Appeal No 125 of 1955
Appeal from the judgment and decree dated November 20 1951 of the former Court of Judicial Commissioner Vindhya Pradesh in Civil First Appeal No 47 of 1951 arising out of the judgment and decree dated June 4 1951 of the Court of Additional District Judge Umaria in Civil Original Suit No 171917 of 1950
Sardar Bahadur for the appellants
Achhru Ram B C Misra and P K Chakravarty for the respondents
December 9
The Judgment of the Court was delivered by SK DAS J
This is an appeal on a certificate granted by the erstwhile Judicial Commissioner of Vindhya Pradesh which is now part of the State of Madhya Pradesh
On behalf of respondent No 1 Nagar Mal who was defendant No 1 in the suit a preliminary objection has been taken to the effect that the suit was not maintainable by reason of the provisions of section 4 of the Rewa State Companies Act 1935 and the appeal filed by the plaintiffs must therefore be dismissed
As this preliminary objection was not taken in any of the two courts below learned counsel for the appellants wanted time to consider the point
Accordingly on October 28 1958 we adjourned the hearing of the appeal for about a month
The appeal was then heard on November 27 1958
As we are of the opinion that the preliminary objection must succeed it is necessary to state the facts only in so far as they have a bearing on it
When cloth control came into force in Rewa State the cloth dealers of Budhar a town in that State formed themselves into an Association to collect the quota of cloth to be allotted to them and sell it on profit wholesale and retail
The Association at Budhar consisted of 25 members who made contributions to the initial 771 capital of the association which was one lac of rupees
No formal Articles of Association were written nor Se was it registered
The Association functioned through a President and a pioneer worker they kept accounts and distributed the profits
Respondent No 1 Nagar Mal was the President of the said Association from January 1946 to June 26 1946
Before that Seth Badri Prasad one of the plaintiffs appellants before us was the President
Nagar Mal ceased to be President after June 26 1946 and Seth Badri Prasad again became President
The Association worked till Febr uary 1948  then cloth was decontrolled and the work of the Association came to an end
On June 25 1949 thirteen members of the Association out of the twenty five brought a suit and in the plaint they alleged that respondent No 1 who was President of the Association from January 1946 to June 1946 had given an account of income and expenditure for the months of January February and March 1946 but had given no accounts for the months of April May and June 1946
They therefore prayed athat defendant No 1 Nagar Mal be ordered to give the accounts of the Cloth Association Budhar from the beginning of the month of April 1946 to June 26 1946 bthat defendant No 1 be ordered to pay the amount whatever is found due to the plaintiffs on account being done along with interest at the rate of annas 12 per cent
per month and cthat interest for the period of the suit and till the realisation of the dues be allowed
Besides Nagar Mal the other eleven businessmen who were members of the Association were joined as proforma defendants some of whom later filed an application to be joined as plaintiffs
Though the plaint did not mention any particular transaction of the Association during the period when Nagar Mal was its President the judgments of the courts below show that the real dispute between the parties related to the sale of cloth of a consignment known as the Gwalior consignment
It appears that in April 1946 a consignment of 666 bales of cloth had come from Gwalior 772 and an order was passed by the Cloth Control Officer that the consignment would be allotted to Nagar Mal who would give the Association an option of taking over the consignment if the Association did not exercise the option the consignment would be taken over by Nagar Mal
It appears that there was some dispute as to whether the other members of the Association were willing to take over the consignment of Gwalior cloth
We are not concerned now with the details of that dispute because we are not deciding the appeal on merits
It is enough if we say that ultimately there was an order to the effect that only 390 bales should be allotted to the Association out of which Nagar Mal had given the Association benefit of the sales of 106 bales and the dispute related to the share of profits made on the remaining 284 bales
Respondent No 1 Nagar Mal raised various points by way of defence his main defence being that none of the members of the Association were entitled to any share in the profits on the sales of 284 bales of Gwalior cloth
The learned District Judge who dealt with the suit in the first instance passed a preliminary decree in favour of the plaintiff appellants
The decree directed Nagar Mal to render accounts of the Cloth Association at Budhar from April 1 1946 to June 26 1946 and it further directed that leaving out 106 bales of Gwalior cloth which Nagar Mal gave to the Association an account should be rendered of the rest of the 390 bales and the profits on the sale thereof shall be according to the capital shares of the members of the Association
Nagar Mal preferred an appeal to the learned Judicial Commissioner of Vindhya Pradesh who reversed the finding of the learned District Judge and came to the conclusion that the other members of the Association were not entitled to participate in the profits made on the sale of 284 bales of the Gwalior cloth and inasmuch as Nagar Mal had rendered accounts with regard to all other transactions the suit for accounts must fail
He accordingly allowed the appeal and dismissed the suit
The preliminary point taken before us is founded on 773 the provisions of section 4 of the Rewa State Companies Act 1935
Sub section 1 of section 4 relates to banking business
We are concerned with sub section
2 of section 4 which is in these terms  42
No company association or partnership consisting of more than twenty persons shall be formed for the purpose of carrying on any other business that has for its object the acquisition of gain by the company association or partnership or by the individual members thereof unless it is registered as a company under this Act or is formed in pursuance of a Charter from the Durbar Mr Sardar Bahadur who has appeared on behalf of the appellants and who took time to consider the point has now conceded before us that the aforesaid provision was in force in the Rewa State at the relevant time when the Association was formed at Budhar and he has further conceded that the said provision was in force till the Indian Companies Act came into force in the said area in 1950
We must therefore decide the preliminary point on the basis of the provision in section 42 of the Rewa State Companies Act 1935
Now the preliminary point taken on behalf of respondent no1 is this
It is contended that by reason of section 42 aforesaid the Cloth Association at Budhar was not a legal Association because it was formed for the purpose of carrying on a business which had for its object the acquisition of gain by the individual members thereof and further because it was not registered as a Company under the Rewa State Companies Act 1935 nor was it formed in pursuance of a charter from the Durbar
It has been contended before us on behalf of respondent no1 that by reason of the illegality in the contract of partnership the members of the partnership have no remedy against each other for contribution or apportionment in respect of the partnership dealings and transactions
Therefore no suit for accounts lay at the instance of the plaintiffs appellants who were also members of the said illegal Association
We consider that this contention is sound and must be upheld
On behalf of the appellants Mr Sardar 774 Bahadur has urged the following points in answer to the preliminary objection firstly he has contended that we should not allow the preliminary objection to be raised at this late stage secondly he has contended that even though the Association was in contravention of section 42 of the Rewa State Companies Act 1935 the purpose of the Association was not illegal and a suit was maintainable for recovery of the contributions made by the appellants and also for accounts thirdly he has contended that on the analogy of section 693a of the  it should be held that the appellants had a right to bring a suit for accounts of the Association which was dissolved in February 1948
We proceed now to consider these contentions of learned counsel for the appellants
The first contention that respondent No 1 should not be allowed to raise an objection of the kind which he has now raised at this late stage can be disposed of very easily
The objection taken rests on the provisions of a public statute which no court can exclude from its consideration
The question is a pure question of law and does not require the investigation of any facts
Admittedly more than twenty persons formed the Association in question and it is not disputed that it was formed in contravention of section 42 of the Rewa State Companies Act 1935
A similar question arose for consideration in Surajmull Nargoremull vs Triton Insurance Company Ltd 1
In that case sub section
1 of section 7 of the Indian Stamp Act 11 of 1899 was pleaded as a bar before their Lordships of the Privy Council the section not having been pleaded earlier and having passed unnoticed in the judgments of the courts below
At p 128 of the report Lord Sumner said The suggestion may be at once dismissed that it is too late now to raise the section as an answer to the claim
No court can enforce as valid that which competent enactments have declared shall not be valid nor is obedience to such an enactment a thing from which a court can be dispensed by the consent of the parties or by a failure to plead or to argue the 11924 LR 52 IA 126 128
775 point at the outset Nixon vs Alibion Marine Insurance Co 1867 L R  The enactment is prohibitory
It is not confined to affording a party a protection of which he may avail himself or not as he pleases 
In Sri Sri Shiba Prasad Singh vs Maharaja Srish Chandra Nandi 1 the provisions of section 72 of the Indian Contract Act were overlooked by the High Court the section was only mentioned in passing by the Subordinate Judge and it appears that the bar of section 72 of the Indian Contract Act was not argued or only faintly argued before the Subordinate Judge or in the High Court
In these circumstances their Lordships of the Privy Council held that they were unable to exclude from their consideration the provisions of a public statute
In our view the same principle applies in the present case and section 42 of the Rewa State Companies Act 1935 being prohibitory in nature cannot be excluded from consideration even though the bar of that provision has been raised at this late stage
On his second contention learned counsel for the appellants has relied on U Sein Po vs U Phyu 2
That was a case in which three members of an association formed for carrying on a rice business claimed a decree 1 declaring the respective shares of the subscribers to that association and ii directing that the plaintiffs be repaid their shares after reconverting the property of the association into cash and after payment of all debts and liabilities
The association it was found consisted of twenty seven members it was not registered and its formation was in contravention of sub section
2 of section 4 of the Indian Companies Act
The lower court granted the decree asked for and this was affirmed in appeal by the High Court
The learned Judges referred to the decision in Sheppard vs Oxenford3 and Butt vs Monteaux 4 and rested their decision on the following passage of  Lindley on Partnership  the learned Judges quoted the passage at p 145 of the 9th edition but the same passage will be found at pp
148 149 of the 11th edition 1 1949 LR 76 IA 244
2 Ran 540
3   4   69 ER 345 776 Although therefore the subscribers to an illegal company have not a right to an account of the dealings and transactions of the company and of the profits made thereby they have a right to have their subscriptions returned and the necessary account taken and even though the moneys subscribed have been laid out in the purchase of land and other things for the purpose of the company the subscribers are entitled to have that land and those things reconverted into money and to have it applied as far as it will go in payment of the debts and liabilities of the concern and then in repayment of the subscriptions
In such cases no illegal contract is sought to be enforced on the contrary the continuance of what is illegal is sought to be prevented
 We do not think that the decision aforesaid be it correct or otherwise is of any help to the appellants in the present case
The appellants herein have not asked for a return or refund of their subscriptions on the contrary they have asked for a rendition of accounts in enforcement of an illegal contract of partnership
The reliefs they have asked for necessarily imply a recognition by the court that an association exists of which accounts ought to be taken
When the association is itself illegal a court cannot assist the plaintiffs in getting accounts made so that they may have their full share of the profits made by the illegal association
The principles which must apply in the present case are those referred to in the following passage at p 145 of Lindley on Partnership 11th edition  The most important consequence however of illegality in a contract of partnership is that the members of the partnership have no remedy against each other for contribution or apportionment in respect of the partnership dealings and transactions
However ungracious and morally reprehensible it may be for a person who has been engaged with another in various dealings and transactions to set up their illegality as a defence to a claim by that other for an account and payment of his share of the profits made thereby such a defence must be allowed to prevail in 777 a court of justice
Were it not so those who ex hypothesi have been guilty of a breach of the law would obtain the aid of the law in enforcing demands arising out of that very breach and not only would all laws be infringed with impunity but what is worse their very infringement would become a ground for obtaining relief from those whose business it is to enforce them
For these reasons therefore and not from any greater favour to one party to an illegal transaction than to his companions if proceedings are instituted by one member of an illegal partnership against another in respect of the partnership transactions it is competent to the defendant to resist the proceedings on the ground of illegality It is true that in order that illegality may be a defence it must affect the contract on which the plaintiff is compelled to rely so as to make out his right to what he asks
It by no means follows that whenever money has been obtained in breach of some law the person in possession of such money is entitled to keep it in his pocket
If money is paid by A to B to be applied by him for some illegal purpose it is competent for A to require B to hand back the money if B has not already parted with it and the illegal purpose has not been carried out see Greenberg vs Cooperstein 1
The case before us stands on a different footing
It is a claim by some members of an illegal association against another member on the footing that the association should be treated as legal in order to give rise to a liability to render accounts in respect of the transac tions of the association
Such a claim is clearly unten able
Where a plaintiff comes to court on allegations which on the face of them show that the contract of partnership on which he sues is illegal the only course for the courts to pursue is to say that he is not entitled to any relief on the allegations made as the courts cannot adjudicate in respect of contracts which the law declares to be illegal Senaji Kapurchand vs Pannaji Devichand2
The same view which we 1 2AIR 98 778 think is correct was expressed in Kumaraswami vs Chinnathambi 1
As to the last contention of learned counsel for the appellants based on the analogy of section 693a of the Partnership Act it is enough to point out that under the  an unregistered firm is not illegal there is no direct compulsion that a partnership firm must be registered though the disabilities consequent on non registration may be extremely inconvenient
Moreover the suit before us was not one for accounts of a dissolved firm but for accounts of an illegal association which was in existence at the relevant period for which accounts were asked
We do not think that the argument by analogy is of any help to the appellants in our opinion the analogy does not really apply
For the reasons given above we hold that the preliminary objection succeeds
The appeal is accordingly dismissed
As the preliminary objection was taken at a very late stage we direct that the parties must bear their own costs of the hearing in this Court
Appeal dismissed
1 ILR 1951 Mad 593


Summary:
The respondent in the appeal a Mounted Constable in the Border Security Force was charged for an offence under section 31b of the for extracting a sum of money from a person without proper authority
A charge sheet was issued evidence in support of the same was recorded and thereafter a Summary Security Force Court as provided under the Act was constituted and the respondent was put on trial
During the recording of evidence the respondent was given an opportunity to cross examine prosecution witnesses but he declined pleaded guilty and prayed for a lenient view to be taken
The Summary Security Force Court passed an order sentencing him to rigorous imprisonment for one year civil prison and also to be dismissed from service
Aggrieved by the aforesaid order the respondent preferred a petition under section 1172 of the Act to the Director General BSF who after going through the petition and the records of the case rejected the same as devoid of any merit
The respondent thereupon filed a petition under Articles 226 and 227 of the Constitution before the High Court urging that there was violation of the principles of natural justice since he had not been heard before disposing of his petition
The High Court allowed the writ petition and directed fresh hearing of the petition of the respondent after giving him an opportunity of being heard
The Union of India appealed to this Court against the decision of the High Court contending that section 1172 of the Act does not provide for 183 a personal hearing
The appeal was contested by the respondent contending that as the  does not expressly exclude a personal hearing and that an employee cannot be condemned without observing the principles of natural justice
On the question whether a personal hearing is required before disposing of a petition under s1172 of the against an order of the Summary Security Force Court Allowing the appeal this Court HELD 1
The doctrine of principles of natural justice and audi alteram partem are part of Article 14 of the Construction
Although principles of natural justice apply to administrative orders affecting the rights of citizen yet it is also clear that in cases of special enactments like Army Act all the principles of natural justice cannot be imported
The same ratio applies to a petition under section 1172 of the also
187A B 191G 12 Chapter XIII consisting of Rules 167 to 169 of the Border Security Force Rules deals with petitions filed under s117 of the 
Even in them there is nothing to indicate that a hearing has to be given disposal of a petition
191G H Maneka Gandhi vs Union of India 1978 2 SCR 621 Som Datt Datta vs Union of India  Ors 1969 2SCR 177 Union of India vs Jyoti Prakash Mitter1971 1 SCC 396 Captain Harish Uppal vs Union of Inida and Others   Shri SN Mukherjee vs Union of India JT 1990 3 630 and Union of India vs Col JN Sinha and Anr
1971 1 SCR 791 relied on
Lt Col
KNS Sidhu vs The Union of India and Others All India Service Law Journal 1977 page 721 referred to
21 Under section 1172 of the  the person aggrieved is only entitled to file a petition but the disposal of such a petition does not attract principles of natural justice
192A 22 The authority disposing of the petition under section 1172 is not a court and every order passed administratively cannot be subjected to the rigours of principles of natural justice
192B 3
In the instant case the respondent had been tried by observing 184 the due process of law and the verdict of the Summary Security Force Court was confirmed and it was only a post confirmation petition that was filed under s1172 of the 
The order was passed by an authority and not by a court and every order passed administratively could not be subjected to the rigours of principles of natural justice
192A B