Skip to content


Yeshvant Dattatraya Vs. Shripad Sadashiv - Court Judgment

LegalCrystal Citation
SubjectFamily
CourtMumbai
Decided On
Case Number Second Appeal No. 947 of 1941
Judge
Reported inAIR1946Bom396; (1946)48BOMLR246
AppellantYeshvant Dattatraya
RespondentShripad Sadashiv
DispositionAppeal allowed
Excerpt:
hindu law - joint family firm-coparcener taking active part in-debts incurred for family business-whether coparcener personally liable.;under hindu law the mere fact that a coparcener takes part in the conduct of a joint family business does not make him personally liable for the satisfaction of debts incurred by the manager for the purpose of the family business. in each case the court must consider the nature and extent of the participation of the coparcener who is sought to be held liable for the debts of the firm. mere participation is not enough. if the court comes to the conclusion that the nature and extent of the participation is such as to put him in the same position as a partner in a partnership firm or as a manager, then he would be personally liable to the creditor as much as..........with defendant no. 1, and on the allegation that) the money was borrowed for the purpose of a joint family business. the trial court held that a certain cloth shop was a joint family business, that the debt was incurred for that business and that the shares of the defendants in that business were liable for the satisfaction of that debt; but in the case of defendants nos. 1, 5 and 6, the trial court held that as they were taking an active part in the conduct of the business, they were personally liable. from that decision defendant no. 6 preferred an appeal to the lower appellate court. the lower appellate court confirmed the decree of the trial court. from that order an appeal was preferred to this court. the appeal came up before mr. justice lokur,. and on march 1, 1943, that.....
Judgment:

Chagla, J.

1. The suit from which this appeal arises was filed by the plaintiff on. a promissory note for Rs. 1,391-12-0 passed by defendant No. 1. Defendants Nos. 2 to 7 were made party-defendants as members of a joint and undivided Hindu family along with defendant No. 1, and on the allegation that) the money was borrowed for the purpose of a joint family business. The trial Court held that a certain cloth shop was a joint family business, that the debt was incurred for that business and that the shares of the defendants in that business were liable for the satisfaction of that debt; but in the case of defendants Nos. 1, 5 and 6, the trial Court held that as they were taking an active part in the conduct of the business, they were personally liable. From that decision defendant No. 6 preferred an appeal to the lower appellate Court. The lower appellate Court confirmed the decree of the trial Court. From that order an appeal was preferred to this Court. The appeal came up before Mr. Justice Lokur,. and on March 1, 1943, that learned Judge sent down two issues to the trial Court for trial. These two issues were:-

(1) Whether, though the promissory note in suit was passed by defendant No. 1 alone,, defendant No. 6 also was in reality a contracting party or whether he can be treated as being a contracting party by reason of his conduct or

(2) Whether he subsequently ratified it?

These issues were tried, and there was an appeal from the findings before the learned District Judge; and the learned District Judge answered both the issues in the negative; but with regard to the second part of issue No. 1, he made his finding subject to certain reservations and it is these reservations which have been the subject of controversy before us. The learned District Judge held that defendant No. 6 had taken, part in the working of the cloth shop which was a joint family business and he considered a decision of our Court in Gokal Kastur v. Amarchand : (1907)9BOMLR1289 , and came to the conclusion that in view of that decision, if defendant No. 6 took part in the working, of the cloth shop, then the second part of issue No. 1 framed by Mr. Justice Lokur would be in the affirmative; or, in other words, according to the learned District Judge,, the mere fact that defendant No. & had taken part in the working of the cloth shop-was sufficient to warrant his being treated as being a contracting party by reason of that particular conduct of his, namely, taking part in the working of the cloth shop.

2. The principle of Hindu law on this particular question has been enunciated by Sir Dinshah Mulla in his well-known treatise on Hindu Law:

The manager is liable not only to the extent of his share in the joint family property, but, being a party to the contract, he is liable personally, that is to say, his separate property is also liable. But as regards, the other co-parceners, they are liable only to the extent of their interest in the family property, unless, in the case of adult co-parceners, the contract sued upon, though purporting to have been entered into by the manager alone, is in reality one to which they are actual contracting parties, or one to which they can be treated as being; contracting parties by reason of their conduct, or one which they have subsequently ratified.

3. Therefore the ordinary rule of Hindu law is that it is only the manager or the managing member of the joint family business who is personally liable with regard to-the debt contracted for that particular joint Hindu family business. The other co-parcerners are only liable when they are contracting parties along with the manager,, or when their conduct is such from which it can be legitimately inferred that they can be regarded as contracting parties or by some act or conduct they have subsequently ratified the loan borrowed by the managing member for the purpose of the business.

4. The distinction between a partnership firm and a joint family business is too well-known and too fundamental to need any repetition or emphasis; whereas one arises, from contract, the other is the result of states,, Whereas in the case of a contractual partnership each partner is the agent of the other and each partner is personally liable,, in the case of a joint family business, as I have just, said, ordinarily only the managing, member is personally liable. Further it has got to be remembered that in the case of a joint Hindu family business, the karta has the right without consulting the other coparceners to contract debts on behalf of the business and to be in complete control of the business and the other coparceners are bound by these acts on the part of the karta. Therefore it can be well understood why Hindu law has restricted the liability of the coparceners other than that of the manager only to their interest in the joint family assets and has not foisted upon them a personal liability. The manager is. personally liable because it is his contract and he is in charge of the business and is in control of it. This principle has been very well enunciated in a recent decision of the Madras High Court in Atagantmal v. Palaniappa [1940] Mad. 1012, In that case Mr. Justice Wordsworth and Mr. Justice Patanjali Sastri came to the conclusion that a coparcener could not be made personally liable except on the ground of implied partnership or estoppel by holding out or ratification; and whether an inference can be drawn as to implied partnership or estoppel must depend upon the nature and extent of the participation of the coparcener in the business. The learned Judges rightly point out that every coparcener has an interest in the joint family business, and if his participation in that business is only such as can reasonably be attributed to his interest in the joint family, then no legitimate inference can be drawn that he intended to undertake a greater liability as a partner in the business. But if a coparcener takes such part in the management of the business as goes beyond what can be sufficiently explained by his, interest in an asset of the family, then a conclusion may be drawn that his relations with the managing member of the firm are similar to those of a partner quae the creditor and that he would be personally liable for the debts incurred. But the learned Judges sound a note of warning and point out that mere participation, however active in the business, is not sufficient to warrant an inference either of partnership or of holding out. The Court must find some definite and unequivocal consensual acts before such an inference can be drawn. The learned Judges further point out that even with regard to the principle of repudiation it has got to be remembered that a Hindu coparcener is not entitled to disown any acts of the manager. Therefore ratification cannot be inferred by the mere fact that the coparcener has not disowned the debt or has not objected to it or protested against it. There must be some positive act from which the Court can say that the coparcener has ratified the transaction. Mere acquiescence would not be sufficient, and the Madras High Court points out that it would be wholly subversive of established principles of Hindu law to hold that a coparcener is personally liable on the ground of ratification by acquiescence for the dealings of the manager in the ordinary course of family businesses.

5. Turning now to the decision of our Court in Gokal Kastur v. Amarchand : (1907)9BOMLR1289 which seems to have caused some difficulty in the mind of the learned District Judge, it is important to note that as the facts set out at p. 1289 clearly show, the firm in that case, in respect of which the decision was given, was a partnership firm; and even in the judgment itself Mr. Justice Chandavarkar at p, 1291 begins his judgment by saying that the debts in dispute were contracted by Kastur as the manager of a joint Hindu family of which he and the defendants were coparceners for the purposes of a partnership business of that family. Later on, Mr. Justice Chandavarkar considers the judgment of the Madras High Court in Chalamayya v. Varadayya I.L.R.(1898) Mad. 166 which laid down that a creditor of a joint Hindu family was not entitled to a personal decree against any coparcener other than the manager who contracted the debt on behalf, of the family, and considers that proposition as not sound; then he proceeds to hold that the coparceners other than Kastur the manager were personally liable inasmuch as they must be treated as having acquiesced in the course of the dealings of the joint family concern. Now with great respect to the learned Judge, once he found as a fact that the business was a partnership business, it was unnecessary to consider the question of Hindu law. If the firm was a partnership business, undoubtedly all the members of that partnership were personally liable to the creditor. The question could only arise for determination if it was a joint family firm. In our opinion, therefore, this particular observation of Mr. Justice Chandavarkar is an obiter and not binding on us; but even assuming that this statement of the law is binding on us, it must be read in its own context. Mr. Justice Chandavarkar first cites with approval a dictum from the same decision of the Madras High Court to which I have just referred, Chalamayya v. Vatttdayya, which lays down that the acquiescence on the part of a coparcener in the business must be such as to warrant his being treated in the matter as a contracting party. Having expressed his approval of this statement of the law, the learned Judge then proceeds to enunciate the proposition to which I have just referred. Therefore it is clear in our opinion that the acquiescence referred to by Mr. Justice Chandavarkar is not any acquiescence by a coparcener in the joint family business but such an acquiescence as would warrant his being treated as a contracting party; or, in other words, his conduct quae the joint family business must be such as to entitle the Court to draw a legitimate inference that he could be regarded or considered as a contracting party along with the manager.

6. Mr. K. V. Joshi for the respondent has strongly relied on a decision in Samalbhai Nathubhai v. Someshvar, Mongol and Harkisan I.L.R. (1880) Bom. 38. In that case the plaintiff sued on a balance of account, signed by defendant No. 1 Someshvar in the name of the firm of ' Jivram Haribhai.' That firm was established by Jivram, the father of Someshvar and his two brothers defendants Nos. 2 and 3. Someshvar at that time was twenty-three years old; Mangal, defendant No. 2, was seventeen and Hari-kisan, defendant No, 3, was a minor. Someshvar admitted the claim but urged that the liability lay upon the firm and not upon himself personally. Defendants Nos. 2 and 3 set up a plea of limitation and contended that they were not the owners of the firm of ' Jivram Haribhai ' solely managed by Someshvar. On all these points the Subordinate Judge decided in favour of the plaintiff and passed a decree accordingly. Mangal alone appealed to the District Judge, and the District Judge held that Mangal was not a partner and dismissed the suit as against Mangal. From that decision an appeal was preferred to the High Court, and Mr. Justice Melvill in his judgment only considered the question whether Mangal was liable as a member of the joint Hindu family; and in the judgment he has discussed the distinction between a partnership firm and a joint family firm. It is to be noted that the question whether Mangal was personally liable or only liable to the extent of the joint family assets is nowhere discussed. It was only Someshvar who raised the point as to whether he was personally liable or his liability was confined to the assets of' the joint family. As far as Mangal was concerned, he disputed his liability altogether. Therefore the observation of Mr. Justice Melvill that a coparcener, even though he may not attend to the family business, is liable to the creditor only applies to the liability of such a co-parcener to the extent of the assets of the joint family firm and not to the personal liability of such a coparcener. Mr. Justice Melvill was only concerned to decide that mere absence from participating in the joint family business does not absolve the coparcener from his liability to the creditor to the extent of the joint family assets.

7. Mayne in his Hindu Law has enunciated the principle in this way:

Where several persons take an active part in the conduct of the business, they may well be regarded as managing members or as persons entrusted with the conduct of the business;and they cannot only bind each other but also members of the family including minor coparceners.

Therefore it is not sufficient that a coparcener should take a part or even an active part in the conduct of the business. It must be further established that the part he takes in the conduct of the business is such as to entitle the Court to regard him as the managing member of the firm in the same way as the manager himself.

8. In this case the finding of fact of the learned District Judge which we accept is that defendant No. 6 took part in the working of the cloth shop at the time when the promissory note was executed. He has found that defendant No. 6 could not be treated as being a contracting party by reason of his conduct. In our opinion the mere fact that defendant No, 6 took part in the working of the cloth shop was not sufficient to make him personally liable for the debts of the business. There is no evidence that his participation in the business was such as to make him liable to be regarded as a manager of the business.

9. In our opinion in each case the Court must consider the nature and extent of the participation of the coparcener who is sought to be held liable for the debts of the firm. Mere participation is not enough. If the Court comes to the conclusion that the, nature and extent of the participation is such as to put him in the same position as a partner in a partnership firm or as a manager, then he would be personally liable to the credit or as much as the manager himself.

10. Under the circumstances we are of the opinion that defendant is not personally liable and the decree passed against him to the extent that he is made personally liable, must be modified and the decree against him must be restricted to the extent of defendant No. 6's share in the joint family assets.

11. We, therefore, allow the appeal with costs in this Court as well as costs in the lower appellate Court.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //