Pandrang Row, J.
1. This is an appeal from the decree of Waller, J., dated 16th February 1931 in C. S. No. 348 of 1928, a suit instituted by the Imperial Bank of India, Madras, to recover the amount due on two promissory-notes executed on the 4th and 7th days of August 1925 for Rs. 25,000 and rupees 37,000 respectively by one Kadiresan Chetty as agent of the guardian of the minor defendant 1, then aged about three years, and the sole proprietor of the P.L.A. Firm. The promissory-notes were executed in favour of defendant 2 firm known as the M.A.R.A.R. Firm, and they were endorsed in favour of the Imperial Bank of India, the first note being endorsed by Kadiresan Chetty himself as agent for defendant 2's firm, and the second note by the principal of that firm. The plaint proceeded on the basis that the promissory-notes were executed by the P.L.A. Firm, and the claim against this firm was based only on the execution of the promissory-notes by this firm. Defendant 2 firm consented to a decree, and only the minor defendant 1 resisted the claim. The minor defendant 1 who is the sole proprietor of the P.L.A. Firm was represented by his maternal uncle as guardian-ad-litem, and in his written statement he contended inter alia that the suit promissory-notes were not executed on his behalf or on behalf of his firm, and that neither his mother and guardian nor her agent Kadiresan Chetty had any authority in law to execute the promissory-notes in question on his behalf, and that he is therefore not liable thereon. He further contended that the first note was executed by Kadiresan Chetty for the purpose of accommodating the M.A.R.A.R. Firm of which also he was an agent, and that the second note was executed by Kadiresan Chetty for the purpose of discharging his own indebtedness to the plaintiff bank and that he, the minor, derived no benefit whatever from either of the promissory-notes which were executed in the absence of any necessity of the minor himself.
2. The trial Judge in a very brief judgment dismissed the plaintiff-bank's claim as against the minor defendant 1 with costs, being of opinion that the liability under the promissory-notes in question was not properly incurred by the guardian's agent. The plaintiff bank appeals. The only point for determination in this appeal is whether the minor defendant 1 is liable on the promissory-notes sued on. The minor's father Venkatachalam Chetty was originally the owner of the P.L.A. Firm and on his death on 1st July 1922 this minor who was then an infant less than a year old became the sole proprietor of the firm. On 24th January 1923 the minor's mother executed a power of attorney in favour of Kadiresan Chetty (Ex. B) authorizing him to manage and conduct the business of the firm in Madras and in Chittoor, Cochin State (and not at other places). This power of attorney authorized the agent inter alia
to make, draw, endorse, accept and discount bills of exchange, promissory-notes, cheques, drafts and orders for money,
to bind the guardian as such or the said firms as security to or for any persons and to sign all deeds necessary for that purpose.
3. The evidence shows that after the death of the minor's father in July 1922 the P.L.A. Firm had no dealings with the plaintiff-bank till the date of the plaint transactions. There is also evidence to show that the firm's business
was rather in the process of being wound up than of being carried on,
and there is the finding of the trial Judge to this effect which has not been shown to be wrong. Though there was no allegation in the plaint that the suit promissory-notes were executed by the agent in the course of his conduct of the business of the P.L.A. Firm as agent, during the trial an attempt was made to show that the notes were so executed, and in accordance with the custom or practice of mutual accommodation prevailing among Chetty money lending firms whereby the agent of one such firm accommodates another with the signature of his firm on condition that when need arises his firm will be similarly accommodated by the other agent. Some attempt was made to show that some enquiry was made by the plaintiff-bank about the state of account between the P.L.A. Firm and M.A.R.A.R. Firm, at the time the promissory notes were executed, and that the bank was satisfied after such inquiry that there was a necessity for a P.L.A. Firm to execute promissory notes for the purpose of accommodating the M.A.R.A.R. Firm. The trial Judge found that the practice or custom of mutual accommodation had been proved even in the case of firms belonging to infant proprietors, but nothing was said by the trial Judge about the existence of any necessity apart from the custom of mutual accommodation for the execution of the promissory notes on behalf of the P.L.A. Firm.
4. The liability of the minor under the two promissory notes has to be considered separately, and the argument of the appellant's advocate has also dealt with the two promissory notes separately, though in the case of both the notes it is admitted that the P.L.A. Firm was only a surety and did not get any benefit. The promissory note first in date was for Rs. 25,000. This was drawn by Kadiresan Chetty as agent of the minor's guardian in favour of defendant 2 and was endorsed by him in favour of the appellant bank as agent of defendant 2 firm. The benefit of this note went to defendant 2 firm, and the amount was utilized for the purpose of reducing the indebtedness of that firm to the appellant bank. The minor's liability in respect of this note is sought to be based not only on the custom or practice of mutual accommodation, but also on the allegation that this note reduced the indebtedness of the minor's firm to defendant 2 firm. The practice of mutual accommodation is not denied, but it is contended that this practice does not entitle a guardian or a guardian's agent to bind the minor by executing a surety bond as such a practice is one at variance with the law. It was contended moreover that mutual accommodation of this kind is not enforceable in law, and that it does not really give rise to any legal obligation, but only to an obligation of honour. This practice of mutual accommodation was not relied upon or referred to in the plaint, and even otherwise it is clear that this practice cannot make the minor liable on the promissory notes. Moreover, it appears from the evidence, as observed by the trial Judge, that as the minor's business was rather in process of being wound up than of being carried on, the minor's firm did not require accommodation, and there was no continuous process of mutuality in accommodation between the minor's firm and the other firm. The minor's firm had no dealings with the bank after the death of the minor's father in July 1922 till the promissory note for Rs. 25,000. There is nothing to show that the minor's firm was in need of any accommodation, or had ever been accommodated by the other firm after the minor became the sole proprietor of the firm. On the other hand, the other firm, namely M.A.R.A.R. Firm was then indebted to the appellant-bank to the extent of nearly eight lakhs of rupees. The minor's firm owed nothing at all to the appellant bank. There was at the time, as admitted by the principal witness for the appellant bank, a financial crisis which affected the Chetty money-lending firms in Madras and elsewhere, as the result of which persons who had deposited moneys with those firms demanded their moneys back and no one was prepared to give money as they had been doing before, and the Chetty firms bad to borrow money elsewhere in order to meet the demands of the depositors, and that as a further result of that crisis two Chetty money-lending firms became insolvent. The position therefore was briefly this. Defendant 2 firm owed the bank nearly eight lakhs and in view of the crisis the bank was naturally anxious to protect itself, and the minor's firm was dragged in as a surety for defendant 2 firm because the same person, namely Kadiresan Chetty was agent of both the firms. It is impossible to believe that either the bank or defendant 2 firm or the agent of the minor's firm ever considered the interests of the minor in the course of this transaction. The transaction seems to have been one entirely for the benefit of defendant 2 firm and of its creditor, the bank. The minor received no benefit, and both the bank as well as the agent of the minor's firm must have known that there was no necessity for the transaction so far as the minor and his firm were concerned. It has been sought, as mentioned already, on behalf of the appellant bank to make the minor liable on the ground that at the time the promissory note was executed the minor's firm was indebted to defendant 2 firm in whose favour the note was executed. The evidence however clearly shows that taking all the accounts together the minor's firm was not indebted to defendant 2 firm at the time, and that on the other hand it was defendant 2 firm that owed money to the minor's firm. The fact is clearly admitted by the principal witness for the appellant bank who says that 'no amount was due from P.L.A. to M.A.R.A.R. at that time if all the accounts are taken.' It is clear that so far as the Madras account is concerned, the M.A.R.A.R. firm owed money to the P.L.A. firm. The advocate for the appellant bank however relied on the indebtedness of the P. L. A, firm to the M.A.R.A.R. firm on the Colombo account, and his contention was that nearly a lakh of rupees was due by the P.L.A. Firm to the M.A.R.A.R. Firm by the end of July 1925; but this calculation admittedly excludes a debt of nearly Rs. 1,90,000 due to the P. L.A. Firm by the M.A.R.A.R. Firm and by a mortgage. There is really no justification for excluding this debt merely 'because it was secured by a mortgage. If all the accounts are taken, it is clear that at the time the M.A.R.A.R. Firm owed the P.L.A. Firm a large sum of money. It is also seen that the amount of the promissory note namely Rs. 25,000, was not actually entered in the P.L.A. Firm account books. It cannot therefore be said the promissory note for this amount was executed for the purpose of reducing the indebtedness of the P.L.A. Firm to the M.A.R.A.R. Firm. Taking all the circumstances into consideration there can be no doubt that the execution of this promissory note was nothing but a pledge of the credit of the minor's firm for the benefit of the M.A.R.A.R. Firm, and that it was not executed because there was any need for the minor's firm to execute it.
5. The question therefore comes to this : Has the agent of a minor's guardian unlimited power to pledge the minor's credit so as to bind the minor's estate? It was held by their Lordships of the Judicial Committee in Wagbela Rajsangji v. Sekh Masludin (1887) 11 Bom. 551 (P.C.), that in India a guardian has no power to bind his ward by a personal covenant. That was a case in which the covenant was apparently beneficial to the minor, and nevertheless their Lordships held that it was not binding on the minor and observed as follows:
There is not in Indian law any rule which gives a guardian and manager greater power to bind the infant ward by a personal covenant than exists in English law. In point of fact, the matter must be decided by equity and good conscience - generally interpreted to mean the rules of English law - if found applicable to Indian society and circumstances. Their Lordships are not aware of any law in which the guardian has such a power, nor do they say why it should be so in India. They conceive in would be a very improper thing to allow the guardian to make covenants in the name of his ward so as to impose a personal liability upon the ward.
6. In another case, namely, Indur Chander Singh v. Radha Kishore (1892) 19 Cal. 507 their Lordships of the Judicial Committee held that, where the guardians had taken certain lands on lease in their own names, but as was alleged for the benefit of the minor, neither the minor nor his estate could be made liable on the contract. In view of these decisions it was held in Sauka Krishnamurthi v. Bank of Burma (1912) 35 Mad. 692 that the rule which makes a minor member of a joint Hindu trading family liable on a bill drawn by the Manager of the family cannot be applied to minors who are not trading in partner, ships, but are sole owners of the business, that the guardian of a minor who is the sole proprietor of the business cannot invest an agent with powers larger than are reasonably proper for carrying on the business, that the creditors can proceed against the minor's estate only where the guardian would be entitled to indemnity for the liabilities properly incurred out of the assets of the minor embarked in the business, and that where the guardian has no such right to indemnity against the assets of the business or where he has acted improperly the creditors have no right against the assets of the minor's business. It was also held that even assuming that it was necessary to give the agent power to draw bills and promissory notes it was not necessary to give him power to draw in favour of himself or his firm, and that the giving of such an unascertained power is improper. This case was referred to with approval in a subsequent case, namely Ramajogayya v. Jagannadhan 1919 Mad. 641 in which the majority of the Full Bench held that no decree can be passed against a 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 obligation incurred by the guardian under the personal law to which he is subject. This was the answer given to the following question referred to the Pull Bench, namely, whether any decree and if so, what decree, can be passed against a minor or his estate on a covenant entered into on his behalf by a guardian for his benefit under which covenant no charge is made on the estate? The answer given by Wallis, C.J., to this question was that a decree cannot be passed against a minor or his estate on a covenant entered into on his behalf by a guardian for his benefit. These Madras decisions have stood unchallenged all these years and must be considered to be good law at least so far as this presidency is concerned, and it is therefore unnecessary to consider the decisions of other High Courts which bear on this question.
7. It is obvious that the agent of a guardian cannot have greater or wider powers to pledge the minor's credit than the guardian from whom he derives his power. The guardian of a Hindu minor who is the sole proprietor of a business cannot have greater or wider powers to pledge the minor's credit than the manager of a joint Hindu family carrying on an ancestral family business to pledge the credit of the minor co-parceners, and the power of the latter is limited or governed by the rule laid down in Hanuman Pershad v. Baboo Mundraj Koonweree (1854-57) 6 M.I.A. 393, as will be seen from the ruling of the Privy Council in Ram Krishna Murarji v. Ratan Chand 1931 P.C. 136. To put the case of the minor at its lowest, the appellant bank can succeed in fixing the liability on the minor in respect of the promissory notes only if it is shown that the bank after making reasonable enquiry into the necessity for the execution of the promissory notes believed in good faith that there was a real necessity for the execution of the promissory notes or that the agent was acting for the benefit of the minor's business. This the appellant bank has failed to do. On the contrary, it is clear from the evidence that the bank was perfectly aware of the real state of affairs at the time the suit promissory notes were executed, namely, that there was no necessity for the minor's firm to execute these promissory notes, and that the only object of the execution of these promissory notes was to benefit the bank's own debtor, defendant 2 firm, and subsequently the bank itself.
8. As regards the second promissory note for Rs. 37,500 the case of the appellant bank is much weaker, for in the case of this promissory note it is clear that the benefit went to the agent himself. In effect this promissory note was one by executing which the agent took his infant principal's money for his own use, and the appellant bank was perfectly aware of this fact. The agent who executed the note owed at the time Rupees 37,500 to the bank in respect of 3 hundies drawn by him in favour of the M.A.R.N. Firm and discounted by the latter with the bank. The M.A.R.N. Firm failed to honour these hundies at maturity and the appellant bank called upon the agent Kadiresan Chetty to pay the money, and he found money for this purpose by executing this promissory note. In fact it was clearly conceded in the argument in this appeal that the appellant bank was aware beforehand that the money was required to wipe off the agent Kadiresan Chetty's indebtedness to the Bank. The appellant bank knew that the agent was pledging his minor principal's credit for his own private purposes, and therefore must have been aware that the agent was perpetrating a fraud on the minor whom he represented. The bank was moreover interested in the transaction nearly as much as Kadiresan himself, and the transaction was one which the bank must have known to be in no way beneficial to the minor, and clearly detrimental to the minor's interests.
9. It follows from what has been said above that the question for decision in this appeal must be answered in the negative, and that neither the agent Kadiresan Chetty nor the guardian of the minor defendant 1 had power to pledge the minor's credit so as to bind the minor in respect of the two promissory notes sued on. It must therefore be held that neither the minor nor the assets of his business can be made liable on either of the suit promissory notes. The decree appealed from is therefore right and the appeal fails. The appeal is accordingly dismissed with costs.