Firm Nathu Ram and Others vs Firm Mam Chand Ram Sarup

Teja Singh, C.J.—This regular second appeal arises out of a suit for the recovery of Rs. 2636/14/6. The Plaintiffs described them selves as firm of Mam Chand Ram Sarup. They carry no business in Patiala. The Defendants were alleged to constitute a Firm known as Nathu Ram Kali Ram and work at Nabha. The Plaintiffs alleged that on a certain day towards the middle of the month of Magh, 2003 the Defendants ordered them to purchase 100 bales of cotton for them at the market rate. On this the Plaintiffs entered into a transaction with Sagar Mal Sham Lal of Patiala and purchased 100 bales from them at the rate of Rs. 42/- per maund, which was the rate on that day. The delivery of the cotton, as was the usage of the market, was to be taken within five to seven days. The Defendants were duly informed of this, and they were even asked to take delivery of the cotton, but since the rates had begun to fall they did not take any notice of the Plaintiffs'' communications. In view of the fact that the market had a downward tendency, the plain tiffs after giving a notice to the Defendants sold the cotton on Phagan Badi 9-2003 and by doing so suffered a loss of Rs. 2375/-. The Plaintiffs contended that they were entitled to recover from the Defendants the amount of the loss together with Rs 261/14/6 on account of miscellaneous expenses that they had in curred on their behalf, thus bringing the total amount to Rs. 2636/14/6 The Defendants denied having placed any order with the plain tiffs and urged that the claim was entirely false. They also denied that the Plaintiffs constituted a firm and urged that since they had not got themselves registered as such they could not maintain the action in the form they did. The trial Court framed as many as eight issues and finding most of them In the Plaintiffs'' favour granted them a decree for Rs. 2270/5/6. Both sides preferred separate appeals to the District Judge. The Defendants'' appeal., was dismissed, but that of the Plaintiffs was allowed and the amount decreed in their favour by the trial Court was raised by Rs. 295/1/3. The Defendants are now the Appellants in this Court.

Most of the arguments advanced before as related to the question whether the Defendants had placed any order for the purchase of 100 bales of cotton with the Plaintiffs and whether the latter purchased the cotton for them and later on sold it at a loss because the Defendants would not own the transaction. As this was a question of fact and the findings of the trial Court and the lower appellate Court were concurrent ordinarily we would not have considered it necessary to go into the evidence very minutely. But since the District Judge had not taken the trouble of discussing the evidence and had adopted the reasons given by the trial Court in support of its finding with slight modifications here and there, we were constrained to allow the Appellants'' counsel to take us through the statements of all the principal witnesses exiled by both sides. (After considering the evidence his Lordship found that the Plaintiffs were ordered to buy 100 bales of cotton by Dcs Raj for the Defendants firm and that the transaction of purchase and said had resulted in a loss of Rs. 2630/1476 to the Plaintiffs. His Lordship then proceeded):

The other point argued by the Appellants'' counsel was that the Defendants firm was not liable for the act of Des Raj and accordingly the Plaintiffs were not entitled to have their claim decreed against them. The Respondents'' counsel objected to the raising of this point in appeal, because it was not raised in the trial Court. The reply of the Appellants'' counsel to this objection was that as the plaint was worded and in view of the allegations made therein, there was no scope for the Defendants to raise the question of Des Raj''s power to bind the Defendants firm by ''his act in their written statement. In my opinion, there is no force in the objection and since the Plaintiffs'' case as set out in the plaint was that the Defendants firm had placed an order for the purchase of cotton and no mention whatsoever was made of the part played by Des Raj, it was not possible for the Defendants to deny Des Raj''s power to bind the firm. According to the Plaintiffs, the Defendants firm was a joint Hindu family firm, but they did not say a word as to who the members of the family were. Nathu Ram and Kali Ram are real brOrs. and since the firm is called after their names, it may be that what the Plaintiffs meant was that they constituted a joint family. It was urged that since Des Raj is Nathu Ram''s son, the presumption is that he is joint with his father and accordingly he too was a member of the joint family firm. (After considering evidence his Lordship continued:)

In the face of this evidence it is difficult to hold that the Defendants firm was a joint Hindu family firm consisting of both the brOrs. and Des Raj son of Nathu Ram and this being the case, Des Raj could not bind the firm by his act, unless he had been specially authorised'' to enter into the transaction, in question with the Plaintiffs'''' firm, but on. this point there is no allegation by the Plaintiffs.

Let us now assume for the sake of, argument that the Defendants'' firm was a; joint family sfirm and Des Raj was a member of it", did that'' give him any power, to order'' the purchase of 100 bales of cotton on behalf of the firm? While answering this question we must remember that he would be only a junior member of the firm and the ''Karta would be his father, who i� the oldest member of the joint family, if it existed at all.. The other fact to be remembered is that it is not the Plaintiffs'' position, at least this is. not alleged by them, that the Defendants'' firm was a hereditary trading firm or trade was their ''Kulachar'' nor did they make any effort to prove this fact by evidence. On the other hand, the evidence to which I have already referred would go to show that money-lending was probably the hereditary avocation of the family and Kali Ram alone took to cloth business. Mayne in his learned treatise ''Hindu Law and Usage'' has devoted considerable space to the powers of managers of joint Hindu family firms and has pointed out that they are governed not by the law of Partnership as embodied in the Indian Partnership Act, but by Hindu Law. Reference in this connection is invited to Page 378, Edition 1950. At page 379 of the Book we find the following passage:

In the case of a family trade or business, as in respect of other family properties, it is only the managing member that can ordinarily act on behalf of the family and bind, by his acts his coparceners. Sometimes for the convenience of the trade or business there is not one manager only but by arrangement amongst the members, several with equal powers. In such a case, the act. of any one will bind all the coparceners.

Later on the learned author says.

Where several persons take an active part on the conduct of the business, they may . well be regarded as managing members or as persons entrusted with the conduct of the business and they can, not only bind each other, but also other members of the family_ including minor coparceners. Where a junior member of a joint Hindu family is in charge of the business, he will have all the powers of a managing member to the extent necessary for the proper conduct of the business of which he is in charge.

As in the present case Des Raj was not the manager of the family and no allegation was made by the Plaintiffs that he had been taking an active part in the conduct of the business by virtue of which he could be regarded as a managing member or a person entrusted with the conduct of the business, according to the principles enunciated by Maybe he had no power to enter into the transaction on behalf of the firm. A.nart from this, purchase and sale of commodities like ''cotton'' was not the ancestral business of the Defendants, and being a new business Des Raj could not commit the family to it even if h? were the manager. This view is supported by the following passage that appears at page 382 of Mayne''s Book.

The power of a managing member, whether hi is a father or some other senior copperier, to carry on a family business is ordinarily confined to ancestral business.. He cannot start a new trade or business so as to impose upon minor members the risk of such a business nor can he start a new business so as to bind adult coparceners except with their consent express or implied.

In - AIR 1932 182 (Privy Council) the question was whether a debt contracted by the managing member of the family for business could bind the minor members of the family. The facts showed that the business had been started by the managing member himself and it was not the ancestral business. So, their Lordships of the Privy Council held that the minor members could not be made liable for the debt. This, in my opinion, applies even to major members of the family and none of them can be made liable for the acts of the managing member, unless they ratify them expressly or by implication. No .such ratification is even alleged in this case. Accordingly I hold that the Plaintiffs'' suit, could not be decreed against the Defendants'' firm. No doubt, they could claim a decree against Des Raj, but unfortunately he was not impleaded as a Defendant in the suit.

In the result I would allow the appeal, set aside the decrees of the Courts below and dismiss the Plaintiffs'' suit; but in view of the peculiar circumstances of the case would leave the parties to bear their own costs throughout.

Gurnam Singh, J.

I agree.