"-.

RAMAGYA PRASAD GUPTA 8f OR~.

MURLl PRASAD & ORS .

April 11, 1974

[P. JAGANMOHAN REDDY; H. R: KHANNA AND p, K. GosWAMI, JJ.]

li1dia11 Electricity Act-1910 read with the Indian Contract A.er-Whether 1no11tY ndvanced by partners in pursuance of an agree111ent whicli subsequenlly beco111ts l'Ofd is recoi•erable.

One M obtained a licence for electrification of the Chapra town. Later the licence was assigned to J and thereafter to the Chapra Electric Supply Co.· Ltd; which went into voluntary liquidation in 1944.

Thereafter, .5 penons entered into an oral agreement of partnership to buy the undertaking and .. their respective hares were :- A 8 annas. M 4 annas, P had 2 annas and G &: N had one anua each. lt was also agreedthat the licence will be obtained in the name of Mu alone. 'Thereafter, the Electrical undertaking was sold by the official liquidator on Spt. 15. 1.944 to Mu.

Each partner contributed in pro portion to their respective shares in the partnership and the total purchase price was paid in 3 instalments. Before the last instalment was paid, the oral agrce-- ment entered into between the partners was incorporated into a partnership deed executed on July 10, 1945 and registered under the Indian Registration .t\ct.

Thereafter; A advanced some money to buy some new plant and machinery and when Mu. and another sold one anna share each out of their i-espective shares.

Thus the share of A. increased to 10 annas. while that of Resp. I & P reduced to 3 annas and one anna respectively. 1"hereafter, the partners contributed the amount in accordance with their respective shares and a second deed was executed to this effect on Aua-. 31. 1950.

After the registration of the second partnership, the Electrical Inspector, Government of Bihar addressed a letter to Resp. I in \Vhich be stated that the partnership was illegal and void as it contravened the provisions of Indian Electricity Act and that, therefore, the Government did not recognise the partnership. Thereafter. one of the partners filed a suit for a declaration that the partnership had been dissolved by service of notice .on the partners and for rendition of accounts. During the pendency of the suit, however, the Government of Bihar acting under S. 4(1) of the Indian Electrictiy Act, 1910 revoked the licence. to Resp. I with the result that according to S. S(l)(a) of the Act, all powers and .liabilities Of the licensees stood determined. A recti\ler W3.S" appointed who took over the electrical concern from Resp. I and R. . After th" receh.•er had taken possesslon, 1he Government decided to. purchase the under taking and deposited a sum of 3 lakhs in the Court as part of purchase money payaQle to the owners of the undertaking. Resp., I thereafter, filed a suit for a declaration that he. beingthe sole licensee was the exclusive owner of the undertaking and as such. he was entitled to receive the entire price paid or payable bv the Government.

He also averred that he alon~ paid the entire

purchae money and others are only his employees.

The trial Court dismissed Resp. l's Title Suit but :the Hih .Court reversed lhe trial Court's judgment and decree by granting a declaration that Resp. .I wa."! entitled to the entire money deposited by the State; because the partnehip wa!I i11e.a1 and void.

Before this Court two questions arose for decision :-

\!) Whether because of dismissal of C.A. No. 1711/67 and 1985/68 which arose out ot the 1"itle Suit No. 68/54, the present two appeals are barred on the ground of res-iudicata and (2) Whether Resp. I was entitled to the entire mpney.

Allowing the appeals, ·

HELD. (1) 'the doctrine of res-judicata applies where a suit has been tried and finally decided on the merits, if the defeated party wishes in another suit

between the same parties, relating to the e property, to re-agitate the same

t,1uestion~. he cannot be allowed to do so because his cause of action has passed into a iudgment and the matter has become res-iudicata. The test is "whether the judge has applied his mind to tf1e decision of the issue involved in the two 1iuits twice or whether there bas been in reality but one trial, one finding and one derisio~." [922 D-Fj Jn the instant case, whatever may have been the common issues between the two suits, one issue which is not common otud makes the subejct-matter of both tile suits different is that whether the plaintiff in Title Suit No. 94 of 19S6, is sdlely entitled to compensation from the State of Bihar or whether they are

entitled to recover their respective shares from the compensation amount. This wa's not the subject-matter of Title Suit No. 68 of 1954. Therefore, no question of res-judicata could arise in the circumstances of the two cases. l921 E-F1

923 H-924 HJ

(2) From the documentary and other ornl evidence, it is clear that the first respondent did not contribute the entire amount for the purchase of the underui.klng arid under S. 65 of the Contract Act, when an agreement is discovered to be void. or even a contract becomes void. any rson whu has re"ived any advantagf." under such agreement or contract is bound to restore it or to make compenscition to the person from whom he received it. [929 A-C]

Budhu Lal v.

Deccan Banking Company Ltd. A J.R. 1955 Hyd. 69, referred to.

Therefore, whether the agreement was void ab initio or was void or valid initially but bt:came void or discovered to be void subsequently, the appellants ai:e entitled to share the compensation money in proportion to their respective shares as specified in the partnership deed of August 31, 1950, after paying the outstanding Jiabilities of the Chapra Electric Supply Works. [930 C-E]

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1710 of 1967 and 1986 of 1968.

From the Judgment and Decree/Order dated the 7th May, 65 of the Patna High Court iu Appeals from O:iginal Decree No>. 160 and 161 of 1959 and in First Appeal No. 160 of 1959 respectivdy.

A. /). N. Sinha, .R. N. Sahay, B. Kumar and S. N. Prasad, for the "'ppellants (in CA 1710/67).

P. C. Bhartari and D. N. Misra, for the Respondents No. 9 & 10 (in CA 1710/67).

U, P. Singh and S. R. Tiwari, for Appellants (in CA 1986/78).

S. C. Agarwa/a, R. K. Garg and V. J. Francis, for respondent No. 17 (in CA 1986/68).

M. B. Lal, for Respondent No. 1 (in both the appeals).

B. P. Singh, for Respondent No. 2 (in both the appeals).

The Judgment of the Court was delivered by

JAGANMOHAN REDDY, J.-These appeals are by certificate against the judgment of the Patna High Court which reversed the judgment a.nd decree of the Trial Court in Title Suit No. 94 of 1956 filed by the first respondent-Murli 'Prasad, H A brief history of this case will be necessary . for understanding the several contentions urged before us. One Ma\lendra l•1asad obtained a licence for electrification of the Chhapra town

Jl. p, GUPTA v. MVJlLI PllASAD (Jaganmohan Reddy, J.) 917

wh W'IS granted to lliJ!1 ii! 1932.

Th~ !i\:tllce was thereafter assi¥n- , , ell to J; m111dh11,11 Prasad Varma after the deatb of his father Mahendra Prasad in 1936. Tbis licence ws subsequently assi, We4 to the Cnluipra Eli:ctric Supply Co., Ltd.,. whih. however, went into voluntary Jiquidation in 1944. It Wl!S decided to sell the electricity undertaking b) public auction and. assign the licenc~ lo the purchaser with the previous sanction of the Government. In pursuance of th:S dechion, the liquidator invited bidders for purchasing the electricity c.oncern.

But before the :date of public auction, it is l!ileged that five persons, nallll'ly, Ayodbya Prasad, Murli Prasad Respondent No. 1, Par.isnath Prasad, Gurbll\lran Shah an<! Nandkishore Prasad entered into an oral agreellll'nt of partnership to purchase the electticJI undertaking in the name of Murli Prasad, the share of Ayqdhya wru; 8 annas, thlt or Murli Prasad 4 annas, Parasnath Pruad had 2 annas and Gurbharan Shah and Nandkishore Prasad had one anna ea:h. It was also agreed tliat the licern:e will be obtained In the name o[ Murli Prasad atone, though each partner had to contribute to the total purchase

mony in proportion of their respective shares in the partnership.

Thereafter the. elettrical undertaking was sold by the official liqaida• tPl on September 15,1944 to Murli Prasad as his was the highest bid of Rs. 4,10,000/-. Thereafter each of the plrtners including Murli Prasad contriblited in proportion to their resp, ctive shares in the partnership to ma)<e up the total sum of Rs. 4,10,000/-. Payments to the official liquidator were made in three instalments.

It also appears that before the last. instalment of Rs. 2,50,000/- was paid on July 13, 1945, the oral agreement entered. into between the partners was incorpor~ into a partnership deed executed on July 10, 1945 and registered un!ler the Indian Registration Act: (Exbibit 'G').

Each of the partners had plid the following sums in accordance with their respective shares and in this manner all of them contri'Juted Rs. 4,10,000/- towards .the purchase' money paid to 'the liquidator: Ajodhya Prasad Gupta-Rs. 2,05,000/-; Murli Prasad-Rs. 1,02,500/-; Parasnath Prasad-Rs. 51,250/-; Gurbharan Shah Rs.

25,62~/- and Nandkishore Prasad-Rs. 25,625/-. Nandkishore Prasad, however, retired from the plftnerhip with the consent of all the partners and his one anna share was taken over by Gurbharan Shah.

It' also appea~ that in 1950 a further sum of Rs. 1,50,000/- was urgently requited for taking delivery of some new phnt and machinery which had arrived at the Chhapra Railway Station. Murli Prasad and Parasnath Prasad expressed t1ieir inabilitv to contribote the sum of Rs. t,50,000/- in 'PfOportion to their shares, so this amount was al<o paid bv Ajodhya Prasad Gupta to whdm Murli .Prasad ahd Paras~ nath Prasad sold one anna share each out of their respective sh1res.

Thus. the share of Aioclhva Prasad inctea<ed to 10 annas while that of Murli Prasad and Parasnath Prased reduced to 3 annas and one anna fC!'PCCtively.

Thereafter tne partners contributed the amount in accordance with their nspective shares. This re-allrc•tion or shares became. the occa•ion for execution of a Recond Dartnership deed Ill! Aul!lfst 31. 1950 which was alo re!istered under tlie Tnian

e•istntion Act: Ext. 9. The oartnenhio Act n Mav B. 1'l53, Ext. 'C'. One otherfact must also be stated at this stage. and th•t

911 SUP, lll!ME COUll.J' llEPO.llTS

[1974) 3 S.C.R.

is, Ajodhya Prasad and Murli Prasad being Kartas of their. respective

joint ramilities, had entered into partnership in that capacity.

Tbc IO anuas share held by' Ajodhya Prasad and 3 annas snare oeld by Murli Prasad weredivided &m0\111 the members of their respective joint families. The share of Murli Prasad was divided bctwoen himsell, Dnarindhar Prasad each having one anna share, while tnc sons of Murli Prasad and Dharmdhar Prasad, namely, Chandrcsbwar l'rilsad Gupta and Kamles.bwar Prasad Gupta and each 6 pies Jhare.

Similarly, Ajodhya Prasad's and his brother Ram Sharan Shah got 3 -annas 9 pies each while the two sons of Ram Sharan Shah, Brahmadev Prasad Gupta and Ramagya Prasad Gupta and respectively I anna 3 pies. There was no change in the shares oJ the two remaining parteners Parasnath Prasad and Gurbharan Sh•h who held one anna and two annas share respectively.

It appears that some time after this revised partnership was registered, the Electrical Inspector, Government of Bihar, addrescd a letter to Murli Prasad In which he stated that the partnership was illegal and void as it contravened the provisions of the Indian Electricity Act . and that, therefore, the Government did not recognise the partnership. The Government ultimately cancelled the licence. It is D alleged that all this was due to .the manipulation of. Murli Prasad who, taking advantage of the letter of the Electrical Inspector, tried to take forcible possession and wanted to dispossess the managing partner of the electrical undertaking.

This attempt gave rise to proceedings under s. 144 of the Code of Criminal Procedure, which, however, were decided on April 14, 1954, in favour of Rarnagya Prasad Gupta and the other partners. Thereafter it is allegec! that Murli Prasad got E Parasnath Prasad a partner and sqn-in'law of Murli Prasad's brother t-0 institute Title Suit No. 68 of 1954, on May 28, 1954 .. This suit was for a . declaration that the pannership had been dissolved by service of notice on the partners and for rendition of accounts by Rama- )!ya Pr_asad Gupta principally and by other p•rtners. During the pendency. of the suit, as stated earlier, the Government of Bihar llC!ing F under s. 4(1) of the Indian Electricity Act, 1910--hereinafter referred to as 'the Act'-revoked the licence of Murli Prasad \\ith the result that according to s. 5(1){a) of the Act all powers and liabilities of the licensee stood determined. l'arasnath Prasad the phintiff in that suit prayed for' appointment of the Additional District Maeistrate, Chhapra,- as receiver. Tile Court granted his prayer and the Receiver in due course took over the electrical concern from Murli G Prasad and Ramagya Prasad.

After the Receiver had taken possession, the Government dor.:ided to purchase the undertakin)! on October 20, 1955 and deposited H on the same day a sum of Rs. 3,00.000/- in the Court as part of the purchase money payable to the owners of the undertakin~. Murli Pra<ad thereafter filed a Title Suit No. 94 of 1956 on November S,

t 956, for a declaration th•t he boing the sole licensee, was the exclusive owner of the undertalcin~. and as such he was the only person who was entitled to receive the entire price paid or payable by the

c . '

R. P. GUPTA v. MURLI PRASAD (Jagamnohan Reddy, !.) 919

Government in respect of the assets of the Chhapra Electric Supply Works.

In this sun Murli Prasad had averred that it was he and he alone who had paid the entire auction money for the purchase of the undertakmg on July 13, 1945 and thereafter he became the sole licencee in charge of the undertaking and that Ramagya Prasad Gupta was a mere employee and. servant und.er him. The partnership was

~!so characterised as illegal and void. Both the Title Suits No. 68/54 hied by .Parasnath Prasad and No. 94156 filed by Murli Prasad were COlll>olidated.

It may also be .mentioned that N andkishore Prasad who was the original partner and who had retired from the partnership and whose share had been taken ovr by Gurbharan Shah also filed a suit No. 113/5T on September 21, 1957 for a declaration that he was still a partner and has 1 anna share. This suit was transferred to the Court where the other two title suits were b•ing tried. Ail the three suits were thereafter consolidated and tried togetl)er. They were also disposed of by a . ommon judgment dated February 10,

J 959 passed by the 5th Add1t1onal Subordinate Judge, Chhapra.

The Trial Court decreed P.i!rasnath Prasad's Title Suit No. 68/54 anti dism, issed Murli Prasad's Title Suit No. 94/56 and Nandkisre Prasad's Title Suit No •. 11~/57. Murli Prasad. filed First Appeal No.

160 /59 against the jugnient and decree of the Trial Court in his Title Suit No. 94/96 and First .Appeal No. 161/59 against the judg- _rnent and decree of the Trial Court passe_d in Title Suit No. 68/54.

Nandkishore Prasad 'filed a First Appeal No. 154/59 against the decree in his Title Suit No. 113/57 but .l•ter he withdraw it and aecor<lingly it was dismissed for non-prosecution. .The remaining two appeals filed. by Murli Prasad were heard together and were dispo.sed of by a common jud$ment by which the High Court reversed the Ttial Court's judgment and decree in Title Suit No. 94/56 by ;; ranting a declaration to Murli Prasad •as prayed for that he alone

was entitled to the entire money deposited or to be deposited by the State of Bihar as price for the assets purchased by them. This decisiol\ was based on the view that the partnership contravened t)!e provisions <>f the Act and was accordingly illegal and void.

Against this decision of the High Court, Ramagya Prasad Gupta one of the respondents in the two First Appeals before tpe H, igh Court filed two appeals in. this Court, namely Civil Appeal No. 1710/67 against the judgment and decree of the High Court passed in First Appeal No. 160/59 which arose out of Title Suit No.,. 94/56 and Civil Appeal No. 1711/67 against the judgment and decree passed by the High Court in First Appeal No. 161159 whkh arose out of Title Suit No. 68/5\l'.

Brahmadeo Prasad, another part11er who was a defendant in both the Title Suits Nos; 68/54 and 94/56 and one of the respondents in the two appeals, namely, First Appeal Nos. 160-161/59 in the High Court, preferred an appeal, namely, Civil Appeal No. 19$6/

68 against the judgment pf the High Court in First Appeal No. 160/ 59 in respect of Title Suit No. 94/56 and Civil Aopeal No. 1985/68 passed in Civil Appeal No. 161/59 in resoect of Title Suit No. 68/54.

It mav here be statoo that in the Title Suit No. 68/54 filed by Parasnath Prasad for dissolution of partnership and rendition of accounts,

(1974] 3 S, C.R.

J(uldip Narain, Jagdish Narain µnd Kedar Nath Sah applied for and were lidded as defendants 12, 13 and 14 on the ground that they as members of the joint family of Parasnath Praslld, should ~. partie~ to the suit.

Accordingly, thy were also parties in the High Court appeii]s as well as in !he Supreme Court appeals Nos. 1711/67 and 1985/68 arising out of Title Suit No. 68/54. It may furthr bo mentioned that these interveners were not parties either in the Title sit No. 94i56 or in the First Appeal arising therefrom, or in lhe appeal before this Coµrt, namely, Civil Appeals No. 1710/67 and No. 1986/ 68 which are the two appeals before us.

Before those four appeals came up for hearing, J agdish Narain one of the interveners/ defendanL<, namely, defendant No. 13 and who was a respondent in Civil Appeals Nos. 1711/67 and. 1985/68 died.

His legal representatives were not brought on record and conseq"ently these two appe'1s were said to have abated as a whole and were dismissed on that account.

At the very threshold it was sought to be contended that the appeals only abated as against Jagdish Narain for not bringing his legal representatives on record but not as a whole.

This que; tion

was CO!!Sidered by this Court in. Ramagya Prasad Gupta v. Murii Prasll</(1) where by a majority, Vaidialingam & Palekar, JJ., Mathew, J.

D dissenting, held that the appeal could not be pro:eeded w:tb and must be dismissed.

We are not concerned with the reasoning for !)le dismissal. except to say that the question whether these two appeals would also abate seems to have been considered by this Court, because they observed at p. 68 : ·

"We are not concerned with those two appeals at dm E stage because J agdish Narain bad not been made a party to the Original Suit filed by Murli Prasad nor bad be app lied to be made a party.

Con5equently Jagdisb Narain docs not and did not figure in the appeals from the de;:ree passed in Suit No. 94/56."

At the hearing, a preliminary objecticm has been r •ised by the learned Advocate for the respondents that having regard to the abatement and dismissal of Civil Appeals Nos. 1711 of 1967 and 1985 of 1968 which arose out of '.Title Suit No. 68/54, the present two aals are barred under s. II of the Code of Civil Procedure and/ or on the general principles of rt!S judicata and should be dismissed. It is contended that the existence of a valid partnership was a ground of attack in Tiile Suit No. 68/54 and the ground of dofence in Title Su'.t No 94/56 and, therefore, that question was directly and sub; tanfally

in issue in both suits; (2) that the plrlies in the two suits "-ere also th., same; at any rate the parties in the present suit No. 94/S6 who will be affected arc the same. The learnect Advocate for the respon dents therefore contends t]lat the tri'1 of the suit bc'M by the same court, the two other conditions necessary for a bar of res judicate, namely, the subject-matter of the two suits and the

(I) (1973) I S.C.R. 63.

ll. P. GUPTA v. MURLI PRASAD (laganmohan Reddy,!.) 92(..

panics being the sme .. are fully sati&ficd. TllC appellants' Advocate,

nower, i:onlfOve~ these contentions and subm1u that not only is the subject-Jllatter in dispute in Tiile Suit No. 68 of 54 different from tlie subject-matter of title in Suit No. 94 of 56, but the panics in Title Suit No. 68 Of 54 are not the same as tnose ill Tiile Suit No. 94 of 56, inasmuch as defendanll! Nos. 12, 13 and 14 wh.o were parties in Title Suit No. 68 of 1954 were not parties in Title Suit No. 94 of 1956. It is contended that in the fortner suit, which was instituted during the. subsistence of both electti-· ci1y licence and electrical undertaking, the subject-matter was limited to a consideration of: (1) Existence of a legal and v.!lid partnership;

and (2) Legality and validity of the notice of dissolution oi partnership alleged to have been served prior to the suit; and (3) tte

liability of Ramagya Prasad Gupta or other partners to rcltder accounts to the plaintiff.· Jn other words, it was a simple suit for rendition of accounts, for dissolution and for such sum of money as might be due to the plaintiff in that suit. The suit out of which these two appeals arise having been filed a yeJr and a half thennfter was not concerned with any of the question because by that time the sub ject-matter of the partnership havin~ d"sappeired by the cm:ellation of the licence of Murli Prasad and by the purchase of the unertak ing by the Government under s. 7(a) of the Act, the pn"y question was whether Murli Prasad is entitled to the entire money deposited in Court and to be deposited thereafter by the Government or whether the persons who were erstwhile partners and who had -contributed the eapital could have a claim to that money in accorcfance with their shares. As the subject-matter of the two suits was different it is contended that the appeals are neither barred by s. 11 nor by any

ot11er principle on Res Judicata.

At the hearing a grat many authorit; zs were cited and certain broad propositions were sought to be canvassed, as for instance, the priciple that when there are two suits which have been tried togeth-r and disposed of by a common judgment and two appeals are taken therefrom, the judgment appaled against ceases to be res judicata even if one of the appeals is dismissed on the ground of limitation or otherwise because the

vrry judgment, which is sought to be pleaded in bar, is still subjudice.

Tn support of this proposition. the view expresSed by the Lahore High Court Full Bench in Lakshmi v. Bhuli(1) has been cited and it was submitted that this view was approved by this Court in Narhari v.

Sankar('i. which it is submi'ted; has been followed in various decisions of the different High Courts. As against this view, it is claimed that this Court subsequently in Sheoilan Singh v. Mst. Daryao Kaur(') tool; a different view, but according to the learned Advocate for the appellants, this case did not consider the correctness either f Naihi:rrs (supra) decision or of the Lahore Full Bench case m IAkshmi v: BhuU (supra). Jn a case where a suit or an appeal is said

(1) tt.11.. 8 Lahore 384 •

. (2) (19501 S.C.R. 754.

0) [1966] 3 S.C.R. 300.

to be barred by res judicata the. question would arise whether that bar is by virtue of s. 11 of the. Code. of. Civil Procedure, or dehors tbat section by the general principles of res judicata, and if s. 11 is appli cable, whether it applies to suits only and not to appeals, and if to suits only, whether the general principles of res judicata apply to appeals. Where two suits having common issues are either by consent of the parties or by order of the Court tried together, the evidence being written in one record and both suits disposed of by a single judgment, the question would arise as to whether there have been two distmct and independent trials.

Tek Chand J., who delivered the majority judgment of the Full Bench in Lakshmi's case (supra) gave ti1e answer at p. 400 thus :

"There has been in substance as well in form but one trial and one verdict, and I venture to think, it will be a travesty of justice to stifle the hearing of the appeal against such a judgment on the ground that the findings contained in it ope

rat> as res judicata. In such. a case there can be no question of the succossful being "vexed twice" over the same matter, nor does the hearing of the appeal in any way militate against any rule of public policy, which requires that there must be an

nd of litigation. There is not only µothing here to attract the principles underlying the rule of res judicata, but, on the other hand, it seems to me, that the acceptance of such a plea in such circumstances would strike at the very root of the basic conception of the doctrine which requires that a party must have at least on~ fair trial of the issue resulting in a decision by the Court of ultimate appeal as allowed by the law for the time being in forces." The test suggested by the learned Judge at p. 401 was "whether the judge has applied his mind to the decision of the issue involved in the two suits twice or whether there has been in reality but one trial. one finding and one decision".

According to him, the detern1ining factor is not the decree but the decision in the matter in controversy.

It is clear thab where a suit has been tried and finally decided on the merits, if the defeated parby wishes in another suit between the same parties relating to the same property to have the same questions re agitated, he cannot be allowed to do so, because his cause of action has passed into a judgment, and the matter has become res judicata. Even where two appeals have been taken from the same judgment by two different parties to which all others are parties either as appellants or respondents and one of the appeals is dismissed either on merits or for any oth<r reasons, it has been held by some of the High Courts, but we express no Opinion th!reon, that the other appeal' has, also to be dismised, beause it is barred by the principles of res judicata as otherwise there will be conflict in the decrees.

In the Lahore decision there were two _cross suits about the same subjectmatter filed simultaneously between the same parties and two decrees were prepared. An appeal being filed in respect of one decree and not in respect of the other, the questio11 was whether the non-filing of the appeal against that decree creates an estoppel against the hearing of the other appeal. In Narhari's case (supra) what this Court held was, where there has been one trial, one finding and one

"ii( ' "l

R. P. Gl!PTA v. J\jURLI PRASAD (Jaganmoha11 Reddy, J.) 923

decision, there need not b~ two appeals even though two decrees may have been drawn up and consequently the fact that one of the appeals was time barred does not bar the other appeal on the ground of res judicata. In this case, these questions need noi be considered; Nor is it relevant to consider whether there is any con, llict between the decision in this case and Sheodan Singh's case (supra). In Sheodan Singh's case two suits were field in the Court of the Civil Judge, one for a declaration of the tiVe to the suit property and the second for other re!iefts and consequently two other suits were filed by the respondents in the Munsif's court against the appellant claiming joint ownership to the suit property and other reliefs. The four suits were tried together by the Civil Judge. Some of the issues were common to all the suits and one of the commons issues relating to the title of the parties was found in favour of the respondent.

The Civil Judge dismissed the appellant's title suit, decreed his other suit partly, and decreed the two suits of the respondent.

The appellant filed appeals against the decree. in each ; uit. The High Court dismissed the two appeals arising out of the respondent's suits, one as time barred, and the other for failure to apply for translation and printing of the record.

As the title of the respondent to the suit property had become final on account of such dismissal, the respondent prayed for the dismissal of the other two appeals also, as the main question involve4 therein was the same. The High Court agreed that the appeals WOTe barred by res judicate and dismissed them. Against these. order of dismissal, the appellant filed

oppeals to this Court and contended that-( l) title to the propecty \Vas not directly and substantially in issue in the respondent's suits ; (•2) the Munsif's Court could not try the title suit filed by the appellant;

(3) it could not be said that appeals arising out of the respondent's m; is were former suits as such the bar of res judicata will be inappiica ble; and ( 4) the two appeals which were dismissed-one on the ground of limitatior> and the other on the ground of not printing 1he records, could not be said to be heard and finally decided. This Court hcid that the High Court was right in dismissing the appeals as being barred by res judicata inasmuch as the issue as to the title was raised in respondent's uits and it was directly and substantially in issue in those suits also and did arise out of the pleadings of the parties, and further the High Court's decision in the 1wo appeals arising from the respondent's appeals were undoubtedly earlier and, therefore the condition that there should liave been a decision in a former sit to give rise to res jµdicata in a subsequent suit was satisfied in that case. The decision in Narhari's case (supra) was distinguished by this Court in !hat case so !hat it coud. not. be caid that that decision was in any way m conflict with the dec1S1on m Narhari's case (supra). In appeals arising ot of a subsequent suit and an earlier suit where there were comm9~ issues, common subject-matter and common trial and the appeals ansmg out of the subsequent suit were dismissed, a question would

nse as to whether the. ao_oeals from te earlier suit which were pending arc barred by res 1ud1cata A ques!Jon may also arise where the subject-matter is the same and the issues are common in the two suits

but oe of the parties are dierent in one suit,. whether the bar of res 1ud1cata would operate against the parties who are common. All

9.24 SUPlt£ME COURT REPORTS

{ 1974) 3 S.C.R.

.these aspects need not be considered in these appeals because, in our view, the subject-mattet of Title Suit No. 68 of 1954 and that of Title Suit No. 94 of 1956 are entirely direct. Even if the issues that .; ire common in the two suits, and it has been admitted by the learned

Advocate for the appellants that some of the issues might be commou lo both the suits, issues Nos. 4, 9, 12, 13 and 14 !II any rate surviv<,

. and consequently ihe bar of res judicata would not apply. The issu.:s Which are said to be surViving are as follows : B "'4. Whether the p!ointiff of T.S. 94 /56 the sole ficensee of the Chapra Electric Supply Works before it was takn over by the State of Bihar ?

9. ls plaintiff of T.S .. 94/ 56 only entitled to compensation from the State of Bihar ?

12. Is the suit 94/56 barred urider section 42 of Specific Relief Act, estoppel and waiver ?

13. ls the amount of court fee filed in T.S. 94/56 sufficient?

14. To what relief or raliefs plaintiff of the two suits entitled?" Jgnoring issues 13 & 14 it will be seen that issues 4, 9 & . 12 are con- .tmed only to Suit No. 94 of 1956 in which respondent No. 1 is seeking to have himself declared as the sole licensee and entitled to the entire amount of compensation on the ground that be and he alone .has contributed to the capital; that the defendants in that suit were

not his partners but servants and such a suit is not bar; ed under s. 42 of the Specific Relief Act on the ground of estoppel & waiver l:ecause of bis conduct and admissions. As we have seen, Title Suit No . . 68 of 1954 postulates the existence of a partnership in which the lirst respondent is a partner, and for disolution of putne1ship and

rndition of accounts. Whatever may have been the common issues between the two suits, one issue which is not common and makes the subject-matter of both the suits different is that wheth" the plaintiff in Title Suit No. 94 of 1956, that is the first respondent in these appeals, is solely entitled to compensation from the State o'. Bihar.

Thi~ issue is not necessarily confined to the existence or val'doty of the partnership but as to whether the other parties to the s"it have contributed to the capital of the firm or paid Murli Prasad any .amounts which they are entitled to recover from out of the compensation amount.

This was not the subject-matter of Title Suit No. 68 of 1954. Even as the learned Advoate contends, there is no longer any question of partnership being dissolved once the subject-matter has disappeared by the revocation of the licence and after the entire assets of the .partnership were taken over by the Governn1ent.

Even if the partnership was illegal and void as contended by the respondent in the other title suit, the same question. namely, whether the plaintilI/tirst respondent alone would be entitled to the entire compensation,. was not the subject-matter of the Title Suit No. 68 of 1954.

If so, no question of res judicata would arise.

The preliminary objection is accordingly overruled.

On the merits the appellants' case is unassailable.

The case of . -the first respondent that he paid the entire money for the purchase of . the undertaking is, in our view, a dishonest pica. .There is ample

• '

R. p, GUPTA v. MURU PllA:SAD (laganmohati Reddy, J.) 925

evidence in ihe case io establish that !hough Murli Prasad WllS. the highest bidder at the auction at wh'.ch the undertaking was sold to him aitd the J:cence was granted to him, the:e was an oral agreement

which preeeded the bidding at the auction whereunder five persons as stated already, including the first respondent, constituted a partnmhip. They also contributed the capital in proportion in their shares. Though at first denied it was subsequently admitted by !he first respondent as we shall presently see.

After the bidding of Murli Prasad was accepted as alreJdy stated, the partn'Is contributed their shares and there was. a registered partnership deed.

Another partnership deed was susequently executed and registered

after there was a reshuffling in the partners as we1 as in their respective shares. The definite case of the first respondent as set but in para 5 of the plaint is that he had paid the entire amount of sale money bf July 13, 1945 and the liquidator granted a rec.eipt to the plaintiff for the auction money paid to him. In para 8 of. the plaint "(Suit No. 94 of 1956) he says that defendants who had a coveting eye persuaded

him illegally to enter into a partnership with them and the plaintiff. being misled by them and under a misapprehension entered into a P'artnership with _the defendants on July 10, 1945 and the same was renewed on August 31, 1950. It is, therefore, clear that he does not deny the execution of these partnership deeds and yet claims that he alone contributed the amounts for the purchase of the undertaking.

If he contributed the entire "amount and the other partners did not contribute any amounts, where was the question of their persuading him to enter jnto a partnership. On the very face of ii, the pleadin!!!l belfo the case of the first respondent. The documentary and <>ral evidence amply supports the conclusion that the first respondent has put forward a false claim and has not hesitated to suppress the truth which, notwithstanding his efforts, could not be suppressed. The first respondent passed a receipt on July 13, 1945, ori the dtte when the partnership deed was .registered, in favour of Ajodhya Prasad who, as we have seen had a 8 annas share in the partnership in terms of the oral agreement which was incorporated _in the partnership agreement of July 13, 1945. The half share of the capital of Rs. 4, t 0,000 which Ajodhya Prasad had to pay was Rs. 2,05,000. This is exactly the amount that he paid to the first rewondent, who passed a receipt in his favour, Ext. F-1. In the xeceipt Murli Prasad says that he had previously received Rs. 1,000 out Qf Rs. 2,05,001} being the proportionate 8 annas share out of Rs. 4, 10,000 from Babu Ajodhya Prasad and the remaining nmount of Rs. 2,04,0:JO was being paid by a cheque No. 34463 drawn upon the Central Bank, elated July 13, 1945 from the said Babu Saheb.

This amount was debiied to the Bank account of Ajodhya Prasad and credited to the Bank account of Murli Prasad.

Exhibit M-'- Ledger Account of M/s Ajodhya Prasad Gupta & Co. in the Central Bank, Chhapra, shows that on July 14, 1945 Rs. 2,04,000 was deb.i~ to llin1 on account of cheque No. 34463 drawn in favour of Blbu MurTI Prasad the number of which tallies with the number mentioned in the receipt Ext. F-1. Similarly, Ext. M-1. Ledger Ac, count of Murli Prasad in the Central Bank, Chhapra, shows that 011 July 14, 1945 a sum

of Rs. 2,04,000 was paid int.o the account by cheque and credited to his account.

In his evidence Murli Prasad denies in examination-in chief that there was a completed agreement before the auction sale between Ajodhya Prasad, Parasnath, Nandkishore Prasad and himself-each representing their respective families to enter into n partnership and that he had not purchased at the auction on behalf of the partners or on behalf of any other person, but had purchased it at the auction for himself alone. He also oenies that the licence was obtained in his name with .their consent or the transfer of the licence in his favour was secured for their benefit. He also denies that Ajodhya Prasad paid Rs. 1,000 for bidding and denies that Parasoath Prasad, Nandkishore Prasad and Gurbharan Shah contributed any sum towards the auction purchase. He further says that it is not a fact that later on Ajodhya Prasad paid him Rs. 2,04,000. His case is that he was fraudulently and illegally induced by the rest of the parties to enter into a partnership on July 10, 1945 and August 31, 1950 which are both invalid and illegal. In crossexamination, he admits that he did not have Rs. 2,00,000 with him at the time but was sure that he could arrange for .the purchase money. He, however, states that only 4 or S months after the auction sale he had an idea to enter into a partnership by which time he had already deposited Rs. 2,05,000 towards the purchase money which he did from his personal fund. He wants us to believe that he signed the partnership deed without reading nor did any one read and explain to him. He signed it because of his faith in Ajodhya Prasad. In cross-examination he admits that the in" tending partners had come to him and expressed their intention o[ having a share in the concern. AjodhyaPrasad wanted 8 annas share, Parasnath Prasad two. annas, Gurbharan Shah and Nandkishorc Prasad 1 anna share each and that he (Murli Prasad) expressed his licsirc to have 4 annas share. He also admits that it \\'.1S agreed that each would contribute in proportion to his respective share. He further admits that though he did not read the partnership dee<l at that time he had got it read subsequently by Ganga Prasad, Pleader, and he found that .the deed embodied all the terms they had previously agreed to.

As for the second partnership deed, he also admits that his share was reduced to three annas from four annas. Similarly, the share of Parasnath's family \Vas reduced to one anna from two annas and that the share of the family of A.iodhya Prasad increased from 8 arinas to 10 annas. What is curious is, he says, that he knew the pfrrtnership deed to be illegal but entered into it because be got the assurance that nothing would happen. He also admits that after the account was audited, a balance sheet was prepared and a copy of such balance sheet used to be sent to each of the partners and the State Government, another factor which shows that the first respondent was fully aware of the partnership and the shares of each of the partners •and that there was nothing secret or sinister about the agreement or partnership. When the partnership decided to have some new machinery, it required Rs. 1,50,000 to take delivery of that machinery.

The proceedings of the meeting of the partners. Ext. E-1 dated August 28, 1950 clearly show that this amount was to be jointly coUccted from H all the partners.

But since some of them were not able to get the money, Babu Parasnath proposed to sell his ooe annas share and

It. j>, GUPTA v. MlJRLI .PRASAD (laganinohan Reddy, !.) I 921

retain his one anna only and Mtirli Prasad, that is respondent No. 1 also proposed to dispose of his one anna share, out of 4 annas share.

These two annas were offered to any ol the partners who was willin!J

and take in. Ajodhya Prasad was agreeabie to purchase these shares and the shares were re-constituted and the amount that each one had to contribute according to his share has been set out in that document, The amount of Rs. 1,)0•,000 has been divided exactiy according to the snares that each of the family has to pay. These proceedings, Ext . .R-1 was shown to respondent No. 1 and while he admits his signature thereon, he denies that he consented to these proceedings. Yet he contr&d1cts hi1n!:clf by saying that thre was res11uttling of the shnres and because money was reqmred for the purchase of new machinery, ; ince there was no money with him, he gave one anna out of his share; and that since the date the concern came to his hand till the date it passed to the Government there was never any profit init. And yet, the learned advocate for respondent No. l would have us believed that large sum towards profits were due from Ramagya Prasad who was managing the concern. It is also clear from the balance-sheet which Murli Prasad admitted were being sent regularly to the partners and the Government, that though the first respondent was shown as the licensee, he is also stated to be a partner. In the certificate given by the Chartered Accountant it is stated that the amount hvcstcd by the licensee and his partners are shown in form 3 capital amount against their respective names and this amount has been shown in Ext. X-1 dated 31-12-1949: Murli Prasad Rs. 1,02,500; Ajodhya Prasad Rs. 2,05,000; Parasnath Rs. 51,250 and Gurbharan Shah Rs. 51,250, thus making Rs. 4,10,000. In each one of these balance sheets Murli Prasad has been shown as partner. It is, therefore, iclle to suggest that the entire amount has been contributed by Murli Prasad and that 03hers did not have any connection with the partnership. Nor could it be said that they had not contributed towards the capital in accordance with their shares. The High Court rather strangely either misread the evidence or misappreciated it when it held that the partnership having not come into existence at any time in the eye of law, Murli had no advance in his hands on accom1t of -the partnership, there was no acquisition by the partnership of the undertaking and the license; and the source from which he paid the consideration money of the bargain between him and the liquidator would not clothe the creditors with the title to the undertaking and the licence or to the benefit of the purchase. The money Jent by the partners to Murli may, of course, be recoverable subject to the Jaw of limitation, but not the properly acquired with the money, since no fiduciary obligation in the eyes of Jaw could arise as between him and the various lenders. In this view, it thought that the claiin. of the partners to recover the money having regard to section 65 of the Contract Act and Art. 62 of the limitation Act is barred by limitation, because the suit of Parasnath was filed more than 3 years after 13-7-45 by which date they were aware of the fact fr, at consent ol the 'Government had ncit been obtained to transfer the licence. This view of the High Court cannot be sustained. It appears to us that there is nothing to suggest that the partners knew or were aware that their partnership was illegal; nor could it be said because at the time when

928 ·•UPRllME COU&T REPORTS [1974] 3 s.c.R.

they entered into the agreement of partnership, this is clearly estab., lished, as no licence had been granted to Murli Prasad. The amounts were contributed by all the partners in accordance with their shates before the licence was assigned to Murli Prasad. Even on the admission of the first respondent, on behalf of the partnership balancc-shets were being prepared and they were being forwarded not only to the partners but to the Government also. If so, the Government as well as the Electrical Inspector, as is evident from several letters Exts. D-4, D-6, D-10, D-12, D---30, D-32, D-44, D---45, C-3jl and C• 4/1, were made aware of the partnership. If they did not take notice it was not the fault of the partners nor does it show that there was pnything secret in that partnership. The openness with which U1e entire business was run clearly establishes that the partners at any rate were p.ot aware of the illegality. It may be true that under the Act prcmission may be necessary to obtain a licence or io have a licence assigned 1to a partnership, but there is nothing in the Electricity Act to warrant µte submission that because no permission was taken for assignment of the licence in the name of the partnership, the claims of the partners ; igajnst each other cannot be adjdicated upon, and that the partners 1will have no rights in the assets held by the partnership. Cwfously, the High Court, when the above exhibits were brought to its notice, tried •to gl:\ over it by saying that the words "we" and ''us" which have been used in Ext. D---6 do not by themselves indicate partnership and that they were apparenfly used for the Chhapra Electric Supply Works.

This conclusion is unjustified and is against the weight of evidence in the case. The i\lellality, if any, was discovered only after the Government issued a notification, Ext. F-1 dated May 19, 1955, revoking the licence. It may also be noticed that Title Suit No. 94 of 1956 was filed on November 5, 1956, while the earlier Suit No .. 68 of 1954 was filed on May 22, 1954, even before the cancellation of the licence. None of these suits can, on any account, be said to be barred by limitation.

In any case, the persons who have contributed the money to provide the capital for the undertaking are entitled to recover t.'Ie amounts in accordance with their respective shares. This relief is not dependent upon the validity of .the partnership either of 1945 or of 1950. The nrrangement betweeno the partners and the licensee does not attract slib-ss. (2) and (3) of s. 9 of the Act which merely debar a licensee's association in the business of supplying energy under the same licence.

Sub-section (2) inhibits the licensee from assigning his licence or transferring his undertaking or any part thereof by saic, mortgage etc. without the previous consent in writing of the .State Government. Subsection (3) makes an agreement relating to auy transaction described in sub-s. (2), u'1less made with or subject to the previous consent as aforesaid, void. Owning of the properties by the Corporation was not in contravention of any of the provisions of the Act. The agreement, therefore, is not void. In these appeals it is not necessary to decide the question whether the carrying on of the business of partnership as an electricity undertaking, when the licence stood in the name of Murli' Prasad is invalid. Even if it is void, what we have to consider is, as pointed out earlier, whether the money of the partners which went to purchase the electrical undertakings at the auction sale and which by virtue of s. 14 of the Partnership Act became the assets of the partnership, those assets which have been convc; tcll iuto money

R. P. GUPTA v. MURLI PRASAD (laganmohan Reddy, /.) 929

which has been deposited in \!ie Court, can be claimed by all those who had originally contributed 'the amount. Section 65 of the Contract Act will readily come to the resct1e of the partners. That section lays down that when an agreement is discovered to be void, ot when a contract becomes void, any person who has received any advantage under such agreement or .contract is hound to restore it, or to make compensation for it, to the person from whom he received it. A Full Bench of the Hyderabad High Court in Bildhu Lal v. D=an Banking

Company Ltd(') to which one of us y, us a party had occasion to consider the question that where money has been paid under the instrument which has been held. to he void, could money paid thereundet' be.recovered. After a review of the case law in India, the decision of their Lordships of the Privy Council in Harnath Kaur v. lnder Bahadw' Singh(') and the observations in the 7th Edition of Pollock and

Mulla's Indian Contract and Specific Relief Act pp. 346-347 to the effect that section 65 of the Indian Contract Act does .not apply to agreements which ilre void under s. 24 by reason of an unlawful consideration or object and' there beingno other provision in the Act under which money paid for an unlawful purpose may be recovered back, an analogy of the English .law will be the best guide, that Court had held that money paid in such circumstances can be recovered.

The reasoning which the learned authors gave for their view was stated in that judgment to be that "if the view of the Privy Council is right, namely, that 'ag-reements discovered to be void' apply to all

agreements whicb are db initio void including agreements based on unlawful consideration, it follows that the person who has paid money or transferred oroperty to another for an illegal pUl'POSe can recover dt back from the transferee under this section even if the illegal nurpose' is carried into execution and both the transferor 8Jid transferee are in nari cfelicto." In respect of this reasoning the Court observed at p. 75:

"In our opinion, the view of the learned authors is neither supported by any of the subsequent Privy Council decisions nor iB it consistent with the natural meaning to be given to the provisions of s. 65. The section by using the words 'when an •!!reement is discovered to be void' means nothing more nor less than : when the plaintiff comes to know or finds out that the agreement is void.

The word 'discovery' would imply the ore-existence of somethin~ which subsequently found out and it may he observed that s. 66, Hyderabad Contract Act makes the knowledee (ilm) of the

a11)'eement being void as one of the pre-requisites for resti: tution and is used in the sense of an agreement being dis covered to be void. If knowledge is •n essential reQuisite even an agreement ah initio void can be discovered to be void .subsequently. There mav be cases where parties enter

into ;; ii ~;:ee~nt hon.estly "thinkin~ that it is a perfectly legal agreement and where oric ;; f !.em sues the other or

(1\ A.T.R. (1Q;<\ Hv~. 69,

(2) A.T.R. (1922) P.C. 40}

/ -, '

wants the other to act on it, it is then that he may discover it to be void. There is nothing specific in s. 65. fodian Contract Act or its corresponding section of the Hyderabad Contract Act to make it inapplicable to the such cases."

The above view, which has been noticed in subsequent edition of Pollock's Book (See 9th Edition, p. 463 Note 41), is in consonance With authority, cqity tnd good' reason. After this conclusion it is not necessary to consider whether s. 70 of the Contract Act or ss. 39 and 41 of the Speqific Relief Act can be invoked jn aid of the appellants.

On any view of the matter whether the agreement was void ab initio, or was void or valid initially but became void or discovered to be void subsequently, the appellants are entitled to succeed in these appeals. We accordingly allow these appeals, reverse the judgment and decree of the High Court and dismiss Suit No. 94 of 1956 with costs.

We hold that the first respondent Murli Prasad is not entitled solely to the whole of the compensation money, but that all those whose names appear in the partnership deed of August 31, 1950, or the legal representatives or assignees of such of them who are dead, arc otherwise entitled to share the compensation money in proportion to their respective shares as specified in the said document. The compensation amount which is so distributed is the balance of the amount remaining after payment of the outstanding liabilities of the Chhapra Electric Supply Work~. The Trial Court will give the necessary directions to the Receiver in this behalf. s.c.

Appeal dismissed.