Sanka Krishna Murthi, by guardian ad litem Sriram Lakshmikantham vs The Bank of Burmah, Limited

Wallis, J.—This is an appeal from a judgment of Mr. Justice Sankaran Nair sitting on the original side by which the plaintiff Bank recovered

judgment against the assets of the minor defendant on five Promissory Notes made on the 19th and 24th July 1908 for Rs. 9,100 in all by one

Lakshminarasimham acting under a power of attorney from the minor''s mother and natural guardian who was carrying on business under the style

of Sanka Ramasami & Son. The business was a joint family business carried on by the father on behalf of himself and the minor under his own

name, and on his death his interest passed by survivorship to the minor who became the sole owner. The notes were signed by K.A.

Lakshminarasimham, P.P. Sanka Ramasami & Son, and were made in favour of the firm of C. Lakshmikantham & Co., of which

Lakshminarasimha was the leading partner and were discounted by Cantham & Co., with the plaintiff Bank who credited them with the amount of

the bills. At the time Cantham & Co. were of good credit, but indebted to Sanka Ramasami & Son in about Rs. 20,000 on a balance of accounts.

Within a month they absconded and were adjudicated insolvents and the plaintiff now seeks to recover the amount of these bills from the minor

defendant.

According to the evidence the Bank were aware that the agent by whom the notes were signed was a partner in the firm of Cantham & Co., in

whose favour they were made but did not know that the business of Sanka Ramasami & Son belonged to a minor as they omitted to inspect the

power of attorney. It is, however, well settled that the signature having been made per proc. they must beheld to have notice of the contents of the

power and therefore of the fact that the business belonged to a minor and of the extent of the agent''s authority under the power. The learned judge

has found that the notes must be treated as made by the mother and guardian herself and having regard to the recitals in the power that as mother

and guardian of her son she was desirous of carrying on business under the style of Sanka Ramasami & Son and to the power it conferred upon

the agent ""in her name and on her behalf in her capacity as mother and guardian to carry on the said business and sign, make, draw, accept,

endorse and negotiate all cheques, receipts, letters, accounts, promissory notes, hundis, drafts, bills of exchange, indents, invoices and delivery

orders and all other papers, whatsoever,"" I think the learned judge was right and that the notes must be treated as purporting to be made by the

mother and guardian carrying on the business of Sanka Ramasami & Son by her agent under the power. The case for the respondents is that it was

necessary and proper for the mother and guardian to carry on during the minority the ancestral business to which her own son had succeeded, and

for that purpose to appoint an agent to carry it on and to give such agent power to draw bills and promissory notes in her name, on the ground that

such a drawing of bills and notes is necessary and incidental to the carrying on of a business and that the business could not be carried on without

it, and they contend that the minor, though not a party to notes made by his guardian, is liable on them to the extent of his estate.

The learned judge agreed with these contentions and was of opinion that the liability of the minor in these circumstances is similar to that of a

minor member of a Joint Hindu trading family for bills drawn by the managing member. The extent and nature of this liability have recently been

considered in Ragunath Tarachand v. The Bank of Bombay ILR (1909) B. 72 where it was held that the minor was liable to the extent of his share

in the firm on bills or notes drawn by the managing member in the name of the firm but in fraud of it and for purposes unconnected with it. In so

doing Chandarvarkar J. applied the rule laid down by Sausse C.J. in Ramlal Thakursidas v. Lakshmichand Mumram (1861) 1 Bom. H.C.R. 51

that ""in carrying on such a trade, infant members of the undivided family will be bound by all acts of the manager (or the adult members acting as

managers) which are necessarily incidental to and flowing out of the carrying on of that trade. * * * The power of a manager to carry on a family

trade necessarily implies a power to pledge the property and credit of the family for the ordinary purposes of that trade."" It is, in my opinion,

unnecessary to consider the reasoning by which the learned judge satisfied himself that this ruling was in accordance with the Smrithis and their

commentaries because it seems to me the general principles laid down in the above passage are far too well settled to admit of question at the

present day. The important point expressly decided for the first time in this case is that minors are to be bound not only on bills or notes drawn or

made in the carrying on of the business, but on such bills or notes drawn or given by the persons carrying on the family business for purposes

unconnected with the business. All that Sausse C.J. says in Ramlal Thakursidoss v. Lakshmichand Muniram (1861) 1 Bom. H.C.R. 51 is that

third parties in the ordinary course of bona fide trade dealings should not be held bound to investigate the status of the family * * * whilst dealing

with him on the credit of the family property."" This does not seem to mean more than that it is unnecessary to enquire whether there are minors or

not. Similarly the remarks of Pontifex J. in Johhirabibee v. Sreegopalmisser ILR (1876) C. 470 at p. 475 are confined to ""debts honestly incurred

in carrying on such business."" Similarly in Sankrabhai v. Moganlal ILR (1901) B. 206 it was held that where an ancestral business descends to and

is carried on by a widow, the reversioners are liable for debts properly incurred by her in connection with the business on the ground that so far as

carrying on the business is concerned her position is analogous to that of the manager of a joint Hindu family.

The question of liability on bills drawn for purposes unconnected with the business and in fraud of the family did not arise in these cases but it

seems to me that as held by the learned Judges the minor in such a case is liable to the extent of his interest in the firm, and this for the reason given

by Batchtlor J. in his judgment that we must be guided by the analogy of the law of partnership as joint Hindu family business is a peculiar sort of

partnership.

In England according to the judgment of the House of Lords in Lovell and Christmas v. Beauchamp (1894) A.C. 611 a minor may be a partner,

but judgment cannot be obtained against him on a partnership debt but the adult partner is entitled to insist that the assets are applied in the first

instance in satisfaction of the partnership debts and if the proper steps are taken the right can be made available for the benefit of the creditors. In

India Section 247, Indian Contract Act, which allows a minor to be a partner and declares the share of the minor in the property of the firm to be

liable for the obligations of the firm, has much the same effect and renders Section 251 so far applicable. u/s 251 each partner who does any act

necessary for or usually done in, carrying on the business of such a partnership as that of which he is a member binds his co-partnership to the

same extent as if he were their agent duly appointed for that purpose; and Illustration (a) shows that where A and B are partners and A in the name

of the firm draws a bill of which B has no notice and any transaction in which he has no interest, still B is liable on the bill. In the same way it seems

to me a minor member of a joint Hindu trading family should be held liable on a bill drawn b) the manager, his liability being limited to his share in

the business on the analogy of Section 247. These are the grounds on which Batchelor J. based his judgment and I think the conclusion is not only

sound but also in accordance with convenience. There will generally be minors in a joint Hindu trading family and it is desirable that such families

should be in a position to trade as freely as other firms. I am not, however, prepared to apply this rule to minors who are not trading in partnerships

but are sole owners of the business without a separate consideration of the law affecting guardian and minors, etc, the extent to which a minor is

liable on contracts made by his guardian. In Waghela Rajsanji v. Shek Masludin ILR (1887) B. 551 has been held by their Lordships of the

judicial Committee that in India a guardian has no power to bind his ward by a personal covenant. There the guardian had alienated part of the

ward''s lands in satisfaction of a debt binding on the ward and had covenanted on behalf of himself and the ward to indemnify the creditor if the

land turned out not to be rent free. Though the covenant was apparently beneficial to the minor their Lordships held it was not binding on him. At

page 561 occur the following observations which appear to show how the present case should be approached. ""Now it was candidly stated by

Mr. Mayne that there is not in Indian law any rule which gives a guardian or manager greater power to bind the infant ward by a personal covenant

than exists in English law. In point of fact, the matter must be decided by equity and good conscience generally interpreted to mean the rules of

English law if found applicable to Indian society and circumstances. Their Lordships are not aware of any law in which a guardian has such power

nor do they see why it should be so in India. They conceive it would be a very improper thing to allow the guardian to make covenants in the name

of his ward so as to impose a personal liability upon the ward."" In Indurchunder Singh v. Radhakrishore Gose ILR (1892) C. 507 where the

guardians had taken certain lands on lease in their own names, but as was alleged for the benefit of the minor, their Lordships held that neither the

minor nor his estate could be made liable on the contract.

On the above decisions it appears to me that neither the minor nor his estate as such can be held liable on the notes sued on.

In order to see whether the holders of the notes are entitled to any recourse against the minor it is necessary in the first place to ascertain the rule

of English Law as embodying prima facie, according to their Lordship''s observations, the rule of justice, equity and good conscience which we are

bound to apply.

Further if the minor is the sole owner of the business it does cot seem to make much difference whether he has acquired it by birth and

survivorship as here or by inheritance or bequest as in England. In either case it seems to me what has to be considered is the interest of the minor.

In England a guardian is not ordinarily entitled to carry on a business to which the ward bas succeeded and in Land v. Land (1874) 43 L.J. 311 Sir

George Jessel after a search for precedents held that the court had no jurisdiction to allow this to be done unless in pursuance of testamentary

authority or at the instance of creditors of the estate. Mr. Simpson in his book on ""Infants"" suggests that the rule is too strictly stated and that one

precedent was overlooked. In India at any rate the rule appears to be otherwise. In Joy Kistocoowar v. Nittyanund Nundy ILR (1878) C. 738 it

was held that a widow and natural guardian may properly carry on a family business belonging to a minor son through a manager, and lam not

prepared to differ from this decision which, so far I know, has never been questioned and merely recognizes the usual practice. But it appears to

me that even so the same rule must apply as when the legal representative or guardian is allowed to carry on the business in England, and that the

guardian or legal representative and not minor or beneficiary on whose behalf the business is carried on is the person personally liable on contracts

entered into in the course of the business Labouchere v. Tapper (1857) 11 Moo. P.C. 198. Creditors of the business have therefore no right of

direct recourse against the minor or his estate, but as the guardian is entitled to indemnity for liabilities properly incurred out of the assets of the

minor embarked in the business, creditors of the business, it has been held, are entitled to proceed directly against such assets. Where, however,

the guardian has no right to indemnity against the assets in the business, as where he has acted improperly, neither have his creditors, as held by Sir

George Jessel in In re Johnson (1880) 15 Ch. D. 548. which was followed in In re Evans (1887) 34 Ch. 597.

Applying these principles it appears to me that the plaintiff can at most be entitled to a decree against the assets embarked in the business and

that the decree against the estate of the minor went too far in my view. In his judgment the learned Judge observed that it was not alleged or

proved that the minor had any property not devoted to the trade, but this, it appears to me, is a matter to be ascertained in execution.

Two questions, then, remain. Is the guardian liable on the notes made by the agent as acting under the apparent authority conferred by the

power Bryant Powis and Bryant v. Quebec Bank (1893) Ap. Cas 130 and is she entitled to indemnity for this liability against the minor''s assets in

the business? Before dealing with these questions it may be well to refer to the terms of the power and the circumstances under which it was given.

No exception can be taken to the particular agent chosen. He had married the minor''s sister, had been entrusted with a power of attorney by

Sanka Ramasami during his lifetime, and was the head of the large firm of Cantham & Co., then (June 30th) in good credit though it failed within

the next two months. It was already probably in difficulties and we find that on March 15th the agent had raised Rs. 7,500 on promissory notes

executed under the power in favour of his own firm. These sums do not find any place in Sanka Ramasami''s account in the books of Cantham and

Co., Exhibit 15, or in Cantham and Co.''s account in Sanka Ramasami''s books, and as the notes retired before they fell due, it does not appear

whether the use made of the power to raise funds for Cantham and Co. at a time when they were already indebted to his firm came to Ramasami''s

knowledge before his death in June 1908. Shortly afterwards on June 30th the agent procured from the widow the power now in question, Exhibit

G, by which he was authorised, among other things, ""to lie in charge of, look after, manage, conduct, and carry on under the style of Sanka

Ramasami & Son the family business of general merchant and commission agent heretofore carried on under the style of Sanka Ramasami, to enter

into any contracts or agreements of any kind with any other persons, firm, or firms, company or companies, to deposit or withdraw monies in or

from any bank or banks, company or companies, and sign, make, draw, accept, indorse or negotiate all cheques, receipts, letters, accounts,

promissory notes, hundis, drafts, bills of exchange, indents, invoices and delivery orders and all other papers what-sover.

Under this power he executed two promissory notes for Rs. 4,100 in favour of Cantham & Co., on, July, 19th and Rs. 5,000 on July 24th and

discounted them with the plaintiff : Bank. The substance of the transaction was that the Bank lent money to Cantham & Co., according to the

common practice on two signatures, its own as indorsers and that of Sanka Ramasami & Son as makers of the notes, the notes being made by the

agent under the power in favour of the firm of Cantham & Co. to which he himself belonged. Now it is not at all clear that the words of the power

which authorised him to enter into any contracts or agreements of any kind with any other person or persons, firm or firms, authorised him to make

a promissory note in favour of his own firm. And assuming there is no express restriction it seems to me open to question whether the power

authorised the agent to execute promissory notes in favour of his own firm, and whether holders taking with notice of the fact are entitled to

recover upon them. According to the American authorities an agent is not entitled to execute negotiable paper in his principal''s name for his

individual purposes and subsequent holders taking with notice that he has done so cannot recover against the principal. See Daniel on ""Negotiable

Instruments,"" Section 282, citing Stainback v. Read and Co. (1854) 62 Am. Dec. 648 Lord Blackburn''s query in Jonmen Jony Coondoo v.

Watson (1884) 9 A.C. 561 points the same way, but in the Bank of Bengal v. Macleod (1849) 5 M.I.A. p. 1 their Lordships held that power to

indorse included power to indorse in the agent''s own favour and the observations in Jonmen Jony Coondoo v. Watson (1884) 9 A.C. 561 leave

the question open. It maybe possible to distinguish these cases but it is unnecessary to decide the point because, in my opinion, assuming the notes

to have been duly m de in the exercise of the power and the guardian to be liable upon them, neither the guardian nor the holders have any right of

recourse against the minor.

Sankaran Nair J.

Decided in the plaintiff''s favour mainly on the ground that it was proper for the guardian to carry on the business through an agent and to give

the agent power to execute negotiable instruments and that the business could not be carried on, as he says, without drawing hundis. There is much

to be said for this view especially as a Hindu widow would not generally be competent to reserve the exercise of such a power to herself. At the

same time there can be no doubt that the result of so holding must be to expose the minor''s estate to a degree of risk that can only be justified on

the ground of its being a lesser evil than closing the business, and here it may be observed that the risk to the minor sole owner is undoubtedly

much greater than that of the minor member of a joint Hindu trading family whose interests are identical with those of the adult members having

control of the business. In these circumstances it seems clear that the guardian cannot, in any view, be justified in giving any larger powers than are

reasonably necessary. Assuming it to be necessary to give the agent power to draw bills and promissory notes, it appears to me that it cannot be

necessary, and it has certainly not been shown to be necessary, to give him power to draw in favour of himself or his firm while to do so must

greatly and unnecessarily increase the risk to the minor''s estate. The giving of such an unrestricted power is, I think, improper, and if, as the result

of giving it, the guardian finds herself involved in liability for the fraud of the agent, she has no right of indemnity against the assets of the minor in the

business nor are her creditors entitled to claim through her. This ground is, in my opinion, sufficient, for the reasons already given, to dispose of the

case and the appeal must accordingly be allowed and the suit dismissed with costs throughout.

Munro J.

I agree.