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Jayantilal Pranlal Thakore Vs. Shrikant Jasvantlal Thakkar and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtGujarat High Court
Decided On
Case NumberFirst Appeal No. 33 of 1978
Judge
Reported inAIR1980Guj67; (1980)GLR152(GJ)
ActsHindu Law; Provincial Insolvency Act, 1920 - Sections 34 and 50
AppellantJayantilal Pranlal Thakore
RespondentShrikant Jasvantlal Thakkar and anr.
Appellant Advocate J.M. Thakore Adv. General and; R.M. Vin, Adv.
Respondent Advocate B.D. Shah, Adv.
Cases ReferredIn Nathuni Prasad v. Firm Radha Kishun Dutt Rai
Excerpt:
civil - maintainability - hindu law and sections 34 and 50 of provincial insolvency act, 1920 - father adjudged an insolvent - pre-partition debt incurred by him not tainted with immorality or illegality - suit debt contracted by defendant father prior to partition cannot be recovered by plaintiff from assets which defendants received upon partition of joint family estate on account of their father having been adjudged an insolvent in insolvency proceedings. - - it resulted in the final decree for partition which was passed on 20th july 1928. in pursuance of the decree for partition, the joint family properties were divided by metes and bounds and separate pw~-session of their shares was taken by the father as well as the sons. therefore, prayed for a decree against the mortgaged.....s.k. sheth, ag.c.j. 1. the plaintiff filed the present suit against the defendants to recover a sum of rs. 27,600/- which consisted of the prini cipal amount of rs. 15,0001- and the in terest amount of rs. 12,600/- from 23rd february 1966 to 23rd february 1975. the principal amount was advanced by the plaintiff to jaswantlal, the father of the defendants, who was carying on business in partnership in the name and style of 'central sales corporation'. one sadashiv and another manubhai were the other partners of that firm. on 23rd february 1966, the plaintiff deposit ed the amount of rs. 15,000/- with the firm. at that time, jaswantlal, the father of the defendants, and the defend ants, who are his sons. were joint. on 10th october 1967, partition of the joint family estate was effected.....
Judgment:

S.K. Sheth, Ag.C.J.

1. The plaintiff filed the present suit against the defendants to recover a sum of Rs. 27,600/- which consisted of the prini cipal amount of Rs. 15,0001- and the in terest amount of Rs. 12,600/- from 23rd February 1966 to 23rd February 1975. The principal amount was advanced by the plaintiff to Jaswantlal, the father of the defendants, who was carying on business in partnership in the name and style of 'Central Sales Corporation'. One Sadashiv and another Manubhai were the other partners of that firm. On 23rd February 1966, the plaintiff deposit ed the amount of Rs. 15,000/- with the firm. At that time, Jaswantlal, the father of the defendants, and the defend ants, who are his sons. were joint. On 10th October 1967, partition of the Joint family estate was effected between Jaswantlal on the one hand and his two sons on the other hand. Thereafter, In solvency Petition No. 15 of 1968 was filed against the Central Sales Corpora tion and its partners who included Jaswantlal, the father of the defendants.On 7th August 1970, the firm and its partners were adjudged insolvents. Official Receiver was appointed to collect the assets of the insolvents. On 24th April, 1972, the plaintiff demanded from the Official Receiver the payment of his dues. He received no reply from his Prior thereto, on 5th February, 1971, insolvent Jaswantlai had taken out a notice of motion for 'being discharged. On 27th July, 1973, his notice of motion was dismissed. The effect of the order was that he was not discharged. On 23rd February, 1973, the plaintiff served notice upon the defendants, who are the sons of Jaswantlal, and instituted the present suit against them on 7th March, 1973.

2. In defence, the defendants denied their liability in respect of the amount claimed from them. They also pleaded that there was no pious obligation which required them to discharge the debt incurred by their father.

3. The learned trial Judge after having raised the necessary issues recorded the finding that the plaintiff has proved the debt. He also recorded the finding that the defendants are liable to pav the amount claimed by the plaintiff only because they are the sons of Jaswantlal. While recording that conclusion, he pressed into service the doctrine of pious obligation of the sons to discharge their father's debt. However, he held that, in absence of Jaswantlal, who had borrowed the suit amount from the Plaintiff, the suit was not maintainable. He, therefore, dismissed the suit.

4. It is that decree which is challenged in this appeal by the plaintiff.

5. This appeal came up for hearing on 13th November 1978 before a Division Bench of which I and my learned brother Mr. Justice Surti were the members. During the course of the hearing, it was found that the appeal raised substantial questions of law which were required to be decided by the Full Bench. Therefore, the following three questions were referred to to Full Bench:

(1) Whether the father is a necessary party to the suit which his creditor files only against his sons to recover prepartion debt out of the share in a joint family property which has gone to the sons - the debt being the personal debt of the father not tainted by in-anorality or illegality.

(2) Do the sons have a remedy against the father in case decree is passed against them and in favour of the father's creditor?

(3) If the sons have a remedy against the father, will that remedy be prejudiced by the absence of the father in the suit and in absence of any decree pasz-3 against him at the instance of his creditor'

6. It is under the aforesaid circumstances that this appeal has come up before this Full Bench for answering the question referred to it.

7. Before we examine the rival contentions raised on behalf of the parties, it is necessary to note certain facts which are not in dispute and which have a vital bearing on the questions which are required to be answered. Jaswantlal, the father of the defendants, incurred the present debt as a partner of Central Sales Corporation. At that time, he and the defendants were joint. There is no doubt about the fact, therefore, that the suit debt is a pre-partition debt of Jaswantlal. Thereafter, joint family estate was partitioned between Jaswantlal on the one hand and his two sons - the defendants - on the other hand. It is also not in dispute that the property which has gone to the share of the defendants is in their possession. After the partition of the joint family estate was effected between Jaswantlal and the defendants, Insolvency Petition No. 15 of 1968 was filed in which, amongst others, Jaswantlal was adjudged an insolvent. The insolvency proceedings are still pending. Jaswantlal has not been discharged. In this insolvency proceedings, the plaintiff has lodged a claim in respect of the amount which he claims from the defendants in the present suit.

8. Upon these undisputed facts, the first question which we are required to answer is whether Jaswantlal, the primary debtor of the plaintiff, is a necessary party to the suit and whether the suit, in his absence, is maintainable. The learned trial Judge has taken - the view that the present suit against the defendants alone, in absence of Jaswantlal, is not maintainable. it is necessary in the first instance to examine the nature of the claim which the plaintiff makes and to find out whether he is ordinarily entitled to reach the property which the defendants have received on partition.

9. In Pannalal v. Mst. Naraini 1952 SCR 544, the Supreme Court has lucidly and eloquently analysed the liabilities of the sons in respect of their father's debts. In that case, the father as the manager of the joint Hindu family consisting of himself and his sons had executed a mortgage bond in favour of Mst. Naraini and one Talok Chand. Under that transaction certain moveable properties belonging to the joint family Were hypothecated to secure a loan of .Rs. 16,000k The sons filed a suit in the Civil Court against their father for partition of the joint family properties. It resulted in the final decree for partition which was passed on 20th July 1928. In pursuance of the decree for partition, the joint family properties were divided by metes and bounds and separate pw~-session of their shares was taken by the father as well as the sons. In 1934, Mst. Naraini filed a suit in the Civil Court at Ambala against Baldev Das, the father, for recovering a sum of Rs. 12,500/- due on the mortgage bond referred to above. She stated in the plaint that the amount was borrowed by Baldey Das as the manager of the joint Hindu family. She. therefore, prayed for a decree against the mortgaged property as well as against the joint family. In course of proceedings in the suit, the sons made an application under Order 1, Rule 10 and Order 34, Rule 1, Civil Procedure Code, for being added as party defendants to the suit because they wanted all the contentions between the parties to be decided in their presence. It was stated by the sons in their application made under Order 1, Rule 10, C.P.C. that their father Baldev Das was not the manager of the joint family and that the joint family properties had been partitioned by a decree of the Court as a result of whi6h the properties which were alleged to be the subject-matter of the mortgage *ere allotted to their shares. It appears that the plaintiff thereupon gave up her claim for a mortgage decree against the properties in suit and stated that she would be satisfied only with a money decree against Baldev Das - the father - personally. The plaint was accordingly amended. Thereupon the sons withdrew the application for being made parties to the suit but reserved their right to take proper legal action if and when one was found necessary. Thereafter, Baldev Das, the their, died and his sons as well as Baldev Das's widow were brought on record as his legal reprer,entatives. They Med a fresh written statement in which they raised a number of pleas in answer to the plaintiff's claim. One' of the contentions which they raised was that Baldev Das had been indulging in speculative transactions and that if any money was due to the plaintiff at all in connection with such transactions, the debt was illegal and immoral and not binding upon the joint family property. Ultimately, the parties arrived at a compromise and a simple money decree was passed in favour of the plaintiff for the full amount claimed by her In the suit. Certain attempts were made to execute the decree. They proved unsuccessful. In 1945, an application for execution was made by the decree-holder in the Civil Court at Ambala. In those execution proceedings, at the instance of the decree-holder, the Court directed the attachment of certain immoveable properties consisting of a number of shops in possession of the sons and situated at a place called Abdullapur. The sons filed objections to the attachment and resisted it on the ground that the properties under attachment- did not belong to Baldev Des and that they were the separate and exclusive properties of theirs which they had obtained on partition of the Joint family estate between them on the one hand and their father Baldev Das on the other hand. It was, therefore, contended that those properties could not be made liable for the satisfaction.of the decretal dues whicli could be realized under the terms of the decree only out of the estate left by Baldev Das. The Executing Court came to the conclusion that there was, in fact, a partition between Baldev Das and his sons and that, as a result of that partition, the properties under attachment had gone to the shares of his sons. He also recorded the finding that the decree which was sought to be executed was obtained after partition of the joint family estate but that, since it was in respect of a debt which was contracted by the father prior to it, the properties in possession of the sons were liable under Hindu Law for attachment and sale for the satisfaction of the pre-partition debt of their father which was not immoral or illegal. In the result, ,he objections filed by the sons were dismissed. On appeal, the order made by the Executing Court was confirmed by a learned single Judge of the High Court. An appeal against the order of the learned single Judge under Letters Patent was also dismissed and it was the order recorded in the Letters Patent Appeal which was challenged in the Supreme Court. One of the contentions which was raised before the Supreme Court was that if there was any pious obligation on the part of the sons to pay the father's debt incurred before laartition, it could be enforced against the sons only in a properly constituted suit and not by way of execution of a decree obtained in a suit which was brought against the father alone during his lifetime and to which the sons were made parties only as legal representatives after the father's death. It was in this connection that the Supreme Court examined the liability of a son under Hindu Law to pay the debts of his father provided they were not tainted with tllegalitv or immorality. One of the principles laid down by the Supreme Court in that connection is that, as regards debts contracted by the father after partition, sons could not be made liable to discharge them. The share which the father receives on partition and which after his death, goes to his sons may certainly at the hands of the latter be available to the creditors of the father but the shares allotted on partition to the sons cannot be made liable for the Post-partition debt of the father. However, the material question which arose before the Supreme Court was whether the sons could be made liable for an unsecured debt of the father incurred before partition in respect of 'which the creditor had filed his suit and obtaine-3 decree after partition took place. The Supreme Court found that there was divergence of opinion on the subject and the -majority of the decided cases were in favour of the view that the separated share of a son could be made liable even after partition for the prepartition debts of the father which were not illegal or immoral. The view taken in a few other cases was that once a partition took place, the obligation to discharge the debt of the father came to an end. After having examined the Hindu texts on the subject, the opinion which the Supreme Court has expressed is that a son is liable even after partition for the pre-partition debts of his father which are not immoral or illegal and for the payment of which no arrangement was made at the time of partition. This decision is an authority for the proposition that in respect of debts incurred by the father prior to partition, sons who have received their shares in the joint family estate as a result of the partition which subsequently took place are liable and that the property which they receive on partition can be reached1for the purpose of satisfying such debts.

10. In S. M. Jakati v. S. M. Borkar AIR 1959 SC 282, the principle laid down by the Supreme Court in Pannalal's case (supra) has been affirmed. The Supreme Court has observed that unless the sons succeed in proving that the decree was passed in respect of a debt which was contracted for an immoral or -illegal purpose, the creditor's right of seizing in execution of the decree the whole coparcenary property including the son's share remains unaffected because except where the debt is for an illegal or immoral purpose it is open to the execution creditor to sell the whole estate in satisfaction of the Judgment obtained against the father alone. It has also been observed by the Supreme Court that in Hindu Law there are two mutually destructive principles: one is the principle of independent copareenary rights. in the sons which is an incident of birth and which gives to the sons vested right in the coparcenary property. The other is the pious dutv of the sons to discharge their father's debt not tainted with immorality or illegality. It is this principle which lays open the whole estate to be seized for the payment of such debts.

11. These two decisions leave no doubt in our minds about the proposition that the jJoJ t family property which upon partition, has gone to the sons can be reached to satisfy the pre-partition debt incurred by the father provided it is not tainted with illegality or immorality.

12. There are two more decisions to which reference has been made but they, in our opinion, do not so much clinch the issue.

13. In Periasami Mudaliar v. Seetharama Chettiar, (1904) ILR 27 Mad 243, the question which arose was as follows Independently of the debt arising from the original transaction, whether the decree against the father, by its own force, created a debt as against him which his sons, accordingly to the Hindu Law, were under an obligation to discharge, unless they showed that the debt was illegal or immoral. It was a case in which an attempt was made to recover from the sons a judgment debt due by a father. That is not the situation in the instant case. In that decision, Mr. Justice Bhashyam Ayyangar has made an observation that during the father's lifetime a suit cannot be brought only against the son for recovery of a debt due by the father. The context in which the said observation has been made by the learned Judge does not permit us to apply it to the facts of the present case.

14. A. R. P. Narayana, Chettiar v. K. P. V. R. Veerappa Chettiar, (1917) ILR 40 Mad 581, was a case in which a Hindu who was domiciled in India but who carried on trade in Singapore was adjudicated a bankrupt bv the Supreme Court at Singapore for the debts incurred by him at Singapore. He eventually obtained a discharge under the Singapore law. The plaintiff who was one of the creditors proved his debt and received two of the dividends due to him. He was a party to the order of discharge. It was held by the High Court of Madras th the extinguishment of the debt under Singapore law operated as a discharge of the insolvent's debt everywhere and that- the creditor could not sue him and his undivided sons in India for the balance of the debt as if it was still subsisting. in the instant case, Jaswantlal, the father of the defendants, has not yet been discharged by the insolvency Court. The question of extinguishment of his debts, therefore, does not arise. It is needless for us to say that if, by operation of law, Jaswantlal's debts had been extinguished, the plaintiff could not have sued the defendants - Jaswantlal's sons - for recovery of such a debt.

15. In the instant case, the insolvency proceedings are still pending. Defendants' father Jsswantlal has not yet been discharged. Under these circumstances, when Jaswantlal's debt is outstanding subject to the result in the insolvency proceedings, is it open to the plaintiff to sue his sons in the Civil Court for recovering Jaswantlal's debt without making Jaswantlal a party? In the first instance, we felt that if the plaintiff wanted to recover the prepartition debt due by Jaswantlal from the property which, upon partition, had gone to the defendants, there should be no reason why he could not do so unless Jaswantlal was a necessary party to the suit. There is no doubt about the fact that Jaswantlal is the plaintiff's primary debtor. It is he who borrowed the moneys. It is he against whom the debt is primarily provable. It is he from whom the debt is primarily recoverable. It is only on account of the operation of the doctrine of pious obligation that his sons are coming in. In such a situation, we prima facie feel that Jaswantlal is a necessarv party. We are, however, not expressing any, final opinion on this question because it is not necessary for us to do so in this case. In the instant case, the situation is different. it cannot be gainsaid that the liability of the sons can co-exist only with the liability of the father. If the liability of the fathpr is extinguished by the operation of law or otherwise, it cannot exist against the sons. Jaswantlal's liability to pay the present debt will indeed be extinguished upon Jaswantlal obtaining an order of discharge from the insolvency Court, In such a case, it cannot remain subsisting against the defendants - his son-,. Now if, during the pendency of the suft against the sons, Jaswantlal obtains an order of discharge, the suit will automatically come to an end oecause the cause-of-action upon which it is founded will vanish with the extinguishmt4nt of the liability of Jaswantlal resulting froi-n the order of discharge made by the Insolvency Court in his favour. If that is the effect of the order of discharge, made in favour of an insolvent, upon the suit filed against his sons in respect of debts recoverable from the insolvent, what is the effect of pending insolvency proceedings upon such a suit? It is geoessary in this connection to refer to Section 34 of the Provincial Insolvency Act, 1920. It, inter alia, provides: 'all debts and liabilities, present or future, certain or contingent, to which the debtor is subject when he is adjudged an insolvent, or to which he may become subject before his discharge by reason of any obligation incurred before the date of such adjudication, shall be deemed to be debts provable under this Act'. It is clear, therefore, that the suit debt which the plaintiff claims from the defendants is provable against Jaswantlai in insolvency proceedings. Section 50 of the said Act provides: 'Where the receiver thinks that a debt has been improperly entered in the schedule, the Court may, on the application of the receiver and after notice to the creditor, and such inquiry (if any) as the Court thinks necessary, expunge such entry or reduce the amount of the debt'. Sub, section (2) of Section 50 provides: 'The Court may also, after like inquiry, expunge an entry or reduce the amount of a debt upon the application of a creditor where no receiver has been appointed, or where the receiver declirits to interfere in the matter or, in the case of a composition or scheme, upon the application of the debtor.' Now, what happens if the debt provable in the insolvency proceedings is shown to be nonexistent? Or what happens if the plaintiff is unable to prove it against the insolvent? Can it be said, on a question of' principle, that the plaintiff is entitled to recover it from Jaswantlal's sons (assuming that he proves it against them in a Court of Law) even if he has failed to prove it against Jaswantlal in insolvency Court? We are unable to contemplate with equanimity that a debt which has not been proved against an insolvent can be proved against his sons and that the sons can be made liable to discharge it on the principle of pious obligation to discharge their father's debt -indeed on account of their having received the share from the joint family properties. If such a situation is allowed to operate, it ~s quite probable that in respect of one debt. there may be two conflicting decisions one recorded by the Insolvency Court in insolvency proceedings against the insolvent and another recorded by the Civil Court wainst his sons. To take this view is to defeat the purpose and object of the Insolvency Act. The Insolvency Act is intended to relieve an insolvent from his obligation to pay hiq debts to the extent to which his assets do not permit them to be discharged. The object of statutorily discharging the debts of an insolvent because he is otherwise incapable of discharging them will be defeated if those very debts are Permitted to be recovered from his sons who have received a share from the joint family estate on partition thereof. It ig necessary to remember that the plaintiff has one and indivisible cause of action against the father and his sons. We are, therefore, of the opinion that a debt which an insolvent owes to a person is only provable in the Insolvency Court. It cannot be proved against his sons in a Civil Court. 'The principle which has twen laid down by Madras and Patna, High Courts in the decisions to which we are presently referring is a sound principle. It enunciates that in order to make the, sons liable to pay the father's prepartition debts, the liability of the father and the sons must co-exist. Now, as soon 'as a father is adjudged an insolvent, the original contractual liability in respect of his pre-partition debt which was favtened upon the joint family estate comes to an end and is extinguished and, a new liability emerges from its ashes. It is the insolvency debt' - a debt which is provable only in the Insolvency Court and recoverable prorata or fully oult of his assets realised by the Official Receiver for disbursement among.st'his creditors. It is difficult to imagine the 'fudl' recovery of insolvency debt because !d the assets of an insolvent are capable of fully discharging all, his debts, the insolvent, in ordinary course of hurnan behaviour, will not knock at the doors of the Insolvency Court nor wilil he permit or enable his creditor or creditors to drag him to the Insolvency Cc,urt. Otherwise also. a wi,3e creditor will not drag his debtor to an Insolvency Court if he can recover all his dues frorn his debtor's assets. Therefore, in ordinary course, 'insolvency debts' are either partially satisfied or not satisfi.ed at all. The liability in respect of the unpaid part or whole, as the case may be, is statutorily extinguished. Therefore. as soon as the father is adjudged an insolvent, his liabilities undergo metamorphosis and emerge in an altogether different garb. They attach themselves only to the insolvent's assets in the Official Receiver's hands and do not peep at their pre-partition assets which have, on partition, gone to his son's shares. Therefore, the liability of the sons to pay, after partition, their father's pre-partition debts-not tainted with illegality or immorality- ceases to co-exist with the liability of the father to discharge his insolvency debts through the Official Receiver who has realised his assets. We are, therefore, unable to imagine that when the law of insolvency transforms the fundamental character of the insolvent's debts and statutorily extinguishes them, the pious obligation of a son to discharge his father's pre-partition debts extends to their full recovery out of the pre-partition assets which have, on partition, gone to him. In that view of the matter, we hold that once the father is adjudged an insolvent, the pious obligation of his sons under Hindu law to discharge his pre-partition debts - not tainted with illegality or immorality - comes to an end.

16. In Muniswamy Reddiar v. Ramamurti, : AIR1970Mad406 , it has been observed by a Division Bench of the High Court of Madras that the son's Pious obligation arises on account of the existence of father's debt and that if the debt itself is extinguished by an order of discharge of the father, the very foundation of the pious obligation is gone. Indeed, . the learned AdvocateGeneral who appears on behalf of the plaintiff has drawn our attention to the fact that, in that case, the insolvent had been discharged and that, therefore, his liability to pay his debts had been extinguished. Secondly, in that case, the mortgag6es and the mortgagors had colluded with each other and, therefore, the mortgagees could not get decree in the suit against the father.

17. In Nathuni Prasad v. Firm Radha Kishun Dutt Rai, AIR 1940 ~at 149, it has been observed 'by a Division Bench of that Court that the son's pious obligation arises on account of the existence of the father's debt and that if the debt itself is extinguished, the very foundation of the pious obligation is gone. In that case, decree was passed against the father alone and the decretal debt due by the father was sought to be recovered in an execution proceedings from his sons. Secondly, the creditor had filed no independent suit against his Sons. The learned Advocate-General has tried to argue that these two facts make all the difference in applying to the facts of the present case the principle laid down by the Patna High Court. In our opinion, the basic principle that the liability of the sons to discharge their father's pre-partition debts in pursuance of their pious obligation can only coexist with their father's liability cannot be disputed. If the father has statutorily 'or otherwise ceased to be liable, pious obligation does not require the sons to discharge it. An insolvent's creditor's cannot recover anything from outside the insolvent's assets in the hands of thel Official Receiver. If they cannot do so they cannot claim anything from the sons as well. We are, therefore, of the opinion that the suit debt, contracted by the defendants' father prior to partition, cannot be recovered bV the plaintiff from the assets which the defendants received upon partition of the joint family estate on account of their father having been adjudged an insolvent in the insolvency proceedings. The only remedy which the plaintiff has is to prove his claim in the insolvency proceedings and to re~over whatever he can out of the insolvent's assets in the hands of the Official Receiver. In this view of the matter, the first question which has been referred to the Full Bench is required to be re-framed as under:

'Whether, during the pendency of insolvency proceedings against the father in which he has been adjudged an insolvent, a pre-partition debt incurred by him - not tainted with immorality or illegality - is recoverable out of the assets which have gone to his sonsl upon partition of the joint family estatel between him and his sons.'

Our answer to this re-framed question is in the negative. In view of the answer which we have given to the -first question, the two other questions do not &rise.; Therefore, we -do not answer them. Now, this appeal should be ordinarily sent back to the Division Bench for deciding it finally in accordance with the answer which we have given. However, in view of the answer which we have given, nothing remains to be decided in the appeal. Both the parties have agreed that a formal final order may be recorded by this Bench.

18. 'In view of the answer which we have given, the appeal fails and is dismissed. We direct that in the circumstances of the case, there shall be no order as to costs.

19. Appeal dismissed;


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