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Ct. Al. Vr. Alagappa Chettiar and anr. Vs. the Bank of Chettinad, Ltd., Kanadukathan Through Its Director and General Manager Pr. Al. Kasi Chettiar and ors. - Court Judgment

LegalCrystal Citation
SubjectFamily;Civil
CourtChennai
Decided On
Reported inAIR1939Mad6; (1938)2MLJ944
AppellantCt. Al. Vr. Alagappa Chettiar and anr.
RespondentThe Bank of Chettinad, Ltd., Kanadukathan Through Its Director and General Manager Pr. Al. Kasi Chet
Cases ReferredChalamayya v. Varadayya
Excerpt:
- - these notes were endorsed by the payees in favour of the plaintiff bank; and the suit promissory note was executed by the first defendant directly in favour of the plaintiff bank, for the amounts due under the endorsed notes exs. the fourth defendant was still a minor and on this and on other grounds set out in the award the arbitrators thought it better that 1;he duty of winding up the mandalay shop should be left to defendants 1 and 2. they accordingly provided in paragraph 9 of ex. by substituting another vilasam and conduct the shop as they liked. the management of a firm like this in foreign parts is carried on by a course of voluminous correspondence between the agent on the spot and the principals at home. palaniappa chetti (1918)35mlj473 seem to proceed on the theory of.....varadachariar, j.1. this appeal arises out of a suit for the recovery of money due under a promissory note (ex. j), executed by the first defendant in favour of the plaintiff on 4th may, 1932. the first defendant is the eldest son of one ct. al. vr. veerappa chettiar who died in october, 1927. the fifth and sixth defendants are the minor sons of the first defendant; the second defendant is the younger brother of the first defendant and the seventh defendant is the minor son of the second defendant. defendants 3 and 4 are the stepbrothers of defendants 1 and 2. the plaint asked for a personal decree against defendants 1, 2 and 3 and for a decree against all the defendants to the extent of the family assets in their hands. the learned subordinate judge dismissed the suit as against.....
Judgment:

Varadachariar, J.

1. This appeal arises out of a suit for the recovery of money due under a promissory note (Ex. J), executed by the first defendant in favour of the plaintiff on 4th May, 1932. The first defendant is the eldest son of one CT. AL. VR. Veerappa Chettiar who died in October, 1927. The fifth and sixth defendants are the minor sons of the first defendant; the second defendant is the younger brother of the first defendant and the seventh defendant is the minor son of the second defendant. Defendants 3 and 4 are the stepbrothers of defendants 1 and 2. The plaint asked for a personal decree against defendants 1, 2 and 3 and for a decree against all the defendants to the extent of the family assets in their hands. The learned Subordinate Judge dismissed the suit as against defendants 3 and 4 and gave the plaintiff a personal decree as against defendants 1 and 2 and a decree against the family assets in the hands of defendants 1, 2 and 5 to 7. Against this decree this appeal has been preferred by defendants 2 and 7.

2. In the lower Court defendants 2 and 7 contended that the suit should be dismissed as against them. Before us, this extreme contention has not been pressed on behalf of the appellants. Their learned Counsel admitted that the plaintiff was entitled to a decree even as against the appellants to the extent of the joint family assets in their hands. The only question for decision in this appeal therefore is whether the second defendant was personally liable for the suit claim, so as to entitle the plaintiff to proceed against properties in his hands not forming part of the joint family assets.

3. The following is the history of the events that led up to-the execution of the suit promissory note. In September, 1922, Veerappa opened a money-lending business in Mandalay with the vilasam of CT. AL. VR. and for the conduct thereof appointed one Somasundara, agent. After Somasundara's term, one Ramasami Chetti was appointed agent. For the financing of that business, Veerappa entered into an arrangement with D.W. 1 for moneys being lent to the Mandalay firm from D.W. l's firm at Rangoon. The Rangoon firm was known by the vilasam of S.R.M.M.A. We however find that moneys have also been borrowed under this arrangement from the S.R.M.M.R.M. firm at Rangoon. The result of the transactions between the CT. AL. VR. firm at Mandalay and the two lending firms at Rangoon was that on 14th January, 1927, a promissory note for Rs. 10,000 was executed by Ramasami Chetti, the Mandalay agent, in favour of the S.R.M.M.A. firm and another note for Rs. 10,000 was executed in favour of the S.R.M.M.R.M. firm on 28th January, 1927, by the same agent. Veerappa died during the term of Ramasami's agency, but before Somasundara's accounts had been finally settled. At that time, the first defendant was at Penang serving as the agent of some other Chetti firm there. The correspondence that passed between the first and second defendants about this period will be referred to later on it shows that the third defendant who had then attained majority was anxious to have a partition effected soon but that the second defendant preferred its being postponed till after the first anniversary of Veerappa's death. The first defendant returned to his native village in India in October, 1928, and soon after the celebration of the first anniversary of their father's death, the parties referred the question of partition to certain arbitrators - vide Ex. D dated 3rd December, 1928. There was an award (Ex. E) on the 8th of January, 1929, the substance of which was that shares were separately allotted to the four brothers in the house and in certain movable properties, as regards the business in Mandalay, the award directed that defendants 1 and 2 should take over its assets and liabilities. It appears from the award itself that the liabilities exceeded the outstandings; a more detailed reference to the terms of the award will be made in due course, when dealing with the arguments advanced by the parties on these terms. One provision may however be mentioned here; the award directed the assets of the Mandalay firm to be collected by the first defendant as theretofore and it also directed defendants 1 and 2 to wind up the whole shop within three years and gave them the option to do new business at Mandalay under a different vilasam. In December, 1929, an additional sum of Rs. 5,000 was borrowed from the S.R.M.M.A. firm by the first defendant. Beyond a statement in the evidence of the first defendant that this was borrowed to pay off a creditor, the wife of Vakil Mukerjee who was pressing, for payment, we have little or no information on the record as to the necessity for this loan or its utilisation. On the 9th of January, 1930, a promissory note Ex. H was executed by the first defendant in respect of this sum of Rs. 5,000 and two promissory notes Exs. G and F were also executed by the first defendant renewing the Rs. 10,000 loans of 14th January, 1927 and 28th January, 1927. These three notes were signed by him as 'managing partner' of the CT. AL. VR. firm. These notes were endorsed by the payees in favour of the plaintiff bank; and the suit promissory note was executed by the first defendant directly in favour of the plaintiff bank, for the amounts due under the endorsed notes Exs. H, G and F.

4. The plaint sought to make defendants 2 and 3 personally liable on the following ground; that when Veerappa Chettiar started the Mandalay business in 1922, it was open not merely by Veerappa but by his sons who were majors at that time, namely, defendants 1, 2 and 3 - see paragraph 4 of the plaint. It was added that

After the death of Veerappa Chettiar, the defendants have been conducting the said firm jointly and in partnership.

5. The several promissory rioted above referred to were alleged to have been executed by the first defendant as 'managing partner' and in paragraph: 14 of the plainti it was stated that defendants 1 to 3 were personally bound in the capacity of partners with the first1 defendant. The learned Subordinate Judge held that at the time the Mandalay firm was started by Veerappa, it could not be regarded as a 'partnership' between the father and his major sens but was-only a joint family business in which the father and his sons were interested as members of a joint family. The sons, though they were adults, were not in his opinion partners in the firm (see end of paragraph 6 of the judgment). He however held that after the death of Veerappa in October, 1927, defendants 1, 2 and 3 became partners of the firm, apart from their being members of a joint family (see end of paragraph 11 of the judgment). He also held that by virtue of the award, Ex. E, in which defendants 1 and 2 acquiesced, they became partners in the firm and had been so till the date of suit. As the third defendant became severed from the partnership and from the family, in consequence of the award, the learned Judge dismissed the suit as against him. As the fourth defendant had all along been a minor, there was no possibility of his having become a partner at any time; and on the footing that he too had become divided from the first defendant in consequence of the award, the suit was dismissed as against him also.

6. The finding that during Veerappa's lifetime, the relation of defendants 1, 2 and 3 to the Mandalay business was only that of members of a joint Hindu family to a family business and not that of partners has not been challenged before us. The second defendant at one stage attempted to suggest that the Mandalay business was not even a joint family business but was started by Veerappa only for the benefit of the third defendant; but this contention has not been pressed and it is obvious from Exs. D and E that the parties have proceeded on the footing that the Mandalay business was a family business, though started for the first time, by the father. The learned Counsel for the appellants has attacked the correctness, of the lower Court's conclusion that after Veerappa's death, the relation between defendants 1, 2 and 3 in respect of that business became changed into that of partners from that of members of a joint Hindu family. He has contended that the course of conduct, relied on by the learned Subordinate Judge as leading up to this conclusion does not warrant that conclusion. He has also challenged the correctness of the finding that defendants 1 and 2 became partners by1 reason of the award Ex. E. This last question would be material if it should be held that the learned Judge was not right in his conclusion that even prior to the date of the award defendants 1, 2 and 3 had become partners. It will be convenient first to dispose of the argument found by the lower Court upon the award.

7. As stated already, it appears from the recitals in the award that the liabilities of the Mandalay shop exceeded the out-standings and that accordingly early arrangements had to be made for the collection of the outstandings and the discharge of the liabilities. The fourth defendant was still a minor and on this and on other grounds set out in the award the arbitrators thought it better that 1;he duty of winding up the Mandalay shop should be left to defendants 1 and 2. They accordingly provided in paragraph 9 of Ex. E, that defendants 1 and 2 should take charge of the Mandalay shop, that the first defendant should manage as heretofore, collect the outstandings and wind up and close the shop and that if for the purpose of enabling him to do so, any papers had to be signed or documents executed by the other parties, the same should be done by them without any objection. Then follows the provision, already referred to, that if defendants 1 and 2 should agree to continue to conduct the said shop, they should within three years discharge the existing liabilities; wind up the whole shop, change the present vilasam of CT. AL. VR. by substituting another vilasam and conduct the shop as they liked. This provision makes it clear that all that was contemplated by the award was that the CT. AL. VR. business should be wound up and it was expected that it might be done within three years from that date. No new business was contemplated to be done under the old vilasam. It is admitted by the first defendant in his evidence as P.W. 7 that after the award, no new account was opened and no new business was done. On the terms of the award, it is difficult to interpret it as changing the pre-existing legal relationship between defendants 1 and 2 in so far as the old business was concerned. We shall presently consider whether prior to the date of the award, the relationship between defendants 1 and 2 had 'become that of partners or not. But it seems to us clear that if they had not already become partners, there is nothing in the terms of the award to make them partners and nothing in their subsequent conduct to create that relationship between them. It is therefore impossible to base on the terms of the award or the conduct subsequent thereto any conclusion to the effect that on 9th January, 1930, when Exs. H, G and F were executed or on 4th May, 1932, when Ex. J was executed, defendants 1 and 2 stood towards each other in the relationship of partners.

8. The evidence relating to the manner in which the parties conducted the Mandalay business between the date of Veerappa's death and the date of Ex. D (the reference to arbitration) is furnished by a few documents. We may point out at the outset that in respect of this period, no evidence has been placed before us as to the nature or the volume of business done at Mandalay. The tenor of the few letters that have been exhibited in the case suggests that even during Veerappa's lifetime, the business had not been profitable and that all that was done after his death was only in the way of winding up the business by collecting the outstandings and discharging the liabilities. A few account books have been produced but no attempt has been made to show either from these accounts or by any question put to the witnesses whether any and if so how much new business was done by the Mandalay firm after Veerappa's death. The management of a firm like this in foreign parts is carried on by a course of voluminous correspondence between the agent on the spot and the principals at home. Very few letters have been produced relating to the conduct of any business at Mandalay during this period. The first defendant is supporting the plaintiff's claim as it will benefit him by diminishing the extent of his liability. It is he who has produced some of the letters which have been exhibited in this case and there is no reason to think that he would have had any difficulty in producing other letters if any, throwing light on this aspect of the matter were in existence. He admits that the account books of the firm are in Mandalay; we are therefore entitled to assume that beyond what have been produced in this case, there is nothing which contains any useful information.

9. The period commencing with Veerappa's death opens with the letter Ex. W written by the second defendant to the Mandalay agent Ramasami Chetti on the 15th November, 1927. It acknowledges receipt of a sum of Rs. 1,000 sent from Mandalay by insured post. It refers to the fact that a letter said to have been sent from Mandalay on the 10th Arpisi, that is, about 20 days before the date of Ex. W has not been received here and asks for a copy of that letter. The last sentence of that letter is significant; it is to the following effect:

Please be sending copy of day book and balance sheet to C.T. to Penang.

10. 'CT' refers to the first defendant who was then employed in Penang as agent in another shop there. This last sentence relates to the practice of Chetti agents in foreign parts sending every month or every fortnight to their principals here copies of their day book and also sending now and then something in the nature of a balance sheet (called Ainthugai in Tamil). There is a reference in Ex. Y-2 which is the missing letter referred to in Ex. W to a suggestion that had been made by the first defendant that day book copies and balance sheets might be sent to him to Penang. But when it is remembered that at the time of writing Ex. W, the second defendant had not seen the letter Ex. Y-2 the reasonable inference seems to us to be that the course of practice must have already come into existence of these copies being sent from Mandalay to Penang and that the second defendant was probably aware of it. The continuance of that practice is more consistent with the hypothesis that the second defendant did not wish to bring about any change in his relation to the business. The receipt of the sum of Rs. 1,000 by insured post is explained as being connected with the expenses of Veerappa's funerals. The practice in the community is that its members keep very little cash in India and on occasions when they require cash, they generally get it down from their firms abroad. Nothing contained in Ex. W suggests any change in the relationship of the second defendant to the family business at Mandalay. If, therefore, his connection with that business was that of a junior member of a family having a family business, Ex. W is consistent with that position being continued even after Veerappa's death.

11. Ex. Y-2 is the copy of the missing letter which was apparently written by the Mandalay agent in ignorance of Veerappa's death. It is not possible to say whether it was-addressed to Veerappa or to the second defendant. The description of it in the printed record as a letter addressed to the second defendant is obviously unwarranted. The third paragraph of this letter refers to a suggestion that had been made by the first defendant to the effect that after he received the day book, etc., copies at Penang he would send the same 'to you after perusal.' We see nothing to justify the contention that the word 'you' in this paragraph refers to the second defendant; in all probability it was, intended to refer to the father as the agent was not then aware of the father's death. No other letter has been produced which will show that either before this date or after this date any kurippu copy of Ainthugai has been sent to the second defendant either in the ordinary course from Maridalay or by the first defendant from Penang. Ex. Y the letter written by the Mandalay agent to the second defendant on 23rd November, 1927,merely enclosed the copy of Ex. Y-2 and carries the matter no further than Ex. Y-2 itself. Ex. Q dated 18th January, 1928, throws very little light upon the matter now under consideration. It is a communication from the second defendant to the first defendant; it refers to the insistence of the third defendant on an early partition but advises its postponement on grounds of decency till after the first anniversary of the father's death. There are two other sets of documents relating to this period and it is on them that great stress has been laid both by the lower Court and by the learned Counsel for the respondents before us, in support of the argument that during this period, the second defendant was so conducting himself in relation to the Mandalay business as to incur a personal liability for its debts. Before dealing with these documents, it is necessary to ascertain with some precision the legal basis on which the second defendant's liability is sought to be sustained. Several decisions relevant to this question have been brought to our notice in the course of the argument; it does not however appear to us necessary to refer to every one of them in detail. They may be conveniently grouped under certain heads. There are observations in some judgments in support of the extreme view that all adult coparceners in a joint Hindu family carrying on a family business are in the position of partners and are personally liable for debts contracted by the manager for the conduct of the business see for instance Debi Dayal v. Baldeo Prasad I.L.R.(1928) All. 982 and the observations of Sadasiva Aiyar, J., in The Official Assignee of Madras v. Palaniappa Chetti : (1918)35MLJ473 . This extreme view has not been sought to be supported before us by the learned Advocate-General who appeared' for the respondents. Indeed, it cannot be reconciled with the positive insistence made by the Legislature in Section 5 of the Indian Partnership Act of 1932 that the relationship of partners arises from contract and not from status. The next paragraph of that section, which is merely a declaration of the pre-existing law, provides in express terms that the members of a Hindu undivided family carrying on a family business as such are not partners in the business. There is another line of authority holding that such of the adult members as take an active part in the conduct of the business must be regarded as incurring a personal liability for the debts contracted by the managing member cf. for instance The Official Assignee of Madras v. Palaniappa Chetti : (1918)35MLJ473 , Joharmal Ladhooram v. Chetram Harisingh I.L.R.(1914) 39 Bom. 715 Shiv Charan Das v. Hari Ram (1935) I.L.R. 17 Lah. 395 Sheo Ram v. Luta Ram A.I.R. 1937 Lah. 6 Nachiappa v. Raman A.I.R. 1935 Rang. 227 Bishambhar Nath v. Fateh Lal I.L.R.(1906) All. 176 and Ramaswami Chettiar v. Srinivasa Aiyar(1935) 70 M.L.J. 214 . It is not clear whether in these cases the personal liability of the participating members was based only on the doctrine of 'holding out' or on the view that by such participation they changed their relationship from that of coparceners in the joint family to that of 'partners' in the business. For instance, the observations of Spencer, J., in The Official Assignee of Madras v. Palaniappa Chetti : (1918)35MLJ473 seem to proceed on the theory of 'holding out'; but the observations of many other learned Judges merely postulate the liability without precisely defining its basis. It cannot be denied that the language sometimes used by them suggestes that the participating members were regarded by them as 'partners'. If active participation in the business is to be accepted as affording a new basis of liability it will be obvious that the basis of the liability thus arising must be more precisely defined; because the extent of the liability incurred by the participating member will be difrereat according as it is based upon the one ground or the other. For instance, if it is based on the theory of 'holding out' it is only persons who have acted on such representation or on the faith of the 'holding out' that can claim to 'hold the participating member liable, whereas if such participation is to be regarded as giving the participating member the status of a partner, he will become liable to all persons dealing in the ordinary course with the business independently of any question whether or not they were aware of the participation by the particular member. Another aspect of this question which has also been left vague in the decisions is as to whether the participating member becomes personally liable only for obligations incurred subsequently to his participation or even for debts existing at the time that he begins to take part in the business. If his liability is to be based on the doctrine of 'holding out', it is obvious that such liability can arise only in respect of transactions subsequently entered into and on the faith of his conduct. Even if it should be held that by such participation the coparcener becomes a partner in the business, it seems to us unreasonable to hold that he thereby incurs a personal liability in respect of the pre-existing debts of the business. So far as we have been able to examine the cases cited to us, none of them has held the participating member liable for preexisting debts see for instance the judgment for Sir John Wallis, C.J. and Spencer, J., in The Official Assignee of Madras v. Palaniappa Chetti : (1918)35MLJ473 . But in many of these cases the position was complicated by the fact that prior to the participation the member in question was a minor. The learned Advocate-Genera! relied upon a decision of the Patna High Court reported in Benares Bank v. Krishna Das : AIR1932Pat206 as holding the participating member liable even for pre-existing debts. The facts are not clear from the report and though the language used is wide, we do not feel sure whether the learned Judges meant to lay down this proposition in that case. We are unable to carry the doctrine of these cases to the extent of postulating personal liability for pre-existing debts for one reason, namely, that even the analogy of a partner formally admitted into a going concern will not support this extreme contention; as laid down in Section 31 of the Indian Partnership Act the person who is introduced as a partner into a firm does not thereby become liable for any act of the firm done before he became a partner (see also Lindley on Partnership, 10th Edn., p. 266).

12. We must add that the decisions which infer a partnership from mere participation of the junior coparcener in the business have not gone unchallenged. In V.R.C.T.V.R. Chettiar v. C.A.P.C. Chettiar I.L.R.(1936) Rang. 122 Page, C.J., critised this line of authority in forcible language and in Sitharama Chettiar v. Sivagurunatha Chettiar (1930) M.W.N. 437 a Division Bench of this Court refused to hold that active participation in the family business by a junior member would suffice to make him a partner in the business see also Murari Lal v. Ghudhumal A.I.R. 1933 Lah. 1018. This last line of cases lays stress on the fact that the relationship of partners can arise only from a consensual act and that the participation by a junior coparcener in the family business is sufficiently explained by his interest therein as a member of the family and cannot justifiably be attributed to an intention to take upon himself a greater liability than would exist if the business was regarded only as a family business. We cannot help thinking that there is a great deal to be said in favour of this last mentioned view. But for the purpose of this case we do not find it necessary to choose definitely between these two lines of authorities. No case of 'holding out' has been put forward in the present suit; D.W. 1 who was the original lender and (later) also chairman of the Board of Directors of the plaintiff-Bank only speaks of the CT. AL. VR. firm as having belonged to Veerappa and his sons 'as members of a joint family.' The two promissory notes for Rs. 10,000 each came into existence during Veerappa's lifetime, that is, long before there was any scope for the argument based upon the second defendant's conduct. In this connection, we may also refer to the observations in Chalamayya v. Varadayya (1898) 9 M.L.J. 3 : I.L.R. 1889 Mad. 166 with reference to the circumstances in which one member of a joint Hindu family can be made personally liable for debts incurred by the manager. Though some doubt has been cast on the correctness of these observations by Chandavarkar, J., in Gokal Kastur v. Amdrchand : (1907)9BOMLR1289 , and by Sadasiva Aiyar, J., in The Official Assignee of Madras v. Palaniappa Chetti : (1918)35MLJ473 , the correctness of the principles there laid down has been accepted in nearly all other reported decisions and with all respect we venture to think that the observations in Chalamayya v. Varadayya (1898) 9 M.L.J. 3 : I.L.R. Mad. 166 enunciate the true principle. We have come to the conclusion that judged by the test there laid down, it is not possible to hold the second defendant personally liable for the suit debt or for the debts which were consolidated by the suit promissory note.

13. The second defendant's conduct relied on in this connection is evidenced by Ex. P, dated 19th December, 1927 and by the set of documents (Exs. A, B and R) relating to the settlement of the accounts of the first agent Somasundara. Exs. Z and Z-1 also bear upon this last topic. Ex. P is a hundi admittedly drawn by the second defendant on the Mandalay firm. It was for a sum of Rs. 301 payable to the sister Seetha for the value of presents usually made in the community on festive occasions during the first three years after a girl's marriage. It is important in judging of the value of this document to remember that this document was in fact never presented at Mandalay for payment; it is often the practice in the community that hundis drawn for such purposes are not presented for payment but are generally paid for in cash in the native village itself. The hundi is drawn more as a matter of honour and is a kind of evidence of the gift of the presents; in due course, the cash is paid in the village itself. Even assuming that this hundi is to be given greater weight than the circumstances above adverted to allow, it does not justify the conclusion that the second defendant was drawing it as partner in the firm. It has not been disputed that the amount was payable as a matter of custom and as we have already stated, it is the practice in the community to draw from the firm abroad for all important cash requirements here;. The first defendant who was the managing member of the family was away in Penang at the time and it fell to the second defendant who was the next senfor member of the family to draw the hundi as per the custom. The calling up of money from the family firm on an occasion ,like this in no way differs from the calling up of money for the funeral expenses of Veerappa. As the terms of thehundi itself indicate, the amount had to be merely debited to the headquarters account and not to any personal account of the drawer. It only remains to add that the vilasam in which the second defendant has signed the hundi is the family vilasam and has no particular relation to the vilasam of the business, except for the fact that the business also was being carried on in the family vilasam.

14. The documents relating to the settlement of Somasundara's account have to be understood in the light of the fact disclosed by the letters themselves that the conduct of the agency by Somasundara had apparently not been very profitable to the family and the family even suspected that Somasundara had misconducted himself in the course of his agency. In the ordinary course, his account would have been settled as soon as he returned to India on the completion of his term, but the settlement seems to have been delayed apparently because the family wanted to have fuller information as to the details of his management before deciding whether to release him from all liability or to hold him liable for any particular amount in respect of losses incurred during his agency. After Veerappa's death the settlement must in due course have been brought about by the first defendant who was the eldest member; but as the first defendant was away at Penang or at Kualalumpur about this time, he seems to have left it to the second defendant to do the needful in the matter. This is made clear by his querry in Ex. Z-1 as to what had been done with Somasundara in respect of the amounts due from him. As often happens in these disputes between the principal and the agent, the parties sought the help of mediators and the documents show that they availed themselves of the services of Dewan Bahadur K.M. Murugappa Chettiar in settling the disputes, with the result that Somasundara executed the promissory note Ex. A in favour of the first defendant for a sum of Rs. 5,250 as representing his consolidated liability on the result of the accounts. On the execution of Ex. A the receipt (Ex. B) was passed, signed by the second arid third defendants first and signed by the first defendant later On. This Settlement was (reported by the second defendant to the first defendant in Ex. R. Ex. Z is a letter which preceded the settlement and shows the kind of enquiries that the second defendant was making before settling the question of Somasundara's liability. Taking this group of documents as a whole, we fail to see how they carry the matter farther than what the second defendant might reasonably be expected to do as a member of the family interested in the family business at Mandalay.

15. It seems to us unreasonable to insist that the adult members of a joint Hindu family should take no interest whatever in the family business except on pain of becoming personally liable for all the transactions of the managing member. Under the Hindu Law, their share in the family property is undoubtedly liable for the liabilities incurred by the manager and they certainly stand to gain, even as joint family members, by the successful conduct of the business. Where the family property consists of other kinds of assets as, for instance, landed property or outstandings, it is not uncommon for junior members to take an active part in the 'supervision of such property, whether it consists in cultivation or in the collection of outstandings. No one has gone the length of saying that the participation by an adult member in business of the last mentioned kind involves him in personal liability for family debts borrowed by the manager. A distinction may arise so far as participation in trade is concerned, by reason of the applicability of the principle of 'holding out' in this line of cases, but except to the extent resulting from that doctrine, it does not seem to us fair or useful to insist that no junior member of a joint Hindu family has any right to take any interest in the affairs of the family trade. The present case itself illustrates the necessity and propriety of the junior member concerning himself in the affairs of the business. The last agent had made a mess of the business; the father was dead and the first defendant was away at Penang. The second defendant as the next eldest member of the family was the only person fit to take steps for settling the accounts of the previous agent if heavy loss to the family was to be averted; and, for the purpose of settling his account, he had necessarily to get adequate information as to the way he had conducted the business.

16. Undue stress cannot be laid on the fact that the receipt (Ex. B) is signed by all the three adult members. That is only to be expected for the protection of the agent. On the other hand, it is significant that the promissory note taken is taken only in the name of the first defendant; and the evidence of the first defendant and of Somasundara shows that the promissory note account was settled wholly between Somasundara and the first defendant himself, a large remission having been made by the first defendant, without any reference to the second defendant.

17. The above remarks also apply to the direction in the opening part of Ex. Z a letter written by the second defendant to the agent Ramasami Chetti on the 4th of April, 1928. He advised him to collect such items as could be collected, without delay and pay up the liabilities. Certainly if the family property was liable for the business debts, the second defendant as a member of the family was justified in advising the agent to do his best to pay up the liabilities from out of the outstandings without adding to the liability of the other properties of the family. It has also to be borne in mind in appreciating the significance of these letters that, as we have already observed, there is no evidence to show that any new business was carried on subsequent to Veerappa's death. What then was the partnership in which the second defendant is to be held to have become a member, ex hypothesi he was liable only to the extent of the family assets in respect of the transactions entered into during the father's lifetime. All that he is shown to have done by the letters above referred to is that he took steps to reduce the liability of the family as far as possible, by insisting that the accounts of the former agent should be properly settled and that the debts of the business should as far as possible be paid off by the collection of its own outstandings. It seems to us impossible to suggest that for this purpose he must have changed or must be deemed to have changed his relationship from that of a junior coparcener in a joint Hindu family to that of a partner. We must accordingly express our dissent from the conclusion of the learned Subordinate Judge that by his conduct the second defendant had made himself a partner in the Mandalay firm or bad incurred a personal liability for the debts of that firm.

18. Relying upon the observations in Chalamayya v. Varadayya (1898) 9 M.L.J. 3 : I.L.R. 1898 Mad. 166 the learned Advocate-General contended that by the conduct above referred to, the second defendant must at least be held to have become personally liable on the ground of acquiescence or adoption or ratification. We are unable to hold that there is any basis for this contention. There is no scope here for the application of the doctrine of 'ratification' in the true sense. The agent who executed the original promissory notes for the two sums of Rs. 10,000 never purported to act as the agent of the second defendant. It is impossible to think of it, when it is remembered that these notes were executed during the father's lifetime and as we have already stated, at that stage the business was only an ordinary joint family business. The utmost that could be inferred from any alleged acquiescence or adoption of the same by the second defendant is that he could no longer be heard to say that it was not binding on the family; there is no reason to read more into the second defendant's conduct and imply therefrom that he intended to convert his limited liability as a coparcener into an unlimited liability as a partner or a contracting party to* the transaction.

19. As regards the item of Rs. 5,000 borrowed in December, 1929 and referred to in Ex. H, the plaintiffs' case stands on an even less firm ground than in respect of the two earlier loans of 10,000 each. The award (Ex. E) had been passed in January, 1929 and according to its terms the Mandalay business had only to be wound up; this sum of Rs. 5,000 was borrowed only at the end of 1929, that is, more than 11 months after the award. It has not been shown that this borrowing was necessary for the purposes of the winding up; it is very doubtful whether even in a regular partnership, one partner can in the course of winding up incur a debt so as to throw upon the other partners a personal liability therefor.

20. Before us, the learned Advocate-General urged a different line of argument on the strength of certain provisions in the award. Referring to the provision in the award throwing the liability for the debts of the family including those of the Mandalay business on defendants 1 and 2, he contended that there was an implied indemnity in favour of defendants 3 arid 4 in respect of the same and he argued that for the purpose of discharging his obligations under that covenant, the first defendant was entitled to enter into transactions like those evidenced by Exs. H, G, F and J even to the extent of throwing art unlimited or personal liability on the second defendant. We are unable to follow this argument. It is true that as between defendants 1 and 2on the one hand and defendants 3 and 4 on the other the arbitrators directed defendants 1 and 2 to discharge the debts; but that did not of itself involve any change in the nature of the pre-existing liability of defendants 1 and 2 for-these debts, either as between themselves or between them and the creditors. The mere fact that an indemnity could be claimed by defendants 3 and 4 if occasion should arise for it will not admittedly avail the creditor who has no party to this arrangement. Assuming that if such division of liability took place by a contract between the parties, there can be any justification for the argument now urged before us, we see even less justification for it when the arrangement is brought about by an award. It was not by his choice that the second defendant agreed to indemnify defendants 3 and 4, but he had to submit to the award made by the arbitrators. He denied that he acquiesced in it but we are not prepared on the evidence to hold that he ever objected to it. But we see no justification for reading into the award the further provision that even as between defendants 1 and 2 the second defendant's liability for the existing debts should become different or that the first defendant should in carrying out the duties imposed upon him by the award be empowered to throw a personal liability on the second defendant. If one is to rely on the terms of the award in this connection, the second defendant is entitled to urge that the power of management given to the first defendant by Clause 9 was only to the effect that the first defendant should manage as heretofore. Even if the personal liability of the first defendant existed already, we see no basis for the argument that the first defendant was empowered to shift that liability on to the second defendant as well.

21. The only document subsequent to the award that remains to be noticed is Ex. AA, dated 4th April, 1929. In that letter the second defendant refers to one Kuttayan Chetti who was for some time working in the Mandalay firm. It was produced to contradict a statement foolishly made by the second defendant from the witness-box that he was not aware of this Kutteyan Chetti at all. The letter undoubtedly shows that the second defendant knew of Kuttayan Chetti and was annoyed at his removal by the first defendant from service in the Mandalay firm. But we do not see that that circumstance carries the plaintiff's case any further than what the other documents help to do. As we have already mentioned, after the award there was no question of any new business. The letter is written to a stranger and the second defendant there complains of the conduct of the first defendanfin getting rid of Kuttayan Chetti after a service of about two months. We may note in this connection that there is nothing to warrant the first defendant's statement that Kuttayan Chetti was sent by the first and second' defendants; but even if it had been so done, we see no particular significance in that circumstance because he must obviously have been sent only to wind up the concern as per the directions in the award. On the other hand, there is more significance in the fact admitted by the first defendant in his cross-examination that when after Veerappa's death occasion arose for giving a power-of-attorney to Ramasami Chetti, the agent, the second defendant refused to execute a power-of-attorney. If anything, this clearly suggests that the second defendant declined to undertake the role of a partner even at that stage.

22. For the above reasons, we hold that the learned Judge was not justified in holding that by reason of his conduct the second defendant had made himself personally liable for the suit debt. The decree of the lower Court must accordingly be varied by deleting the reference to the second defendant in the earlier part which contains the declaration of personal liability. The second defendant must also be exonerated from personal liability so far as the payment of costs in the lower Court is concerned. Having regard to the extreme contention put forward by the second defendant in the lower Court, we do not propose to interfere further with that Court's order as to costs. The appellants will be entitled to the costs of this appeal, to be paid by the first respondent.


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