K.M. Ramakrishna Mudaliar vs V.S.V. Manikka Mudaliar (deceased) and Others

Varadachariar, J.—This appeal arises out of a mortgagee s suit for sale. The mortgage document (Ex. A) which was executed by the first

defendant on 25th September, 1915, comprised properties which it appears from several statements on record stood in the first defendant''s name,

but as the title deeds themselves have not been produced it is not possible to make a mere positive statement on the point. At the time of the

mortgage, the first defendant was undoubtedly a member of a joint family which consisted of a large number of male members and his father

Varadaraja Mudaliar was also alive. The evidence establishes that the family was a trading family and was carrying on cloth trade; for convenience,

they were having two shops which may be referred to as Shop No. 154 and Shop No. 172. In their dealings with outsiders, the family seem to

have found it convenient, whether it be for bookkeeping purposes or for other purposes as well, to keep two sets of accounts, one for Shop No.

154 and another for Shop No. 172 though there was some amount of mixture even in respect of the transactions relating to one shop and the

other. The plaintiff is clearly proved to have been supplying goods to and to have had dealings with both these shops for a long period. It is also

stated that he was related to the family and presumably he was well acquainted with its position and affairs.

The main contesting defendants are persons who have purchased the interest of the second and third defendants in certain items of property in

Court-sale and in the interests of the fourth defendant in a sale by the Official Receiver in the insolvency of the fourth defendant. These purchases

took place in the years 1926, 1927 and 1929, and the insolvency proceedings began in 1923. It is clear that between 1915 and the date of the suit

no member of the family ever questioned either the binding character of this debt or the binding character of the mortgage; on the other hand, we

have the fact that in a partition suit instituted by the third defendant against the other members of the family in 1916 the properties comprised by the

suit mortgage were not brought into the partition suit at all by any of the parties thereto nor was any suggestion made that this mortgage was not

binding on the family. In the insolvency petition filed by the fourth defendant, he included the suit debt as one of the debts for which he was liable,

and referred to the existence of the mortgage securing repayment of the same. Neither the Official Receiver nor any of the creditors of the fourth

defendant took any steps to impeach the suit mortgage. On the other hand, the Official Receiver sold the property subject to the suit mortgage and

when certain of the creditors attempted to have that sale set aside as having been held at an undervalue the Official Receiver as well as the present

13th and 14th defendants justified the sale on the ground-that as the properties were sold subject to mortgages including the suit mortgage the

price fetched at the sale was a fair value. It is true that the mere fact of the sale having been held subject to the mortgage would not preclude

purchasers from questioning the truth or the validity of the mortgage. Issat-un-nisa Begum v. Pertab Singh (1909) 19 M.L.J. 682 : L.R. 36 IndAp

203 : ILR 31 All. 583 (P.C.). But the conduct of the parties can certainly be taken into account in dealing with the question of fact and drawing

inference as to the truth and validity of the mortgage.

A suggestion was made in the written statements of the alienee-defendants in this case, that the suit mortgage was a sham transaction not

supported by consideration but brought into existence in favour of a near relative of the family merely for the purpose of screening some property

from the creditors of the family. In the argument before us, reliance was placed in this connection upon the admission of P.W. 1 that the title deed

was not examined before the mortgage was taken nor did the plaintiff make any adequate enquiries. It was also pointed out that the suit had been

instituted after considerable delay almost when the period of limitation was about to expire. These circumstances are explained, by the very

relationship that the parties bore to each other. If the plaintiff was related to the family of the mortgagor defendants and had known their affairs

there was nothing particular for him to enquire about. Similarly when nobody ever disputed his mortgage but on the other hand it was not called in

question either in the partition suit or in the insolvency proceedings, it is nothing strange that in view of his relationship to the family the plaintiff did

not think it necessary to sue unless and until it became inevitable. The real question therefore is whether there is sufficient proof on record as to the

existence of the debt the payment of which was secured by this mortgage. The learned Subordinate Judge has discussed the evidence on this point

very fully; a large mass of correspondence has been filed showing the dealings between the parties; the plaintiff also filed his accounts in Court

showing how the amount of the suit bond was arrived at. No attempt has been made by the contesting defendants to show that the evidence thus

prima facie furnished is open to suspicion.

It has been pressed upon us that the plaintiff did not call any of the members of the mortgagor''s family to give evidence on his side. Assuming

for the sake of argument that all the members of the mortgagor''s family are sympathising with the plaintiff, there is nothing whatever to show that

the Official Receiver if he had been summoned on the defendant''s side would not have produced the accounts of the business or would not have

given useful information bearing on the question of the truth of the debt and he would have been in the best position to explain why neither he nor

any of the other creditors in the insolvency of the fourth defendant thought fit to impeach the suit mortgage but on the other hand to sell the

properties subject to the suit mortgage. In these circumstances we have no hesitation in concurring in the finding of the lower Court that Ex. A was

executed for the balance due on settlement of accounts of dealings between the plaintiff and the first defendant in respect of the business carried on

by the first defendant in Shop No. 172.

The only other question in the case was whether the suit mortgage was binding upon the interests of the other members of the family in the

mortgaged properties. On a view of the law which seems to vis untenable, the learned Subordinate Judge held against the plaintiff on this point. On

behalf of the respondents his view has been attempted to be supported on three grounds. The first of them is that in entering into the suit mortgage

transaction, the first defendant did not purport to act on behalf of the family or as manager of the family business but only purported to mortgage

the properties standing in his name describing them as properties purchased out of his earnings and in his possession and enjoyment. It was pointed

out that the plaint did not proceed on the footing that these properties were the self-acquired properties of the first defendant and as such the first

defendant was entitled to mortgage them in his own right. It was next argued that in view of the principle of the decision in Balwant Singh v. R.

Clancy (1912) 23 M.L.J. 18 : L.R. 39 IndAp 109 : ILR 34 All. 296 (P.C.) the Court will not be justified in treating the suit mortgage as a

transaction entered into by the first defendant on behalf of the family and as its manager. Lastly, it was contended that as the first defendant was

only a junior member of the family he had no authority to mortgage the interests of the other members in the family property.

As to the first of these questions, it must be admitted that though in paragraph 3 of the plaint there is a reference to some of the mortgaged items

standing in the name of the first defendant, the plaint proceed mainly on the footing that the mortgage was made for purposes of the joint family

business and is therefore binding upon whatever interest the other members of the family possessed in the mortgaged items. The lower Court''s

decision that the mortgaged properties must be held to be properties of the joint family apparently rests upon the presumption of the Hindu Law in

favour of their joint character and the general rule as to onus of proof in regard to self-acquisition when purchases are made in the name of a

member of a joint family. By way of excluding that presumption in this case, Mr. Sitarama Rao invited our attention to the observations of this

Court in Kumarappa Chettiar v. Adaikkalam Chetty (1931) 62 M.L.J. 141 : ILR 55 Mad. 483 following a judgment of the Bombay High Court in

Narayan Babaji v. Nana Manohar (1870) 7 B.H.C.R. 153. If the matter rested upon presumptions alone Mr. Sitarama Rao is probably justified in

the contention that the presumption arising in favour of the joint character at the time of the mortgage may well be set against the presumption

arising from the non-inclusion of these properties in the partition suit of 1916 and the presumption of the completeness of a partition when one

takes place, so that at the time when the question arises in this suit there is no scope for the application of any presumption in favour of the joint

family character of the properties. But, as pointed out by Mr. Krishnaswamy Aiyangar on behalf of the respondents, the matter does not rest upon

presumption alone, because the very facts spoken to by P.W. 1 in the evidence go to establish the joint family character of these properties. We

do not therefore think it proper or necessary to rest our decision in this case on any finding that the mortgaged properties were the separate

properties of the first defendant.

The second head of argument advanced by the earned Counsel for the respondents on the strength of the decision in Balwant Singh v. R.

Clancy (1912) 23 M.L.J. 18 : L.R. 39 IndAp 109 : ILR 34 All. 296 (P.C.) is answered by more than one decision of this Court vide Sabapathy

Chetty v. Ponnuswamy Chetty (1915) 28 I.C. 365 and Sadayappa Asari v. Raghava Asari (1919) 27 M.L.T. 325 : 62 I.C. 220 to the effect that

the mere fact that properties are described by a member of a family as properties acquired out of his earnings is not the assertion of such a hostile

claim as against the interests of the family or an indication that it was his own personal transaction as to preclude the application of the principle that

if the purpose was one binding on the family the transferor might still be regarded as having entered into the transaction in the capacity in which he

could bind the family. It must also be remembered that in this case, cloth Shop No. 172 was undoubtedly a concern of the joint family and there is

no reason why the first defendant should mortgage what he considered his self-acquired properties for the liabilities of that shop. As has frequently

been pointed out in the judgments of this Court, the mere description that properties were acquired out of a member''s earnings is not the same as

claiming for it the character of ''self-acquisition'' in the legal sense; it is merely a statement of the fact that they were not originally the property of the

joint Hindu family but had been acquired out of the earnings made in the course of business by one of the members. The fact that the law will in

such circumstances impress upon the property so purchased the character of joint family property should not be unduly pressed in construing the

terms of the document.

With reference to the third question, namely, the power of the first defendant to* bind the interests of the other members of the family by the suit

mortgage, the evidence establishes what indeed is admitted in the written statement of defendants 13 and 14, that though Varadaraja Mudaliar the

father of the first defendant and the eldest member of the family was alive, the first defendant was authorised by the members of the family to

conduct the family trade carried on in this shop. We have already held that the mortgage was created to secure the repayment of a debt incurred in

the course of the business conducted in that shop. It is well established as a rule of Hindu Law that the manager of a joint Hindu family conducting

a family business may mortgage or sell joint family property for debts and liabilities incurred in the course of that business. In the present case, the

learned Subordinate Judge himself has held that the members of the family would be liable for the debt secured by Ex. A but he felt himself bound

to hold that even for securing repayment of such a debt the first defendant had no authority to create a mortgage binding on the interests of the

other members. The proposition of law stated in Mr. Maine''s book and adopted in several decisions in India is that a person who is the

accredited agent"" of a family so as to be able to bind the family by debts borrowed for a proper and necessary purpose can also pledge the

properties of the family for debts so incurred. The plaint proceeds on the footing that the first defendant was the accredited agent of the family

within the meaning of this rule. The written statement denies that the mere fact of the first defendant being authorised to manage one of the two

shops of the family will empower him to alienate the family properties.

Even if the question stood as an abstract proposition of law, there is much to be said in favour of the view that if the first defendant was the

accredited agent of the family for the purpose of managing Shop No. 172 to the extent of being empowered to bind the members of the family for

debts incurred in connexion with that shop, he would also be entitled to pledge the credit of the family and its properties for such debts. It must be

remembered that the Hindu Law with reference to the power of the father or the managing member to alienate family property, is intimately

connected with the power possessed by the creditor to recover from the family property debts incurred by them for proper purposes. It seems to

us meaningless to say in a case like the present (as the learned Subordinate Judge has held) that the creditor could bring the family property to sale

for the realisation of the debt under Ex. A as a simple debt though it has been incurred by the first defendant but the first defendant himself could

not by a voluntary alienation either secure the repayment or arrange for its discharge. The language employed by the learned Judges of the Calcutta

High Court in Sheo Pershad Singh v. Saheb Lal (1892) ILR 20 Cal. 453 is in favour of the view that even a junior member, if he is in charge of the

family business, 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.

Reference was made in the course of the argument to the decision in Subbaraya Mudali v. Thangavelu Mudali (1922) 45 M.L.J. 44 a case

which arose out of the partition suit in this very family already referred to, and reliance was strongly placed on behalf of the respondents on the fact

that a mortgage executed in favour of the thirty-fifth defendant in that case by the present first defendant was set aside on appeal by this Court; but

the observations in that case (at page 51) do not seem to us to support the proposition of law contended for on behalf of the respondents. It may

be that the learned Judges in that case took the view that the security was not created in circumstances making the creation of a mortgage

necessary, but their observations do not read as if they intended to exclude the possibility of the first defendant ever being able to create a valid

mortgage even for binding debts. The learned Judges recognised that a person who is not the managing member may, if he is the accredited agent

of the family, alienate joint property for family necessity, and in the earlier portion of the judgment they refer to the debts created by the present

first defendant as debts incurred by an accredited agent of the family in the course of the management of the family business and on that very

ground hold that the properties of the family were liable for the discharge of these debts. The judgment of Ramesam and Stone, JJ., in Appeals in

Appeal Nos. 406 and 467 of 1930 was also referred to in this connexion. There again, the learned Judges based their conclusion on the

circumstances of the particular case, namely, that for some reason the parties made the transaction a personal one of the junior member and the

plaint sought to enforce it on that basis and not on the footing that it was entered to by him as the accredited agent of the family.

The circumstances mentioned by the learned Subordinate Judge in paragraph 18 of his judgment arising out of certain proceedings for

attachment before judgment in O.S. No. 49 of 1915 probably explain why Ex. A came to be executed by the first defendant alone without the

other members of the family joining in it. He points out that during the pendency of the attachment application, some of the other members of the

family had given an undertaking not to alienate the properties pending disposal of the application, but the first defendant did not join in the

undertaking. The respondents no doubt wanted to use that circumstance as an argument in favour of the nominal character of the mortgage, but as

we have found on the other evidence in the case that the transaction was genuine and fully supported by consideration, that circumstance really

seems to us to further the clue for the other people not joining in it though by their later conduct they have clearly shown that this transaction had

their full approval. It may also be mentioned that in July, 1918, an endorsement was made on the suit bond by adjustment towards it a sum of Rs.

600 and odd due from the plaintiff to Varada-raja Mudaliar as per account of Shop No. 154. This is another circumstance indicating that the

family regarded the transaction as binding on them for otherwise there was no reason for them to appropriate that amount in part satisfaction of this

claim; and this endorsement is attested by the fourth defendant. Having regard therefore to the conduct of the family in not attempting to impeach

the suit transaction at any time and particularly to the conduct of the fourth defendant in admitting it in the insolvency proceedings and of the Official

Receiver in accepting the mortgage and selling the property subject to it and the attitude taken by defendants 1 to 7 and 9 in this litigation in

remaining ex parte we think the proper inference is that the suit mortgage was executed by the first defendant with the knowledge and approval of

all the other members of the family in the circumstances above stated ; and as it has been found to be for a debt binding on the family we think that

the lower Court erred in holding that the mortgage was not binding on the interests of the other members.

The result is that this appeal is allowed and a decree for sale given to the plaintiff as against the mortgaged property in terms of paragraph 18

(a) of the plaint. The plaintiff will be entitled to his costs both here and in the Court below. Clause 3 of the lower Court''s decree will be deleted

and defendants 12 to 14 will be liable to pay to the plaintiff his costs both here and in the Court below. Time for payment six months.