Rajasekaran and Others vs Nagarathinammal and Others

Ramaprasada Rao, J.—These two appeals raise a common question which apparently prompted the Court below to try the same together and render a common judgment. As the Court below considered the rank of parties with reference to Original Suit No. 47 of 1967 on the file of the Subordinate Judge of Salem, we shall adopt the same in the course of our judgment.

Original Suit No. 47 of 1967 was a suit on a mortgage filed by the mortgagee as against the executants impleading the executants who are the mother and son as also the grand-children of the first executants besides the subsequent mortgagee. One of the executants having by then become insolvent, the Official Receiver was also made a party. The other suit was a suit for partition by the children of one of the executants in the earlier mortgage questioning the mortgages executed by other father and claiming that such, debts do not bind them and that, therefore, they are entitled to their legitimate share without being burdened with any obligation to pay the debts incurred by their father.

To State briefly the facts, Nagarathnammal (the first Defendants) is the grand-mother. We are not concerned with her husband who was admittedly the common ancestor in the family and who was engaged in Maligai trade. His son is Ramachandra Chettiar who is the second Defendant in the suit. It is common ground that after the death of the common ancestor, the first and second Defendants respected the Kulachara and continued the family Maligai business. From time to time, to wit, under promissory notes Exhibits A-2, A-3, B-29, B-30, B-31 and B-32, the first and second Defendants borrowed moneys between the years 1958 and 1964 from third parties to meet the family expenses and for the ancestral business of Maligai and presumably for the purpose of investing moneys in a new venture started by the second Defendant which consisted of taking produced film for distribution. In the course of such borrowing and in order to discharge Exhibits A-2and A-3, the first and second Defendants as also the sixth Defendant who was a minor at that time represented by the first Defendant executed the mortgage Exhibit A-1 dated 7th September, 1964 and borrowed thereunder moneys not only to discharge Exhibits A-2 and A-3 but also for the family expenses, Maligai business and probably for the other new Venture started by the second Defendant. Again, in order to discharge Exhibits B-29, B-30, B-31 and B-32, the first and second Defendants along with the minor sixth Defendant executed a mortgage Exhibit B-28 dated 5th June, 1965. Both the mortgages under Exhibits A-1 and B-28 remained unpaid. The mortgagee under exhibit B-28, namely, one V. G. Srinivasan Chettiar assigned the mortgage in favour of eight Defendant, one Veerappan. As the mortgages remained undercharged, the mortgagee under Exhibit A-1 filed the suit Original Suit No. 47 of 1967 impleading the first Defendant, second Defendant and the sixth Defendant who by then became a major and also impleaded Defendants 3 to 5 who were the minor children of the second and fifth Defendant. The Official Receiver by then represented the estate of the insolvent (Second Defendant). Mr. Veerappan, the eighth Defendant was the assignee of the second mortgage, which assignment is established and admitted to be true as evidence by Exhibit B-37. When the above suit on the mortgage Exhibit A-1 was pending the brother of the second Defendant, namely, the sixth Defendant who by then became a major and the sons of the second Defendant. namely, the third and fifth Defendants together filed a suit for general partition in Original Suit No. 363 of 1968 impleading the grand mother, the father the first mortgagee, the earlier second mortgagee, the assignee under the second mortage and also another Defendant as the seventh in that suit who by then was said to have advanced moneys to the father under Exhibit B-38.

In the above circumstances, the learned Judge thought that the material issue Which arises for consideration in this case was whether Exhibit A-1, B-28 and B-37 were binding on the sons of the second Defendant and whether such debts which are claimed by the sons of the second Defendant in Original Suit No. 47 of 1967 and the Plaintiffs in Original Suit No. 363 of 1968 were tainted with immorality and illegality and, therefore, Avyavaharika debts.

It is common ground before us that the shares as declared by the trial Judge in the general partition action has been correctly decided upon. It is not, therefore, necessary for us to reaffirm the share of the Plaintiffs in Original Suit No. 363 of 1968 in the admitted joint family property. Rightly, therefore, the learned Counsel for the Appellants canvassed the correctness of the decision of the Court below which upheld the mortgages Exhibits A-1 and B-28 as binding on the other coparceners of the family of the second Defendant. The Court below was of the view that as long as moneys were borrowed by the father manager, partly for the purpose of carrying on the Kulachara of the family, namely, the Maligai business and partly for expanding the commercial activities of a trading family by associating himself with distribution work of produced films and so long as there is no evidence clinching or otherwise so as to characterize the borrowing or the activity as an avyavaharika one or not being for the benefit of the family, the mortgages Exhibits A-1 and B-28 had to be upheld as binding on the other coparceners of the family of the second Defendant.

The learned Counsel for the Appellants canvassing the correctness of the conclusion of the learned Judge has come up before this Court and would contend mainly before us that Exhibit A-1 and B-28 cannot bind the other male members of the family of the second Defendant. He would urge that the borrowings effected under Exhibit A-1, though prima facie were for the purpose of discharging earlier or anterior debts, they are not binding on the other members of the family as they cannot be said to be legal necessity or for their benefit. The same contention is urged even with reference to the validity of Exhibit B-28. Several decisions of this Court, ancient, modern and latest, were cited before us so as to sustain the contention that a departure from the Kulachara by itself is a sufficient indicia to show that such indulgence is not for the benefit of the family and much less for the legal necessity of it. Far from the ratio in the decisions cited gaining support for the contention urged by the learned Counsel for the Appellants, we are prima facie of the view that excepting for one decision reported in Sankaranarayanan and Another Vs. The Official Receiver, Tirunelveli and Others, all other decisions are against the said proposition. We shall presently consider them.

The evidence in this case is very meagre. D.W. 1, who was associate in the promissory notes to which the first and second Defendants were the primary executors, after having become a major had gone into the box to speak about the alleged avyavaharika nature of the debts incurred by his mother. He was aged 8 years at the time of the death of his father.

He had to therefore, admit that his brother, the second Defendant continued the father''s Maligai business. He would only say in the chief examination that his brother as Manager was leading an immoral life and that he was borrowing without necessarily. He would not refer to Exhibits A-1 and B-28 expressly in his evidence excepting to say that the alleged promissory notes Exhibits A-2 and A-3 paid off under Exhibits A-1 had not been brought into the Maligai account. He produced the Maligai accounts Exhibits B-3 to B-21. He would also add that the surplus amount received under Exhibit A-1 after having paid off Exhibits A-2 and A-3 had been brought into the Maligai account. He would say that his brother signed Exhibit B-22 and similar agreements and would say that there was no necessity for the family to borrow money. This testimony of D.W. 1 needed no cross examination at all. From the chief examination, we are not able to find even a whisper by the complaining coparcener that his brother was indulging in illegal activities and that the film distribution business started by him along side the Maligai business was a speculative one and a risky one. Obviously, his brother, who has become an insolvent is behind the entire show. He has allowed D.W. 1 to take the account books of the Maligai business to Court. He files a written statement. He keeps himself away from the witness box. The old woman, namely the mother of D.W. 1 does not get into the witness box though she is aware that she was a party to all such relevant borrowings which resulted in Exhibits A-1 and B-28. At least, she could have been brought to Court to say that there was no necessity for her son, who was managing the affairs of the family to enter into the film distribution business. It is in this way we characterize the evidence let in by the complaining coparcener as hopelessly meagre and extremely self-serving and supporting. We have to therefore, reject the testimony of D. W. 1. If we eschew such evidence of D. W. 1, it is not stated before us by the learned Counsel for the Appellants that there is any other piece or pieces of evidence to support his case that the borrowing effected by the second Defendant as the kartha of the family was either illegal or immoral.

The next legal contention of the learned Counsel for the Appellants is that the second Defendant as the Kartha of the family (sic) not to have indulged in a business other than Maligai business. His extreme contention is that any coparcener or a member of a joint family taking over the responsibility of the administration and concern of a Hindu undivided family as Kartha thereof should be content with the quondam business done by the family and should never expand or think of expanding and further proceeding it even though he feels bona fide and is otherwise satisfied that such extension of business or setting up of a new trade is for the benefit of the family in general. We are unable to accede to this extreme proposition. In the instant case the Kulachara of the family was trade and the only business which the father of the second Defendant and the husband of the first Defendant was admittedly doing was Maligai business. It cannot be said that once a family is a Maligai trading family, it should always be a Maligai trading family alone.

We would only refer to the conclusion come to by mayne in eleventh edition which passage is very apposite. We understood the learned author thus--that imposing any limitation and we would add, an embargo on the entrepreneurship of the manager of a Hindu family, who wishes to enlarge the scope of the commercial activity of a trading family would be an undue curtailment of commercial adventure and enterprise, which is the very life, so to say, of a hereditary trading family.

At the outset, therefore, we are unable to agree that under no circumstances a trading family should attempt or think of expansion of their commercial activity and should always be circumscribed to the ancient activities of the family because the word Kulachara has to be understood only in that limited sense that it is the achara of the family to trade in one particular commodity alone and not in others. As already stated by us such a mandate and limitation in the normal human element of entrepreneurship which is merged in a trading family would amount to imposing on such members, who are in charge of the trading family a curb which neither the texts nor even the general trend of judicial decisions rendered by our court ever contemplated.

Though at one time, at any rate, soon after 1932 the ruling of the Privy Council in The Benares Bank Ltd. v. Hari Narain (1932) 63 M.L.J. 92 (P.C.). was ruling the field, yet, an inroad was made into the scope of the said decision for the first time by a Division Bench of our High Court in Kumbakonam Bank Limited Vs. K.R.M.P. Shanmugham Pillai and Others, . That was a case where the family was admittedly a trading family. The argument was that such a trading family cannot extend its trade and indulge in new business. Govindamenon and Ramaswami, JJ., in that case categorically laid down that it is not right to extend the principle laid down in Banaras Bank''s case (1932) 63 M.L.J. 92 (P.C.) to a trading family. They noted that when such expression was indented bona fide and with all sincerity and it has been beneficial to the family and so long as it is not a risky business or a trade which would cause prejudice to the other members or coparceners of the family and would affect their rights is the joint family properties, then courts could encourage such methods of expansion of business, the only caution required is to see whether the expanded trade is a dangerous and risky trade, almost bearing on avyavaharika activities. Forcibly enough, Rajamannar C.J., in The Canara Banking Corporation Ltd. Vs. The South Indian Bank Ltd. and Others, following the earlier Division Bench decision cited above stated that a distinction has to be drawn between families whose hereditary avocation is trade and other ordinary families, and the general acceptance of the principle that the father or manager of a Hindu Joint Family has no power to impose upon a minor of the Family risk and liability of a new business started by him has to give way to the first cited Principle that if it is a trading family, a liberal interpretation of the above rule has to be made. The learned Judges therein again referred to a decision of the Allahabad High Court and particularly to Mulla''s Hindu Law, eleventh edition Page 274 (edited by the late Chief Justice of the Supreme Court of India Mukherjea, C.J.) and observed that the rule of law laid down in Banaras Bank''s Case cannot apply to a new business started by the sole surviving coparcener of a Mitakshara family.

While agreeing with the view expressed by Govinda Menon J., in the Kumbakonam Bank Limited Vs. K.R.M.P. Shanmugham Pillai and Others, they agreed in principle that no matter, on facts, a distinction should be made as between a trading and a non-trading family.

In the case of a non-trading family, different considerations might arise, but in our view, having regard to the march of time and progress of society and its ideals, it cannot even be said that even in the case of a non-trading family, the mere fact that the father manager or manager of a Hindu undivided family starts a new business with all pious and good intentions and for the benefit of the family that by itself a transaction which should be characterized as an avyavaharika one or an activity which is not for the benefits of the family. If the manager even in a non-trading family takes up a new business with bona fide intentions and if he does the same for the benefit of the family knowing that no risk is involved but only the usual commercial adventure which is very much present in every individual in our country, whether he belongs to a trading family or a non-trading family, then courts ought not to be too astute as to brand such transactions as not binding on the other members of the coparcener ipso facto and for the only reason that it is a new adventure.

A fortiori, therefore, if there is an extension of trade or a setting up of a new business in a quondam trading family, then that is all the more the reason why such an indulgence by the manager or the father-manager of the Hindu undivided family should be encouraged so long as such a new trade or new business is beneficially thought of and is not risky, speculative and on the face of it could not be said to be to the prejudice of the other members of the family.

In A. Pattammal alias Pachaiyammal Vs. Nagarajan and Others, the term bona fides has been explained in great detail by a Division Bench of this Court to which one of us was a party. Bona fides not being an artistic expression has to be assessed objectively but not to be interpreted Subjective 1 a rational approach is necessary in given cases to find whether the act of a manager of a Hindu family is bona fide or not. Expatiating this concept, The Division Bench in the above case said:

It is not every activity of a father-manager which could come up for scrutiny and complaint. It is only such of those acts of his which are deliberately motivated and designed, so as to gain advantage for himself and cause prejudice to the other members of the family that can be considered and adjudicated upon. In a case where the father-manager whose powers are still those of the father in a Roman family and which were characterized as the powers of a Patria Potestas, they cannot he whittled down by bickering and complaints made by the other members, so as to improve their position to the disadvantage of third party alienees. Strong and compelling circumstances are required, so as to establish that such a conduct or activity of the manager was intended and deliberately to prejudice the other members and to cause wrongful loss to them....

In the light of this understanding of the rational expression bona-fides, the commercial activity indulged in by the father-manager of even a non-trading family has to be looked into. Times were when amongst trading families, there was such pessimism that no one intended to hope over the bale of activity indulged in by their ancestors and go beyond what is known as the Kulachara or the ancient family trade. But in a progressive society and particularly in an air of advancement which we are claiming in a developing country like ours, a static adoption of that ancient principle of adherence to the quondam Kulachara without even thinking of expansion of that activity ought not to be encouraged mostly in the interests of the society at large. Even in the case of a non-trading family, the father-manager has the liberty to start a new trade has been acceded to by two Division Bench judgments of this Court,

The firestone is reported in Rajan and Others Vs. Kannikonda Reddiar and Another, Venkataraman J. and Gokulakrishnan J., held that where the father sells ancestral property in order to discharge an antecedent debt, it would be binding even though the antecedent debt had been contracted for starting a new business and that the starting of a new business, the business in this case, cannot be called avyavaharika and the sons would be liable to pay the debt in cured for the purpose on the pious obligation theory. We shall advert to the theory of pious obligation some time later.

Another Division Bench of this Court to which one of us was a party reported in Sridharan and Others Vs. Murthi Brothers, by partner C.S. Balasubramani and Another, after referring to the earlier decision of this Court in Achutan v. Ratnajee (1925) 50 M.L.J. 208 observed:

...In a joint family, which is a non-trading family it is left to the option of the father manager, as patria potestas of the family to formulate Schemes of expansion in the matter of acquisition of property by lawful means and if, in the course of such wishful thinking, the father-manager departs from the usual avocation of the family and starts a new business as an entrepreneur, that by itself cannot be characterized as an activity of the father which is not contemplated in the personal law or against it. If such a business conducted by the father manager is ex-facie a speculative one or one which no reasonable or prudent person would characterize as a business undertaken by the father-manager in the interests of the other members of the family, then things might be different. But, on the only ground that the new business has been started by the father-manager, as a commercial activity thought of by him and for the purpose of prudentially conducting it for the benefit and welfare of his children and other coparceners of the family, that by itself, would not raise any presumption, much less a reasonable presumption that the debts contracted in the course of the working of such a commercial activity are by themselves A yavaharika debts.

At this juncture, we are inclined to refer to a passage which is apposite for being quoted. An illustrious Chief justice of this Court, Coutts Trotter C.J., in Achutan v. Ratnajee (1925) 50 M.L.J. 208 stated thus in (page 209):

A modern Court would, therefore, be free in interpreting the general term to consider the particular instances given as obsolete under the conditions of today. I am clearly of opinion that commercial debts fall into this category and that we ought to say that the pious obligation extends to them. It may well be that in the time of Gautama it was thought that to engage in trade was degrading, at any rate in the case of the higher caste. No one could pretend that, that view would be entertained today....

For greater reasons, today of today is far away from the today of 1926.

A fortiori, therefore, we are of the view that a debt incurred for commercial purposes even by a non-trading family as such should not be viewed with such suspicion unless there is material to reject them as immoral, illegal or to use compendiously avyavaharika debts.

It is in the light of the decisions as above, we are unable, with respect, to agree to the conservative view expressed by one of our learned Judges in Sankaranarayanan and Another Vs. The Official Receiver, Tirunelveli and Others, Sethuraman, J., still is of the view:

...Though there is perhaps no proof that Defendants 2 and 3 incurred any debts which could be classified as avyavaharika debts, still in view of the fact that they had started a business, which is not the Kulachara of the family and have incurred obligations therein, the minor coparceners in the family cannot be held to be bound by any such obligation.

with great respect to the learned Judge, we are not inclined to follow this view.

The subject could also be approached from a different angle. The doctrine of pious obligation which is again a new tenet which governs Hindus in accordance with their established personal law could also be invoked to sustain such commercial debts incurred by the father-manager, even though the family was non-trading family. We have already made it clear that in so far as the trading family is concerned, the accepted view of this Court has been that a manager of a trading family is entitled to start a new business, so as to bind minor members of the family, the only restriction on his powers being that it should net be a Speculative business.

The new business started by the father manager need not be allied to the erstwhile industrial business vide the decision of Ganapatia Pillai and Venkatadri JJ., in Rangammal and Others Vs. The Union of India (UOI) and Others, . Invoking the doctrine of pious obligation, the debts contracted by the father-manager even in the case of a non-trading family could be sustained so long as the business of trade is not a risky or speculative one.

In Appeal No. 115 of 1971 N. Janardhanam Nanda Gopal Vasudevan Appellants v. Venkatachala Thevar Narayanaswami Naidu Official Receiver Coimbatore representing the estate in Insolvency Petition No. 86759, Sub-Court, Coimbatore. N Janardhanam and Ors. v. Venkatachala Thevar and Ors. a Division Bench of this Court had occasion to consider the concept of pious obligation and expressed the view that the peculiar liability of the son to pay the debts of his father under the doctrine of pious obligation exists, whether the father be alive or dead.

We shall now consider the historical growth of the doctrine of pious obligation. As early as 1882 in a Full Bench decision of our Court in Ponnappa Pillai v. Pappuvayyangar 4 M.L.J. 1 expressed thus:

...The question as to the extent of the son''s liability is not one of contract, but the duty is an incident of Inheritance. Assets available for the payment of a father''s debts means and includes the whole estate in which the son by birth acquired rights. The validity of an alienation to a purchaser for consideration in Bombay, as in Madras, did not originate in any local usage, but in an exceptional doctrine established by modern jurisprudence. The duty of the son is incidental to the heritage and subsist from the inception of the son''s interest therein. As a father can make a valid alienation of ancestral property so as to bind the son''s interest, the law will execute the father''s power for the benefit of creditors.

Again a Division Bench of our Court in Achutan v. Ratnajee (1925) 50 M.L.J. 208 which was cited already by us in a different context upheld the principle of son''s obligation under the doctrine of pious obligations to pay his father''s debts and it was held that it would extend to commercial debts as well.

In the light of the discussion as above, the facts of this case have to be considered. Mr. Vedantam, the learned Counsel for the Appellants who brought to our notice many of the decisions referred to above would contend still that the Plaintiffs as sons of a Hindu family are not liable to respect the debts of their father, to wit, under Exhibits A-1 and B-28. He would also refer to the new business started by the father which undoubtedly was nowhere near akin to the Maligai business which is the Kulachara and would contend that the film distribution business by itself is a speculative trade. We are unable to agree. Whatever may be said of an activity involving production of films, We are not prepared to accept the bald contention on the subject that a contract to take distribution of films already produced should automatically be viewed with suspicion and be branded as a speculative enterprises. Exhibits B-23 to B-26 no doubt establish that the father-manager was either by himself or in conjunction with others entering into contracts for distributing films and no doubt was using the money of the joint family either by borrowing ot otherwise.

The question is whether such an activity raise the automatic presumption that such contracts are to be viewed with displeasure and should not be encouraged and should in any event be characterized as a speculative business. Once again, we are reminded of the observation of Mayne in the eleventh edition already cited by us and referred to by Rajamannar C.J., in The Canara Banking Corporation Ltd. Vs. The South Indian Bank Ltd. and Others, and also to the passage of Coutts Trotter C.J., in Achutan v. Ratnajee.

In a progressive society like ours and particularly in days where advancement is adapted as the watch word for progress. It cannot be stated that the involvement or association of the father manager or the manager of a Hindu family in an activity, though not the Kulachara of the family, but which is not harmful, which is not a speculative and which no rational being could characterize as a commercial activity which would invariably result in prejudice to the other members, is by itself an indicia that such a trade or business should invariably be characterized as a speculative trade and the debts which the father manager involved, in connection thereto should be held to be not binding on the other coparceners, minors or majors.

It, therefore, follows that commercial debts incurred by the father in connection with a trade which is not speculative though not connected with the Kulachara of the family are binding on the minors, and are equally binding on them on the well known principles of pious obligation as well. After having found that there is no evidence at all of such speculative indulgence by the father-manager in the instant case as the debts evidenced by Exhibits A-2, A-3, B-29, B-30, B-31 and B-32 are all for purposes of the family and for business and as they have been discharged under Exhibits A-1 and B-28 the later mortgages effected by the father-manager over the joint family property is binding on the Plaintiffs in Original Suit No. 363 of 1968.

No other issue was brought to our notice as arising in these appeals. On the questions argued before us we are of the view that the learned Subordinate Judge was right.

The appeals fail and, therefore, they are dismissed, bat without costs, The Appellants in Appeal Suit No. 39 of 1975 shall pay the court fee due to the government.