N.C. Krishna Ayyar and Others vs Pierce Leslie and Co.

Cornish, J.—I have been asked by the petitioning creditor''s learned advocate to remand this case for a finding whether the respondents to

the insolvency petitions (who are the petitioners before me) formed a, partnership firm. But as the creditors'' petition did not allege a partnership,

and as it was apparently nobody''s case in the lower Court, that there was a partnership, I see no reason why I should open the question at this

stage. I think that the business of the Auto and General Company, though originally the partnership business of respondent 2, and a stranger to the

family, became after the stranger''s death, the business of the joint family of which all the respondents are members. In the deed of alienation of

their Immovable property which the respondents jointly executed to raise funds for meeting their creditors'' claims in respect of the business, they

admit that the business was a joint family business. It was sought to explain away this admission by stating that this admission was made at the

request of the alienees. But I am not inclined to accept this having regard to the evidence that joint family funds were from time to time put into the

business by respondent 1, who was the manager of the family. Respondent 2 was the manager of the business. But I think the true position was

that the business was the joint family business and not the private venture of respondent 2.

All the respondents, i.e. 1 to 9, have been adjudicated. Respondent 2 alone does not appeal against the order of adjudication. And this brings

me to the question whether these other respondents have been properly adjudicated. They have been adjudicated on the ground that all have

joined in alienations of property which amount to a fraudulent preference. But an act of insolvency, to serve as the basis of an adjudication upon a

creditor''s petition, must be an act committed by his debtor. And unless there is a personal liability in respect of the debt there is no such relation of

debtor as will serve to support an adjudication order. Unless, therefore, there is a personal liability on the respondents for the debts incurred in the

family business the respondents are not subject to be adjudicated insolvents. The following propositions laid down in Chalamayya v. Varadayya

(1899) 22 Mad 166 show how this personal liability may arise. If the debt has been incurred on a contract entered into by the managing member

alone, but the other co-parceners are in reality parties to it, or if, being competent, they have subsequently ratified the contract, they will be

personally liable in respect of it. And they will be equally liable if there has been an acquiescence on their part in the course of the business in which

the particular contract was entered into so as to warrant their being treated as parties to the contract. These propositions have been accepted and

approved in later cases. The learned Advocate for the creditors has pressed upon me two authorities Somasundaram v. Kanoo Chettiar 1929

Mad 573 and Muthu Veerappa Chettiar v. Sivagurunatha Pillai 1926 49 Mad 217. But in the former the members of the joint family were carrying

on business as partners and were therefore personally liable for debts incurred in carrying on the firm''s business. And it was held that the fact that

the creditors'' decrees were limited to their shares in the family property would not affect the personal liability on which they would be adjudicated

insolvents. The other case turned on its peculiar facts. A son after his father''s death had accepted personal liability for his father''s debts, and was

held to be liable to be adjudicated.

As regards respondents 3 to 9, there is not in my judgment sufficient evidence to hold that they were taking a part in the management of the

business from which it can be inferred that they were parties to the contract upon which the liability to the petitioning creditors arose. One of them,

respondent 5, did on one occasion sign a plaint on behalf of the Auto Company; but I think this is not sufficient to classify him as an active

participant in the business. These respondents, therefore, incurred no ''personal'' liability, and in my judgment their adjudication ought to be set

aside. The case of respondent 1 is different. He is shown to have been actively engaged with respondent 2 in the conduct of the business: signing

cheques, drawing out money for the business, and putting family money into the business. I think therefore, respondent 1 has made himself

personally liable and was rightly adjudicated. The result is that Civil Revision Petition No. 1117 of 1933 is allowed with costs as regards

respondents 3-9 and Civil Revision Petition No. 1219 of 1932 is dismissed with costs. The petitioning creditors will get their costs from the estate.

Respondent 10, the Continental Tyre and Rubber Company, will get costs of this petition from the estate. I should add that the order in the lower

Court adjudicating the family of the respondents is misconceived and is set aside. No further order is necessary as to costs in Civil Revision

Petition No. 1219 of 1932. The petitioners in Civil Revision Petition No. 1117 of 1933 will get their costs from the respondent throughout. They

will recover their costs throughout from the estate and likewise recover the costs ordered to be paid by them to the petitioners.