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Durga Prosad Barhai Vs. Jewdhari Sing and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKolkata
Decided On
Reported inAIR1936Cal116
AppellantDurga Prosad Barhai
RespondentJewdhari Sing and ors.
Cases ReferredNazir Begum v. Raghunath Singh
Excerpt:
- d.n. mitter, j.1. this is an appeal by the defendant and arises out of a preliminary decree in a suit on mortgage commenced by the plaintiff. the decree is dated 15th february 1932. the suit was to enforce a mortgage executed by one jadu nath sarma, who is said to be the karta of a joint mitakshara family, on 26th may 1922. jadunath hypothecated by this document the immoveable properties belonging to the joint family. in order to understand the position of jadunath with reference to the family it is necessary to state the following facts: one bhagoo mistri had three brothers namely gakul, nimchand and fulchand. there was some sort of a partition between gakul, nimchand and fulchand, and bhagoo got in his share the properties some of which have been mortgaged by the document on which the.....
Judgment:

D.N. Mitter, J.

1. This is an appeal by the defendant and arises out of a preliminary decree in a suit on mortgage commenced by the plaintiff. The decree is dated 15th February 1932. The suit was to enforce a mortgage executed by one Jadu Nath Sarma, who is said to be the Karta of a joint Mitakshara family, on 26th May 1922. Jadunath hypothecated by this document the immoveable properties belonging to the joint family. In order to understand the position of Jadunath with reference to the family it is necessary to state the following facts: One Bhagoo Mistri had three brothers namely Gakul, Nimchand and Fulchand. There was some sort of a partition between Gakul, Nimchand and Fulchand, and Bhagoo got in his share the properties some of which have been mortgaged by the document on which the present suit has been brought. Bhagoo died leaving behind him surviving his son Kali Charan who died on 9th February 1918. Kali Charan had a son Raghunath who died at the age of 42 but during the lifetime of Kali Charan. Kali Charan died on the date already mentioned leaving him surviving Jadu Nath and Durga Prosad, two of his grandsons by his son Raghunath. The relationship between the plaintiff and some of the pro forma defendants to the suit may be shown as follows: Chattar Singh had five sons Jewdhari, plaintiff 1 in the present suit, Deo Narayan, whose son is Bharat Singh, defendant 2, Ramdhiyan Singh whose son is Sadhusaran Singh, plaintiff 2, Ramnarayan, and Sewsagar, whose son is Ambika Singh, plaintiff 3 to the suit. The allegations of the plaintiffs in the plaint are that for the purpose of meeting the expenses of the joint family which consisted of Jadunath himself and his infant brother Durga Prosad, who was born in August 1909, a sum of rupees twelve thousand (Rs. 12000) was borrowed on 26th May 1922, by Jadu Nath as the Karta of the joint family. It may be mentioned that the mother of Durga Prasad, Musammat Daho Kuar, was also a member of the family at the time of the execution of the mortgage. The amount advanced on the mortgage was Rs. 12,000 (rupees twelve thousand) and the mortgage is said to have been executed by Jadunath Sarma for self and as the natural guardian of Durga Prosad, the defendant appellant.

2. The interest claimed was Re. 1-8-0 per mensem, that is 18 per cent per annum with nine-monthly rests if the sum be not paid within the period of nine months. The due date of the mortgage was 26th May 1924. The properties mortgaged are given in Schs. A and B to the plaint. Plaintiffs stated that the amount due at the date of the suit on the bond including interest would be about Rs. 54,000 (rupees fifty-four thousand) and that the plaintiffs were giving up a sum of Rs. 9,000 (rupees nine thousand) out of the interest and claimed Rs. 45,000 (rupees forty-five thousand). Plaintiffs accordingly asked for the usual decree for sale, the mortgage being in the nature of a simple mortgage. Several defences were taken in the suit. It was stated that Jadunath was not the karta of the joint family consisting of Jadunath and Durga Prosad. It was also said that the previous debts were neither genuine nor real nor were incurred for family necessity, and that there was no justifying necessity when the mortgage was executed so as to make the alienation binding on the joint family property. A further defence was taken, namely that as Jadunath obtained letters of administration of the estate of Kalicharan, after Kalicharan's death in 1918, the mortgage was not binding on the minor as no sanction was obtained from the probate Court sanctioning the alienation in question. A very important statement is made in the written statement to the effect that a short time before the execution of this mortgage Jadunath, with the permission of the District Delegate of Darjeeling, sold to Abdul Rahim of Calcutta a very good portion of the ancestral properties for Rs. 50,000 (rupees fifty thousand) as administrator, karta and natural guardian of the defendant, and after paying the debts, recited in the deed of conveyance in favour of Abdur Rahim, a very large sum of money, namely Rs. 22,253 (rupees twenty-two thousand two hundred and fifty-three) remained in his hands and there was absolutely no necessity to borrow those twelve thousand rupees from the plaintiffs on 26th May 1922; and it is said that there was no justifying cause for the transfer by way of mortgage.

3. It was also alleged in the written defence of the defendants that Jadunath was a man of dissolute habits, and that he became early addicted to wine and women and began to spend his time in debauchery. It was also said that the high rate of interest mentioned in the bond could not be justified even if there was legal necessity for the borrowing. In other words the plea taken was that even if there was any justification for the borrowing of Rs. 12,000 there was no justifying necessity for borrowing on high rate of interest, namely 18 percent per annum, with nine-monthly rests. It is also said that the interest was hard and unconscionable. The Subordinate Judge rejected all these defences and decreed the suit in full. Against this decree the present appeal has been brought by the defendant and several grounds which were based on the defences taken in the Court below and which have been already mentioned, were urged before us in support of the appeal. It was contended in the first place that Jadunath was not really the karta of the joint family consisting of himself and his brother and the mother of Durga Prosad, and that therefore the mortgage could not bind the joint family properties. It was said in support of this argument that Jadunath assumed the role of karta for the time when he was executing the mortgage in question. The Subordinate Judge has, however, relied on the oral evidence adduced in this case and has come to the conclusion that Jadunath was acting as the karta. (His Lordship after agreeing with the lower Court proceeded). We are therefore of opinion that this contention that Jadunath was not acting as a Karta of the joint family must fail. The second contention which is raised on behalf of the appellant is that Jadunath obtained letters of administration of the estate of Kali Charan and having obtained the letters of administration he could not execute a valid mortgage so as to bind the joint family estate without obtaining the sanction of the District Judge. The question really turns on the construction which is to be put on the provisions of Section 211 (2), Succession Act. That clause runs as follows:

When the deceased was a Hindu, Mahomedan, Buddhist, Sikh or Jaina or an exempted person, nothing herein contained shall vest in an executor or administrator any property of the deceased person which would otherwise have passed by survivorship to some other person.

4. It may be taken for the purposes of this case that Kali Charan and his two grandsons Jadunath and the present appellant formed members of the joint Mitakshara family and the properties which form the subject matter of the mortgage were the ancestral properties in the hands of Jadunath and Durga Prosad after Kali Charan's death. After Kali Charan's death in the absence of a son the properties would pass by survivorship to Jadunath and Durga Prosad, and there would be according to the provisions of Section 211 (2) no property of the deceased person Kali Charan in respect of which letters of administration could be granted. At the moment of the death of Kali Charan no property of his vested in the executor, the right of survivorship taking precedence over any other right; and that therefore when Kali Charan died the right in the joint family properties passed by survivorship to their two infant grandsons and nothing became vested in the executor, or the administrator notwithstanding the grant of letters of administration. This view is supported by the decision to which we were referred in the cases of T.R. Gopalaswamy Pillai v. Minakshi Ammal 1929 Rang 99, Debendra v. Surendra 1920 Pat 313 and Bai Harkar v. Manik Lal (1888) 12 Bom 621. We are referred by Mr. Mukerji who appears for the appellant to a decision in Ranjit Singh v. Amullya Prosad Ghose (1905) 9 C W N 923, but Mr. Mukerji, after examining the case frankly admitted that that was a case where the property was not the property of a member of a Mitakshara family but of one governed by the Dayabhag School of Hindu Law. So that that case has no application and we need not consider it.

5. The argument of the appellant with regard to this point was that even if the probate Court had no jurisdiction to grant letters of administration the point of the want of jurisdiction cannot be taken in a collateral proceeding but that the order granting letters of administration should have been set aside by a proper proceeding, and we are referred to the provisions of Section 263, Succession Act, and in particular to illustration (1) to that Section. That illustration is to the following effect: 'The Court by which the grant was made bad no jurisdiction.' Section 263 states that the grant of probate or letters of administration may be revoked or annulled for just cause; and it is said that even where there is an error of jurisdiction the letters of administration should have been revoked for just cause which includes according to the illustration the case where probate Court has no jurisdiction. At the same time we are confronted by the well known principle established by a series of decisions of their Lordships of the Judicial Committee that if proceedings are taken by a Court without jurisdiction no further proceedings are necessary to set the same aside or to nullify the effect of such proceedings. We may refer in this connection to the decisions of their Lordships of the Judicial Committee in the case of Khairajmal v. Dain (1905) 32 Cal 296. But apart from this question being viewed from this standpoint it appears by reason of Section 211 (2), that no letters of administration can be granted in respect of the estate of the deceased person who was a member of a joint Mitakshara family along with other co-parceners. It was therefore not necessary to obtain the sanction of the District Judge in order to render the mortgage in question valid and binding on the joint family estate. This contention of the appellant therefore also fails.

6. The third contention in this appeal is that as the debts, for paying which the mortgage Ex. 1, dated 26th May 1922 was executed, were not such debts as were incurred for family purposes, the mortgage cannot bind the family properties. It was further said that there is no reliable evidence of bona fide enquiry by the plaintiffs mortgagees as to the existence of necessity, and it is contended that having regard to the well established principle, regarding the limits of the authority of .Karta of a Mitakshara joint family to bind the joint family properties by sale or mortgage, the mortgage in question, should be held to be not binding on the family properties and the suit to enforce the mortgage security must fail. Before proceeding to deal with the question raised by the ground as to the existence of legal necessity or as to the existence of an inquiry into the legal necessity, it is necessary just to set forth the law in this behalf which has been summarized in the decision of their Lordships of the Judicial Committee in the case of Brij Narain v. Mangla Prosad 1924 P C 50. At p. 139 after reviewing the numerous authorities both of Indian Courts and also of their Lordships of the Judicial Committee of the Privy Council their Lordships say this:

Their Lordships may sum up the propositions which they would wish to lay down as the result of these authorities as follows:

7. We will cite here only proposition (1) for that is material for the purposes of the present case. The proposition (1) runs as follows:

The managing member of a joint undivided estate cannot alienate or burden the estate qua manager except for the purposes of necessity.

8. It is not disputed, and it cannot be disputed, that the burden of proving the necessity for the debts and that there has been a bona fide inquiry by the lender is on the lender i.e., the plaintiffs mortgagees in the present case. We have to consider how far they have been able to discharge that burden with reference to the present mortgage. In considering this question there is a circumstance of very great importance in this case which has to be kept in view, namely that just a few days prior to the execution of the present mortgage, portions of the family properties were sold to one Abdur Rahim for a sum of Rs. 50,000 (rupees fifty thousand), and having regard to this circumstance the burden is indeed very heavy on the plaintiffs mortgagees to establish the existence of legal necessity seeing that the family was put in possession of a considerable sum of money, namely, Rs. 50,000 (rupees fifty thousand) a few days before the transaction which is challenged by the defendant in the present case. The Subordinate Judge is of opinion that the plaintiffs did make sufficient inquiry with regard to how the sum of Rs. 50,000 (rupees fifty thousand) was spent for family purposes and that therefore the mortgagees have discharged the onus of showing this: that after due inquiry they were satisfied that so far as Rupees 50,000 (rupees fifty-thousand) were concerned nothing remained out of that sum so as to justify the borrowing on the present mortgage. (His Lordship after discussing evidence proceeded). On this evidence we are not prepared to disagree with the finding of the Subordinate Judge that as a matter of fact the sum of Rupees 50,000 was spent. The question however still remains as to whether the lender should have made a proper inquiry with reference to Rs. 50,000 as to whether these debts which were liquidated by the consideration money of Rahim's kobala were incurred for family purposes. On this part of the case this witness Bhuban states this:

I do not remember if I .made any inquiry as to whether these debts were incurred entirely for the benefit of the minor Durga Prosad or for family necessity, but I know Jadunath to be acting as Karta of the family. I was acting on instructions from Jadunath as his pleader; it was not a personal question. I did not think it necessary to inquire minutely as a lender regarding family necessity and benefit of the minor etc.

9. Again this witness at p. 64 states this with reference to the sum of Rs. 12,000 (rupees twelve thousand) which form the subject matter of the present mortgage, and this statement throws a flood of light on the question as to whether there was a due inquiry with reference to the legal necessity in respect of the sum borrowed on the mortgage, namely in respect of Rs. 12,000. The statement is this:

As I was not a lender it was not necessary for me to enquire whether these debts were incurred for family necessity or for benefit of the minor Durga Prosad. I spoke to several creditors who at my request gave up some portion of their dues, but I cannot say how much this amounted to.

10. This statement shows at once that no enquiry was made with reference to the existence of the legal necessity for borrowing the sums advanced on the mortgage in question. We would hold therefore that there was no bona fide enquiry made with regard to the existence of legal necessity for the mortgage loan of Rs. 12,000 but, would hold at the same time in agreement with the Subordinate Judge that it has been shown in the account that the sum of Rs. 50,000 obtained from Abdur Rahim had, as a matter of fact, been actually spent. In this view it remains to examine whether there was legal necessity in respect of each of the items which go to make up the consideration for the mortgage and which went together to make up the sum of Rs. 12,000. (His Lordship after considering the evidence regarding the legal necessity of each item of advance proceeded.

11. The result therefore is that we hold that out of the sum of Rs. 12,000 which is borrowed on this mortgage there was justifying necessity for Rs. 7692-0-9 and that there was no such necessity for the balance of that sum. It has been argued for the respondents that even on the view which we have taken, the mortgage transaction should be upheld in its entirety. It is argued that as it has been found that there was legal necessity for a substantial portion of Rs. 12,000 the presumption should be that there was legal necessity for the rest also and in support of this contention reliance has been placed on a number of decisions both of this Court and also of their Lordships of the Judicial Committee of the Privy Council. The leading decision on this point is the recent decision of their Lordships of the Judicial Committee of the Privy Council in Krishan Das v. Nathur Ram 1927 P C 37. At the outset and before considering the contention of the respondents it becomes necessary to state the law as expounded by their Lordships in this case. The case in which the observations were made depended on the following facts: there was a sale of a joint property governed by the Mitakshara School of the Hindu law and it was proved that the purchaser had made due enquiry as to the necessity for the sale. Out of a fund of Rs. 3,500, Rs. 3,000 had been applied to purposes of necessity and that the price was adequate. The High Court made a decree setting aside the sale conditionally upon Rs. 3,000 being repaid to the purchaser. In this state of facts their Lordships of the Judicial Committee held that the decree was contrary to all principle and authority and that the suit should be dismissed. Lord Salve-son in delivering the judgment of their Lordships made the following significant observation which is to be found at p. 88 of the report:

This is in line with the series of decisions already referred to, in which it was held that, where the purchaser acts in good faith and after due inquiry, and is able to show that the sale itself was justified by legal necessity, he is under no obligation to inquire into the application of any surplus and is, therefore, not bound to make repayment of such surplus to the members of the family challenging the sale.

12. There are two very important considerations which have to be kept in view in construing what their Lordships have said in the case. Before the contention of the respondent can be upheld, it must be shown that in a case of sale where the purchaser acts in good faith and after due enquiry and is able to show that the sale is justified by legal necessity, he is under no obligation to enquire into the application of that surplus. Two conditions, namely the existence of a bona fide enquiry and the existence of evidence to show that the sale itself was justified by legal necessity, must co-exist in order to attract the application of this rule to a particular case. This decision does not give countenance to the position contended for by the respondents that as soon as it is shown that there was a legal necessity for a part, the whole transaction must be upheld although the purchaser had failed to show that this was legal necessity for the remainder. But this position cannot be maintained because it appears from the clear exposition of the law in the passage to which we have referred that their Lordships of the Judicial Committee hold that the two elements must co-exist in order to attract the principle to the case, namely (1) that the purchaser has made a bona fide enquiry and (2) that the sale is justified by legal necessity.

13. If the contention of the respondents is given effect to, it would lead to somewhat difficult position. To take one illustration: suppose in a sale for Rs. 51,000 evidence is given to show that there was legal necessity say for Rs. 10,000, then according to the contention of the respondents the sale must be upheld although the purchaser has failed to give evidence as to the existence of legal necessity for a substantial portion of the consideration. This could not have been intended by the decision which we are just considering. It seems to us that their Lordships were laying down the rule in the circumstances that where there has been a bona fide enquiry by the purchaser as to the existence of legal necessity and if the entire consideration is not applied to the necessary purposes the purchaser is not bound to enquire as to the application of the money and is protected if he has made an enquiry only as to the existence of legal necessity. The true position laid down by this decision has been formulated by Sir Dinshah Mulla in his treatise on the Principles of Hindu Law in Article 245 while dealing with purchase money or money raised on mortgage applied by manager in part only to purposes of legal necessity. He says this:

Cases frequently arise in which joint family property is sold by the manager of the family for legal necessity, but the whole of the price is not proved to have been applied to purposes of necessity, and the sale is challenged on that ground by the other members of the family. In such cases if the sale itself is justified by legal necessity, and the purchaser pays a fair price for the property sold, and acts in good faith and after due enquiry as to the necessity for the sale, the mere fact that part of the price is not proved to have been applied to purposes of necessity would not invalidate the sale, the purchaser not being 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 applied to purposes of necessity is considerable or not.

14. That seems to be the correct way of reading the decision of their Lordships of the Judicial Committee in the case with which we are now dealing. In Krishan Das v. Nathur Ram 1927 P C 37, a reference has been made of the case of Hunooman Persaud Pandey v. Babooee Munraj Koonwaree (1854-57) 6 M I A 393. There also as in the present case, the point emphasized was that the validity of the sale in cases of this kind would not depend upon the proof of the application of the sale price. The reason is that the bona fide purchaser for value is not bound to see to the application of the price paid by him. If it were otherwise he would himself have to enter into the management and direct and control the actual application of the money. In these circumstances it has been held in cases for which legal necessity has been established for a portion of the consideration that the mere fact that a consideration of the price of Rs. 712 out of Rs. 5,300, as in Medai Dalui v. Nainar Tevan 1922 P C 307 or of Rs. 2,000 out of Rs. 18,400 as in the case of Masit Ullah v. Damodar Prasad 1926 P C 105 or of Rs. 38,400 out of Rs. 43,500 as in Niamat Rai v. Din Dayal 1927 P C 121, is not proved to have been applied, for legal necessity is not a ground in law for setting aside the sale.

15. The true gist of the decisions is that there must be a bona fide enquiry by the purchaser and (if the doctrine is to apply to cases of mortgage) there must be bona fide enquiry by the lenders in order to attract the principle in Krishan Das v. Nathur Ram 1927 P C 37. The other authorities which follow the decision of Krishan Das v. Nathur Ram 1927 P C 37 are on the same lines. Reference has been made to the decisions of the Judicial Committee which follow this and which are Niamat Rai v. Din Dayal 1927 P C 121, Gouri Shankar v. Jiwan Singh 1927 P C 246, Jagannath v. Shrinath 1934 P C 55. The application of the principle, as has already been stated, must depend on the co-existence of the two elements of bona fide enquiry and the existence of necessity for a part of the consideration. There have been cases before the Judicial Committee where in the case of sale a conditional order of repayment of the portion for which there was no legal necessity was made and in this connexion we might refer to the decisions in the cases of Deputy Commissioner of Kheri v. Khanjan Singh (1907) 29 All 331 and in Raja Rai Bhagwat Dayal Singh v. Debi Dayal Sahu (1908) 35 Cal 420. At p. 57 of the latter report it will appear that the conveyances were not held good, but the decree for possession in that case was made conditional because it was found that the payment made by the particular respondent of portions of the consideration money were advanced for legitimate necessities. We are therefore of opinion that the contention of the respondents must fail having regard to our finding that it has not been established on evidence that there was a bona fide enquiry by the lender in the present case.

16. It is not necessary to express our opinion finally upon the question which has been raised in the course of the argument that the principle laid down in Krishan Das v. Nathur Ram 1927 P C 37, can only apply to cases of sale and not to cases of mortgage. There is a divergence of judicial opinion on the point. The Lucknow Chief Court would seem to hold that this principle would apply to cases of sale and should not be attracted to cases of mortgage. The reason given by that Court is that it is not always possible for the father or the manager of a family to sell that share of the property which will bring in the precise sum which is wanted to clear the debts which are binding; while in the case of a mortgage he can borrow the precise amount which is required to meet the family necessity and if he mortgages for more money than is required, the sons cannot be made liable for the sum in excess of the family necessity. See the decision of the case of Jai Indra Bahadur Singh v. Khairati Lal 1928 Oudh 465. On the other hand the Patna High Court would seem to hold that the case of mortgage stands on the same footing as the case of sale; and the rule laid down in Krishan Das v. Nathur Ram 1927 P C 37 which was a case of sale applies also to mortgage. See the decision in Hitendra Narayan Singh v. Sukhdeb Prosad Jha 1929 Pat 360. In the view which we have taken that this principle has no application because the bona fide enquiry required is absent, in the present case it is not necessary to express any opinion on the divergence of opinion between the Patna High Court decisions and the Oudh Chief Court decision.

17. The next question we have to consider is as to whether there was any necessity for borrowing the sum, for which we have found legal necessity to exist, at the high rate of interest, namely 18 per cent with nine monthly rests. The question has to be viewed in the light of what has been observed by their Lordships of the Judicial Committee in Nazir Begum v. Raghunath Singh 1919 P C 12. In that case their Lordships lay down that those who support a mortgage of joint family property made by the manager must prove not only that there was necessity to borrow the principal but that it was not unreasonable to borrow at some such high rate, and upon some such terms as are provided by the mortgage. Their Lordships further lay down that if the rate of interest is exorbitantly high although the security is ample, the Court can properly infer that it was unnecessarily high, and can make a mortgage decree allowing a reduced rate.

18. On behalf of the respondents our attention has been drawn to a number of transactions between Jadunath and Kalicharan and other creditors in which the interests varied from 9 per cent per annum with yearly rests to 15 per cent per annum with yearly rests, and in some cases with half-yearly rests. We have been referred to Ex. J at p. 127 of the second part of the paper book, Ex. 4 at p. 1, lines 35 to 45 of the second part of the paper book, Ex. A (c), which is typed in the supplementary paper-book when the interest is at the rate of 21 per cent per annum, Ex. A at p. 82 of the second part of the paper-book where the interest is at the rate of 15 per cent per annum with half-yearly rests and some promissory notes for small sums of money ranging between Rs. 187 to Rs. 1,775 in which the interest varies from 18 per cent to 36 per cent per annum simple. Considering the facts that in this case the security is ample and that there was a long delay made in bringing the suit, we think that simple interest at the rate of 18 per cent per annum would be amply sufficient to compensate the mortgagee for the interest which he should get on the principal amount of the mortgage. As we have said that there was a real necessity for payment for the two transactions evidenced by Ex. 4, at p. 3 of the second part of the paper-book and Ex. A at p. 82 of the second part of the paper-book that there were many debts due to Bhagban Ram and Narsingh Pandey and it does not appear that there was such a high pressure from these two creditors as would justify those high rates of interest at which the sums were borrowed. The only evidence with reference to these two transactions is to be found at p. 44 of the first part of the paper-book, which is the evidence of one Jangi Ram who is the gomastha of the firm of Bhaban Ram Goga Ram. He says this:

The interest in Ex. 4 was 9 percent per annum ....... But I know that repeated demands were made by the maliks for the money at the time that Daroga Bazar was sold. Demands were made at our shop where Jadunath and Mahabir Prosad used to come.

19. It does not appear that demands had been made through Court till the institution of this suit, so as to justify the borrowing at a high rate. In these circumstances the decree of the Subordinate Judge must be varied by granting the usual mortgage decree for a sum of Rupees 7,692-0-9 with simple interest at the rate of 18 per cent per annum up to the date of three months from now. If the mortgage money be not paid with interest thereon by that date the mortgaged properties will be sold. The costs will be costs in proportion throughout. After the date fixed for redemption the interest will run at the rate of 6 (six) per cent per annum until realization. Liberty is given to the appellant to mention to this Court about the continuance of the receiver even after the decree is signed in this case.

Patterson, J.

20. I agree.


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