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V.P.L.R.M. Palaniappa Chetty Vs. the Official Assignee of Madras and anr. - Court Judgment

LegalCrystal Citation
CourtChennai
Decided On
Judge
Reported in36Ind.Cas.787
AppellantV.P.L.R.M. Palaniappa Chetty
RespondentThe Official Assignee of Madras and anr.
Cases ReferredLutchmanen Chetty v. Siva Prokasa Modeliar
Excerpt:
hindu law - joint family--trade started by manager, when family trade--minor co-parcener, admission of, into partnership or trade, proof of--joint family hade, presumption as to--partnership--minor member, liability of-adjudication in insolvency-contract act (ix of 1872), sections 247, 248, applicability of. - .....the business was not an ancestral business inherited by the father and the son. was it then a joint family business? the only other member of the family when the business was started by the 1stinsolvent was his son, then a minor, and so far as it appears the only family property which they had at the time was a house at devakotah. it is not shown that the business was carried on with any family fund or with money raised on the security of the family house. nor is it proved that the receipts of the business were brought) into a joint stock. it is said that there is a general presumption of hindu law that a business carried on by the head of a hindu family, although started by himself for the first time, is, without anything more being shown, the joint business of the family. i do not.....
Judgment:

Abdur Rahim, Officiating C.J.

1. Mr. Justice Bake well having dismissed the appellant's application to revoke an adjudication order made against him and his father on 28th January 1915 so far as it affects the appellant, this appeal is against that order. The petition for adjudication was presented by certain creditors, Messrs. Wilson and Co., on 27th January 1915, alleging that both the father and the son were merchants carrying on business in the town of Madras, that they used to indent for piece-goods through the petitioners and that between April 1910 and July 1913 they ordered for and obtained delivery of goods for the value of which they executed promissory notes on which the amount due with interest amounted to Rs. 18,505-15-1. The alleged acts of insolvency are said to have been committed by the appellant and his father in December 1914 and January 1915. The plaintiff attained majority in April 1914 and was thus a minor on the dates of the promissory notes. The question for decision is, is the appellant personally liable for the above-mentioned debt, incurred by his father. If not, the order of adjudication is bad and must be set aside. The appellant is willing that his share in the ancestral property consisting of a house at Devakotah should be available for paying his father's creditors, although in law he is not liable at all.

2. There is no dispute now about the facts. The promissory notes were executed by the father alone in his own name and the goods were ordered by him. But the plaintiff, who was 14 to 17 years old during the dates' covered by these transactions, used to sit by the iron safe and along with the gumashtas take delivery of the goods iii the father's absence, sign in the vendors books and look after the accounts. It is admitted that unlike the gumashtas, however, he was not paid any salary but no one would expects that he would be, even if he was not a partner. The appellant's, name does not appear in the firm's title and it is not alleged that he ever held himself out as a partner and there is no evidence, as I read it, that Messrs. Wilson and Co. dealt with him on that footing. The insolvents are Nattukottai Chetties who ordinarily do business as bankers and money-lenders. The appellant's personal liability for the debts of his father incurred in the course of the business carried on by him depends on the provisions of the Hindu Law and the Indian Contract Act.

3. The business was not an ancestral business inherited by the father and the son. Was it then a joint family business? The only other member of the family when the business was started by the 1stinsolvent was his son, then a minor, and so far as it appears the only family property which they had at the time was a house at Devakotah. It is not shown that the business was carried on with any family fund or with money raised on the security of the family house. Nor is it proved that the receipts of the business were brought) into a joint stock. It is said that there is a general presumption of Hindu Law that a business carried on by the head of a Hindu family, although started by himself for the first time, is, without anything more being shown, the joint business of the family. I do not think there is any I such absolute presumption. In order that a presumption may arise, it must be shown that the other members by participating in the conduct of the business or its profits or by a long course of acquiescence treated it as a business in which all the co-parceners were interested. That is to say, there must be evidence forthcoming to show that such members of the family as were competent to judge for themselves adopted the business as a joint concern of the family. If such conduct is shown on the part of the adult co-parceners who may ordinarily be assumed to safeguard the family affairs in which they are all equally interested, that is sufficient to constitute the trades a joint family business so that the infant members would also become sharers in that concern. In the case of a family whose ordinary occupation is trade much less proof than in other cases will, no doubt, be required of the adoption of a business as a joint family business by the members of the family. Similarly the use of family funds for the purpose of business with the knowledge and concurrence of the other adult members would ordinarily be strong evidence that the business was joint. In Sudarsanam Maistri v. Narasimhulu Maistri 11 M.L.J. 353 and in Vadilal Lallubhai v. Shah Khushal Dalpatram 4 Bom. L.R. 968 it was held that if there was nothing to show that business was set up with the aid of family funds, there was no presumption that it was family business. But in cases where the family consists of two members, one adult and the other a minor, is it to be presumed mat a business started and carried on by the former is ipso facto the joint business of the family? I do not think there is any clear authority for such a presumption and in the presence of authority we should not be justified in adopting it as a rule of Hindi jaw. There would not be a sufficient guarantee a case like this that what was being lone was in the interests of the family, as there would be where it has the sanction of it least one adult co-parcener' other than the manager. Nor is there any good reason why should be otherwise in cases where trades the ordinary occupation of the caste to which a family belongs, if the business in question was not ancestral but started by he manager himself, The fact that a minor member agreed to treat the business is joint family business cannot make any reference so far as his rights and liabilities ire concerned, as under the law as laid down by the Privy Council in Mohori Bibee v. Dhannodas Ghose 30 I.A. 114 : 5 Bom. L.R. 421 : 8 P.C.J. 374 such agreement would be void and of no effect. If the observations if Mr. Justice Sale in Lutchmanen Chetty v. Siva Prokasa Modeliar 26 C.k 349 : 3 C.W.N. 190, cited at the Bar, mean that where a minor member of a Hindu family is shown to have taken part in the business carried on by the managing member or exercised any control over it, then he becomes a co-contractor of the debt contracted in course of business in the sense of being personally liable for the debt, that can no longer be the law. I doubt, however, if the learned Judge intended to lay down any such proposition.

4. Where, however, a minor is shown to have been admitted to the benefits of a business, the principle underlying Section 247 of the Indian Contract Act may rightly be applied and his share in the property acquired out of the proceeds of the business held, liable for the obligation which arose in the course of that business. But this principle, which is based on obvious considerations of justice, only applies when the business is shown to have yielded profits and the minor admitted to some share in them, Then Section 248 says that the minor who was admitted to the benefits of the partnership business becomes on attaining majority liable for all the obligations incurred by the partnership since he was so admitted, unless he gives notice within a reasonable time of his repudiation of the partnership. This enactment is quite independent of the principles of Hindu family law and is applicable to all. It may be pointed out that this goes further than the English Law, under which the minor who does not disclaim is only answerable for debts contracted by the former since he attained majority. However that may be, before Section 248 can be applied it has to be shown when the minor was admitted to the benefits of the partnership, for he is made liable only for debts incurred since such admission. That again implies that admission to the benefits of the partnership must be by some definite act, such as by the allotment of a share or distribution of profits or something of an analogous character.

5. In this case we have no clear evidence that the business carried on by the appellant's father yielded profits or that he received any portion of profits, if any. He, no doubt, lived with his father who maintained him but that might or might not be out of the earnings of that business. The business in question was started only in 1910 so the family must have had other means of maintenance, either income derived from the house at Devakotah or from some other source not disclosed in the evidence. Nor is it proved when the appellant was admitted into the partnership, and there is no reason why we must presume that he was so admitted when the business was first started.

6. If the case is not brought within Section 248, then even on the assumption that the business was joint family business the appellant would not be personally liable, but only his share in the property acquired out of the proceeds of the trade and in the ancestral property would under the Hindu Law be liable for the debts. This is clearly laid down in Chalamayya v. Varadayya 22 M.k 166 and in Sheik Ibrahim Tharagan v. Rama Aiyar 10 Ind. Cas 874: 21 M. L.J. 508 and this view of the law as expounded in Chalamayya v. Varadayya 22 M. 166 : 9 M.L.J. 3 was adoptee in Bishambhar Nath v. Fateh Lal 29 A. 176 : 4 A.L.J. 94 : (1907) A.W.N. 13. In Sheik Ibrahim Tharagan v. K.R. Rama Aiyar 10 Ind. Cas 874 : 21 M. L.J. 508 : (1911) 1 M.W.N. 412 tin ruling of the Privy Council in Waghela Rajsanji v. Shekh Madudin 14 I.A. 89 : 11 Ind. Jur. 315 : 6 Ind. Dec. 361 that a guardian of Hindu minor cannot bind him by a personal covenant, was held to apply to a case similar to this.

7. In the Bombay High Court also tin weight of opinion seems to be in favour of the view that only the share of the minor would be liable and not that he personally liable. See Rampartab Samraihra v. Foolibai and Goolibai 20 Bo. 767; Raghunathji Tarachand v. Bank of Bombay 2 Ind. Cas. 173: 11 Bom. L.R. 255; Vadilal Lalubhai v. Shah Khushal Dalpatram 4 Bom. L.R. 968; Gokal Kastur v. Amarchand Jasraj 9 Bom. L.R. 1289 No doubt the case of Samalbhai Nathubhai v. Someshvar Mangal and Harhisan 5 Ind. Jur. 372 : 3 Ind. Dec. 26 might be understood to decide otherwise, but does not appear whether the question o personal liability of the minor was raise there or not. In the Calcutta High Court also the decisions proceed on the same view of law as expressed in Chalamayya v. Varadayya 4 Bom. L.R. 968 on this point. See Joykisto Cowar v. Nittyanund Nundy 3 Ind. Jur. 117 : 1 Ind. Dec. 1053 and Sanyasi Charan Mandal v. Asuiosh Ghosh 26 Ind. Cas. 830. In fact there is a consensus of opinion on the subject and I find no warrant for departing from it.

8. I would, therefore, allow the appeal and set aside the order of adjudication made against the appellant. The 2nd respondent will pay the appellant's costs both in this Court and in the Court below.

Phillips, J.

9. The sole question for decision in this appeal is whether appellant is liable to adjudication as an insolvent. The order of adjudication was passed on 28th January 1915 when appellant was nearly nineteen years old. In 1910 his father started a business in Madras and was assisted by the appellant, who used to sit by the iron safe, look after the accounts, take delivery of goods and sign in the vendors' (2nd respondent's) books. It is not suggested that he received any remuneration by way of salary. He and hi' father are undivided, and when the trade began the family admittedly owned some ancestral property, which was as a matter of fact mortgaged at about the time that the trade commenced. It is contended for appellant that, as the debts, with which we are now concerned, were contracted during his minority on promissory notes signed by the father alone, appellant cannot be hold liable for them, and a further contention was raised that the provisions of the Indian Contract Act are not applicable to Hindus. This latter contention seems to me to go considerably further than the law warrants. No doubt the provisions of the Indian Contract Act must be read together with the provisions of Hindu Law, for the co-parcenary of a joint Hindu family is of such a nature that it must modify to a certain extent some of the provisions of the Indian Contract Act in regard to partnership, but this is no ground for contending that such provisions are not to be applied, as far as are consistent with Hindu Law, to the partnership constituted by a joint family business.

10. There is no evidence that appellant's father's business had been handed down from his ancestors, although it is probable hat there was a family trade, seeing that the parties are Nattukottai Chetties. However, the evidence here is that the particular lusiness with which we are concerned was started by appellant's father away from the ancestral home. It seems to me useless to argue that the trade was the separate property of the father when there is no evidence to support the argument, for there was admittedly a nucleus of ancestral property in the possession of the family and the presumption of Hindu Law is that; in such circumstances other property that monies into the hands of the manager of the family also joint family property, No evidence has been adduced to rebut this presumption and consequently it appears to me that the business must be considered to be a joint family business, although there is no evidence that the trade was ancestral.

11. It is suggested that the present business was started without any capital, but there is no evidence to support the suggestion, and it is unreasonable to suppose that appellant's father could have secured the large credit, that he did, unless he were possessed of some property to warrant such credit. SO far as appears from the evidence the only property which could have given him, such credit was the joint family property, and consequently the business may--be said to be based on this property. In the matter of Haroon Mahomed 14 B.k 189 it was held that a member of a joint family which carried on a family business became a partner on the father's death, even if he was not a partner before, and it was for him to prove that he was not a partner: and in Raghunathji Tarachand v. Bank of Bombay 11 Bom. L.R. 255 a minor member's share in a joint family firm was held liable for the debts of the firm and Batchelor, J., went further and held that in establishing the legal relations of a joint firm the Courts treat it as a kind of partnership and apply the principles of that law. In Sanyasi Charan Mandal v. Asutosh Ghosh 26 Ind. Cas. 836 it was held that a minor partner of a firm cannot be adjudicated insolvent, but the learned Judges expressed a very decided opinion that there is no difference in principle between the nature of the liability of an infant admitted by agreement into a partnership business and that of another on whose behalf an ancestral trade is carried on by his guardian. In Lutchmanen Chetty v. Siva Prokasa Modaliar 3 C.W.N. 190, which is relied on by appellant's Counsel, it was only held that minor members of the family, who had taken no part in the business, were not necessary parties to a suit to recover debts due to the family firm. The case of Ghalamayya v. Varadayya 9 M.L.J. 3 is distinguished by the learned Judges who decided it from the case in In the matter of Harom Mahomed 14 B.k 189 and is only authority for h aiding that the separate property of members of a joint family, which carried on a trade, is not liable for the debts of the trade, when there is no evidence that those members took any part in the trade or had impliedly consented to the contract sought to be enforced against them. In Gohal Rastur v. Amarchand Jasraj 9 Bom. L.R. 1289 three members of a joint family were held liable for the debt contracted by another member for the purpose of the joint family trade.

12. It seems to be immaterial whether the trade is ancestral, i.e., descended from a grandfather or great-grandfather, or whether it is a mere joint family trade started by the father. It is not disputed that in either case a minor member's share of the business is liable for debts incurred. The only further question is whether any particular member is liable personally as a partner and this, I think, must depend on the facts of each case, The consentient act, which is the requisite test laid down by the Calcutta High Court in Lutchmanen Chetty v. Siva Prokasa Modeliar 3 C.W.N. 190, has in the present case been sufficiently proved. Appellant assisted in the business from its very beginning and contributed his skill to the partnership, his only remuneration being the share of the profits to which he was entitled as a member of a joint family. Inasmuch as he was a co-parconer in the trade and took an active part in conducting it, his conduct is sufficient to show that he was a consenting party to the manner in which the business was carried on. He must, therefore, be considered to be a partner, and then under Section 248 of the Indian Contract Act he became liable on attaining majority for all obligations incurred since he became a partner, and has failed to give public notice of his repudiation of the partnership. I, therefore, think that appellant has been rightly adjudicated insolvent and would dismiss this appeal with costs.

13. Under Section 36 of the Letters Patent, the appeal is allowed with costs throughout on the Original Side scale.


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