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Kakumanu Venkatasuryanarayana Vs. Akuthota Ramayya and Akuthota Venkatasubramanayam, Minor by Guardian - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Reported inAIR1921Mad98; (1921)40MLJ153
AppellantKakumanu Venkatasuryanarayana
RespondentAkuthota Ramayya and Akuthota Venkatasubramanayam, Minor by Guardian
Cases ReferredRatuajagayya v. Jagannadhan I.L.R.
Excerpt:
.....like rs. this, to rny mind, is clearly an unsustainable proposition. but does the same hold good with respect to the guardian of infants ? no express authority has been brought to our notice in support of the latter proposition. if that is a good proposition of law with respect to partnership entered into by the manager of a joint hindu family and as to the position of the other adult members of that family, it seems to me, a fortiori that the infants do not become partners in a business carried on by their guardian and do not therefore acquire rights or become subject to the liabilities of a partnership. sections 247 and 248 of the indian contract act to my mind clearly lead to this result. the plaintiffs asked the district judge, when they were presented with these difficulties,..........ama-rayya, the father of defendants 1 and 2, died on 21st november, 1906 leaving' three sons, the minor defendants in the suit and one venkatasubba rao, their eldest brother. the eldest brother represented his family in the business till he retired in 1907, having effected a partition with his minor brothers in that year. thereupon the mother acting as the guardian of the defendants 1 and 2 purported to carry on the business with the first plaintiff and did so until about the institution of the suit. it is alleged that this lady made away with the accounts and would not render accounts of the partnership. it is further alleged that amarayya had appropriated something like rs. 25,000 or 30,000, part of the assets of the business3. the claim of the plaintiffs is that the defendants 1 and.....
Judgment:

Abdur Rahim, J.

1. This second appeal arises in a suit instituted by the plaintiffs against defendants 1 and 2, two minors represented in the suit by their mother as guardian adlitem for a declaration that the suit partnership was dissolved, for the taking of the partnership accounts and for other ancillary reliefs. It is necessary to state shortly the history of the case in order to understand the questions that arise in the appeal. The first plaintiff's father Narasimhulu, and the 1st and second defendants' father Amarayya, and another person called Guravayya carried on business in partnership from before 1887. Guravayya died in 1887; and the business was carried on by his brother Gopalan taking his place. Gopalan retired from the business after settling accounts on 15th November, 1887.

2. Then Narasimhulu who is the father of the first plaintiff continued the business along with the father of the defendants down to 12th November, 1S9S when Narasimhulu died. On his death, the first plaintiff continued the same business as the representative of the 2nd plaintiff, that is, his natural son and an undivided co-parcener. Ama-rayya, the father of defendants 1 and 2, died on 21st November, 1906 leaving' three sons, the minor defendants in the suit and one Venkatasubba Rao, their eldest brother. The eldest brother represented his family in the business till he retired in 1907, having effected a partition with his minor brothers in that year. Thereupon the mother acting as the guardian of the defendants 1 and 2 purported to carry on the business with the first plaintiff and did so until about the institution of the suit. It is alleged that this lady made away with the accounts and would not render accounts of the partnership. It is further alleged that Amarayya had appropriated something like Rs. 25,000 or 30,000, part of the assets of the business

3. The claim of the plaintiffs is that the defendants 1 and 2 are partners and. they now seek for a dissolution of the partnership and for the settling of accounts.

4. The subordinate Judge who tried this case gave a preliminary decree and afterwards a final decree. On appeal the learned District Judge dismissed the suit holding that the defendants were not partners and that therefore the suit as framed was not sustainable. He held that a suit might lie against the guardian, the mother of defendants 1 and 2 in her individual, capacity, but that the defendants 1 and 2 themselves who are minors, could not be made liable on the basis of being partners in the business. The trial Court in paragraph 14 of its Judgment finds that the embarking on this business by the mother of defendants 1 and 2 was for their benefit and therefore they are liable as claimed by the plaintiffs. He says that their family and their father owed to the plaintiff's firm sums of money amounting to Rs. 25,000 and if Ramanamma, their mother, chose to wind up the business when Venkatasubba Rao the eldest male member of the family withdrew, the family immoveable property worth Rs. 25,000 or Rs. 27,000 would have to be sold by forced sales in order to pay the debts of the firm and thus the family would suffer loss, and therefore the guardian of defendants 1 and 2 was justified in carrying on the business for the benefit of the minors. This, to rny mind, is clearly an unsustainable proposition. The carrying one of a trade cannot by itself be said to be an act which a guardian of Hindu minors is authorised by law to do. By its very nature a trade or business might result in a loss and thereby the family property of the minors might be jeopardised. I do not know of any proposition of Hindu Law that a guardian of Hindu infants is authorised to carry on trade embarking the minor's property in the business in order to liquidate family debts. No authority has been cited before us in support of such a proposition which, in my opinion, is, prima face, untenable.

5. The case of the plaintiffs, however, has been put before us essentially in this way. This is a family of Komuttis whose chief occupation is trade or business, and this particular business was started by the father of the minors although in partnership with strangers. Therefore we must treat the business as ancestral business, and hence, it was contended, the guardian of the defendants 1 and 2 was entitled to carry it on in partnership with the plaintiffs. That a manager of a Hindu family can carry on ancestral business not only on his own behalf but on behalf of the joint family in partnership with a stranger is not and cannot be disputed; but does the same hold good with respect to the guardian of infants No express authority has been brought to our notice in support of the latter proposition. The question does not rest there. Admitting for argument's sake that a guardian can carry on an ancestral business on behalf of minors in partnership with a stranger, the further question has to be decided whether by reason of such an act of the guardian the minors become partners in the business with all the rights and liabilities of partners. It is not necessary to go through all the rulings that bear on the subject. But it seems to me that three Full Bench decisions of this court and a ruling of the Privy Council must be taken to have settled the law in the matter. In Gangayya v. Venkaaramaih I.L.R. (1917) M. 454 it is laid down that a contract of partnership entered into by the manager of a joint Hindu family with a stranger does not ipso facto make the other members of the family partners; and not being partners, the other members whether divided or undivided, cannot institute any suit with respect to the partnership, that is, a suit for the dissolution of partnership. If that is a good proposition of law with respect to partnership entered into by the manager of a joint Hindu family and as to the position of the other adult members of that family, it seems to me, a fortiori that the infants do not become partners in a business carried on by their guardian and do not therefore acquire rights or become subject to the liabilities of a partnership. The position of a member of the family whose manager carried on business in partnership with a stranger is described as being analogous to that of a sub-partner. Those members cannot ask for a dissolution of the partnership and for accounts as it was the manager who entered into the contract and therefore it was he who acquired all the rights and became subject to all the liabilities of the partnership. No doubt as between him and the other members of the family he is liable to account for the profits of the business, and he is entitled to charge the family property with the losses that might have been incurred in the business. But except himself the other members of the family have not the status of a partner. Another full Bench decision is reported in the same volume at page Section 24, The Official Assignee of Madras v. Palaniappa Chetty I.L.R. (1918) M. 824. There it was held by a majority of the Judges, my learned brother Mr. Justice Sadasiva Aiyar dissenting, that the members of a joint family on attaining majority do not necessarily by virtue of Sections 247 and 248 of the Indian Contract Act or otherwise become personally liable to adjudication as an insolvent in respect of the debts contracted in the partnership business--during their minority. If the minors do not become personally liable for the debts contracted in the conduct of the joint family business during their minority even on attaining majority, it follows that they are not so liable during the period of their minority. Sections 247 and 248 of the Indian Contract Act to my mind clearly lead to this result. Section 247 says that a minor may be admitted to the benefits of the partnership but cannot be made personally liable for any obligation of the firm, though the share of such a minor in the property of the firm is liable for the obligations of the firm. Section 248 lays down: ' A person who has been admitted to the benefits of partnership under the age of majority becomes, on attaining that age, liable for all obligations incurred by the partnership since he was so admitted, unless he gives public notice, within a reasonable time of his repudiation of the partnership.' That is to say, it is only by his acquiescence that he can be said to have accepted the position of a partner, with it all the liabilities of a partner. Otherwise a minor merely by being admitted to the benefits of the partnership, cannot be said to become a partner in the full and proper sense of the term though his share in the partnership property is liable for debts of the firm. That implies that his other properties including his share in the joint family property will not be liable. In this case the learned Judge pointed out that, as far as the partnership is concerned, it has been, sold and the real claim of the plaintiffs is to make the property of the minors, that is to say, any family or separate family property that they may have liable for the debts of the firm. The next Full Bench decision which has to be noticed is Ramajogayya v. Jagannathan (1918) ILR.42. 185. There the learned Chief justice holds that ' a decree cannot be passed against a minor on his attaining his majority or his estate on a covenant entered into on his behalf by a guardian for his benefit. ' And the other two learned Judges, Ayling and Seshagiri Aiyar, JJ., lay clown a somewhat modified proposition. The proposition which they accept would in no way help the plaintiffs but in my opinion must be taken to negative their claim. They say that ' on a contract entered into on behalf of a minor by his guardian under which the guardian borrowed money but no charge was created on the minor's estate, no decree can be passed against the minor on his attaining majority or against his estate, except in cases in which the minor's estate would have been liable for the obligation incurred by the guardian under the personal law to which he is subject.' Mr. Justice Seshagiri Aiyar sums up the cases in which the guardian can bind the properties of the minor at page 193. None of them support the case of the plaintiffs in this suit. That a guardian cannot bind his minor by any personal covenant or a contract except for necessaries has long been established. The ruling authority on the point is Waghela Rajsanji v. Shekh Masludin I.L.R.(1887) B 551 a decision of the Privy Council. To the same effect is the decision in Indur Ghunder Singh v. Radhakrisna Ghose I.L.R. (1892) C. 507 another decision of their Lordships of the Privy Council.

6. The position shortly on the facts of this case is this. It may be assumed that on the death of the father of defendants 1 and 2, their elder brother, Venkata Subba Rao, was entitled to carry on the business on behalf of the family. But he retired from the business in 1907. On that date therefore the partnership under the ordinary law of contract would come to an end. Then the mother of defendants 1 and 2 stepping into the shoes of Venkata Subba Rao would be entering into a new contract of partnership although no formal documentor writing was executed. I have already pointed out that such a contract could not properly be said to amount to either a necessary act or an act for the benefit of the minor in the ordinary sense of the Hindu Law. Then, as she could not bind the minors personally by any covenant or contract, which she might enter into on their behalf, she could not by any act of her own make them partners in the business which she carried on with the plaintiffs. The relationship of partnership implies that the parties to it must be sui jurisable to enter into a contract. But a minor is incapable of entering into any contract by virtue of Section 11 of the Contract Act. He could not take any effective part in the management so as to bind the partnership and it follows that he could not incur any liability by any act of his purporting to be done in the conduct of a partnership. The guardian who entered into the partnership on behalf of the minor can alone then be treated as a partner.

7.It was suggested in the course of the argument that the plaintiffs must be taken to have admitted defendants 1 and 2 into the benefits of the partnership, and therefore Section 247 applies. But, conceding that to be so, all that could be contended is that their shares in the business would be held liable. That by itself would not make the defendants 1 and 2 partners in the sense that they would be personally liable for the debts so that their other properties might be seized in liquidation of the partnership debts. But we are asked to say that when the mother of defendants 1 and 2 entered into the business on their behalf it must be taken that she took over the liability of their father and that we should hold that that being part of the bargain the minors are liable for the debts of the father on the basis of having been admitted to the benefits of the partnership. To my mind this proposition on the face of it is untenable; it would be abuse of language to call it an admission to the benefits of partnership such as Section 247 of the Contract Act contemplates. The plaintiffs asked the District Judge, when they were presented with these difficulties, for leave to amend the plaint by adding Ramanamma, mother of defendants 1 and 2 as a defendant in her individual capacity and so that there might be a decree against her as a partner and the rights of the plaintiffs against her might be satisfied through any right of indemnity which Ramanamma might have as against the minors. I am of opinion that the learned District. Judge was right in not allowing this prayer. I do not think it would have been at all convenient in this suit to work out the rights of the parties in the way suggested. I have therefore come to the conclusion that the second appeal fails and must be dismissed with costs.

Sadasiva Aiyar, J.

8. The question for decision is whether the defendants 1 and 2 were validly made partners with the plaintiffs by the act of their mother. There is also another legal question involved in the case, namely, whether minors admitted to the benefits of partnership by a person become at once partners with the person for all purposes including the liability to be sued by that person for the dissolution of partnership and for taking of accounts and so on.

9. As regards both these questions I expressed some views in. The Official Assignee of Madras v. Palaniappa Chetty 35 M.L.J.473 . et. seq. But I was in the minority in that case and I would therefore not proceed in deciding the present case upon what I considered in that case to be the true principles to be followed in deciding such questions. Reading the decisions in Gangayya v. Venkataramiah 34 M.L.J. 271, and The Official Assignee of Madras v. Palaniappa Chetty 35 M.L.J. 473 together, I think it must be taken to have been established, either expressly or impliedly, by those decisions that a manager even in a trading family who enters into a partnership with a third person does not give the minor members of his family the status of partners and can only give them a position analogous to sub-partners under him. If so, I take it that it follows a fortiori that a guardian of minors cannot enter into an agreement with a third person which can give her wards the status of partners with that third person; and it follows that the defendants 1 and 2 in this case did not become partners with the plaintiffs by any such act of their guardian purporting to make them such partners. There can be no doubt on the facts that they were admitted by the 1st plaintiff to the benefit of partnership with the first plaintiff. Did they thereby become partners in a firm with the first plaintiff As I said, whatever my own opinion was in The Official Assignee of Madras v. PalaniappaChetty 35 M.L.J. 473. I think the language of the judgments of the majority implies that, notwithstanding Section 247 of the Contract Act, a minor does not thereby become a partner. There might be a sort of inchoate partnership between the major member and the minor member admitted to 'benefits ', but it becomes a real partnership in the eye of the law only after the minor attains majority and does not repudiate his admission into the partnership during his minority within a reasonable time under Section 248. If he does repudiate it, he has no rights as a partner nor is he liable as a partner though under Section 247; his share in the property of the 'firm' is liable for the obligations of the 'firm'. Of course, it; is rather anomalous to speak of his share in the property of the firm if his repudiationinvolves the, result that he had never the status of a partner in the firm; and: therefore had no ' share ' in it. But I suppose that it mustbe taken that the 'share ' of such a partner under Section 247 would then mean the share which the other member or members of the firm intended to allow, and did allow to him but which he does not own, owing to his repudiation. In this view, as the defendants had not attained majority when this suit was, brought and had not had any opportunity to affirm by non-s repudiation or disaffirm by repudiation under Section248, they were not partners with the first plaintiff when this suit was; brought.

10. I shall now refer to the case in Ramajogayya v. Jagannadhan 36 M.L.J. 29 in which, in my opinion, there was a substantial difference of views between the learned Chief Justice and the other two Judges. All that was held by the majority was that a guardian can bind the ward by a new obligation which was incurred by the guardian acting for the ward to satisfy an old obligation under which the ward then lay under the Hindu Law. In that particular case, the mother of the minor borrowed money for the expenses of the marriage of the minor's sister and it was held by the majority that the minor could be proceeded against directly for that loan to the extent of his ancestral properties. It cannot be said in the present case that the entering by the mother on behalf of her sons into a contract of partnership was the incurring of a definite clear-cut new obligation in order to discharge an existing obligation of the minors. She did it thinking that it will enable the minors to discharge an existing obligation by earning profits in the partnership business and not with a view to incurring on their behalf and imposing a new, obligation on them in satisfaction of the existing liability. I therefore do not think that the decision in Ratuajagayya v. Jagannadhan I.L.R. (1918) M. 185 helps the plaintiffs in this case. I feel that the precedents (which I find myself compelled in loyalty to follow) narrow in an undesirable manner the powers of the manager and of the guardian of minors in a trading family. But it is advisable that there should be settled rules of law in these matters; and I therefore agree that this second appeal should be dismissed with costs.

11. As regards the amendment of the plaint so as to make the guardian a supplemental defendant, she never intended to make herself a partner and the 1st plaintiff never intended to make her a partner in her personalcapacity; The analogy of the executor or a temple trustee who is presumed to intend to make himself personally liable when he enters into transactions with third persons (other than transactions which create a charge on the property under his control) has no application to this case and the proposed amendment therefore cannot be allowed.


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