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V.S.V. Subbaraya Mudali Vs. Thangavelu Mudali and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil;Property
CourtChennai
Decided On
Reported in(1923)45MLJ44
AppellantV.S.V. Subbaraya Mudali
RespondentThangavelu Mudali and ors.
Cases ReferredRajagopala Chetty v. Kandappa Chetty
Excerpt:
.....are liable for debts incurred in the course of the business to the extent of their share in the family property and that seems to be only reasonable, because a business like the one in question is carried out on the credit of the entire family property. and odgers j, held that 'in the case of trading families like the kometti chetties, if monies are borrowed for the purpose of an ancestral business carried on by the members of the joint family, all the members of the family including minors are liable for the re-payment of such sums, to the extent of their share in the whole family including the assets of business. if it could be shown that any particular debt was not incurred for the purpose of the trade but for some purpose of the 2nd defendant without any reference to the family or..........on trade, his share of the trade assets alone could be made liable for debts contracted for trade purposes, and he relied upon sanka krishna murti v. the bank of burma i.l.r. (1911) m. 692. in that case it was held that a minor member of a joint hindu family was liable on a bill drawn by the manager, his liability being limited to his share in the business, on the analogy of section 247 of the contract act (ix of 1872). mr. justice wallis (as he then was) in the course of the judgment quotes the well-known observations of sausse, c.j., in ramlal thakursidas v. lakshmichand muniram (1861) 1 bom. h.c.r. (appx) 51 'the power of a manager to carry on a family trade necessarily implies a power to pledge the property and credit of the family for the ordinary purposes of that trade,' and.....
Judgment:

Devadoss, J.

1. This is an appeal against the preliminary decree of the District Judge of Chingleput in Original Suit No. 18 of 1916 by the plaintiff, who sued the defendants 1 to 5 for partition of the family properties and impleaded certain alienees and creditors as defendants. The 1st defendant was the father of the plaintiff and defendants 2 and 3. 4th defendant is the brother's son of the 1st defendant. 5th defendant is the mother of the plaintiff. Defendants Nos. 6, 31, 32, 33, 34, 35, 37 and 39 are alienees. The rest are creditors.

2. The plaint allegations are : the 1st defendant was the manager of the joint family of which plaintiff and defendants Nos. 2 to 4 were members. The properties set out in B schedule are the joint family properties. The plaintiff's family carried on a cloth trade under the name and style of V.S. Varadaraja Mudaly in shop No. 154. The 2nd defendant who was at enmity with the rest of the family carried on a separate trade in another shop under a different Vilasam. He contracted debts and purchased some properties, and the plaintiff is not liable to pay from his share of the family property the debts contracted by the 2nd defendant, which were not for family purposes and which could not bind the family.

3. C. Schedule properties were purchased by the 2nd defendant and the plaintiff did not claim any share in them : but stated that should the Court hold that the 2nd defendant purchased them out of the family funds, the plaintiff would be entitled to his share in them also.

4. The 1st defendant died before notice of the suit could be served on him. 2nd defendant was ex-parte. 3rd defendant filed a written statement supporting the plaintiff's case. 4th defendant supports the case of the creditors. The creditors and alienees pleaded that the 1st defendant was too old to manage the family concern, that 2nd defendant was managing the affairs of the family, that the trade carried on by him was a family trade, the debts were incurred for purposes of the trade, that the plaintiff, the 1st defendant and other members of the family were benefited by the trade, and the debts are binding upon the plaintiff and the plaintiff cannot question the alienations made by the 2nd defendant.

5. The learned District Judge in a very careful and elaborate judgment held that the trade carried on by the 2nd defendant was a family trade and that the debts were contracted and the alienations were made for purposes which could bind the family and gave a preliminary decree for partition and directed that Rs. 300 should be paid for the marriage expenses of the plaintiff. The plaintiff now appeals in forma pauperis against that portion of the decree which declares that his share is liable for the debts contracted by the 2nd defendant, and the alienations are binding upon him. Original Suit No. 18 of 1916 was tried along with several other suits brought by the creditors against plaintiff and defendants 1 to 4 for recovery of the amounts due to them and the evidence was recorded by consent in O.S. No. 18 of 1916. The main judgment is in O.S. No. 18 of 1916 and the learned District Judge has written separate judgments in the other suits dealing specifically with the case of each plaintiff.

6. The issues common to all the cases are issues Nos. 6, 7 and 15. They are:

(1.) Whether the 1st defendant was not the manager of the family or whether the 2nd defendant was constituted its manager?

(2) Whether the trade referred to in paragraph 6 of the plaint is also family business?

(3) Whether the plaintiff and defendants 1 and 4 under-took to pay the debts alleged to be due to defendants 7, 8 and 9 and if they did, whether any objection in respect thereof is supported by consideration?

7. It was agreed at the bar that issues 6, 7 and 15 which are dealt with by the Dt. Judge in his judgment in O.S. No. 18 of 1916 should be tried first, and after their disposal the appeals against the decrees in favour of the creditors should be heard and decided.

[His Lordship after an examination of the evidence in detail found Issue 6 in favour of the plaintiff and Issues 7 and 15 against him].

8. It was next urged that the 2nd defendant had no right to incur debts for buying property. No member of a joint family has a right to incur debts for buying property. But in this case there is no specific evidence except in the case of the loan of the 14th defendant that any money which was borrowed was utilised for buying property. It may be that the 2nd defendant thought he was making a large income and was investing a portion of the income upon immoveable property. If there is specific evidence that any loan was given for the purpose of buying property it may be contended with some show of reason that that loan could not bind a minor member of the family unless it was shown that the buying of property was a necessary purpose.

9. Mr. Ramachandra Ayyar urged that the plaintiff being a minor member of a joint Hindu family which carried on trade, his share of the trade assets alone could be made liable for debts contracted for trade purposes, and he relied upon Sanka Krishna Murti v. The Bank of Burma I.L.R. (1911) M. 692. In that case it was held that a minor member of a joint Hindu family was liable on a bill drawn by the manager, his liability being limited to his share in the business, on the analogy of Section 247 of the Contract Act (IX of 1872). Mr. Justice Wallis (as he then was) in the course of the judgment quotes the well-known observations of Sausse, C.J., in Ramlal Thakursidas v. Lakshmichand Muniram (1861) 1 Bom. H.C.R. (Appx) 51 'the power of a manager to carry on a family trade necessarily implies a power to pledge the property and credit of the family for the ordinary purposes of that trade,' and observes : 'This does not seem to mean more than that it is unnecessary to enquire whether there are minors or not.' The principle of that decision is, that on a bill drawn by the managing member, a creditor could obtain a decree only against the trade assets of a minor member of a joint Hindu family. That case does not consider what the trade assets are. If credit is got on the strength of the family possessing immoveable property it cannot be said that the assets of the trade are limited to the goodwill, stock in trade and outstandings. This is quite clear from a decision reported in Muthaya Pillay v. Tinnevelly South Indian Bank (1977) 5 L.W. 341 where a Bench of this Court held that the minor's liability was not confined to the trade assets alone. The learned Judges observe at page 342, after referring to the cases reported in Ramlal Thakursidas v. Lakshmichand Muniram (1861) 1 Bom. H.C.R. (App.) 51 , Raghunathji Tarachand v. The Bank of Bombay I.L.R.(1909) B. 72, and Chalamayya v. Varadayya 9 M.L.J. 3. 'Those decisions held in clear terms that in the case of an ancestral business all the members of the family including the minors are liable for debts incurred in the course of the business to the extent of their share in the family property and that seems to be only reasonable, because a business like the one in question is carried out on the credit of the entire family property. The family property is swelled by the profits earned in the business and it would be not only unjust to confine liability to the extent of the appellant's share in the assets of the business but it would be impossible in a case of this nature to say what is the extent of the property embarked on the business.' The decision in Raghunathji Tarachand v. The Bank of Bombay I.L.R(1909) . B. 72 lays down 'where a family carries on a business or profession and maintains itself by means of it, the member who manages it for the family has an implied authority to contract debts for its purposes, and the creditor is not bound to inquire into the purpose of the debt in order to bind the whole family thereby, because that power is necessary for the very existence of the family.' Chandravarkar J, says at page 81 : 'Where a minor is a coparcener in a joint family, his share in the family property is liable for debts contracted by his managing coparcener for any family purpose or any purpose incidental to it. If the family is a trading firm, the same rule must apply with this difference that the term family purpose or purposes incidental to it, must here give way to the expression, trading purpose or purpose incidental to it having regard to the nature and objects of the family business.' It is therefore clear that where an accredited agent of the family, who carries on a business on behalf of the family, contracts debts for purposes of the trade, the purpose for which he contracts the debt is a family purpose because the trade is a family concern and the creditors are entitled to go against the whole of the family property and a minor member is bound inasmuch as the debt is borrowed for a family purpose. It would be quite different if it could be established that the loan was not given for the purpose of the trade but for some other purpose which was not necessary for carrying on the trade. This principle is made quite clear by a later decision of the Madras High Court reported in Thammanna Chinna Lakshminarasimham v. Akarapu Venkanna Chinniah (1919) 38 M.L.J. 55 . There Sir Abdur Rahim, Officiating C.J. and Odgers J, held that 'in the case of trading families like the Kometti Chetties, if monies are borrowed for the purpose of an ancestral business carried on by the members of the joint family, all the members of the family including minors are liable for the re-payment of such sums, to the extent of their share in the whole family including the assets of business.' They follow the ruling in Muthaya Pillai v. Tinnevelly South Indian Bank (1916) 5 L.W. 341 , and observe. 'This view of the law is followed in the case just referred to in Malaiperumal Chettiar v. Arunachala Chettiar (1917) 6 L.W. 417 , where it is laid down that the ordinary presumption in the case of such business is that the entire family property is embarked in the business and forms part of the assets of the business. It is unnecessary to pursue this matter further as it is quite clear that a minor member is bound to pay out of his share of the family property the debts contracted for bona-fide trading purposes when the trade is a family trade managed by the managing member or some one deputed by the managing member to do so.

10. Mr. Ramachandra Ayyar relied upon Sahu Ram Chandra v. Bhup Singh 33 M.L.J. 14, as supporting his contention that a minor is not bound to pay out of the family property the debts contracted by the managing member. That case was one of alienation and it was held in that case that the father could alienate joint family property for necessity or for an antecedent debt. That case has no application to the present as the 2nd defendant was managing the family trade and contracted debts for the purpose of carrying it on. The trade carried on by the 2nd defendant has been shown to be one that was started in the life-time of the grand-father and carried on by the plaintiff's uncle Singaravelu Mudaliar till his death, and afterwards continued by the 2nd defendant. The family is a trading family and there is nothing to show that the assets of the trade were confined to the stock in trade and outstandings. Evidently the family property was acquired out of the savings from the income of the trade and it cannot be said after a number of years that the immoveable property of the family became dissociated from the trade in such a way as to make the trade a separate entity altogether from the family property. There may be cases where the family trade is carried on without any reference to the family property, but in this case the income of the immoveable property belonging to the family was brought into the trade, was credited in the books kept for the purposes of the trade and the expenses of the family were met from the trade funds. It cannot be contended in this case that the family property was not embarked on the trade carried on by the family. It must therefore be held that the plaintiff's share in the family property is liable for such of the debts as were incurred for the purposes of the trade. If it could be shown that any particular debt was not incurred for the purpose of the trade but for some purpose of the 2nd defendant without any reference to the family or for an object which was not a family purpose then it might be contended with success that that debt could not bind the minor's share in the family property.

11. As regards the alienations, there is no appeal in respect of the alienations in favour of the 6th and 31st defendants. The alienation in favour of the 32nd defendant is attacked by the plaintiff. The property covered by this alienation is a house. This was purchased in 1902 in the name of the 2nd defendant under Ex. 57(a), and was sold in 1912 to 32nd defendant under Ex. 57. In 1902 the 2nd defendant had no business of his own and the property must have been purchased in his name out of family funds. The learned District Judge thinks that the 2nd defendant was the ostensible owner of the property and the other members did not object to the sale. When a person buys from a member of a joint Hindu family who is not himself the manager he should take care to see that the person selling has a good title to convey. The fact that there is a recital in Exhibit 57 that it is the self-acquisition of the 2nd defendant would not by itself give a good title to the vendee if the 2nd defendant had no right to sell. The vendee, 32nd defendant, did not take the trouble to get a sale-deed from the managing member of the family, the 1st defendant, or at least to get the consent of the other members of the family to the sale by the 2nd defendant. It is usual to obtain the attestation of even divided members when property is sold by a person who was once a member of a joint Hindu family. In Exhibit 57 there is no attestation by any one member of the plaintiff's family. I therefore hold that the 32nd defendant is not a purchaser in good faith and the sale in his favour cannot prevail against the plaintiff.

12. As regards improvements, he made them at his own risk. He did not act as an ordinarily prudent man would do and therefore cannot claim the value of the improvements made by him.

13. As regards alienation in favour of the 33rd and 34th defendants, here also a house was sold by the 2nd defendant and it has changed hands. The house was purchased under Ex. 76(b) in 1907 by the 2nd defendant and was sold under Ex. 76(c) on 12-3-1908. The learned District Judge says there is no evidence that the family ever objected to the alienation by the 2nd defendant. The question is whether the 2nd defendant had power to sell. In the light of the decision of their Lordships of the Privy Council in Sahu Ram's case 33 M.L.J. 14 (P.C.) , I cannot hold that the 2nd defendant could give a valid title to the property against the plaintiff. The alienation is not binding on the plaintiff.

14. The next alienation is that of a mortgage in favour of the 35th defendant. The mortgage is for Rs. 5,000. But consideration to the extent of Rs. 1,500 has failed. The mortgage (Ex. 58b) was on the 17th August, 1915. A junior member of a joint Hindu family has no right to alienate property belonging to the family. No doubt a father could sell for an antecedent debt, but a brother stands in a different position; and when he is not the managing member he could not alienate family property even for an antecedent debt. If he is the accredited agent of the family he could alienate only for family necessity. No doubt the family WHS in embarrassed circumstances. But in the case of this alienation there is no evidence that it was made for the purpose of staving off the evil day. It cannot bind the plaintiff.

15. The next alienation is a mortgage in favour of the 37th defendant. By Ex. 39(a) dated 2-9-1915, 4th defendant mortgaged some of the family property. 4th defendant was only a junior member of a joint Hindu family and he could not convey more than his share in the family property. It is in evidence that the mortgagee is the husband of his maternal aunt, and there was no need to make that alienation. It can only bind the 4th defendant s share and the plaintiff s share is not bound by the alienation.

16. The next alienation is in favour of the 39th defendant. It is also a mortgage. By Ex. 75, 4th defendant mortgaged the properties belonging to the family. The same remarks apply to this as to Ex. 39(a). The 4th defendant had no right to convey more than his share of the family property in favour of the mortgagee. The plaintiff's share is not bound.

17. In the result the preliminary decree of the Lower Court will be modified by declaring that the alienations in favour of defendants Nos. 32, 33, 34, 35, 37 and 39 do not bind the plaintiff's share of the family property. The plaintiff is entitled to proportionate costs from defendants Nos. 32, 34, 35, 37 and 39.

18. The question of costs and the reliefs in respect of the debts will be decided after the connected appeals are heard.

Spencer, J.

19. I agree.

20. Appeals Nos. 387 to 396, 398 and 400 to 408 of 1918 coming on for hearing on Monday, the 18th September, 1922, and this day and Appeal No. 386 of 1918 coming on again for hearing this day, the Court delivered the following

21. Appeal No. 387 of 1918 : In this appeal the only question argued was whether the plaintiff was entitled to claim interest at the contract rate from the date of plaint to the date of decree. The Court has a discretion in the matter and the learned District Judge has allowed interest according to law. The case in Ramachandra v. Devu I.L.R. (1889) M. 485 is relied upon as showing that the Court has no discretion in the matter but there is a later decision of the learned Chief Justice and Seshagiri Aiyar, J. in Rajagopala Chetty v. Kandappa Chetty (1915) 28 I.C. 429 to the effect that the Court has a discretion in the matter under Section 34, C.P.C. Therefore the learned District Judge's order is correct and the appeal is dismissed with costs.

22. The decisions in the other appeals turned on their special facts and are not material to this report.


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