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Manchersha Ardesar Vs. Govind Ganesh Joshi - Court Judgment

LegalCrystal Citation
SubjectCivil;Family
CourtMumbai
Decided On
Case Number Second Appeal No. 300 of 1928
Judge
Reported inAIR1930Bom424; (1930)32BOMLR1035
AppellantManchersha Ardesar
RespondentGovind Ganesh Joshi
DispositionAppeal dismissed
Excerpt:
.....instruments act (xxvi of 1881), sections 26, 27 - promissory note by manager of joint hindu family-suit on the note against the maker only-other members not liable in a suit on the note.;a suit based on a promissory note passed by one member of a joint hindu family for the purposes of the family can be allowed to be converted into a suit on the original debt, against all the members of the family.;vithalrao v. vithalrao (1922) 25 bom. l.r. 151, followed. ;sitaram krishna v. chinmandas fatehchand (1928) i.l.r. 52 bom. 640, s.c. 30 bom. l.r. 1300, distinguished.;where a person executes 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. hence, members of a joint..........notes exhibits 54 and 56, executed by defendant no. 3 in his personal capacity. the promissory note exhibit 54 dated june 3, 1925, was executed by defendant no. 3 in favour of plaintiff no. 1 alone and the promissory note exhibit 56 dated july 81, 1925, was executed by defendant no. 3 in favour of plaintiffs nos. 1 and 2. there is evidence to show that the dealings of both the plaintiffs are joint and the court of first instance has found that both the plaintiffs are jointly interested in the two promissory notes in suit. this finding is not challenged by respondent's pleader. exhibit 54 was for a sum of rs. 5|200 due under an account and exhibit 56 was for a sum of rs. 300. out of this sum of rs. 300 a sum of rs. 100 is stated to have been borrowed on june 7, 1925.2. five persons.....
Judgment:

Shingne, J.

1. This is a suit to recover a debt due on two promissory notes Exhibits 54 and 56, executed by defendant No. 3 in his personal capacity. The promissory note Exhibit 54 dated June 3, 1925, was executed by defendant No. 3 in favour of plaintiff No. 1 alone and the promissory note Exhibit 56 dated July 81, 1925, was executed by defendant No. 3 in favour of plaintiffs Nos. 1 and 2. There is evidence to show that the dealings of both the plaintiffs are joint and the Court of first instance has found that both the plaintiffs are jointly interested in the two promissory notes in suit. This finding is not challenged by respondent's pleader. Exhibit 54 was for a sum of Rs. 5|200 due under an account and Exhibit 56 was for a sum of Rs. 300. Out of this sum of Rs. 300 a sum of Rs. 100 is stated to have been borrowed on June 7, 1925.

2. Five persons were impleaded as defendants one of whom, , viz., defendant No. 5, is a minor. Defendants Nos. 1 to 4 are full brothers and defendant No. 5 is their nephew. Plaintiffs alleged in paragraph 1 of the plaint as follows:-

The defendants are the members of a joint undivided Hindu family and the of affairs of the family are managed by all the three persons, viz., defendants Nos 1-2-3 as the leading members of the family. The transaction in suit has-been effected accordingly by defendant No. 3 with the plaintiffs for the purpose of the joint family of the defendants and the benefit and consequently all the defendants and the property belonging to their joint family are responsible for the plaintiffs' claim.

3. All the defendants denied that defendants Nos. 1 to 5 formed a joint family with defendants Nos. 1 to 3 as managers of the family and alleged that defendant No. 3 entered into the suit transaction on his own responsibility. Defendants Nos. 1, 2, 4 and 5, therefore, denied their liability to pay. Detailed contentions will be found in the written statements in the case. They are summed up at pages 7 and 8 of the print.

4. The suit was filed on January 19, 1926. Issues were first drawn on March 24,1926. The issues then drawn were :-

' (1) Are the promissory notes proved against and binding on defendants Nos. 1, 2, 4 and 5 ?

' (2) What order should be passed ' ?

On December 9, 1926, plaintiffs applied for fresh issues (vide Exhibit 72), Thereupon the issues were recast. The issues as finally settled are at page 8 of the print. The third issue is:-

Are defendants Nos. 1, 2, 4 and 5 liable on the promissory notes Are plaintiffs entitled to recover promissory note amounts from them

The issue is apparently wide enough to cover the point as to * whether defendants other than defendant No. 3 could be sued on the promissory notes as also the point as to whether the promissory notes were for debts contracted for the alleged joint family. The learned Judge, however, regarded it, to quote his own term 'a law-issue'. There is further proof on record to support the view that the issue was framed in view of the ruling of the Bombay High Court in Vithalrao v. Vithalrao (1922) 25 Bom. L.R. 151 (vide the learned Judge's note in Exhibit 83). It is clear from the note that the learned Judge disallowed questions as to whether the promissory notes were for joint family debts.

5. Plaintiff No. 1 was examined on January 20, 1927. Exhibit 83 is his deposition. That was the day on which the suit was peremptorily fixed for hearing. On that day the learned pleader for the plaintiffs put in two applications. They are Exhibits 81 and 82. Exhibit 81, it is argued, was an application for amendment of the plaint. It will be desirable to state verbatim the text of the application. It runs as follows:-

Application on behalf of the plaintiffs is as follows :

The present suit is filed in respect of promissory notes. The defendants are liable to the plaintiffs in respect of the same, inasmuch as the promissory note transaction was effected with the plaintiffs by defendant No. 3 as the leading member of the family. The suit is filed on the strength of the promissory notes. Moreover the plaintiffs have to file a suit against the defendants in 'respect of dealings independently. That loan transaction (mentioned in paras. 3 and 4 of the plaint) has been effected with the plaintiffs by defendant No. 3 for the benefit of the joint family of the defendants, Therefore also the plaintiffs have claimed relief in this suit against the defendants. The relief is alternative (?), A separate stamp is not required for the same.

A new clause may be inserted as above as Clause 4A. On account of the said amendment the burden of proof does not increase. If this amendment is not made then there is every chance for the plaintiffs to suffer loss. Therefore this amendment may be allowed. Date January 20, 1917.

It may be noted that Exhibit 81 mentions that the suit is filed on the strength of the promissory notes.

By Exhibit 82, plaintiffs' pleader asked that the following issue should be framed :-

Whether or not the loans in respect of which the promissory notes were passed were taken (by the defendant) as the leading member of the family for the benefit of the family ?The learned Subordinate Judge disallowed both the applications for reasons stated on the applications.

6. The learned Subordinate Judge ultimately allowed the suit only against defendant No. 3 and dismissed the claim against the other defendants. He held that as the suit was based on the promissory notes signed by defendant No. 3 alone and that too not as manager of the family, the claim could not be proved against the other defendants. He followed the ruling in Vithalrao v. Vithalrao mentioned above.

7. The plaintiffs appealed to the District Court. The appeal was filed against defendants Nos. 1, 2, 4 and 5. It was contended in appeal that the plaint, as drafted, made mention of the joint family business in paragraph 1, although the dates given in paragraphs 3 and 4 of the plaint made a reference to the dates of the promissory notes, and, therefore, the plaint should have been allowed to be amended.

The learned District Judge held that it was certain that in the trial Court the suit was regarded as brought on the promissory notes. He further held that the amendment was properly refused because (a) it was applied for at a late stage of the case, and (b) the amendment, if allowed, would have altered the nature of the suit by converting the suit based on promissory notes into one for recovering debts for past dealings which were ' summarised ' in the first promissory note. Towards the end of his judgment, the learned Judge observed that the judgment of the learned Chief Justice Sir Norman Macleod in the case of Vithalrao v. Vithalrao clearly contemplated a suit of the nature suggested in the application (Exhibit 81), if that application had been made in time. The learned Judge dismissed the appeal.

8. In this second appeal, the same contentions were advanced as in the District Court. It was first contended that the application (Exhibit 81) was not a belated one. It is important, however, to note that the suit was filed early in 1926 and the issues were first framed on March 24, 1926. They were re-settled on December 9, 1926, and the third issue came to be drawn. It is clear that the issue did not prominently bring out the contentions of the plaintiff's that the defendants other than defendant No. 3 were liable because the debts were incurred for the purpose of the alleged joint family consisting of all the defendants as its members. All this required prompt handling of the situation. In spite of all this, having regard to the allegations in paragraph 1 of the plaint, I should have, following the ruling in Kisandas Rupchand v. Rachappa Vithoba ILR (1909) 33 Bom. 644, 11 Bom. L.R. 1042 allowed the plaint to be amended, subject to the consideration of the question of costs, were it not for my view that this was a suit on the promissory notes and that Exhibit 81 was really not an application to amend the plaint but simply reaffirmed that the suit was based on the promissory notes and as a consequence the only person who could be held liable was defendant No. 3, the executant of the promissory notes. No doubt, to allow a suit on promissory notes to be converted into a suit on the original debt would have introduced a cause of action entirely different from that for promissory notes. I should have, however,' considered this as a fit case for amendment if it had been asked for in the lower Court.

9. My reasons for holding that I should have allowed an amendment are these : In paragraph 1 of the plaint, the plaintiffs had alleged that the defendants formed a joint Hindu family and that the debt was incurred for the purpose of the joint family. The defendants were aware of the contention and had traversed it in their written statements and the third issue as framed was, as (1) ILR (1909) 33 Bom 644, B. C. stated above, wide enough, though the learned Judge had regarded it as one of law. The remarks of Sir Norman Macleod C. J. at pages 152 and 153 of the aforesaid case (Vithalrao v. Vithalrao) also justify the view that such an amendment was permissible. Even the learned District Judge towards the end of his judgment expressed that he would have allowed the amendment if the plaintiffs had applied in time. I appreciate that in the case of Sitaram Krishna v. Chimandas Fatehchand ILR (1928) 52 Bom. 640, 30 Bom. L.R. 1300-I shall refer to the case presently for another purpose-such an amendment was refused. But in that case the leave to amend was asked for in the opening address of the counsel for the party in whose interest the amendment was asked for.

10. It is now pertinent to consider if any amendment was really sought by means of Exhibit 81. I have already cited the full text of Exhibit 81. The application states more than once that the suit was filed in respect of or on the strength of the promissory notes and that the defendants were liable in respect of the same. It adds that the plaintiffs have to file a suit against the' defendants in respect of the dealings independently. Exhibit 81 refers to loan transactions, meaning thereby those which are mentioned in paragraphs 3 and 4 of the plaint. This has reference to the promissory notes. It is necessary to note that Exhibit 81 is entirely silent as to the cause of action for the original debt 'By Order VII, Rule (e)', the plaint must state the cause of action and when it arose. It is thus difficult to conclude that Exhibit 81 was really an application for amendment of the plaint. As I read Exhibit 81, it simply re-affirms that the suit was based on promissory notes and restates the contents of paragraph 1 of the plaint. In Exhibit 81 there is no endeavour to base the claim on the loans that preceded the promissory notes. It will not be correct' say that Exhibit 81 is an application for amendment of plaint. It will not be out of place to observe that, as remarked by their Lordships of the Privy Council in the case of Sadasuk v. Sir Kishan Pershad (1018) 21 Bom L R 605, L.R. 46 IndAp 33 , it was open to the plaintiffs to base their claim ; on the promissory notes and alternatively on the original debt. But that was not even done.

In concluding in this way I have not lost sight of the remarks made in numerous cases that pleadings in the moffussil should be liberally construed.

11. Thus the claim in this suit was on the promissory notes and continued to be so based in spite of the filing of Exhibit 81. I have, therefore, to see if the contending defendants (defendants Nos. 1, 2, 4 and 5) can be held liable in such a suit. Confining my attention to the provisions of the Negotiable Instruments Act, it will follow that even though the maker of the promissory notes may be the manager of a joint Hindu family, the promissory notes cannot bind the other members. The provision in Section 26, so far as it is relevant, is :-

Every person capable of contracting, according to the law to which he is subject, may bind himself and be bound by the making, drawing, acceptance, indorsement, delivery and negotiation of a promissory note, bill of exchange or cheque.

Then Section 27 enacts thus :-

Every person capable of binding himself or of being bound, as mentioned in Section 26, may so bind himself or be bound by a duly authorised agent acting in his name.

Combining the two sections, it will follow that while Section 26 treats of the capacity of persons to bind themselves as parties to negotiable instruments, Section 27 treats of the authority or power of a person to contract on behalf of another so as to bind him. It is clear, therefore, that when a person executes 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. Section 1 of the Negotiable Instruments Act does not exempt from the operation of the Act promissory notes executed by Hindus. The legislature does occasionally make reservations in some cases and exempts classes of persons from the operation of enactments, e. g., Section 2 of the Transfer of Property Act or Section 8 of the Court of Wards Act (Bom, Act I of 1925). This is how the situation stands on a consideration of the statute that is to govern the case.

12. Turning to the case-law, I find that the case of Vithalrao v. Vithalrao (1922) 25 Bom. L.R. 151 is in point. It is a case of a joint Hindu family. The decision is binding on me. I follow it and hold that members of a joint Hindu family cannot be held liable in a 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.

13. In the case of Subba Narayana Vathiyar v. Ramaswami Aiyar ILR (1906) Mad. 88 the Court, while considering Section 27, remarked that (p. 91) 'the principal can only be made liable through his agent on a negotiable instrument when the agent acts as here prescribed in his (the principal's) name, that is, when he signs as agent.' Later on it was observed that (p. 92):-

We do not think that the general provisions of the Indian Contract Act , 1872, as to the rights and liabilities of undisclosed principals were intended to alter -well-established rules as to negotiable instruments which in our opinion continued to be governed by the law merchant based on general mercantile usage.

No doubt, the case was not under Hindu law but the principle laid down is important. The principle underlying the decision of their Lordships of the Privy Council in Sadusuk Janhi Das v. Kishan Pershad (1918) L.R. 46 I. A. 33, 21 Bom. L R. 605 also justifies the same conclusion. In that case, the plaintiffs had sued on hundis drawn by defendant No. 2 (Mohan Lal) who, while drawing the hundis had described himself as acting superintendent of the Private Treasury of His Excellency Sir Maharaja the Prime Minister of H. H. the Nizam. Defendant No. 1 to the suit was the aforesaid Sir Maharaja. Their Lordships held that the aforesaid words underlined by me were merely descriptive of defendant No. 2. The hundis were, moreover, headed thus at the top : ' By order of the Sirkar may his happiness increase.' A contention was raised in argument that these words at the top quoted within inverted commas implied that the subsequent signature of defendant No. 2 together with the description that followed the signature should be construed as sufficient to bind defendant No. 1. Their Lordships observed that (p. 609) ' it is of the utmost importance that the name of a person or firm to be charged upon a negotiable document should be clearly stated on the face or on the document, so that the responsibility is made plain and can be instantly recognised as the document passes from hand to hand.' As a result plaintiffs in that case did not succeed in holding in holding defendant No. 1 responsible for the hundis. In the recent case of Sitaram Krishna v. Chimandas Fatehchand ILR (1928) 82 Bom. 640, 30 Bom. L.R. 1300, decided by our learned Chief Justice Sir Amberson Marten and by my learned brother Mr. Justice Blackwell, it was held that in an action on a bill of exchange or promissory note against a person whose name properly appears as party to the instrument, it was not open to show that the signatory was in reality acting for an undisclosed principal. I know and appreciate that these cases which I have cited in this paragraph were not cases in which members of a joint Hindu family were sued, but I think that the principle laid down in the above cases is equally applicable to a case of joint Hindu family. There can be no distinction in principle-there ought to be none. As remarked by Blackwell J. in the aforesaid case cited by me, it would be dangerous in the extreme to permit evidence to be given that the person who had signed a negotiable instrument was in fact the agent of an undisclosed principal.

14. I think I should not close this discussion without referring to a few other decisions. In a case, Krishna Ayyar v. Krishnasami Ayyar ILR (1900) Mad. 597, the maker of a promissory note executed in favour of the plaintiff in the case was a member of an undivided Hindu family and had borrowed from the plaintiff the money represented by the note and had purchased therewith land f or the benefit of the family. The family consisted of himself (the maker of the note); an uncle, and the sons of the uncle. The uncle had always recognised the debt as a family debt, and the land purchased with the money borrowed had, in a subsequent division of property, been allotted to the uncle and his sons, who had also agreed with the maker of the note that they would discharge the debt. A suit was brought to recover the money due on the promissory note against the maker of the note as well as the uncle and his sons. 'When the case first came on for hearing before Subrahmania Ayyar and Davies JJ., their Lordships differed in their opinions. Subrahmania Ayyar J. felt doubtful as to the strict applicability of the English rule of law as to undisclosed principals to this country. The learned Judge observed (p. 599) :-

No doubt according to the English law none but those whose signatures appeal- on a bill of exchange or a negotiable promissory note can be sued thereupon. No authority was cited to show that that rule has been adopted in this country. ... And having regard to Sections 233 and 234 of the Indian Contract Act, it is a question whether the principal cannot be proceeded against upon a negotiable instrument executed, by an agent in his own name.

The learned Judge thereupon followed the Hindu law and held that all the defendants were liable. Davies J. held that as the maker of the promissory note did not purport to make it on behalf of any one else but himself, no on(c) but the maker could be held liable. The learned Judge remarked (p. 601):-

Had the suit been brought on the debt, of which the promissory note afforded evidence, other members of the first defendant's family might have been held liable as well as himself on the ground that the first defendant represented them ; but in the case of a promissory note, no such representation can be pleaded, unless the persons said to be represented appear on the face of the document by name [vide Section 27 of the Negotiable Instruments Act).

The matter went in appeal under Letters Patent and was heard by a Bench of three Judges, two of whom had previously heard the appeal and Shephard J. was the third Judge who constituted the Bench. Shephard J. held that assuming that Section 27 of the Negotiable Instruments Act was intended to enact the English rule of law for this country it cannot prevent the maintenance of the suit, as the section presupposes a case of mere agency, while the liability which was sought to be enforced, in the case was founded on Hindu law in respect of a debt incurred by a manager and not on the law of agency But in another part of the judgment the learned Judge observed thus (p. 605):-

When the father or manager of a Hindu family has incurred a debt and given a promissory note therefor, the creditor may sue him upon the note and make him personally liable ; he cannot make the sons or other members of the family liable personally, nor in strictness can he sue them upon the note.

The case was ultimately decided on the construction of the plaint in the case. Shephard J. held that the plaint, was capable of being regarded as based on the original debt. Subrahmania Ayyar J. practically put the same construction on the plaint. Davies J. disagreed and observed that in his opinion the suit was based entirely on the promissory note and could not be treated as based on the original consideration as fresh questions of limitation otherwise would arise and the trial would have to begin de novo. It is, there-wore, clear that the judgment did not in effect introduce as exception to s 27 of the Act as regards the case of a Hindu family. The claim was somehow taken out of the Negotiable Instruments Act and brought within the province of Hindu law. Probably the peculiar facts of the case led the learned Judges to conclude as /they did. Speaking for myself, and with all respect, I observe | that a plaint is an important document and has got to be drawn with precision and thoroughness, and I see no justification for conctruing the plaint in this case in the way in which it was done in the Madras case, I feel bound to state further that the observations of Subrahmania Ayyar J. as to Sections 223 and 224 of the Indian Contract Act lose their force if reference is made to the observations of their Lordships of the Privy Council in connection with Sections 26, 27 and 28 of the Negotiable Instruments Act, in the case of Sadasuh v. Sir Kishan Pershad. The observations towards the end of the judgment are (p. 610) :>

It is sufficient to say that these sections contain nothing inconsistent with the principles already enunciated, and nothing to support the contention, which is contrary to all established rules, that in an action on a bill of exchange or promissory note against a person whose name properly appears as party to the instrument it is open either by way of claim or defence to show that the signatory was in reality acting for an undisclosed principal.

See also the remarks of Blackwell J. to the same effect in the lease of Sitaram v. Chimandas, cited above.

15. After their Lordships of the Privy Council decided the case of Setdasuk v. Sir Kishan Pershad, the Allahabad High Court had occasion to consider the point of the liability of the members of a joint Hindu family in respect of a promissory note executed by the managing member of the family and it was held that there is no inherent reason why the managing member of a joint Hindu family cannot in that capacity execute in his sole name a promissory note which shall be binding on the family as a whole and the property owned by it. It was observed that the principle that it is of the utmost importance that the name of the person or firm to be charged upon a negotiable instrument should be clearly stated on the face or on the back of the document had no application to the case of a joint Hindu family, as a joint Hindu family being a legal person according to Hindu law is represented by the managing member. With all respect, I differ, from this view and agree with the remarks. Sir Norman Macleod C. J. who considered the above, cases in the case of Vithalrao v. Vithalrao and did not think it advisable to accept them and to allow the claim against all the members of the joint family impleaded in the case.

16. As stated above, it was open to the plaintiffs to base their claim on the promissory notes and alternatively on the pre- existing liability. But that was not done in this case. As stated above, the so-called amendment application (Exhibit 81) did not in terms or substance seek to base the claim upon a cause of action for money lent independently of the promissory notes. Returning, therefore, to the conclusion arrived at as to the nature of the suit and the consequent futility of the claim against the present respondents (the original defendants Nos. 1, 2, 4 and 5), I see no alternative but to dismiss the appeal. The plaintiffs dealt with defendant No. 3. They got a decree against him. They must be content with the result.

The appeal is, therefore, dismissed with costs.


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