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Kumbakonam Bank, Limited, Represented by the Managing Director Vs. K.R.M.P. Shanmugham Pillai and ors. - Court Judgment

LegalCrystal Citation
SubjectFamily
CourtChennai High Court
Decided On
Reported in(1956)1MLJ58
AppellantKumbakonam Bank, Limited, Represented by the Managing Director
RespondentK.R.M.P. Shanmugham Pillai and ors.
Cases Referred and Venateswara v. Ammayya
Excerpt:
.....arecanuts, etc. 567, as well as to the well known case, benares bank v. the defeated plaintiff, the kumbakonam bank, appeals against that portion of the decree disallowing the charge on the properties covered by the security bond in regard to the shares of defendants 2 to 4. 3. the law relating to the power of the managing member of a joint hindu family to continue or extend or change or start a new business has become really well-settled. there is nothing to prevent both an ordinary non-trading hindu family as well as a trading family consisting of only adults from starting a business with their joint family funds which becomes on their death an ancestral business. 625, as well as in the madras decision in subbaratnam v......63 m.l.j. 92 : l.r. 59 indap 300 : i.l.r. 354 all. 564 can be extended to a case where a joint hindu family has trade as its kulachara and one of the members of that family instead of participating in the joint family business starts a special business of his own and incurs debts in the conduct of that separate business is a point for decision. the question for consideration is whether his sons can be made liable for the debts incurred in regard to the running of that business. from the judgment of sir dinshah mulla, in the benares bank's case (1932) 63 m.l.j. 92 : l.r. 59 indap 300 : i.l.r. 354 all. 564 it becomes clear that the subject-matter of consideration was theka business and also building contracts under the public works department started by a member of a joint hindu family.....
Judgment:

Govinda Menon, J.

1. I am in agreement with the conclusion arrived at by my learned brother though I would like to state the reasons for arriving at that conclusion in my own way.

2. It is clear from the evidence of P.W. 2 that the first defendant and his father were carrying on grocery business in Mannargudi and in another village before they became divided. Under the partition the old grocery business with all its assets and liabilities were allotted to the share of the father and the first defendant was given for his share five acres and 70 cents of land charged with a debt of Rs. 700. Even before the partition, the first defendant had started a business of his own which he continued afterwards.' This business consisted of importing goods like arecanuts, etc. from Ceylon, Burma and Singapore. The question is whether this business can be styled as the ancestral trade of defendants 2 to 4. The learned Subordinate Judge was of the opinion that as the old grocery business which had been carried on by the father of the first defendant had not been continued by the first defendant after the partition, it cannot be said that he was carrying on an ancestral business with the result that the shares of defendants 2 to 4 are not liable for the debt relying upon the observations of Venkataramana Rao, J. in Soundararajulu v. Shanmugam : (1942)1MLJ184 , that in order that the business should not be considered to be new it must be a continuation or revival of the old business and that when another business is started by a manager which had absolutely no connection with the old business the fact that the business started was of the same nature as the old business cannot be considered to be an ancestral business at all. Reference had also been made to the decision in Rattamma v. Narayana Rao M.L.J. 485 : I.L.R. (1947) Mad. 567, as well as to the well known case, Benares Bank v. Hari Narain .

3. How far the observations of their Lordships in the Benares Bank's case (1932) 63 M.L.J. 92 : L.R. 59 IndAp 300 : I.L.R. 354 All. 564 can be extended to a case where a joint Hindu family has trade as its kulachara and one of the members of that family instead of participating in the joint family business starts a special business of his own and incurs debts in the conduct of that separate business is a point for decision. The question for consideration is whether his sons can be made liable for the debts incurred in regard to the running of that business. From the judgment of Sir Dinshah Mulla, in the Benares Bank's case (1932) 63 M.L.J. 92 : L.R. 59 IndAp 300 : I.L.R. 354 All. 564 it becomes clear that the subject-matter of consideration was Theka business and also building contracts under the Public works Department started by a member of a joint Hindu family which evidently was not a trading family. The observations at pages 570 and 571 are significant and nowhere is there any mention that the kulachara of that family was trade. If for example a member of a Bania caste or such trading communities as Nattukottai Chettiars or Arya Vysias begins a business, apart from the family business and incurs debts in the course of the conduct of that business I do not think that the sons of such a member can be absolved from the liability for the debts incurred by their father in the course of his new venture.

4. It is clear from Manu Chapter VIII placitum 41 and Yajnyavalkya 360-361 that those law-givers considered trading families in a different perspective. This has been noticed by Chandavarker, J. at page 77 in Raghunathji Tarachand v. The Bank of Bombay I.L.R. (1909) Bom. 72'. In my view a distinction has to be drawn between families which thrive and depend solely and purely upon agriculture or the learned professions and those whose members are totally devoted to the calling of trade or commerce. In the latter case it cannot be said that if one of the members starts a business, his sons cannot be made liable for the debts incurred by their father. It may be that a member of a money-lending family may embark upon a different kind of commercial transaction, for example, the starting of a spinning and weaving mill or some other industrial concern. Can it be said that if he starts such a business with family funds his sons will not be liable for the debts incurred by him? I am of the opinion that it is not right to extend the principles laid down in the Benares Bank Case which dealt with a non-trading family to trading families. This distinction has been noticed by the learned editor of Mayne's Hindu Law (10th Edn. (Late S. Srinivasa Ayyangar) in paragraphs 306 and 307) at pp. 382 and 385 and that has met with the approval of the succeeding editior of the 11th Edn. of the same book (N. Chandrasekhara Aiyar). It is also seen that the High Courts of Allahabad, Patna and Lahore have restricted the application of the principle in the Benares Bank's case . I do not want to extract here copious quotations from the aforesaid pages of Mayne's Hindu Law where all the cases have been quoted. What I wish to make clear is that a distinction has to be drawn between a trading and a non-trading family and in the former case where the business started by a member is not speculative then the shares of his sons will certainly be made liable for the debts incurred by their father. Heredity in business should be the touch-stone and not the difference or novelty in the nature of the commercial undertaking. If the family trade had once been coach building or horse breeding, in my view the fact that under the changed conditions the same family started business in motors and petrol, cannot make the subsequent business in motor cars and petrol a new one. Likewise a family dealing in gramophones which later on takes to manufacture and sale of radio sets cannot be said to have started a new business.

5. The matter can be looked at in another way. In a partition among the members of a family belonging to a trading community it is not always possible to allot the existing trade to more than one of the members and when each of the other members who has not been trained to any other profession or agriculture starts a business of his own, it is not right to call that business a new trade within the meaning of the expression in the Benares Bank's case in order to absolve the sons of such members from liability in it. It is very often the case, as is the one before us that at the partition a different kind of asset from the family trade is given to a member and in his hand whether it is money or immovable property the same is ancestral and if it is cash and if the family's kulachara is trade then that member cannot be blamed for trading with the cash received under the partition.

6. In the present case it is not disputed that trade was the kulachara of the family and under those circumstances the debt incurred by the first defendant in the course of his business transactions must be held to be binding on defendants 2 to 4. I am of the opinion that the appeal must be allowed with costs.

Ramaswami, J.

1. This is an appeal preferred against the decree and judgment of the learned Subordinate Judge, Tanjore, in O.S. No. 52 of 1949.

2. The facts are: Defendants 1 to 4 are members of a joint Hindu family of which the first defendant is the manager. They constituted a trading family and their kulachara is grocery business. In regard to this family business the firs defendant has been borrowing from the plaintiff Kumbakonam Bank, Limited under promissory notes and overdrafts and has executed security bonds and which on the casting of accounts amounted to the sum for which the suit had been laid viz., Rs. 12,275-14-7. The plaintiff bank filed the suit for recovery of the said amount and sought to enforce the same from the first defendant personally and from defendants 2 to 4 in so far as their shares in the joint family properties are concerned and which had been given as security to the bank. The execution of the promissory notes and the security bonds and the passing of consideration and the amount for which the suit has been laid were not disputed. The only point which was raised for consideration in the lower Court was whether the suit debt was binding on defendants 2 to 4 also and whether their shares in the family properties will be liable to satisfy the suit debt. The contention advanced on behalf of defendants 2 to 4 was that the business for which these debts were contracted was not the ancestral grocery business but a new and speculative business of trading in arecanuts with foreign countries. This contention found acceptance at the hands of the learned Subordinate Judge following the decision in The Benares Bank Limited v.. Hari Narain , and he gave a decree for the plaintiff for the sum claimed and costs with subsequent interest, etc., against the first defendant and the joint family properties of defendants 2 to 4 on the foot of pious obligation, the debts not being shown to be tainted with immorality and illegality. But in regard to the charge claimed over the properties secured under the security bond, he held that a charge for the decree amount could be given only against the one-fourth share of the father and manager, the first defendant, and that no charge could be given as regards the shares of defendants 2 to 4. The subsequent encumbrancers defendants 6 and 7 were referred to separate suits. The fifth defendant does not concern us as he was exonerated by the plaintiff. The defeated plaintiff, the Kumbakonam Bank, appeals against that portion of the decree disallowing the charge on the properties covered by the security bond in regard to the shares of defendants 2 to 4.

3. The law relating to the power of the managing member of a joint Hindu family to continue or extend or change or start a new business has become really well-settled. In regard to the powers of a managing member, there is however a marked distinction between a family whose hereditary avocation or kulachara is trade or commerce and a non-trading family. There is nothing to prevent both an ordinary non-trading Hindu family as well as a trading family consisting of only adults from starting a business with their joint family funds which becomes on their death an ancestral business. Bahadursingh Bau v. Girdharilal Naorangilal . If it is really beneficial to the family and he and the adult members of the family treat it as belonging to the family and deal with the property acquired out of the funds of the business as joint family assets, a debt incurred for the requirements of the business will be binding on the family including the shares of the minors who have obtained the benefits of the business being treated as a joint family asset. The Allahabad High Court in Ram Math v. Chiranji Lal I.L.R. (1934) All. 605 distinguished the Benares Bank's Case and held that a business may be joint family business of the father and the sons and that such a transaction even in the case of a non-trading Hindu family may be justified on the ground of legal necessity or benefit. This view has been followed consistently by that High Court and by the High Courts of Patna and Lahore and Madras in Babu Lal v. Babu Lal I.L.R. (1941) All. 343, Angney Lal v. Angney Lal : AIR1951All400 , Liladhar v. Chunni : AIR1951All574 , Ambalal v. Bihar Hosiery Mills Ltd. I.L.R. (1937) Pat. 545, Prabh Dayal v. Basant Lal. I.L.R. (1938.) Lah. 655, Hayat Ali v. Nem Chand A.I.R. 1945 Lah. 169 Venkatachalam v. Venkateswara : AIR1944Mad33 . Of course, if either necessity or benefit is put forward, it must be strictly proved. In Nataraja v. Lakshman : AIR1937Mad195 , it was held that when the ancestral character of the business was put aside and the transaction was sought to be justified on the ground of necessity, no difference could turn on the fact that the debts were incurred by the father and not by any other manager and that proof must amount to proof of necessity in the sense ordinarily known to Hindu Law. On the other hand where the nature of the property owned or acquired by the family is such that it is usual to work it as a business as in the case of quarries, mines, forests, plantations, saltpans, and boats, the manager would have the right so to work it though it may not in every case be an ancestral business.

4. This limitation in the case of a non-trading family, viz., the starting of a new business or extending or changing it when there are minors in the family or when the other adult members do not participate or acquiesce or benefit by it or it is a necessity, is not applicable in the case of a hereditary trading family. In such a case the usage of the family is deemed to modify the ordinary rules relating to joint Hindu families so as to empower the managing member to start a new business either in place of the old or in addition to it. . A.I.R. 1953 Trav. Co. 481. The distinction therefore in the case of such families between an ancestral and new business appears, as pointed out in Mayne's Treatise on Hindu Law and Usage (Eleventh edition) page 384, and cited with approval in Sugan Chand v. Laduram I.L.R. (1942) Nag. 281 : A.I.R. 1941 Nag. 105, so far as the risk and liability are concerned, to be more formal than substantial. An inherited business may involve quite as much risk as a new business and apparently there is no duty on the part of a manager to close down an ancestral business notwithstanding its evident risk. The element of risk incident in varying degree to all kinds of trade or business, is necessarily assumed by trading families. Otherwise there would be an undue curtailment of commercial adventure and enterprise which is the very life, so to say, of a hereditary trading family. The only limitation where there are minors and non-participating, non-acquiescing and non-benefiting other adults of the family and their interests have to be protected by law, is that the managing member of a hereditary trading family cannot enter into a speculative business, or one attended with unusual risk. It is the nature of type of business which is the deciding factor and not the particular commodity which is dealt with, per Wadsworth, O.C.J. and Govindarajachari, J., in Rattamma v. Narayanan : AIR1947Mad252 .

5. Therefore in the case of a hereditary trading family where there has been an extension or change in the ancestral business, the only criterion is whether the particular business challenged is a bona fide extension or reconstruction of the business or whether it is of such speculative character entailing unusual hazards against which the interests of the minors and the other categories of persons have got to be protected by law.

6. In Mayne's Hindu Law (Eleventh edition) page 385 (1953 Reprint) the case-law illustrating these principles has been collected as follows:

In Damodaram v. Bansilal (1926) 55 M.L.J. 471 : I.L.R. 51 Mad. 711, it was laid down that where a family business consisted in the purchase and sale of one commodity, the purchase and sale of another commodity was not outside the scope of that business.

The question to be determined in each case should be whether having regard to the recognised business, profession, means of livelihood or what is called the 'kulachara' of the family, the particular enterprise or embarking was only within the reasonable limits of the exercise thereof or really having regard to its nature or extent, a new speculative enterprise.' Rajagopala Iyer v. Raman Chettiar : AIR1927Mad1190 ; Venkatarathnam v. Sambasiva Rao : AIR1939Mad525 . (Father doing commission business, but on his death eldest son doing business in yarn and cloth held new business); Kalanda Rowther v. Sivapunyan : (1939)1MLJ751 (oil seeds business changed into starting of a rice-mil business-held new business); Rattamma v. Narayana Rao : AIR1947Mad252 , Bhagwansingh v. Behari Lal I.L.R. (1938) Nag. 237; Bahadru Singh v. Girdharilal I.L.R. (1942) Nag. 543; Subramanyam Chetti v. Ramakrishnammal (1924) 10 M.L.W. 627; Ramanath v. Chiranji Lal I.L.R. (1935) All. 605; Hari Shanker v. Ram Sarup A.I.R. 1938 Lah. 113; Atma Ram v. Mian Umar Ali I.L.R. (1941) Lah. 39; Hayat Ali v. Nem Chand A.I.R. 1945 Lah. 169 (cycle business extended to that of selling perambulators and manufacturing rubber solution.-not a new business.)

7. In the result, the view taken of the ruling in Banares Bank's case, by the Allahabad, Patna and Lahore High Courts appears to be the reasonable and correct view. The proposition laid down by the Privy Council as to a new business cannot be taken to be a technical or invariable rule admitting of no exceptions. The pious obligation of the son to pay the debts of a new business started by the father would in any case remain as pointed out in the Bombay case of Ghulam Khaja v. Shivalal (1937) 40 Bom.L.R. 381 and Jagadish Prasad v. Ambashankar (1933) 36 B.L.R. 625, as well as in the Madras decision in Subbaratnam v. Gunavanthalal : AIR1937Mad472 and Chockalingam v. Muthukaruppan : AIR1938Mad849 and Venateswara v. Ammayya : AIR1939Mad561 and in regard to which effect has been given by the learned Subordinate Judge.

8. In other words, applying these principles to the facts of the instant case, it becomes a question of fact to be decided from all the circumstances of this case whether the arecanut business was an admissible extension or change of the family ancestral business. The ancestral business consisted the grocery business on a small scale. The first defendant has extended this business by importing from Burma, Ceylon and Singapore. One of the groceries imported and for which there was a large demand was arecanut. There is no evidence to show that this importing was attended by unusual hazarads. It was certainly not a speculative business. This import business naturally carried with it an element of risk naturally incidental in varying degree to all kinds of trade in grocery and which is necessarily assumed by trading families. To import unnecessary limitations and characterise this extension as new business would certainly constitute an undue curtailment of commercial adventure and enterprise which is the very life, so to say of a hereditary trading family. We hold that the arecanut business in the circumstances of this case was not a new business of a speculative or hazardous character but an admissible extension of the ancestral business.

9. In the result, we find that the learned Subordinate Judge Was not justified in holding that the security bonds Exhibit A-1 to A-3 which are true and valid are not binding on defendants 2 to 4. We find issue 2 in the affirmative and in favour of the plaintiff. This appeal is allowed with costs. The decree of the lower Court is modified accordingly and the plaintiff will have a decree as prayed for i n the plaint. Time for payment three months.


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