- Bookmark
- Share
- CaseIQ
Thadi Murali Mohan Reddi, Minor By Guardian Sabbella Rami Reddi v. Chinta Bramayya And Others
Structured Summary of the Provided Opinion
Factual and Procedural Background
This appeal arises from a suit to recover amounts due under two promissory notes dated 12 November 1930 and 5 December 1930 executed by Bulli Gangireddi, the deceased father of the defendant, in favour of the plaintiff. At the time the notes were executed the father and defendant (son) were members of an undivided joint family and the father conducted a family business; the debts were incurred in the course of that business.
The father was adjudicated insolvent on 13 November 1931 upon a creditor petition. Prior to the order of adjudication, the defendant (represented by next friend) filed a suit for partition; a preliminary decree for partition was passed on 16 November 1931 and a final decree was later passed on 6 April 1935 (this last date is brought to the court's notice). The plaintiff proved his debt before the Official Receiver but received no dividend up to the date of the lower Court's decree. The Subordinate Judge gave a decree in favour of the plaintiff, and the defendant appealed.
Legal Issues Presented
- Whether the suit is barred by limitation, having regard to the facts and an alleged deed of composition (Ex. D) filed in the Insolvency Court.
- Whether the suit was incompetent because it was instituted without:
- the leave of the Insolvent Court under Section 28(2) of the Provincial Insolvency Act; and
- without making the Official Receiver a party (i.e., whether the Official Receiver must be joined as legal representative of the insolvent father for a debt contracted by the father).
Arguments of the Parties
Appellant's (Defendant's) Arguments — as presented by Mr. Raghava Rao
- The suit is barred by limitation (first main defence).
- The suit is incompetent because the necessary leave of the Insolvent Court under Section 28(2) of the Provincial Insolvency Act was not obtained before instituting the suit.
- Even if leave were not required, the Official Receiver should have been made a party because the debt was contracted by the father and no relief could be given against the son unless the person who entered into the contract (or his legal representative) is a party.
- As an alternative, if the court did not accept these objections, the appellant suggested adding the Official Receiver as a party (relying on Privy Council observations in Sanyasi Charan Mandal v. Krishnadhan Banerji) in order to avoid multiplicity of proceedings.
Respondent's (Plaintiff's) Position — as reflected in the opinion
- The plaintiff relied on a deed of composition (Ex. D), dated 22 March 1933, filed in the Insolvency Court, which the lower Court treated as an acknowledgment of the debt.
- The plaintiff had proved his debt before the Official Receiver and sought recovery from the son; the lower Court granted a decree in the plaintiff's favour.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Periasami Mudaliar v. Seetharama Chettiar (1903) 14 M.L.J. 84; I.L.B. 27 Mad. 243 | Observation (by Bhashyam Aiyangar, J.) that in cases where father and son were undivided a decree against the father creates a debt (contract or record) and a suit could be maintained against the son after the father's death. | The Court noted the origin of a dictum and observed that later authorities approved it but confined it to undivided cases; the Court considered the facts here different (partition and insolvency intervened) and therefore did not rely on this authority to bar the suit. |
| Narayanan v. Veerappa (1916) 31 M.L.J. 386; I.L.R. 40 Mad. 581 | Approved the dictum in Periasami Mudaliar; interpreted in the context of undivided father-son relationships. | Referred to as an approving case; used to show later authorities confined the earlier dictum to undivided families and therefore its applicability is limited. |
| Jaqannatha Bap v. Viswesam (1924) 46 M.L.J. 590; I.L.R. 47 Mad. 621 | Also approved the dictum in Periasami Mudaliar and interpreted it as confined to undivided cases. | Used to support the proposition that the principle from Periasami Mudaliar is confined to undivided father-son situations; not decisive on the present facts where separation occurred. |
| Bankey Lal v. Durga Prdsad (1931) I.L.R. 53 All. 868 | Explained the liability of a junior member of a family for debts contracted by the manager (father) for family necessity/benefit: liability continues after separation but is confined to the joint property available to each member (manager acts analogously to an agent). | The Court relied upon this exposition to hold that where a debt was contracted by the father as manager for family business, the debt is a joint family debt and the son remains liable to pay from his share after partition; this supported the competence of the suit against the son. |
| Sanyasi Charan Mandal v. Krishnadhan Banerji (1922) 43 M.L.J. 41; L.R. 49 I.A. 108; I.L.R. 49 Cal. 560 | Privy Council observations suggesting that adding the Official Receiver as a party might prevent multiplicity of proceedings by several creditors. | The appellant relied on these observations to seek joinder of the Official Receiver; the Court noted the suggestion but found it unnecessary because the Official Receiver had had opportunities to protect creditors' interests and, in the circumstances, there was nothing further the Official Receiver could now do. |
Court's Reasoning and Analysis
The Court proceeded through the contested issues in structured steps:
- On limitation: the lower Court relied on a deed of composition (Ex. D), dated 22 March 1933 and filed in the Insolvency Court, as an acknowledgment of the debt. Ex. D was signed by the insolvent father and the creditors including the plaintiff. The appellant argued Ex. D would not operate as an acknowledgment, but the Court was not convinced and overruled that objection.
- On Section 28(2) of the Provincial Insolvency Act (statutory provision quoted in the opinion): the Court examined whether leave of the Insolvent Court was a prerequisite to suing the son. The Court noted recent decisions of the Privy Council and this Court which establish that the son's share does not vest in the Official Receiver and therefore is not "the property of the insolvent" within the meaning of the clause; although the Official Receiver acquires a power to sell the son's interest before severance, that power ceases upon severance. Because in this case severance had already occurred (partition), the Court found the appellant could not sustain an objection based on the phrase "the property of the insolvent."
- The Court considered the broader phrase in Section 28(2) — "commence any suit or other legal proceeding" — and construed it in context as referring to suits against the insolvent or in respect of the property vested in the Insolvent Court. The Court rejected a wide construction that would bar suits even against persons jointly indebted with the insolvent whose property was not under the control of the Official Receiver; the Court regarded that wide reading as inconsistent with legislative intent.
- On joinder of the Official Receiver: the appellant contended that the Official Receiver, as legal representative of the insolvent father, must be made a party because the debt was contracted by the father. The Court reviewed authority (including Mulla's statement and the Periasami Mudaliar line) and concluded the authorities were confined to undivided father-son situations; the facts here were different because the debt was contracted by the father as managing member of the joint family for the joint family business, making it a joint family debt. The Court relied on Bankey Lal v. Durga Prdsad to explain that debts incurred by the manager for family necessity remain liabilities of all members after separation, but the liability is confined to joint family property available to them.
- The Court noted that the creditor had proved his debt in the insolvency proceedings and that the Official Receiver, who had been made a party to the partition suit, could have sought to secure the son's share for payment of creditors (e.g., by asking for a provision in the partition to set aside property). The Official Receiver did not take such steps. The Court emphasized that the Official Receiver's failure to act did not deprive the creditor of his right to realize the debt from the son's share.
- On the practical question of joining the Official Receiver at this stage, the Court observed that the property had already been sold and sale proceeds rateably distributed among creditors (i.e., the proceeds which the Official Receiver would have distributed if he had realized them). Consequently, adding the Official Receiver would serve no practical purpose because there was nothing the Official Receiver could now do.
- Synthesizing these points, the Court concluded that a suit against the son was competent in the circumstances: the debt was a joint family debt; the son remained liable from the share in his hands after division; the remedy against the father had been pursued in insolvency; and it was not necessary to require the leave of the Insolvent Court or the joinder of the Official Receiver for maintaining the suit against the son given the severance and the practical facts.
Holding and Implications
Holding: The appeal is dismissed. The Court held that the plaintiff's suit as laid was competent and that the defences based upon limitation and on Section 28(2) and non-joinder of the Official Receiver were not tenable in the circumstances.
Direct consequences and specific orders recorded in the opinion:
- The appeal fails and is dismissed with costs.
- Advocate's fee of Rs. 150 was recorded (paragraph 9).
- Appeals Nos. 322 and 323 of 1937 and 12 to 18 of 1939 were dismissed following the decision in Appeal No. 321 of 1937; respondents were awarded printing charges in each of those appeals (paragraph 10).
- Advocate's fees in two specified appeals: Mr. A. Satyanarayana is given Rs. 100 in Appeal No. 12 of 1939 and Mr. Mangachary Rs. 100 in Appeal No. 14 of 1939 (paragraph 10).
- Applications by Mr. Ch. Raghava Rao in all appeals to scale down the debt (listed CMP numbers) were to be forwarded to the lower Court; the decrees in the appeals will be subject to reliefs that applicants may obtain in those petitions, and respondents have leave to file counter affidavits in those petitions (paragraph 11).
- The appellants are directed to pay court-fee to the Government on the memoranda of appeals (paragraph 12).
Broader legal implication: The opinion establishes (on the facts before the court) that where a debt was contracted by the father as managing member of a joint family for family business and the family has been severed before suit, a creditor may maintain suit against the son to realize the debt from the son's share without the leave of the Insolvent Court and without necessarily joining the Official Receiver, particularly where the Official Receiver has had an opportunity to act and the proceeds (or appropriate steps) have already been handled.
1. 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.
2. 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 under Section 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.
3. 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.
4. 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".
5. 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.
6. 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: I.L.B. 27 Mad. 243 at p. 247 (F.B.)., 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 Narayanan v. Veerappa (1916) 31 M.L.J. 386: I.L.R. 40 Mad. 581 at 585 and Jaqannatha Bap v. Viswesam (1924) 46 M.L.J. 590: I.L.R. 47 Mad. 621 at 626). 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 (1931) I.L.R. 53 All. 868 at p. 872 (F.B.), 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.
7. 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 Sanyasi Charan Mandal v. Krishnadhan Banerji (1922) 43 M.L.J. 41: L.R. 49 I.A. 108:, I.L.R. 49 Cal. 560 at 571, 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.
8. We are therefore of the opinion that the suit as laid was competent. The appeal fails and is dismissed with costs.
9. Advocate's fee Rs. 150.
10. 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.
11. 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.
12. The appellants will pay court-fee to the Government on the memoranda of appeals.
Alert