Bhola Prasad and Others vs Ramkumar Marwari and Others

This appeal has been heard along with appeal from original order No. 65 of 1930 Haji Muhammad Ali v. Ramkumar Marwari in which a separate judgment has been delivered.

The present appeal is preferred against the third paragraph of order No. 65, dated the 19th February, 1930, in Insolvency Case No. 113 of 1929 refusing to exempt from sale "the ancestral property of the petitioners", who are minor partners of an insolvent firm.

The application for adjudication was made by the creditor Ramkumar Marwari (respondent No. 1) against nine persons, all Kalwars.

Of the nine persons eight constitute a joint family with Garibchand Ram of Bkaunaganj as karta, while the ninth is Bansidhar Kalwar of Rampur (who, it may be observed, also holds 4 annas in tawsi No. 11291 of Bkaunaganj whereof the joint family holds 8 annas).

The first four members of the joint family are adulate, while the other four who are the present appellants, are minors, the first two being the sons of Garibchand and the second two the sons of Lurki Prasad, another adult member of the joint family.

The act of insolvency alleged was the execution by the debtors within three months of the application of a bogus deed of mortgage (Ex. I) for Rs. 27,500 in favour of Haji Muhammad Ali, Jagannath Prasad of Calcutta, by which all the properties appertaining to the debtors have been mortgaged, in order to defraud and defeat the claims of other creditors. By amendment, the addition was made to the names of the opposite party of the description

Partners carrying on business at Arrah in the name and style Garibchand Lurki Prasad.

The learned Judge held that the debtors had committed the act of insolvency alleged and the objection that the mortgagee was a creditor in respect of another business, namely, Ramprasad Bansidhar, of the debtors'' joint family in which Bansidhar was also a partner was negatives (Lurki Prasad is son of Ramprasad), it being held that the grain business in which the petitioners'' debt had accrued, and the business in which Bansidhar was a partner, actually belonged to the same persons, the joint family and Bansidhar being interested in both. In the bond itself which is executed by Garibchand Bam, Lurki Prasad and Bansidhar, it is actually set out that Bansidhar is a partner of the other executors and that they all carry on both the businesses, and if was held that all the nine debtors were liable to the petitioning creditor and also to other creditors, and that they had committed an act of insolvency. The learned District Judge accordingly passed "an order of adjudication against the debtors".

In appeal the first contention is that the minors could not be adjudicated insolvents. The order which has been quoted has, however, to be read in conjunction with the previous order of the 26th August, 1929, in which it was held that an application in the names of the partners to adjudge the firm insolvent is maintainable, and the Judge proceeded as follows:

As regards the minors the decision in Jagmohan Narain v. Girish Babu 58 Ind. Cas. 557 : 42 A. 515 : 2 U.P.L.R. (A ) 144 : 18 A.L.J. 611 and the decision--In re Sital Prasad 37 Ind. Cas. 663 : 43 C. 1157 : 20 C.W.N. 1065 show that a minor cannot be adjudicated insolvent. It is clear, however, to my mind that a minor is a proper party to an application to adjudge insolvent a firm in which, that minor is a partner.

I, therefore, allow the amendment and hold that after amendment the application to adjudge the firm insolvent is maintainable provided that none of the minors who are partners in the firm, shall personally be adjudged insolvent.

Unfortunately the procedure was somewhat casual in that no formal adjudication order was drawn up and no copy of the notification in the Gazette is found on the record. But it is clear or reading the two orders together that the minors were not adjudicated insolvent and in fact they have not preferred any appeal against the order of adjudication.

In their petition the minors (now appellants) claimed that [as minors they could not be partners of the firm and that, at any rate, their ancestral properties, not being assets of the firm, could not be liable for the debts of the firm nor taken by the Receiver in insolvency.

In view of the findings it is not now contended that they are not partners of the firm.

The only contention is that their shares in the ancestral property cannot be sold to discharge the debts of a firm in which their joint family is in partnership with a stranger and that it is only the property of the firm which vests in the Receiver. In this connection it may be observed that all the property has actually been sold by the Receiver except the family house, sale of which was stayed by this Court The Receiver is the second of the two respondents in this appeal.

Now the property (except the house) in which the appellants claim their shares to be not liable to sale, was in fact mortgaged by their respective fathers together in Ex. 1, wherein Bansidhar also mortgaged his own property. The property was manifestly mortgaged by the said fathers who are the karta of the joint family and another adult member, for a debt of the joint family as a partner in the, firm, and was thus treated as a part of the assets of the firm. This included the shares of the minors In the family property mortgaged. As a result of toe adjudication in insolvency of the firm, all the assets of the firm vest in the Receiver. The fact that the minors have not been and cannot be adjudicated insolvent will not affect the vesting--in the Receiver--of the entire assets of the firm including their shares in the family property which had become part of the firm''s assets. With the insolvency of the firm, as on the dissolution of a firm, the share of the minor appellants in the property or assets of the firm means nothing more than their right to participate in the surplus or divisible income and capital of the firm at the proper time and after the obligations of the firm have been discharged. The minors'' shares in the family property which was mortgaged for a debt of the family as a partner in the firm cannot in any event be saved by them except by showing that the debts for which the fathers are personally liable were contracted for immoral purposes; and the same would appear to be the case with the family house which was not mortgaged.

The question of the liability of ancestral family property in circumstances somewhat like the present has been the subject of much judicial decision in recent years in this and other courts.

In Sant Prasad Singh Vs. Sheodut Singh, the three minor sons of an insolvent applied for the exemption of their three-fourths share in the family property, the whole of which was about to be sold by the Receiver under the orders of the District Judge. Das, J. (Kulwant Sahay, J. concurring) was of opinion that in view of the decision of their Lordships of the Judicial Committee in Sahu Ram Chandra v. Bhup Singh 39 Ind. Cas. 280 : 39 A. 437 : 44 I.A. 126 : 21 C.W.N. 698 : 1 P.L.W. 557 : 15 A.L.J. 437 : 19 Bom. LR 498: 26 C.L.J. 1 : 33 M.L.J. 14 : (1917) M.W.N. 439 : 22 M.L.T. 22 : 6 L.W. 213 (P.C.) it can no longer be held that the fattier had any property, within the meaning of the Provincial Insolvency Act, that could vest in the Receiver. The same insolvent''s case came again before the High Court is Chairman, District Board, Monghyr Vs. Sheodutt Singh, in which Ross, J. (Kulwant Sahay, J. concurring) referred so the subsequent decision of their Lordships of the Judicial Committee in Brij Narain Rai v. Mangla Prasad 77 Ind. Cas. 689 : 46 A. 95 : 21 A.L.J. 934 : 46 M.L.J. 23 : 5 P.L.T. 1 : 28 C.W.N. 253 : (1924) M.W.N. 68 : 19 L.W. 72 : 2 PLR 41 : 10 O. and A.L.R. 82 : AIR 1924 P.C. 50 : 33 M.L.T. 457 : 26 Bom. L.R. 500 : 51 I.A. 129 : 11 O.L.J. 107 : 1 O.W.N. 48 (P.C) and following the Full Bench decision of the Lahore High Court in Behari Lal v. Sat Narain 69 Ind. Cas. 486 : 3 Lah 329 : AIR 1923 Lab. 1 held that as the father''s debt was not shown to have been incurred for immoral purposes, there was no obstacle to the sale of the family property by the Receiver in order that the debt may be discharged, the son having no right to question the sale effected in order to liquidate his father''s debt. In the earlier case of Amolak Chand Vs. Mansukh Rai Mangan Lal, Ross, J. (Das, J. concurring) had distinguishing Sant Prasad Singh Vs. Sheodut Singh, definitely held that property over which a person has a disposing power which he may exercise for his own benefit, includes ancestral property which may be sold for the satisfaction of antecedent debts. The Full Bench decision of the Lahore High Court in Behari Lal v. Sat Narain 69 Ind. Cas. 486 : 3 Lah. 329 : AIR 1923 Lab 1 was overruled by the Judicial Committee in AIR 1925 18 (Privy Council) . This was a decision under the Presidency Towns Insolvency Act of 190 y, though the suit was for pre-emption (on the ground of contiguity) brought by the minor son of a Mitakshara insolvent. The High Court held that on the father''s insolvency, the entire property of the joint family, including the share of the minor, vested in the Official Assignee. The Judicial Committee definitely overruled)that view, but observed that it may be that in some way the property may in a proper case be made available for payment of the father''s just debts. The observation probably referred to the alternative mentioned by Shadi Lal C.J., in the Full Bench decision in Behari Lal v. Sat Narain 69 Ind. Cas. 486 : 3 Lah. 329 : AIR 1923 Lab. 1 (F.B.).

As the son''s share is in certain cases liable for the debts of the father, the Official Receiver may be able to enforce that liability, provided that he takes appropriate proceedings for the purpose and satisfies the condition which alone render the son''s interest liable for the father''s debts

In Khem Chand v. Narain Das 89 Ind. Cas. 1022 : 6 Lah. 493 : AIR 1926 Lah. 41 a Bench of the Lahore High Court, after referring to the Privy Council decision in AIR 1925 18 (Privy Council) held that the Receiver was entitled to proceed against all-the co-parcenary property, even though the minor sons share in it does not vest is the Receiver; this was a case of insolvency in the course of a business started and carried on by the father as the karta of the family. In Allahabad Bank Vs. Bhagwan Das Johari and Others, it was held that the insolvency of the father does not vest in the Receiver the interest of the sons is the joint family property. The Bombay High Court in Shripad Gopalkrishna Chandavarkar Vs. Basappa Rudrappa Dandi, held that where a creditor had obtained a decree against a father and his son, and attached the joint family property, and the father was subsequently adjudicated insolvent the creditor was entitled as against the Receiver to execute his decree against the son Macleod, C.J., speaking for himself, did not consider that the manager''s power to dispose of family property for legal necessity had vested in the Receiver. Coyajee, J. only agreed with Macleod, C.J., in dismissing the appeal. In T.S. Balavenkataseetharama Chettiar and Another Vs. The Official Receiver and Others, a Full Bench of the Madras High Court consisting of three Judges held that the power of the father in a Mitakshara joint family to sell his son''s shares also for paying his just and proper debts vests on his insolvency in the Receivar, though the shares themselves do not vest in him. In the The Official Receiver Vs. Ramachandrappa by next friend Bala Nagamma and Others, there was a difference of opinion between Odgera, J. and Curgenvan, J., who first heard the appeal. The case was one of a Hindu joint trading family with several minors; the manager was not the father and the adult members including the manager had been adjudicated insolvent. Curgenven, J. was of opinion that the manager''s power of disposing of the family property was not properly within the definition of the Provincial Insolvency Act and was distinguishable from the father''s power inasmuch as his own debts may be binding upon his sons. Odgers, J. held that there was no difference between the power of the manager, if he is a father, and the power of the manager when he is a brother or some other relation of a minor partner who cannot be adjudicated, Devadoss, J., to whom the case was referred u/s 98 of the Code of Civil Procedure, agreed on the authorities with Odgers, J. Thus the decision of the majority was that the power of the manager to dispose of joint family property for debts incurred for trading purposes passes to, and becomes exercisable by, the Official Receiver so as to bind the minors'' shares. Devadose, J., however observed that if the question were res integra, he would be inclined to hold that under the Provincial Insolvency Act the power of a Hindu father to dispose of his son''s shares in the family property for his debts does not vest in the Official Receiver.

In the present case the liability of the minors as the sons of their fathers must be distinguished from their liability as partners of the firm. So far as the latter is concerned, they are under no personal liability and no property of theirs, which is not the property of the firm, can be touched by the Receiver. Their liability as the sons of their fathers is confined to such debts incurred by their fathers as are not shown to be immoral. The liability of the fathers for the trading debts is not confined to the assets of the firm but will extend to their shares in the joint family property. The decisions of this Court may possibly have gone a little too far, and it is perhaps not essential in the present case to say whether the fathers'' power to dispose of their sons'' shares for their own just and proper debts has vested in the Receiver. On the authorities the Receiver would seem to be entitled to proceed against the interest of the minor sons in the joint family property, and the sons can only obtain exemption by showing that the father''s debts are not binding on the sons by reason of immorality and the like, and there is no proof or even suggestion of anything of the kind.

The appeal is dismissed with costs.