the deed.
For the above reasons I would dismiss the appeal with costs.
1918.
LasobiiIiBS
C.J.
MeyappaGhetty «.Bamanathan
Wood Renton J.—
His Lordship discussed the facts and continued: —
If it had been necessary to decide the question, I should have beenprepared to hold -that the partnership, even if established, was anillegal one, and that no action would lie to enforce any rights arisingunder it. In the issue framed on the point at the trial it was soughtto establish his illegality on the somewhat narrow- ground that theappellant was not himself the licensee under Government of at leastsome of the rents in question. It was argued on the other side thatthe appellant was only a. sub-partner with a share in the profits, and
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that the fact, in so far as it was a fact, that he was unlicensed! didnot -render illegal a partnership carried on by other duly qualifiedpersons. (See Lindley on Partnership, 7th ed., p. 299.) Forthe purposes of another part of the case, however, the appellantcontended that he had concerned himself actively with the businessof the partnership.
“ In 1908,” lie says, ” I used to go to the opium boutique inKayman's Gate and s.ee what the salesmen were doing.My kanakapulle went on behalf of. the syndicate andvisited the shops in Badulla and other places. He wentat my request.”
And again—
“ I took an interest in the opium business being a partner. Thedefendants had an opium office. I frequently wentthere.”
Section 6 of the Opium Ordinance of 1899 (No. 5 of 1899) issufficient to stamp with illegality and render unenforceable rightsarising under a partnership in the opium business, when an un*
_ licensed person claiming, as the appellant does here and underdocument P. 1, tof have been a partner has been engaged as such infurthering its interests– Direct Indian authority to this effect isto be found in Padmanabhan v. Sarda,1 a case decided under theanalogous provisions contained in section 9 of the Indian OpiumAct, 1878 (Act I. of . 1878), and the same principle has beenaffirmed in numerous decisions in regard to other classes ofbusiness which the Legislature has made illegal unless certainconditions are present. It has been held, for instance, that the.licensee of a wine shop let to an unlicensed person in contraventionof the Bengal Act II. of 1866 could not recover rent due under thelease, Shaba v. Shaba,2 and cp. Shaba v. Shaba,2 and Ritchie v.Smith 4), and that an action on a secret contract of partnershipin pawnbroking, where in violation of the requirements of the lawthe name of one partner only appeared above the office door, couldnot be maintained [.Gordon v. Hoxvden,5 and cp. Davis v. Makuna •(assumption of an unlicensed person as a medical partner)].
It might be said, however, that a decision of the case on thisground disposed only of the appellant’s right to share in the profitsderived from these rents as to which he held no license. I wouldprefer, therefore, to hold that the deed of partnership P 3, underwhich the appellant claims to come in between the respondents andMessrs, de Mel, Cooray, and Peris, was itself illegal, as being contraryto the- policy of the Opium .Ordinance of 1899, and can give rise to
'1911) 21 Mad. L. J. B. 423.4 (1848) 8. L. J. C. i 9.
(1874) 21 W. R. Civ. 289.5 (1845) 12 CL & F. 237.
.* 0904) I. L.R. 31 Cal. 798.* (1885) 29 Ch. D. 896.
1918.
WoodBenton J.
MeyappaGhettji 9.Ramanathan
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no lights enforceable by action. I would adopt in this connection,without any additions of my own, the reasons given by my Lord theChief Justice in his judgment, whioh I have had the advantage ofperusing, for arriving at the same conclusion. The fact that thecase was not argued before us on this basis is immaterial. “ Whenupon the trial of an action,” said Kennedy J. in Ge'dge v. Ba ExchangeAssurance Corporation,1 “ the plaintiff's case discloses that thetransaction, which is the basis of the plaintiff's claim, is itself illegal,the Court cannot properly ignore the illegality and give effect to theclaim.”
would dismiss this appeal with costB.
1918.
WoodBenton J.
Meyappa
Chettyv.
Ramanathan
Appeal dismissed.