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Rm. L.M.L.V. Alagammai Achi and anr. Vs. Vr. Pl. M. Palaniappa Chettiar and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported inAIR1940Mad580; (1940)1MLJ469
AppellantRm. L.M.L.V. Alagammai Achi and anr.
RespondentVr. Pl. M. Palaniappa Chettiar and anr.
Cases ReferredChelamayya v. Varadayya
Excerpt:
.....law to hold that a coparcener is personally liable on the ground of ratification by acquiescence for the dealings of the manager in the ordinary course of family business......of all the defendants as it was a debt contracted by the first defendant in the course of the family business. not satisfied with this decree, the plaintiffs have appealed claiming a personal decree also against defendants 2 and 3, the respondents herein, and the only question for decision relates to their personal liability.2. such liability is said to arise on the ground that, as sons i of the first defendant, they were managing the family business jointly with him and must, by virtue of such participation in management, be deemed to have become partners. a special ground of liability was also urged so far as the first respondent was concerned, namely, that he had expressly undertaken to pay the debt personally in certain letters written by him to the second appellant. the learned.....
Judgment:

Patanjali Sastri, J.

1. This appeal arises out of a suit brought by the appellant for recovery of Rs. 5,982-14-9 from defendants 1 to 3 personally and from the family properties of all the defendants. The first defendant is the father of defendants 2 to 4 and the fifth defendant is the son of the first defendant's deceased brother. The defendants constitute a joint Hindu family of which the first defendant is the manager. The defendants are Nattukottai Chetties and were carrying money lending and banking business under their family vilasam V.R. Pl. M. at Rangoon and other places in Burma. The amount claimed is said to be the stridhanam money of the first plaintiff deposited by her father the second plaintiff with the first defendant. The Court below decreed the claim against the first defendant personally and against the family properties of all the defendants as it was a debt contracted by the first defendant in the course of the family business. Not satisfied with this decree, the plaintiffs have appealed claiming a personal decree also against defendants 2 and 3, the respondents herein, and the only question for decision relates to their personal liability.

2. Such liability is said to arise on the ground that, as sons I of the first defendant, they were managing the family business jointly with him and must, by virtue of such participation in management, be deemed to have become partners. A special ground of liability was also urged so far as the first respondent was concerned, namely, that he had expressly undertaken to pay the debt personally in certain letters written by him to the second appellant. The learned Subordinate Judge found that all that was established by the appellants was that the first respondent was managing the business under a power of attorney dated 13th July, 1931, executed in his favour by his father for a period of three years thereafter, and that the second respondent was writing the accounts of the firm for some time and held, on these findings, that the respondents could not be said to have become partners or to have held themselves out as such, so as to be personally liable for the debts incurred in the course of the business. The learned Judge said nothing about the special ground urged as regards the first respondent, as the point was apparently not raised before him.

3. Some criticism was directed against the finding that the first respondent was managing the firm under a power of attorney executed by the first defendant, and it was pointed out that the power of attorney was not produced by the respondents. We are not prepared to attach any importance to the non-production of the power as the appellant's own witness (P.W. 2) who was the agent of another Chettiar firm in Rangoon which had dealings with the respondents' firm, admitted that the first respondent was acting under a power executed by his father when he was managing the family business in Burma. But this is not, in our view, a material circumstance, for, we are clearly of opinion that even if he managed the firm in his capacity as a junior member of the family interested in the business, no personal liability could arise by virtue of sudh management in the circumstances of this case. For, the deposits to which the suit relates were all made prior to 10th December, 1924 and duly stamped vouchers evidencing the terms of the deposits including the final deposit letter (Ex. A dated 11th December, 1930) on which the suit was brought, were all executed from time to time only by the first defendant, before the respondents began to participate in the conduct of the business in 1931. Assuming, therefore, that the respondents must be deemed to have become partners or to have held themselves out as such in relation to the family business in Burma by reason of such participation, they could not, in our opinion, be held to be personally liable in respect of the pre-existing debts of the firm.

4. On the question of personal liability of junior members of a joint Hindu family for debts incurred in the course of family business on the ground of their participation in the conduct or management of it, the decisions of this Court, to go no further, have been neither clear nor uniform. In Official Assignee of Madras v. Palaniappa Chetty : (1918)35MLJ473 , it was held by Wallis, C.J. and Spencer, J., that the fact that the son had been assisting the father in the conduct of the business during his minority and had taken an active part in its management after attaining majority, did not make the son personally liable for obligations contracted during his minority, but that in respect of debts incurred since he attained majority such liability arose by reason of his conduct in taking an active part in the business. Both the learned Judges were of opinion that Sections 247 and 248 of the Indian Contract Act did not apply to the case and based their conclusion apparently on the principles of Hindu Law. Sadasiva Aiyar, J., held that both by virtue of those sections and the rules of Hindu Law, the son was personally liable for all the debts of the business including those contracted during his minority. This extreme view has never been followed in this Court and may be left out of consideration. The other two learned judges, however, have not clearly indicated on what legal basis personal liability in such a case rests--whether it is based on implied partnership or estoppel by holding out or ratification. In Ramaswami Chettiar v. Srinvasa Aiyar (1935) 70 M.L.J. 214, the view is expressed that personal liability, where it arises in such cases, rests on the doctrine of holding out and that, 'a partnership from the point of view of the general public comes into existence.' It is, however, somewhat difficult to see how the rule of estoppel which can only preclude proof of facts as against individuals actually misled, can give rise to a partnership quoad the 'general public'.

5. On the other hand, in Sitharama Chettiar v. Sivagurunatha Chetty (1930) M.W.N. 371, it was thought that, according to the majority view in Official Assignee of Madras v. Palaniappa Chetty : (1918)35MLJ473 .

Unless they (that is, the junior members of the family) were partners, they cannot be made personally liable for the debts of the business

and the case was sent down to the lower Court for a finding on that point. That Court having found that the junior members had taken an active part in the management of the family business, the case came up again before Coutts-Trotter, C.J. and Ramesam, J., who, however, would seem to repudiate the doctrine of personal liability of a coparcener arising out of an active participation in the family business, and refused to hold the junior members personally liable in the absence of

any other evidence of a consensual act whereby a definite new relation other than that of members of a joint Hindu family trading together was created. Sitharama Chettiar v. Sivagurnnatha Chettiar (1930) M.W.N. 371.

6. It seems to us however that this divergence of opinion is more apparent than real, for, we venture to think that the whole question whether a coparcener who takes part in the conduct of the family business is personally liable, and, if so, on what legal basis, is essentially one of fact depending for its decision upon the nature and extent of participation as disclosed by the evidence in the particular case. If what the junior member is shown to have done in relation to the business is nothing more than what can reasonably be attributed to his interest in the business as a member of the family, there will be no legitimate inference that he intended to undertake a greater liability as a partner in the business. This is all, as it seems to us, that the learned Judges meant to affirm in the last mentioned case. On the other hand, if the part taken by such member in the management of the business goes beyond what can be sufficiently explained by his interest in it as an asset of the family, as for instance, when he joins in borrowing for the purposes of the business, it may afford ground for the conclusion that he has become a partner so as to be personally answerable for all the debts incurred in the course of the business including those which he did not join in borrowing. Without such definite and unequivocal consensual acts, no partnership relation between members of a joint family can, in our opinion, be implied from participation, however active, in the conduct of the family business, a position which has received additional emphasis from the provisions of Section 5 of the Indian Partnership Act which postulate the possibility of members of a joint family carrying on the family business without becoming partners therein in the legal sense of the term. Again, the part taken by a junior member, while it may not be sufficient to justify an inference of partnership, may be such as to lead others to act on the belief that he is a partner, in which case the member will be precluded by the principle of estoppel from showing as against the person misled that he (the member) is not in fact a partner. Thus in each case, the question is, as it seems to us, what is the proper inference to be drawn from the facts proved, and as pointed out by Varadachariar, J., in Alagappa Chettiar v. Bank of Chettinad : AIR1939Mad6 , the extent of the personal liability incurred by the member will vary according as it is found to arise on the one ground or the other. But what is important for the purpose of this appeal is, that such liability does not extend, in either case, to antecedent transactions. As observed by the same learned Judge in the case referred to above:

If the liability is to be based on the doctrine of holding out it is obvious that such liability can arise only in respect of transactions subsequently entered into and on the faith of his conduct. Even if it should be held that by such participation the coparcener becomes a partner in the business, seems to us unreasonable to h old that he thereby incurs a personal liability in respect of the pre-existing debts of the business. See also Russa Engineering Works v. The Kanara Transport Co. : AIR1926Mad1138 .

7. The appellants next relied on the following observations in Chelamayya v. Varadayya (1898) 9 M.L.J. 3 : I.L.R. 22 Mad. 166 :

No doubt 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 coparceners are actual undertaking parties either because they had agreed, before the contract 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 coparcener is absolutely responsible. Equally he would be responsible though he did not assent to the particular contract if these had been such acquiescence on his part in the course of dealings, in which the particular contract was entered into, as to warrant his being treated in the matter as a contracting party.

8. Appellants accordingly urged that the respondents must be taken by reason of their participation in the business to have 'ratified and adopted' even the antecedent transactions in the business including the suit deposit and that, in any case, there has been such 'acquiescence' on the part of the respondents in the course of the dealings had by the father as to warrant the respondents being regarded as contracting parties themselves in respect of the suit deposit. Our attention was also drawn to the approval by Varadachariar, J., of Alagappa Chettiar v. Bank of Chettinad : AIR1939Mad6 already referred to, of the observations in Chelamayya v. Varadayya (1898) 9 M.L.J. 3 : I.L.R. 22 Mad. 166 quoted above. There is nothing in those observations which need arouse any dissent, for, they do no more than envisage the possible application of the general principle of ratification by adoption or acquiescence to this class of cases. The principle itself is simple and well-known, but the difficulty arises, as with so many other principles, in the application. In holding a junior member of a family personally liable for a contract purporting to have been entered into by the manager on the ground of ratification, it is important to bear in mind that the doctrine pre-supposes ability to adopt or repudiate the transaction in question and cannot properly be applied for this reason to dealings or transactions which under the Hindu Law the coparceners are powerless to disown, so long as they continue to remain in the joint family. As pointed out in the very case in which these observations occur, when

the contract is of a character such as under the Hindu 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.' (Italics ours.)

9. It would be wholly subversive of this well-established rule of Hindu Law to hold that a coparcener is personally liable on the ground of ratification by acquiescence for the dealings of the manager in the ordinary course of family business. If it had been shown in this case that the first defendant oledged the individual credit of the respondents at the time when he received the deposits in question and that the respondents having come to know of the transaction accepted or acquiesced in it, it might be possible to hold them personally bound on the principle of ratification; but nothing of the kind has been proved or even suggested in this case. We have therefore no hesitation in rejecting this contention.

10. It remains to consider the special ground of liability urged with reference to the first respondent, namely, a personal under-taking to pay in consideration of the appellants' forbearance to sue. Reliance was placed upon Exs. J, J-1 and D to show that when the second appellant demanded the money and threatened to sue, the first respondent wanted time for payment promising to pay the debt personally and that in consequence the filing of the suit was delayed for over a year. We are unable, however, to read these letters as containing any undertaking by the first respondent to pay the debt due to the appellants personally. The letters merely explained why there was delay in the payment of the debt and gave an assurance that as soon as conditions of trade improved, arrangement would be made to pay up the debt.

11. Though written by the first respondent, the letters bore only the family vilasam V.R. P1 M. and were signed with an invocation of the family deity, the mode usually adopted for signing family letters in accordance with the practice prevailing among Nattukottai Chetties. The letters are thus consistent with the first respondent having merely affirmed the pre-existing liability of the family such as it was, and contain no indication of his having undertaken any additional or extended liability for the debt. Nor is there any definite request in any of them for' grant of time for payment. The suit was, no doubt, brought more than a year after the latest of them, namely, Ex. D, but it does not appear that this delay was due to the appellants having granted any time for payment. The second appellant who was examined as P.W. 1 does not say that time was granted in compliance with the request of the first respondent, nor was such a thing suggested in the cross-examination of the first respondent. On the other hand, the allegations in paragraph 7 of the plaint that:

On several dates after the said date (that is, after Ex. D) both personally and through agents demands were made on the defendants and a demand was made lastly on 30th June, 1934, all to no purpose.

are plainly destructive of any such suggestion.

12. The appeal fails and is dismissed with costs.


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