Bhakthavatsalam, by guardian, Tirupalliswami Naidu and another vs O. Muthunara Reddiar

Veeraswami, J.—These appeals by defendants arise from a decree against the 2nd defendant for a total sum of Rs. 26799 with interest and costs, making the 1st defendant''s estate jointly liable out of that amount to Rs. 13,799 with interest and proportionate costs. The 2nd defendant is the mother and the 1st defendant is her minor son. She executed for herself and as guardian of her minor son two promissory notes in favour of the plaintiff, the first dated 1-11-1951 for Rs. 24,000 and the second dated 7-7-1956 for Rs. 2799. The suit was to enforce the joint liability of the defendants under the two promissory notes. Their execution by the 2nd defendant for herself and as purporting to be the guardian of the 1st defendant has not been disputed. The 1st defendant, however, denied his liability on the ground that his mother was neither his de jure or de facto guardian and was not competent to borrow money executing the promissory notes on his behalf and that the 1st promissory note was also barred by limitation as the acknowledgment by the 2nd defendant by an endorsement thereon dated 20-3-1955 for payment of Rs. 100 was invalid and not binding on him. The 1st defendant also did not admit the borrowing under the two promissory notes and put the plaintiff to strict proof in that regard. The 2nd defendant denied consideration and maintained that the promissory notes were only executed as security for moneys to be advanced. She also alleged that the promissory notes were obtained from her by undue influence exercised by the plaintiff. V.R. Satagopa Naidu, since dead, who was an undivided member of a wealthy Hindu family, in South Arcot Dt., denied that the 2nd defendant was his lawfully wedded wife and the 1st defendant was born to him, O.S. 44 of 1950 on the file of the Court of the Subordinate Judge, Cuddalore had to be filed by the 1st defendant against his father to establish his status as his son and for partition and separate possession of his share. When he married the 2nd defendant, Satagopa Naidu had executed an agreement in favour of Tirupuliswami Naidu for the benefit of his daughter, the second defendant, on the basis of which the 2nd defendant had to institute a suit against her husband for recovery of Rs. 25,000 and a fourth share out of her husband''s properties as also for maintenance. As the defendants were impetuous and so too Tirupuliswami Naidu and required funds for expenses in connection with the litigation, Tirupuliswami and the 2nd defendant for herself and on behalf of her minor son, executed an agreement dated 19-4-1950, in favour of the plaintiff, stipulating that the latter should finance the litigation of both the defendants and that, in consideration the plaintiff should be repaid not only the advances made by him, but an additional sum of Rs. 5000 "by way of profits." On 24-2-1951, the 2nd defendant had also executed a power of attorney in favour of the plaintiff. According to the plaintiff, the sum of Rs. 24,000 covered by the first promissory note was advanced towards the expenses of the litigation and the sum of Rs. 2799 covered by the second promissory note was paid towards the lawyer''s fee in the appeal arising out of the suit instituted on behalf of the minor which had been decreed in his favour. The plaintiff averred that the consideration for the first promissory note was made up of three items of advances made earlier : (1) Rs. 15,000 (2) Rs. 3350 and (3) a sum of Rs. 5,660 and that the borrowings under the two promissory notes were for purposes binding on the 1st defendant and his estate. By an amendment of the plaint, which was granted, the plaintiff also based his claim of the original consideration apart from the promissory notes.

The trial Court framed as many as seven issues and four more additional issues and found that the suit promissory notes were not executed on account of undue influence exercised by the plaintiff, that they were supported by consideration, that the first promissory note was not barred by time, as the acknowledgment relied on by the plaintiff was valid and sufficient to save limitation, that the second defendant was a de jure guardian of the first defendant competent to execute the promissory notes on his behalf and borrow the debts and to acknowledge the liability thereunder and that only a sum of Rs. 11000 out of a sum of Rs. 24000 covered by the first promissory note was proved as borrowed or spent for the benefit of the first defendant, apart from the entire consideration for the second promissory note. On these findings, the trial Court made a decree as mentioned at the outset. Each of the defendants has separately appealed to this Court to the extent the decree is against the one or the other.

In App. No. 454 of 1961, which is by the first defendant, the contention before us is as regards the capacity of the second defendant to execute the two promissory notes not only for him�herself but also on behalf of the first defendant as his guardian and acknowledge the debt under the first promissory note so as to make it binding on the first defendant. A further contention for the minor is that the suit, as framed, was not one for enforcing the second defendant''s right of indemnity against the estate of the first defendant in respect of debts incurred by her for purposes binding on him. In the other appeal by the 2nd defendant, the argument for her is that the plaintiff was not entitled to the statutory presumption in respect of the consideration for the promissory notes in view of the fact that though it was admitted that he had vouchers and accounts for payment of various amounts to the second defendant, he had failed to produce them and that the trial Court should have drawn, from these circumstances, an adverse inference against the plaintiff.

We agree with the first defendant-appellant that the trial Court was not right in its view that the second defendant was his de jure guardian. It formed that view because the father of the first defendant, though alive, was inimical towards him and clearly acted in a manner hostile to him and adverse to his interests. In fact, the father went to the extent of disowning the paternity of his son and fought against him. So, according to the trial Court, the father must be deemed to have lost his right to act as the legal guardian of his minor son and that his mother had stepped, therefore, into his father''s place as his legal guardian. We are unable to accept this line of reasoning. No doubt, the father''s conduct disentitled him from continuing to act as the natural guardian of his minor son. But, in our view, it does not necessarily follow from it that the mother ipso facto or ipso jure steps into the father''s place as the minor''s natural guardian. When the father is alive, though he disabled himself by his conduct from acting as the guardian of his minor son, the mother of the boy cannot under his personal law be regarded as his natural guardian and she can become his lawful guardian only by an order of Court. Shivprasad v. Natwarlal AIR 1949 Bom. 408, is not an authority in support of the trial Court''s view. All that was held in that case was that the adoption of the boy there was not invalid because the mother gave away her son in adoption during the lifetime of his natural father who was a lunatic and was therefore incapable of giving assent to the adoption. We should, therefore, proceed on the basis that the 2nd defendant, in the circumstances, acted but as a de facto guardian of her minor son, and executed the two promissory notes for herself and for her minor son, as such guardian.

On the next contention for the first defendant as to the capacity of his mother to execute the suit promissory notes on his behalf, it is clear that from the more or less similar language employed in them that they were executed by the mother and the son in their respective names, though the former purported to act as the guardian of her son and signed on his behalf in that capacity in both the promissory notes. It is well settled that if a promissory note has been executed by a minor in his name, whether represented by a guardian or not, it is void. It was so held by the Privy Council in Ma Hnt. v. Hashim Ebrahim Meter AIR 1919 P.C. 129. This is on the principle that a minor has no capacity to enter into a contract and such a contract is void. AIR 1949 218 (Federal Court) was also concerned with the validity of a promissory note executed in the name of a minor but represented by his natural lather and guardian and it was held:

A de facto guardian of a Hindu minor has no power to pass a promissory note in the name of the minor so as to bind his estate without making himself liable and thus furnish consideration for a subsequent conveyance of minor''s property executed by the de facto guardian.

It was also further held that no such promissory note could be treated in law as an acknowledgment of a pre-existing debt because it was made by a person who was not authorised to give an acknowledgment under the Limitation Act. In this type of cases, where the bond or the promissory note is executed by a guardian in the name of the minor alone, the guardian''s personal liability is excluded or does not arise and a suit based on such a promissory note, which is invalid, or the consideration covered by it, unless it related to the value of necessaries supplied to the minor within S. 68 of the Contract Act, must fail. But there may be other cases of promissory notes or bonds executed by the guardian in which he has expressly stated that he did so as the guardian of the minor. Sometimes, as in this case, a guardian may execute a promissory note in his own name and that of a minor represented by him as his guardian or the promissory note may be executed simply in terms that the guardian made it for himself and as guardian of the minor. It is obvious that in none of these cases a promisee can get a decree against the minor or his estate straightaway merely on the basis of the contract or the contractual debt. But the guardian in such cases cannot escape from a decree on his personal liability. Where the debt incurred by the guardian is proved to be for necessity or benefit of the minor and the guardian is liable therefore, the law allows him to the extent of such liability to reimburse himself from the estate of the minor. On this basis, and the principle of subrogation the promisee, in his suit both against the guardian and the minor is given a decree making the estate of the minor liable, provided the debt is proved to be for his necessity or benefit. The law was thus stated by Mukherjea, J. as he then was, with whom some of the other learned Judges of the Federal Court in AIR 1949 218 (Federal Court) agreed:

.........But as the guardian was personally liable under the contract, he would be entitled to reimbursement from the minor''s estate under the rule of Hindu Law, if the borrowing was for necessity or benefit of the minor. The creditor in such circumstances can invoke the equitable doctrine of subrogation in his favour and claim to be placed in the position of the guardian for enforcement of the latter''s right of reimbursement against the minor''s estate. Instead of there being two suits, one by the creditor against the guardian and the other by the guardian against the minor, both the reliefs may be worked out in one and the same suit and thereby multiplicity of litigation could be avoided. This is the only proper way in which the Hindu Law rights of the guardian in the matter of contractual debts for necessity or benefit of the minor could be given effect to in perfect consonance with the well established principles of the law of contract and the ordinary rules of procedure in personal actions.

The liability of the minor''s estates cannot, however, arise if the guardian borrowed money in that capacity but excluding his personal liability to it.

In the instant case, clearly the mother was one of the executants of the promissory notes and made herself personally liable for the debts covered by them. Under the personal law of the minor, a de facto guardian as was held by the Federal Court in the case already referred to, has the authority or competence to incur a debt by executing a promissory note himself and as the guardian of the minor and, on the basis of the equitable doctrine of subrogation, make the estate of the minor liable therefore, provided it is shown that the debt is for necessity or benefit of the minor and to a suit to enforce the promissory note the minor has also been made a party defendant. This principle has been recently followed and applied by a Division Bench of this Court in Ramakkal v. Chinnappa Gounder L.P.A. 38 of (1963). (Since reported in 78 L.W. 529). It follows, therefore, that the trial Court was right in granting a decree against the 1st defendant''s estate to the extent the debts under the suit promissory notes were found to be binding on him.

It is however argued that the liability of the 1st defendant''s estate on the basis of subrogation cannot he availed of by the plaintiff as his claim in the plaint has not been rested on the 2nd defendant''s right to indemnity. In our view, there is no substance in this contention. The plaint has clearly recited that the moneys were borrowed for recovering vast extent of properties of the minor which were ultimately recovered and the borrowing was therefore for necessity and benefit of the minor. Learned Counsel for the 1st defendant could not, convince us that the debt to the extent decreed against the 1st defendant was not a necessity or was not to his benefit and that the finding of the Court below in this regard is in any way erroneous.

We shall now proceed to deal with the point relating to limitation. Without the acknowledgment dated 20th March relied on by the plaintiff, the suit on the 1st promissory note would of course be out of time. What is contended for the 1st defendant is that the 2nd defendant had no right or capacity as a de facto guardian to acknowledge the debt so as to keep the debt under the first promissory note alive. But this contention overlooks the fact that the 2nd defendant, as one of the executants of that promissory note, was entitled to acknowledge her own liability thereunder. It may also be seen that the fact that the joint promissory note was not enforceable as such against the 1st defendant, did not relieve the 2nd defendant from her own liability thereunder. In Jamna Bai v. Vasantarao 39 Mad. 409 : 3 L.W. 540 P.C., it had been found that a compromise made on behalf of a minor without the leave of the Court was not enforceable against him. It was on that basis contended that one of the promisors could plead the minority and the consequent immunity of the other as a bar to the promisee''s claim against him. The Privy Council held that the plea could not be maintained. In the present case, the acknowledgment of the debt made by the 2nd defendant was valid so far as her liability to the debt was concerned and that meant that the plaintiff could on that basis sustain the decree against the minor. This will dispose of the appeal by the 1st defendant.

In the other appeal by the 2nd defendant, the only contention for her is that the trial Court was not right in applying the statutory presumption as to consideration and that, in the circumstances, it should be held that, the plaintiff having admitted that he had kept a hand book in loose sheets, showing the amounts paid to the second defendant in instalments and also had obtained her father''s signatures for those payments but failed to produce the note book and the vouchers, an adverse inference should be drawn against him. We are not impressed by this argument. There can be no doubt, of course, that the statutory presumption under S. 118 of the Negotiable Instruments Act is a rebut-table one and such rebuttal may be from direct or circumstantial evidence disproving the presumption. The rebuttal evidence may also consist of presumptions drawn from proved facts or adverse inferences drawn from relevant conduct. Where what is in question is the factum of consideration for a negotiable instrument or the endorsement thereof and execution of the instrument is proved, S. 118 of the Negotiable Instruments Act directs a presumption to be drawn in favour of its being supported by consideration. By means of this presumption, the promisee on whom the burden of proof is fixed by the law is shifted on to the promisor to demolish the presumption and establish that the instrument or the endorsement is not supported by consideration. The precise question relating to presumption under S. 118 of the Negotiable Instruments Act and the burden of proof as a matter of law and pleading and the burden of establishing a case was the subject matter of Kundanlal v. Custodian, Evacuee Property AIR 1961 S.C. 1316. After referring to the two meanings of burden of proof, namely, one, the burden of proof as a matter of law and pleading and the other the burden of establishing a case, and stating that the former is fixed as a question of law on the basis of the pleadings and is unchanged during the entire trial and the latter is not constant but shifts according to the evidence in the case, the Supreme Court has pointed out that the presumption raised by S. 118, of the Negotiable Instruments Act could be rebutted, among other evidence, by a presumption of fact drawn under S. 114 of the Evidence Act. In that case, the plaintiff claimed that the promissory note sought to be enforced was executed in consideration of the price for the goods sold by him and that he was in possession of the relevant account books to show that he was in possession of the goods sold and that the sale was effected for a particular consideration. The Custodian with whom the Custodian-General, Evacuee property had agreed found that the promissory note was not supported by consideration as in his view the statutory presumption could not prevail as it was rebutted by other evidence and circumstances. While holding that they were right in drawing an adverse inference against the plaintiff from his non-production of the account books, the Supreme Court observed at page 1319:

In those circumstances, if such a relevant evidence is withheld by the plaintiff, S. 114 enables the Court to draw a presumption to the effect that, if produced, the said accounts would be unfavourable to the plaintiff. This presumption, if raised by a Court, can under certain circumstances rebut the presumption of law raised under S. 118 of the Negotiable Instruments Act. Briefly stated, the burden of proof may be shifted by presumptions of law or fact, and presumptions of law or presumptions of fact may be rebutted not only by direct or circumstantial evidence but also by presumptions of law or fact.

The Supreme Court also noticed certain authorities both of the Privy Council and of its own and reiterated the principle that it is the duty of a party to a suit in possession of important documents to produce in Court and if they failed to do so, the Court would be justified in drawing an adverse inference under S. 114 of the Evidence Act. Where both sides have adduced evidence, seldom would the decision turn on a question of onus, unless of course the evidence on either side is evenly balanced. The Supreme Court quoted with approval the following observations of Varadachariar J., in Narayanarao v. Venkatapayya ILR 1937 Mad. 299 = 44 L.W. 784.

...that even the onus under S. 118 of the Negotiable Instruments Act need not always be discharged by direct evidence adduced by the defendant; ......... Not merely can the Court base its conclusion on the effect of the evidence taken as a whole, but it may also draw adverse inferences against a party who being in a position to adduce better evidence deliberately abstains from doing so.

Relying on these principles, Learned Counsel for the second defendant says that the failure of the Court below to draw an adverse inference against the plaintiff from his deliberate non-production of his accounts and vouchers, which he admittedly had in his possession and which would have been the best evidence in proof of consideration for the suit promissory notes, vitiated its finding. We are of the view that there is no substance in this contention.

The plaintiff not merely relied on the statutory presumption but let in evidence both oral and documentary to prove consideration. Two of the attestors to the first promissory note were examined by him who spoke to the passing of the entire consideration for that note. The plaintiff also relied on certain correspondence that passed between him and one of his witnesses on the one hand and Thirupuliswami Naidu on the other, the latter requesting the plaintiff to advance moneys on several occasions. In addition to the oral evidence and the correspondence, the trial Court also referred to certain circumstantial evidence showing that the defendants in connection with the institution of the suits had to incur expenses and for that purpose had to borrow money. It is not as if the trial Court failed to bear in mind the fact that although the plaintiff had admitted in the witness box that he had kept a note book showing the amounts paid in instalments and also he had obtained the signatures of the second defendant''s father, in token of the payments, he had no proper explanation why he failed to produce them in evidence. On the other hand, the Court below had also to keep in view the fact that neither Thirupuliswami nor the second defendant came forward to give evidence that the sum of Rs. 24,000 was not advanced under the first promissory note. It seems to us that the trial Court arrived at its finding that the first promissory note was supported by consideration on the basis of the entire evidence before it and we are unable to hold that it is vitiated on the ground urged for the second defendant. We may also observe that so far as the second promissory note is concerned, there can be little doubt that it too was supported by consideration as it appears, in point of fact, the amount covered by it was paid to the lawyer of the defendants as his fee for appearance in the earlier litigation against Sadagopa Naidu.

Learned Counsel for the second defendant further urged that the evidence directed at the trial concerned, if at all only the consideration for the promissory notes but not its binding purpose and that on that question beyond the recitals in the promissory notes, there was no other evidence. But Counsel has failed to convince us on this point. We do not see why the recitals in the promissory notes could not be relied on properly by the trial Court. Further the trial Court has also adverted to the terms of the agreement of April 1950 and the power of attorney of February 1951. The appeals are dismissed with costs to be worked out proportionate to the liability of each of the defendants. Counsel''s fee one set. The defendants will pay court-fee to the Government on their respective appeals.