1. This appeal arises out of a suit on a promissory note executed by defendant No. 2 as guardian and vahivatdar of the estate of defendant No. 1 in favour of one Bapuji Yeshwant Prabhu, dated January 30, 1928. The plaintiff is the assignee of the suit promissory note.
2. The facts are that one Ganu Sakharam Kode died possessed of considerable property, both movable and immoveable, and consisting, inter alia, of a business which he was carrying on in his own name. Prior to his death he made a will by which he bequeathed all his property to the first defendant, who was his minor adopted son, and appointed the second defendant, who was the natural father of the first defendant, as guardian and vahivatdar of the estate. By the will the deceased authorized the second defendant to manage the estate and to carry on the business with the advice of one Tanavade, whom, the will stated, the deceased was going to appoint, along with two other persons, as ' trustees.' It has been found by both the Courts that the clause by which the testator directed the second defendant to consult Tanavade and the other two so-called trustees became impossible of performance and was never acted upon. Tanavade died before the transaction in the suit, and had become incapable of giving any advice as he had become paralytic for some years prior to his death, and the other two persons never accepted the alleged trust and never acted as trustees, nor were they consulted in the management of the estate by the second defendant. This finding is binding upon me in this second appeal. It has also been found by both the Courts-and I think rightly-that no trust was created by the will.
3. The second defendant continued to manage the estate and to carry on the business, and it has been found by the Courts below that the estate was benefited by the business which defendant No. 2 carried on and had expanded out of the profits derived in the business. The shop of Ganu Sakharam Kode had dealings with the Bombay shop of one Bapuji Yeshwant Prabhu and purchased goods from that shop for sale. In respect of those dealings a large sum became due to Bapuji Yeshwant. An account was made in respect of those dealings, and after making certain remissions, a sum of Rs. 1,925 was found due to him, in respect of which the promissory note in suit was passed. The promissory note recites that the first defendant was a minor and also recites the facts which I have stated with regard to the dealings and the account. It purportes to be signed by the minor, his signature being made by the writer, and also by the second defendant. As stated above, the plaintiff is the assignee of the promissory note, and both the Courts have held that the assignment has been duly proved and is valid in law.
4. Various defences were taken by both the defendants which were, however, rejected by both the Courts, and a decree in favour of the plaintiff was made by the trial Court for the sum of Rs. 2,346, with interest and costs, to be recovered from the estate, both moveable and immoveable, of defendant No. 1 only. The suit against defendant No. 2 was dismissed, and the defendants were made to pay their own costs of the suit. That decree was confirmed in appeal by the First Class Subordinate Judge of Ratnagiri. It is from his judgment that this appeal is taken.
5. Mr. Desai relying upon the cases of Keshav v. Balaji : AIR1932Bom460 and Shankar v. Nathu : AIR1932Bom480 contends that the minor was not liable. In my opinion the cases relied upon are clearly distinguishable on the facts of this case. Here, defendant No. 2 passed the promissory note for the purposes of the business, which he was authorized by the will to carry on. There was no restriction in the will itself upon his powers to continue and carry on the business. It is clear law that although the minor is not personally liable on the debts incurred by his guardian in the course of business, and although the creditors of the business have no right of direct recourse against the minor, still hiss guardian will be entitled to indemnity for liability properly incurred out of the assets of the business, and the creditors of the business can proceed directly against such assets for liability properly incurred by the guardian, The following observations of Mayne in Mayne on Hindu Law and Usage, 9th edn., are relevant (p. 299):--
Similarly, where the guardian or legal representative carries on a business on behalf of the minor, creditors of the business have no right of direct recourse against the minor or his estate ; but as the guardian is entitled to indemnity for liabilities properly incurred out of the assets of the minor embarked in the business, creditors are entitled to proceed directly against such assets ; where, therefore, the guardian has no right to indemnity against such assets, as where he acted improperly, neither have his creditors. This conclusion is arrived at not on considerations of Hindu law, but of justice, equity and good conscience following the English decisions.
The principle is, that in these circumstances, the creditor is subrogated to the position of the guardian. No authority is necessary for this proposition, but if one is needed, reference may be made to the case of Sanka Krishnamurthi v. The Bank of Burma I.L.R. (1911) Mad. 692. In this case there is no suggestion that the second defendant acted improperly.
6. There is another way of looking at the facts of this case. The second defendant was certainly an executor according to the tenor of the will. He was authorized to run the business. Now, where an executor is authorized by the will tocarry on business, though he is personally liable for the debts which he incurs, he is entitled as against the beneficiaries to be indemnified out of that part of the testator's estate which he is authorized by the will to employ in the business. [See Ex parte 'Garland (1804) 10 Ves. Jun. 110 and Dowse v. Gorton (1891) A.C.J.
7. I think, therefore, the minor would be liable on the promissory note in this case, but his liability will be limited to the assets of the business. To that extent, therefore, the decree made will have to be varied, and the decree will run as follows :
8. Plaintiff to recover a sum of Rs. 2,346 and costs of suit with future interest on Rs. 2,346 and the amount of costs at the rate of six per cent, per annum from tha date of suit till realization from the assets of the shop originally carried on in the name of Ganu Sakharamshet Kode and now carried on by defendant No. 1 in his own name or any property purchased out of the said assets.
9. The defendants to bear their own costs of suit.
10. Defendant No. 1 must pay the costs of the appeal and of the appeal in the District Court to the respondent.