Case: Seth Badri Prasad And Others Vs. Seth Nagarmal And Others

formation was in contravention of sub-s. (2) of S. 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 v. Oxenford, (1855) 1 K and J 491 : 69 E R 552) and Butt v. Monteaux, (1854) 1 K and J 98 : 69 ER 385, 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): "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 it 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 showed to prevail in a court of justice. Were it not so, those who-ex hypothesi-have been guilty of 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 o 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 v. Cooperstein, (1926) 1 Ch 657. 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 transactions of the association. Such a claim is clearly untenable. 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 ant 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 v. Pannaji Devichand, A I R 1930 P C 300.The same view which we think is correct, was expressed in Kumaraswami v. Chinuathambi, ILR (1951) Mad 593; AIR 1951 Mad 291 ). 8. As to the last contention of learned counsel for the appellants, based on the analogy of S. 69(3)(a) of the Partnership Act, it is enough to point out that under the Indian Partnership Act, 1932 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 it of any help to the appellants; in our opinion, the analogy does not really apply.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]7. 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 transactions of the association. Such a claim is clearly untenable. 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 ant 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 v. Pannaji Devichand, A I R 1930 P C 300.The same view which we think is correct, was expressed in Kumaraswami v. Chinuathambi, ILR (1951) Mad 593; AIR 1951 Mad 291  )8. As to the last contention of learned counsel for the appellants, based on the analogy of S. 69(3)(a) of the Partnership Act, it is enough to point out that under the Indian Partnership Act, 1932 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