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PETITIONER: RAMAGYA PRASAD GUPTA & ORS.

       Vs.

RESPONDENT: MURLI PRASAD & ORS.

DATE OF JUDGMENT11/04/1974

BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN KHANNA, HANS RAJ GOSWAMI, P.K.

CITATION:  1974 AIR 1320            1974 SCR  (3) 915  1974 SCC  (2) 266  CITATOR INFO :  R          1974 SC1892  (10)  D          1976 SC 688  (40)

ACT: Indian  Electricity Act--1910 read with the Indian  Contract Act--Whether  money advanced by partners in pursuance of  an agreement which subsequently becomes void is recoverable.

HEADNOTE: One  M obtained a licence for electrification of the  Chapra town.  Later the licence was assigned to J and thereafter to the  Chapra  Electric  Supply  Co.  Ltd;  which  went   into voluntary liquidation in 1944. thereafter, 5 persons entered into an oral agreement of partnership to buy the undertaking and their respective shares were : A 8 annas.  M 4 annas.  P had 2 annas and G & N had one anna each.  It was also agreed that  the licence will be obtained in the name of Mu  alone. Thereafter,  the  Electrical  undertaking was  sold  by  the official  liquidator on Sept. 15, 1944 to Mu.  Each  partner contributed in proportion, to their respective shares in the partnership  and  the  total purchase price was  paid  in  3 instalments.  Before the last instalment was paid, the  oral agreement entered into between the partners was incorporated into  a  partnership  deed executed on  July  10,  1945  and registered under the Indian Registration Act.  Thereafter, A advanced some money to buy some new plant and machinery  and when  Mu. and another sold one anna share each out of  their respective  shares.   Thus the share of A  increased  to  10 annas, while that of Resp.  I & P reduced to 3 annas and one anna respectively.  Thereafter, the partners contributed the amount  in  accordance with their respective  shares  and  a second deed was executed to this effect on Aug. 31, 1950. After  the  registration  of  the  second  partnership,  the Electrical Inspector, Government of Bihar addressed a letter to  Resp.   I in which he stated that  the  partnership  was illegal and void as it contravened the provisions of  Indian Electricity Act and that, therefore, the Government did  not recognise the partnership.  Thereafter. one of the  partners filed a suit for a declaration that the partnership had been dissolved  by  service  of notice on the  partners  and  for rendition  of  accounts.  During the pendency of  the  suit,

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however, the Government of Bihar acting under S. 4(1) of the Indian Electrictiy Act, 1910 revoked the licence to Resp.  I with the result that according to S. 5(1)(a) of the Act, all powers and liabilities of the licensees stood determined.  A receiver was appointed who took over the electrical  concern from   Resp.   I  and  R.  After  the  receiver  had   taken possession,  the Government decided to purchase  the  under- taking  and deposited a sum of 3 lakhs in the Court as  part of purchase money payable to the owners of the  undertaking. Resp., I thereafter, filed a suit for a declaration that he, being  the  sole  licensee was the exclusive  owner  of  the undertaking  and  as such, he was entitled  to  receive  the entire  price  paid or payable by the Government.   He  also averred  that  he alone paid the entire purchase  money  and others are only his employees. The  trial,  Court dismissed Resp.  1’s Title Suit  but  the High Court reversed the trial Curt’s judgment and decree  by granting  a  declaration that Resp.  I was entitled  to  the entire money deposited by the State; because the partnership was illegal and void.  Before this Court two questions arose for decision (1)  Whether  because of dismissal of C.A. No. 1711./67  and 1985/68  which  arose out of the Title Suit No.  68/54,  the present two appeals are barred on the ground of res-judicata and (2.) Whether Resp.  I was entitled to the entire  money. Allowing the appeals, HELD. (1) The doctrine of res-judicata applies where a  suit has  been  tried and finally decided on the merits,  if  the defeated party wishes in another suit 916 between the same parties relating to the, game properity, to re-agitate the game questions, he cannot be allowed to do so because  his cause of action has passed into a judgment  and the  matter has become. res-judicata.  The test is  "whether the judge has applied his mind to the decision of the  issue involved  in the two ,suits twice or whether there has  been in  reality  but one trial, one finding and  one  decision." [922 D-F] In  the  instant  case. whatever may have  been  the  common issues between the two suits, one issue which is not  common and makes the subejct-matter of both the suits different  is that whether the plaintiff in Title Suit No. 94 of 1956,  is solely  entitled to compensation from the State of Bihar  or whether they are entitled to recover their respective shares from  the  compensation amount.  This was not  the  subject- matter of Title Suit No. 68 of 1954.  Therefore, no question of res-judicata could arise in the circumstances of the  two cases. [921 E-F, 923 H-924 H] (2)  From  the  documentary and other oral evidence,  it  is clear that the first respondent did     not  contribute  the entire amount for the purchase of the undertaking and  under s.   65 of the Contract Act, when an agreement is discovered to be void, or even a contract heroines void, any person who has  received any advantage under  such     agreement     or contract  is bound to restore it or to make compensation  to the person from whom he received it. [929 A-C] Budhu  Lal v. Deccan Banking Company Ltd, A.I.R.  1955  Hyd. 69, referred to. Therefore,  whether the agreement was void ab initio or  was void or valid initially but became void or discovered to  be void subsequently, the appellants are entitled to share  the compensation money in proportion to their respective  shares as  specified  in the partnership deed of August  31,  1950, after  paying  the  outstanding  liabilities  of-the  Chapra Electric Supply Works. [930 C-E]

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JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal Nos.  1710  of 1967 and 1986 of 1968. From the Judgment and Decree/Order dated the 7th May, 65  of the  Patna High Court in Appeals from Original  Decree  N03. 160  and  161 of 1959 and in First Appeal No.  160  of  1959 respectively. A.   B.  N. Sinha, R. N. Sahay, B. Kumar and S.  N.  Prasad, for the Appellants (in CA 1710/67). P.   C. Bhartari and D. N. Misra, for the Respondents No.  9 & lo (in CA 1710/67). U.   P.  Singh  and  S. R. Tiwari,  for  Appellants  (in  CA 1986/78). S.   C.  Agarwala,  R.  K.  Garg  and  V.  J.  Francis,  for respondent No. 17   (in, CA 1986/68). M.   B..Lal, for Respondent No. 1 (in both the appeals). B.   P. Singh, for Respondent No. 2 (in both the appeals). The Judgment of the Court was delivered by JAGANMOHAN  REDDY,  J.-These  appeals  are  by   certificate against the judgment of the Patna High Court which  reversed the Judgment and decree of the Trial Court in Title Suit NO. 94  of 1956 filed by ’the first respondent-Murli Prasad.   A brief  history  of this case will be  necessary  for  under- standing  the  several  contentions urged  before  us.   One Mahendra  Prasad obtained a licence for  electrification  of the-Chhapra town 917 which.  was  granted  to  him  in  1932.   The  licence  was thereafter  assigned  to Janardhan Prasad  varma  after  the death  of his father-Mahendra Prasad in 1936.  This  licence was  subsequently  assigned to the Cnhapra  Electric  Supply Co., Ltd. which, however, went into voluntary liquidation in 1944.     It was decided to sell the electricity undertaking by public auction   and assign the licence to the purchaser, with the  previous sanction of     the    Government.     In pursuance  of this decision, the liquidator invited  bidders for purchasing the electricity concern.  But before the date of public auction, it is alleged that five persons,. namely, Ayodhya  Prasad, Murli Prasad Respondent No.  1,  Parasnath. Prasad,  Gurbharan Shah and Nandkishore Prasad entered  into an oral agreement of partnership to purchase the  electrical undertaking  in  the  name of Murli  Prasad,  the  share  of Ayodhya was 8 annas, that of Murli Prasad 4 annas, Parasnath Prasad had 2 annas and Gurbharan Shah and Nandkishore Prasad bad one anna each.  It was also agreed that the licence will be  obtained in the name of Murli Prasad alone, though  each partner  had to contribute to the total. purchase  money  in proportion  of their respective shares in  the  partnership. Thereafter  the  electrical  undertaking  was  sold  by  the official liquidator on September 15,1944 to Murli Prasad  as his was the highest bid of Rs. 4,10,000/-.  Thereafter  each of  the  partners  including  Murli  Prasad  contributed  in proportion to their respective shares in the partnership  to make  up the total sum of Rs. 4,10,000/-.  Payments  to  the official liquidator were made in three instalments.  It also appears  that before the last instalment of  Rs.  2,50,000/- was  paid on July 13, 1945, the oral agreement entered  into between  the  partners was incorporated into  a  partnership deed  executed  on July 10, 1945 and  registered  under  the Indian  Registration  Act:  (Exhibit  ’G’).   Each  of   the partners  had  paid the following sums  in  accordance  with their  respective  shares  and in this manner  all  of  them

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contributed Rs.’ 4,10,000/- towards the purchase money  paid to  the  liquidator: Ajodhya Prasad  Gupta  Rs.  2,05,000/-; Murli Prasad Rs. 1,02,500/-; Parasnath Prasad  Rs. 51,250/-; Gurbharan  Shah  Rs.  25,625/- and  Nandkishore  Prasad  Rs. 25,625/-.   Nandkishore  Prasad, however, retired  from  the partnership with the consent of all the partners and his one anna  share  was  taken over by  Gurbharan  Shah.   It  also appears  that  in 1950 a further sum of Rs.  1,50,000/-  was urgently required for taking delivery of some new plant  and machinery which had arrived at the Chhapra Railway  Station. Murli Prasad and Parasnath Prasad expressed ’their inability to  contribute  the sum of Rs. 1,50,0001- in  proportion  to their shares, so this amount was also paid by Ajodhya Prasad Gupta  to  whom Murli Prasad and Parasnath Prasad  sold  one anna  share each out of their respective shares.  Thus,  the share of Ayodhya Prasad increased to 10 annas while that  of Murli Prasad and Parasnath Prasad reduced to 3 annas and one anna respectively.  Thereafter the partners contributed  the amount in accordance with     their respective shares.  This re-allocation of shares became’ the     occasion         for execution of a second partnership deed on August 31,   1950- which was also registered under the Indian Registration  Act : Ext. 9. The partnership Act on May 13, 1953, Ext.  ’C’.  I ’One other fact must also be stated at this stage. and that 918 is,  Ajodhya,  Prasad and Murli Prasad  being,.   Kartas  of their  respective  joint,  familities,  had.  entered   into partnership  in that capacity.  The 10 annas share  held  by Ajodhya Prasad and 3 annas share hold by Murli  Prasad  were divided   among  the  members  of  their  respective   joint families.   The share, of Murli Prasad was  divided  between himself, Dharindhar Prasad each having one anna share, while the  sons  of Murli Prasad and  Dharindhar  Prasad,  namely, Chandreshwar  Prasad Gupta.and Kamleshwar Prasad  Gupta  and each  6 pies share.  Similarily., Ajodhya Prasad’s  and  his brother Ram Sharan Shah got 3 :annas 9 pies each while  the, two  sons  of Ram Sharan Shah, Brahmadev  Prasad  Gupta  and Ramagya Prasad Gupta and respectively 1 anna 3 pies.   There was  no change in the shares of the two  remaining  partners Parasnath  Prasad and Gurbharan Shah who held one  anna  and two annas share respectively. it appears that some time after this revised partnership was registered,  the Electrical Inspector, Government of  Bihar, addressed  a letter to Murli Prasad in which he stated  that the partnership was illegal. and void as it contravened  the provisions   of  the  Indian  Electricity  Act   and   that, therefore, the Government did not recognise the partnership. The  Government  ultimately cancelled the  licence.   It  is alleged  that all this was due to the manipulation of  Murli Prasad who, taking advantage of the letter of the Electrical Inspector,  tried to take forcible possession and wanted  to dispossess   the   managing  partner   of   the   electrical undertaking.  This attempt gave rise to proceedings under s. 144 of the Code of Criminal Procedure, which, however,  were decided on April 14, 1954, in favour of Ramagya Prasad Gupta and the other partners.  Thereafter it is alleged that Murli Prasad  got  Parasnath Prasad a partner  and  son-in-law  of Murli  Prasad’s brother to institute Title Suit No. 68 of  1 954, on May 28, 1954.  This suit was for a declaration  that the  partnership had been dissolved by service of notice  on the partners and for rendition of accounts by Ramagya Prasad Gupta  principally and by other partners.  During  the  pen- dency  of  the suit, as stated earlier,  the  Government  of Bihar  acting under s. 4(1) of the Indian  Electricity  Act, 1910-hereinafter  referred  to  as  ’the  Act’-revoked   the

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licence of Murli Prasad with the result that according to s. 5(1)(a)  of  the  Act  all powers  and  liabilities  of  the licensee  stood determined.  Parasnath Prasad the  plaintiff in  that  suit  prayed for  appointment  of  the  Additional District  Magistrate,  Chhapra,  as  receiver.   The   Court granted his prayer and the Receiver in due course took  over the electrical concern from Murli Prasad and Ramagya Prasad. After  the  Receiver had taken  possession,  the  Government decided to purchase the undertaking on October 20, 1955  and deposited  on  the same day a sum of Rs. 3,00,000/-  in  the Court as part of the purchase money payable to the owners of the undertaking.  Murli Prasad thereafter filed a Title Suit No.  94 of 1956 on November 5, 1956, for a declaration  that he  being the sole licensee, was the exclusive owner of  the undertaking,  and  as such be was the only person  who  ’Was entitled to receive the’ entire price paid or payable by the 919 Government in respect of the assets of the Chhapra Electric. Supply Works.  In this suit Murli Prasad had averred that it was  he and he alone who: had,paid the entire auction  money for  the  purchase of the undertaking on July 13,  1945  and thereafter  he  became the sole: licensee in charge  of  the undertaking  and  that  Ramagya  Prasad  Gupta  was  a  mere employee  and servant under him.  The partnership  was  also characterised as illegal and void.  Both the Title Suits No. 68/54 filed by Parasnath Prasad and No. 94/56 filed by Murli Prasad  were  consolidated.  It may also be  mentioned  that Nandkishore Prasad who was the original partner and who  had retired from the partnership and whose share had been  taken over  by  Gurbharan  Shah also filed a suit  No.  113/57  on September  21,  1957 for a declaration that he was  still  a partner and has 1 anna share.  This suit was transferred  to the Court where the other two title suits were being  tried. All  the three suits were thereafter consolidated and  tried together.   They were also disposed of by a common  judgment dated  February  10,  1959  passed  by  the  5th  Additional Subordinate Judge, Chhapra. The  Trial Court decreed Parasnath Prasad’s Title  Suit  No. 68/54 and dismissed Murli Prasad’s Title Suit No. 94/56  and Nandkishore  Prasad’s Title Suit No. 113/57.   Murli  Prasad filed  First  Appeal  No. 160/59 against  the  judgment  and decree  of the Trial Court in his Title Suit No.  94/96  and First  Appeal No. 161/59 against the judgment and decree  of the Trial Court passed in Title Suit No. 68/54.  Nandkishore Prasad  filed a First Appeal No. 154 /59 against the  decree in  his Title Suit No. 113/57 but later he withdraw  it  and accordingly  it  was  dismissed  for  non-prosecution.   The remaining  two  appeals  filed by Murli  Prasad  were  heard together and were disposed of by a common judgment by  which the  High  Court reversed the Trial.  Court’s  judgment  and decree in Title Suit No. 94/56 by ,ranting a declaration  to Murli Prasad as prayed for that he alone was entitled to the entire  money deposited or to be deposited by the  State  of Bihar as price for the assets purchased by them.  This deci- sion was based on the view that the partnership  contravened the  provisions of the Act and was accordingly  illegal  and void.   Against  this decision of the  High  Court,  Ramagya Prasad Gupta one of the respondents in the two First Appeals before  the  High  Court filed two appeals  in  this  Court, namely  Civil  Appeal No. 1710/67 against the  judgment  and decree  of the High Court passed in First Appeal No.  160/59 which arose out of Title Suit No. 94/56 and Civil Appeal No. 1711/67  against  the  judgment and  decree  passed  by  the High  .Court in First Appeal No. 161/59 which arose  out  of Title Suit No. 68/54.  Brahmadeo Prasad, another partner who

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was a defendant in both the Title Suits Nos. 68/54 and 94/56 and one of the respondents in the two appeals, namely, First Appeal  Nos.  160-161/59 in the High  Court,  preferred  _an appeal,  namely,  Civil  Appeal No.  1986/  68  against  the judgment  of the High Court in First Appeal No. 1601  59  in respect of Title Suit No. 94/56 and Civil Appeal No. 1985/69 passed  in Civil Appeal No. 161/59 in respect of Title  Suit No. 68/54.  It may here be stated that in the Title Suit No. 68/54   filed  by  Parasnath  Prasad  for   dissolution   of partnership and rendition of accounts, 920 Kuldip.  Narain, Jagdish.  Narain and Kedar Nath Sah applied for,  and  were  added as defendants 12, 13 and  14  on  the ground that they as members of the joint family of Parasnath Prasad, should be parties to the suit.  According ,     they were also parties in the.  High Court appeals as well as in     th e Supreme  Court appeals Nos. 1711/67 and 1985/68 arising  out of   Title Suit No. 68/54.  It may further be mentioned that these interveners were not parties either in the Title  Suit No.  94/56 or in the First Appeal arising therefrom,  or  in the  appeal  before this Court, namely,  Civil  Appeals  No. 1710/67  and No. 1986/ 68 which are the two  appeals  before us.  Before those four appeals came up for, hearing, Jagdish Narain one of the interveners/defendants, namely,  defendant No.  13  and  who was a respondent  in  Civil  Appeals  Nos. 1711/67  and 1985/68 died.  His legal  representatives  were not  brought  on record and consequently these  two  appeals were  said to have abated as a whole and were  dismissed  on that account. At the very threshold it was sought to be contended that the appeals  only  abated  as against  Jagdish  Narain  for  not bringing  his legal representatives on record but not  as  a whole.   This  question  was considered by  this  Court.  in Ramagya Prasad Gupta v. Murli Prasad(1) where by a majority, Vaidialingam  &  Palekar, JJ., Mathew, J.  dissenting,  held that  the  appeal could not be proceeded with and  must.  be dismissed.  We are not concerned with the reasoning  for-the dismissal, except to say that the question whether these two appeals  would also abate seems to have been  considered  by this Court, because they observed at p. 68               "We  are not concerned with those two  appeals               at  this stage because Jagdigh Narain had  not               been  made a party to the Original Suit  filed               by Murli Prasad nor had he applied to be  made               a party.  Consequently Jagdish Narain does not               and  did  not figure in the appeals  from  the               decree passed in Suit No. 94/56." At  the hearing, a preliminary objection has been raised  by the learned Advocate, for the respondents that having regard to the abatement and dismissal of Civil Appeals Nos. 1711 of 1967  and  1985 of 1968 which arose out of  Title  Suit  No. 68/54, the present two appeals are barred under s. 11 of the Code of Civil Procedure and/or on-the general principles  of res judicata and should be dismissed.  It is contended  that the existence of a valid partnership was a. ground of attack in  Title Suit No. 68/54 and the ground of defence in  Title Suit No 94/56 and, therefore, that question was directly and substantially  in issue in both suits; (2) that the  parties in the two suits were also the same; at any rate the parties in  the present suit No. 94/56 who will be affected are  the same.   The learned Advocate for the  respondents  therefore contends that the trial of the suit being by the same court, the  two  other  conditions  necessary  for  a  bar  of  res judicate,  namely, the subject matter of the two  suits  and

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the (1)  (1971) 1 S.C.R. 63. 921 parties being the same, are fully satisfied.  The appellants Advocate, however controverts these contentions and  submits that not only is the subject-matter in dispute in Title Suit No. 68 of 54 different front the subject-matter of title  in Suit  No. 94 of 56, but the parties in Title Suit No. 68  of 54  are not the same as. those in Title Suit-No. 94 of  56., inasmuch as defendants Nos. 12, 13 and 14 who we’re  patties in Title Suit No. 68 of 1954 were not patties in Title  Suit No.  94 of 1956.  It is contended that in the  former  suit, which  was  instituted  during  the,  subsistence  of   both electricity licence and electrical undertaking, the subject- matter Was limited to a consideration of : (1) Existence  of a legal and valid partnership; and (2) Legality and validity of the notice of dissolution of partnership alleged to, have been  served  prior to the suit; and (3)  the  liability  of Ramagya  Prasad Gupta or other  partners to reader  accounts to the plaintiff.  In other Words, it Was a simple suit  for rendition  of accounts, for dissolution and for such sum  of money  as, might be due to the plaintiff in that suit.   The suit out of. which these two appeals arise having been filed a  year and a half there after was-. not concerned with  any of  the question because by that time the subject-matter  of the  partnership having disappeared by the  cancellation  of the  licence  of  Murli Prasad and by the  purchase  of  the undertaking by the Government under s. 7(a) of the Act,  the only  question was whether Murli Prasad is entitled  to  the entire  money  deposited  in  Court  and  to  be   deposited thereafter by the Government or whether the persons who were erstwhile partners and who had contributed the capital could have a claim to that money in accordance with their  shares. As  the subject-matter of the two suits was different it  is contended  that the appeals are neither barred by s. 11  nor by any other principle on Res Judicata. At  the  hearing  a great many authorities  were  cited  and certain broad’ propositions were sought to be canvassed,  as for  instance, the principle that when there are  two  suits which have been tried together and disposed of’ by a  common judgment  and two appeals are taken therefrom, the  judgment appeared  against ceases to be res judicata even if  one  of the  appeals  is dismissed on the ground  of  limitation  or otherwise because the. very judgment, which is sought to  be pleaded  in  bar, is still subjudice.. In  support  of  this proposition,  the view expressed by the Lahore  High,  Court Full Bench in Lakshmi v. Bhuli(1) has been cited and it  was submitted  that  this  view was approved by  this  Court  in Narhari  v.  Sankar(2)  which  it  is  submitted,  has  been followed in various decisions of the different High  Courts. As  against  this  view,  it is  claimed’  that  this  Court subsequently in Sheodan Singh v. Mst.  Ddryao Kaur(3) took a different  ’view, but according to the learned Advocate  for the  appellants, this case did not consider the  correctness either of’ Narhari’s (supra) decision or of the Lahore  Full Bench  case in Lakshmi v. Bhuti (supra).  In a case where  a suit or an appeal is said’ (1) I.L.R.  8 Lahore 384. (2)[1950] S.C. R. 754. (3) [1966]3S:C:R. 100.  922 to  be  barred  by res judicata  the  question  would  arise whether that bar is by virtue of s. 11 of the Code of  Civil Procedure, or dehors that section by the general  principles of  res  judicata, and if s. 11 is  applicable,  whether  it

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applies  to suits only and not to appeals, and if  to  suits only,  whether the general principles of res judicata  apply to appeals.  Where two suits having common issues are either by  consent  of the parties or by order of the  Court  tried together the evidence licing written in one record and  both suits  disposed of by a single judgment, the question  would arise  as  to  whether  there have  been  two  distinct  and independent  trials.   Tek  Chand  J.,  who  delivered   the majority  judgment  of  the Full  Bench  in  Lakshmi’s  case (supra) gave the answer at p. 400 thus :               "There  has been in substance as well in  form               but one trial and. one verdict, and I  venture               to think, it will be a travesty of justice  to               stifle the hearing of the appeal against  such               ,a  judgment on the ground that  the  findings               contained in it operate. as res judicata.   In               such  a case there can be no question  of  the               successful  being "vexed twice" over the  same               matter, nor does the hearing of the appeal  in               any  way militate against any rule  of  public               policy,  which requires that there must be  an               end of litigation.  There is not only  nothing               here to attract the principles underlying  the               rule of res judicata, but, on the other  hand,               it seems to me, that the acceptance of such  a               plea in such circumstances would strike at the               very  root  of  the basic  conception  of  the               doctrine which requires that a party must have               at  least  on.-.  fair  trial  of  the   issue               resulting  in  a  decision  by  the  Court  of               ultimate appeal as allowed by the law for  the               time being in forces." The  test  suggested  by the learned Judge  at  p.  401  was "whether  the judge has applied his mind to the decision  of the  issue involved in the two suits twice or whether  there has  been  in  reality but one trial, one  finding  and  one decision".  According to him, the determining factor is :not the decree but the decision in the matter in controversy. It  is  clear that where a suit has been tried  and  finally decided  on  the  merits, if the defeated  party  wishes  in another  suit between the same parties relating to the  same property  to have the same questions re-agitated, he  cannot be allowed to do so, because his cause of action has  passed into  a  judgment, and the matter has become  res  judicata. Even  where  two  appeals  have been  taken  from  the  same judgment  by two different parties to which all  others  are parties  either as appellants or respondents and one of  the appeals  is  dismissed  either on merits or  for  any  other reasons, it has been held by some of the High Courts, but we express  no opinion thereon, that the other appeal has  also to  be dismissed, because it is barred by the principles  of res  judicata  as otherwise there will be conflict  in.  the decrees.  In the Lahore decision there were two cross  suits about  the same subject-matter filed simultaneously  between the  same parties and two decrees were prepared.  An  appeal being  filed in respect of one decree and not in respect  of the  other, the question was whether the non-filing  of  the appeal  against that decree creates an estoppel against  the hearing of the other appeal.  In Narhari’s case (supra) what this  Court held was, where there has been on.-. trial,  one finding and one 923 decision,  there  need not be two appeals  even  though  two decrees  may  have been drawn up and consequently  the  fact that  one  of the appeals was time barred does not  bar  the

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other  appeal on the ground of res judicata.  In this  case, these questions need not be considered.  Nor is it  relevant to  consider  whether  there is  any  conflict  between  the decision in this case and Sheodan Singh’s case (supra).   In Sheodan  Singh’s case two suits were field in the  Court  of the  Civil Judge, one for a declaration of the title to  the suit   property  and  the  second  for  other  reliefs   and consequently  two other suits were filed by the  respondents in  the Munsif’s court against the appellant claiming  joint ownership to the suit property and other reliefs.  The  four suits  were tried together by the Civil Judge.  Some of  the issues  were common to all the suits and one of the  commons issues  relating  to the title of the parties was  found  in favour  of  the respondent.  The Civil Judge  dismissed  the appellant’s  title suit, decreed his other suit partly,  and decreed  the  two suits of the  respondent.   The  appellant filed  appeals  against the decree in each suit.   The  High Court   dismissed  the  two  appeals  arising  out  of   the respondent’s  suits, one as time barred, and the  other  for failure to apply for translation and printing of the record. As  the  title of the respondent to the  suit  property  had become  final on account of such dismissal,  the  respondent prayed  for the dismissal of the other two appeals also,  as the  main question involved therein was the same.  The  High Court  agreed that the appeals were barred by  res  judicate and  dismissed them.  Against these order of dismissal,  the appellant filed appeals to this Court and contended that-(1) title to the property was not directly and substantially it% issue in the respondent’s suits (2)     the  Munsif’s  Court could not try the title suit filed by the appellant;(3)  it could   not  be  said  that  appeals  arising  out  of   the respondent’s suits were former suits as such the bar of  res judicata will be inapplicable; and (4) the two appeals which were  dismissed-one  on the ground of  limitations  and  the other  on the ground of not printing the records, could  not be  said to be heard and finally decided.  This  Court  held that  the High Court was right in dismissing the appeals  as being barred by res indicate inasmuch as the issue as to the title  was raised in respondent’s suits and it was  directly and substantially in issue in those suits also and did arise out  of the pleadings of the parties, and further  the  High Court’s  decision  in  the  two  appeals  arising  from  the respondent’s   appeals   were   undoubtedly   earlier   and, therefore,  the  condition  that there should  have  been  a decision in a former suit to give rise to res judicate in  a subsequent suit was satisfied in that case.  The decision in Narhari’s  case (supra) was distinguished by this  Court  in that  case so that it could not be said that  that  decision was  in any way in conflict with the decision  in  Narhari’s case  (supra).  In appeals arising out of a subsequent  suit and  an earlier suit where there were common issues,  common subject-matter and common trial and the appeals arising  out of  the  subsequent suit were dismissed,  a  question  would arise as to whether the appeals from the earlier suit  which were pending arc barred by res judicata A question may  also arise  where the subject-matter is the same and  the  issues are  common  in the two suits but some of  the  parties  are different in one suit, whether the bar of res judicata would operate against the parties who are common.  All 924 these     aspects need not be considered in theseappeals because, in our view,    the  subject-matter of  Title  Suit No.68  of 1954 and that of Title Suit No. 94 of  1956  are entirely direct.  Even if the issues that are common in  the two suits, and it has been admitted by the learned .Advocate

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for  the appellants that some of the issues might be  common to  both the suits, issues Nos. 4, 9, 12, 13 and 14  at  any rate survive, and consequently the bar of res judicata would not  apply.  The issues ,which are said to be surviving  are as follows               "4.  Whether the plaintiff of T.S.  94/56  the               sole  licensee of the Chapra  Electric  Supply               Works before it was taken over by the State of               Bihar?               9.    Is plaintiff of T.S. 94/56 only entitled               to compensation from the State of Bihar ?               12.   Is  the suit 94/56 barred under  section               42 of Specific Relief Act, estoppel and waiver               ?               13.   Is the amount of court fee filed in T.S.               94/56 sufficient ?               14. To what relief or raliefs plaintiff of the               two suits entitled ? Ignoring  issues 13 & 14 it will be seen that issues 4, 9  & 12  are  confined  only  to Suit No. 94  of  1956  in  which respondent No. 1 is seeking to have himself declared as  the sole  licensee  and  entitled  to  the  ,entire  amount   of compensation  on  the  ground  that  be  and  he  alone  has contributed.  to  the capital; that the defendants  in  that suit  were not his partners but servants and such a suit  is not  barred  under s. 42 of the Specific Relief Act  on  the ground  of  estoppel & waiver be.cause of  his  conduct  and admissions.   As  we have seen, Title Suit No.  68  of  1954 postulates the existence of a partnership in which the first respondent is a partner, and for dissolution of  partnership and  rendition  of  accounts.  Whatever may  have  been  the common issues between the two suits, one issue which is  not common  and  makes  the subject-matter  of  both  the  suits different is that whether the plaintiff in Title Suit No. 94 of 1956, that is the first respondent in these ap.peals,  is solely  entitled  to compensation from the State  of  Bihar. This  issue is not necessarily confined to the existence  or validity  of  ,the partnership but as to whether  the  other parties to the suit have ,contributed to the capital of  the firm  or  paid  Murli  Prasad any  amounts  which  they  are entitled  to  recover from out of the  compensation  amount. This  was  not the subject-matter of Title Suit  No.  68  of 1954.   Even as the learned Advocate contends, there  is  no longer any question of partnership being dissolved once  the subject-matter  has  disappeared by the  revocation  of  the licence and after the entire assets of the partnership  were taken  over by the Government.  Even if the partnership  was illegal and void as contended by the respondent in the other title  suit, the same question. namely, whether  the  plain- ,tiff/first respondent alone would be entitled to the entire compensation, was not the subject-matter of, the Title  Suit No.  68 of 1954. .If so, no question of res  judicata  would arise.  The preliminary objection is accordingly overruled. On  the  merits the appellants’ case is  unassailable.   The case  of the first respondent that be paid the entire  money for  the  purchase  of the undertaking is, in  our  view,  a dishonest plea.  There is ample 925 evidence  in the case to establish that though Murli  Prasad was  the  highest  bidder  at  the  auction  at  which   the undertaking  was sold to him and the licence was granted  to him, there was an oral agreement which preceded the  bidding at  the auction whereunder five persons as  stated  already, including  the first respondent, constituted a  partnership. They  also  contributed the capital in proportion  in  their

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shares.  Though at first denied it was subsequently admitted by  the first respondent as we shall presently  see.   After the bidding of Murli Prasad was accepted as already  stated, the  partners  contributed  their shares  and  there  was  a registered  partnership deed.  Another partnership deed  was subsequently  executed  and  registered after  there  was  a reshuffling  in the partners as well as in their  respective shares.  The definite case of the first respondent asset but in  para  5  of the plaint is that he had  paid  the  entire amount  of  sale money by July 13, 1945 and  the  liquidator granted  a  receipt to the plaintiff for the  auction  money paid to him.  In para 8 of the plaint (Suit No. 94 of  1956) he says that defendants who had a coveting eye persuaded him illegally  to  enter into a partnership with  them  and  the plaintiff  being misled by them and under a  misapprehension entered  into a partnership with the defendants on July  10, 1945  and the same was renewed on August 31, 1950.   It  is, therefore,  clear  that he does not deny  the  execution  of these  partnership  deeds  and  yet  claims  that  he  alone contributed the amounts for the purchase of the undertaking. If he contributed the entire amount and the, other  partners did  not contribute any amounts, where was the  question  of their  persuading him to enter into a partnership.   On  the very  face of it, the pleadings belie the case of the  first respondent.    The  documentary  and  oral  evidence   amply supports  the conclusion that the first respondent  has  put forward a false claim and has not hesitated to suppress  the truth  which,  notwithstanding  his efforts,  could  not  be suppressed.   The first respondent passed a receipt on  July 13,  1945,  on  the  date  when  the  partnership  deed  was registered, in favour of Ajodhya Prasad who, as we have seen had a 8 annas share in the partnership in terms of the  oral agreement   which  was  incorporated  in   the   partnership agreement  of July 13, 1945.  The half share of the  capital of  Rs.  4,10,000 which Ajodhya Prasad had to  pay  was  Rs. 2,05,000.   This is exactly the amount that he paid  to  the first  respondent, who passed a receipt in his favour,  Ext. F-1.   In  the  receipt  Murli  Prasad  says  that  be   had previously received Rs. 1,000 out of Rs. 2,015,000 being the proportionate  8 annas share out of Rs. 4,10,000  from  Babu Ajodhya Prasad and the remaining amount of Rs. 2,04,030  was being  paid  by a cheque No. 34463 drawn  upon  the  Central Bank,,  dated July 13, 1945 from the said Babu Saheb.   This amount was debited to the Bank account of Ajodhya Prasad and credited  to  the Bank account of Murli Prasad,  Exhibit  M- Ledger  Account  of M/s Ajodhya Prasad Gupta &  Co.  in  the Central  Bank,  Chhapra,  shows that on July  14,  1945  Rs. 2,04,000  was debited to him on account of cheque No.  34463 drawn  in  favour of Babu Murli Prasad the number  of  which tallies with the number mentioned in the receipt Ext.   F-1. Similarly,  Ext..M-1, Ledger Account of Murli Prasad in  the Central Bank, Chhapra, shows that on July 14, 1945 a sum 926 of  Rs.  2,04,000 was paid into the account  by  cheque  and credited  to  his  account.  In his  evidence  Murli  Prasad denies  in examination-in chief that there was  a  completed agreement  before the auction sale between  Ajodhya  Prasad, Parasnath, Nandkishore Prasad and himself-each  representing their  respective families to enter into a  partnership  and that  he had not purchased at the auction on behalf  of  the partners or on behalf of any other person, but had purchased it  at the auction for himself alone.  He also  denies  that the  licence was obtained in his name with their consent  or the  transfer of the licence in his favour was  secured  for their benefit.  He also denies that Ajodhya Prasad paid  Rs.

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1,000   for  bidding  and  denies  that  Parasnath   frasad, Nandkishore  Prasad and Gurcharan Shah contributed  any  sum towards  the auction purchase.  He further says that  it  is not  a  fact  that  later on Ajodhya  Prasad  paid  him  Rs. 2,04,000.   His  case  is  that  he  was  fraudulently   and illegally induced by the rest of the parties to enter into a partnership  on July 10, 1945 and August 31, 1950 which  are both invalid and illegal.  In cross-examination, he,  admits that  he did not have Rs. 2,00,000 with him at the time  but was sure that he, could arrange for the purchase money.  He, however,  states that only 4 or 5 months after the,  auction sale  he  had an idea to enter into a partnership  by  which time  he  had  already deposited Rs.  2,05,000  towards  the purchase,  money  which he did from his personal  fund.   He wants  us  to believe that he signed  the  partnership  deed without reading nor did any one read and explain to him.  He signed it because of his faith in Ajodhya Prasad.  In cross- examination  he admits that the intending partners had  come to  him and expressed their intention of having a  share  in the concern.  Ajodhya Prasad wanted 8 annas share, Parasnath Prasad  two annas, Gurbharan Shah and Nandkishore  Prasad  1 anna  share  each and that he (Murli Prasad)  expressed  his desire  to have 4 annas share.  He also admits that it  %,as agreed  that  each ’would contribute in  proportion  to  his respective share.  He further admits that though he did  not read  the partnership deed at that time he had got  it  read subsequently by Ganga Prasad, Pleader, and he found that the deed  embodied all the terms they had previously agreed  to. As for the second partnership deed, he also admits that  his share   was  reduced  to  three  annas  from   four   annas. Similarly,  the share of Parasnath’s family was  reduced  to one anna from two annas and that the share of the family  of Ajodhya Prasad increased from 8 annas to 10 annas.  What  is curious is, be says, that be knew the partnership deed to be illegal  but  entered into it because he got  the  assurance that  nothing would happen.  He also admits that  after  the account was audited, a balance sheet was prepared and a copy of  such  balance  sheet  used to be sent  to  each  of  the partners  and  the State Government,  another  factor  which shows  that  the  first respondent was fully  aware  of  the partnership and the shares of each of the partners and  that there was nothing secret or sinister about the agreement  or partnership.  When the partnership decided to have some  new machinery, it required Rs. 1,50,000 to take delivery of that machinery.  The proceedings of the meeting of the  partners, Ext.   E-1  dated  August 28, 1950 clearly  show  that  this amount  was to be Jointly collected from all  the  partners. But since some of them were not able to get the money,  Babu Parasnath proposed to sell his one annas share and 927 retain  his  one  anna  only  and  Murli,  Prasad,  that  is respondent  No. 1 also proposed to dispose of his  one  anna share,  out of 4 annas share.  These two annas were  offered to any of the partners who was willing and take in’  Ajodhya Prasad was agreeable to purchase these shares and the shares were  re-constituted  and the amount that each  one  had  to contribute  according to his share has been set out in  that document.   The  amount  of Rs. 1,5O,OOO  has  been  divided exactly according to the shares that each of the family  has to   pay.   These  proceedings,  Ext.   R-1  was  shown   to respondent No. 1 and while he admits his signature  thereon, he  denies that he consented to these proceedings.   Yet  he contradicts himself by saying that there was reshuffling  of the  shares and because money was required for the  purchase of new machinery, since there was no money with him, he gave

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one  anna  out  of his share; and that since  the  date  the concern  came  to his hand till the date it  passed  to  the Government  there was never any profit in it.  And yet,  the learned advocate for respondent No. 1 would have us believed that large sum towards profits were due from Ramagya  Prasad who  was Managing, the concern.  It is also clear  from  the balance-sheet  which Murli Prasad admitted were  being  sent regularly  to the partners and, the Government, that  though the first. respondent was shown’as the licensee, he is  also stated  to  be a partner.  In the certificate given  by  the Chartered  Accountant it is stated that the amount  invested by the licence and his partners are shown in form 3  capital amount  against their respective names and this  amount  has been  shown in Ext.  X-1 dated 31-12-1949: Murli Prasad  Rs. 1,0,2,500;  Ajodhya  Prasad   Rs.  2,05,000;  Parasnath  Rs. 51,250  and  Gurcharan  Shah Rs.  51,250,  thus  making  Rs. 4,10,000.  In each one of these balance sheets Murli  Prasad has  been  shown  as partner.  It  is,  therefore,  idle  to suggest that the entire amount has been contributed by Murli Prasad and that others did not have any connection with  the partnership.   Nor  could  if  be said  that  they  had  not contributed  towards  the capital in accordance  with  their shares.  The High Court rather strangely either misread  the evidence  or  misappreciated  it  when  it  held  that   the partnership  having not come into existence at any  time  in the eye of law, Murli had no advance in his hands on account of  the  partnership,  there  was  no  acquisition  by   the partnership  of  the undertaking and the  license;  and  the source  from  which he paid the consideration money  of  the bargain between him and the liquidator would not clothe  the creditors with the title to the undertaking and the  licence or  to the benefit of the purchase.  The money lent  by  the partners  to Murli may, of cease, be recoverable subject  to the  law of limitation, but not the property  acquired  with the money, since no fiduciary obligation in the eyes of  law could arise as between him and the various lenders.  In this view, it thought that the claim of the partners to  recover’ the  money having regard to section 65 of the, Contract  Act and  Art. 62 of the limitation Act is barred by  limitation, because  the suit of Parasnath was filed more than  3  years after 13-7-45 by which date they were aware of the fact that consent of the Government had not been obtained to  transfer the  licence.   This  view  of  the  High  Court  cannot  be sustained.   It  appears  to us that  there  is  nothing  to suggest  that  the partners knew or were  aware  that  their partnership was illegal; nor could it be said because at the time when 928 they  entered  into the agreement of  partnership,  this  is clearly established, as no licence had been granted to Murli Prasad.  The amounts wore contributed by all the partners in accordance with their shares before the licence was assigned to  Murli  Prasad.   Even  on the  admission  of  the  first respondent, on behalf of the partnership balance-sheets were being prepared and they were being forwarded not only to the partners  but to the Government also. if so, the  Government as  well  as the Electrical Inspector, as  is  evident  from several letters Exts.  D-4, D-6, D-10, D,-12, D-30, D-32, D- 44,   D-45,  C-3/1  and  C4/1,  were  made  aware   of   the partnership.   If  they did not take notice it was  not  the fault  of  the  partners nor does it  show  that  there  was anything  secret  in that partnership.   The  openness  with which  the entire business was run clearly establishes  that the  partners at any rate were pot aware of the  illegality. It  may  be  true  that under  the  Act  permission  may  be

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necessary to obtain a licence or to have a licence  assigned to  a partnership, but there is nothing in  the  Electricity Act to warrant the submission that because no permission was taken  for  assignment  of the licence in the  name  of  the partnership,  the claims of the partners against each  other cannot be adjudicated upon, and that the partners will  have no rights in the assets held by the partnership.  Curiously, the High Court, when the above exhibits were brought to  its notice,  tried to get over it by saying that the words  "we" and  "us"  which  have  been used in Ext.   D-6  do  not  by themselves   indicate   partnership  and  that   they   were apparently used_for the Chhapra Electric Supply Works. ,This conclusion  is  unjustified  and is against  the  weight  of evidence   in  the  case.   The  illegality,  if  any,   was discovered only after the Government issued a  notification, Ext.  F-1 dated May 19, 1955, revoking the licence.  It  may also be noticed that Title Suit No. 94 of 1956 was filed  on November 5, 1956, while the earlier Suit No. 68 of 1954  was filed  on May 22, 1954, even before the cancellation of  the licence.   None of these suits can, on any account, be  said to  be barred by limitation.  In any case, the  persons  who have  contributed the money to provide the capital  for  the undertaking   are  entitled  to  recover  the   amounts   in accordance with their respective shares.  This relief is not dependent  upon  the validity of the partnership  either  of 1945  or of 1950.  The arrangement between the partners  and the licensee does not attract sub-ss. (2) and (3) of s. 9 of the  Act which merely debar a licensee’s association in  the business  of supplying energy under the same licence.   Sub- section (2) inhibits the licensee from assigning his licence or transferring his undertaking or any part thereof by sale, mortgage etc. without the previous consent in writing of the State   Government.   Subsection  (3)  makes  an   agreement relating to any transaction described in sub-s. (2),  unless made  with or subject to the previous consent as  aforesaid, void.   Owning of the properties by the Corporation was  not in  contravention of any of the provisions of the Act.   The agreement, therefore, is not void.  In these. appeals it  is not  necessary to decide, the question whether the  carrying on  of  the  business  of  partnership  as  an   electricity undertaking,  when  the licence stood in the name  of  Murli Prasad  is  invalid.  Even if it is void, what  we  have  to consider  is, as pointed out earlier, whether the  money  of the   partners  which  went  to  purchase   the   electrical undertakings  at the auction sale and which by virtue of  s. 14  of  the,  Partnership  Act  became  the  assets  of  the partnership,  those  assets which have been  converted  into money 929 which has been deposited in the Court, can be claimed by all those who had originally contributed the amount.  Section 65 of  the Contract Act will readily come to the rescue of  the partners.  That section lays down that when an agreement  is discovered to be void, or when a contract becomes void,  any person  who has received any advantage under such  agreement or contract is bound to restore it, or to make ’compensation for  it,  to the person from whom be received  it.   A  Fall Bench  of  the Hyderabad High Court in Budhu Lal  v.  Deccan Banking  Company Ltd(1) to which one of us was a  party  had occasion to consider the question that where money has  been paid  under the instrument which has been held to  be  void, could  money paid thereunder, be recovered.  After a  review of the case law in India, the decision of their Lordships of the Privy Council in Harnath Kaur v. Inder Bahadur Singh  (2 )  and  the observations in the 7th Edition of  Pollock  and

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Mulla’s Indian Contract and Specific Relief Act pp.  346-347 to  the  effect that section 65 of the Indian  Contract  Act does  not apply to agreements which are void under s. 24  by reason  of  an unlawful consideration or  object  and  there being  no other provision in the Act under which money  paid for  an unlawful purpose may be. recovered back, an  analogy of  the English law will be the best guide, that  Court  had held that money paid in such circumstances can be recovered. The reasoning which the learned authors gave for their  view was  stated in that judgment to be that "if the view of  the Privy Council is right, namely, that ’agreements  discovered to be void’ apply to all agreements which are ab initio void including  agreements  based on unlawful  consideration,  it follows  that the person who has paid money  or  transferred property  to another for an illegal purpose can  recover  it back  from  the transferee under this section  even  if  the illegal  purpose  is  carried into execution  and  both  the transferor  and transferee are in pari delicto." In  respect of this reasoning the Court observed at p. 75 :               "In  our  opinion,  the view  of  the  learned               authors  is  neither supported by any  of  the               subsequent  Privy Council decisions nor is  it               consistent  with  the natural  meaning  to  be               given to the provisions of s. 65.  The section               by  using  the  words ’when  an  agreement  is               discovered to be void’ means nothing more  nor               less  than : when the plaintiff comes to  know               or finds out that the agreement is void.   The               word ’discovery’ would imply the  preexistence               of something which subsequently found out  and               it  may  be  observed that  s.  66,  Hyderabad               Contract Act makes the knowledge (ilm) of  the               agreement  being  void  a , one  of  the  pre-               requisites for restitution and is used in  the               sense  of an agreement being discovered to  be               void.  If knowledge is an essential  requisite               even  an  agreement  ab  initio  void  can  be               discovered to be void subsequently.  There may               be cases where parties enter into an agreement               honestly  "thinking  that it  is  a  perfectly               legal agreement and where one of them sues the               other or               (1)   A.T.R. (1955) Hyd. 69.               (2)   A.I.R. (1922) P.C. 403.               930               wants the other to act on it, it is then  that               he  may  discover  it to be  void.   There  is               nothing,  specific in s. 65.  Indian  Contract               Act  or  its  corresponding  section  of   the               Hyderabad    Contract   Act   to    make    it               inapplicable, to the such cases." The above view, which has been noticed in subsequent edition of  Pollock’s Book (See 9th Edition, p. 463 Note 41), is  in consonance  with authority, equity and good  reason.   After this  conclusion it is not necessary to consider whether  s. 70  of  the Contract Act or ss. 39 and 41  of  the  Specific Relief Act can be invoked in aid of the appellants. On any view of the matter whether the agreement was void  ab initio,  or was void or valid initially but became  void  or discovered  to  be  void subsequently,  the  appellants  are entitled to succeed in these appeals.  We accordingly  allow these  appeals, reverse the judgment an decree-of  the  High Court  and dismiss Suit No. 94 of 1956 with costs,  We  hold that  the  first  respondent Murli Prasad  is  not  entitled solely to the whole of the compensation money, but that  all

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those  whose names appear in the partnership deed of  August 31, 1950, or the legal representatives or assignees of  such of  them who are dead, are otherwise entitled to  share  the compensation money in proportion to their respective  shares as specified in the said document.  The compensation  amount which  is  ’so  distributed is the  balance  of  the  amount remaining  after payment of the outstanding  liabilities  of the  Chhapra  Electric Supply Works.  The Trial  Court  will give  the  necessary  directions to  the  Receiver  in  this behalf. S.C.                          Appeal dismissed. 931