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Fateh Lal and ors. Vs. Bishambhar Nath - Court Judgment

LegalCrystal Citation
SubjectFamily
CourtAllahabad
Decided On
Judge
Reported in(1907)ILR29All176
AppellantFateh Lal and ors.
RespondentBishambhar Nath
Excerpt:
.....not follow that a hindu infant, who by birth or inheritance becomes entitled to an interest in a joint family business becomes at the same time a member of the trading partnership which carries on the business. when a minor attains full age, there is no good reason why the security of a party having dealings with the firm should be enhanced by giving him in addition to the security of the joint family property the security of any separate property to which a minor member may on attaining majority become entitled, unless it be that by some consentient act on the part of the latter he has accepted the position of a partner and ratified the transactions out of which the obligation to the creditor arose. if any of the members of a joint family happen to have separate estates we know of no..........also found, and it is admitted here, that the business of the firm of jagat nath thanti mal was a joint ancestral family business. the learned subordinate judge held that bishambhar nath did not repudiate connection with the business when he attained age, but on the contrary ratified the partnership and rendered himself liable in respect of its transactions.3. as we said in our judgment in f.a. no. 314 of 1903, a personal decree against a member of a bankrupt firm would ordinarily not be of much pecuniary value. in this case, however, it would be otherwise. the appellant was on the 1st of january 1903 appointed treasurer of the bank of bengal at lucknow and subsequently at other places, and to qualify himself for that position he was obliged to deposit with the bank as security for the.....
Judgment:

John Stanley, C.J. and Burkitt, J.

1. This appeal is connected with F.A. No. 314 of 1903 and several other appeals against decrees passed against the appellant and other defendants whereby the appellant is made personally liable for the amount of the decrees, The appellant and other members of his family constituted a joint and undivided Hindu family, owning as such an ancestral trading and banking firm at Cawnpore and Lucknow, the firm at Cawnpore being known by the style of Jagat Nath Thanti Mal and that at Lucknow by the style of Sheo Prasad Khazanchi. In our judgment delivered on the 28th of March 1906 in First Appeal No. 314 the circumstances under which the indebtedness arose are fully stated. The suit which has, given rise to this appeal is one for recovery of a debt amounting to over Rs. 11,000, representing the balance due in respect of a number of hundis which were drawn by the defendant's firm on the plaintiff' firm at Cawnpore styled Moti Lal, Fateh Lal. The defence of the defendant Bishambhar Nath to the suit was that he was never a partner in the firm of Jagat Nath Thanti Mal and had no concern with that firm. He also alleged that during his minority he severed connection with the ancestral business and family property, and that if it were found that any debt was due to the plaintiffs' firm he and his separate property could not be made liable therefor, inasmuch as the indebtedness was incurred at a time when he was a minor.

2. The Court below decreed the plaintiffs' claim, finding that Bishambhar Nath was a major at the time the debts sued for were incurred. It is now admitted that this was the case, Bishambhar Nath having attained majority on the 9th of November 1901. It also found, and it is admitted here, that the business of the firm of Jagat Nath Thanti Mal was a joint ancestral family business. The learned Subordinate Judge held that Bishambhar Nath did not repudiate connection with the business when he attained age, but on the contrary ratified the partnership and rendered himself liable in respect of its transactions.

3. As we said in our judgment in F.A. No. 314 of 1903, a personal decree against a member of a bankrupt firm would ordinarily not be of much pecuniary value. In this case, however, it would be otherwise. The appellant was on the 1st of January 1903 appointed Treasurer of the Bank of Bengal at Lucknow and subsequently at other places, and to qualify himself for that position he was obliged to deposit with the Bank as security for the faithful discharge of his duties a sum of Rs. 50,000. He had no money of his own; but his mother-in-law Musammat Tulsha Kunwar, who is a wealthy lady of Muzaffarpur, deposited in the Bank in his name the requisite amount and so enabled him to secure the appointment. The object of the respondents, as the appellant alleges, is to put pressure on the appellant's mother-in-law by attaching this Rs. 50,000 in execution of a personal decree and so compel her to discharge their debt. We are told that sums amounting to no less than Rs. 1,70,000 have been placed to the credit of the appellant to enable him to secure the appointment of Treasurer at various places.

4. The Court below found that the appellant not only assisted his father in the work of the Bank but also managed the affairs of the ancestral business jointly with his uncle Suraj Prasad, both before and after he had attained majority, and that, so far from repudiating his connection with the family business, he by his acts adopted and ratified its transactions. In our judgment in F.A. No. 314 of 1903 we reviewed at considerable length the evidence upon which this decision was arrived at and it is unnecessary here to repeat it. We shall treat our remarks in that judgment as embodied in this judgment. The same evidence applies to both cases. The conclusion at which we arrived was that the plaintiff in that case bad wholly failed to establish his case. We held that the defendant appellant took no active part in the business of the firm of Jagat Nath Thanti Mal after he attained majority; and that, so far from doing so, he kept himself aloof from all connection with it. He says in his evidence that be went to Lucknow in April 1901, that is, before he attained full age, and there met Mr. Logan, the Agent of the Bank of Bengal, who promised that if he learnt the treasury work in the Bank and qualified himself to look after it, he would appoint him Treasurer. Mr. Logan, he says, asked him if he had any concern with his father's firm at Lucknow and Cawnpore and he replied in the negative. In a further deposition made on the 7th of May 1903 he stated that Mr. Logan at this interview told him that the post of Treasurer could not be given to any person having connection with his family business, and that he told Mr. Logan that he had severed his connection with the members of his family. The family business was, we may mention at this time, in a tottering condition. Chidammi Lal, who was in the employment of the firm of Lachmi Narain Suraj Prasad, deposed that when Khannu Lal died, Suraj Prasad, the uncle of the defendant appellant, took him (the witness) to Lucknow in April 1901 and there he remained for a year. He staled that the business was carried on under the orders of Suraj Prasad; that Bishambhar Nath did not interfere with the business of the firm, nor had he any concern with it. We are quite satisfied that the defendant appellant never took any active part in or had any concern with its management directly or indirectly after he attained majority.

5. Under these circumstances the question for determination is whether the defendant appellant can be held personally liable for debts incurred by the managing members of the ancestral family business after he attained majority.

6. To the extent of his share in the joint family property he does not dispute his liability, but he claims exemption from payment of those debts out of separate property which came to him from his mother-in-law and other friends after the ancestral firm had ceased to do business. The transactions in respect of which the defendant is sued were entered into between the plaintiffs and the manager of the ancestral business; and there is nothing to show that the appellant was aware of, much less that he ratified or adopted these transactions. On the contrary, the evidence. shows that he designedly abstained from taking any part in the business and kept aloof from it. There is no conduct on his part which could have led the plaintiffs to believe that in their dealings with the manager the appellant was a contracting party. They dealt with the manager as they had been previously dealing with him as a person carrying on an ancestral family business on the credit of the joint family property. They could not have dealt with the firm on the credit of appellant's private separate estate, for it was after the date of the hundis sued on that appellant's mother-in-law put him in funds to take up the office he now holds in the Bank of Bengal in Lucknow. Before that time he possessed nothing but his interest in the family joint estate, the liability of which he does not dispute. The question, then is, can a manager who carries on a family business pledge, not merely the family joint credit but also the separate estate which an individual member of the family may subsequently acquire? We are not aware of any authority for an affirmative answer to this question. In the two cases upon which reliance was placed by Mr. Ryves on behalf of the plaintiffs respondents, the persons who were held liable were considered to have by their conduct constituted themselves partners. In the case of Samalbhai Nathubhai v. Sameshvar (1880) I.L.R., 5 Bom., 38 Melvill, J., in delivering the judgment expressly guarded himself in regard to this question. 'Whether,' he observed, 'a Hindu who becomes entitled by inheritance to a share in a trading business is ipso facto and without his own consent involved in all the liabilities of a partner it is unnecessary for us to determine.' In the other case, entitled In the matter of Haroon Mahomed (1890) I.L.R., 14, Bom., 139 it was held that the insolvent Haroon Mahomed had taken an active part after he attained age in the management of the business of the partnership. In the course of his judgment Sarjent, C.J., observes: 'The petitioning creditors alleged that his (i.e., Haroon's) father took a principal part in managing the firm up to the time of his death and since that time Haroon has taken his place. It appears that since then, at all events, Haroon has kept up an intimate connection with the firm. He has raised money for it. He has paid money into the Bank for it and drawn money out for it. He has lived with the other members of his family, who are admittedly members of the firm. He does not disclose how he is supported if he draws no profits out of the firm, as a partner, for his maintenance.' In that case a very different state of facts from those in the present case is disclosed.

7. We are not aware of any case, and none has been cited to us, in which it was held that persons carrying on a joint family business have authority to pledge the credit of each member of the family in his individual and separate capacity. Authority to pledge the joint family property and property acquired with' funds derived from the joint business undoubtedly exists. In Ram Lal Thakursidas v. Lakhmichand Muniram (1861) 1 Bom., H.C. Rep., App. li it was held that a minor member of a family, interested in an ancestral trade carried on behalf of the family, is bound by the acts of the manager necessary with reference to the carrying on of the trade, but Sausse, C.J., in delivering judgment treated the rule as exceptional and not to be pushed beyond its strict limits. He observes, at p. LXXII: 'The general benefit of the undivided family is considered by Hindu law to be paramount to any individual interest, and the recognition of a trade as inheritable property renders it necessary for the general benefit of the family that the protection which the Hindu law generally extends to the interests of a minor should be so far trenched upon as to bind him by acts of the family manager necessary for the carrying on and consequent preservation of that family property; but that infringement is not to be carried beyond the actual necessity of the case.' See also Johurra Bibee v. Sreegopal Misser (1876) I.L.R., 1 Calc., 470 and Bemola Dossee v. Mohun Dossee (1880) I.L.R., 5 Calc., 792. Further than this the authorities do not go.

8. In the case of Lutchmanen Chetty v. Siva Prokasa Modaliar (1899) I.L.R., 26 Calc., 349 Sale, J., in the course of his judgment repudiated the notion that a Hindu minor who by birth or inheritance becomes entitled to an interest in a joint family business becomes at the same time a member of the trading partnership which carries on the business. He says, at p. 354: 'A trade like other personal property is descendible amongst Hindus, but it does not follow that a Hindu infant, who by birth or inheritance becomes entitled to an interest in a joint family business becomes at the same time a member of the trading partnership which carries on the business. He can only become a member of the partnership by a consentient act on the part of himself and his partners, and it was on this ground held by the late Supreme Court that an infant of tender years. whose name was used in a partnership business, need not be joined as a co-plaintiff in a suit by the father to recover a trade debt--Petum Doss v. Ramdhone Doss (1848) Taylor, 279.'

9. In the case to which Mr. Justice Sale referred it was held that a child of tender years cannot be constituted nor can he hold himself out as a partner in a trading firm. Sir L. Peel, C.J., in his judgment in that case remarked that 'a trading partnership is a consentient contract;' and later on: 'A trade may be directed to be carried on for the benefit of infants, but without their consent they cannot be made partners. It seems to follow from this that if infants are not partners, if they are to become partners on attaining age they must take some active step in that behalf. Persons having dealings with and giving credit to a joint family trading firm where there are minor members of the joint family presumably rely on the credit of the joint family property. It is that property alone, so far as minors are concerned, which the acting partners can pledge and to which the creditor can have recourse. When a minor attains full age, there is no good reason why the security of a party having dealings with the firm should be enhanced by giving him in addition to the security of the joint family property the security of any separate property to which a minor member may on attaining majority become entitled, unless it be that by some consentient act on the part of the latter he has accepted the position of a partner and ratified the transactions out of which the obligation to the creditor arose. Subramania Ayyar, J., aptly puts the matter thus in refusing to give a personal decree against certain members of a joint family to the creditors of a family partnership for a debt incurred by the managing members of the joint family, that is, a decree which should bind not merely the family estate but be enforceable also against the self-acquired or separate property of a son and nephews of one of the contracting parties. 'No doubt,' he observes, 'where it is shown that the contract relied on, though purporting to have been entered into by the manager only, is in reality one to which the other co-parceners are actual contracting parties, either because they had agreed before the contact was entered into to be personally bound thereby or because they, being, in existence at the date of the contract and competent to enter into it, have subsequently duly ratified and adopted it, in that case unquestionably every such co-parcener is absolutely responsible. Equally he would be responsible, though he did not assent to the particular contract, if there had been such acquiescence on his part in the course of dealings, in which the particular contract was entered, as to warrant his being treated in the matter as a contracting party. When, however, such is not the case, but the contract is of a character such as under the law to entitle the manager to enter into independently of the consent of the other members of the family, so as to bind them thereby, then it is clear that the scope of the manager's power is restricted to and does not extend beyond the family property. As regards the other property in the hands of a coparcener no other co-parcener, whether he be the manager or not, has any title whatsoever. The legal individuality of a co-parcener is not merged in the manager so far as the co-parcener's self-acquired or other separate property is concerned.'--Chalamayya v. Varadayya (1898) I.L.R., 22 Mad., 167.

10. This view commends itself to us. A Joint ancestral family business under the Hindu law managed by the adult members of the family differs from an ordinary contractual partnership. In the case of the latter, each partner is a contracting party, all the partners holding themselves out as trading on the credit of their combined and separate funds. Whereas in the case of a joint family ancestral business there is no contract of partnership whatever between the members of the joint family. The family frequently contains amongst its members minors who acquired their interest in the business by birth. Indeed it may be safely assumed that in most of the existing Hindu joint family trading firms the parties now interested in them acquired their interest by birth and not by contract. Admittedly minor members are liable to the extent of their respective interests in-the joint family property for the acts of the managers of the joint family business. But we do not think that their liability extends further. If any of the members of a joint family happen to have separate estates we know of no good reason why such separate estate should be held so liable. We do not think that the rule laid, down in the case of Goode v. Harrison (1821) 24 R.R., 307 that a minor on attaining majority must promptly notify his disaffirmance of a partnership if ho is to avoid future liabilities can, bearing in mind the dissimilarity in the ways in which a contractual partnership and a Hindu joint ancestral family trading business originate, be applicable.

11. In conclusion, then our view is that the defendant appellant, never having held himself out as a partner and never having taken any part whatever in the transactions out of which the plaintiff's claim has arisen, even though he had attained majority at the time, is not liable to satisfy that claim out of his separate property, in other words, that he did not after he had attained full age by any consentient act become a partner in the joint ancestral family business and thereby render his separate estate liable to satisfy the obligations of the firm. We therefore allow the appeal, and set aside so much of the decree under appeal as renders the appellant Bishambhar Nath personally liable under it. In other respects the decree will stand. We give the appellant, his costs of this appeal.


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