15. Dehors the report of the consultant, the Chief Engineer of the Board was of the opinion that the consortium and another tenderer Alluminium Industries Ltd., had no adequate required experience for this project and hence, are not eligible to tender. But the Board took a decision to open the price bids of all the tenderers including the appellant, who was also disqualified from the financial aspect, evidently invoking non-obstante clause about which we shall deal in succeeding paragraphs. Further, the report of the consultant was received by the Board on 11-5-1992 while price bids were opened on 30-4-1992. Thus, the question whether the report of the consultant is binding on the Board and whether the Board ought to have rejected the tender of the 4th respondent following the report of the consultant are both academic. However, as these are relevant for deciding the next contention or the appellant, we have to consider them. The relevant clauses of the agreement may now be noticed.

"Cl.1.1(d): DESEIN should study the Existing State I & II units; and design to specify schemes for the proposed State III units making provision for interconnections wherever possible such as Auxiliary Steam system, DM Water Makeup system, Compressed Service Air system, Instrumentation Air system, Oil Handling system, Electrical systems, Communication systems, Trippers and Coal Bunkers Feeding systems etc. Cl. 2.1:DESEIN shall assume full responsibility for engineering adequacy, quality, co-ordination and timely completion of design construction, start up commissioning and all other activities, the execution of the Project as developing on them under the provisions of this contract. Desein shall be fully responsible for the complete designing and engineering of all the Civil, Electrical, Mechanical and Instrumention works of the Project."


Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994

Cl. 2.3 (h): Tender drawings and specifications shall be prepared with the utmost expedition and promptly furnished to the Board.

Cl. 2.4: Study and evaluate the offers received technically and economically and make purchase recommendations to the Board within a month from the date of receipt with complete technical and financial analysis. Where a composite tender for Civil, Electrical and Mechanical works is invited, DESEIN shall furnish their analysis for the complete tender including Civil Works, the analysis for all the tenders shall be submitted in 25 copies. In case where confirmations/clarifications on technical details are necessary from the bidders, these shall be obtained directly only once by DESEIN with copies to the Board. While furnishing the analysis DESEIN shall indicate loading for all the technical and commercial deficiencies apart from giving the final list or confirmations/ clarifications still to be obtained from the bidders before placing the orders. Were the lowest offer is not recommended for acceptance, DESEIN shall furnish a list of deviations from the specifications giving the reasons why these are not acceptable.

Cl. 13: Variation in Scope of Work:
The Board reserves the right to delete any item or items of work from the scope of the consultants and execute the same by itself or through any other agency separately appointed by the Board. This provision shall apply at any time during currency of the contract. The total contract price in such case shall stand suitably adjusted by proportionately reducing the cost of the deleted item from the contract price.


16. Thus, from the above it can be seen that the Consultant is responsible for engineering adequacy, quality coordination and timely completion of designing construction and commissioning and other activities in the execution of the project. In particular, the consultant has to study and review the details of the engineering specific features and scope of plant and equipment to be supplied by the Board or other suppliers. It shall also carry out the basic duties and various systems of the station and prepare basic engineering and consortium designing for the same. It shall also prepare technical specifications and draft enquiry document for the supply and erection of all power station branches and equipment such as boilers without auxiliaries, lifts etc. It shall also draft as many specifications as are necessary for the completion of the project. Thus, the agreement does not provide for giving any opinion by the consultant on the prequalification requirement of the tenderers and even assuming mat the consultant could give its opinion. There is no clause in the agreement to the effect that such an opinion is binding on the Board.

Contention No. 1 (c):-
17. The next contention is that in order to help the 4th respondent, the Board opened the Part-II price bids without waiting for the consultant's report regarding Part-I prequalification technical bids of all the tenderers and that it is contrary to the tender notice.


18. The learned counsel for the appellant contended that the Board anticitipating that the consultant is likely to disqualify the 4th respondent, opened the price bids of all the tenderers in order to help the 4th resondent in whom Sri V.V. Reddy, the then chairmam of the Board was interested. The contention or the Board is that the consultant is not required to give report on the prequalification requirement of the tenderers and hence there is no obligation to wait for the report of the consultant and that it is competent to open the price bids in over all interest of the Board invoking the non-obstante clause 3 of Annexure-I to bid Qualification requirements, which reads as follows:
 "Notwithstanding anything stated above the Board reserves the right to assess the tenderer's capability to execute the contract should the circumstances warrant such assessment in the overall interest of the Board".


19. The further case of the Board is that it is usual practice of the Board and that in the case of Rayalaseema Thermal Power Project, Muddnuru, Cuddapah District also similar decision was taken by the Board and contract was awarded to the appellant. It is also the further contention of the Board that the Board does not consist of the Chairman alone, but of other members also who were responsible officers of high rank and there is nothing suggest that they were pressurised by the then Chairman. It is further contended that though the apellant, 4th respondent and the Alluminum Industries Ltd., were not qualified for the prequalification requirement, the 5 members of the Board evidently invoking the non-obstante clause, were of the opinion that price bids of the appellant may be opened, and when the Chariman suggested opening of all the bids, the members concurred with his suggestion. In the counter, the allegation of mala fides is denied. It is also stated by the learned counsel for the Board that Sri V. V. Reddy, who was the then Chairman and who was to lay down his office on 4-5-92, died on 3-5-1992 long before filing of the Writ Petition.

20. The submission of the appellant proceeds on the assumption that it is qualified to submit the tender. Sri Swamy, the learnd counsel for the appellant contends that financial capacity is not one of the prequalification requirements and that the appellant cannot be disqualified on that count. Clause 1 (c) of Annexure-1, which prescribes Bid qualification requirements, reads as follows:
 "The bidder must have financial standing to execute works of this nature and cost and produces evidence in support".

21. Thus, Sri Swamy is not right in contending that financial capacity is not one of the prequalification requirements and that the appellant is not disqualified on that count.


22. We have already held while dealing with the preceding contention that the consultant is not required to give its opinion on the prequalification eligibility of the tenderers, that its duty is only to advise the Board on technical aspects and that such a report is not binding on the Board. Hence, it follows that the Board need not wait for the receipt of the report of the consultant before opening the price bids. In fact the Chief Engineer of the Board recommended opening of the price bids excluding the bid of the 4th respondent and the bid of Alluminium Industries Ltd., even before receipt of the report of the consultant. Thus, the grievance of the appellant seems to be more against opening of the bid of the 4th respondent and not so much against the timing of the opening of the bids as such.

23. Another contention is that when the Board came to the conclusion that the appellant is not eligible a s per prequalification requirement, it ought to have returned the appellant's bid istead of opening the bid along with other bids. We fail to appreciate how the appellant is prejudiced by this. If its bid were to be lowest, the appellant would have been granted the contract and thus having taken the chance, the appellant without then raising this plea, cannot now complain having lost the constract.


24. We have perused the file produced by the learned counsel for the Board. The Chief Engineer in his note to the Board has not expressed his view about the financial status of the bidders, except by merely saying that the financial statements of the bidders are enclosed. He recommended that the appellant may be considered as qualified on the ground of having experience and that the 4th respondent does not have the required experience and hence it is disqualified. He accordingly recommended opening of price bids of all the tenderers except 4th respondent and Alluminiurn Industries Ltd. This note was approved by the five members of the Board who however did not record any reasons. But the Chairman Sri V.V. Reddy endorsed on 21-4-1992 as follows:
 "When we can consider the tender of M/s. Bhanu, I do not see why we cannot open other tenders. Better all tenders are opened."


Then the file was recirculated to the members who agreed with the views of the Chairman. The allegation that the price bids of all the tenderers were opened in order to help the 4th respondent is without substance since the offers of all the tenderers were in sealed covers and not known to anybody until they were opened. Though no reasons are recorded by the Board, as to why price bids of all the tenderers were opened, the reason suggested in the counter was that the Board invoked the non-obstante Clause 3. Sri Swamy contends that giving reasons in the counter is not enough in the absence of those reasons finding place in the file and relies on the decision of the Supreme Court in Mohinder Singh v. Chief Election Commr., This is without substance since there is no reason recorded by other members as to why the price bids of the appellant whose financial capacity was not discussed, should be opened, that too, even before receipt of the report of the consultant. We must not forget that these are administrative matters and one cannot expect the authorities to record detailed reasons in support of the decisions which are generally preceded by deliberations. Of course, it would have been better had the Board indicated some reasons in the note file. But merely because they have not noted, we cannot hold that the Board is not competent to indicate the reason in the counter-affidavit. So the decision of the Supreme Court is distinguishable. Further, the learned counsel for the appellant has proceeded on the premises that the Board in its counter has justified its action on the ground that it will result in saving of Rs. 75 lakhs to the Board. There is no such reason disclosed either in the counter-affidavit or additional counter-affidavit. Thus, we hold that the Board has not acted illegally in invoking the non-obstante clause and in considering bids of all the tenderers, and even before receipt of the report of the consultant by invoking non-obstante clause.


Contention No. 1 (d):-
25. It is next contended by Sri Swamy, the learned counsel for the appellant that the non-obstante clause cannot be interpreted to have effect of scuttling the clear mandatory term in the tender notice and relies on the decision of the Supreme Court in Dominion of India v. Sreen Bhai in which it is held that, ". ...it is however necessary to observe that althogh ordinarily there should be a close approximation between the non-obstante clause and the operative part of the section the non-obstante clause need not necessarily and always be co-extensive with the operative part, so as to have the effect of cutting down the clear terms of an enactment. If the words of the enactment are clear and are capable of only one interpretation on a plain and grammatical construction of the words thereof a non-obstante clause cannot cut down the construction and restrict the scope of its operation. In such cases the non-obstante clause has to be read as clarifying the whole position and must be understood to have been incorporated in the enactment by the Legislature by way of abundant caution and not by way of limiting the ambit and scope of the operative part of the enactment...."

26. In that case, Clause 3 of Requisitioned Land (Continuance of Powers) Ordinance (19 of 1946) fell for consideration. The Clause reads as follows:.

Cl. 3: 'Continuance of requisitions':-
Notwithstanding the expiration of the Defence of India Act, 1939 (35 of 1939), and the rules made thereunder, all requisitioned lands shall continue to be subject to requisition until the expiry of this Ordinance and the apporpriate Government may use or deal with any requisitioned land in such manner as may appear to it to be expedient."


27. We fail to seen how this decision is of any assistance to the appellant. The other decisions relied on by the learned counsel for the apellant in Chief Inspector of Mines v. K.C. Thapars , L.I.C. of India v. S.V. Oak , Flnnmnar Nath v. Tek Chand, and Chief Justice of A.P. v. L.V.A. Dikshitulu do not throw any light on the point in discussion.

Contention No. 1(b):-
28. The next contention of the learned counsel for the appellant is that the non-obstante clause can be invoked only after the price bids are opened and not carrier. We are afrid we cannot agree. The non-obstante clause does not make any such distinction or restriction.

29. The learned counsel for the appellant relies on the decision of the Supreme Court in Ramana v. International Airport Authority of India, . In that case, the tender notice by the International Airport Authority, which is a statutory body stated that:
 "the sealed tenders in the prescribed form are hereby invited from Registered II Class Hoteliers having at least 5 year's experience for putting up and running a II Class Restaurant and two Snack Bars at this Airport for a period of 3 years".


30. But the Airport authority has accepted the tender of the person who does not satisfy the requirement of the tender notice. It was held by the Supreme Court that the requirement mentioned in the tender notice is a condition of eligibility which is an objective test and not a subjective one and accordingly it was observed that it is a well settled rule of administrative law that an executive authority must be rigorously held to the standards by which it profasses its actions to be judged and it must scrupulously observe those standards on pain of invalidation of an act in violation of them. It has further held that, "It must, therefore, be taken to be the law that where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largess, the Government cannot act arbitrarily at its sweat will and like a private individual, deal with any person it pleases, but its action must be in conformity with standard or norm which is not arbitrary, irrational or irrelevant. The power of discretion of the Government in the matter of grant of largess including award of jobs, contracts quotas, licences etc.,must be confined and structured by rational, relevant and nondiscriminatory standard or norm and if the Government departs from such standard or norm in any particular case or cases, the action of the Government would be liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory."

Later again the Court observed:
 "The Corporation acting as an instrumentality or agency of Government, obviously be subject to the same limitation in the filed of constitutional and administrative law as Government itself though in the eye of law there is distinct and legal entities."


31. It can be seen that the minimum requirement prescribed in that tender notice was absolute and there was no power of relaxation available to the authorities unlike in the present case. Thus, this case is distinguishable.

32. The learned counsel for the appellant relied on two other decisions of the Supreme Court in M. Lachia Setty & Sons Ltd. v. Coffee Board Bangalore, and Harminder Singh v. Union of India, for the propositation that offer of a person not eligible to participate in the tender, cannot be considered by the Government. In M. Lachia Setty & Sons Ltd., case, as per condition No. 6 of conditions of sale, the Coffee Board does not bind itself to accept the highest or any bid and the Board need not assign any reasons for doing so and its decision shall be final and conclusive. The highest bid was not accepted by the Coffee Board for some reason and the Coffee Board thereupon acepted the lawest bid of and her tenderer. The Supreme Court on construction of that condition held that the Coffee Board is empowered to accept the lower bid in preference to any higher bid. We fail to see how this helps the appellant.


33. The next case relied on by the learned counsel for the appellant is Haraminder Singh's case, . In that case, tenders were invited for supply of mik. Though the tender of Harminder Singh, the appellant therein was the lowest, the Government accepted the higher tender of Government Milk Scheme. The award of contract of milk scheme was set aside by the Supreme Court on the ground that the tenders were to be adjudged on their own intrinsic merits in accoidure with the terms and conditions of that tender notice and that as the tender notice do not indicate any preference to any Government Undertaking, the authority concerned acted arbitrarily in allowing 10% price to Government Milk Scheme. This decision is not relevant since as in International Air Port' Authority's case (12 supra), in this case also there is no power of relaxation available to the authorities unlike the present case.


34. On the other hand, the learned Counsel for the respondents relied on M/s. G.J. Fernandes v. State of Karnatakai, which deals with the permissibility of relaxation of prequalification requirements. It is held in the said decision, "Thirdly, the conditions and stipulations in a tender notice like this have two types of consequences. The first is that the party issuing the tender has the right to punctiliously and rigidly enforce them. Thus, if party does not strictly comply with the requirements of paras III, V or VI of the Notification Inviting Tenders (NIT), it is open to the Karnataka Power Corporation Ltd., (KPC) to decline to consider the party for the contract and if a party conies to Court saying that the KPC should be stopped from doing so, the Court will decline relief. The second consequence, indicated by this Court in earlier decisions, is not that the KPC cannot deviate from these guidelines at all in any situation but that any deviation, if made, should not result in arbitrariness or discrimination. It comes in for application where the non-conformity with, or relaxation from, the prescribed standards results in some substantial prejudice or injustice to any of the parties involved or to public interest in general. For example, in this very case, the KPC made some changes in the time frame originally prescribed. These changes affected all intending applicants alike and were not objectionable. In the same way, changes or relaxations in other directions would be unobjectionable unless the benefit of those changes or relaxations were extended to some but denied to others. The fact that a document was belatedly entertained from one of the applicants will cause substantial prejudice to another party who wanted, like wise, an extension of time for filing a similar certificate or document but was declined the benefit. It may perhaps be said to cause prejudice also to a party which can show that if had refrained from applying for


be said to cause prejudice also to a party which can show that if had refrained from applying for the tender documents only because it thought it would not be able to produce the document by the time stipulated but would have applied had it known that the rule was likely to be relaxed. But neither of these situations is present here. Sri Vaidhyanathan says that in this case one of the applicants was excluded at the preliminary stage. But it is not known on what grounds that application was rejected nor has that party come to Court with any such grievance. The question, then, is whether the course adopted by the KPC has caused any real prejudice to the appellant and other parties who had already supplied all the documents in time and sought no extension at all? It is true that the relaxation of time schedule in the case of one party does affect even such a person in the sense that he would otherwise have had one competitor less. But, we are inclined to agree with the respondent's contention that while the rule in Ramana's case (supra) will be readily applied by Courts to a case where a person complains that a departure from the qualifications has kept him out of the race, injustice is less apparent where the attempt of the applicant before Court is only to gain immunity from competition. Assuming for purposes of argument that there has been a slight deviation from the terms of the NIT, it has not deprived the appellant of its right to be considered for the contract; on the other hand, its tender has received due and full consideration. If, save for the delay in filing one of the relevant documents, MCC is also found to be qualified to tender for the contract, no injustice can be said to have been done to the appellant by the consideration of its tender side by side with that of the MCC and in the KPC going in for a choice of the better on the merits".


35. Thus, we hold that non-obstante clause can be invoked even before opening of price bids and that as both the appellant and the 4th respondent did not satisfy the prequalification requirements, the Board invoked the non- obstante Clause and opened the price bids of all the tenderers and there is nothing illegal about it.

Contention No. 1 (f):-
36. The next contention of the learned Counsel for the appellant is that even if the Board can invoke non-obstante clause before opening price bids, it has not recorded any valid reasons to differ from the report of the consultant. This is ex facie without substance since the price bids were opened on 30-4-1992 while the consultant's report was received on 11-5-1992. Thus, we reject this contention II. Price Bids:-
37. Contention No. II (g):- The learned counsel for the appellant next contended that the price bids ought to have been referred to the Consultant for evaluation. This is opposed by the Counsel for the Board who contends that evaluation of price bids is not covered by the agreement with the Consultant. To appreciate this contention, it is necessary to refer to Clauses 2.1,2.4 and 5.1 of the agreement. Though clauses 2.1 and 2.4 are extracted elsewhere in this judgment, they are extracted again here for the sake of convenience:
2.1: DESE1N shall assume full responsibility for Engineering adequacy, quality, co-ordination and timely completion of design construction strartup commissioning and all other activities, the execution of the Project as devolving on them under the provisions of this contract. DESEIN shall be fully responsible for the complete designing and engineering of all the Civil, Electrical, Mechanical and Instrumentation works of the Project.


Cl.2.4: Study and evahtate the offers received technically and economically and make purchase recommandations to the Board within a month from the date of receipt with complete technical and financial analysis. Where a composite tender for Civil, Electrical and Mechanical works is invited, DESEIN shall furnish their analysis for the complete tender including Civil works, the analysis for all the tenders shall be submitted in 25 copies. In case where confirmations/clarifications on technical details are necessary from the bidders, these shall be obtained directly only once by DESEIN with copies to the Board. While furnishing the analysis, DESEIN shall indicate loading for all the technical and commercial deficiencies part from giving the final list of confirmations/ clarifications still to be obtained from the bidders before placing the orders. Where the lowest offer is not recommended for acceptance, DESEIN shall furnish a list of deviations from the specifications giving the reasons why these are not acceptable.


Cl. 5.1: For all services indicated in Article No. 2 herein above including for the services of Resident erection and commissioning supervisory Engineers as detailed in Clauses 2.31 and 2.32, Board shall pay DESEIN a lumpsum firm fee of Rs. 105.25 lakhs (Rupees One Hundred and Five lakhs twenty five thousand only), as per the following breakup details:
38. No doubt, these clauses indicate that the Consultant can also evaluate the bids. But according to the Board it is not always obligatory on its part to refer price bids for evaluation to the Consultant whose main function is to advise on the technical side. The learned counsel for the Board has filed list of 34 contracts relating to Rayalaseema Thermal Power Project and V.T.P.S. State-Ill in respect of which price bids were not earlier sent to the Consultant to show that there is nothing unusual about the procedure adopted in the instant case. We agree with this plea of the respondents.

Contention No. II(h):-
39. The next contention is that the method of evaluation of the price bids adopted by the Board is incorrect and arbitrary and if the bids are properly evaluated, the price quoted by the appellant would be the lowest.

40. As already seen, the prices quoted by the appellant and the 4th respondent and the avaluated prices by the Board are as follows:
                                   Quoted price.    Evaluated price.
                                 Rs.              Rs.
1. M/s. Bhanu Construction
Co. Ltd. (Appellant).            3,12,96,835      3,36,03,387
2. M/s. Controls & Schematics
Pvt. Ltd. (4th respondent)       2,18,43,650      2,76,54,014


41. Sri B.S.A. Swamy, the learned Counsel has taken us through various technical details like loading, off-loading etc. and vehemently argued that the evaluation of the price bids is illegal. For example, he says that the quantities offered by the 4th respondent in civil works are mostly inadequate and hence the bid of the 4th respondent in civil works has to be 'loaded'. Similarly, in Structural Steel, Bus Bar System and Equipment, the contention of the appellant is that as a result of wrong evaluation done by the Board, the evaluated price of the bid offered by the 4th respondent became the lowest and the price of the appellant became the highest.

42. On the other hand, the learned Counsel for the Board and the 4th respondent contended that the bids were properly evaluated and all tenderers were treated equally arid the bid of the 4th respondent being the lowest, the 4th respondent was awarded the work after negotiations when certain conditions were imposed in accordance with the opinion of the Consultant. It is also their contention that small deviations are magnified by the appellant due to the business rivalry with the 4th respondent.


43. From the perusal of the file produced, it is seen that the valuation process was completed on 7-7-1992 and the file was sent to the Financial Adviser for arithmetical check-up and the Financial Adviser returned it to the Board on 16-7-1992. The Store Purchase Committee consisting of entire Board and two Officers of the Government met on 18-8-1992 and after considering the Tender Analysis documents came to the conclusion that the evaluated bid of the 4th respondent is the lowest but wanted the 4th respondent to be called for negotiations with the negotiating Committee consisting of Member (Projects), Member (Accounts) and Member (Secretary). The offers were kept valid till 27-8-1992 and hence the tenderers were not asked to revalidate the tenders and finally after negotiations, tender of the 4th respondent was accepted with the addition of Rs. 19 lakhs towards the cost of extra Structural Steel required to make up for 215 tons and 47.52 tons of Reinforced Steel required to be used in accordance with the opinion of the consultant.


44. The appellant is not consistent about the evaluatd price of his bid as well as bid of the 4th respondent as can be seen from the following statement:
                     Page-8 of          Page-37of           Page-8 of addl.
                   Sec. II (at        Sec. IX material    papers
                   the time of        (during argu-       (filed during
                   filing W.P.)       ments of W.P.)      hearing of W.A.)
                     Rs.              Rs.     Rs.
Appellant (M/s.
Bhanu Construc-
tion Co.)          3,03,44,000*       3,15,48,900**       3,10,43,259"*
4th Respondent     3,47,94,700****    3,42,90/048         3,42,90,048
(*).  Rs. 3,03,85,000.    (**). Rs. 3,15,50,935
(***) Rs. 3,09,45,935.    (****) Rs. 3,46,94,700....Due to Arithmetical
                          mistakes.

The appellant has taken its quoted price at Rs. 3,12,76,935/- while the correct figure is Rs. 3,12,96,835/-. If this difference of Rs. 19,900/- is taken into consideration, the evaluated prices of the Appellant will be nearly Rs. 19,900/- more than those indicated above in the table.


45. The figures of loadings and off-loadings relating to the appellant are different in the three statements as can be seen from tine following table.
                          Page-8 of     Page-37 of    Page-8B of
                        Sec.II.       Sec. IX       addl. material
                        (in lakhs)    (in lakhs)    papers.
                        (1)           (2)           (3)
1. Civil Works          nil           -0.32         nil.
2. Structural Steel.    + 12.10       + 10.29       + 8.97
3. Bus Bar System       - 23.77       - 15.70       -15.70
4. Equipment            + 2.50        + 2.38        + 2.38
5. D.C. Boards          + 0.25        + 0.22        + 0.23
6. Financial Loading    Not made      + 5.87        + 5.87
7. Rebate for excess    Not made      Not made      - 5.06
Provision.
                        - 8.92*        + 2.74**     - 3.31***
(*). Not-9.32 lakhs; (**) not + 2.72 lakhs. (***)not-2.34 lakhs.


46. The appellant has also filed a statement (found at page-20 of Sec. IX) computing its evaluated bid at Rs. 2,97,06,343 with reference to "short falls of the offer of the 4th respondent", compared to its offer. As per this statement, the 4th respondent's evaluated bid is Rs. 3,18,91,970/-. But the appellant has not chosen to give the comparable evaluated bids of other tenderers to prove that its bid is the lowest.

47. These disputed bid valuation figures with all their technical features like loading, off-loading, cannot evidently be gone into the writ proceedings. What all this Court has to see is whether the decision is arrived at by the authorities applying the correct test and considering tenders dispassionately and without bias. The Court can interfere if the decision making process of the authorities is vitiated on any ground, but cannot interfere with the decision arrived at. This has been so held by the Supreme Court in Sterling Computers Ltd. v. M/s. M.N. Publications Ltd, 1993 (1) SCC 116 and F.C.I, v. M/s. Kamadhenu Cattle Feed Industries, .

48. In Sterling Computers Ltd. case, '" the Supreme Court held:
"While exercising the power of judicial review, in respect of contracts entered in to on behalf of the State, the Court is concerned primarily as to whether there has been any infirmity in the "decision making process". In this connection reference may be made to the case of Chief Constable of North Wales Police v. Evans where it was said that: (p. 144-a).


"The purpose of judicial review is to ensure that the individual receives fair treatment, and not to ensure that the authority, after according fair treatment, reaches on a matter which it is authorised or enjoined by law to decide for itself a conclusion which is correct in the eyes of the Court".

By way of judicial review the Court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State Courts have inherent limitations on the scope of any such enquiry. But at the same time as was said by the House of Lords in the aforesaid case, Chief Constable of the North Wales Police v. Evans the Courts can certainly examine whether "decision making process" was reasonable, rational, not arbitrary and violative of Article 14 of the Constitution.

If the con tract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest of the State and the public, the Court cannot act as an appellate authority by substituting its opinion i n respect of selection made for entering into such contract. But, once the procedure adopted by an authority for purpose of entering into a contract is held to be against the mandate of Article 14 of the Constitution, the Courts cannot ignore such action saying that the authorities concerned must have some latitude or liberty in contractural matters and any interference by Court amounts to encroachment on the exclusive right of the executive to take such decision".


49. In F.C.I. 's case, the Supreme Court observed as follows:
 "7. In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article-14 of the Constitution of. which non-arbitrariness is a significant facet. There is no unfettered discretion in public law. A public authority possesses powers only to use them for public good: This imposes the duty to act fairly and to adopt a procedure which is 'fairplay in action'. The observance of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his inter action with the State and its instrumentalities, with this element forming a necessary component of the decision making process in all State actions. To satisfy this requirement of non-arbitrariness in a State action, it is, therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart from affecting the bona fides of the decision in a given case. The decision so made would be exposed to challenge on the ground of arbitrariness. Rule of law does not completely elimiate discretion in the exercise of power as it is unrealistic, but provides for control of its exercise by judicial review".


50. A feeble argument was advanced by the learned Counsel for the appellant that there are two different statements of valuation of price bids both dt. 7-9-92 - one typed and one in manuscript. We have seen the file. Tine allegation is absolutely without substance. As per the office practice, the manuscript is the draft and typed one is the fair and there is absolutely no difference between the two. The stand of the Board is that the object of loading and off-loading is not to award contract on the evaluated price, but to know whether the bidder is having any idea about scope of the work and whether any reasonable person in this line can quote those prices.

51. Another contention urged by Sri Swamy is that negotiating with only one tenderer is bad. He relies on the following observations in M/s. C.J. Fernacleiz's case (15 supra), at page-967.

 "Assuming for purpose of argument that there has been a siight deviation from the terms of the NIT, it has not deprived the appellant of its right to be considered for the contract; on the other hand, its tender has received due and full consideration. If, save for the delay in filing one of the relevant documents, MCC is also found to be qualified to tender for the contract, no injustice can be said to have been done to the appellant by the consideration of its tender side by side with that of the MCC and in the KPC going in for a choice of the better on the merits. The appellant had no doubt also urged that the MCC had no experience in this line of work and that the appellant was much better qualified for the contract. The cooperative merits of the appellant vis-a-vis MCC are, however, a matter for the KPC (counselled by the TCE) to decide and not for the Courts. We were, therefore, rightly not called upon to go into this question".


52. We fail to see how these observations are of any assistance to the appellant. Here, the bids of all the tenderers including the appellant and the 4th respondent were considered and the bid of the 4th respondent was found to be the lowest and hence it was given the contract. In fact this is the decision relied on by the learned Counsel for the 4th respondent.

53. We agree with the learned Counsel for the Board who has also raised a plea that in any event, the appellant cannot get the contract as it is only Alluminium Industries Ltd., whose evaluated bid of Rs. 3,13,23,986 is the lowest, that could have got the contract. We accordingly hold that the complaint of the appellant that price bids were arbitrarily evaluated by the Board is not justified.

Contention No. II (i):-
54. The next contention of the learned Counsel for the appellant is that even if it is found that the rates quoted by the appellant are higher, the Board ought to have awarded the contract to it in view of its previous experience. To appreciate this contention, Clause 2.8.1 of Section 2 of Tender Specifications is relevant and it reads as follows:
Cl. 2.8.1. - Experience:
 "While being equal of comparable on other aspects preffrence will be given to those who had supplied similar plant/equipment/materials to that specified du ring the last 5 years or supplying now under a running contract. A list of such supplies should be given in a schedule".


55. From tlis, it i s clear that preference wil1 be given to the persons who have experience provided the other things are equal. It is a matter of policy decision and especially when awarding contract to a party, who has quoted more for doing the work, there should be compelling and strong reasons to award to it in preference to the one who quoted less. Merely because it was earlier given work of Rayalaseema Thermal Power Project when its financial position was 25 the same, it does not follow that the appellant should be preferred for this work also even though it has quoted higher rates. It is also to be remembered that the appellant was not given the contract in question not because of its financial capability, but because the evaluated price of its bid was found to be more than that of the 4th respondent. Hence, the contention that the Board ought to have relaxed from the requirement of financial capability has no force. The learned Counsel has relied on voluminous documents filed by him in support his contention that the appellant has got many claims pending settlement against the Board to the extent of Rs. 2.75 crores, that it is now executing many contracts with the Board to its satisfaction and that mere accumulation of losses of about Rs. 5.96croresason31-3-1991 does not disabletheappellantfromtakingup and executing the work. But all these are not material since the appellant was denied the contract not because of its financial incapacity, but because its bid was not the lowest.


56. The learned Counsel for the appellant relies on the principle of legitimate expectation laid down in U.O.I. and Ors. v. Hindustan Development Corporation and Ors., where the Supreme Court observed as follows:
 "A case of legitimate expectation would arise when a body by representation or by past practice aroused expectation which it would be within its powers to fulfil. The protection is limited to that extent and a judicial review can be within those limits. But as discussed above a person who bases his claim on the doctrine of legitimate expectation, in the first instance, must satisfy that there is a foundation and thus has locus standi to make such a claim. In considering the same several factors which give rise to such legitimate expectation must be present. The decision taken by the authority must be found to be arbitrary, unreasonable and not taken in public interest. If it is a question of policy, even by way of change of old policy, the Courts cannot interfere with a decision. In a given case whether there are such facts and circumstances giving rise to a legitimate expectation, it would primarily be a question of fact. If these tests are satisfied and if the Court is satisfied that a case of legitimate expectation is made out then the next question would be whether failure to give an opportunity of hearing before the decision affecting such legitimate expectation is taken, has resulted in failure of justice and whether on that ground the decision should be quashed. If that be so then what should be the relied is again a matter which depends on several factors".


57. Explaining the theory in its application, the Supreme Court went on, "....By and large they (legitimate expectations) arise in cases of promotions which are in normal course expected, though not guaranteed by way of a statutory right, in cases of contracts, distribution of largess by the Government and in somewhat similar situations. For instance in cases of discretionary grant of licences, permits or the like, carries with it a reasonable expectation, though not a legal right to renewal or nonrevocation, but to summarily disappoint that expectation may be seen as unfair without the expectant person being heard. But there again the Court has to see whether it was done as a policy or in the public interest either by way of G.O. rule or by way of a legislation........"

58. The grounds on which the administrative action can be assailed and the relief that can be given to a party are laid down by the Supreme Court in the same case as under:
"....If that be so, a decision denying a legitimate expectation based on such grounds does not qualify for interference unless in a given case, the decision or action taken amounts to an abuse of power......."

 xxx xxx xxx "......For instance if an authority who has full discretion to grant a licence and if he prefers an existing licence holder to a new applicant, the decision cannot be interefered with on the ground of legitimate expectation entertained by the new applicant applying the principles of natural justice. It can therefore be seen that legitimate expectation can at the most be one of the grounds which may give rise to judicial review but the granting of relief is very much limited......"


xxx xxx xxx "If a denial of legitimate expectation in a given case amounts to denial of right guaranteed or is arbitrary, discriminatary, unfair or biased, gross abuse of power or violation of principles of natural justice, the same can be questioned on the well known grounds attracting Article-14 but a claim based on mere legitimate expectation without anything more can not ipso facto give a right to invoke these principles...."

 xxx xxx xxx "As cautioned in Attorney General for New South Wales' case the Courts should restrain themselves and restrict such claims duly to the legal limitations. It is a well-meant caution. Otherwise a resourceful litigant having vested interests in contracts, licences etc. can successfully indulge in getting welfare activities mandated by directive principles thwarted to further his own interests. The caution, particularly in the changing scenario, becomes all the more important."

59. We are afraid that this decision is not of any help to the appellant. First of all there is no pleading to this effect either in the Writ Petition or in the Writ Appeal. Even otherwise, there is no change of policy here. If the appellant was denied the contract on the ground of its financial position, it could have some justification to contend that hitherto it was given contracts by the Board inspite of its financial position and that there are no reasons to depart from the practice in deciding this contract, without notice to the appellant. Whether in such circumstances the appellant is entitled to the benefit of theory of legitimate expectation is also doubtful and we need not express any opinion in this case since it is academic. Thus, we reject this contention.

60. Sri Swamy, the learned Counsel for the appellant also contended that the price quoted by the 4th respondent is predatory and that the three members of the consortium formed cartel and relied on the observations of the Supreme Court in Hindustan Development Corporation case (18 supra), in para 15.


"The cartel therefore is an association of producer who by agreement among themselves attempt to control production, sale and prices of the product to obtain a monopoly in any particular industry or commodity. Analysing the object of formation of a cartel in other words, it amounts to an unfair trade practice which is not in the public interest. The intention to acquire monopoly power can be spelt out from formation of such a cartel by some of the producers. However, the determination whether such agreement unreasonably restrains the trade depends on the nature of the agreement and on the surrounding circumstances that give rise to an inference that the parties intended to restrain the trade and monopolise the same".

61. Later, the Supreme Court said in Matsushita Electric Industrial Co. Ltd., et al v. Zenith Radio Coloration et al 89 L.Ed. 2d 538, that predatory pricing conspiracies are by nature speculative and that the agreement to price below the competition level requires the conspirators to forego profits that free competition would offer them".

62. On the other hand, Sri Subrahmanya Reddy, the learned Counsel for tine respondents relied on the very same judgment at paras 17 and 19.

".....Therefore mere offering of a lower price by itself, though appears to be predatory, cannot be a factor for inferring formation of a cartel unless an agreement amounting to conspiracy is also proved".

"1.9. A mere offer of a lower price by itself does not mainfest the requisite intent to gain monopoly and in the absence of a specific agreement by way of a concerted action suggesting conspiracy, the formation of a cartel among the producers who offered such lower price cannot readily be inferred".

63. Here, neither the question of cartel nor the question of predatory price arises. Further, this plea has not been taken by the appellant either in the Writ Petition or in the Writ Appeal.


Contention No. II (J):-
64. The last contention of the learned Counsel for the appellant is that the award of contract to the 4th respondent is vitiated by mala fides, since it was selected though the designs and drawings submitted by it are not in accordance with tender specifications and the Board not only agreed to pay higher price than what has been quoted by i t, but aIso conferred some extra benefits on it. The learned Counsel for the Board drew our attention to Clauses 6.3.0 and 6.4.0 of sub-section-D of Technical Specifications which are extracted hereunder:
Cl. 6.3.0: Contracts shall submit design calculations in support of the design and fabrication drawings submitted by him for the approval of ConsuItant /Purchaser.

Cl.6.4.0: Contractor shall check erection clearance and ensure that detailing of connection is carefully planned for easy erection.

65. Relying on these clauses, he contended that as the consultant has pointed out number of defects and deficiencies in the contract submitted by the 4th respondent, the Board took an undertaking from it that it will execute the work as per the specifications given by the consultant and as such there is no reason to reject the tender on that ground.


66. Coming to the higher price being paid, it is true that the 4th respondent has quoted Rs. 2,18,43,650/-. In the negotiations the 4th respondent was given extra amount of Rs. 19 lakhs to cover the cost of additional tonnage to make up 215 M.Tons of structural steel and 47.52 tons of R.C.C. steel as per the requirement pointed out by the consultant. The learned Counsel for the appellant criticises the stipulation of payment of extra amount to the 4th respondent in case any extra structural steel is required to be used over and above the estimated 215 M.Tons. The learned Counsel for the Board says that the possibility of using extra steel over 215 M.Tons is a remote one in view of the fact that the appellant itself has estimated use of 229.1 tons and even otherwise that the amount may be meagre. He has also drawn out attention to the Clause in the Final Acceptance of the offer dated 28-4-1993 to the effect that extra reinforced steel if any required to be used has to be borne by the 4th respondent. He has also stated that in fact the amount at which the contract was awarded was far less than the evaluated price and the Board has gained by about Rs. 39 lakhs (Rs. 2,76,54,014 the evaluated price Bid less Rs. 2,37,43,650 the price at which awarded) and that the price quoted by the appellant (Rs. 3,12,96,835) is nearly Rs. 75 lakhs higher than the price at which the contract was awarded to the 4th respondent. We agree with the contention of the learned counsel for the Board.


67. The learned counsel for the appellant has relied on clause 2.03 of subsection (B) of Standard Specification and Clauses 2.2.3. and 2.26.4 of Tender Specifications, which read as follows:
Cl.2.03.00: Should major deviations be desired by the Bidder, then a Base Offer shall be made in compliance with the specification and a separate Alternate offer may be made. Evaluation comparisons will, however, be made on the basis of Base offer only and the Alternate offer will be considered only when the Base offer of the Bidder is competitive otherwise and technically acceptable.

Alternate offer exhibits improved technology and economy over its Base Officer. Bids without Base Offer will be rejected as 'Irresponsive'.

Cl.2.2.3.: Clarifications, amplications and/or any other correspondence from the tenderer subsequent to the opening of the tender, will not be entertained. The tenderers are, therefore, advised to ensure that their tenders sent in COMPLETE SHAPE at the first instance itself. Post tender rebates, revisions or deviations in quoted prices and /or conditions or any such offers which will give a benefit to the tender over others wil1 not only be rejected but the ORIGINAL TENDER ITSELF WILL GET DISQUALIFIED ON THIS ACCOUNT AND THE TENDERER'S EARNEST MONEY DEPOSIT FORFEITED.

Cl.2.26.4: Under no circumstances shall tenderer alter his price during the validity period after tenders are opened, any tenderer who does so resulting in recalling of tenders by the Board or additional expenditure to the Board shall not only lose his Earnest Money Deposit but also run the risk of being black listed by the Board which reserves the right under the Law to recover damages resulting therefrom.


68. The learned counsel for the appellant contended that in view of any major deviation proposed by the 4th respondent the base offer ought to have been rejected and the quoted price cannot be enhanced in any circumstances. These clauses do not indicate such a prohibition. These clauses also indicate that the tenderers while submitting their Base Offers can also submit alternate offer with major deviations if any. But evaluation of the bids will be madeonly on the basis of Base Offer. The Clauses also advises the tenderers that they should firm offers at the first instance itself and post tender modification or alteration of the price giving benefit to the tenderers over others will result in disqualification of the original tender itself. As can be seen, these apply to unilateral alteration of price due to any reason including as a result of major deviations. But here the amount of Rs. 19 lakhs is the amount agreed to by the Board through negotiations and not the amount demanded by the 4th respondent unilaterally. Further, by this enhancement of Rs. 19 lakhs, the 4th respondent does not derive any benefit over the other tenderers since even after the addition of Rs. 19 lakhs, the evaluated price bids of all the tenders are not disturbed and the bid of the 4th respondent continued to be the lowest of all the tenderers.


69. The plea of mala fides raised by the appellant is without any merit. It is well settled that the burden of establishing mala fide is on the person who alleges the same. (See: E.P. Royappa v. State of Tamil Nadu, and M. Sankaranarayana, IAS v. State of Karnataka, . In E.P. Royappa's case, the Supreme Court, observed as follows:


"92. Secondly, we must not also overlook that the burden of establishing mala fides is very heavy on the person who alleges it. The allegations of. mala fides are often more easily made than proved, and the very seriousness of such allegations demands proof of a high order of credibility. Here the petitioner, who was himself once the Chief Secretary, has flung a series of charges of oblique conduct against the Chief Minister. That is in itself a rather extraordinary and unusual occurrence and if these charges are true, they are bound to shake the confidence of the people in the political custodians of power in the State and therefore, the anxiety of the Court should be all the greater to insist on a high degree of proof. In this context it may be noted that top administrators are often required to do acts which affect others adversely but which are necessary in the execution of their duties. These acts may lend themselves to misconstruction and suspcion as to the bona fides of their author when the full facts and surrounding circumstances are not known. The Court would, therefore, be slow to draw dubious inferences from incomplete facts placed before it by a party, particularly when the imputations are grave and they are made against the holder of an office which has a high responsibility in the administration. Such is the judicial perspective devaluating charges of unworthy conduct against ministers and other high authorities, not because of any special status which they are supposed to enjoy, nor because they are highly placed in social life or administrative set up - these considerations are wholly irrelevant in judicial approach - but because otherwise, functioning effectively would become difficult in a democracy. It is from this stand-point that we must assess the merits of the allegations of mala fides made by the petitioner against the second respondent".


70. In Sankaranarayana's case , the Supreme Court observed that it may be permissible in an appropriate case to draw reasonable inference of mala fides from the facts pleaded and established. But such inference must be based on factual matrix, which cannot remain in the realm of insinuation, surmise or conjecture.

71. The learned Counsel for the appellant heavily relied on the decision of a Full Bench of this Court in Kranth Sangram Parishath v. Sri N. Janardhan Reddy, 1992 (3) ALT 99 (F.B.). It was held in that case, "It is of paramount importance that decisions affecting the lives and liberties of citizens are rendered by people who are impartial, act fairly and bring to bear a dispassionate and objective consideration to the issues involved".

72. There is absolutely no dispute about this proposition and whether there is bias or not has to be decided on the facts and circumstances of each case. In the instant case, there is no material to show bias on the part of any member of the Board or Chairman or late Chairman in favour of the 4th respondent or against the appellant.


73. Apart from this, there is another hurdle in the way of the appellant. The appellant did not raise this plea of bias before the Board at various levels when the matter was considered and took a chance of getting a favourable order from the Board awarding the contract. Having failed, it is not now open to it to allege bias. The observations of the Supreme Court in G. Sarana v. Lucknoxv University, are apposite:
"We do not, however, consider it necessary in the present case to go into the question of the reasonableness of bias or real likelihood of bias as despite the fact that the appellant knew all the relevant facts, he did not before appearing for the interview or at the time of the interivew raise even his little finger against the constitution of the Selection Committee. He seems to have voluntarily appeared before the Committee and taken a chance of having a favourable recommendation from it. Having done so, it isnot now open to him to turn round and question the constitution of the Committee. This view gains strength from a decision of this Court in Manak Lal's case (supra) wherein more or less similar circumstances, it was held that the failure of the appellant to take the identical plea at the earlier stage of the proceedings created an effective bar of waiver against him. The following observations made therein are worth quoting:-
 "It seems clear that the appellant wanted to take a chance to secure a favourable report from the tribunal which was constituted and when he found that he was confronted with an unfavourable report, he adopted the devise of raising the present technical point".


74. In reply to the contention raised by the respondents that in any event it is only Alluminium Industries Ltd., which is the lowest tenderer that could complain, and which has not come to the Court and it is not for the appellant to champion its cause, the learned Counsel for the appellant relied on the decision in Bangalore Medical Trust v. B.S. Muddappa, wherein the Supreme Court observed as follows:
 "....It is too late in the day, therefore, to claim that petition filed by inhabitants of a locality whose park was converted into a nursing home had no cause to invoke equity jurisdiction of the High Court. In fact public spirited citizens having faith in rule of law are rendering great social and legal service by espousing couse of public nature. They cannot be ignored or overlooked on technical or conservative yardstick of the rule of locus standi or absence of personal loss or injury. Present day development of this branch of jurisprudence is towards free movement both in nature of litigation and approach of the Courts. Residents of locality seeking protection and maintenance of environment of their locality cannot be said to be busy bodies or interlopers . Even otherwise physical or personal or economic injury may give rise to civil or criminal action but violation of rule of law either by ignoring or affronting individual or action of the executive in disregard of the provisions of law raises substantial issue of accountability of those entrusted with responsibility of the administration. It furnishes enough cause of action either for individual or community in general to approach by way of writ petition and the authorities cannot be permitted to seek shelter under cover of technical) ties of locus standi nor they can be heard to plead for restraint in exercise of discretion as grave issues of public concern outweight such considerations".


75. The learned Counsel for the appellant contends that applying the above principle, this can be treated as a public interest litigation. On the other hand, in Janata Dal v. H.S. Choudary, , Justice Ramaval Pandian speaking for the Bench, a fter reviewing all the cases of public in terest litigation held that persons acting bona fide and having sufficient interest in instituting an action for redressal of public wrong or public injury, to advance the cause of community or disadvantaged groups and individuals can maintain public interest litigation. The Supreme Court also held that mere busy body or a meddlesome interloper or way farer or officious intervener has no locus standi to file public interest litigation for personal gain or private motivation or any other oblique consideration or for glare of publicity.

76. In the instant case, no interest of any disadvantaged group of individuals is vindicated. The appellant does not come within the parameters laid down by the Supreme Court in the Janata Dai's case (24 supra). As already seen, the Writ Petition and the Writ Appeal have been filed due to the business rivalry of the appellant with the 4th respondent and because he was not successful in getting the contract.

77. For the above, reasons, the Writ Appeal is dismissed with costs. Advocates fee Rs. 1,000/-.

78. After pronouncing the judgment Sri B.S.A. Swamy, the learned Counsel for the Appellant, has sought oral leave for appeal to Supreme Court. We do not think that this case involves any substantial question of law of general importance which needs to be decided by the Supreme Court. Accordingly leave is refused.


V. Basavayya vs N. Kottayya on 5 July, 1963

JUDGMENT Anantanaravana Avyar, J.
1. Veguntha Basavayya, as sole plaintiff, filed O.S. No. 209 of 1952 in the Court of the Principal District Munsif, Eluru, for a dissolution of partnership business carried on between him (plaintiff) and the defendant and for accounts. The case of the plaintiff was that he and the defendant were partners of a partnership firm and did business from 1944 to 1947 in sundry articles and cloth. The defendant contested the suit raising various contentions which result ed in various issues. Of them, Additional Issue No. 1 framed on 31-7-1954 was: "Whether the suit is not maintainable by reason of the suit partnership being void"? The learned Principal District Munsif heard this as a preliminary issue and held that the suit partnership was illegal, void and unenforceable and that the suit was not main tainable. Accordingly he dismissed the suit with costs. The plaintiff filed A.S. No. 36 of 1955 before the learned Subordinate Judge, Eluru. The latter framed 3 single point for decision, namely, "Whether the suit is maintainable or not". He agreed with the trial Court and dismissed the appeal. Thereupon the plaintiff filed this second appeal.
 2. When the second appeal originally came up for hearing before our learned brother, Seshachalapathi, J. he passed an order dated 3-8-1961 as follows :


"The two Courts below have relied upon the decislcn in Pisupati Rama Rao v. Tadepalli Papayya, 1954-2 MLJ (Andh) 103 : (AIR 1954 Andh 51). That decision had been rendered on the language of an express prohibition erected under Sections 13 and 16 of the Rice Rationing Order of 1943. It is not in dispute that the Madras Cloth (Dealers) Control Order of 1948 does not in express terms contain a prohibition analogous to Sections 13 and 16 of the Rice Rationing Order of 1943 referred to above. The question is bereft of any direct authority of this Court. A decision of the Calcutta High Court in Matizuddin Khan Choudhury v. Habibuddin Sheikn, (S) , has been brought to my notice which, while dealing with the terms of the Bengal Silk Control Order of 1945, held that forming a partnership for running the licensed business is neither illegal nor opposed to public policy. In view of the importance of question and the large number of similar cases that may arise, I direct that this Second Appeal may be posted before a Bench."
 Accordingly, this appeal has come up before this Bench.
 3. The points which arise are:
 (1) Whether the suit partnership is void? And (2) Whether the suit is not maintainable on that ground?
 4. The relevant facts of the case are as follows:
 The partnership is alleged to have been formed in 1944 for carrying on business in sundry articles and cloth.On   26-10-1948,  the   plaintiff  obtained  a  licence (Ex.  A-1)
under the Madras Cloth (Dealers) Control Order, 1944. The


under the Madras Cloth (Dealers) Control Order, 1944. The
licence  mentions the  plaintiff as the  licensee and   gives
his father's name.    It describes the business as follows:


"6. Nature of business for   Retail business in
which   licence  has                     mill-made doth on
been issued.                            his own account."

 It also elves the exact description and boundary of the premises where the business was to be carried on as 'in his own house at Dharmajigudem'. The plaintiff alleged

that the defendant was in management of the partnership business, from 1946 up to the end of 1950 which means that the defendant was the managing partner from prior to the obtaining of the licence.

 5. Section 81 (2) of the Defence of India Rules runs as follows:

 "The Central Government or the Provincial Government so far as appears to it to be necessary or expedient for securing the defence of British India or the efficient prosecution of the war or for maintaining supplies and services essential to the life of the community may by order provide


(a) for regulating or prohibiting the production, treatment, keeping, storage, movement, transport, distribution, disposal, acquisition, use or consumption of articles of any description whatsoever and in particular for prohibiting the withholding from sale either generally or to specified persons or classes of persons of articles or things kept for sale to be sold either generally or to specified persons or classes of persons or in specified circumstances.
 (b) for controlling the prices or rates at which articles or things of any description whatsoever may be sold or hired and for relaxing any maximum or minimum limits otherwise imposed on such prices or rates." Rule 81 (4) runs as follows:
 "If any person contravenes any order made under this rule, he shall be punishable with imprisonment for a term, which may extend to three years or with fine or with both."
 The Government of Madras, in exercise of the powers conferred by Rule 81 (2) (b), made the Madras Cloth (Dealers) Control Order (hereinafter referred to for convenience as the M.C.D.C. Order) in 1944. Both sides have placed before us the above Order of 1944 and proceeded on the basis that the provisions of that Order were subrtantially in force during the relevant period concerned in this case and were substantially the provisions under which the licence (Ex. A-1) was issued. We also proceed accordingly. Clause 3(c) of the M.C.D.C. Order defines a 'dealer' as follows:
 dealer means a person carrying on the Business, whether on his own account or as commission agent, or selling or storing for sale cloth, whether wholesale of re tail, and whether or not in conjunction, with any other business and includes a hawker."


Clause 4 reads: , "Save as hereinafter provided, no person shall carry on business as a dealer or hawker or store cloth for sale on or after 2nd May, 1944, except under and in accordance with the terms and conditions of a licence granted under this Order by the licensing authority.
 Note: Where a dealer has more than one shop or place of business, whether in the same town or village or in different towns or villages, he shall obtain a separate licence in respect of each shop or place of business."
 Clause 17 runs:
 "if any person contravenes any of the provisions of this Order, then, without prejudice to any other punishment to which he may be" liable, any Court trying the offence may order that any stocks together with the packages and coverings thereof. In respect of which the Court is satisfied that the offence has been committed, shall be forfeited to His Majesty."
 6. The two lower Courts relied on the decision of this Court in 1954-2 Mad LJ (Andh) 108 : (AIR 1954 Andh 51). The facts in that case were the plaintiff and defendants formed a partnership for running a rice ration shop business from 3-9-1944 and conducted that business on the basis of a ration shop licence issued in the name of the first defendant and the suit was filed by the plaintiff for a declaration that the firm had been dissolved on the 1st September 1945 and for settlement of accounts and other allied reliefs. The sole question which arose in the second appeal was whether the suit partnership was illegal. Subba Rao, C. J. (as he then was) obseived as follows: at p. 109 (of Mad LJ (Andh)); (at p. 52 or AIR):


"It is seen from the aforesaid provisions that the Ration Older was passed for maintaining supplies and services essential to the life of the community. It was intended to ensure an equitable distribution of rice to the members of the public at controlled rates, to achieve that object, it was necessary that the person, who buys and sells rice, should be under the control of the authorities concerned and subject to the regulations made to prevent abuse. The Order, therefore, enabled the authorities concerned to issue an authorisation to a retail dealer to buy and sell rice subject to the conditions laid down in the said Order. Under Section 13, the authorisation cannot be used by any person other than the person to whom it was issued. Under Section 16, such a person is prohibited from transferring a ration document to any other parson ..... It is, therefore, obvious that 'any contract involving the transfer of a ration document not only contravenes the express prohibition' contained in Section 13 of the Order 'but also relates to an act which is made an offence punishable' under the Defence of India Rules. Such a contract would be void under Section 23 of the Contract Act as the object of that contract involves something illegal or contrary to public policy."
 The learned Judge relied on the decision in Nalan Padmanabhan v. Badrinath Sarda, 21 Mad LJ 425 and the decision of the Full Bench in Velu Padayachi v. Slvasoariam Pillai, and observed as follows: at p. 111 (of Mad LJ (Andh)) : (at p. 53 of AIR):


"In my view, the principles laid down in the aforesaid decisions equally apply to the facts of the instant case. The partnership business of buying rice and selling the, same in the retail shop was carried on with the aid of a licence in favour of the 1st defendant. When the licence was issued to the 1st defendant, it was intended that he should and none else (should) use that for doing Business. Instead, the plaintiff and other partners, who had no ration card along with the 1st. defendant bought and sold rice. 'It certainly was a user of the ration card by persons other than the one to idiom it was issued in contravention of Section 13 of the Rationing Order'. It also involved the transfer of a ration document prohibited by Section 16 of the Rationing Order."
 The above decision is based on the following grounds:
 (1) That the licence issued to the 1st defendant was intended that he and no one else should use that for doing business.
 (2) When the partnership did the business, not only D. 1 (the licensee) but also the other partners including the plaintiff did the business though they had no ration card.
(3) So, it was the user or the ration card by persons other than those to whom it was issued and thus a contravention of Section 13 of the Madras Rationing Order.
 (4) The forming of the partnership involved transfer of a ration document prohibited by Section 16 of the Madras Rationing Order.
 (5) The forming of the partnership related to an act which was an offence punishable under the Defence of India Rules.
 (7) In (FB), Horwill, J. observed as follows: at pp. 320-321 (of Mad LJ) : (at pp. 446-447 of AIR):


"..... when a licence, 'which is a personal privilege to vend', is acquired by one partner. It is certainly his licence and not the licence of the partnership. Since it was granted to him on the express understanding that it was to be used by him and by him alone, its use by the partnership would involve a transfer in precisely the same way as it would if the partnership were entered into 'after the licence was issued. 'On the question of public policy it is difficult to see any difference between the object of a partnership entered into before the licence was granted and one entered into after it was granted'. In either case, the partnership would be entered into for the purpose of bringing about a result prohibited by law i.e., the vending of arrack by a person who had no licence to do so."
 (8) In 21 Mad LJ 425, the learned Judges observed thus: (at pp. 430-431):
 "But 'if one person carrying on a trade and possessing stock' and capital, 'admits another into partnership' with himself, making the stock and capital, the joint property of both, 'it is impossible to contend that there is not a transfer in such a case .....


We are not concerned in construing a statute like the Opium Act with the mere form of the transaction but with the substance of it."
 9. It has been held in In Re Manu Iyer, also that the licence issued to a person under Clause 4(1) of the M.C.D.C. Order was personal to the licences and would not enure for the benefit of his heirs after his death.
 10. Thus, it is clear that the licence (Ex. A-l) was a personal privilege granted to the plaintiff to deal in cloth and that if it was used by the partnership there was in substance and in effect, a transfer of the licence to the partners other than the plaintiff and dealing under the licence by the partnership would amount to those partners, in addition to the plaintiff, also dealing under that licence.
 11. Both the lower Courts proceeded on the basis that the decision in 1954-2 Mad LJ (Andh) 103 : (AIR 1954 Andh 51), which related to the Madras Rationing Order 1943, also applied to the present case. In the judgment of the trial Court, it is observed that a licence issued under the provisions of Cloth Dealers' control Order comes within the definition of a 'ration document' under Section 2 (9) of the Rationing Order and that, therefore, Sections 13 and 16 of the Madras Rationing Order directly applied. The learned Subordinate Judge, in his appeal judgment, has referred to the Madras Cloth (Dealers) Control Order 1944 in two places wrongly as Cloth Rationing Order. 'Ration document' is defined in Section 2 (9) of the Madras Rationing Order, 1943 as follows:


" 'ration document' includes a ration book, a ration card or any part of any ration book or ration card or any ration coupon or any declaration, authority, permit or other 'document issued' or made by or 'under' the provisions of this Order."
 The licence (Ex. A-1) clearly shows that it was issued under the M.C.D.C. Order, 1944 and was not issued under the Madras Rationing Order, 1943. It is not a 'ration document', as defined in Section 2(9) of the Madras Rationing Order, 1943, in spite of the fact that the definition mentions the word 'includes'.
 12. The learned District Munsif also mentions in his judgment as follows :
 "It is conceded that during the relevant period, the mill cloth was a rationed article and that no person can deal with mill cloth without first obtaining a licence."
 Shri N. Bapiraju, the learned counsel for the appellant, contends before us that mill cloth for which the licence (Ex. A-1) was issued was not a rationed article but he is not able to substantiate his contention by placing any material before us. Shri N.C.V. Ramanujachari for the respondent, also does not produce any material. In view of the fact that there was a concession made before the trial Court obviously by the party against whose interest that concession was made, we do not find sufficient reason to held that the above observation by the trial court is wrong or without adequate basis. But, even then, the licence (Ex. A-1) is not a ration 'document' as defined in Section 2(9) of the Madras Rationing Order, 1943,


13. Both sides have argued elaborately before us on the question as to whether the above decision in 1954-2 Mad LJ (Andh) 108 : (AIR 1954 Andh 51), is applicable to the present case purely on the basis of the M.C.D.C. Order.
 14. Sections 13 and 16 of the Madras Rationing Order, 1943 run as follows :
 "Section 13. A ration document shall not be used for obtaining any rationed article except by or on behalf of the person to whom such document was issued." "Section 16. No person shall transfer to any other parson a ration document issued to himself."
 It is beyond doubt or dispute that there is no clause in the M.C.D.C. Order laying down express prohibition of transfer of a licence like Ex. A-l, corresponding to Section 16 of the Madras Rationing Order. As seen above, the partnership conducting the business amounted to transfer of rights under the licence by the plaintiff to the defendant who was a partner but was not a licensee tinder Ex. A-l. The question is whether the absence of any such express prohibition by a clause in the M.C.D.C. Order makes a material difference.


15. Shri Bapi Raju contends that there is no clause in the M.C.D.C. Order corresponding to Section 13 of the Madras Rationing Order and that, therefore, the operation by me partnership of the licence which was issued in the name of the plaintiff was not illegal. It is true that though there is no clause in the M.C.D.C. order which is exactly in terms of Section 13 of the Madras Rationing Order, there is Clause 4 which we have already extracted earlier in this judgment. Shri Bapi Raju argues that operation of licence by the partnership was not in conflict with Clause 4 and that it can be reconciled with Clause 4 as being in conformity with it. He contends that the defendant as partner and also the plaintiff as partner carried business only in accordance with the terms and conditions of the licence (Ex. A-1). It is true that the business if done by the plaintiff alone would have been in accordance with the terms and condition of the licence (Ex. A-1). But that fact does not mean that it was done in conformity with Clause 4 when the defendant as partner, in effect, did the business.


Defendant did business as 'dealer'. Dealer as defined in Clause 3 (e) of the M.C.D.C. Order has to do Business under and in accordance with the terms of licence which means that he must do business under a licence granted to him as dealer. As already pointed out by us above and held by the various Madras decisions including the Full Bench in , the licence (Ex. A-1) is a personal privilege and gave lawful sanction to business by the Plaintiff alone as dealer and not the defendant as dealer. Shri Bapi Raju points out that the note in Clause 4 of the M.C.D.C. Order mentions that when a dealer has more than one shop, he should have a licence in respect of each shop. This does not mean that when a dealer had one shop and one licence, the business could be conducted in that shop under that licence by any dealer other than that licenced dealer even if the former be a partner of the licenced dealer. We find that this contention of Shri Bapi Raju is not tenable.


16. In Marudamuthu Pillai v. Rangasaml Moopan, ILR 24 Mad 401, A held a licence for sale of toddy while B held a licence for sale of arrack and A entered into an agreement of partnership with 8 in the business of vending arrack and toddy at a time when there was a rule in force under the Abkari Act prohibiting a person having a licence for the sale of toddy from being interested in the sale of arrack and prohibiting a person having a licence for the sale of arrack from being interested in the sale of toddy. A filed a suit against B for dissolution of partnership. The suit was held to be not maintainable and was dismissed. The learned Judges of the High Court held that the contract was void ab initio as being in contravention of the rule which was made not merely for the protection of the revenue but also in the interests of the public and that the contract vas also invalid on another ground as follows (at pp. 404-405) :-
 "Apart from this, we should hold that the contract was invalid also on the ground that the licence in each case was to be obtained by only one of the partners .....To hold that a person who has not got a licence could still be partner with one who has a licence and as such partner carry on the business with or without the other would enable the unlicensed partner to evade the liabilities intended by the law to be cast on persons carrying on abkari business."
 In the present case also, it is clear that the M.C.D.C. Order was passed not merely for the protection of reveres but also in the interests of the public. The ground mentioned in the above passage holds good independent of the rule under the Abkari Act and applies to the present case.


17. In ILR 35 Mad 582, which was under the Opium Act, the learned Judges of the Division Bench held that the contract of partnership was void and the suit vas not maintainable on two main grounds:
 (1) that the transfer without sanction of the collector was prohibited; and (2) that there was contravention of provisions of Clause 20 of the licence which prohibited the transfer of the right.
 In this case, the conditions of the licence do not include any express prohibition of transfer but the first term in the licence is that it was granted subject to the provisions of M.C.D.C. Order 1944 and the other conditions specified in it.
 18. In Ramanayudu v. Seetharamayya, AIR 1935 Mad 440 : 41 Mad LW 521 (FB) the highest bidder at an abkari auction of toddy shop entered into a partnership with another to work the abkari business of the shop without getting previous permission of the Collector for such partnership and the partnership ran the business though the licence was only in the sole name of the highest bidder. It was held that the suit for recovery of the advances made by him to the partnership business was not maintainable. The learned Judges relied on the decision in ILR 24 Mad 401 and other decisions and held that the partnership was illegal and that the suit was not maintainable.


19. In a Full Bench held that a partner in a partnership entered into for the purpose of vending arrack under a licence granted to only one of the partners could not sue for the balance due on settlement of accounts as the contract was void ab initio whether it was entered into before the licence was granted or afterwards. The learned Judges approved of the decisions in ILR 24 Mad 401, ILR 35 Mad 582, AIR 1935 Mad 440 : 41 Mad LW 521 (FB) and observed as follows at p. 324 (of Mad LJ) : (at pp. 449-450 of AIR):
 "If the licensee holds his licence for the partnership or by an act of volition shares his licence with his partner, then there is a transfer which offends Rule 27. If it be found that the licensee does not hold the licence for the partnership, because it is illegal for him to do so, or because for any other reason the non-licenced partner does not purport to sell, by himself or through his partner, under his partner's licence, then there is no transfer; but the non-licensed partner would then commit a breach of Section 15 of the Act. In either case, a punishable offence would be committed; and a partnership formed that would lead to a breach of these provisions would be illegal, either because an offence would necessarily be committed or because it would be against the general public policy underlying the enactment that only approved persons, specifically licensed, should be allowed to sell liquor."
 Section 15 of the Abkari Act which is substantially similar to Clause 4 of the M.C.D.C. Order ran as follows:
 "He liquor or intoxicating drug shall be sold without a licence from the Collector".


"He liquor or intoxicating drug shall be sold without a licence from the Collector".
 (20) In (S) the learned Judges of the Division Bench of the Calcutta High Court discussed the above decision in AIR 1935 Mad 440 (FB) In para 50 and observed as follows: at p. 341 "The Madras High Court applied R. 27 framed undo1 the Madras Abkari Act and strictly enforced the same. The strict provisions of R, 27 may be so interpreted, but we do not think that the rules of public policy which were attempted to be applied or introduced were properly applied in that case AIR 1935 Mad 440 (FB).....


Suffice it to say for the present that, in our view, the consideration of an object of agreement will not be deemed to be forbidden by law unless in the circumstances related above there is a specific provision forbidding transfer or sale of a right made under a license".
 On an interpretation of the facts of that case including the relevant provision of the Silk Control Order, which did not prohibit the formation of any partnership for the starting of a filature or for carrying on silk business and only required that the owners of a filature should get themselves registered, the learned Judges held that the arrangement under the partnership was not prohibited under the Silk Control Order and that there was no contravention of Section 23 of the Contract Act on the ground that the object of the partnership was opposed to public policy. The Full Bench decision of the Madras High Court in that a partnership's conducting a business under a licence which stood in the name of one of the partners is opposed to public policy for the purpose of Section 23 of the Contract Act is binding on this Court.


21. In the Calcutta case, it was observed that the first defendant in that case whose name was registered as owner of the filature under the Silk Control Order had been in sole charge of the management of the filature. Such a fact would not make any difference in the present case and the position would be the same in this case if plaintiff, in whose name the licence stood, had been doing the management in view of the decisions of the Madras High Court which we have referred to above and which we respectfully follow. But, all the same, as a matter of fact, the case of the plaintiff is that the defendant was in management of the partnership business and conducted the business. In effect, the Calcutta High Court held on the basis of the specific provisions of the Silk Control Order that the formation of a partnership was not prohibited by law and was not opposed to public policy.


22. In Bhushayya v. Chinnappa Reddy, it was held by a Division Bench of this Court consisting of Syed Qamar Hasan, J. and Jaganmohan Reddy J. that a partnership by persons who are licensed under the Central Excises and Salt Act (1 of 1944) with those who had no licences was not prohibited (by law). This was based on the provisions of Section 6 of that Act and certain rules framed under that Act. In particular, Rule 178(4) merely required that intimation should be given to the authority concerned within a month from the date of an unlicensed person becoming a partner with a licensed person. A penalty of fine vas provided for failure to make such intimation. It was held by the learned Judges in at in view of the fact that there was special provision that, notwithstanding the omission to give intimation as mentioned above, an unlicensed person who became a partner with a licensed person would still be responsible for the terms and conditions of the licence, it did not appear that the intention of the rule was to declare such partnership as illegal or invalid. They also observed as follows: at p. 553 (or Andh WR) : (at p. 41 of AIR):


"Apart from the fact that under the rule there is a clear distinction, cases under the Abkari, Opium and Forest Acts have no application in determining the validity of partnerships made in contravention of the provisions of the Central Excises and Salt Act, as the prohibition is for the protection or convenient collection of revenue (but not in furtherance of a public policy as in the Abkari and Opium Acts). Where, therefore, a statute merely imposes a penalty without declaring it to be illegal or void, the imposition of penalty by itself does not in our view have the effect of making any contract made in contravention of a specific provision of the statute -- illegal or void. It must further be seen whether 'he statute was designed as a whole to further a public policy".
 They relied on a passage in Anson's Law of Contract as follows:
 "The effect in such a case depends on the proper construction of the particular statute. But where the words of the statute leave room for doubt as to its intention, it is material to ask whether the object of the Act in imposing the penalty is merely to protect the revenue or whether its object or one of its objects-is to protect the general public or some class of the general public by requiring that the contract shall be accompanied by certain formalities or conditions, as, for example, registration in the case of a money-lender. In the latter case. It is probable that the act for the doing of which the penalty is imposed is impliedly prohibited by the statute and therefore illegal."
 This makes it clear that the act for the doing of which penalty was imposed can be impliedly prohibited and that, therefore, the prohibition need not necessarily be in express terms. In particular, in the present case, prohibition of formation of partnership or transfer of licence under the M.C.D.C. Order can be implied and inferred even though it is not mentioned in that Order in express terms.


23. The above decision was relied on by a later Division Bench of this Court in Venkatadri v. Govindaraju, 1960-2 Andh WR 151. The learned Judges held that it was indisputable that the Abkari Act and the Opium Act were designed in furtherance of a public policy and not merely for fiscal purposes and that, on the other hand, the Central Excises and Salt Act was designed with the avowed object of levy and collection of duties and that, therefore, the principle of the decision of the Full Bench in did not apply to the case of a holder of licence under the Central Excises and Salt Act (1 of 1944) entering into a partnership in regard to a business covered by the licence and contravening the provisions of the concerned rule by failing to report the fact of partnership within 30 days. They took into account the fact that, notwithstanding the omission to give intimation to the licensing authority within 30 days which was punishable with a penalty, the unlicensed partners were responsible under the rules for the terms and conditions of the license.
 24. Section 23 of the Contract Act runs as follows:
 "Section 23. The consideration or object of an agreement is lawful, unless


(i) it is forbidden by law or


(ii) is of such a nature that, if permitted, it would defeat the provisions of any law; or -
 (iii) is fraudulent;
 (iv) or involves or implies injury to the person or property of another;
 (v) or the Court regards it as (a) immoral, or (b) opposed to public policy."


In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. For purposes of convenience of reference, we have givne numbers (i) to (v) and letters (a), (b) to the various portions in the above section. In this case, we are concerned only with items (ii) and (v) (b). The question as to whether a contract of partnership is valid or not depends on whether it comes under category (ii) or (v) (b). A licence, such as is concerned in the present case namely, a licence issued to a person under the M.C.D.C. Older, is a personal privilege given to the licensee (See (FB)). The privilege granted under it cannot extend to any persons with whom the licensee chooses to form a partnership Vide . M.C.D.C. Order was designed not merely for the protection of public revenue but in furtherance of a public policy. This is clear from the nature of the provisions in We order, formation of a partnership in effect amounts to transfer of rights under the licence by the licensee mentioned in that licence to his partners. Section 21 Mad LJ 425. If transfer of rights or formation of partnership in the above manner were expressly prohibited by law (M.C.D.C. Order), then the dealing in the business by the partnership would amount to an offence punishable under Rule 81(4) of the Defence of India Rules and also to the penalty of confiscation of stocks etc., under Clause 17 of the M.C.D.C. Order which is also a punitive provision.


The mere fact that punishment is provided for formation of a partnership may not render the partnership illegal if there is no express provision of the Act concerned making it illegal provided that the object of the Act is merely for protection of the revenue. But if the abject of the Act is furtherance of a public policy, the formation of the partnership would become illegal under category (v) (b) as being opposed to public policy. me formation of the partnership can be illegal if it falls under category (ii) of Section 23, i.e., such partnership, if permitted, would defeat the provisions of the M.C.D.C. Order. If a partnership such as existed in the present case is allowed, it would enable a person who has not got a licence to evade the liabilities intended by the law to be cast on persons carrying on the business of dealing in cloth. So, it would come under category (n) of Section 23 it would also come under category (v) (o) of Section 23. The decision of the Full Bench in as well as the other decisions of the Madras High Court already referred to by us including ILR 24 Mad 401 are applicable to this case.


25. It is true that the M.C.D.C. Order does not contain an express prohibition of the formation of partnership or transfer of licence or an express provision that formation of partnership or transfer of licence is illegal. But prohibition of transfership and of transfer of licence and their being illegal need not necessarily be declared in express terms. They can be implied and they can be inferred from the provisions of the statute and the rules in (FB) It was held that (a) if the licensee held his licence for the partnership and shared his licence with the partner, then the transfer attended against Rule 27 and trial (o) if the licencee did not hold the licence for the partner ship, then the unlicensed partner committed a breach of Section 15 of the Act because of selling without a licence and that in either case, an offence would be committed and that, therefore formation of partnership was illegal because an offence would be committed or it would be against the general public policy underlying the enactment that only approved persons specifically licensed should be allowed to do business under the license.
In the present case also, it is clear that the public policy underlying the enactment especially as seen from Clause 4 of the M.C.D.C. Order is that only approved persons specifically licensed should be allowed to do the cloth business under the licence and the formation of partnership would be against that general public policy and would, if permitted, defeat the implied provisions of the M.C.D.C. Order especially Clause 4. So, me formation of partnership is illegal. The provisions of the M.C.D.C. Order show that by implication though not by express terms in the Order, the formation and working of partnership by a licensee with non-licensees was prohibited and amounted to a violation of the conditions of the licence (Ex. A-1).


26. In an unreported judgment of the supreme Court in Govinda Rao v. Nathmal, (unreported judgment of the Supreme Court in C.A No. 30 of 1960, D/- 11-4-1952 the question of maintainability of a suit for accounts of a dissolved firm came up for decision under the following circumstances. Plaintiff filed a suit for accounts of a dissolved firm which, according to him, had existed as a partnership between himself and the defendants by formation in October 1946 under which the firm was to trade in food-grains. The defendants challenged the partnership on the ground that it contravened the Central Provinces and Berar Food Grains Control Order (1945) and was, therefore, illegal. That plea of the defendants was accepted by the two lower courts and came up on appeal by the plaintiff to the Supreme Court. The two defendants held a licence in the name of their joint family firm in Rajnandgaon State under the law in force in that State for dealing in foodgrains there. That State was an Indian State outside British India. The plaintiff held a licence under the Central Provinces and Berar Food Grains Control Order, 1945, for dealing in food-grains as a wholesale dealer in the Nagpur District. In October 1946 the plaintiff entered into a partnership with the two defendants for dealing in food-grains. This partnership conducted two transactions of purchase in Central Provinces. It was the admitted case of the plaintiff that the partnership was formed for the specific purpose of exporting food-grains to places outside the Central Provinces and was formed because the two defendants, who were not registered dealers in the Central Provinces, could not get permits for export from the Central Provinces.
 27. The relevant provisions in the C.P. and Berar Food-Grains Control Order, 1945, were as follows:-


"Section 3(1). No person shall deal in food-grains as a wholesale dealer except under and in accordance with a licence issued by the Deputy Commissioner of the district." The phrase 'deal in food-grains' is defined as follow:
 "To engage in the business of purchase, sale or storage for sale of food-grains whether on one's own account or on account of or in partnership or in association with any other person or as a commission agent or arhatiya, and whether or not in conjunction with are other business; and the words 'dealer' and 'dealing' shall be construed accordingly."
 A 'wholesale dealer', under the Food Grains Control Order, was a dealer dealing in food-grains in quantities above a certain weight.
 28. Their Lordships of the Supreme Court observed as follows:
 "Without going into the pleas of the defendants, it is quite clear that the appellant (plaintiff) was making it easy for the respondents to trade in food-grains in Central Provinces and Berar without holding a licence, thus abetting an offence of the contravention of the Food Grains Control Order by the respondents. If not committing an offence himself. The definition of the phrase 'deal in food grains' which we have quoted above, clearly shows that every person who dealt in food-grains in a place where the Order applied, had to possess a licence. The word 'person' in Section 3(1) must include a group or association of persons like a firm of partners. A licence in the name of one of the partners was not enough. The partnership thus was an illegal one, because the object of the partnership was illegal. .....