Rajasekharan 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 patties with reference to O.S. No. 47 of 1967 on the file, of the

Subordinate Judge, Salem, we shall adopt the same in the course of our judgment. O.S. 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 grandchildren of the first executant 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 their 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, Nagarathinammal (the first defendant) is the grandmother. 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 Exs. 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 films for distribution. In the course of such borrowing and in order to discharge Ex. A-2 and A-3, the first and second defendants as also

the sixth defendant who was a minor at that time represented by the first defendant, (sic) executed the mortgage Ex. A-1 d. 7th September, 1964,

and borrowed thereunder moneys not only to discharge Ex. A-2 and A-3 but also for the family expenses, maligai business and probably for the

other new ventures started by the second defendant. Again, in order to discharge Exs. B-29, B-30, B-31 and B-32, the first and second

defendants along with the minor 6th defendant executed a mortgage Ex. B-21, d. 5th June, 1965. Both the mortgages under Ex. A-1 and B-21

remained unpaid. The mortgagee under Ex. B-28, namely, one V.G. Srinivasa Chettiar, assigned the mortgage in favour of the 8th defendant, one

Veerappan. As the mortgages remained undischarged, the mortgagee under Ex. A-1 filed the suit O. S. No. 47 of 1967, impleading the 1st

defendant, 2nd defendant and the 6th defendant who by then became a major and also impleaded defendants 3 to 5 who were the minor children

of the 2nd defendant. The Official Receiver by then represented the estate of the insolvent (2nd defendant). Mr. Veerappan, the 8th defendant was

the assignee of the second mortgage, which assignment is established and admitted to be true as evidenced by Ex. B-37. When the above suit of

the mortgage Ex. A-1 was pending, the brother of the 2nd defendant, namely, the 6th defendant who by then became a major and the sons of the

2nd defendant, namely, the 3rd and 5th defendants together filed a suit for general partition in O.S. No. 363 of 1968 impleading the grandmother,

father, the first mortgagee, the earlier second mortgagee, the assignee under the second mortgage and also another defendant as the seventh

defendant in that suit who by then was said to have advanced moneys to the father under Ex. B-38.

In the above circumstances, the learned Judge thought that the material issue which arises for consideration in this case was whether Exs. 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 2nd defendant in

O. S. No. 47 of 1967 and the plaintiff in O. S. 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 re-affirm the share of the plaintiffs in O. S. 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, Exs. 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 characterise the borrowing or the activity as an avyavaharika one or not being for the benefit of the family,

the mortgages Exs. 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 Exs. 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 Ex. 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 for legal necessity or for their benefit. The same contention is urged even

with reference to the validity of Ex. 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 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 associated 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 his 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 necessity. He would not refer to Exs. A-1

and B-28 expressly in his evidence excepting to say that the alleged promissory notes, Exs. A-2 and A-3 paid off under Ex. A-1 had not been

brought into the maligai account. He produced the maligai accounts, Exs. B-3 to B-21. He would also add that the surplus account received under

Ex. A-1 after having paid off Exs. A-2 and A-3 had been brought into the maligai account. He would say that his brother signed Ex. D-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 alongside 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 Exs. 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 characterise 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 borrowings effected by the 2nd

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 ought 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 contact with the quondam business done

by the family and should never expand or think of expanding and further processing 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 extremis

proposition. In the instant case the kulachars of the family was ''trade'' and the only business which the father of the second defendant and the

husband of 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 11th 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 inhered 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 lime, at any rate, soon after 1932, the ruling of the Privy Council in Banaras Bank v. Harinarain 63 M.L.J. 92 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

Ltd. v. Shanmugam Pillai 1956-1 M.L.J. 58 = 62 L.W. 22. 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. Govinda Menon 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 63 M.L.J. 92, to a trading family. They noted that when such

expansion was intended bona fide and with all sincerity and it has been beneficial to the family and so long as it is note a risky business or a trade

which would cause prejudice to the other members or coparceners of the family and would affect their rights in 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 or

and risky trade, almost bordering on avyavaharika activities. Forcibly enough, Rajamannar, C.J., in Canara Banking Corpn. v. South Indian Bank

1957-2 M.L.J. 502 = 70 L.W. 88 following the earlier 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 Mullah''s Hindu Law, 11th Edn. 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 63 M.L.J 92. 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''s case 1957-2 M.L.J. 502=70 L.W. 88, 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 is a transaction which

should be characterised as an avyavaharika one or an activity which is not for the benefit 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 coparcenary 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 (sic) banally 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 Pattammal v. Nagarajan 1977-2 M.L.J. 286 = 90 L.W. 39(S.N.) 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 subjectively. 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 gala 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

characterised as the powers of a patria potestas. They cannot be whittled down by bickerings 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 intended to prejudice the other members and to cause wrongful loss to them...

In the light of this understanding of the rational expression ''bone fide'' the commercial activity indulged in by the father-manager of even a non-

trading family that to be looked into. Times were when amongst trading families, there was such pessimism that no one intended to hop over the

halo 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, that the father-manager has the liberty to start a new trade has been acceded to by two

Division Bench judgments of this Court.

The first one is reported in Rajan v. Kannikonda Reddiar 1975-1 M.L.J. 26 = 88 L.W. 205. 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 bus in this case, cannot be called avayavaharika and the

tons would be liable to pay the debt incurred for the purpose of the pious obligation theory. We shall advert to the theory of pious obligation

sometime later.

Another Division Bench of this Court to which one of us was a party reported in Sridevan v. Murthi Bros, 1976-1 M.L.J. 100 = 88 L.W. 47

(S.N.), after referring to the earlier decision of this Court in Achataramayya v. Ratnajee Bhootaji 50 M.L.J. 208 = 23 L.W. 193, 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 new business as an entrepreneur, that by itself cannot be characterised 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 characterise 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 avyavaharika 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, CI. in Atchutam v. Ratnaji 50 M.L.J. 208 : 23 L.W. 193 stated thus in 1926:

.....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 lime 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 a greater reason, ''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 a 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 not 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 or trade is not a risky or speculative one.

In Janardhana Vasudevan v. Venkattchala Thevar App. No. 113 of 1971 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 a Full Bench decision of Our Court in

Ponnappa Pillai. v Pappurayyangar 4 M.L.J. 1 expressed thus:

...The question as to the extent of the son''s liability it 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 subsists from the inception of 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 the creditors.

Again, a Division Bench of our Court in Atchuthoram v. Ratnaji 50 M.L.J. 208 = 23 L.W. 193 which was cited already by us in a different context

upheld the principle of son''s obligation under he doctrine of pious obligation 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 Ex. A-1 and Ex. 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 enterprise. Exs. B-23 to B-25 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 or otherwise.

The question is whether such an activity raises the automatic presumption that such contracts are to be viewed with displeasure and should not

be encouraged and should in any event be characterised as a speculative business. Once again, we are reminded of the observation of Mayne in

the 11th 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 Atchutharam v. Ratnaji 50 M.L.J. 208 = 23 L.W. 193.

In a progressive society like ours and particularly in days where advancement is adopted as the watch-word for progress, it cannot be stated

that the involvement or association of the father-manager or the managers of Hindu family in an activity, though, not the kulachara of the family but

which is not harmful, which is not speculative and which no rational being could characterise as a commercial activity which would invariably result

in the prejudice to the other members, is by itself an indicia that such a trade or business should invariably be characterised as 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 as on the well-known principle 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, and as the debts

evidenced by Exs. 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 Exs. A-1 and B-28, the later mortgages effected by the father-manager over the joint family property is binding on the plaintiffs in O.S. 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 but without costs. The appellants in A.S. No. 59 of 1973 shall pay

the court fee due to the Government.