The Chikkottil Rama Variar, Sammadayi of Nhuralath Devaswom vs Ananthanarayana Pattar and Others

Viswanatha Sastri, J.—Defendant 5, the Samudayi of a Malabar Devaswom, seeks a revision of a decree of a Small Cause Court passed

against the assets of the Devaswom. On 18-10-1943, the four Uralars of the Devaswom executed a promissory note, Ex. A. 1, in favour of the

plaintiff in these terms :

On demand, we, the Uralars of Nharalath Devaswom, namely, (1) Vasudevan Nambudir, son of Vasudevan Nambudir, (2) Vasudevan

Nambudiri, son of Parameswaran Nambudiri, (3) Thuppan Nambudiri, son of Damodarau Nambudiri, and (4) Padmana-bhan Nambudiri, son of

Parameswaran Nambudiri, hereby promise to pay to Ananthanarayana Pattar (plaintiff) or order the sum of Rs. 750 with interest thereon at 6 1/4

per cent. per annum. The entire consideration amount has been received to the satisfaction of the aforesaid devaswom in the following manner ....

Thus, the entire consideration amount has been received to the satisfaction of the aforesaid Devaswom.

(Sd.) Vasudevan Nambudiri

(Sd.) Vasudevan Nambudiri

(Sd.) Thuppan Nambudiri

(Sd.) Padmanabhan Nambudiri.

It is conceded by Mr. D. A. Krishna Variar, the learned advocate for the petitioner, that this promissory note was the last of a series of prior

promissory notes which had been renewed in succession and that the amount borrowed under the earliest of the promissory notes was applied for

the discharge of a possessory mortgage of the lands of the Devaswom. That the debt was borrowed for a proper and necessary purpose of the

Devaswom is not disputed; but it is contended that a decree should not have been passed against the assets of the Devaswom in this suit instituted

for recovery of the amount due under the promissory note, Ex. A. 1.

In Swaminatha Aiyar v. Srinivasa Aiyar, 32 M.L.J. 259 : AIR 1918 Mad. 533, Abdur Eahim and Spencer JJ. held following the decisions in

Strickland v. Symons, (1884) 26 Ch. D. 245: 53 L. J. oh. 582 and Shearman v. Robinson, (1880) 15 oh. D. 548 : 49 L. J. Ch. 745 that the fact

that the money borrowed by the trustee of a temple was utilised for the purposes of the temple would not entitle the creditor to a decree against the

assets of the temple. This decision was followed and applied by King J. in Chettikulam Sri Ekambareswaraswami and Dhandayudapani Swami

Temple Vs. Veerappa Gounder and Another, where the suit was on a promissory note on the same terms as in the present case. The learned

Judge distinguished his own earlier decision in Ekambara and Chettikulam Sri Ekambareswaraswami and Sri Dhandayudhapaniswami Temples Vs.

Arunachala Goundar and Another, on the ground that in that case there was a promise by the trustee to pay the debt out of the temple funds.

These were the cases relied on by the petitioner.

There are other decisions to which reference may be made. In P.N. Madhava Rao, Executive Officer of Perdoor Sri Ananta Padhmanabha

Temple Vs. C. Vaikunta Kamath and Others, , Happell J. following the decisions cited above, held that a decree could not be passed against the

assets of a temple in a suit on a promissory note executed by the trustee describing himself as a trustee in the body of the note, in spite of the fact

that the debt was borrowed for the purposes of the temple. In P. Balavenkatarama Chettiar and Others Vs. Maruthamuthu Chettiar and Another, ,

Patanjali Sastri J. held that on a promissory note similar to the one in the present case the trustees alone were personally liable. He stated his

reasons in these words :

In the case of a trustee or manager of a charity borrowing money on a promissory note, the undertaking to pay which such execution necessarily

imports, can he imputed only to the executant, as there is no principal who can be bound by such undertaking and it is difficult to see how such a

person can borrow on a promissory note without incurring thereby personal liability. To attribute to the parties in such cases an intention to exclude

the personal liability of the executant would, in effect, be to nullify the unconditional undertaking contained in the instrument. Hence it is, I

apprehend, that Courts have always inclined to the view that trustees or Managers borrowing money on promissory notes incur personal liability.

The learned Judge followed the decision in Palaniappa Chettiar v. Shanmugham Chettiar, 41 Mad. 815 : AIR 1919 Mad. 616 where all the earlier

cases of this Court were reviewed by Wallis C. J. and Spencer J. There, the learned Judges held that a trustee who executed a hundi on behalf of

a charity and signed his name as trustee was, nevertheless, personally liable for the debt and that no decree could be passed against the charity

properties. They were of the opinion that a person drawing a bill or making a note as trustee of a temple or charity was not acting on behalf of a

principal and could not therefore claim the benefit of Section 28, Negotiable Instruments Act.

The respondent''s learned advocate relied on a decision of the Full Bench in Sivagurunatha Pillai Vs. Padmavathi Ammal and Another, . But it

was a case of an agent seeking to exclude his personal liability u/s 28, Negotiable Instruments Act. Section 28 has no application to the case of a

trustee executing a promissory note on behalf of the trust estate. In Subramaniam Pattar v. Velu Nair, 49 M. L. J. 717 : A. I. R. 1926 Mad. 249,

Phillips J. held that a creditor suing on a promissory note executed by the trustee of a temple promising to repay the debt from the devaswom

properties was entitled to a decree against the assets of the temple if the debt was to be found to be one binding on the institution. In Niladri Sahu

v. Chathurbhuj Das, 6 Pat. 139: A. I. R. 1926 P. C. 112 and AIR 1927 131 (Privy Council) the Judicial Committee held that a decree could be

passed against the assets of a religious charity like a mutt, for debts contracted by the head of the mutt for purposes of institution. These two

decisions of the Judicial Committee were relied on in Venhatabalagurumurthi Chettiar v. Balakrishna Odayar, 60 M. L. J. 90: A. I. R. 1930 Mad.

1009, where this Court held that where a trustee of a temple buys goods on credit for the conduct of the services of the temple, the creditor is

entitled to recover the value of the goods sold from the properties of the temple. In Lakshmindra Thirthaswamiar v. Raghavendrarao, 43 Mad. 795

: A. I. R. 1920 Mad. 678, Sadasiva Aiyar and Spencer JJ. held that in a suit to recover a simple money debt incurred by the Sanyasi head of a

mutt for the necessary purposes of the mutt, the properties of the mutt could be made liable for the satisfaction of the debt and distinguished the

cases of debts incurred by lay trustees of religious or charitable institutions and executors or administrators as standing on a different footing. In

Sundaresan Chettiar v. Viswanatha Pandara Sannadhi, 45 Mad. 703: AIR 1922 Mad. 402 Ayling and Krishnan JJ. granted, in addition to a

personal decree against the trustee who executed a bond, a decree charging the temple funds on the finding that the trustee had agreed to repay the

loan out of the funds of the temple and that the loan itself had been borrowed for temple purposes.

The case law is not altogether consistent. It is well established that it is competent to the trustee of a religious endowment to incur debts and

borrow money for the proper and legitimate expenses of the institution, such as keeping up the religious worship, conducting or defending litigation,

averting loss of trust properties, etc. It has also been held that the authority of the manager or trustee of an endowment is of the same nature as that

of a guardian of an infant heir so far as the capacity to bind the estate by his borrowings is concerned (See Pramatha Nath Mullick v.

Pradyumnakumar Mullick and Nataraja Desikar v. Nur Mahomed, 31 Mad. 47 : 17 M. L. J. 553. It has also been held that on a promissory note

executed by a guardian, the minor is not personally liable, but if the creditor files his suit for recovery of the debt evidenced by the note, he is

entitled to a decree against the estate of the minor if the debt is proved to have been incurred for the necessities of the minor or his estate (see

Annamalai Chetti v. Muthusivami, I. L. R. 1939 Mad. 891: A.I.E. 1939 Mad. 538 and Pundarikalcshayya v. Sreeramulu, I. L. R. 1946 Mad. 242

: A. I. R. 1946 Mad. 1 affirmed, on appeal by the Federal Court in AIR 1949 218 (Federal Court) . It is difficult, however, to say whether their

Lordships of the Federal Court were unanimous in their approval of the observations of this Court, though they upheld its conclusion.

In India, a promissory note is a part of the mechanism of money-lending and it was for this reason that the Judicial Committee held that

Provincial legislation regulating money-lending so as to affect and Scale down debts evidenced by promissory notes was intra vires, though

promissory notes and banking were included among the Federal subjects under the Constitution Act of 1935. (See Prafulla Kumar v. Bank of

Commerce 1947-2-M. L. J. 6 : AIR 1947 P. C. 60. As between the actual lender and borrower, a promissory note is only a collateral security

and a lender can sue on the original debt or consideration disregarding the security. A promise to repay is implied in the loan itself. The original

debt or loan does not get merged in the promissory note, so as to make the promissory note the only cause of action available to the lender. Nor is

the liability for repayment of the debt extinguished by renewals of the original promissory note. This was the basis of the many decisions given by

this Court under Madras Act IV [4] of 1938, of which Gudivada Suryanarayana Vs. Tadikonda Alavandararao and Others, may be cited as an

instance. If so much is established both on principle and authority, it may logically be contended that a creditor should be entitled to a decree

against the assets of a temple in a suit on the debt borrowed by the trustee, even though there is a promissory note accompanying or succeeding

the loan, provided the debt is found to have been borrowed for the necessities of the temple.

Law, however, does not march on logical lines and there is considerable authority for the view that where a trustee or a person in the position of

a trustee, incurs a debt without charging the trust property, the creditor should be taken as having lent the money on the personal credit of the

borrower and can look to that credit alone and also to the principle of subrogation for the recovery of his loan in cases where the trustee has a right

to reimbursements. The difficulties in the way of working out the right of subrogation and making it available to the creditor in a suit for recovery of

the loan will be apparent from the dissenting judgments in Ammalu Ammal v. Namagiri Ammal, 33 M. L. J. 631 : A. I. R. 1918 Mad. 300 where

the earlier cases are collected by Kumaraswami Sastri J. In Sriramulu v. Pundarikakshayya, 1949-12-F. L. J. 288 : AIR 1949 P. C. 218, Fazl Ali

J. observed as follows :

It has been held in a series of cases that an executor or a trustee cannot by borrowing money from a person make him a creditor of the estate in

his hands, even though the money was applied for the purposes of the estate. In Farlwll v. Farhall, (1871) 7 Ch. A. 128 : 41 L. J. Ch. 146, Mellish

L. J. took it to be settled law that upon a contract of borrowing made by an executor after the death of the testator, the executor is only liable

personally and cannot be sued as executor so as to get execution against the assets of the testator. The principle enunciated in this case has been

applied to the case of an executor or trustee in a number of cases in this country also (See Sailendra Nath Palit Vs. Syed Hade Kaza, . The

general rule, however, is subject to certain exceptions and, in a proper case, the executor or trustee may be entitled to be indemnified out of the

estate in his charge.

Mukherjee J. also referred to Farhall v. Farhall, 1871-7 Ch. A. 123 : 41 L. J. Ch. 146 and held that an executor who borrowed money for the

purpose of administration made himself only personally liable and the creditor could not proceed directly against the estate.

In the present case, beyond the description of the executants as Uralars and the statement that the debt had been borrowed for purposes of the

Devaswom, there is no indication in the promissory note that the Uralars wanted to exclude their personal liability; nor is there any promise to pay

the debt out of the funds of the temple. Sitting singly, I am bound by the decisions in Palaniappa Chettiar v. Shanmugham Chettiar, 41 Mad. 815 :

A. I. R. 1919 md. 616 nd Swaminatha, Ayyar v. Srinivasa Aiyar, 32 M. L. J. 259 : A. I. R. 1918 Mad. 533 which stand unreversed, to hold that

no decree could be passed against the Devaswom properties. I, therefore, reverse the decree of the Court below and pass a decree personally

against defendants 1 and 2, the executants of the promissory note, and against the assets of the other two deceased executants in the hands of

defendants 1 to 4. I direct that the costs of the plaintiff both in the Courts below and in this Court be paid by defendants 1 and 2. The petitioner in

this Court will get his costs out of the assets of the temple.