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Seth Banarsi Dass Gupta Vs. B.B. Bindal and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 97 of 1979
Judge
Reported in20(1981)DLT437; ILR1981Delhi817
ActsIndian Contract Act, 1872 - Sections 11; Code of Civil Procedure (CPC), 1908 - Sections 115
AppellantSeth Banarsi Dass Gupta
RespondentB.B. Bindal and ors.
Advocates: Shanti Bhushan,; S.S. Sabharwal,; L.M. Sanghvi,;
Cases ReferredG) Hindustan Aeronautics Ltd. vs. Ajit Prasad Tarway
Excerpt:
.....can be no family arrangement in a hindu undivided family in favor of one of the members, the family arrangement is to last permanently for the duration of the life of that member.; (ii) contract act - section 11--only a person who has attained majority can be a party to an agreement. ; (iii) civil procedure code - section 115 and order 35. rules 1 & 2--revisional jurisdiction of the high court is very limited--can only be granted when discretion has been wrongly exercise by the courts below--injunction cannot be granted when there is a patent defect in the case of the party or where a material fact has not been taken consideration by the court granting the injunction.; the instant appeal arises from an order confirming a temporary injunction in favor of the respondent no. 2..........(hereinafter referred to as the huf). 'that huf is carrying on a number of businesses which are modern industries at sahibabad, jaswant sugar mills ltd. at meerut, s. b. sugar mills. bijnore and mohan orchards, meeduwala tahsil najibabad, district bijnore. the dispute is about modern industries which is carrying on the manufacture of railway wagons, steel re-rollers, steel forgings, industrial oxygen gases etc. it was established somewhere in 1940. (4) the affairs of modern industries are being managed by the plaintiff according to whom he is doing so under a family arrangement entered into between him, his brothers and defendant no. 1. it is alleged by the plaintiff that that family arrangement entitles him to carry on the aforesaid business till his life time. ascertain of the.....
Judgment:

G.R. Luthra, J.

(1) The present appeal is directed against an order dated April 17, 1979 of Shri B. B. Gupta, Additional District Judge, Delhi.

(2) Vide aforesaid order Shri B. B. Gupta confirmed a temporary injunction issued in favor of Shri Brij Bhushan Lal Bindal, respondent No. 1 (hereinafter referred to as the plaintiff) restraining Seth Banarsi Dass Gupta appellant (hereinafter referred to as the defendant No. 1) from interfering in the management of the property known as Modern Industries situate at Sahibabad till the partition of the Hindu Undivided Family properties.

(3) The plaintiff is the son of defendant No. 1. The defendant No. 1, the plaintiff and other sons of defendant No. 1, namely Seth Jatender Lal, Seth Satender Lal and Shri Mohan Lal Gupta formed Hindu Undivided Family (hereinafter referred to as the HUF). 'That Huf is carrying on a number of businesses which are Modern Industries at Sahibabad, Jaswant Sugar Mills Ltd. at Meerut, S. B. Sugar Mills. Bijnore and Mohan Orchards, Meeduwala Tahsil Najibabad, District Bijnore. The dispute is about Modern Industries which is carrying on the manufacture of Railway Wagons, steel re-rollers, steel forgings, industrial oxygen gases etc. It was established somewhere in 1940.

(4) The affairs of Modern Industries are being managed by the plaintiff according to whom he is doing so under a family arrangement entered into between him, his brothers and defendant No. 1. It is alleged by the plaintiff that that family arrangement entitles him to carry on the aforesaid business till his life time. Ascertain of the plaintiff further is that the family arrangement provided that business of Jaswant Sugar Mills Ltd. Meerut in which Huf has 80% shares as well as S. B. Sugar Mills at Bijnore should be managed by defendant No. 1, that Seth Mohan Lal Gupta was appointed Administrative Officer of the aforesaid Mills while Seth Jatender Lal was given all rights of managing Mohan Orchards. According to the plaintiff, Satender Lal is not considered, so active for medical reasons and, thereforee, he was not given any management of any particular business but he has been enjoying all rights and interests as member of the HUF.

(5) Further case of the plaintiff is as follows. Under the aforesaid family arrangement he started management from the year 1953-54 and has been describing himself as Managing Proprietor of Modern Industries. The assets of the said business, prior to 1956 were about Rs. 8,61,000.00 but due to the efficient handling, the business made good profits and on June 30, 1977 the assets had. risen to the tune of Rs. 98,08,136.00 . Due to mismanagement on the part of the defendant No. 1, and Seth Mohan Lal the Sugar Mills at Meerut was not properly functioning on account of which U.P. Government took over the same. Similarly, there was mismanagement in the affairs of the S. B, Sugar Mills, Bijnore which was also taken over by the Government somewhere in the year 1970-71. The Mohan Orchards was also not managed properly and for the reasons better known to the other members of the Huf the same was mortgaged.

(6) On July 30, 1956 defendant No. 1 styling himself as proprietor of Modern Industries executed a Power of Attorney in favor of the plaintiff with a view to efficient handling of the bank accounts and the litigation with third parties. On November 16,1978 defendant No. 1 sent a letter to Central Bank of India, defendant No. 2 to stop the operation of the bank account of Modern Industries, Sahibabad under the signatures of the plaintiff. The plaintiff contacted the bank who conveyed the instructions received from defendant No. 1. The plaintiff pleaded with the Bank that the aforesaid directions were uncalled for and had no force in the eye of law but defendant No. 2 stated that it did not want to involve in any sort of dispute between the former and defendant No. 1. Then plaintiff approached defendant No. 1 but the latter was not prepared to listen to any request and insisted; upon the illegality as embodied in the letter dated 13-11-1978. The plaintiff challenges that act of the defendant No. 1 as illegal. He, thereforee, brought a suit for issue of perpetual injunction restraining the defendant No. 1 for interfering or otherwise in any manner not permitting the plaintiff to continue the management of Modern Industries and operation of his accounts with defendant No. 2. He also sought perpetual injunction against defendant No. 2 from stopping the operation of the bank account with it.

(7) Along with the suit an application under Order 39 Rule 1 & 2 and Section 151 Civil Procedure Code was given 'for issue of a temporary injunction restraining the defendant No. 1 from taking any steps for stopping bank operation of Modern Industries with defendant No. 2 or from interfering in the management of the said business and also restraining defendant No. 2 from stopping the plaintiff from operating upon the bank account of the said business.

(8) Defendant No. 1 contested the suit as well as application. He denied that the management of Modern Industries was handed over to the plaintiff on account of any family arrangement or family settlement. He stated that he was karta of the Huf known as Seth Banarsi Dass Gupta and used to look after all the interest and businesses of the HUF. He explained that in order to get assistance in the management and work of Huf he required the other co-parceners to help him in different capacities and that in order to get their help he employed them as agents and wherever necessary he executed powers of attorney. He pointed out that the plaintiff was employed as an agent to look after the business of Modern Industries and that in order to facilitate the plaintiff to work on behalf of the former, a power of attorney was executed in favor of the latter on July 30, 1956. He admitted that Mohan Lal was appointed as Administrative Officer of Jawant Sugar Mills Ltd., Meerut but he explained that that was not on account of any family arrangement but was in personal capacity of the latter. He denied that Mohan Lal was representing or managing the interests and affairs of S. B. Sugar Mills Bijnore. He also denied that his son Jatender Lal was given rights of managing the affairs of Mohan Orchards Meeduwala. He asserted that it was he who was looking after the affairs of that Orchards. According to him, his son Jatender Lal was a paid employee of Huf to look after the affairs at Meeduwala. He stated that Satender Lal was looking after the clerical work of Huf as paid employee.

(9) Defendant No. 1 complained that the plaintiff was guilty of mismanagement and bungling in the accounts thereby defrauding the other coparceners in the Huf that the aforesaid frauds were exposed and that Income Tax Officer made huge additions' to the income of Modern Industries in respect of the year 1975-76. He has given the details of those additions in the written statement.

(10) He also complained that the plaintiff cheated the Modern Industries during employment as attorney by diverting huge funds, raw materials and other assets without payment to his concern 'Rukmani Metals & Gaseous Ltd.' Nagpur which resulted in huge losses and injuries to the interests of the HUF.

(11) He admitted that the plaintiff was described as managing proprietor in the various documents relating to the affairs of Modern Industry. But he explained that although the plaintiff was appointed as a manager only and given power of attorney dated July 30, 1976 to work as such on attaining majority, but the latter being son of the former it was thought proper not to label the latter as manager and the latter was given a dignified status by way of coining the word 'managing proprietor' for describing the latter. According to him he has been managing the affairs of the Modern Industries as sole proprietor.

(12) He admitted that he had informed the Central Bank of India defendant No. 2 to the effect that he had revoked the power of attorney in favor of the plaintiff and that the plaintiff should not be allowed to operate upon account of Modern Industries. He explained that he did so because the assessment orders of the Income Tax Officer, Meerut dated September 19, 1978 for the year 1975-76 (referred to above) had brought to light the misdeeds off the plaintiff in respect of pocketing huge amount for his own benefit and not showing as the income of the Huf, and which amounts had to be added back for the purpose of computing the income tax.

(13) He denied that the plaintiff was an efficient hand for managing the Modern Industries. He explained that from 1940 till 1956 when the plaintiff was minor, the former used to manage and. do the work of 'Modern Industries' single handedly by himself and that thereforee there was no question of the latter being specialist in the carrying on that business while the former had no specialised knowledge in that behalf. He complained that when after terminating the power of attorney given by him in favor of the plaintiff he took steps to manage the Modern Industries Sahibabad and remained there a few days in November 1978, at the instigation of the latter senior staff of the business refused to co-operate and even the water connections of the premises in which the former as well as other members of the Huf were staying was disconnected on November 22, 1978.

(14) He admitted that Jaswant Sugar Mills, Meerut and S. B. Sugar Mills, Bijnore were taken over by the Government but explained that that was not on account of any mismanagement but was on account of the policies of the Government inasmuch as the Government was forcing Sugar-Mill-owners' to pay more price to sugar cane growers than was fixed by the Central Government which resulted in losses.

(15) He also raised preliminary objection to the effect that suit was not maintainable on account of non-joinder of other co-parceners, that the suit was not valued properly for the purpose of court-fee and jurisdiction, that Delhi courts had no territorial jurisdiction to try the suit because neither any cause of action arose within the territory of Delhi nor he was residing. within such territory and that the suit for injunction was not maintainable against him as karta of HUF.

(16) Defendant No. 2 filed written statement but did, not controvert any of the allegations of the plaintiff. It rather showed ignorance. According to defendant No. 2 plaintiff had been operating the account with it since 1953-54.

(17) In the replication, the plaintiff denied the allegations of defendant No. 1 in respect of defrauding or cheating the Huf or embezzlement of any monies. He stated that the order of the Income Tax Officer relied upon by defendant No. 1 was actually drafts one and in the final order there was only slight adding back. During the course of arguments in this Court he with the permission of the Court placing on record an order of Commissioner of Income Tax.

(18) The learned Additional District Judge expressed the view that there was a prima facie case in as much as it appeared from the documents placed on the record that there was some family arrangement entitling the plaintiff to carry on the business of the Modern Industries to the exclusion of defendant No. 1 and other co-parceners. He remarked that it was conceded before him by the counsel for defendant No. 1 that in case there was a prima, facie case, balance of convenience favored the plaintiff and issue of temporary injunction was necessary to avoid irreparable injury to him. Accordingly, he granted the temporary injunction as already mentioned.

(19) The learned counsel for the appellant contended that there was no prima facie case because firstly, as a matter of law there could not be any family arrangement for management of property for whole life as alleged by the plaintiff and that secondly, none was prima facie shown from any evidence. As far as, the first point is concerned, the learned counsel explained as follows. Plaintiff accepts Modern Industries as a joint Hindu family property. He accepts that defendant No. 1 was karta. It is well known concept of Hindu Law that the karta has a legal right to manage all joint properties and if any junior member of the family has any grievance against the management of karta, his only right is to sue for partition of his share. It is also well settled that it is open to karta in managing the properties to take help of other members of the family so long as he wishes. The only plea raised by the plaintiff is that that karta lost the right to manage Modern Industries, on account of a family arrangement which is to) last permanently till the life of the plaintiff. Such right to management is not permissible or authorised by law. In the present case, at the time when the family arrangement is alleged by the plaintiff to have been made Jatender Lal and Satender Lal were minors. Affidavit of Jatender Lal dated 14th December 1978 shows that he was 36 years of age on the date of the filing of the affidavit. That means that he was born some time in 1942. In 1953-54, the alleged time of entering into family arrangement, Jatender Lal was about 11 or 12 years' old. He was, thereforee, minor. Similarly, affidavit of Satender Lal dated December 14, 1978 shows that he was 32 years of age in 1978, which means that he was about 7 or 8 years old when the alleged family arrangement was arrived at. He was also thus minor.

(20) The learned counsel for the plaintiff relied upon some authorities for the purpose of showing that the family arrangement could be arrived at for the purpose of resolving present or future possible disputes or for keeping peace or harmony in the family. Those authorities are Maturi Pullaiah and another v. Maturi Narasimhan and others : AIR1966SC1836 , Kale and others v. Deputy Director of Consolidation and others, : [1976]3SCR202 and Ram Charan Das v, Girja Nandini Devi and others, : [1965]3SCR841 . The aforesaid authorities related to family arrangement to the title of the property and not to an arrangement regarding right to manage a property by one of the junior coparceners during his entire life time to the exclusion of the karta.

(21) However, the following was held in Union of India vs. Shree Ram Bohra and others, : [1965]2SCR830 (relevant observations' are in paragraph 14) :

'TWOpersons' may look after the affairs of a joint Hindu family on the basis of the members of the joint Hindu family clothing with authority to represent the family. They would be two persons entitled to represent the family and their power to represent would depend on the terms of the authority conferred on them by the members of the joint Hindu family. Their authority to act for the family is not derived under any principle of Hindu Law, but is based on the members of the joint Hindu family conferring certain authority on them.'

The aforesaid authority of Supreme Court says that members of Joint family could give right to manage a property to any one by means of an agreement. But so that an agreement can be valid it must be in accordance with the Contract Act. According to Sec. 11 of the Indian Contract a person having attained majority can be a party to an agreement. thereforee, a contract by a minor is void ab initio. In the present case, Jatender Lal and Satender Lal being minors, agreement in the shape of family arrangement, even if such an agreement did exist, was void and did not confer any authority on the plaintiff to manage Modern Industries. In H. N. Aryamurthi and another v. M. L. Subharaya Setty, : AIR1972SC1279 , it was held that when one of the signatories of a family settlement was a minor it was not a binding arrangement.

(22) The learned counsel for the respondent contended that prima facie case did not mean that the case of the plaintiff must succeed and that the only thing required was that the case was one which raised a serious and bonafide controversy and the same needed consideration. He in this respect relied upon Bishambar Nath Jaithy v. Municipal Committee, Delhi; A.I.R. 1926 Lah 589, in which the following was held:

'THE rule that before the issue of a temporary injunction the Court must satisfy itself that the plaintiff has a prima facie case, does not mean that the Court should examine the merits of the case closely and come to a conclusion that the plaintiff has a case in which he is likely to succeed. This would amount to prejudging the case on its' merits. All that the Court has to see is that on the face of it the person applying for an injunction has a case which needs consideration and which is not bound to fall by virtue of some apparent defect.'

He also relied upon Agricultural Engineering Co. v. Birla Cotton Spinning Weaving Mills, 1971 R.L.R. 36 and judgment of Justice H. L. Anand of Delhi High Court in Gopal Krishan Kapur v. Ramesh Chander, 1973 R.L.R. 542. In 1971 R.L.R. Note 36, the following was held :

'Prima-facie nature of the case means that on a perusal of the plaint, the Court must be satisfied that there is a serious question to be tried at the hearing and that the suit is not barred by any provision of principle of law and on the allegations made between the parties there is a probability that the plaintiff might succeed.'

In 1973 R.L.R. 542 it was held that prima facie case meant one which was not bound in fail on account of any technical defect and needed investigation.

(23) The learned counsel for the plaintiff in the present case urged that there was a family arrangement between all the coparceners including defendant No. 1 as karta, that the plaintiff would be entitled to manage the Modern Industries during his life time, that the said allegation needed serious consideration and investigation, that the learned Additional District Judge had also found that there was some family arrangement on account of which the plaintiff was managing the aforesaid business since 1953-54, and that thereforee, there was a prima facie case. The learned counsel also urged that it was not necessary that there should have been formal agreement in writing embodying the family arrangement and as held in Sahu Madho Dey and others vs. Mukand Ram and another : AIR1955SC481 , existence of family arrangement could be inferred from long course of a dealing. He pointed out that there were number of documents which indicated that the plaintiff was carrying on the business of Modern Industries much before the first power of attorney was executed in his favor on July 30, 1956 by defendant No. 1 which meant that the plaintiff was carrying on the business independently of any power of attorney and that he was managing the Modern Industries under alleged family arrangement.

(24) The learned counsel for the plaintiff also relied upon a judgment of a Supreme Court in T.V.B. Sabbu Chetty's Family Charities vs. Raghava Mudaliar & others, Air 1961 S.C. 797. In that case the following was laid down :

'IF a presumptive reversioner is a party to an arrangement which may properly be called a family arrangement and taken benefit under it, he would be precluded from disputing the validity of the said arrangement when reversion falls open and he becomes the actual reversioner. The doctrine of ratification may also be invoked against a presumptive reversioner who though not a party to the transaction, subsequently ratifies it with full knowledge of his rights by assenting to it and taking benefit under an arrangement by which a Hindu widow alienates the property of her deceased husband would not, however, preclude a presumptive reversioner from disputing the validity of the said alienation when he becomes the actual reversioner. It must be always a question of fact a to whether the conduct of the said reversioner or which the plea of ratification is based does in law amount to ratification property so called.'

The learned counsel for the plaintiff contended that in the present case Jatender Lal and Satender, though minors at the time of the entering into alleged oral family arrangement could be deemed to have ratified, the same by this subsequent conduct after they became major when they allowed the plaintiff to continue the business.

(25) However, the aforesaid contention has no force. It is true, that prima facie case does mean that the case of the plaintiff should be of the nature which requires consideration and investigation. But at the same time, it is necessary that there should not be any patent defect or any prohibition of law. This is clear from the judgments relied upon by the learned counsel. In the present case, without prejudice to the decision of the case of the plaintiff on merits, there is a patent defect inasmuch as two co-parceners being minors at the time of the coming into the alleged family arrangement could not enter into the same. They were totally incapable of entering into any agreement and, thereforee, they could not be a party to the family arrangement. The facts of the Supreme Court case A.I.R. 1961 S.C. 797 are totally distinguishable. In that case reversioner, who was not a party to the agreement got benefit of the same and was given title to a property which is- not the case here. Here Jatender and Satender after attaining majority could not be said to have got anything. Further Jatender Lal and Satender Lal, being minors, the alleged family arrangement was void ab initio and it could not be validated or revived by the principle of ratification.

(26) The learned counsel for the plaintiff also urged that in an appeal this Court should not normally interfere with the discretion exercised by the lower court in the matter of issue of injunction. First of all, he relied upon a judgment of Supreme Court in Uttar Pradesh Co-operative Federation Ltd. vs. Sunder Bros. Delhi, : AIR1967SC249 . In that case a suit was stayed under Section 34 of the Indian Arbitration Act. It was held when a court had exercised a discretion of staying the suit the same should not be interfered with by the appellate court unless the exercise of the discretion appeared to be capricious or unreasonable. Reliance of the learned counsel of the plaintiff is also on a judgment of Supreme Court in the Saharanpur Co- operative Cane Development Union Ltd. and . others vs. The Lord Krishna Sugar Mills Ltd. & others, : AIR1973SC1451 . It is laid down that Supreme Court will not interfere with the interim order passed by the High Court except in the most exceptional circumstances and that the interference would not serve the interests of any of the-parties. Reliance further is on judgment of Supreme Court in the Managing Director (MIG) Hindustan Aeronautics Ltd. vs. Ajit Prasad Tarway, Manager (Purchase & Store) Hindustan Aeronautics Ltd., in which it is laid down that High Court should not interfere with the order of , a lower court, whether it is right or wrong, in exercise of revisional jurisdiction under Section 115 of the Code of Civil Procedure. In the present case, the aforesaid authorities have no application. The revisional jurisdiction under Section 115 of the Code of Civil Procedure is very limited, and thereforee, the authority on revisional powers has no application. Further the discretion in the present case was not exercise according to law. 'There was a clear patent defect of two of the co-parceners, on account of minority being incapable of entering into any family arrangement. That fact was not taken into consideration by the learned lower court. Then there is also another defect that all the co-parceners' were not made party to the suit when it is being alleged by the plaintiff that they were parties to the family arrangement. In the absence of those co-parceners namely, Mohan Lal, Jatender Lal and Satender Lal the suit cannot be completely and effectually decided. Without prejudice to the decision of the case on merits, it was wrongly remarked by the learned lower court the said co-parceners' were represented by defendant No. 1 while actually defendant No. 1 could not represent them when it is being alleged that these co-parceners had independently in their own right entered into the family arrangement.

(27) An application being I.A. No. 1197 of 1979 was filed by the defendant No. I appellant for staying the operation of the order of the lower court during the pendency of the appeal or in the alternative for appointment of the receiver of the 'Modern Industries'. Arguments on that application were started. But thereafter as agreed between the counsel for the parties, arguments were heard on the entire appeal. As the entire appeal is now being decided, the aforesaid interim application has become infructuous and no order is called for.

(28) In view of the foregoing reasons, I accept the appeal with costs, set aside the order of the lower court and vacate the injunction issued by the said court.


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