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P.E.R.M. Annamalai Chetty, Joint Firm, Palni, Through Its Partner P.E. Rama Periya Karuppan Chettiar Vs. Satyavadivel Muthuswami Maniagaran and ors. - Court Judgment

LegalCrystal Citation
SubjectFamily;Contract
CourtChennai
Decided On
Reported inAIR1939Mad538; (1939)1MLJ792
AppellantP.E.R.M. Annamalai Chetty, Joint Firm, Palni, Through Its Partner P.E. Rama Periya Karuppan Chettiar
RespondentSatyavadivel Muthuswami Maniagaran and ors.
Cases ReferredMaharana Shri Ranmalsingji v. Vadilal Vakhatchand I.L.R.
Excerpt:
- - we should therefore hesitate to sanction a departure from what appears to be a well-established principle unless we are satisfied that there is clear authority to the contrary. in the face of such overwhelming authority which clearly binds us, only one conclusion is possible, namely, that hunoomanpersaud's case (1856) 6 m. 735 ,on a consideration of all the surrounding circumstances which is precisely what the subordinate judge has done, and we can find no error of law in it......note executed by the mother to raise money for discharging the minor's share of a prior family debt contracted by the uncle and manager. two privy council decisions waghela rajsanji v. shekh masludin and indur chunder singh v. radhakishore ghose were referred to, and distinguished on the ground that in them there was no 'pre-existing liability' such as there was in the case before the court. but it is to be observed that there is really nothing in this judgment to support the theory, that necessity by itself could not justify the incurring of the debt. we feel no doubt that the reference to a 'preexisting liability' was only illustrative of the general doctrine of necessity on which the decision in fact proceeded. this cae was followed in duraisami reddi v. muthial reddi i.l.r.(1908).....
Judgment:

Krishnaswami Aiyangar, J.

1. This is an appeal under the Letters Patent against the judgment of Venkataramana Rao, J., in S.A. No. 492 of 1934. By that judgment he has reversed the decree of both the lower Courts and dismissed the suit with costs throughout.

2. The appeal raises a question of importance involving a decision as to the limits within which a natural guardian under Hindu law can incur a simple contract debt so as to bind the minor's estate. That such a guardian has the power to borrow by charging, mortgaging or even by selling the estate or a sufficient portion of it, for purposes termed necessary or beneficial according to that law, cannot at this time of the day be questioned. It is also settled that even in the absence of a proved necessity or benefit, an honest creditor can still recover the debt from the estate if he can show that in advancing the money he acted in the bona fide belief after due enquiry, that the guardian was acting for such a purpose in incurring the debt. These principles which are based as much on Hindu law as on general considerations of equity, have been held to afford a test of the validity of similar transactions by other persons also who occupy an analogous position. The manager of a joint family governed by the Mitakshara, female owners in possession of inherited property, the head of a Mutt, and the Dharmakartha of a temple are among the class of persons whose powers are so limited. Indeed it can be truly said that what the Judicial Committee said with regard to a guardian in Hunoomanpersaud's case (1856) 6 M.I.A. 393, has become an integral part of the branch of the law relating to the borrowing powers of all qualified owners. In the case of all such persons there exists in fact, no difference in the test to be applied whether the money is obtained by pledge or sale of the property, or by way of a simple loan.

3. The decision of Venkataramana Rao, J., if we understand it aright, appears to introduce into this branch of the law a distinction between simple loans and loans borrowed on the security of property and to lay down with respect to the former a stricter rule than that which obtains in the latter. We are ho doubt in this case concerned with the powers of a mother and natural guardian but it is none the lesss necessary to bear in mind that any interference with a rule so general in its application as that laid down in Hunoomanpersaud's Case (1856) 6 M.I.A. 393 may tend to create uncertainty in the administration of the law as regards also the other persons, who belong to the same group and are governed by the same principles. We should therefore hesitate to sanction a departure from what appears to be a well-established principle unless we are satisfied that there is clear authority to the contrary.

4. The learned Judge has expressed the opinion that the law is correctly summed up in the following statement in Trevelyan on 'Minors' at page 169:

Although a guardian may under certain circumstances sell or charge the ward's property he cannot bind the ward personally by a simple contract debt, by a covenant, or by any promise to pay money or damages unless such promise is made merely to pay or to keep alive the debt for which the ward's property was liable.

5. This passage means according to Venkataramana Rao, J., as indeed it does seem to mean, that a guardian cannot, without charging the estate, contract so as to bind the minor, except it be to pay or keep alive a debt already in existence, and binding on the estate. On this view a pre-existing debt or liability could alone support a simple contract debt and not necessity, nor benefit. In fact he says that:

The test is not a mere question of benefit nor the mere fact that the debt was incurred for necessary purposes; the observations made in some of the cases that where the debt is incurred by the guardian for necessary purposes, his estate can be rendered liable are too broadly made.

6. The learned advocate for the respondent has been unable to cite any authoritative precedent which recognises such a distinction between the one class of debts and the other. In support of his view Venkataramana Rao, J., has referred to the decision of the Privy Council in Indur Chunder Singh v. Radhakishore Ghose as authority for the proposition:

That the considerations by which the validity of a charge is judged are not the same in adjudging the binding nature of a contractor a covenant entered into by the guardian.

7. We can find no such proposition laid down in this decision or indeed in any other decision to which our attention was drawn except the one in Maharana Shri Ranmalsingji v. Vadilal Vakhatchand I.L.R. (1894) 20 Bom. 61. This case however cannot, after the Full Bench ruling in Ramajogayya v. Jagannadham (1918) 36 M.L.J. 29 : I.L.R. 42 Mad. 185 , be regarded as stating the law correctly on the point. That ruling as we understand it lays down the proposition that the same test is applicable to both classes of borrowings. The majority view was that

No decree should be passed against the minor or his estate on a contract entered into on his behalf by a guardian under which covenant no charge is created on the estate except in cases in which the minor's estate would have been liable for the obligations incurred by the guardian under the personal law to which he is subject.

8. A reading of the judgment makes it plain that the observations of the Privy Council in Waghela Rajsanji v. Shekh Masludin are not to be understood literally so as to preclude the recognition of a larger power in the guardian where the personal law of the minor confers it. Wallis, C.J., who delivered the dissenting judgment was inclined to accept the more limited construction of the guardian's power taken in Maharana Shri Ranmalsingji v. Vadilal Vakhatchand I.L.R.(1894) 20 Bom. 61. He would limit it to necessaries supplied to the minor within Section 68 of the Contract Act though in deciding what should be regarded as necessaries, the position of the minor and the expenses which are properly chargeable to his estate under the personal law by which he is governed may have to be taken into account. That this is his view appears from the observation that

What are necessaries must depend upon the facts of each case, and in the case of a Hindu, money advanced for the expenses of a marriage which the minor has to perform or to pay off a debt binding on him may be recoverable under this head from his estate.

9. Apart from necessaries, there is also the power to acknowledge an already existing valid debt or a promise to pay it, which though denied in Maharana Shri Ranmalsingji v. Vadilal Vakhatchand I.L.R.(1894) 20 Bom. 61 has been since recognised in Annapagauda v. Sangadigyapa I.L.R.(1901) 26 Bom. 221 which on this point overruled the earlier decision. According to the learned Chief Justice, all the decisions are capable of being brought under one or other of these two heads of liability, which are both independent of contract. A direct contractual liability enforceable against the estate, had been, according to him, definitely negatived by the Privy Council. If, as the Chief Justice was inclined to hold, the terra 'necessaries' is understood in an expanded sense so as to cover all those purposes which are sufficient according to Hindu law to support an alienation the difference virtually disappears, leaving only the head of benefit about which as an independent source of authority there has been a conflict of opinion. Seshagiri Aiyar, J., with whom Ayling, J., concurred, took a more liberal view, and rested the decision on what he described as the broader ground, disclosed by the decisions of the Courts in the Madras and the other Presidencies Differing from the Chief Justice he held that there was a power in the guardian by contract to bind the minor's estate according to Hindu law, if the circumstances indicated a case of necessity or benefit. On an examination of the cases both before and after the Privy Council decision in Waghela Rajsanji's case , he reached the conclusion that according to all the High Courts the liability of the minor under the Hindu law is not affected by the circumstance that it was the guardian who had incurred the obligation. That result was in his opinion not opposed to the decisions of the Privy Council, as their Lordships should not be held to have intended 'to lay down that under no circumstances can the guardian bind the estate of the ward, except it be by creating a charge'. As we understand it, the difference in Ramajogayya v. Jagannadham (1918) 36 M.L.J. 29 : I.L.R. 42 Mad. 185 , between the Chief Justice on the one hand and the other two learned Judges on the other, consisted in the former denying a power in the guardian to bind the minor by contract apart from necessaries, while the latter admitted such a power to reside in him subject however to the conditions imposed by the personal law of the minor. The passages occurring at page 195 make it sufficiently clear that no distinction is to be made between a charge, and a simple loan according to this decision, and none seems to exist on principle, so far as we could see.

10. It is perhaps unnecessary to undertake a re-investigation of the earlier case-law which appears to have been amply considered in the Full Bench decision which we regard as furnishing a binding precedent for the decision of this appeal. In that case the money had been borrowed on a mortgage which was however ineffectual as the property was inalienable; yet the debt was declared enforceable against the estate on the ground that it had been incurred for a necessary purpose. In Subramania Aiyar v. Arumugha Chetty I.L.R.(1902) 26 Mad. 330, the minor's estate was held liable on a promissory note executed by the mother to raise money for discharging the minor's share of a prior family debt contracted by the uncle and manager. Two Privy Council decisions Waghela Rajsanji v. Shekh Masludin and Indur Chunder Singh v. Radhakishore Ghose were referred to, and distinguished on the ground that in them there was no 'pre-existing liability' such as there was in the case before the Court. But it is to be observed that there is really nothing in this judgment to support the theory, that necessity by itself could not justify the incurring of the debt. We feel no doubt that the reference to a 'preexisting liability' was only illustrative of the general doctrine of necessity on which the decision in fact proceeded. This cae was followed in Duraisami Reddi v. Muthial Reddi I.L.R.(1908) 31 Mad. 458 and Venkitaswami Naicker v. Muthuswami Pillai (1917) 34 M.L.J. 177, in both of which a guardian had executed simple bonds, as also in Krishna Chettiar v. Nagamani Ammal I.L.R.(1915) 39 Mad. 915, in which the liability was sought to be charged on a promissory note. In all these cases it will be seen that it was the test laid down in Hunoomanpersaud's case (1856) 6 M.I.A. 393 that formed the basis of the decision. The criticism that these decisions did not give full effect to the opinion of the Privy Council expressed in Waghela Rajsanji v. Shekh Masludin and Indur Chunder Singh v. Radhakishore Ghose , led to the reference in Ramajogayya v. Jagannadham (1918) 36 M.L.J. 29 : I.L.R. 42 Mad. 185 with the result already mentioned. The case of Ramakrishna Reddiar v. Chidambara Swamigal (1927) 54 M.L.J. 412, though not a case of debt is noteworthy for the way in which the learned Judges understood the effect of the Full Bench decision. Wallace, J., considered that Krishna Chettiar v. Nagamani Ammal I.L.R. (1915) 39 Mad. 915, which had held that a promissory note executed by a guardian of a Hindu minor for purposes binding on him is enforceable against his estate, fell directly within the principle of the Full Bench decision. Thiruvenkata Chariar, J., was more explicit and recognised the power of the guardian to contract loans without charging the estate, for necessary purposes the term to be understood as comprising 'all that is necessary to meet the wants of the minor and of other members of his family who have claims either against him personally or against his estate'. In Meenakshisundaram v. Ranga Aiyangar (1931) 35 L.W. 397, the Full Bench decision was again followed without question and a decree against the estate was rendered on a promissory note. The learned Judges referred with approval to the rule in the form stated by Tiruvenkatachariar, J., in the case last cited, observing that that learned Judge had correctly understood the effect of the Full Bench decision. More recently there has been another Full Bench decision reported in Satyanarayana v. Mallayya (1934) 68 M.L.J. 540 : I.L.R. 58 Mad. 735 , in which the liability Of a minor's estate on a promissory note executed by the guardian came up once again for consideration. Ramesam, J., reviewed the relevant decisions bearing upon the point; and referring in particular to the earlier ruling in Ramajogayya v. Jagannadham (1918) 36 M.L.J. 29 : I.L.R. 42 Mad. 185 he said that that decision had always been followed in this Court as settling the law and that nothing had happened since to justify a departure from it. He accepted the statement of law by Curgenven, J., in Zamindar of Polavaram v. Maharaja of Pittapuram (1930) 60 M.L.J. 56 : I.L.R. 54 Mad. 163, to the effect that any liability to which the minor would be subject under the Hindu law is not the less a liability because it was incurred by a guardian on his behalf. That he understood the earlier Full Bench decisions in the sense in which Tiruvenkatachariar, J., understood them is clear from his observation:

That in no transaction entered into by a guardian on behalf of a minor can the opposite party succeed, if challenged, without establishing some fact such as that the transaction was for the benefit of the minor or some such other fact.

11. The learned Judge had obviously in mind the rule in Hunoomanpersaud's case (1856) 6 M.I.A. 393 as governing the question. This Full Bench decision has very recently been followed in Seetharamayya Garu v. Sathiah (1938) M.W.N. 677, to which one of us was a party. In the face of such overwhelming authority which clearly binds us, only one conclusion is possible, namely, that Hunoomanpersaud's case (1856) 6 M.I.A. 393 contains the true test for deciding the binding character even of a simple loan. We may also perhaps add that justice and equity regarded both from the point of view of the minor, and the lender, are in consonance with the view which has been all along accepted in this Court. The statement of the law in Trevelyan's book on which Venkataramana Rao, J., has relied, merely purports to state the effect of the cases mentioned in the footnote, without noticing the course of decisions in this Presidency interpreting the Privy Council decisions. This is a serious omission which is sufficient in itself, to deprive the statement of real value, so far at any rate as this Court is concerned. The Patna High Court also seems to take the same view of the powers of a guardian, see Suchit Chaudhuri v. Harnandan Singh I.L.R. (1932) 12 Pat. 112. As I have said in Ramanathan Chettiar v. Palaniappa Chettiar (1938) 49 L.W. 132:

It is difficult to appreciate an argument which denies to a guardian a power to contract a simple debt while conceding to him in identical circumstances a power to charge or even sell the estate in spite of the greater strictness with which the Hindu law regards transactions affecting immovable properties.

12. In this proposition an answer was attempted. A sale or a mortgage it was said affects that portion only of the minor's estate which is involved in the particular transaction whereas a simple loan might endanger the entire estate by reason of the possibility of a limitless expansion by way of accumulating interest. Even if this is a sound proposition, which we doubt, there is no reason why it should not equally apply to other limited owners whose position is analogous to that of the guardian. Such is not however the case. The evil if any is due not to the honest creditor who lends the money, but to the irresponsible guardian who negligently omits to take prompt steps to repay it. In this connection it is not to be forgotten that the creditor has to make out a necessity not merely for the loan advanced but also for the rate of interest charged.

13. A trustee or an executor stands in a different position and to him the principle of the English law which prohibits him from binding the minor by a personal covenant are rightly applied, see Srishchandra Nandi v. Sudhirkrishna Banerji I.L.R.(1931) 59 Cal. 216. To them however no less to the guardian the doctrine of subrogation is applicable. This doctrine is to be invoked in cases where there is no direct contractual liability enforceable against the estate. Where the trustee or the executor does not sell or charge but merely contracts or covenants, the effect of the transaction is that it binds him personally and not the estate and consequently there is no direct recourse against the estate available to the creditor. But the law goes to this extent to help him, that if the money is utilised for the benefit of the estate, he will be entitled to such rights of reimbursement, as the borrower himself may have out of it.

14. It is necessary to sound a note of caution against the error of thinking that the promissory note evidences a contract binding on the minor by force of the instrument itself. The liability does not arise on the instrument, but on the debt evidenced by it, and is enforced against the estate, not on account of the fiction that the contract of the guardian is the contract of the minor, but on account of the substantive principle of the personal law of the minor which creates the liability. It is scarcely necessary to add that the liability of the estate though personal in the English Law sense of the word, is not personal in the sense that the person of the minor even after majority can be arrested in execution. A personal liability arising out of the contract of the guardian is a liability of the minor's estate only.

15. Coming to the facts of the present case the lower appellate Court has definitely found that out of the three promissory notes which formed the consideration for the note sued on, one only, namely, Ex. A-1 which was for a sum of Rs. 1,000 had been executed by the mother of the minor first respondent for purposes binding on the latter. That is a finding of fact which cannot be, and has not been challenged before us, and is enough in our view of the law to sustain the decree passed by the District Munsif. It is true that that promissory note was executed by the mother and by her agent signing their names without purporting to do so on behalf of the minor. But that is not a material defect. For the circumstances proved in the case, taken along with the recital that the money was borrowed for family and pannai, etc., expenses are sufficient to support the finding of the learned Subordinate Judge that the promissory note was executed by the mother not in her personal capacity but in her capacity as a guardian acting for the minor. The intention of the makers must have been to exclude the personal liability of the guardian and her agent, and leave the minor's estate alone liable. This intention can be properly inferred, according to Satyanarayana v. Mallayya (1934) 68 M.L.J. 540 : I.L.R. 58 Mad. 735 , on a consideration of all the surrounding circumstances which is precisely what the Subordinate Judge has done, and we can find no error of law in it. Nor is there anything in the pleadings which prevents the appellant who is the payee tinder the note, from relying on the Hindu law liability of the minor. The plaint has been framed in such a way as to raise the liability of the minor on the consideration, that is, the debt, which is an obligation different from, and external to the note, though arising out of it under the personal law. There is therefore no valid objection to the appellant's claim.

16. There is one more argument of the respondents' counsel which may be briefly noticed. He contended that there was no proof that the money advanced under Ex. A-1 had been utilized for the benefit of the estate. Assuming that there is no such proof, still it is difficult to appreciate the argument. It is settled that a bona fide lender is under no obligation to see to the application of the money. As observed by the Judicial Committee in Hunoomanpersaud's case (1856) 6 M.I.A. 393:

The purposes for which a loan is wanted are often future, as regards the actual application, and a lender can rarely have, unless he enters on the management, the means of controlling and directing the actual application. Their Lordships do not think that a bona fide creditor should suffer when he has acted honestly and with due caution, but is himself deceived.

17. Proof of actual application will be necessary only if the transaction is to be tested from the point of view of necessaries under the Contract Act and not if it is to be decided on the rule of Hindu law. If a different rule has been enunciated in Maharana Shri Ranmalsingji v. Vadilal Vakhatchand I.L.R. (1894) 20 Bom. 61, or in any other case, we must express our inability to accept it as correct.

18. On the law to be applied to the facts found in this case, the appellant is entitled to succeed. The appeal is accordingly allowed, the judgment of Venkataramana Rao, J., is set aside and the decree of the District Munsif restored with costs throughout. The first respondent has filed an application claiming to be an agriculturist and praying for the benefit of the Madras Agriculturists' Debtors Relief Act (IV of 1938). This petition will be referred to the District Munsif of Palani for enquiry and disposal according to law.


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