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Mulchand DevidIn and ors. Vs. Sugnamal Radhamal - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtMumbai High Court
Decided On
Case NumberAppeal No. 137 of 1953
Judge
Reported inAIR1959Bom90; (1958)60BOMLR1343; ILR1959Bom458
ActsNegotiable Instruments Act, 1881 - Sections 27
AppellantMulchand DevidIn and ors.
RespondentSugnamal Radhamal
Appellant AdvocateN.M. Chatterjee, Adv.
Respondent AdvocateM.P. Kelkar, Adv.
Excerpt:
promissory note--liability of person or firm under promissory note how to be determined.;in order that a person or a firm should be made liable upon a promissory note or a hundi or a bill of exchange, the instrument must indicate upon a fair interpretation of its terms the name of the person or firm sought to be made liable.;manchersho v. govind (1930) 32 bom. l.r. 1035 : s.c. [1930] a.i.r. bom. 424 ramgopal ghose v. dhirendra nath. (1927) i.l.r. 54 cal. 380 : s.c. [1927] a.i.r. cal. 376 motilal v. punjagi [1933] a.i.r. nag. 160 sadasuk kanki das v. kishan pershad (1918) l.r. 46 i.a. 33 : s.c. 21 bom. l.r. 605, p.c., sitaram krishna v. chimandas fatehchand (1928) i.l.r. 52 bom. 640 : s.c. 30 bom. l.r. 1300 and sivagurunatha v. padmauathi [1941] mad. 513, f.b. referred to. - - 3, had no..........the defendants carried on business at sagar in the name of 'mulchand & brothers' and this joint family firm had taken a contract of supplying meat, vegetables etc., to the central ammunition depot at pulgaon, and defendant no. 2's son babulal, defendant no. 5, was managing that work. it was the plaintiff's case that an amount of rs. 6000/- was borrowed on 21-2-1952 by defendant no. 5 from the plaintiff for the purpose of the said joint family business and consequently all defendants were liable. the plaintiff claimed to recover rs. 6030/- inclusive of interest at 6 per cent. per annum. defendant no. 3 nandkumar did not file nay written statement and remained ex parte. defendants nos. 1, 2 and 4 denied that the amount was borrowed by defendant no. 5 as a representative or a.....
Judgment:

1. This is an appeal by the original defendants against a decree passed in favour of the plaintiff for Rs. 6030/- with future interest at 4 per cent. per annum from the date of the decree till realization. The suit was filed on a promissory note for Rs. 6,000/- executed by defendant No. 5 Babulal in favour of the plaintiff n 21st February 1952. Defendants Nos. 1 to 4 are brothers, while Babulal is the son of defendant No. 2 Ramprasad. According to the plaintiff, the defendants carried on business at Sagar in the name of 'Mulchand & Brothers' and this joint family firm had taken a contract of supplying meat, vegetables etc., to the Central Ammunition Depot at Pulgaon, and defendant No. 2's son Babulal, defendant No. 5, was managing that work. It was the plaintiff's case that an amount of Rs. 6000/- was borrowed on 21-2-1952 by defendant No. 5 from the plaintiff for the purpose of the said joint family business and consequently all defendants were liable. The plaintiff claimed to recover Rs. 6030/- inclusive of interest at 6 per cent. per annum. Defendant No. 3 Nandkumar did not file nay written statement and remained ex parte. Defendants Nos. 1, 2 and 4 denied that the amount was borrowed by defendant No. 5 as a representative or a nominee of Mulchand & Brothers and they also contended that the money was not taken to pay the debts of their creditors. It was their contention that defendant No. 3 had separated long before and was living separately since 1950 and he had no interest in the family business of the other defendants. The defendants therefore stated that defendant No. 5 alone was personally liable under the suit promissory note. Defendant No. 5 filed a written statement and contended that defendants Nos. 1 to 4 were not liable ad his further defence was that only Rs. 4200/- were due before the promissory note in suit was executed, and Ex. P-1, the promissory note or the receipt came to be executed as Rs. 1100/- were charged by the plaintiff by way of interest at 4 per cent. Per month up to 1st June 1951, and future interest was charged amounting to Rs. 700/- from 1st June 1951 to 21st February 1952 and that is why a promissory note for Rs. 6000/- came to be executed. He prayed also that incase a decree was passed against him, he might be given instalments of Rs. 500/- per year. All the contentions of the defendants were negatived by the trial court which held that defendants Nos. 1 to 4 were liable as defendant 5 had the necessary authority to incur loan for the joint family business, and defendant No. 5 did in fact incur the loan in suit from the plaintiff on behalf of the joint family firm, and the loan was also borrowed for the purpose of the joint family business, and was utilized by defendant No. 5 for that purpose. The trial Court refused to accede to defendant No. 5's request for instalments. On the issued as to separation of defendant No. 3 the learned Judge held that it was not proved that defendant No.3 had separated from the other defendants in the year 1950. On these findings, the learned trial Judge passed a decree in favour of the plaintiffs agaisnt all the defendants for an amount of Rs. 6030/- with costs and interest as already stated abvoe.

2. In this appeal Mr.Chatterjee, the learned advocate appearing on behalf of the defendants, has raised three contentions. In the first instance, he says that the learned trial Judge was wrong in passing a decree against defendant No. 3 Nand kumar as on the evidence he must be held to have separated from the rest of the joint family. It was not denied in the trial Court, nor was it disputed before me, that Mulchand & Brothers was it disputed before me, that Mulchand & Brothers was a joint family firm at the relevant date, but the contention of the defendants was that with that firm Nand kumar, defendant No. 3, had no concern, because he had already separated since 1950. Undoubtedly the evidence of Babulal, the executant of the promissory note as well as that of Ramprasad, his father, is to the effect that Nandkumar, defendant No. 3 had separated from the joint family, and it is the contention of Mr. Chatterjee that this evidence stands uncontroverted. Unfortunately for his clients, Nandkumar, defendant No. 3, who has now joined in the appeal, filed no written statement and did not step into the witness-box to give evidence on his own behalf. Babulal did not say anything in his examination-in-chief about the separation of Nandkumar, but in his cross-examination, he stated that his uncle, Nandkumar, had separated from the family since three years. His father Ramprasad, however, went a step further and alleged that Nand kumar had separated from the family eight years before, which would place the date of his separation in 1945. In the written statement the year of his separation is state to be 1950. In view of this conflict of testimony and the fact that Nand kumar did not file any written statement nor did he give nay evidence on his own behalf, in my judgment, the finding of the trial Court that it was not proved that Nandkumar had separated form the family in 1950 is correct.

3. The principal contention of Mr. Chatterjee is that on the promissory note all the defendants could not be made liable, but that defendant No. 5 alone was liable because it was executed by Babulal, defendant No. 5, in his individual capacity, and further, contends Mr. Chatterjee, Babulal had no authority to borrow monies from the plaintiff for the joint family business. Now, it is to be noted that the suit itself is not strictly based on the promissory note only. The amount of Rs. 6000/- was borrowed by defendant No. 5, according to the plaintiff, on 21-2-1952 and the plaintiff has stated in paragraph 8 of the plaint that he does not base his claim on any document but relies on the receipt Ex. P-1 executed by defendant No. 5 on 21-2-1952. It would, therefore, appear that the suit is not based on the promissory note alone but also on the original cause of action , namely, the debt borrowed by the joint family, according to the plaintiff, on the same date. But in any case, the first question that will have to be considered is whether Babulal had the necessary authority to incur a debt on behalf of the joint family firm of Mulchand & Brothers. Even if this suit were to be treated as a suit based on the promissory note, as the authority of Babulal to execute the document is questioned, that authority must be established before the instrument executed by him is looked at: see Sivagurunatha v. Padmavathi, ILR 1941 Mad 513 : AIR 1941 Mad 417 (A). (His Lordship examined the evidence on the question of the authority of Babulal to incur the loan and concluded:)

4. On this evidence, I, therefore, hold agreeing with the finding of the learned trial Judge, that Babulal had authority to incur debts on behalf of defendants Nos. 1 to 4.

5. That leads me to the contention of Mr. Chatterjee that in this suit on the promissory note (Ex.P-1) Which is signed by Babulal, Babulal alone can be made responsible for the dues under the promissory note, while the other defendants, members of the joint family, who own the business of Mulchand and Brothers cannot be held liable. I have already pointed out that from the plaint, it would appear the plaintiff has not based his suit purely on the promissory note. But assuming that this is a suit based on the promissory note only, in my opinion, the contention of Mr. Chatterjee is not well founded. The promissory note (Ex. P-1) which is in the form of a receipt executed on 4 one anna revenue stamps on 21-2-1952 runs as follows:

'I the undersigned Babulal son of Ramprasad Contractor have undertaken the work of supply under military contract at Pulgaon. That theka (contract) stands in the name of Mulchand and Brothers. I am carrying on its management and I have got its full power. Rs. 6000/-, in words, rupees six thousand, in cash have been taken from Suganmal Radhamal Sindhi on 21-2-1952 for supply in the month of February in the presence of Govindram.'

'That amount I will return to Suganmal when he shall ask for it. Dated 21-2-1952.'

The signature on this reads:

'Babulal Ramprasad

for Mulchand & Brothers.

Dated 21-2-1952.'

Now, Mr. Chatterjee urges that the last line in the body of the promissory note would clearly indicate that it was Babulal who was personally liable to return the amount, and his argument is that in this promissory note which is signed by Babulal, he has individually undertaken to return the loan and the other members of the family cannot consequently be made liable. It is clear, however, from the promissory note that Babulal Ramprasad signed it not for himself but for Mulchand & Brothers, which is a joint family firm of the defendants. In the body of the promissory note, it is stated that he was carrying on the management of and had full power to act on behalf of Mulchand & Brothers. It is also stated that the theka or the contract in connection with the supply of articles to the military authorities at Pulgaon was in the name of Mulchand and Brothers and the amount was borrowed for supply in the month of February. In my opinion, the contents of this promissory note, reasonably read, would indicate that the promissory note was executed by Babulal for and on behalf of Mulchand and Brothers for the purpose of the business of the firm.

6. In support of his argument, Mr. Chatterjee relied upon Manchersha v. Govind, 32 Bom LR 1035: AIR 1930 Bom 424 in which it was held that when a person executed a promissory note in his own name and not as agent acting in the name of another, the maker whose name appears in the promissory note can alone be made liable thereunder and therefore members of a joint Hindu family cannot be held liable in the suit filed on a promissory note signed by one of its members in his individual capacity even though the maker of the promissory note may be proved to be the manager of the family. Mr. Chatterjee is right that even assuming that Babulal had the requisite authority, he must execute the promissory note as the agent of the firm. But, as I have already pointed out, the promissory note clearly shows that he has not signed it in his individual capacity but on behalf of Mulchand & Brothers.

7. Then reliance is placed on the case of Ramgopal Ghose v. Dhirendra Nath : AIR1927Cal376 in which it was held that the karta of a joint Hindu family, by executing a promissory note unconditionally in his own name for family purposes cannot thereby bind the other members of the family or the interest of any other member in the joint family property. In this case it was further held that the other members of the joint family would only be bound by a promissory note or bill of exchange signed by the karta for family purposes, if the name of each member of the joint family to be charged appears on the instrument itself and is disclosed in such a way that on any fair interpretation of the document his name is the real name of the person liable upon it. This case again, in my judgment, would not be of any assistance to Mr. Chatterjee. In that case the suit promissory note was signed by the karta in his own name though the borrowing was made for the family and that was why it was held that the other members of the family could not be bound by the promissory note.

8. Then Mr. Chatterjee referred me to the case of Motilal v. Punjaji, , which also holds that a suit based on a promissory note executed by the manager of the joint family is not tenable against the other members of the joint family. Now, this case again is distinguishable on facts. Then, reference was made to the Privy Council case of Sadasuk Janki Das v. Sri Kishen Pershad, 46 Ind App 33: AIR 1918 PC 146. In this Privy Council case, the hundi on which the suit was brought was signed by one Mohan Lal who was described as 'Acting Superintendent of the Private Treasury of His Excellency Sir Maharajah, the Prime Minister of H.H. the Nizam,' and on the back of the promissory note, there was a statement that the hundi was accepted by Mohanlal and this statement was signed by Mohanlal. On these facts, their Lordships of the Privy Council held that:

'No person is liable upon a hundi or bill of exchange unless his name appears upon the instrument in a manner which, upon a fair interpretation of its terms, shows that the name is the name of the persons really liable.'

And their Lordships observed that the statement after the signature of the drawer that he was Acting Superintendent of the Private Treasury of His Excellency Sir Maharajah, the Prime Minister of H.H. the Nizam, was merely descriptive and does not make that other person a party to the instrument. Sitaram Krishna v. Chimandas Fatehchand, ILR Bom 640: AIR 1928 Bom 516 was decided on similar facts. The test, therefore, appears to be that in order that a person or a firm should be made liable upon a promissory note, or a hundi or a bill of exchange, the instrument must indicate upon a fair interpretation of its terms the name of the person or firm sought to be made liable. The question is whether on a fair interpretation of Ex. P-1, it may be said that the person liable under it is Mulchand & Brothers. As I have already pointed out, the name of Mulchand & Brothers appears in the body of the promissory note itself as having taken the contract with the military authorities at Pulgaon. The amount is borrowed for the purpose of the said contract. Babulal who executed it has stated that he is conducting the management and has full power form Mulchand & Brothers and he has signed and executed the promissory note as Babulal Ramprasad for Mulchand & Brothers. In my opinion, on a fair reading of the instrument, it indicates that the promissory note was executed by Babulal representing Mulchand & Brothers and it is Mulchand and Brothers who are indicated as the principal who would be liable on it.

9. In this connection, Mr. Kelkar, the learned advocate appearing for the respondent has relied upon a Full Bench decision of the Madras High Court in ILR 1941 Mad 513: AIR 1941 Mad 417 in which it was held that the Court cannot look into surrounding circumstances to decide whether the maker of the promissory note had executed it as an agent or a representative of the firm. In construing such an instrument, the Court cannot, their Lordships held, look beyond what is stated in the instrument, and if the authority of the agent is questioned, his authority must be established before the instrument is looked at. Patanjali Sastri J., as he then was, who was a member of the Full Bench, observed in his concurring judgment that a Court should not brush aside forms of words commonly used in vernacular instruments to express agency and adhere too rigidly to English rules of construction of similar documents. No doubt in the body of the promissory note in that case, the executant was described as the agent under power of attorney etc.; but that, in my opinion, would not distinguish that case from the present case, because the promissory note in that case was signed by the executant without adding any words indicating the capacity in which he signed it. In my opinion, to some extent, the instant case would be a stronger case because in Ex. P-1 not only is there a reference to the contract entered into by Mulchand & borrowed, but Babulal, the executant, has signed it for Mulchand & Brothers. In my opinion, therefore, the legal objection raised by Mr. Chatterjee to the passing of the decree against defendants Nos. 1 to 4 cannot also be upheld.

10. The result is that I must hold that Babulal was authorized to incur debts on behalf of Mulchand & Brothers, the joint family firm of the defendants, and he did in fact incur debts for the purposes of the joint family business of Mulchand & Brothers and executed the suit promissory note on its behalf. In this view of the matte, the decree passed by the trial Court against all the defendants would be correct. The result is that this appeal fails and is dismissed with costs.

11. Appeal dismissed.


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