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Chakka Purnachandrarao Vs. Kunala Mallikharjuna Rao and ors. - Court Judgment

LegalCrystal Citation
SubjectFamily;Commercial
CourtAndhra Pradesh High Court
Decided On
Case NumberAppeal No. 284 of 1956
Judge
Reported inAIR1961AP247
ActsHindu Law; Negotiable Instruments Act, 1881 - Sections 50
AppellantChakka Purnachandrarao
RespondentKunala Mallikharjuna Rao and ors.
Appellant AdvocateV. Venkateswarlu and ;V. Dasaratharamayya, Advs.
Respondent AdvocateSankara Sastry, ;K. Venkatarao and ;T. Veerabhadrayya, Advs.
DispositionAppeal dismissed
Excerpt:
family - partition - hindu law and section 50 of negotiable instrument act,1881- joint family traditional profession is business - manager can diversify ,expand into new channels till it is not speculative - all non speculative transaction binding upon family - held, on partition debt previously incurred holds good - creditors right not affected. - - the evidence clearly shows that the 5th and the 6th defendants have always been sailing together, even until the date of the present suit. the probabilities of the case clearly indicate that the 5th and 6th defendants are both trying to avoid the suit liability being enforced against all the assets belonging to their family liability. ) where it was held that the endorsee of a promissory note executed by the managing member of a hindu..........stated that defendants 2 to 5 were partners. the 6th defendant was described as a member of the joint family consisting of himself and his elder brother the 5th defendant and if was stated that the 5th defendant joined the firm on behalf of the joint family. the 7th defendant was impleaded as the widow of the second defendant's father who was also stated to be a partner of the firm.2. we are only interested in the present appeal with the suit in so far as it related to the 6th defendant. the suit was based upon two promissory notes both dated 20th january 1952 -- one executed in favour of the plaintiff for a sum of rs. 3,000/-by the 2nd defendant on behalf of the firm, and the other for a sum of rs. 2000/- also by the 2nd defendant for the firm of one kunala basavapunniah and.....
Judgment:

Bhimasankaram, J.

1. The 6th defendant in O. S. No. 95 of 1954 on the file of the Subordinate Judge, Tenali is the appellant in this appeal. The 1st respondent was the plaintiff in that suit. That suit was instituted for the recovery of a sum of Rs. 6737-3-0 from the defendants of whom there were seven. The 1st defendant was a firm of which it was stated that defendants 2 to 5 were partners. The 6th defendant was described as a member of the joint family consisting of himself and his elder brother the 5th defendant and if was stated that the 5th defendant joined the firm on behalf of the joint family. The 7th defendant was impleaded as the widow of the second defendant's father who was also stated to be a partner of the firm.

2. We are only interested in the present appeal with the suit in so far as it related to the 6th defendant. The suit was based upon two promissory notes both dated 20th January 1952 -- one executed in favour of the plaintiff for a sum of Rs. 3,000/-by the 2nd defendant on behalf of the firm, and the other for a sum of Rs. 2000/- also by the 2nd defendant for the firm of one Kunala Basavapunniah and transferred to the plaintiff for collection.

The 6th defendant put the plaintiff to proof of the execution of the promissory notes and the passing of the consideration thereunder and contended that the 5th defendant was a member of the firm only in his personal capacity, that in fact there had been a division in status between him and the 5th defendant some time in 1951 and that pursuant to it (on the basis of a demand made by him on 1-8-1952 as soon as he became a major) there was an agreement to divide to 6-1-1953 which was followed by an actual division by metes and bounds evidenced by a registered partition deed dated 1-7-1953. He averred further that the 5th defendant ever since the partition was endeavouring to involve him in his own liabilities.

The suit debts were entirely the personal debts of the 2nd defendant and they were therefore not enforceable against him. The trial court found that there was actually no division between the brothers at any time, that the 5th defendant became a partner of the 1st defendant-firm in his capacity as the manager of the joint family consisting of himself and the 6th defendant, that the debts evidenced by the suit promissory notes were incurred on behalf of the firm and that the 6th defendant was equally with the other members of the firm, liable therefor. The 6th defendant as above-stated has therefore come up in appeal to us.

3. Three contentions have been raised before us on behalf of the appellant: firstly that the 6th defendant is not at all liable for the debts because the 5th defendant did not as a matter of fact and further could not as a matter of law join the firm on behalf of the joint family; secondly that there could be no personal decree against the 6th defendant and a decree if any against him should be limited to his share in the properties belonging to the joint family; thirdly, that in any case, as the plaintiff is not entitled to a decree against any of the members of the firm so far as Ex. A-2 the promissory note for Rs. 2,000/- is concerned, as the endorsement of that note in his favour does not operate to transfer the debt, upon which alone he could ask for decree against any person other than the maker.

4. We may observe that although some point was made of the division in status between the 5th and the 6th defendant in the lower court preceding the execution of the promissory notes, it has not been, rightly in our opinion, repeated before us. According to the written statement of the 6th defendant, he became a major only on 1-8-1952 and he could not have demanded partition at any time earlier. Further, no evidence was produced in the lower court to establish the alleged partition in status before the attainment of majority by the 6th defendant. A partition, therefore, only which took place subsequent to the date when the debts had been incurred would not affect the rights of the creditors. We shall deal with the three points made Seriatim.

5. Ex. B-2 dated 6-1-1953 is a registered partition agreement executed between the defendants 5 and 6 and Chekka Punannua, their mother. This was followed by Ex. B-1 dated 1-7-1953 a deed evidencing partition among them. It is therefore clear that at the time when the 5th defendant joined the firm which is admittedly before these two dates, the 5th defendant was the manager of the joint family consisting of himself and his brother.

The question then really is whether the 5th defendant represented his family in being a partner of the firm. Now the brothers, belong to the vysya community whose hereditary occupation, is business. It is not denied that their father carried on a business until his death about 8 years before the suit. That business, it is said by the 6th defendant, as D. W. 1, was a commission business in chillies, ground-nuts etc. After their father's death, the 5th defendant ran a business in brass-ware. He also dealt in tobacco.

The 6th defendant would maintain in his evidence that the 5th defendant never carried on any joint family business. It is admitted however that the brothers arid the mother have been living together in the family residence and apart from some sites and the residential house they have no family property unless the business carried on by the 5th defendant is to be treated as such property. It is not said that the 6th defendant by himself carried on any business of his own. He states that he is working as a clerk under D. W. 2 from Sept. 1951 till Jan. 1955. It is most unlikely that this family gave up all business dealings after their father's death when as the 6th defendant himself admits, their ancestral occupation was business. Above all, there is a recital in Ex. A-8, which is a certified copy of a trust agreement dated 119-7-53 subscribed by the 6th defendant among others, that the 5th defendant had carried on along with others business under the name of the 1st defendant 'for the benefit of his family' and that the parties to the deed agreed that they were liable for the debts incurred in connection with that business.

It is true that the 6th defendant states in his re-examination that this agreement Ex. A-8 (wrongly described in his evidence as a trust deed) was signed by him without knowledge of its contents, that he was forced to do so by his brother and brother-in-law and that he was questioning the truth and validity of the deed in a court of law. The plaintiff only relies upon the recital as an admission. The deed not being a trust deed by itself, but only an agreement to execute one, it is difficult to see what the 6th defendant meant when he said that he was attacking its truth and validity in a court of law.

That he has signed it, he admits it, is therefore true and as regards its validity it is not obviously enforceable by itself. Unless the explanation offered by the 6th defendant is satisfactory, the admission-contained in Ex. A-8 is entitled to the greatest weight. The evidence clearly shows that the 5th and the 6th defendants have always been sailing together, even until the date of the present suit. Exs. B-2 and B-1 seem to represent attempts-to-save some of the family properties from the ruin with which they were threatened as a result of the heavy obligations incurred by the family.

The very fact that Ex. A-8 came into existence subsequent to Exs. B-2 and B-1 seems to us to reinforce the inference that the recital contained therein is true. The further fact that the brother-in-law of the 6th defendant was present when Ex. A-8 was drawn up renders it unlikely that any improper influence was brought to bear upon the 6th defendant. The probabilities of the case clearly indicate that the 5th and 6th defendants are both trying to avoid the suit liability being enforced against all the assets belonging to their family liability. In these circumstances the proper inference to be drawn is that, the 5th defendant represented the family in joining as a partner in the 1st defendant-firm.

6. It is also contended for the appellant that this being a new business, the 5th defendant had no authority to enter into it and that it would not therefore be binding upon the 6th defendant who was a minor when the 5th defendant entered the partnership. We are not persuaded that there is any force in this contention. Now it must be remembered as already indicated that we have here a family whose Kulacliara is business.

The rule in such a case seems to he that unless the new business entered into by the manager is a speculative one, it is binding upon the family. The mere fact that the business is different in kind from the business previously carried On or that it relates to a commodity different from that which, the family were dealing in previously does not make it any the less binding upon the family. It is open to a manager to extend an existing business or to divert it into new channels so long as the business remains a business and does not deteriorate into speculation.

To hold otherwise, as pointed out in a number of cases to which it is unnecessary to refer, would strike at the root of enterprise and initiative and would hardly be in the interests of the business community. It must be admitted that there are dicta in some of the cases which are not wholly reconcilable; some Judges would seem to take the view that it is not open to a manager to start a 'wholly' new line -- whatever that may meanwhile others would seem to hold that if the new business is not a, highly speculative business, it must be held to be one within the competence of the manager to undertake.

The narrow view is illustrated by the decisions in Venkatarathnam v. Sambasiva Rao, AIR 1939 Mad 525 and Rattamina v. Narayanarao, 1946-2 'Mad LJ 485: (AIR 1947 Mad 252), while the wider view is represented by the decision in Kalandar v. Sivapunyam Chettiar, AIR 1939 Mad 686 and in 'Damodhram Chetty v. Bansilal Abbeerchand, AIR 1928 Mad 566. The true position in law seems to us to be set out in the following passage from Mayno's Hindu Law, 11th Edition at page 384 which has been cited with approval in a decision of the Madras High Court by the learned Chief Justice Rajamannar and Panchapakesa Ayyar, J, in Canara Banking Corporation Ltd. v. The South Indian Bank Ltd., 1957-2 Mad LJ 502: (AIR 1958 Mad 132).

' 'It is however not unreasonable to distinguish between a family whose hereditary avocation or kulacharam is trade or commerce and a non-trading family. In the latter case, of course, the starting of a new business cannot be within the powers either of a father or other managing member. In the former case, the usage of the family must be held to modify the ordinary rule relating to the joint family so as to empower the managing member to start a new business either in place of the old or in addition to it. Hindu Law does certainly recognise the usage of a trading family. And the distinction in the case of such families between an ancestral and a new business appears, so far as the risk and liability are concerned, to be more formal than substantial. An inherited business may involve quite as much risk as a new business and apparently there is no duty on the part of a manager to close down an ancestral, business notwithstanding its evident risk. The element of risk, incident in varying degree to all kinds of trade, or business, is necessarily assumed by trading families.'

7. In our view even though the ancestral business of the 5th and the 6th defendants was a com-mission business in chillies and groundnuts as is stated for the 6th defendant, the 5th defendant had still power under the law in his capacity as manager to bind the joint family by undertaking a business in brass-ware. This he could do either directly by starting such a business or indirectly by joining a firm carrying on such a business. We, therefore, hold that the 5th defendant in joining the firm of the 1st defendant could and did represent the joint family and that the joint family is liable for the debts incurred in carrying on the business by the first defendant-firm.

8. As regards the second contention, it is not disputed for the respondents that there could be no personal decree against the 6th defendant. The decree therefore shall state that the liability of the 6th defendant is limited to his share in the proparties belonging to the joint family consisting of himself and the 5th defendant.

9. As regards the third contention, the appellant relies on the principle laid down in Marutha-imuthu v. Kadir Badsha, AIR 1938 Mad 377 (F. B.) where it was held that

'the endorsee of a promissory note executed by the managing member of a Hindu family is limited to his remedy on the note, unless the endorsement is so worded as to transfer the debt as well and the stamp law is complied with.'

In the present case, however, the endorsement is clearly one for collection, and as observed in Govindaswami v. Kandaswami, AIR 1942 Mad 742(1) such an endorsement has the effect merely of constituting the endorsee an agent of the payee, and if the latter could have sued persons other than the maker on the debt there is no reason why the endorsee for collection should be restricted only to the remedy on the note. In that case, the learned Judge distinguished the decision in Raghavalu Naidu v. Rajalingam, AIH 1939 Mad 846 which dealt with a case of an ordinary endorsee and not an endorsee for collection. We think the distinction made in this decision is sound and should be adopted. Therefore, a decree could well be made in the present case against a person other than the maker,

10. In the result, except for the modification above indicated, the appeal fails and is dismissed with costs.


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