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Gopalakrishnan Vs. Balasubramania Chettiar and ors. - Court Judgment

LegalCrystal Citation
CourtChennai High Court
Decided On
Reported in(1969)1MLJ537
RespondentBalasubramania Chettiar and ors.
Cases ReferredSri Krishna Das v. Kathu Ram and Mamat Rai
- .....of over 2 lakhs of rupees and according to the plaintiff this led to the partition in the larger joint family between the first defendant, and his brothers. the partition was on the 9th august, 1928, and is evidenced by the partition deed exhibit a-l. a major portion of the debts incurred was directed to be discharged by the first defendant, he being allotted more properties for the said purpose. all the outstandings due to the business it is said, were also allotted to the first defendant besides lands. buildings, etc. the plaintiff charges his father with continuing his speculative and hazardous business in grounduts and cotton even after the partition and incurring debts between 1928 and 1932. it is admitted by the plaintiff in his plaint that by 1932 the first defendant had.....

M. Natesan, J.

1. The plaintiff who has substantially failed in the Courts below has filed this second appeal. The suit, ostensibly and in the ultimate one for partition and separate possession of the plaintiff's 1/3 share in the properties of a joint Hindu family with consequential reliefs, is in the main one challenging the alienations made by the plaintiff's father. The first defendant in the suit is the father and the second defendant, the younger brother of the plaintiff. Defendants 3 to 14 are alienees from the father. Defendants 10, 11 and 14 did not contest the plaintiff's claim and except in respect of items 6, 7 and 10 in the plaint in which they were said to be interested, the plaintiff's claim for partition was rejected. A preliminary decree for partition was granted to the plaintiff as against the ex parte defendants in respect of the items in which they were stated to be interested. Of the contested items that were made the subject-matter in the second appeal the arguments in Court were confined to items 2, 3, 4, 5, 8 and 9 only. In the Courts below one of the main planks of attack was that the debts incurred by the father were in a. speculative and hazardous new business, that the business was not the ancestral business of the family, and that the alienations for discharge of the debts of the business would not therefore, bind the son. There are of course the usual allegations that the father was weak minded, taken to immoral ways and that the alienations were for discharge of avyavaharika debts. Averments were also made that there was no necessity for the sales, and that in some of the cases the properties were sold for in adequate consideration.

2. The parties are Vysias whose Kulachara is trade. Even during the lifetime of the plaintiff's grandfather, the family had trade in rice, groceries and gunpowder. It was a flourishing business with considerable annual income. It is stated that the first defendant in 1924 started a new business, the business being in cotton and groundnuts, and that he entered into forward contracts in respect of these commodities. It is the expansion in this business which is characterised as speculative in character. Between 1924 and 1928 the first defendant had incurred a liability of over 2 lakhs of rupees and according to the plaintiff this led to the partition in the larger joint family between the first defendant, and his brothers. The partition was on the 9th August, 1928, and is evidenced by the partition deed Exhibit A-l. A major portion of the debts incurred was directed to be discharged by the first defendant, he being allotted more properties for the said purpose. All the outstandings due to the business it is said, were also allotted to the first defendant besides lands. buildings, etc. The plaintiff charges his father with continuing his speculative and hazardous business in grounduts and cotton even after the partition and incurring debts between 1928 and 1932. It is admitted by the plaintiff in his plaint that by 1932 the first defendant had discharged the debts undertaken by him in the partition deed selling properties and realising the outstandings. It is stated that even after setting apart properties for discharge of debts in the partition substantial properties were left with the first defendant. It is alleged that still he became worse after the partition and incurred debts by his immoral life. According to the plaintiff as a prudent man the first defendant ought not to have continued the business. The alienees sought to sustain the sales in their favour contending that the alienations Were effected for the discharge of antecedent debts, that the business in groundnuts and cotton was neither a new nor speculative business, and that at any rate the business was started even before the plaintiff was born. It was pleaded by the defendants that the alienations were fully supported by consideration, and that the debts were all incurred for the purposes binding on the family, by the first defendant Who was a very careful and prudent manager.

3. The Courts below have examined the several alienations in detail taking each alienation separately for consideration. The Courts below have, in considering the validity of the alienations, referred to the legal principles applicable in the matter by reference to decided cases. The questions raised were approached for consideration on correct legal principles. The Courts below found that the alienations were valid and binding on the plaintiff. They held that there was legal necessity for the alienations and the debts for discharge of which the alienations were made were binding debts. They found that the business carried on by the first defendant was neither speculative nor hazardous. The business was started when the first defendant was joint with his brothers. He had continued the business after the partition in the family in 1928. The plaintiff is the eldest son of the first defendant and he was born only in August, 1933. It was not open to the plaintiff in the circumstances to contend that his father had embarked the ancestral assets on a hazardous and speculative business. Even in 1924 the family had a ginning factory. The first defendant purchased cotton, ginned and sold the same to mills at Coimbatore. The family had a grocery business and was also trading in rice. According to the modern concept of business in the circumstances it cannot be held that the business embarked upon by the first defendant was new and speculative and debts incurred therein would not bind the members of the family. It must be noticed that it was during the continuance of the business after the partition, that the first defendant discharged debts to the tune of two lakhs which he was directed to discharge under the partition deed. When the new line of the business was started, the first defendant was the sole coparcener. He as the sole coparcener was entitled to start the new business with the joint family funds. (See Sakthivel v. South Indian Bank : AIR1958Mad132 . Learned Counsel for the appellant, therefore, did not challenge before me that the debts incurred are in consequence of a speculative ventures and, therefore, they cannot bind the family. Learned Counsel does not even challenge the truth or genuineness of the debts referred to in the impugned alienations : nor does he contend that the debts cannot properly form the consideration for the alienations in question. What is urged before me for the appellant is that in respect of some of the alienations there has been no adequate consideration, and that in respect of some of them a good part of the consideration was cash. It is stated that in such cases where only a part of the consideration had gone in discharge of the debts, in the absence of proof that the cash had also been applied for discharge of the debts or bona fide enquiry by the alienees as to the necessity for alienation had been made the alienations must fail. It is also stated that a mere recital in a deed of alienation that the alienation was for discharge of debts generally without specifying the debts will not be sufficient, and that the alienee must prove existence of debts for the discharge of which the alienation was effected or enquiry by the alienee of existence of the debts. The Courts below have examined the impugned alienations with reference to the adequacy of consideration and also the application of the balance when upholding their validity. If they have approached the question from the right legal perspective and applied the legal principles to the evidence on record, really there is little left in the matter for consideration in second appeal.

4. Reference was made by learned Counsel for the appellant to Kailash Nath v. Tulshi Ram I.L.R. (1946) All. 457, to emphasise that the adequacy of the price was an important factor when considering the validity of an alienation, that it was not merely enough that the consideration was calculated to relieve the necessity, and that even though the consideration was devoted to the payment of the just debts, it was not open to the father to sacrifice the family properties for an inadequate consideration. Learned Counsel also cited Parmanayakam v. Sivaraman (1952) 1 M.L.J. 308 : I.L.R. (1952) Mad. 835, where it was held:

Where an alienation is made by a father or manager of a joint Hindu family and if either the alienation is fully supported by necessity or supported by necessity except to a small extent, the alienation has to be upheld.

If, however, the alienation made by the father or manager of a joint family is supported only by partial necessity, the alienee would be entitled in a suit for partition instituted either by him or by other coparceners, impugning the alienation, to have the alienor's share allotted to him and also to have the binding portion of the consideration distributed equally having regard to the interest of the alienor and the value of the property alienated.

I do not see how the decision in Sri Nath v. Jagannath (1952) 1 M.L.J. 308 : I.L.R. (1952) Mad. 835, which was cited would be of any help to the appellant. It is observed therein at page 397..the true question which calls for an answer in such cases is whether the sale itself was one which was justified by legal necessity. Whether any portion was or was not required for family necessity is not the most important question. What we have to decide is whether the sale of the property was itself for necessity.

5. Referring to Gouri Shankar v. Jiwan Singh (1927) 53 M.L.J. 786 Sulaiman, J., states in Sri Nath v. Jagannath I.L.R. (1929) All. 391:

In Gouri Shankar's case (1927) 53 M.L.J. 786 Their Lordships have explained their meaning on page 791 in the following Words : The real question that has to be considered is this whether the sale itself was justified by necessity. Their Lordships cannot go back upon that decision. If the purchaser has acted honestly, if the existence of a family necessity for sale is made out, and the price is not unreasonably low, he (the purchaser) is not bound to account for the application of the price. This view has been re-affirmed by their Lordships in Ram Sunder Lal's case (Ram Sunder Lal v. Lachmi Narain) (1929) 57 M.L.J. 7, where at page 437 after remarking that the material question, however, is whether the sale itself was one which was justified by the legal necessity, Their Lordships proceeded to point out that a substantial portion of the consideration had been used for legal necessity, that due inquiries as to the necessity had been made by the purchaser and that the consideration was adequate. Their Lordships at page 438 upheld the deed on the findings that the sale was effected after due inquiry, that the sale was for adequate consideration and that legal necessity had been proved to the extent of Rs. 7,744 out of Rs. 10,767 even though the defendants after a long interval of time had not been able to prove how the surplus was applied.

6. Adequacy of consideration is certainly a necessary element. The price stipulated must be fair. If the price is unreasonably low, it will be sacrificing the family property and may suggest want of bona fides and improper pressure. A few more of the cases cited on either side may also be referred to before going into the case on its merits and examining whether the principles of law have been properly applied.

7. In Anant Ram v. Collector of Etah (1917)34 M.L.J. 291 I.L.R. 51 All. 171, the Judicial Committee observed:

If the necessity cannot be established by direct evidence it may be assumed, if it can be shown that reasonable care was taken to ascertain if such circumstances existed and the transferee acted in good faith (section 38, Transfer of Property Act). In either case the burden of proof lies on the person who claims the benefit of the mortgage. There is no difference between the burden of proof when it is desired to support a mortgage made by a manager of a joint estate and that which is required to support the mortgage, made, for example, by a widow who has only a similar limited power of disposition.

8. Learned Counsel for the alienees stressed one aspect of the matter in the case, namely, that the family was a trading family and was engaged in trade. It was urged that the matter must be examined in the background that the father was admittedly having an extensive trade. He had been able to discharge considerable debts between 1928 and 1932 during the course of the trade. Of course he was also incurring debts in the course of the trade. The business was a running one. Learned Counsel submitted that a father in charge of a business may borrow for the purpose of the business. In Ram Charan Lonia v. Bhagwan Das Maheshri L.R. (1926) IndAp 142 : I.L.R. 48 All 443, cited by learned Counsel, the Judicial Committee observed:

No funds were available to stay the no longer remote possibility of all value in the equity of redemption being extinguished; money also was needed for payment of other trade debts that had accrued, as well as for the development of the family cloth business then recently initiated. In these circumstances, a transaction even involving the disposal by Gopal Das of this entire immovable family property might well be justifiable and be binding on the whole family, provided the property was not sacrificed for an inadequate price and provided the consideration was calculated to relieve the necessity, the existence of which called for the disposition.

9. For the alienees reference was also made to Mamat Rai v. Din Dayal I.L.R. (1927) Lah. 597, where Their Lordships observed at 600:

The onus was, of course, on the defendants to show that the sale was justified but it must be borne in mind that in this case the first defendant, Lachhman Das, and the minor plaintiffs were the members of a joint family who had succeeded to what is known as a joint family business--that is to say, a business carried on with joint family funds for the benefit of the joint family, that the properties of the joint family, both movable and immovable, including the shares of minor members of the family, are liable for debts incurred in carrying on the business and that it is within the powers of the managing member in a proper case to sell immovable as well as the movable property for the purpose of discharging such debts or enabling the business to be carried on.

(italicised is ours.)

10. Dealing with the question that the debts did not exhaust the consideration, Their Lordships observed at 603:

Even if there had been no joint family business, proof that property had been sold for Rs. 43,500 to satisfy pre-existing debts to the amount of Rs. 38,000 would have been enough to support the sale without a showing how the balance had been applied, as held by their Lordships in the recent case of Sri Krishan Das v. Nathu Ram (1926) L.R. 54 LA. 79 : 1926 52 M.L.J. 720 : I.L.R. 49 All. 149.

Where there is a joint family business the manager, as already pointed out, has authority to raise money not only for the payment of debt, but also for the purpose of carrying on the business. The learned Judges of the High Court were of opinion that, as in this case the business had recently resulted in loss, the managing member was not justified in putting more money into it, and that in any case he should have raised money by mortgage instead of by sale. As regards the latter question, it is not clear that borrowing probably at a high rate of interest, would have been more beneficial than sale. In any case this was a question for the manager to decide. It was equally a question for the Manager whether it would be better to raise more money or to close down the business and it would, in their Lordships' opinion, be unreasonable to require a lender or purchaser to go into question of this kind, as to which he would rarely be in a position to form a sound opinion.

11. The observations immediately above cited would apply directly to most of the contentions raised for the appellant. If the father had decided to sell a property, rather than raise money on mortgage the fact that a portion of the consideration had not gone in discharge of debts will not affect the alienation. The question is whether there was any legal necessity for the alienation. It is for the father to choose whether the property should be sold and funds raised or other kind of alienation resorted to. It may be that by mortgaging the property the amount required may be raised. In the present case the father decided to sell the properties for meeting the needs of the business and also paying sundry trade debts.

12. It is well established that the managing member of a trading family has wider powers than those of the manager of a non-trading a family. Of course acts done by the manager must be for the benefit or necessities of the family. But acts like the incurring of debts are necessities to a trading family. Credit is the very essence of trade and the existence of business creates the necessity for borrowing and purchasing on credit. The power of a manager therefore to carry on the family trade necessarily implies a power to pledge the property and credit of the family, for the ordinary purposes of that trade. As pointed out, in Mayne's Hindu Law, eleventh edition, at page 389 in the case of a trading family:

Those who deal with him (the manager) and to whom he incurs debts are not upon enquiry as to whether the debts Were incurred for the benefit or necessities of the family, so long as they are incidental to the family business; for the karta of a Hindu joint family which carries on a family business has implied authority to borrow money for its purposes.

13. With reference to the contention that the entire purchase-money must be shown to have been applied in the payment, the principles in this regard stated in Mulla's Hindu Law twentieth edition at page 350 may be set out:

It sometimes happens that joint family property is sold by the father of a joint family for the payment of an antecedent debt, but the whole of the price is not proved to have been applied in payment of such debt and the sale is challenged by the sons on that ground. In such a case, if the sale was necessary to discharge the debt, and the purchaser pays a fair price for the property sold, and acts in good faith and after due inquiry as to the necessity for the sale, the mere fact that part of the price is not proved to have been applied in payment of the debt does not invalidate the sale, the reason being that the purchaser is not bound to see to the application of the price. If the above conditions are satisfied, the sale must be upheld unconditionally, whether the part not proved to have been appplied in payment of the debt is considerable or small.

14. Cases illustrative of the position giving the cost portion of the price and the antecedent debt part of it are found collected under footnote (a) at page 218 and in footnote (b) at page 280 in Mulla's Hindu Law, twentieth edition. Reference was also made to a recent decision of the Supreme Court in Radhakrishnadas v. Kaluram : [1963]1SCR648 , where the decisions in Sri Krishna Das v. Kathu Ram and Mamat Rai v. Din Dayal I.L.R. (1927) Lah. 597, are referred to and it is stated:

It is well established by the decisions of the Courts in India and the Privy Council that what the alienee is required to establish is legal necessity for the transaction and that it is not necessary for him to show that every bit of the consideration which he advanced was actually applied for meeting family necessity.

15. The impugned alienations were between 1936 and 1940. The evidence is that the first defendant was heavily involved in debts. P.W. 3 admits in evidence that the first defendant was suffering from financial difficulties in 1935, 1936, 1937 and earlier years. It is stated that he was badly in need of money for his business, and it is admitted that he was discharging the earlier family debts to the tune of two lakhs allotted for him to discharge, gradually by selling portions of his property. After the 1928 partition he is stated to have invested about Rs. 40,000 in the business, and that he continued to horrow and conduct business. The argument in fact before the lower appellate Court was not that the cash received at some of the sales was not applied in discharge of debts, but that the debts were illegal and under pressure he sold the properties. It was stated that he sold some of the items for inadequate prices. The first defendant, the father who is 'best fitted to speak about the inadequacy of consideration for the sales on sacrifice, has not chosen to go into the box. The plaintiff would not examine him. The appellate Court is of the view that the suit must have been instituted in consultation with the first defendant. Sundry business debts cannot be expected to be specified in detail in the deeds. The presence of pressure for cost and involvement in debts establish existence of necessity. Question of proof of bona fide enquiry can arise only in a case where there are no debts and factually there is no necessity. It is nobody's case that the cash considerations received were misapplied and were not spent in discharge of debts or for the benefit of family in the business. It cannot be said on the evidence that the sales in question were uncalled for and not warranted in the circumstances of the family at that time. The father was heavily indebted and P.W. 3 admits that hard cash was needed by the family. And as regards inadequacy for price, as held by the learned District Judge, the plaintiff has not been able to show that the consideration for any of the sales was unreasonably low. The learned District Judge who has confirmed the decision of the trial Court has addressed himself to the questions that came up for consideration before him in the light of the well-established legal principles after duly referring to them and comes to his conclusion on a review of the entire evidence on record. I have myself reviewed the evidence and I can see no ground for disturbing the concurrent findings of the Courts below within the limited scope of a second appeal.

16. In the result the second appeal fails and is dismissed. No costs. No leave.

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