Partnership in liquor business not illegal absent transfer of licence under the governing excise law

A partnership carrying on liquor business in Orissa was not illegal merely because the firm's head office was in Madhya Pradesh. The governing excise law in Orissa prohibited transfer or assignment of the exclusive privilege, but it did not prohibit a licensee from entering into a partnership. Mere admission of partners did not amount to transfer of the licence unless the licence itself was assigned to the partnership. A restriction under the Madhya Pradesh excise rules applied only to liquor business within Madhya Pradesh and had no bearing on the Orissa business. The partnership was therefore entitled to registration for the Orissa business.

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Issues: Whether registration could be denied to a partnership carrying on liquor business in Orissa on the ground that the firm's head office was situated in Madhya Pradesh, and whether the partnership was illegal under section 23 of the Bihar and Orissa Excise Act.

Analysis: The decisive question was whether the law governing the Orissa business prohibited entry into a partnership. Section 23 of the Bihar and Orissa Excise Act prohibits letting or assignment of the exclusive privilege, but it does not in terms prohibit a licensee from entering into a partnership. The mere admission of partners does not amount to transfer or assignment unless the licence itself is transferred to the partnership. The restriction contained in rule 6 of the Rules relating to General Conditions of Licence made under the Madhya Pradesh Excise Act, 1915, applied only to liquor business within Madhya Pradesh and had no application to the Orissa business. Since no finding showed that the licence had been transferred to the partnership, the partnership was not illegal. The Orissa business was also distinct from the Madhya Pradesh business.

Conclusion: The partnership was entitled to registration in respect of the business carried on in Orissa, and the answer to the reference was in the affirmative in favour of the assessee.

Ratio Decidendi: Where the governing excise law prohibits assignment or transfer of a licence but does not prohibit entry into partnership, the mere constitution of a partnership does not render the business illegal unless the licence itself is transferred or assigned.

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