Thakur Prasad and Others vs Ajodhya Prasad Chaudhury and Others

Rowland, J.—This appeal arises out of a suit for recovery of money from the defendants who are members of a Hindu Mitak-shara joint family. It is alleged in the plaint that for the necessities of the family, defendant 2 who was its karta from time to time took goods on credit or advances of cash from the firm of the plaintiffs. Account was adjusted on 16th Chaith 1327 Fasli and a hathchitha taken. Account was again adjusted on 3rd Chaith 1330 Fasli and a hathchitha taken. Accounts were again adjusted on 5th Aswin 1333 and the adjustment was signed by defendant 2 as karta. Account was again adjusted on 11th Sraban 1335, and defendant 2 executed a hand-note for the balance due. A similar adjustment was made on 1st Asarh 1338, and defendant 2 executed a handnote for the amount due. The last adjustment was made on 1st Jeth 1341, when Rs. 5754 was found due, in proof of which defendant 2 as head of the family, executed a handnote dated 1st Jeth 1341. The suit is to recover the amount entered in the handnote with interest.

It is alleged that all the defendants have been benefited by the money which is previous debt due from the joint family and spent for meeting the family expenses and for the benefit of the joint family of the defendants. Hence all the defendants are liable to repay it. The cause of action is said to have arisen on the day when the handnote was executed and also on 25th Aghan 1343 Fasli, when the demand was made. Interest is claimed at one per cent, per mensem as entered in the handnote. Defendant 2 did not contest the suit; he appeared and admitted the claim but prayed for an instalment decree. Contest was not entered on behalf of other major defendants. The suit was contested only for the minor defendants through the guardian ad litem. The written statement substantially puts the plaintiffs to the proof of all the allegations in the plaint, denies that the suit is maintainable and denies that the minor defendants were benefited.

The plaintiffs gave evidence of the previous indebtedness and of the benefit to all the defendants as well as of the execution of the handnotes. The Subordinate Judge held that the entire family of the defendants was benefited by the loans and transactions, the debts being incurred for the expenses of the family, but he held that the suit was a suit on a negotiable instrument, and as such was not maintainable against the minor defendants or against any of the other defendants besides defendant 2, the executant. He rested this conclusion on a decision of a Single Judge of this Court in Birkeswar Raut Vs. Ram Lochan Pandey and Another, which follows a Division Bench decision, Jibach Mahto Vs. B. Shib Shanker Chaudhry, and proceeds on the principle that in a suit based on a handnote no person other than the signatory of the handnote can be made liable. He gave the plaintiffs an instalment decree against defendant 2 only.

In appeal by the plaintiff it is contended that the handnote was executed by defendant 2 in his capacity as karta of the family and was enforcible against the whole family. It is also contended that the suit is based not entirely upon the handnote, but also on the transactions and indebtedness of the family which themselves gave the plaintiffs a good cause of action against the defendants other than defendant 2. In support of the first contention, he relies on Sirikant Lal and Another Vs. Sidheswari Prasad Narain Singh and Another, in which Fazl Ali J. was inclined to think that the rule laid down by the Privy Council in Sadasuk Janki Das v. Kishen Prasad A.I.R (1918) . P.C. 146 was not applicable to a Hindu family. Fazl Ali J. however rested his decision in that case on another ground namely:

That the suit was in essence a suit for debt and therefore all the members of the family would be liable to repay the debts if they were contracted for legitimate family necessity.

The same learned Judge repeated this opinion and based his decision on it in Baijnath Prasad v. Binda Prasad Singh A.I.R (1939) . Pat 97 and came to the conclusion that in a suit based on a promissory note the plaintiff may prove that the maker of the instrument borrowed money to meet a family necessity and on proving that, may get a decree against all members of the family, but the decree against members other than the karta will be limited to their interest in the joint family property. No doubt that result will follow if the pleadings are so framed as to entitle the plaintiff to rely on the fact of borrowing and to use the negotiable instrument as proof of it. If the learned Judges meant more than that, the decision would be in conflict with Jibach Mahto Vs. B. Shib Shanker Chaudhry, and perhaps difficult to reconcile with the Privy Council decision in Sadasuk Janki Das v. Kishen Prasad AIR (1918) P.C. 146 In the former case, Kulwant Sahay J. said:

The suit as framed being based entirely on the handnote, no person other than the signatory of the handnote can be made liable,

and in the latter case, Lord Buckmaster said:

It would of course have been open to the plaintiffs had they thought fit to have framed their case in an alternative form and to have sued both on the hundis and alternatively upon the consideration. It is indeed urged by the appellants that the plaint in fact embraced both these forms of relief but their Lordships are unable to accept this contention.

Assuming that in order to get the relief he asks for, the plaintiff must sue as a creditor to recover a debt and not as the holder of a negotiable instrument to enforce the instrument; it does not follow that it is the policy of the Legislature to defeat just claims on a technical ground. On the contrary the Courts will, in proper cases, and on such terms as may be just, allow "all such amendments to be made as are necessary for the purpose of determining the real questions in controversy between the parties," and it is unnecessary to cite cases in which such amendment has been allowed. But it is contended that in this suit the plaintiffs are not suing exclusively on the handnote as its holders; they are claiming also on the debt as creditors, and are entitled to succeed without any amendment of the plaint.

For the respondents, stress is laid on para. 8 of the plaint and on the form of the account claimed. In para. 8, it is said that the cause of action arose on the date on which the handnote was executed as also on Aghan 25, 1343 Fasli, when demand was made. The items of account are "handnote of Rs. 5754" and interest from the date of execution. But the body of the plaint recites a long series of transactions--the purchase of goods on credit, the borrowing of money in cash and so on. It is said that so much was found due and "as proof thereof" defendants signed the account and "as proof" of the amount due, defendant executed a hath-chitha. The words "as proof thereof" appear repeatedly in paras. 3, 4 and 5 of the plaint.

In my opinion it would be taking too narrow a view to hold that the cause of action relied on by the plaintiffs in their pleading is exclusively the handnote. The action appears to be based on the debt with the handnote as proof of it. The words in para. 8 of the plaint can be explained as intended to give a date from which limitation is to run. With regard to the effect of such an acknowledgment, it is enacted in Section 21(3), Limitation Act, that

where a liability has been incurred by or on behalf of a Hindu undivided family as such an acknowledgment or payment made by or by duly authorized agent or the manager of the family for the time being shall be deemed to have been made on behalf of the whole family

for the purposes of Sections 19 and 20, that is to say for the purposes of saving limitation against them: in effect it keeps alive their liability, as debtors, to be sued for the debt, which is not the same as imposing on each of them a new liability as a drawer of a negotiable instrument. In my opinion the plaint can and ought to be read as claiming repayment of a debt evidenced and acknowledged by the handnote. In that view it is maintainable against all the defendants.

We have only to see whether all the defendants were benefited by the transactions. The plaintiffs'' witness has asserted this in his evidence and it is not controverted by any evidence. I would accept the finding of the learned Subordinate Judge that the entire family of the defendants including the minors were benefited by the transactions. That being so, the suit should have been decreed against all the defendants with the reservation that except defendant 2 the other defendants are liable only to the extent of their share in the joint family property.

In conclusion, we were asked to take into consideration the provisions of the Bihar Money-lenders Act, 1938, and to reduce the amount of interest. But the rate of interest which is 12 per cent, simple does not contravene the Act. It is said that successive renewals of handnotes have had the effect of charging compound interest and that in such a case Section 12 empowers the Court to re-open the transactions. The Court is not however bound to do this, and we are not disposed to do so in this case in which the lender firm appears to have behaved reasonably and forbearingly to wards their debtors. I would therefore allow the appeal with costs and decree the claim in full against all the defendants subject to the reservation that except defendant 2 the others are not personally liable and I would allow the plaintiffs their costs of the appeal.

Dhavle J.

The view of the lower Court that the suit is based on the last handnote and not on the original loans does not attach sufficient weight to the allegations in paras. 3 and 7 of the plaint that defendant 2, as head of his family, used to take cloth and borrow money "according to necessity for meeting the necessities and for the benefit of his joint family" and that all the defendants have been benefited by the money sued for

which is previous debt due from the joint family, and the same debt has been spent for meeting the expenses and for the benefit of the joint family of the defendants.

The succession of hathchithas and hand notes is also repeatedly referred to in the plaint as "proof of the amount due," "proof of the sued amount," "proof of the amount remaining due" or "proof thereof". It is true that in stating in para. 8 when the cause of action arose, reference is made to the last handnote and to the last demand ; but this, it is obvious, was merely intended to state the terminus a quo for the limitation applicable, and cannot be taken to mean that the suit was intended to be merely a suit on the handnote. If it is the handnote that is referred to in the account at the end of the plaint, this also cannot be taken as an indication that the suit was intended to be a suit on the handnote alone; a suit for the recovery of the debt may quite easily have contained the same account. Nor was the suit in fact tried as a suit on the handnote alone, for in a suit of that kind issue 3, "whether the minors were benefited by the loan," would not have been required to be framed. It therefore seems quite clear that the suit was both on the handnote and on the debt -- the latter especially as regards defendants other than defendant 2 who alone executed the hand, note. The liability of the maker of the handnote is undoubtedly more extensive than that of the other members of the family, but would not be affected by the circumstance that the suit was alternatively a suit on the debt.

As regards the Money-lenders Act, the maximum rate of interest in the case of unsecured loans, namely 12 per cent, per annum in the case of an unsecured loan, prescribed in Section 9 of the Act, expressly applies to loans advanced after the commencement of the Act, while the loan and the handnote in suit are dated 1934 and carry interest at no more than the maximum rate already referred to. If Section 12 of the Act be taken to apply the Court would be at liberty to reopen the transaction; but the circumstances of the case are not such as to warrant the exercise of that power. I therefore agree in the order proposed by my learned brother.

In the view that we have taken of the character of the suit before us, it does not seem to me very necessary to deal with the question whether a decree may be passed in a suit on a promissory note (upon the plaintiff proving that the note had been executed by the karta for a loan for the purposes of the joint family) not only against the karta personally, but also against the other members of the joint family, limited to their interests in the property of the joint family. In Baijnath Prasad v. Binda Prasad Singh AIR (1939) Pat 97 . Fazl Ali J. (with the concurrence of the late Chief Justice) answered the question in the affirmative. He had previously expressed the same opinion, without however basing his decision on it, in Sirikant Lal and Another Vs. Sidheswari Prasad Narain Singh and Another, The learned Subordinate Judge decided the present case before the ruling in Sirikant Lal and Another Vs. Sidheswari Prasad Narain Singh and Another, p> 16. He was referred to Jibach Mahto Vs. B. Shib Shanker Chaudhry, but thought that this did not help the plaintiffs. Now, in Jibach Mahto Vs. B. Shib Shanker Chaudhry, the lower Court had passed a decree on a handnote not only against the executant but also against his younger brother on the ground that they were members of a joint Hindu family. Kulwant Sahay J., (with the concurrence of the late Chief Justice) reversed this for two reasons:

In the first place the suit as framed being based entirely upon the handnote no person other than the signatory of the handnote can be made liable. In the second place, assuming that the suit was framed on the original transaction and not on the handnote, even then no decree could have been made against defendant 2 without a finding that the loan was for the benefit of the family.

It will be observed that this was not a decision on the liability of the joint family when the karta executes a handnote for the purposes of the family. The first of the reasons given by Kulwant Sahay J. was followed by Wort J. (as he then was) sitting singly in Sheikh Bhukhan Mian Vs. Srimati Radhika Kumari Debi and Another, on the authority of which the lower Court has held that no decree can be passed against members of the joint family other than defendant 2, the executant. It seems how-ever that in Sheikh Bhukhan Mian Vs. Srimati Radhika Kumari Debi and Another, there was a finding that the handnote had been executed for the joint family necessity, such as there was not in Jibach Mahto Vs. B. Shib Shanker Chaudhry, . The decision was rested on the fact that the action was based on the handnote alone, and it is not stated that the case was of that rare kind in which there is no cause of aotion apart from the handnote itself: see Shikh Akbar v. Shikh Khan (1881) 7 Cal. 256 which was discussed last year in Laduram Marwari v. Bansidhar Marwari A.I.R (1937). Pat. 527 by Varma J. and myself. The decision of the Judicial Committee in AIR 1934 4 (Privy Council) on which Fazl Ali J. relies was distinguished by Wort J. as an action against the surviving members of the family after the person who has executed the promissory note was dead, and therefore in substance an action for the original consideration. Speaking with all respect, it is difficult to accept the distinction, for, Lord Thankerton began his judgment in AIR 1934 4 (Privy Council) by describing the appellants as plaintiffs in "an action on two promissory notes." As Fazl Ali J. pointed out in Sirikant Lal and Another Vs. Sidheswari Prasad Narain Singh and Another, the distinction between suits based on promissory notes and suits for the recovery of debts

becomes highly artificial in many oases, first because, except in a few mercantile towns, a pro-missory note is not popularly regarded as a negotiable instrument, and secondly, because the distinction depends largely on the view one takes of the pleadings and the pleadings in the mufassil Courts are generally defective and badly drafted.

When we come to apply the distinction to a joint Hindu family, it has to be remembered in the first place that all debts raised by the karta of such a family for family purposes bind the family property, and secondly, that suits for the recovery of debts borrowed by the karta of a joint family can be resisted by other members of the family on the ground that they were not supported by family necessity. The latter of these rules will certainly apply whether or not the debts were raised on handnotes. While the other members of the family cannot be made liable without proof of family necessity, they cannot, if such necessity is made out, escape liability to the extent of their interests in the joint family property--in the execution proceedings, if not in the suit itself.

Moreover, if the whole family is sued on the karta''s handnote alone but coupled with the allegation that the loan was taken for family necessity, the majority of the reported decisions show a disinclination on the part of the Courts to dismiss the suit as against the other members of the family in case the family necessity (or benefit) is made out. Neither the Negotiable Instruments Act nor justice would seem in such cases to require anything more than at the most a formal amendment of the plaint setting up the debt as an alternative oause of action: see Vithalrao Sheshgirirao Moktesar Vs. Vithalrao Sondekar, With or without such a formal amendment, the suit would, in substance, be a suit of a composite character. The liability of the karta as the executant of the handnote would be irrespective of whether or not the loan was binding on the family and would be a personal liability; the liability of the other members would be grounded if not on the objection of the hand, note as such, then on other considerations and would be limited to their interests in the family property.

As in Krishnanand Nath Khare Vs. Raja Ram Singh, Fazl Ali J.''s view is based on the consideration that the karta of a joint family is not a mere agent (to whom the rule in Sadasuk Janki Das v. Kishen Prasad A.I.R (1918) . P.C. 146 will apply) when he executes a hand, note for the purposes of the family; and no reference has been made in any of the reported decisions to anything in Hindu law to prevent the karta from borrowing on handnotes for the purposes of the joint family. And as the learned Judge has pointed out, if it had really been the view of the Judicial Committee that the principle laid down in Sadasuk Janki Das v. Kishen Prasad A.I.R (1918) . P.C. 146 applies to the karta of a joint Hindu family, the appeal in AIR 1934 4 (Privy Council) would hardly have been dis. posed of on the very different ground that the borrowing by the karta could not be presumed, and was not proved, to have been for the purpose of the joint family business.