Thadi Murali Mohan Reddi vs Chinta Brahmayya and Others

Venkataramana Rao, J.—This appeal arises out of a suit brought to recover the amount due under two promissory notes dated 12th

November, 1930 and 5th December, 1930, executed by one Bulli Gangireddi. the deceased father of the defendant in favour of the plaintiff. At the

date of the execution of the suit promissory notes the defendant and his father were members of a joint family and undivided. The father was

carrying on a family business and the suit debts were incurred in the course 01 that business. The father was adjudicated insolvent on 13th

November, 1931, on a petition filed by his creditors. Before the order of adjudication, the defendant represented by his next friend filed a suit for

partition against his father and on 16th November, 1931, a preliminary decree for partition was passed and it has since been brought to our notice

that a final decree was passed on 6th. April, 1935. The plaintiff proved his debt before the. Official Receiver but no dividend was paid to him on

the date of the suit for even up to the date of the decree in the lower Court. The learned Subordinate Judge gave a decree in favour, of the plaintiff

and this appeal has been preferred by the defendant.

Several defences were raised in the lower Court but Mr. Raghava Rao his learned Counsel has confined himself to two main defences, (1) the

suit is barred by limiitation; and (2) the suit is incompetent by reason of (a) the leave of the Insolvent Court was not obtained before the institution

of the suit u/s 28 (2) of the Provincial Insolvency Act, and (b) the Official Receiver not having been made a party to the suit, the suit against the

defendant alone on a debt contracted by the father is not maintainable.

In regard to the first contention the lower Court relied upon a deed of composition (Ex. D), dated 22nd March, 1933, filed in the Insolvency

Court as an acknowledgment of the debt by the father. The main contention of Mr. Raghava Rao is that the composition deed would not operate

as an acknowledgment. He has taken us through the terms of the composition deed but was not able to convince us that the view of the lower

Court was wrong. Ex. D is signed by the insolvent and the creditors including the plaintiff. This contention must therefore be overruled.

The next contention relates to the maintainability of the suit. The first branch of his contention is in regard to the necessity for the leave of the

Insolvent Court as a condition precedent to the institution of the suit. Section 28 (2) of the Provincial Insolvency Act runs thus:

On the making of an order of adjudication, the whole of the property of the insolvent shall vest in the Court or in a receiver as hereinafter provided,

and shall become divisible among the creditors, and thereafter, except as provided by this Act, no creditor to whom the insolvent is indebted in

respect of any debt provable under this Act shall during the pendency of the insolvency proceedings have any remedy against the property of the

insolvent in respect of the debt, or commence any suit or other legal proceeding, except with the leave of the Court and on such terms as the Court

may impose.

In view of the recent decisions of the Privy Council and of this Court, on the insolvency of the father, the share of the son will not vest in the Official

Receiver and it will not be the property of the insolvent within the meaning of the said clause.'''' Though the share of the son does not vest, the

decisions have laid down that the power of the father to sell the son''s interest will vest in the Official Receiver. But that power ceases the moment

the severance of interest between the father and the son takes place and in this case the severance has taken place. Mr. Raghava Rao was not

therefore able to sustain the argument with reference to Section 28 (2) of the Act based on the expression ""the property of the insolvent"".

He next contended that Section 28 (2) prohibits the commencement of any suit or legal proceeding in respect of a debt and therefore even a suit

against the son without the leave of the Court is prohibited by that section. The words ""commence any suit or other legal proceedings"" must be

construed as referring to a suit or other proceeding against an insolvent having regard to the context. No doubt the words are general but if the

wide interpretation as contended by Mr. Raghava Rao is given, it would mean that a creditor is prohibited from filing a suit"" even as against a

person who is jointly indebted with the insolvent and whose property could not have vested in the Official Receiver. We do not think it was the

intention of the Legislature to prohibit all suits in respect of the debt even as against persons over whom or whose assets the Insolvent Court would

have no control. We are therefore of the opinion that this contention also is not tenable.

The next contention of Mr. Raghava Rao is that the Official Receiver must be a party to the suit as the legal representative of the father on the

ground that it being a debt contracted by the father, no relief could be given against the son unless the person who entered into the contract or his

legal representative is a party to the suit. In support of his contention he relied upon the following passage in Mulla''s Law of Insolvency:

Where a debt has been contracted by the father for his personal benefit he is primarily liable to discharge it. Such being the case the son alone

cannot be sued during the father''s lifetime.

It will be seen that this proposition was. based by Mulla on an observation by Bhashyam Aiyangar, J., in Periasami Mudaliar v. Seetharama

Chettiar (1903) 14 M.L.J. 84 : ILR Mad. 243 In that case the learned Judge was dealing with a case where the father and. son were undivided

and the exact point for decision was whether a suit could be filed against the son after the father''s death on a decree obtained by a creditor against

the father alone during his lifetime. It was held that the decree creates a debt which is a debt of contract or record and a suit was maintainable. No

doubt this dictum was approved in later cases (vide A.R.P. Narayanan Chetti and Others Vs. Kana Pana Veeanna Rana Virappa Chetti and

Others, and Taduri Ramachandra Jagannatharao and Others Vs. Vadrevu Viswesam, . Prom the observations of the learned Judges in those cases

it will be seen that they were confining the dictum to cases where the son and the father were undivided. But how far this is applicable to cases

where there was division between the father and son and also where insolvency supervenes is. not free from difficulty. We think it unnecessary to

discuss the scope of this principle as the facts in this case are different. The debt here was contracted by the father as the managing member of the

joint family in the course of the joint family business. The debt was therefore a joint family debt and as much a debt, of the son as that of the father.

The father is dead and further the father and son became divided before the suit was instituted. In Bankey Lal v. Durga Prdsad I.L.R.(1931) All.

868 Sulaiman, C.J., explained the nature and extent of the liability of a junior member of a family for a debt contracted by the manager for family

necessity or for family benefit thus:

As regards debts which had been incurred by the father before the partition took place and had been for family necessity or benefit, the liability

continues on all the members even after the separation. The reason is obvious. These debts had been incurred by the manager for the benefit of all

and his capacity was analogous to that of an agent. All the other members were therefore principal debtors, but their liability was not personal and

was confined to the joint property that might be available.

Therefore when division takes place the sons continue to be liable to pay the said debt from and out of the property in their hands. In this case

the creditor has proved his debt against the father in insolvency. No doubt it was open to the Official Receiver to have secured the son''s share for

the payment of the debts due to the father''s creditors in the suit for partition by asking for a provision being made by setting apart sufficient

property for their discharge. In this case though the Official Receiver was made a party to the suit, he has not availed himself of that remedy which

was open to him and which he was bound to have sought as one administering the property in insolvency for the benefit of the creditors. But the

fact that the Official Receiver failed to do so would not deprive the creditor of his right to realise the amount due to him from the son''s share.

Whether the creditor would be entitled to appropriate the whole of the sale proceeds of the son''s share and what remedy will be open to the

other creditors or even to the Official Receiver in regard to the said sale proceeds are matters on which we refraiin from expressing any opinion.

The only question is whether in the circumstances of this case the creditor is not entitled to maintain the suit against the defendant. As the defendant

is liable to pay the debt which was contracted on his behalf by the father who was also the manager from and out of, the share of the joint family

property in his possession, a suit against him by the creditor Would be competent especially where necessary steps to enforce the relief against the

father have been taken in proceedings in insolvency. We think it unnecessary to express any opinion on the question whether, if the family, is

undivided, it would be open to a creditor to maintain the suit against the other members without imploading the manager or the Official Receiver.

Mr. Raghava Rao next submitted that if we were not inclined to agree with him in his contention he would suggest the addition of the Official

Receiver as a party to the suit relying on certain observations of the Privy Council in AIR 1922 237 (Privy Council) in order that his client may not

be harassed by a multiplicity of proceedings from various creditors and Mr. Rama Rao had no objection to add him as a party. But it seems to us

that there is no use at this stage in adding him as a party apart from the question whether that course would be feasible or not We find that the

property has been sold and the sale proceeds have been rateably distributed among all the creditors among whom the said sale proceeds would

have been distributed by the Official Receiver if he himself had realised them. There is therefore nothing which the Official Receiver can do at

present.

We are therefore of the opinion that the suit as laid was competent. The appeal fails and is dismissed with costs.

Advocate''s fee Rs. 150.

Appeals Nos. 322 and 323 of 1937 and 12 to 18 of 1939 are dismissed following our decision in Appeal No. 321 of 1937. So far as the

costs are concerned, the respondent will get the printing charges in each of these appeals. So far as the advocate''s fees are concerned, we give

Mr. A. Satyanaryana Rs. 100 in Appeal No. 12 of 1939 and Mr. Mangachary Rs. 100 in Appeal No. 14 of 1939.

Mr. Ch. Raghava Rao has put in applications in all the appeals to scale down the debt (C.M.Ps. Nos. 4029 to 4035 of 1939 and 5519 to

5521 of 1940), and they will be forwarded to the lower Court and the decree in the said appeals will be subject to the reliefs the applicants will get

in these petitions. The respondents will have leave to file their counter affidavits in these petitions.

The appellants will pay court-fee to the Government on the memoranda of appeals.