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Raj Kumar and ors. Vs. S. Mohan Lal - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad
Decided On
Reported inAIR1931All253
AppellantRaj Kumar and ors.
RespondentS. Mohan Lal
Cases ReferredNiamat Rai v. Din Dayal
Excerpt:
.....would have made this point clear consisted of the account books of the shop itself, but they have been withheld by the defendants. but by the time the loan was taken, the business had been run on for 14 years, and it might well be that on account of the experience gained by him the business could not be said to be anything of a speculative nature. din dayal their lordships of the privy council considered that a joint family business was a business which was carried on with the joint family funds for the benefit of the joint family and that the properties of the joint family, both moveable and immovable, including the shares of the minor members of the family, are liable for debts incurred in carrying on the business and that it is within the power of the manager in a proper case to..........that to increase the stock of a business is not such necessity as would justify an alienation of joint family property. reliance is strongly placed on the case of inspector singh v. kharak singh : air1928all403 . in that case it was laid down that it is not open to the karta of a joint hindu family including minor members and governed by the mitakshara law, to start a new venture by creating liability on the ancestral property, even though the new business is likely to bring large profits to the karta or through him to his sons. it was further remarked that the ' benefit to the estate ' contemplated by their lordships of the privy council in some leading cases was a benefit of a defensive nature calculated to protect the estate from possible . danger or destruction. in that case the.....
Judgment:

Sulaiman, J.

1. This is a defendants' appeal arising out of a suit for sale on the basis of a mortgage deed dated 14th October 1920 for Rs. 4,000 executed by Mukat Lal, defendant 1, for self and as guardian of his two minor sons. All these persons are impleaded in the suit, as also other minor sons who were born subsequently. The claim was contested on the ground that the mortgage was without any legal necessity and was not binding on the family. The reply of the plaintiff was that the money had been required for the purposes of an ancestral business and the debt was binding on the family.

2. The learned Subordinate Judge has come to the conclusion that it is not true that there was any ancestral family business, but it is proved that the money was required for a family business which had been carried on by Mukat Lal for about 14 years before the loan and that the money was utilized for the purpose of increasing the stock of cloth. He commented on the fact that defendant 1 had not produced the account books of the business, and thought that it was a fact which went a great way against him and in favour of the plaintiff. He came to the conclusion that in view of the fact that Mukat Lal had been and was still running the business of selling cloth for a long time, it was the main source of income for the support of his family. He cited cases which laid stress on a prudent act of a manager being binding on the family, and then held that the debt was borrowed for legal necessity and its payment was binding on the defendants.

3. It will be conceded that there was no clear issue as to whether the transaction at the time it was entered into was one which a prudent manager of a joint Hindu family would enter into.

4. The defendants have come in appeal and on their behalf it is urged that the loan was not supported by any legal necessity.

5. The evidence led on behalf of the plaintiff that the same business had been carried on in the lifetime of Mukat Lal's father, was meagre and weak. The learned Subordinate Judge did not considered it strong enough to establish such a case. We are not prepared to differ from that view. It may therefore be taken that the plaintiff has failed to prove that any ancestral business which had been carried on by the deceased father of Mukat Lal had descended to him (Mukat Lal). But the learned Subordinate Judge has found that Mukat Lal had been carrying on this business for many years before this loan was taken. This finding is based, not only on the evidence led by the plaintiff, but also on the statement of a witness for the defendants, namely, Chidda Khan, who stated in, 1929 that Mukat Lal alone had started the cloth business about twenty or twenty-two years ago and that he was still doing that cloth business. The eldest son, Raj Kumar, was about 12 years of age when the loan was taken, and therefore on the evidence of Chidda Khan, even he was not born when the business was started by the father, who was at that time the sole male member of the family. On the evidence, we accept this finding.

6. The execution and the receipt of the consideration for this loan were also denied by the defendants. But there can be no doubt that the document was duly executed and the full amount of consideration was paid to Mukat Lal before the Sub-Registrar. Mukat Lal has not thought fit to come into the witness box. and deny the execution and the receipt of the consideration. The endorsement by the Sub-Registrar on the back of the document proves the execution and the payment of the consideration. We are fully satisfied that the amount was paid.

7. We further accept the finding of the Court below that this amount was utilized for the purchase of fresh stock for this business. The best evidence which would have made this point clear consisted of the account books of the shop itself, but they have been withheld by the defendants. Mukat Lal's statement was that they had been taken away by a partner of his and were sold as waste paper. A few years before the suit was filed Mukat Lal had himself instituted suits on the basis of his account books, and therefore he cannot say that no : account books exist. His story that they have been sold as waste paper equally cannot be accepted. The learned Judge thought that they had been suppressed and he considered that a fair presumption could be made against the defendants for not having produced these books. There is however other oral evidence which shows that cloth was purchased by Mukat Lal just after this loan. Witnesses for the plaintiff have deposed that the value of the stock in the shop was raised by about Rs. 4,000. There is also evidence-to show that another dealer was paid Rs. 740 towards the purchase of cloth in October 1920. The evidence on behalf of the defendants is practically nil. An attempt was made on their behalf to make out that the whole of this sum was squandered away by Mukat Lal in gambling. The finding was against the defendants and the learned Counsel for them has not thought it fit to press that point before us. It may therefore be taken as established that the whole of this amount was utilized for the purpose of purchasing cloth in order to raise the stock of this business.

8. It is next contended before us that to increase the stock of a business is not such necessity as would justify an alienation of joint family property. Reliance is strongly placed on the case of Inspector Singh v. Kharak Singh : AIR1928All403 . In that case it was laid down that it is not open to the karta of a joint Hindu family including minor members and governed by the Mitakshara law, to start a new venture by creating liability on the ancestral property, even though the new business is likely to bring large profits to the karta or through him to his sons. It was further remarked that the ' benefit to the estate ' contemplated by their Lordships of the Privy Council in some leading cases was a benefit of a defensive nature calculated to protect the estate from possible . danger or destruction. In that case the money had been taken for the purpose of starting a new business of plying motor lorries. The Bench held that the loan was not justified. One reason given was that a new business could not be started when minor members existed who could not give a valid consent. It was however remarked on p. 587 that a business may be started at a time when there is no minor member in the family and with the consent of the sole or all the adult members. Doubt was expressed on the view taken in an earlier case of Jado Singh v. Natthu Singh : AIR1926All511 , and it was considered that the authority of the manager to bind the family by debts incurred for a family business was restricted to an ancestral business. The point however did not strictly arise in Inspector Singh's case

9. So far as the proposition that the benefit to the estate must be of a defensive nature is concerned, a Full Bench of this Court in the case of Jagat Narain v. Mathura Das : AIR1928All454 has not accepted it. It has been held in this last mentioned case that a manager of a joint Hindu family has power to alienate joint Hindu property provided the transaction is for the benefit of the family, and that the transaction need not be of a defensive nature, but it must be such as a prudent owner would enter into, taking into consideration all the facts available to him including the fact that he was dealing with the property in which his sons had an equal interest with him.

10. It seems to us that it is not necessary to decide this broader question of law or to express any final opinion on the question on which apparently a conflict of view exists.

11. In the present case, as pointed out. above, the business was started by Mukat Lal before any of his sons were born. At that time the family consisted of a sole male member, who had full authority to start the business, and no question of any invalidity of the consent of minor members arose at all. At the time when it was started it might have been one of a speculative nature, if it was an entirely new trade by Mukat Lal. But by the time the loan was taken, the business had been run on for 14 years, and it might well be that on account of the experience gained by him the business could not be said to be anything of a speculative nature. The sons who are born in a Hindu family acquire an interest in the family property by their birth. In this case a family business existed at the time the eldest son was born, and therefore he would acquire an interest in this business with all its assets and liabilities.

12. Without deciding the point conclusively we would assume that a Hindu father has no authority to start an altogether new venture in the form of a new business, no matter whether it may be considered beneficial by him or not. We would further assume that if the manager suddenly increased the capital of a running buisness to such a great extent as practically to constitute a new venture, there would be no authority for alienating the joint family property, in order to' raise money for it. ' On the other hand, we are not prepared to accept the contention made on behalf of the appellants that the manager is bound to carry on a business on the same scale as it had gone on in the past without any right to improve it or extend it. It is difficult to see that there is any obligation on the manager to keep a particular business up to a fixed limit and not enlarge it. It follows therefore that the mere fact that the capital was increased would not by itself make it unjustified.

13. It seems to us that the question whether the alienation of a family property in order to raise money for a family business was or was not justified, must depend on the particular circumstances of each case. In the case of Niamat Rai v. Din Dayal their Lordships of the Privy Council considered that a joint family business was a business which was carried on with the joint family funds for the benefit of the joint family and that the properties of the joint family, both moveable and immovable, including the shares of the minor members of the family, are liable for debts incurred in carrying on the business and that it is Within the power of the manager in a proper case to mortgage or sell immovable as well as moveable property to raise money for the purpose of discharging such debts or enabling the business to be carried on. But there is no doubt that in that case it was a business to which the minor members , had apparently succeeded.

14. As observed by the Full Bench in the case quoted above, the test was to be whether the transaction was to the benefit of the estate and was such as a prudent owner would have carried out with the knowledge that was available to him at the time; the degree of prudence being the prudence which a man would exercise with the knowledge available to him. It further held that the transaction would have to be judged not by its results bat by what might have been expected to be its results, at the time it was entered into. The subsequent results cannot of course be a decisive factor, but merely furnish circumstantial evidence as to the propriety of the act at the time.

15. It is pointed out on behalf of the appellants that the case was not approached from this standpoint in the Court below, and it is urged that the defendants have not had an opportunity of producing sufficient evidence to explain the nature of the transaction. We think that there is force in this contention, and that a clear finding on an issue to that effect should be asked for.

16. We accordingly send down the following issue to. the Court' below for determination:

Issue.-Whether having regard to all the circumstances that existed at the time and the knowledge that was available to Mukat Lal, it was for the benefit of the estate and a prudent act on his part, to raise the capital of the family business by Rs. 4,000 by borrowing money by mortgaging the family property on the terms of the mortgage deed? The parties will be at liberty to adduce fresh evidence on the point. The findings will be returned within three months. The usual ten days will be granted for filing objections if any.


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