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Shewkissen Mohata and ors. Vs. Mangalchand Maloo and ors. - Court Judgment

LegalCrystal Citation
Decided On
Reported inAIR1941Cal341
AppellantShewkissen Mohata and ors.
RespondentMangalchand Maloo and ors.
Cases ReferredIn Krishnadhan Banerjee v. Sanyasi Charan Mondal
- .....godowns and sell them through commission agents or aratdars at calcutta. messrs. mangal chand deep chand ,of which the respondent mangal chand maloo is the sole proprietor, was one of such commission agents. in sambat 1989 (1931-32) premsukh and pannalal began to enter into forward contracts through mangal chand deep chand as their agents and brokers. there was great loss on those forward contracts.2. the position appearing from the account books of mangal chand deep chand is as follows : in the year ending 1988 sambati (15th april 1931) there was a credit balance of rs. 25,924-15-6 in favour of mangal chand chunilal (ex. 13 (f); a, ii, 23)*. the account of the year 1989 sambat ending with 15th april 1932 shows that the whole of the credit balance of sambat 1988 had been wiped away.....

1. This appeal is in a suit Instituted by the mortgagee, Mangal Chand Maloo to enforce the four mortgages dated 10th August 1932, mentioned in our judgment delivered in First Appeal No. 96 of 1937. The persons against whom the mortgages are sought to be enforced are Premsukh, Pannalal and their sons and the grandson of Premsukh. Two other persons, Sukhdeo Das Baithi and Hanumandas Baithi were impleaded as defendants as puisne mortgagees. They disclaimed all interest in the mortgaged premises in the lower Court and so have been dismissed from the suit. The learned subordinate Judge has passed a preliminary decree on 16th March 1937. From this decree the sons of Premsukh, except his eldest son Shewratan, that is those of his sons who were minors at the time of the execution of the aforesaid four mortgages, the minor son of Pannalal and the minor grandson of Premsukh, being the son of Shewratan have preferred this appeal. The points pressed by the appellants are: (i) that the mortgages cannot bind their interest in the mortgaged properties as the mortgages were given by their direct ancestors Premsukh and Pannalal to secure debts, very substantial portions whereof were immoral debts, i. e., gambling debts; (ii) that a good portion of the debt was incurred in conducting new businesses started by Premsukh and Pannalal, one of them being in co-partnership with strangers including, namely Mangal Chand Maloo himself; (iii) some portions of the mortgage money (Rs. 17,579) represented debts of strangers taken over by Premsukh and Pannalal; (iv) that the Bengal Money-lenders Act, 1940, applies and so: (a) compound interest is not allowable, (b) simple interest at 8 per cent. per annum can only be allowed up to preliminary decree, (c) simple interest at 6 per cent. per annum on the principal sum can only be allowed after the preliminary decree and (d) payment by instalments must be provided for in the preliminary decree; (v) that in any event compound interest cannot: be allowed on the terms of the mortgages. Point 4 could not be urged in the lower Court as the Bengal Money-lenders Act, 1940, was only passed in the year 1940 and came into force in September of this year : Point 5 is not noticed in the judgment of the lower Court, but the other three points are dealt with by the learned subordinate Judge who overruled point 1 and though he seemed to have assumed that Rs. 39,994 odd had been incurred as loss in a new business started by Premsukh and Pannalal in co-partnership with strangers and that Rs. 17,597 odd represented a debt due by strangers to Maloo, the liability for payment of which had been taken over by Premsukh and Pannalal, he still held the appellants liable for the said sums of money and the mortgages bound their interest in the properties which were the ancestral properties of Premsukh and Pannalal, to the full extent of the consideration recited therein. The first question is whether any portion of the consideration mentioned in the mortgages represented gambling debts of Premsukh and Pannalal. It is established on the evidence the past modus operandi of the family business carried on through Premsukh and Pannalal in the name and style of Mangal Chand Chunilal and Dugasidas Mangal Chand was to buy jute at different jute marts at Khulna, Daulatpur and Sachiadaha, to store them in their godowns and sell them through commission agents or aratdars at Calcutta. Messrs. Mangal Chand Deep Chand ,of which the respondent Mangal Chand Maloo is the sole proprietor, was one of such commission agents. In Sambat 1989 (1931-32) Premsukh and Pannalal began to enter into forward contracts through Mangal Chand Deep Chand as their agents and brokers. There was great loss on those forward contracts.

2. The position appearing from the account books of Mangal Chand Deep Chand is as follows : In the year ending 1988 Sambati (15th April 1931) there was a credit balance of Rs. 25,924-15-6 in favour of Mangal Chand Chunilal (Ex. 13 (f); A, II, 23)*. The account of the year 1989 Sambat ending with 15th April 1932 shows that the whole of the credit balance of Sambat 1988 had been wiped away and Mangal Chand Chunilal became indebted to Mangal Chand Deep Chand to the extent of Rs. 2,38,176-4-9 (ex. 12A, II, 25). The details of the loss are given in the Rojenamcha (Daily Account Book of Mangal Chand Deep Chand). Only portions of the Rojenamcha of 1989 Sambat have been printed and remaining relevant portions have been supplied to us in type. The Rojenamcha shows that Mangal Chand Deep Chand used to pay moneys payable on the forward contracts on behalf of Mangal Chand Chunilal. The defendants did not produce account books of Mangal Chand Chunilal in respect of the dealings with Mangal Chand Deep Chand though they were called upon to produce them. The plaintiff has produced some photographic copies of the account books of Mangal Chand Chunilal which he had obtained in circumstances not necessary to be detailed and those photographic copies tally with the corresponding entries in the account books of Mangal Chand Deep Chand. The account books of Mangal Chand Deep Chand must accordingly be accepted as correct. The case of the defendants is that some of those forward contracts were phatka or gambling transactions and the amount of loss debited against Mangal Chand Chunilal on account of the differences paid by Mangal Chand Deep Chand on behalf of Mangal Chand Chunilal cannot be recovered from the family properties or charged on the share of the junior coparceners who were minors at the date of the mortgages. Premsukh has not been examined as a witness on an excuse which does appear to us to be convincing. Pannalal has deposed. Ha says that only eight out of the many forward contracts represented phatka or gambling transactions. Those contracts, and the result thereof are as follows:

*[We have marked the paper book of F.A. 224 of 1937 as A and that of F.A. 96 of 1937 as B and the book of photographs as C.].

------------------------------------------------------------1 2 3 4------------------------------------------------------------No. Date of Quantity taken Loss debited toof the the over by Mangal Mangal Chandcon- contract Chand Chunilal Chunilal.tract------------------------------------------------------------ 4229 4-11-1931 12500 maunds Rs. 20132-12-04239 9-11-1931 2625 ' ' 2253-8-34240 9-11-1931 3250 ' ' 2048-8-9 4237 10-11-1931 5000 ' ' 11902-8-3101 10-11-1931 2250 ' ' 1357-4-94251 23-11-1931 6000 ' ' 21380-3-04295 24- 2-1932 1250 ' ' 4531-14-94296 24- 2-1932] 10000 ' ' 35695- 2-0------------------------------------------------------------

3. The total loss of Mangal Chand Chunilal on those eight contracts was Rs. 99,876-2-9. The details of the loss which are given in col. 4 are taken from the Rojenamcha of Mangal Chand Deep Chand which has not been printed but of which typed copies were supplied to us. On the documentary evidence, we cannot hold that any of those eight forward contracts represented phatka transactions. Some of those contracts have been set out in a tabular form at Book All-246 and one contract No. 4229 has been printed in extenso (Ex. 18 (e) All 252) and with that we propose to deal in detail. This was a contract dated 4th November 1931 by which Mangal Chand Deep Chand agreed to buy from the well known merchants, Messrs. Ralli Brothers Limited 20,000 maunds of jute of two qualities; shipment 15th January and/or February 1932; the mills to which jute was to be delivered were to be notified by 3rd week of January 1932. This contract was entered into by Mangal Chand Deep Chand not as principals but as agents of three principals, one of them being Mangal, Chand Chunilal for whom 12,500 maunds was contracted for. This is proved by the endorsement on the back of the contract, where Premsukh himself puts down 12,500 maunds to Mangal Chand Chunilal. Extensions of time for performance of the contract were taken from Ralli Brothers from time to time and finally the time for delivery was fixed in May-June 1932. The fact that extensions were taken is inconsistent with phatka or gambling in differences only. The goods were sold by Mangal Chand Deep Chand on behalf of Mangal Chand Chunilal to a jute mill, e. g., India Jute Mills, and the goods were actually delivered to that mill. Exhibit 35, Bill No. 342 (a 11-270), is a bill by Ralli Brothers to Mangal Chand Deep Chand for 2800 maunds out of the quantity of contract Ho. 4229 dated 4th November 1931 actually sent to the India mills. It was for Rupees 18,275-8-6 being the price thereof less railway freight. The goods were sent insured through Atlas & Co. by railway. This sum was paid to Messrs. Ralli Brothers by Mangal Chand Deep Chand (Ex. 12 (b), at A II-30).

4. Other consignments of jute were similarly sent and the entries relating thereto are printed at pp. 30 to 32 of Book A, Part ii. The other bills are not printed. The last entry at p. 32 is significant. A sum of Rs. 2555-6-0 was deducted from Ralli Brothers' Bills on account of short weight. From the Nakal Book entries (not printed) which were posted in the ledger in the name of Mangal Chand Chunilal it appears that Mangal Chand Deep Chand actually sold on behalf of Mangal Chand Chunilal and other principals the goods which had been bought on the latter's behalf to another party (India Jute mills) under contract No. 4294 dated 17th February 1932 (Ex. 181 (g) not printed). Jute marked 'L R' which had been bought from Ralli Brothers at Rs. 7 per maund was sold at Rs. 5-12-0 per maund and that marked 'XLR' which was bought from the Ralli Brothers at Rs. 6-8-0 a maund was sold at Rs. 5-4-0 a maund. The loss (Rs. 20,132-12-0) thus resulting from the sale of 12,500 maunds taken over by Mangal Chand Chunilal was debited to them in the Bojenamcha (Ex. 0 not printed). We fail to see how on these facts forward contract No. 4229 dated 4th November 1931 can be said to represent a gambling transaction. The goods were actually delivered to the buyers who in turn sold and delivered them to another. Property in the goods was actually transferred by the delivery.

5. Forward contracts for the purchase and sale of goods are recognized forms of commercial transaction. They may be perfectly legitimate and genuine trade transactions though of a speculative character or simply gambling or wagering contracts. The distinction between the two is frequently a narrow one and difficult of determination even after the examination of the parties concerned, the course of business and the nature of the contracts. But the difficulty is created not by reason of any ambiguity in the principle to be applied but by reason of the difficulty of the application of that principle to the facts of a particular case. To be a wagering contract there must be a bargain for differences. It would still be] regarded a wagering contract and so void, even if a party thereto had an option under the terms of the contract to demand delivery : Universal Stock Exchange Ltd. v. David Strachan (No. 1) (1896) A c 166. Such a bargain for differences may appear on the face of the contract in which case no further evidence would be required to condemn the contract as a wagering one: In re Gieve (1899) 1 Q B 794. But where the contract on the face of ii appears to be a contract for the sale of goods for a price, extrinsic evidence may establish that there was a common intention to wager, that is the intention of both the parties to the contract was that the title to the goods would not pass, i. e., there is to be no delivery, but the intention was only to take differences according to the rise and fall of the market on the date of delivery mentioned in the contract. If such an intention is established the contract is a wagering one and so void. If such an intention on the part of one of the contracting parties is established and it is further established that the other party though intending a trading transaction was aware of the other's intention at the time of the formation of the questioned contract possibly it would be regarded as a wagering contract. Some of the Indian decisions have so laid down, for instance, Joshi Narbadashankar v. Mathuradas Gokuldas ('10) 34 Bom 519 at page 524.

6. Leaving out a case of that description, the common intention to wager can be established either by direct evidence or from surrounding circumstances, as was done in Kong Yee Lone & Co. v. Lowjee Nanjee ('02) 28 I A 239 though the contract at its face value may appear to be a genuine contract for sale and purchase of goods. But when it is found that all or a substantial part of goods were actually taken delivery of, such a forward-contract must necessarily be taken to represent a genuine commercial transaction, as the fact of delivery destroys the inference of a common intention to wager. According to these principles and on the findings we have arrived at, contract No. 4229 cannot be held to be a wagering contract. The other seven contracts were also dealt with in the same manner as contract No. 4229. Time for performance was extended (1st entry at p. 37, Book A, part II and slips attached to some of the contracts), delivery of the goods taken by Mangal Chand Deep Chand and then the goods were actually sold and delivered to jute mills. Some of the bills like the bill Ex. 35, have been printed. They are to be found at p. 272, Book A, part II and the following pages. We hold accordingly that none of the contracts were wagering contracts. It cannot be held that Premsukh started a new business in jute in 1989 Sam-bat simply because from that year he began to make forward contracts relating to purchase and sale of jute. The ancestral trade of the family was the trade of buying and selling jute. It was a case of extending the field of operation of the ancestral business by extending the market.

7. In Ram Krishna Muraji v. Ratan Chand Hardeo Das was a member of a joint family governed by the Mitakshara School. The members of the joint family consisted of himself, of his adopted son, Golab Chand, and his natural sons Madan Gopal and Ratan Chand. He carried on a business in partnership with his brother-in-law, Kalyan Mull under the name and style of Hardeodas Kalyan Mull till his death in 1917. That business was in gold, silver and cotton and probably of com-mission agents. On the death of Hardeo Das, his eldest son Gulabchand carried on the business with Kalyan Mull till October 1919 when Kalyan Mull retired. After his retirement Gulabchand carried on the business in the same manner as before and for the benefit of the joint family. It was held that no new business was started by Gulab Chand after the retirement of Kalyan Mull, there being continuity. This part of the judgment of the Judicial Committee is not very material to the case before us but has to be recited as an introductory matter. But the next set of facts have an important bearing on this case. Leaving aside the commission agency business, the manner of carrying on the business in gold, silver and cotton till Kalyan Mull retired was to actually buy and sell those commodities without entering into forward contracts. For about six months after the retirement of Kalyan Mull that was also the mode of business adopted by Gulabchand as karta of the joint family. But thereafter Gulab Chand entered into forward contracts in respect of some of those commodities, incurred debts and to secure those debts mortgaged one of the joint family properties. It was held by the Judicial Committee that the forward contracts though of a speculative character could not be held to be wagering ones and the mortgage was binding on the minor Ratanchand on the basis that the forward contract business was not a new business started by Gulab Chand. At page 183 of the report Sir Lancelot Sanderson made the following observations:

The fact, if it be the fact, that Gulab Chand as a later stage, entered into speculative transactions (i. e., forward contracts) did not make the business a new business, retrospectively or otherwise.

8. The above finding of ours relates to such business as was carried in the name and style of Mangal Chand Chunilal or Dungaridas Mangalchand, a business in which no outsiders had any interest. We now proceed to deal with another business. It was also a business in jute. It had not come down from Chagemull and his brothers. It was started in 1989 sambat (1931-32) long after the death of Chagemull by Premsukh as karta and by Pannalal with outsiders as partners in the name and style of Hazarimull Maloo & Co. The business centres were Baramgunj and Bhairab. The shares in case of loss were as follows: Mangal Chand Chunilal 6 as. i p., Mangal Chand Deep Chand 5 as. 4 p. and Gulab Chand Lakshminarayan 4 as. 4 p. The whole of the capital was to be contributed by Mangal Chand Deep Chand and the other two partners had no right to contribute anything towards capital. For the capital advanced by them Mangal Chand Deep Chand were to charge the Firm interest at 9 per cent. per annum. If any hundi had to be drawn, it must be drawn on Mangal Chand Deep Chand. The buying and the selling of jute were to be under the control of Mangal Chand Deep Chand (ex. 27 A II 256). On this partnership business there was a loss of Rs. 39,994-14.9. We hold that this business was a new business started by Premsukh and Pannalal.

9. A karta of a joint trading family has power to deal with the family properties for conducting an ancestral family business but he has no power to commit minor co. parceners to the obligations of a new business started by him or deal with their shares in the family property for the purpose of securing or liquidating the debts incurred in carrying on a new business : Niamat Rai v. Din Dayal Sanyasi Charan Mondal v. Krishnadhan Banerjee ('22) 9 AIR 1922 PC 237. In these respects it makes no difference whether the joint family is governed by the Dayabhaga or the Mitakshara School: Benares Bank Ltd. v. Hari Narain . Whether a business started by the karta is a new business or is a branch of the ancestral business is a question of fact. In Krishnadhan Banerjee v. Sanyasi Charan Mondal ('19) 6 AIR 1919 Cal 296 N.E. Chatterjee and Newbold JJ. made the following observations:

We think the distinction is to be drawn between an ancestral business and a new trade started after the death of the ancestor by the manager of family and not one between the same line of business and a new line of business.

10. In that case the ancestor Bhuban had a fuel shop at Munshiganj and a rice shop at Kalibazar. After his death his eldest son as karta started a rice shop at another place, namely the Orphanganj market. In this shop business of the same like as in the Kali-bazar shop was done, e. g., purchase and sale of rice. It was still held that the trade at the Orphanganj market was a new business and not branch of the ancestral business at Kalibazar. The Judicial Committee affirmed the decree of this Court. It did not deal in detail with the question as to whether the Orphanganj market shop was a new business as there was a concurrent finding of fact on that point in the Courts in India, but a general approval was given to what N. R. Chatterjee and Newbold JJ. had said in their judgment. In that case no strangers had been taken in as partners in the Orphanganj shop. Still, it was held not to be a branch of the ancestral business. Here we have the fact that in the business started in the name of Hazarimull Malloo & Co., two strangers were taken in as partners and the terms of the partnership agreement left Premsukh and Pannalal in subordinate positions. These are very material factors. It was not only a business with strangers as partners, started long after Chagemull's death, but one of the strangers partners was the sole controlling authority. We cannot hold this business to be a branch of the ancestral family business of the Mohatas. It was a new business started by Premsukh. The liability incurred in the conduct of this business cannot be put on the shoulders of the coparceners who were minors, and if any part of the consideration for the four mortgages included the loss of this business, the share of the appellants cannot be bound or affected to that extent.

11. The learned subordinate Judge has not considered question whether Rs. 39,994 odd which is the loss of account of this new business was a part of the consideration of Rs. 1,50,000 covered by the four mortgages in suit. Mr. I. P. Mukherjee who appears before us for the respondent and who conducted his client's case before the subordinate Judge stated before us without contradiction that he argued that point there and in support of his statement has produced the notes of his argument in the lower Court. His notes support his statement. We accordingly proceed to consider this question of fact. The liability of Mangal Chand Chunilal to Mangal Chand Deep Chand in respect of what we have held as the ancestral business at the end of the year 1989 Sambat was Rs. 2,38,176-4-9 (Ex. 12-All 25). That Sambat year ended on 15th April 1932. In this sum was not included the liability incurred for carrying on the business of Hazarimull Maloo & Co. This sum of rupees 2,38,176 odd represented accordingly the liability of the ancestral business of the appellants. The four mortgages were executed on 10th August 1932 and they did not secure the full amount of their liability but only Rs. 1,50,000 out of it. The share of the liability of Mangal Chand Chuniial in the loss of the firm Hazarimull Maloo & Co. (the new business) was settled, and that at Rs. 39,994 odd, only on 22nd October 1932, that is two months after the four mortgages in suit. This is borne out by the letters written by Pannalal to Hazarimull Maloo & Co. (Ex. 28 A II 295) and by Mangal Chand Chuniial to Mangal Chand Deep Chand (Ex. 28 (a) A II 296), both dated 22nd October 1932 and the liability to that extent was posted as a debit balance against Mangal Chand Chuniial on 22nd October 1932 in the books of account of Mangal Chand Deep Chand (Ex. 11 at A, II, 100). The photographic copies of the relevant portions of the account book of Mangal Chand Chuniial produced by the respondent corroborates that entry in Ex. 11 (Ex. 15 (f) translation at C 14). The fifth mortgage not in suit) which secured the liability of Rs. 1,00,000 and which was executed on 26th November 1932 by Premsukh and others included the liability for this sum of Rs. 39,994 odd but not the four mortgages in suit. On this finding the appellants cannot get relief to the extent of Rs. 39,994 odd and interest thereon.

12. Regarding the third point urged before us the position is also clear. The sum of Rs. 17,597 was due by two strangers to the family, Sukhdeodas and Hanuman Das (relations of Sewratan by marriage) to Mangal Chand Deep Chand. Their liability was taken over by Premsukh and Pannalal. The appellants' share in the family properties prima facie cannot be liable for this sum and the mortgages in suit cannot be enforced against their share of the properties mortgaged, if the said sum was included in the consideration of the four mortgages in suit. Here again the learned subordinate Judge did not consider the respondent's case that the said sum did not enter into the consideration of those four mortgages, Mr. I. P. Mukherjee stated without being contradicted that he argued this point also before him and his notes bear him out. The liability for this amount was taken over by Premsukh Pannalal in the name of Mangal Chand Chunilal on 26th November 1932, that is long after 10th August 1932 when the four mortgages in suit were executed, (Ex. 26 A II-233; Ex. 11 at A, II, 104). That liability was taken over on the date on which the fifth mortgage was executed. The said sum entered into the consideration of the fifth mortgage but not of the four mortgages in suit. This point is also overruled.

13. The learned subordinate Judge on the assumption that Rs. 39,994 odd (which was the liability of a new business) and Rs. 17,597 odd (which was the liability of strangers taken over by the karta) had formed a part of the consideration of the four mortgages in suit held that the appellants were liable on the ground that they were under the obligation of paying their fathers and grandfathers' debts, which were not immoral ones. On the view we have taken, it is not necessary to express any definite opinion on this point. All we wish to point out is that the learned subordinate Judge in this respect has gone on a case not made in the plaint, which he ought not to have done. The Bengal Money-lenders Act, 1940, cannot apply to the mortgages in suit. The loans secured by these mortgages were commercial loans as defined in S.2, Sub-section (4) of that Act. Such loans have been exempted from the operation of that Act by Section 2, Sub-section (12), Clause (f). The claim for compound interest cannot however be allowed, for the mortgages in suit do not provide for compound interest. This point was conceded before us by the respondent's counsel, Mr. I.P. Mukherjee. The preliminary decree has to be modified to this extent in favour of all the defendants mortgagees. To determine the amount of the decree simple interest at the rates mentioned in the mortgages can only be allowed. Subject to this modification the appeal is dismissed with costs to the plaintiff-respondent.

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