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Nibaran Chandra Shaha Vs. Lalit Mohan Brindaban Shaha - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKolkata
Decided On
Reported inAIR1939Cal187
AppellantNibaran Chandra Shaha
RespondentLalit Mohan Brindaban Shaha
Cases ReferredGovinda Rani Dasi v. Radha Ballabh Das
Excerpt:
- .....section 4, companies act, must also be one formed on the basis of contract between its members. a joint family business concern however which by its nature descends from father to son, in which interests are acquired by the succeeding generations not by an act of party but by the law of inheritance, is not an association of persons in this sense, and does not therefore come within the scope of section 4, companies act. if the members of the family who have interest in such a business concern exceed 10 or 20 as the case may be, regard being had to the nature of the business, there is accordingly no necessity of registration under the companies act. the cases have gone even to this length that if the karta of a joint hindu family, the junior members of which exceed 20 in number, enters.....
Judgment:

1. The suit out of which this appeal arises was instituted on 26th August 1931, by the plaintiffs-respondents for a declaration that the leasehold interest in premises Nos. 23 and 23/1, Canal West Road, belongs to them. The suit was originally filed with defendant 1, Heera Lal Shaha, as the only party defendant, but later on, on 12th January 1934, Nibaran Chandra Shaha and Jaga Bandhu Shaha were, on their own application, added as defendants 2 and 3, respectively. Heeralal had after the institution of the suit mortgaged the leasehold interest to them treating the same to be his property. The learned Subordinate Judge has granted a decree to the plaintiffs-respondents with a condition that they must pay to Heeralal the sums of money which the latter had paid as security deposit and as rent and taxes. Defendants 2 and 3 have preferred this appeal. Their advocate, Mr. Gopali Chandra Das, raises the following points it support of the appeal: (1) that the suit is premature; (2) that the plaintiffs' firm is an illegal association and so the suit is not maintainable; (3) that the said firm having, been dissolved before suit, the suit as constituted is not maintainable; (4) that Section 42,. Specific Relief Act, is a bar; (5) that the plaintiffs have no interest in the said leasehold, Heera Lal being the beneficial owner thereof, and (6) that at any rate his clients ought to be given a charge on the leasehold for such amount as was spent by Heera Lal for acquiring the same and for paying rent and taxes, and that if they are not entitled in law to have such a charge on the premises, the learned Subordinate' Judge ought to have directed the plaintiffs to pay the said sum not to Heera Lal, but. to his clients.

2. We shall first deal with point No. 5 which involves the merits of the claim of the respective parties. The admitted facts are these: Premises Nos. 23 and 23/1 form a part of a Government Khas Mehals estate. The Collector of the 24-Parganas, who is in charge on behalf of the Secretary of State for India in Council, has been letting out the same for successive terms of years since 1890. The following are particulars of such leases:

(i) First lease for a term of five years from 1890 to 1895. Name of the lessee - Shyam Chand, Shaha.

(ii) Second lease for a term of five years from 1896 to 1900. Name of the lessee, Sital Chandra Shaha, father of defendant 1, Heeralal Shaha.

(iii) Third lease for a term of thirty years fromi 1901 to 1930. Name of the lessee - the same Sitali Chandra Saha.

Sital Chandra Shaha died during the currency of this lease, and Heera Lal's name was substituted in his father's place in the records of the Collector.

(iv) Fourth lease for a term of thirty years from 1931 to 1960, Name of the lessee, Hiralal Shaha.

3. It is this leasehold interest which is the subject-matter of the suit. It is also an admitted fact that very valuable structures have been raised on the land after 1890 at a cost of about a lakh of rupees and the plaintiffs are in possession since 1890 by using a substantial part of the premises for their business, the remainder being in the possession of sub-tenants. (Here the Court discusses the leases and the evidence in the case on the question as to whether the beneficial interest in the leases belonged to the plaintiffs.) We have, accordingly, no difficulty in agreeing with the Subordinate Judge that the beneficial interest in the third lease was in the plaintiffs, and that Sital and thereafter Heera Lal were the plaintiffs' benamidars. On the merits there, fore the plaintiffs have established their case, and if they are not otherwise debarred, they are entitled to have the declaration prayed for. We accordingly proceed to consider the other points raised by the appellants.

4. There is no substance in the first and the fourth points which can be disposed of very shortly. No doubt, the lease was actually executed by the Collector after the suit was filed. But he had already sanctioned a settlement with Heeralal before 4th August 1931, and that fact was communicated to the plaintiffs by his letter of that date (Ex. 44, of the paper-book, part 2, p. 218), and they were directed to go to the Civil Court to establish their rights. Heera Lal had already denied the plaintiffs' title and asserted his own title. The suit which was instituted on 29th August 1931 was not accordingly premature. Regarding the bar of Section 42, Specific Belief Act, we do not see what further relief the plaintiffs could have claimed or could be compelled in law to claim, if at the date of the suit they were in possession. (Here the Court discusses the evidence of possession.) There is a mass of reliable oral and documentary evidence on the record which conclusively establishes that the plaintiffs were in possession and are still in possession. We therefore overrule the fourth point urged by the appellants.

5. We now take up the second contention urged before us. The plaintiffs who have been described as a firm in these proceedings are twenty-eight in number. Admittedly, they carry on or have, at any rate, carried on business for the purpose of gain. The defendants contend that they have formed an association or partnership for the purpose of carrying on business, and as their number exceeds twenty, the association or partnership ought to have been registered under Section 4, Companies Act, and as there has been no such registration the plaintiffs form an illegal association and the suit at their instance is not maintainable. It is not disputed that if the association is an illegal one by reason of the fact of non-registration, the suit is not maintainable: Firm of Senaji Kapurchand v. Firm of Pannaji Devichand (1930) 17 A.I.R. P.C. 300 affirming the decision of the Madras High Court in Firm of Pannaji Devichand v. Firm of Senaji kapurchand (1927) 14 A.I.R. Mad. 123. It is also good law that the members of a partnership or company or association hit by Section 4, Companies Act, can have beneficial interest in property: Queen v. Tankard (1894) 1 Q.B. 548. The Subordinate Judge met this contention on a two-fold ground. He has said, firstly, that the plaintiffs' trade is an ancestral joint Hindu family business and so does not come within Section 4(2), Companies Act, and, secondly, that assuming that the plaintiffs are members of a firm on the basis of a partnership, that partnership was formed many many years ago before the Companies Act of 1913 was passed, in fact even before the first Companies Act, and that Section 4(2) of the said Act only prevents the projection of a company, association or partnership with a number of members exceeding twenty and does not render illegal, by reason of nonregistration, a company, association or partnership, which had already been formed before the Act came into force. We may state at once that if the plaintiffs be regarded as partners of a partnership firm, we do not consider the second reason given by the learned Subordinate Judge to be a sound one. The evidence discloses that since 1913 there have been several changes caused by deaths, and if the association of these individuals was a partnership, on each of such occasions when a death occurred and the heirs of the deceased partner were taken in, a new partnership would in the eye of the law be formed, and this would clearly come within the words of Section 4(2). We are moreover of opinion that Section 4 on its true construction governs not only the first formation of the company, association or partnership, but rules its continuance. In our opinion, an association formed for trading may be perfectly legal at its formation, if the original members be not more than ten in number, in the case of a banking business and twenty in other businesses, but if the number increases later on and exceeds the maximum allowable, the association becomes an illegal one, if no registration is effected. This is the principle laid down in In re Thomas; Ex parte Poppleton (1885) 14 Q.B.D. 379 at p. 382, where Cave J. observed that he could not assent to the doctrine that

because a society is projected by less than 20 people originally and subsequently grows to more than 20, it is outside the Act,

meaning the English Act of 1862, Section 4 of which corresponds to Section 4, Indian Companies Act, 1913. We are however of opinion that the first ground on which the learned Subordinate Judge has based his decision on this point is a sound one. In the formation of a partnership, the basic element is contract. A trading association, which is synonymous with the term 'a trading company' or 'a trading society,' to be within Section 4, Companies Act, must also be one formed on the basis of contract between its members. A joint family business concern however which by its nature descends from father to son, in which interests are acquired by the succeeding generations not by an act of party but by the law of inheritance, is not an association of persons in this sense, and does not therefore come within the scope of Section 4, Companies Act. If the members of the family who have interest in such a business concern exceed 10 or 20 as the case may be, regard being had to the nature of the business, there is accordingly no necessity of registration under the Companies Act. The cases have gone even to this length that if the karta of a joint Hindu family, the junior members of which exceed 20 in number, enters into a partnership with a stranger for carrying on the business, the partnership need not be registered under the Companies Act, and non-registration would not make the partnership an illegal one : Moti Ram v. Muhammad Abdul Jalil (1924) 11 A.I.R. All. 414 and Mewa Ram v. Ram Gopal : AIR1926All337 . The correctness of these decisions was recognized in Firm of Pannaji Devichand v. Firm of Senaji kapurchand (1927) 14 A.I.R. Mad. 123 by the Madras High Court, when those cases were distinguished from the case then before it on the ground that the four firms which had combined to carry on business, and the total number' of whose members had exceeded 20, were none of them Hindu joint family concerns, and the unqualified approval of the reasons given by the Madras High Court by the Judicial Committee on appeal from the said case may be regarded as an approval of this line of cases : Firm of Senaji Kapurchand v. Firm of Pannaji Devichand (1930) 17 A.I.R. P.C. 300. Some change has been effected by the amendment of the Companies Act in 1936, by the introduction of the last part of Sub-section (3) of Section 4, but in the view we take of the facts, it is not necessary to consider whether Moti Ram v. Muhammad Abdul Jalil (1924) 11 A.I.R. All. 414 or Mewa Ram v. Ram Gopal : AIR1926All337 has been overruled by the Legislature or not. The first part of Sub-section (3) has given statutory recognition to what was law before 1936.

6. The point therefore reduces itself to this: namely, whether the business we have to consider in the case before us is a Hindu joint family business or not. The facts proved are these : All the 28 persons who may be regarded as plaintiffs are Hindus. They were till very lately joint in mess, lived in the same family dwelling house and are relations Shortly before the suit, they separated in mess and divided most of their immovable properties, but some properties still remained joint, including the business. The history of the business, which is an arhatdari business is as follows: It was started by one Sham Chand Shaha, a common lineal ancestor of all the plaintiffs, about one hundred years ago. He left him surviving two sons, Earn Krishna Shaha and Madan Shaha and a daughter named Chini Sundari whose husband was Shyam. Chand's gharjamai, that is, lived with his wife as a member of Shyam Chand's family, and, under the Hindu law, had a right of maintenance : Govinda Rani Dasi v. Radha Ballabh Das (1910) 12 C.L.J. 173. On Shyam Chand's deatfh his sons, Ram Krishna and Madan, and his daughter Chini Sundari became malika. On the death of these persons, Chini Sundari's son Rai Chand became malik along with the heirs of Ram Krishna and Madan. The 28 plaintiffs are the descendants in the line of heirs of Ram Krishna, Madan and Rai Chand. The defendants contend that as Chini Sundari or Rai Chand was not an heir-at-law of Shyam Chand, the business cannot be considered as a joint family business. We have to examine this position.

7. A Hindu joint family, even one coming under the Bengal School, consists of a wider group than the coparceners, i.e. sharers. The wives of the co-parceners, the unmarried daughters, the sons and grandsons of a Dayabhaga family when the father or grand-father is living, and the other members who have a claim on the family funds for maintenance would, accordingly, be regarded as members of the joint family. The common mess, the common worship, the common residence, coupled with ties of blood and introductions into the family by marriage and adoption, make them members of a joint Hindu family. Normally, a daughter by marriage goes out of the family, but the case is entirely different when she is married to a gharjamai. She not only continues to be a member of her father's family, but she introduces into that family others who, in normal circumstances, would not be regarded as members of the family, namely her husband and her 'sons. It would, in our opinion, be straining too much if we were to hold that the business was not to be regarded as a joint family business simply because it was not confined to the heirs of Shyam Chand on his death, but included his daughter who was a continuing member of his family, or his gharjamai who by marriage was introduced into the family. In our opinion, such a narrow interpretation should not be applied in considering what constitutes a 'Hindu joint family business.' It would satisfy every legitimate test, if the business is confined to the members of the family, meaning thereby not merely the cosharers but including dependant members and relations who are de facto members of th.3 family, and if the proceeds, like the proceeds of all joint family property, are utilized and made available for the maintenance and other legitimate expenses of the family. Applying this test, the business which has passed by the law of inheritance to the plaintiffs cannot but be regarded as a joint family business. We accordingly overrule the objection that the plaintiffs form an illegal association formed for the purpose of gain through trade.

8. In this view of the matter, the third point urged before us loses much of its force. The leasehold in question is a part of the family property in which the plaintiffs have shares. There can therefore be no question of dissolution of business. The business however has not been dissolved. No doubt, owing to dissensions, buying and selling was suspended just before the suit, but that by itself, even in the case of a partnership, would not have constituted a dissolution. There only remains for consideration the last point. On the footing that Heera Lal was in the position of a trustee, he is entitled to be indemnified for just expenses. But the right of indemnity was his personal right. He deposited out of what was his money, which he got as a result of borrowing from defendants 2 and 3, a sum of Rs. 1895 with the Collector as security. We cannot see on what principle defendants 2 and 3 can claim a charge on the property for this sum or for any other, sum that may have been paid by Heera hal, in the shape of rent and taxes. Heera Lal mortgaged to them the property as his own Defendant 2's and 3's officer made perfunctory enquiries when they advanced the loans; a little enquiry would have disclosed to them Heera Lal's true position. They cannot, in our opinion, compel the plaintiffs to pay them the money. Their remedy lies against Heera Lal and Heera Lal only. It is unfortunate that they have been cheated, but their blind faith in Heera Lal and' Bankim Chandra Shaha has placed them, in the position in which they find themselves today, and they have to thank themselves if they cannot recover anything from Heera Lal. The point that the plaintiff could not use the firm's name in the suit was not pressed either in the lower Court or before us, and if it had been taken in time, the defect could have been cured by an amendment of the plaint, there being no question of limitation. The names of the persons interested in the property in dispute as plaintiffs were supplied and are on the record.

9. The result of our decision is that this, appeal should be and it is hereby dismissed with costs to the plaintiffs-respondents, the hearing fee in this Court being assessed at. Rs. 300.


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