1. This is an appeal by defendants 2 to 4 in a suit brought to enforce a security bond executed by defendant 1 in favour of the plaintiff in July 1918, (Ex. C). Defendants 2 to 4 are the sons of defendant 1, and they were all minors at the date of Ex. C. Ex. C itself does not refer to any particular debt but provides that defendant 1 wished to have debit and credit transactions with the plaintiff for a period of five years from that day to the limit of Rs. 5,000 both separately and jointly with other persona on promissory notes and on account. The properties specified in the schedule were offered as security for any sum of principal and interest that might become due to the plaintiff as a result of such transactions. The suit has been laid for recovery of the amounts remaining due on foot of the two promissory notes, Exs. A and B, dated respectively 28th September 1920 and 31st May 1921; and it is claimed that in respect of the amounts due under these two documents plaintiff is entitled to enforce, the security under Ex. C.
2. In the plaint it was alleged that the moneys claimed were borrowed to discharge antecedent debts and for other necessary purposes binding on the family. It was also added that defendant 1 was conducting a rice mill business 'for which also the sums borrowed appear to have been utilized.' Defendants 2 to 4 contended that the security created by Ex. C should not be held to be binding on their shares in the property because they are admittedly joint family properties and there was no antecedent debt or family necessity. The question of the availability of Ex. C as against defendants 2 to 4 was raised by issue 2a in the case, though the issue is not strictly correct in form in throwing the onus on the defendants. The learned Subordinate Judge did not adopt the suggestion in the plaint that Ex. C was executed for the discharge of any antecedent debts; following the decision of this Court in Venkatasami Naicker v. Palaniappa Chettiar AIR 1929 Mad 153, he held that the rice mill business started by defendant 1 was a family business and that securities created for the repayment of moneys borrowed in connexion with that business by the father would be binding on the sons shares in the joint family property.
3. There was no definite evidence to connect the suit debts with the rice mill business nor any very clear evidence as to the profitableness or otherwise of that business; but as defendant 1 who must presumably be in possession of the accounts relating to that business did not produce them in spite of notice to do so given by the plaintiff, the learned Judge drew the inference that the moneys were likely to have been used for that business and the business must have been a profitable one. He also observed that having regard to the evidence that in the ordinary course the family lands would have yielded only an income of about Rs. 1,000 per annum, defendant 1 was justified in starting the mill to increase the family income so that its members may live in comfort. For these reasons, he held that the security bond was enforceable against the shares of defendants 2 to 4 as well. He also adverted to the fact that when in 1928 some items of family properties were sold for paying off a portion of the amount due to the plaintiff under Ex. C as well as another transaction between the parties, viz., Ex. F, defendant 2 who had attained majority by that time joined in the sales and from this circumstance, the learned Judge drew the inference that defendant 2 had ratified his father's transactions.
4. In this appeal, it has been argued on behalf of the appellants that the view taken by this Court in Venkatasami Naicker v. Palaniappa Chettiar AIR 1929 Mad 153, can no longer be held to be good in law in view of the decision of the Privy Council in Benares Bank, Ltd. v. Hari Narain . It was accordingly contended that so much of the lower Court's reasoning as rested on Venkatasami Naicker v. Palaniappa Chettiar AIR 1929 Mad 153 must be held to be erroneous. It was next argued that when the family was in possession of an ordinary income of Rs. 1,000 per annum, it was not open to a father in a family which was not a trading family by hereditary profession to start a business merely with a view to increase the income of the family and add to its comforts. The passing observation of the learned Subordinate Judge on the question of ratification need not be seriously dealt with, because no issue on the question of the alleged ratification was raised, and we are not in possession of all the circumstances attending the sales of 1928, so as to justify us in finding on the plea of ratification in plaintiff's favour. On behalf of the respondent, Mr. Venkatachariar agreed that after the decision of the Privy Council in Benares Bank, Ltd. v. Hari Narain , we could not follow the decision in Venkatasami Naicker v. Palaniappa Chettiar AIR 1929 Mad 153. But he argued that the fact that the debts might have been incurred in connexion with the rice mill business does not preclude him from showing that apart from the assumed ancestral character of the business, the debts themselves were borrowed in circumstances or for purposes that will make them binding on the family by independent evidence. We are prepared to follow the opinion of the Full Bench of the Allahabad High Court in Ram Nath v. Chiranji Lal : AIR1935All221 , which supports this contention of Mr. Venkatachariar, but in dealing with this contention, it must be remembered that when the family character of the business is put aside and the transaction is sought to be justified on the ground of necessity, no difference can turn on the fact that the debts are incurred by the father and not by any other manager. The proof must therefore amount to proof of necessity in the sense ordinarily known to the Hindu law.
5. In the Allahabad case, reference is made to the possibility that in certain circumstances a business, though not an ancestral business, may in view of the conduct of the parties, be reasonably regarded as joint business. This might be possible in cases where the other members of the family are adults but not where, as in the present case, they are minors. It may be that a manager who uses family assets for the purpose of a business started by him will expose himself to the 'liabilities' of a manager of a family business if the minor members choose to claim the benefit of that business; but he cannot by his conduct alone or by the use of the family funds impose upon them against their will the character of a joint business on a business started by him. Further, when considering the question whether moneys required in connexion with such a business can be said to be moneys required for 'family necessity,' the learned Judges suggest that necessity need not be restricted to transactions of a purely 'defensive nature.' There is some conflict of opinion on this point, but for the purpose of this case it seems to us unnecessary to canvass that question, because even assuming that a category of 'benefit' may be recognised in this connection apart from 'necessity' in the ordinary sense, the cases referring to such benefit also recognise that the benefit must at least be certain and the business free from any risk or danger. It is difficult, in the present case, to say that the starting of a rice mill business by a person situated in the position of defendant 1 is not attended with risk or danger to the family properties. One has only to examine the transactions disclosed by the documents exhibited in this case to see how the family is in danger of losing all its patrimony as a result of defendant 1's management.
6. Assuming that defendant 1 was actuated by the motive of increasing the family income by adding to it the profits derived from the business, we do not think a family manager who is in charge of the estate of junior members, all of whom are minors, is either obliged to adopt or is justified in adopting a course of this kind with a view to give them more comfort than the normal income of the family properties would make possible. We are therefore unable to hold that Ex. C is operative against the shares of the appellants either on the ground of family necessity or benefit or on the ground that it was executed in connexion with an ancestral business in the sense in which the expression is known to the Hindu law.
7. Mr. Venkatachariar next tried to support the transaction on the footing that Ex. C was really executed to secure antecedent debts. In the first place, the language of Ex. C is by no means in favour of that construction. The list of debts which Mr. Venkatachariar has made out no doubt suggests that by the date of Ex. C, there have been borrowings by defendant 1 from the plaintiff to the extent of about Rupees 1,200 and another borrowing by defendant 1 jointly with one Vembu Iyer to the extent of Rs. 2,200. We are unable to understand why if Ex. C was intended to secure pre-existing liabilities as well, no reference whatever is made to these transactions in Ex. C. Assuming however for the sake of argument that Ex. C can be made available for antecedent debts, it is not by any means clear that the sum of Rs. 2,200 due on the promissory note executed by Vembu Iyer and defendant 1 could ever have been intended to be covered by Ex. C. It is fairly clear from the evidence of the plaintiff himself that when a document is executed by two persons it is the first executant that must have been the real borrower, and we find in the present case that this sum of Rs. 2,200 and its subsequent renewals are brought not into defendant 1's accounts but into a separate account in the joint names of defendant 1 and Vembu Iyer. Later on, when a renewal note, Ex. B, was executed in respect of this Rs. 2,200 and the interest accrued upon it, it is executed by defendant 1 and Vembu Iyer's son, the present defendant 5. The plaintiff's evidence shows that there have been settlements of accounts between the plaintiff and defendant 1 and defendant 5 in respect of transactions wherein Vembu Iyer or defendant 5 was the first executant and another settlement of accounts in respect of transactions where defendant 1 was the first executant. We are not satisfied that we have before us the whole evidence relating to these complicated transactions or the arrangements between Vembu Iyer and defendant 1 as a result whereof these joint notes were executed. There is some force in the suggestion made on the side of the appellants, which is also supported by Ex. 2 and the evidence of D.W. 1 that about the time that this Rs. 2,200 was borrowed Vembu Iyer celebrated his daughter's marriage. We are not therefore prepared to say that on any construction, Ex. C can be made available for recovery of the debt due under Ex. B. As regards the other amount of about Rs. 1,200 which might perhaps be regarded as an antecedent debt, it is sufficient to say that under Ex. A in which this sum of Rs. 1,200 has been incorporated along with a number of other items which cannot in any sense be regarded as antecedent debts, the plaintiff has received payment of more than Rupees 5,000 out of which at least Rs. 4,000 odd had been paid by a mortgage of joint family property executed by defendant 1 and defendant 2 and by defendants 3 and 4 represented by defendant 1. In these circumstances we do not think that we are denying any just claim to the plaintiff when we hold that even if Ex. C could be regarded as available to the plaintiff for recovery of this sum of Rs. 1,200, he has received very much more than Rs. 1,200 from the joint sharers under Ex. F, and there is accordingly no reason why the claim now said to be remaining due under Ex. A should be held to be binding against the shares of defendants 2 to 4.
8. Great stress was laid by Mr. Venkatachariar on the non-production of the business accounts by defendant 1 and he drew our attention to the fact that the learned Subordinate Judge holds that defendant 1 is supporting defendants 2 to 4. We are willing to give full effect to this argument, but making all allowance for it, the only inference we can draw is that the sums borrowed by defendant 1 from the plaintiff are likely to have been applied for the purpose of the business. But for the reasons that we have already given, that will not suffice to entitle the plaintiff to the decree which the lower Court has given in his favour as regards the shares of defendants 2 to 4. Some suggestion was vaguely made about marriages in the family; but on the question put by us it has been elicited that it is impossible to connect any of the suit items with any marriage in first defendant's family. It was next claimed by Mr. Narayanaswami Iyer that we must investigate the account put forward by the plaintiff as regards the amounts due on foot of Exs. A and B and fix the sum for which a personal decree could be given against the father, because in execution of that decree it might be sought to proceed against the sons shares in the family property as well. We do not however think that this is the proper stage to deal with that matter. The lower Court has only given a decree for sale and we are allowing the appeal to the extent of excluding the shares of defendants 2 to 4 from the security. As the father has not appealed, we are not called upon to reduce the liability of his share. It is true that in execution of the personal decree to be obtained against the father after the sale of his share, joint family properties may be brought to sale; but we think the proper stage for determining the extent to which the family properties may be made liable even on the basis of the sons' liability under the pious obligation doctrine will be when the plaintiff applies for the passing of a personal decree. We will only add that on such an application the Court must in circumstances of this case give notice to defendants 2 to 4 so that they may have an opportunity of substantiating their objections to the amount claimed by the plaintiff. The declaration of amount in the preliminary decree of the lower Court must not be treated as concluding the question. The appeal is accordingly allowed with costs to be paid by the plaintiff-respondent 1. The decree of the lower Court will be modified by excluding the shares of defendants 2 to 4 from liability for sale.
9. There is a memorandum of objections filed by defendant 6 who is respondent 4 in this appeal. She is the purchaser of some of the items included in Ex. C. These were sold to her under Ex. 3, on 19th December 1918 for a sum of Rupees 3,977-8-0. The plaintiff admits that the title deeds relating to the properties comprised in Ex. 3 were in the first instance handed over to him at the time of the execution of Ex. C and were afterwards taken from him by the mortgagor. He does not suggest that there was any fraudulent misrepresentation by the mortgagor in that connexion. He also admits that on 21st December 1918, that is, two days after the sale to defendant 6, defendant 1 paid to him a sum of Rs. 3,150. It is true that in the plaintiff's accounts this sum of Rs. 3,150 is entered under two heads, one of Rs. 1,150 applied in discharge of the liability under Ex. C and another of Rs. 2,000 carried to the credit of defendant 1 in current account. If however, we are justified in drawing an inference that the plaintiff knew, in that defendant 1 took from him the title deeds relating to these properties with a view to sell them and pay the gale proceeds to the plaintiff, we do not think that any arrangement between the plaintiff and defendant 1 as to the way in which the proceeds thus paid in should be appropriated in the accounts can make any difference in law. We are not prepared to accept the plaintiff's statement that he came to know of the sale only in 1923. If he was for the first time then apprised of the fact of one of the items of the property having been sold away and the title deeds taken from him by defendant 1 were never returned, he is hardly likely to have left the matter there. It seems to us reasonable in the circumstances to hold that defendant 1 must have taken the title deeds from the plaintiff after informing him that it was for the purpose of selling the property and paying the sale proceeds to him. From the price stated, it is clear that the price was paid for the full value of the property and not merely for the value of the equity of redemption. It is a legitimate inference from these circumstances that the understanding must have been that the plaintiff must release these properties and receive their value instead. On that inference it would follow that the plaintiff will not be justified in seeking to sell the properties over again.
10. Mr. Venkatachariar however contends that the case in the written statement of defendant 6 was put not as one of release but of estoppel, and he relied on the fact that defendant 6 alleged in the written statement that she was not even aware of the encumbrance in favour of the plaintiff. So far as the plea of estoppel is concerned, it must be said that there may not arise here an estoppel in the sense of Section 115 Evidence Act; but the plaintiff's conduct is akin to the kind of negligence contemplated by Section 78, T.P. Act. It is true that cases in this Court have held that in view of the system of registration of mortgages prevalent in the mofussil, the mere omission to take charge of the title deeds or even parting with the title deeds by the mortgagee may not always amount to the negligence; but if, as the circumstances here suggest the plaintiff parted with the title deeds relating to these properties when he had sufficient reason to think that the mortgagor required them for the purpose of effecting a sale of the properties, we do not see any reason why the plaintiff should not be held guilty of negligence in having allowed the mortgagor to defraud defendant 6. The sale deed, Ex. 3, expressly recites that there is no encumbrance on the property and that the title deeds relating to the property are being handed over to the vendee.
11. If, on the other hand, we should hold that notwithstanding the denial in the written statement of knowledge of the existence of the encumbrance in the plaintiff's favour, defendant 6 must at the date of Ex. 3 have been aware of the encumbrance, it is unlikely that she would have parted with the full value of the property except on an assurance that the property purchased by her should be released from the security. It is not unreasonable to infer that it was at her instance that the mortgagor must have taken possession of the title deeds from the plaintiff promising to give him the sale proceeds of the property. If this is a correct inference, defendant 6 might legitimately claim that the plaintiff is no longer entitled to hold this property liable for the charge under Ex. C. The principle of the decision in Munusami Mudaliar v. Govindaraja Chettiar : AIR1935Mad113 clearly supports that position. No difficulty about registration arises in this case, because there is no document of release; nor is there any problem Under Section 92(4), Evidence Act, because, in the circumstances, the mortgagor must be taken to have acted on behalf of the intending purchaser. The memorandum of objections must therefore be allowed and the properties covered by Ex. 3, must also be released from the decree for sale. The plaintiff will pay the costs of defendant 6 both here and in the Court below.