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Agarwala, J.—This second appeal raises the question as to the liability of the members of a joint Hindu family on a mortgage executed by some of the senior members of the family for the purpose of financing a venture initiated by the karta.
The facts were as follows : A tikka was executed in favour of Rasiklal, defendant 1, and his cousin Ajodhya, the father of defendant 6. These two individuals were the senior members of a joint Hindu family. No salami was paid for the tikka which was for a term of nine years at a rental of Rs. 700 per annum. As security for payment of the rent a mortgage in favour of the lessor was executed by Rasiklal and Ajodhya and the latter''s brother, Babulal, defendant 2 (father of defendant 7). They having defaulted in the payment of the tikka rent, the lessor instituted a suit on his mortgage which resulted in a decree for Rs. 2981. The executants of the mortgage and their sons were all impleaded in the mortgage suit. In execution of the mortgage decree, the mortgaged property was purchased by the plaintiffs. The mortgaged property consisted of two plots of land constituting the ancestral property of the family. These two plots were Nos. 164 and 166. Formal delivery of possession was given to the auction-purchaser but when he attempted to take actual possession he was obstructed by Chhotey Lal, the brother of Ajodhya and Babulal, two of the mortgagors. This resulted in a proceeding u/s 145, Criminal P.C., which was decided against the auction-purchaser with the result that he instituted the present suit for possession. The suit has been decreed by both the Courts below.
In appeal by the defendants it is contended on the authority of the decision of the Privy Council in AIR 1932 182 (Privy Council) that Rasiklal and Ajodhya had no authority to take the tikka lease and that the members of the family, other than the executants of the mortgage, are not bound by the bond which was executed to secure the rent of the tikka. The particular passage in the judgment of their Lordships of the Privy Council on which reliance is placed is as follows:
The power of the manager of a joint family governed by the Mitakshara law to alienate immovable property belonging to the family is defined in verses 27 to 29 of Chap. 1 of the Mitak-shara. The judgment of the Board in Hunooman Persaud Panday v. Mt. Babooee Munraj Koonweree (1854-57) 6 M.I.A. 393, relied on by the Bank, was founded apparently on those verses. A new business, their Lordships think, is not within the purview of those verses. It does not make any difference that the manager starting the new business is the father.
The particular item which their Lordships were dealing with in citing that passage was an item of nearly Rs. 4000 which had been borrowed for the purpose of financing a contracting business. It does not appear from the report of the case what the ordinary business, if any, of the family was. This passage is however cited by the learned advocate for the appellants for the proposition that the karta of the joint family is in no circumstances authorized to commence any business or embark on any venture which may possibly imperil the shares of the other members of the family in the ancestral property or to incur liabilities to finance such a business or venture.
Prior to the decision of the Privy Council in the case cited above, there had been a divergence of views in the High Courts in India as to the powers of the karta of the family in this regard. One view was that the karta was never authorized to embark on a new business or venture in such a manner as to incur liabilities on the other members of the family. The other view was that the manager had such authority but that the members of the family would not be bound unless it were shown that the venture was of such a nature as might reasonably be expected to be for the benefit of the family.
In this Court, in Jan Mohammad v. Bikoo Mahto A.I.R.1929. Pat. 130 , Boss, J, observed:
I quite agree that the manager of a joint family has no authority whatever to affect or dispose of any portion of joint family property in order to enable him to embark on speculative transactions, but I cannot say that the mortgagee must in each case satisfy the Court that the transaction was bound to benefit the joint family. There is a certain element of risk in every business transaction and if we are to hold that when the business has succeeded and the entire family has benefited by it, that one ought not to uphold the mortgage transaction entered into by the manager to enable him to embark on such business, unless the mortgagee satisfies us that the business was bound to succeed and that benefit was bound to accrue to the family, we would necessarily handicap the managers of joint Hindu families and place a limitation on their powers, which would have the effect of stopping all business transactions in every Mitakshara family.
In that case the purchase of the equity of redemption in a share in a property which was in the possession of the family was held to justify a mortgage of joint family property.
In Sheotahal Singh v. Arjun Das A.I.R.1920. Pat. 70 Das and Adami, JJ. held that a mortgage bond executed to pay the premium for a lease taken for the benefit of the family was binding upon all the members.
In Biswanath Singh v. Kayasta Trading & Banking Corporation Ltd. A.I.R.1929. Pat. 422 Ross, J. observed that in cases of the present description it is necessary to examine the evidence as to the nature of the business for which the debt was incurred for the purpose of ascertaining whether the act was the act of a prudent manager or not.
In that case a mortgage of joint family property of petty zamindars to raise funds to finance a speculative contracting business was held not to be binding on the members of the family. An analysis of the cases decided in this, Court shows that a mortgage of joint family property to finance a venture embarked on by the manager of a joint family for the benefit of the family (and not for his own benefit only) is binding on the members of the family, whether they in fact profited by the venture or not, provided it was of such a nature as a prudent manager would undertake and funds were in fact required to finance it. It is contended that since the decision of the Privy Council in AIR 1932 182 (Privy Council) this view is no longer supportable.
That question has been agitated in the Allahabad High Court on various occasions since the decision in the Benares Bank case. AIR 1932 182 (Privy Council) In Inspector Singh and Another Vs. Kharak Singh and Others Mukerji, J. in delivering the judgment of the Bench held that it was not competent to the manager of a joint Hindu family comprising minor members to raise money on the security of the family property in order to start a new business, even if such business may reasonably be supposed likely to be a profitable one.
That view was based on an interpretation of the decision of the Privy Council in Hunooman Persaud Panday v. Mt. Babooee Munraj Koonweree (1854) 6 M.I.A. 393.
In the opinion of Mukerji, J. the phrase "benefit of the estate" which occurs in the judgment of the Privy Council in Hunooman Persaud''s case Hunooman Persaud Panday v. Mt. Babooee Munraj Koonweree (1854) 6 M.I.A. 393 contemplates a benefit "of a defensive nature" calculated to protect the estate from possible danger or destruction and no benefit that could arise by any other means falls within the phrase as used in that case.
This view was challenged in Jagat Narain and Another Vs. Mathura Das and Others which was decided by a Full Bench in which it was held that:
In order to sustain an alienation of joint family property, made by the managing member of the family the transaction must be one which is for the benefit of the estate and such as a prudent owner would have carried out with the knowledge available to him at the time.
Their Lordships who constituted the Full Bench expressly repudiated Mukerji, J.''s interpretation of the phrase "benefit of the estate" which occurs in Hunooman Persaud Panday v. Mt. Babooee Munraj Koonweree 1854.6 M.I.A. 393 and held that those words "are not limited to those transactions which are of a defensive nature."
The matter again came before a Full Bench of the Allahabad High Court in Ram Nath and Another Vs. Chiranji Lal and Another, . In considering the effect of the decision of the Privy Council in AIR 1932 182 (Privy Council) , their Lordships held that while it is settled law that money borrowed for the purposes of an ancestral family business is per se a valid justification for alienation of family property without further inquiry on the part of the creditor, yet in the case of a business which is not ancestral but newly started by the manager or father, the mere fact that money was required for such a business is not in itself sufficient to justify an alienation of the family property. In such a case two separate questions arise: (i) was the business one which a prudent manager would start and (ii) was the mortgage for legal necessity or for the benefit the estate. If the business, though not ancestral, had become joint family business and was not the separate business of particular members, then there may be circumstances under which money required may either be for legal necessity or for the benefit of the family and the family estate. At p. 619 the learned Chief Justice stated:
It seems to follow that the question whether the particular transaction in dispute was for legal necessity or was for the benefit of the estate and the joint family is something more than the mere question whether the money borrowed was required for the purposes of a new business. The fact that it was required for a new business would not be any justification. If in addition thereto, it could be shown that there was either a pressure of necessity to continue that business, as it was the mainstay of the family, or that the particular transaction was at the time beneficial to the family and the family estate, the transaction would be supported, but, of course, on the latter ground. The question whether the transaction was for such benefit or not is a question of fact depending on the circumstances of the case, and it is for the Court to decide whether it was so beneficial and was such as an ordinary prudent manager would have entered into in the interest of the family.
Thom, J., another member of the Full Bench, referring to the decision in AIR 1932 182 (Privy Council) , said that that case never intended to lay down the general proposition that a loan taken by the manager of a joint Hindu family for the purpose of starting a new business could never be binding upon the minor members of the family. There is ample authority, not only in the original texts but in the decisions of the Privy Council and of this Court, for the proposition that where the starting of a new business is a prudent step taken by manager of the family for the benefit of the family, a loan taken for this purpose or for the carrying on of the new business is a valid loan and is binding on the minor members of the family.
AIR 1932 182 (Privy Council) was considered in this Court recently by Wort and Varma, JJ. in Ganesh Prasad Singh v. Sheogobind Sahu A.I.R.1938. Pat. 40. In that case the karta of the family had taken a farming lease of a ferry and had executed a mortgage to raise money for that purpose. In a suit on the mortgage it was contended that the manager had no authority to start the ferry business or to bind the members of the family by the mortgage. Wort, J. in delivering the judgment of the Court said:
Had it been a question of the adult members only, I think I should have come to the conclusion that the plaintiff would be entitled to a decree for sale as regards the whole of the consideration. But the difficulty arises by reason of the existence of one minor member, and unless it can be held that the business was an ancestral business, or being joint family business, it was indeed for legal necessity, that is to say legal necessity in connexion with the joint family estate, the plaintiff would be entitled only to a decree for money.
In the result, Wort, J. concluded that the borrowing of money in that case could not in law be held to be for justifying legal necessity qua the joint family estate. The important distinction between that case and the present one is that there is no indication either in the judgment or in the report of that case that the ferry-farming had anything to do with the avocations of the members of the family. In the present case the family of the defendants were cultivators and in addition to this, some of the members earned their living as zamindari servants, that is to say, tahsildars and patwaris, so that they were people well qualified to judge the prudence of a trans, action such as that with which we are concerned in the present appeal, the trans, action itself being one closely related to the ordinary avocations of the members of the family, the only difference being that whereas ordinarily they cultivated the land, in this particular instance they were going to add to their cultivated, land lands from which the profit would be derived from rents paid by the tenants. The case decided by Wort and Varma, JJ. is also distinguishable from the present case in, another respect. In that case, objection to the liability of the members of the family, including the minor, was raised in the mortgage suit itself where it was open to all the parties to state what objections they had to the transaction entered into by the karta.
In the present case, although all the members of the family, except Chhoteylal, were impleaded in the suit on the mortgage and had an opportunity of showing that they were not bound by the mortgage they did not do so and are parties to the decree which has been passed. Since however Chhoteylal was not impleaded in the mortgage suit it is open to him to show that the tikka in the present case was not a prudent venture and that the mortgage is not binding on the members of the family. Now, instead of concentrating his attack on these points, what Chhoteylal endeavoured to prove at the trial was that he himself was the karta of the family. In this he signally failed and the finding of the Courts on this point is not challenged, in second appeal.
With regard to the other question, namely whether the venture was a prudent one or whether it was for the benefit of the family, the Courts have found that although the evidence is meagre it was one for the benefit of the family. The known facts about it are that it was a venture which had the express approval of three out of the four adult members of the family, namely the three members who executed the mortgage bond, that it was a venture the prudence of which the adult members of the family were well able to judge owing to their connexion with zamindari matters, that no member of the family, except Chhoteylal, has challenged the transaction on the ground of its being imprudent or not for the benefit of the family and that there is nothing on the record of this case to indicate that the terms of the tikka were such as not to justify a reasonable prospect of its turning out to be a profitable undertaking. Two recent decisions in this Court are relevant to the point in issue in the present case.
In Jai Sahu Vs. Hadibandhu Behera and Another, . Dhavle, J. held that the power of the manager of a joint Hindu family to enter into transactions for the support of the family is to be judged (when in exercise of such power the family property is charged or alienated by the manager) by the consideration whether that transaction was one into which a prudent owner would enter.
In that case the manager of a teli family executed a mortgage bond to provide funds for starting a grocery shop to supplement the income of the family which was not in a flourishing condition. It was held that a grocer''s shop was neither a luxury nor a speculative transaction and that the mortgage was binding on all the members of the family. AIR 1932 182 (Privy Council) was referred to. The second case, Lalji Singh v. Muchkund Singh A.I.R.1934. Pat. 699, is a decision of a Division Bench. The facts in that case were that a mortgage had been executed to raise money partly for the payment of a previous debt and partly for the purchase of 41/2 bighas of land situated about a mile and half from the residence of the mortgagor''s family. The suit on the mortgage was contested on the ground that there was no legal necessity for the loan. In delivering the judgment of the High Court Mohammad Noor, J. observed:
What was required to be done by the mortgagees was a reasonable and honest enquiry that the purchase was being made for the benefit of the family. I have said that the usual livelihood of the family was cultivation. Augmenting the means of livelihood, unless speculative or risky, must be taken to be beneficial to the family.
In my view the decision of the Courts below is right and is not open to challenge now. Another question raised by the learned advocate for the appellants arises in this way. One of the mortgaged plots, namely plot No. 166, has since been sold in execution of a decree for arrears of rent. It was purchased by the superior landlord and settled with the present plaintiffs. It was contended that the decree in execution of which plot No. 166 was purchased was not a rent decree but a money decree. That question does not require decision having regard to the view we take with regard to the first question.
In my opinion, this appeal must be dismissed with costs.
Yarma, J.
I agree. Mr. De on behalf of the appellants has framed his argument chiefly on the decision in Benares Bank Ltd. v. Hari Narain A.I.R.1923. P.C. 182 and also on a decision of this Court in Ganesh Prasad Singh v. Sheogobind Sahu A.I.R.1938. Pat. 40 to which I was a party. His argument that the business was a new one and there fore the other members of the family, besides the executants of the mortgage bond, were not bound by the transaction would have been effective if the facts of the present case were in any way similar to the facts which were dealt with in AIR 1932 182 (Privy Council) or in Ganesh Prasad Singh v. Sheogobind Sahu A.I.R.1938. Pat. 40 . Except the word ''thika'' with occurs in Benares Bank case AIR 1932 182 (Privy Council) as well as in the present case there is not much similarity between the former case and the present one.
In the Benares Bank case AIR 1932 182 (Privy Council) the word ''thika'' mentioned meant the business of a contractor, but in this case ''thika'' is something like a lease of immovable property taken by the present defendants. The Hindu law recognizes a difference between ancestral business and a new business.
The distinction was pointed out in Sanyasi Charan Mandal v. Krishnadhan Banerji A.I.R.1922. P.C. 237 referred to in the Benares Bank case. AIR 1932 182 (Privy Council) . In Ganesh Prasad Singh v. Sheogobind Sahu A.I.R.1938. Pat. 40 the mortgage debt was created partly for legal necessity of the family and partly for payment of rent of a ferry taken in lease, and the question involved was whether the mortgage was binding on the minor member of the family.
The lower Appellate Court had come to certain findings on which it was of opinion that the business for which the mortgage was executed was not ancestral and there, fore on the decision of the Judicial Committee in Sanyasi Charan Mandal v. Krishnadhan Banerji A.I.R.1922. P.C. 237 this Court held that the money borrowed for paying rent could not possibly in law be held to be for justifying legal necessity qua the joint family estate.
In the present case the position is that the adult members of a family, including the karta belong to the agricultural class and their occupation is said to be that of cultivator. The question is that if they executed a mortgage bond, as a security for the lease, in order to extend the amount of land in their possession whether it can be called first a business and secondly a new business. In my opinion, taking into consideration the class of people from which these defendants come, it cannot be said that the taking of the thika was the starting of a new business and this view of mine is strengthened by the way in which the case was contested in the lower Courts. I do not find any mention of this line of argument in the judgment either of the Appellate Court or of the trial Court. The line of contest adopted by the defendants especially the present appellant 1, Chhoteylal, was that Easiklal was not the karta of the family but it was he, Chhoteylal, who was the karta of the family and therefore the mortgage bond was not executed by a person who had the authority to bind the other members of the family.
The written statement filed by the defendants in the case has been well summarized by the trial Court where, apart from the other formal defences taken up, the chief defence taken up by defendant 3, Chhoteylal, was that Rasiklal was never the karta of the family but that it was he who was the karta of the family all along; it was also contested that the security bond was not for the benefit of the joint family. They never contested the suit on the basis that the bond was for the purposes of starting it new business. The decision of this Court in Lalji Singh v. Muchkund Singh A.I.R.1934. Pat. 699 is very much in point, where Noor, J. observed as follows:
Taking into consideration the fact that the family was of cultivators, that they purchased a small piece of land in the neighbourhood of their home, and that the purchase was made both by the father and the son, the purchase must be held for the benefit of the family.
I am therefore of opinion that on the findings of the Courts below, appellants'' appeal must fail and that the argument based on the decisions in AIR 1932 182 (Privy Council) and Ganesh Prasad Singh v. Sheogobind Sahu A.I.R.1938. Pat. 40 is not at all helpful to them in this case.