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U.P. Oil Mills Vs. Jamna Prasad and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtAllahabad
Decided On
Reported inAIR1933All334
AppellantU.P. Oil Mills
RespondentJamna Prasad and ors.
Excerpt:
- - shiam lal now clearly establishes that jagmohan ram signed the memorandum of association as a promoter and made himself liable for 151 shares of the value of rs. for there would be no credit in the market and nobody would lend money or provisions to the father because they would have no or a poor remedy against the father. in any other case like the present one, there is no liability at all on the family......or self-acquired property of jagmohan ram is liable, but also the share of ram lakhan in the family property is liable to pay jagmohan ram's debt because of the pious duty of ram lakhan to pay such debt.2. there can be no doubt that the debt in question is not tainted with immorality. now we have to find out how far the share of ram lakhan in the joint family property is liable to pay jagmohan ram's debt. the relevant proposition of hindu law, when fully stated, would stand as follows: a son is liable to pay his father's debt, out of the family property consisting of his own share and the share of the father the property which was in the father's hand in the life-time of the father. it is not a complete statement of the law to say, that a hindu son is bound to pay his father's debt.....
Judgment:

Mukerji, Ag. C.J.

1. The case was partly heard and decided on 31st May, 1932. The result of that decision was that the application of the official liquidator was dismissed as against all the opposite parties, except as against Ram Lakhan, son of Jag Mohan Ram. We directed by our order that Shiarm Lal, witness, should be re-examined, and he has been re-examined. Now we proceed to decide the remaining issues. Issue 1. The evidence of; Shiam Lal now clearly establishes that Jagmohan Ram signed the memorandum of association as a promoter and made himself liable for 151 shares of the value of Rs. 100 each. Shiam Lal swore that he attested the memorandum of association in the presence of the executant, Jagmohan Ram. It was argued that this evidence was not enough and that Shiam Lal ought to have said specifically that he was present when Jagmohan Ram made his signature and that Jagmohan Ram was present when Shiam Lal signed the document as a witness. In our opinion the statement made by the witness makes this clear, and if this was not clear, questions should have been put in cross-examination to find out if J Shaim Lal meant to say something else. This not having been done, we hold that Shiam Lal did attest according to law the signature of Jagmohan Ram and Jagmohan Ram's liability arose. Issue No. 2 no longer arises, as on the question of fact involved in issue No. 1, we have found that Jagmohan Ram did actually sign the memorandum of association and his signature was attested in accordance with law. Issue No. 3 has already been decided so far as the question of benefit to the family is concerned. We held that membres of the joint family other than the son were not liable. We have now to determine the liability of the son. This will be considered in connection with issue No. 4. Issue No. 4. According to Section 160, Companies Act, Ram Lakhan is liable as a legal representative of Jagmohan Ram as a contributory 'in due course of administration'. This means that so far as Jagmohan Ram may have died possessed of separate property, that property in the hands of his son, Ram Lakhan, is liable as indicated in Section 160, Companies Act. It is however argued that not only the separate or self-acquired property of Jagmohan Ram is liable, but also the share of Ram Lakhan in the family property is liable to pay Jagmohan Ram's debt because of the pious duty of Ram Lakhan to pay such debt.

2. There can be no doubt that the debt in question is not tainted with immorality. Now we have to find out how far the share of Ram Lakhan in the joint family property is liable to pay Jagmohan Ram's debt. The relevant proposition of Hindu Law, when fully stated, would stand as follows: A son is liable to pay his father's debt, out of the family property consisting of his own share and the share of the father the property which was in the father's hand in the life-time of the father. It is not a complete statement of the law to say, that a Hindu son is bound to pay his father's debt because of a pious obligation to that effect. If that were the sole proposition of law, the son would be' liable to pay out of his personal earnings, which however is not the law. The doctrine of pious obligation was invented to settle a conflict between two positions that were bound to arise in a family consisting of a father and his sons. The first position was that, in ancestral property, a son by his mere birth, got a share which was equal to the share of the father. In accordance with this proposition of law, the property in the hands of the father is not the absolute property of the father. That being so, he cannot utilise that property for the payment of his debts. The next position is this. A father is the head of the family. Ostensibly, he owns the entire property which he manages, although, legally, he and his sons have equal shares in the property. On the strength of this property, and on the credit of it, the father deals with the world at large and incurs debts. If the father be unable to raise any money on the credit of the joint family property, the result would probably be that in many cases maintenance of the sons and the family would become impossible; for there would be no credit in the market and nobody would lend money or provisions to the father because they would have no or a poor remedy against the father. To adjust: between these conflicting positions, a doctrine was invented that it is the pious duty of the son to pay the father's debt out of the entire family property, including the shares of the sons, provided the debt is not tainted with immorality.

3. The doctrine of pious obligation to pay the father's debt would be available only when there is a family consisting of father and sons. For, where the family consists not only of the father and the sons, but of brothers of the father and nephews of the father, the position becomes entirely different. Then it is no longer a case of a father at the head of his family, and incurring debts on the credit of family property. It is then a case of a debt incurred by one of the members of a Hindu family. If the person who has incurred the debt be the manager of the family, he can bind the family only if he has incurred the debt for the benefit of the family. If he be not the manager, he cannot bind the family in any circumstances. If there is no benefit to the family, the debt can be realised, is the case of a simple money decree being passed on it, by attachment of the share of the debtor in his life time. If an attachment be effected, that attachment would virtually take the property attached out of the hands of the joint family and put it into the custody of the Court. In that case the debtor's share, so attached may be sold. But the share' of debtor's son would not be liable to be sold. It is the property, which a father himself may sell to pay his own debt, that can be sold through the intervention of the Court. Where the debtor is not himself the1 head of a family consisting of himself and his son, he cannot sell any portion of the family property, even his own share, to pay his own debt. See Balgobind v. Narain Lal (1893) 15 All 339. If there be no attachment in the life time of the debtor, his interest would pass by survivorship to the remaining members of the family and the creditor would be without any remedy whatsoever. See Binda Prasad v. Raj Ballabh : AIR1926All220 .

4. This state of the law has been recently laid down by their Lordships of the Privy Council in the case of Brij Narain v. Mangla Prasad AIR 1924 PC 50. The case that was actually before their Lordships of the Privy Council was a case of a mortgage. But the Full Board of seven Judges proceeded to lay down the entire proposition of Hindu Law on the question of payment of debts because a previous decision of their Lordships, in Saha Ram Chander v. Bhup Singh AIR 1917 PC 61, had to some extent unsettled the law as it was previously understood. In one sense, therefore, the proposition laid down by their Lordships were mostly obiter dicta, but in view of the fact that their Lordships did mean to settle the entire law, we must accept their pronouncement as conclusive for us. At p. 104 their Lordships considered the several aspects that could arise in a Hindu family. The first case that their Lordships considered was the case of a joint family which was managed by one of the members. The law that was laid down was that the managing coparcener could neither alienate the family property nor burden the estate in his capacity as a manager except for purposes of necessity. It is important to note that their Lordships laid down the extent of the capacity of a member, as the manager. The reason was that in other circumstances, the member's acts had no effect. In the second proposition their Lordships lay down that where the manager is a father and the family consists of a father and sons, the father has greater powers and so long as the debt incurred by the father is not immoral, the whole estate of the family (consisting of the father and the sons) was liable to be taken in execution proceedings upon a decree for payment of that debt. Their Lordships then state two other propositions of law with which we are not concerned here, and then they state as a fifth proposition that the liability of the estate in the case of facts stated in case No. 2 was not affected by the question whether the father was dead or alive.

5. Now in the case before us we have a family which does not consist merely of a father and son or sons, but which consists of several members who do not stand in relation to one another as father and sons. The family of Jag-mohan Ram consisted of himself, his brothers and his nephews and his own son. In such a case the debt incurred by the manager could be enforced against the other members of the family only in the case of there existing a family necessity for incurring the debt. In any other case like the present one, there is no liability at all on the family. The case before us does not fall under proposition No. 2 as enunciated in Brij Narain's case AIR 1924 PC 50, because it was not the case of a family consisting of a father and sons, but it was a case in which there were members of the family other than sons. The case before us not being covered by proposition 2, of their Lordships', and being covered by proposition 1, the liability of Ram Lakhan will be only to the extent of the separate or self-acquired property (which did not merge in the joint family estate) in the hands of Ram Lakhan. We accordingly decide that the liability of Ram Lakhan is only to the extent of the property to which Section 160, Companies Act applies, namely, the separate property of Jagmohan Ram in which no other person had any interest in the life-time of Jagmohan Ram.

6. Issue No. 5 does not require any decision in the circumstances of the case. Issues Nos. 6 and 7. No evidence has been laid before us to show that Jagmohan Ram's shares were forfeited and they were sold and re-allotted to other persons. Issue No. 8. There is no evidence to substantiate it. Issue No. 9. It is not argued before us. Issue No. 10. It was argued on behalf of Ram Lakhan that Jagmohan Ram having died in the year 1921, he ceased to be a member of the company and therefore became a past member within the meaning of Section 158, Companies Act, and therefore his estate is not liable. This argument is not sound. Jagmohan Ram by his death did not become a past member within the meaning of 156 (1). Having died, he could not continue to be a member of the company, but his estate continued to be liable. No authority has been produced before us to show that by mere death, a member of a company becomes a 'past member' within the meaning of Section 156, Companies Act. Section 156 deals with the case of a member who has legally parted with his shares. We accordingly hold that Jagmohan Ram's son is liable to be placed on the list of contributories. Issue No. 11. The learned Counsel for Ram Lakhan argued that because Jagmohan Ram did not pay anything towards the shares subscribed by him there was only a liability to be enforced by a suit for specific performance of the contract to make him take up shares in the company. The argument is based on Section 30, Companies Act, which says that the subscribers of the memorandum of a company 'shall be deemed to have agreed to become members of the company'. This section has been interpreted in several cases :in this Court and other Courts and it has been held that the words 'shall be deemed to have agreed to become members of the company', in Section 30 mean that the subscribers of the memorandum of a company are to be treated as having become members of the company by the fact of the subscription. This view was taken in In the matter of the Union Bank Allahabad : AIR1925All519 , and in the case of J.H. Chandler & Co., v. H.I. Phillips : AIR1926All550 . No decided case In conflict with these authorities has been produced before us and we hold that by merely subscribing to the memorandum of association Jagmohan Ram became a member, of the company.

7. Issue No. 12. In view of our findings on issues Nos. 3 and 4 recorded above this issue no longer arises. We are not holding that the joint family property is liable in the hands of Ram Lakhan and the other members of the joint family and therefore we need not discuss the question whether the venture was a new one and how far Ram Lakhan was entitled to bind the joint family by entering into a new venture. The result is that we allow the application of the official liquidator to this extent that we direct Ram Lakhan to be placed on the list of contributories for 151 shares and that he be liable 'in due course of administration' as the legal representative of Jagmohan Ram. The liquidator will have his costs from Ram Lakhan personally inasmuch as Ram Lakhan unnecessarily raised pleas against his liability to be brought on the list of contributories. As to the sum of Rs. 500 which the opposite parties, other than Ram Lakhan, paid into Court for the appointment of a guardian ad litem for Ram Rakhan the decision was postponed till to-day. We are now in possession of the entire facts and are of opinion that that sum must be borne by those people who actually paid it into Court. Our reasons are that the case for Ram Lakhan could have been defended on its proper lines by the other members of the family who lived jointly with Ram Lakhan. The obstacles which those members put in the way of the decision of the case could not be justified, and therefore they must pay those costs. Ram Lakhan will pay his own costs.


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