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Summary of the Opinion — Pontifex, J.

Factual and Procedural Background

The core question in the appeal was whether two adult widows (one the plaintiff and the other a defendant joined in the same interest) of two members of an undivided Hindu family governed by the Dayabhaga are bound by a mortgage of joint family property made by the surviving brother and managing member of the family (Gourchurn) without consulting them, and whether they are bound by the subsequent decree for sale obtained in a suit by the mortgagee against Gourchurn as sole defendant.

Background facts found in the opinion:

  • Ramlochun Soor was the father of Obhoychurn, Sreechurn and Gourchurn. During his life Ramlochun carried on business in partnership with a third person (referred to as the independent partner). Some properties were purchased during Ramlochun's life, two in the names of Ramlochun and the independent partner.
  • Ramlochun died intestate more than 14 years before the events described; his share in the business and property was inherited by his three sons.
  • Obhoychurn (the plaintiff's husband) died intestate and without issue in 1868; Sreechurn died intestate and without issue in 1872 leaving a widow who is a defendant in this suit.
  • After those deaths Gourchurn continued to manage the family share in the partnership and the joint family property; the widows continued to live in the undivided family and to share in profits and maintenance. The lower court disbelieved the plaintiff's evidence that she had withdrawn from the business.
  • The business was financed by the defendants (creditors). By 1874 the amount due exceeded Rs. 21,000. The defendants agreed to further advances only upon security for the existing debt and for further advances up to Rs. 31,000.
  • In March 1874 Gourchurn and the independent partner executed a mortgage that covered the joint family property (the subject of this suit) and the independent partner's property. A further advance followed.
  • By June 1876 the balance due under the mortgage exceeded Rs. 29,000. On 8 June 1876 mortgagees sued Gourchurn and the independent partner; on 17 August a decree was obtained and one property purchased by Ramlochun was sold (the purchaser is not a party to the present suit).
  • The present suit (brought by the plaintiff) seeks primarily declaratory relief: to have her rights in the mortgaged premises ascertained and declared, to declare that her share is not affected by the mortgage, that the mortgage decree is fraudulent and void as against her, an account of rents and profits, payment of her share, and partition (partition is treated as a secondary relief in the opinion).

Legal Issues Presented

  1. Whether two adult widows (members of an undivided Hindu family governed by the Dayabhaga), not consulted by the managing member, are bound by a mortgage of joint family property executed by the managing member.
  2. Whether those widows are bound by the subsequent decree for sale obtained by the mortgagee in a suit against the managing member as sole defendant.
  3. Whether, given the joint family property was intimately connected to the family share in the partnership business, the managing member had the power to pledge (mortgage) the joint family property for business necessities and thereby bind adult members of the family.

Arguments of the Parties

Appellant's (Plaintiff's) Arguments

  • The plaintiff sought a declaration that her rights in the mortgaged premises be ascertained and declared and that her share was not affected by the mortgage.
  • She alleged the mortgage decree obtained in the mortgage suit was fraudulent and void as against her because she was not consulted.
  • Her pleading also sought an account of rents and profits and partition of the mortgaged property (partition treated as secondary relief in the opinion).
  • The record contains a claim by the plaintiff (described as meagre and disbelieved by the lower court) that she had withdrawn from the business or altered her position with respect thereto.

Respondents' Arguments

The opinion does not contain a detailed account of the respondents' separate legal arguments in the form typical of adversarial pleadings; the facts in the judgment, however, show that the defendants were the financiers who insisted on security and obtained the mortgage and subsequent decree.

Table of Precedents Cited

Precedent / Authority Rule or Principle Cited For Application by the Court
Suraj Bunsi Koer v. Sheo Prosaud Sing, L.B., 6 I.A., 101 Illustrates doubt under the Mitakshara whether an adult member (before partition) with no definite share would be bound by a mortgage or alienation made by the managing member without consent. Used to show that under Mitakshara law there is uncertainty on this point and to contrast that uncertainty with the present case governed by Dayabhaga (the court notes it would seem even more doubtful under Dayabhaga but relies on the facts and other principles to reach its conclusion).
Mr. Justice Lindley, Partnership (book), p. 229 (1st Edn.) States the proposition that an equitable mortgage made by a partner of partnership real estate ought to be held valid where the partner has an implied power to borrow on the firm's credit. The court cited Lindley to support the view that Gourchurn had an implied power to borrow on the credit of the joint family as partners in the firm, and hence could make an equitable pledge binding the plaintiff for necessary business purposes.
Ramlal Thakursidas v. Lakhmichand Muniram, 1 Bom. H.C.B. Appx. 51 Holds that the power of a manager to carry on a family trade implies the power to pledge the property and credit of the family for ordinary trade purposes; third parties dealing in good faith should not be required to investigate the manager's status; binding infants may be necessary to preserve the family trade. The court adopted the principles stated in this decision (and its propositions) to conclude that a family manager has power to pledge family property for ordinary trade purposes and applied that reasoning to bind the plaintiff to the mortgage as necessary for the business.
Johurra Bebee v. Sree Gopal Misser, I.L.R., 1 Cal., 471 Approved the Ramlal Thakursidas decision and its propositions about the manager's power to pledge family property for the trade. The court relied on the approval of Ramlal in this case to reinforce the principle that the managing member's power to pledge for the business can bind family members.

Court's Reasoning and Analysis

The court's reasoning proceeds in the following steps, drawn from the opinion:

  1. Scope of the legal question: The court framed the central question as whether the two adult widows are bound by the mortgage made by the managing member and by the subsequent decree obtained against him alone.
  2. Identification of the factual context that affects the legal question: The court held this is not a simple joint family property case "pure and simple" because the family share comprised an active business partnership interest: the family share in the partnership and the joint family property were intertwined, and the widows continued to be interested in and maintained from the profits of that business.
  3. Evidentiary finding: The lower court disbelieved the plaintiff's sparse evidence that she had withdrawn from the business; the appellate court agreed with that disbelief and emphasized the widows' continued participation and benefit from the business.
  4. Liability for business debts: Because the widows continued to share in and be maintained by the business, and because the business was financed by the defendants, the court found that the widows were "certainly liable for the debts of the business."
  5. Managerial power analysis: The court analyzed whether Gourchurn, as authorised manager of the family share, had power to raise monies necessary for the business by mortgaging the joint family property. The court accepted the position in partnership law (as stated by Lindley) that a partner with implied power to borrow on the firm's credit may make equitable mortgages of partnership real estate, and analogously held that Gourchurn had an implied power to borrow on the credit of the joint family as partners and as a joint family for the purposes of the firm.
  6. Reliance on prior authority concerning family manager's power: The court relied on Ramlal Thakursidas (and its approval in Johurra Bebee) which states that a family manager's power to carry on trade necessarily implies power to pledge the property and credit of the family for ordinary business purposes, and that third parties dealing in good faith should not be compelled to investigate the manager's status.
  7. Application to present facts: Given the partnership/business context, the continued participation and benefit of the widows, and the financing arrangement where the creditors insisted on security before advancing funds, the court concluded that Gourchurn had at least the power to make an equitable pledge of the joint family property for the necessary purposes of the business and that such a pledge would bind the plaintiff.
  8. Equitable relief and condition precedent: The court noted the plaintiff sought equitable relief (a declaratory decree) but had made no offer to pay or to discharge the debt. The court explained that equitable relief ought not be granted where a plaintiff seeks the aid of equity without "offering to do equity." It observed that had the plaintiff offered to pay the debt she might have been entitled to have the decree re-opened and accounts re-taken to permit redemption.
  9. Decision on decree-binding issue: The court expressly declined to resolve whether the plaintiff is bound by the mortgage decree in the mortgage suit to which she was not a party, because resolution of that issue was unnecessary to the outcome (the court found she was liable for the debt and bound by the pledge regardless).
  10. Observations on the plaintiff's conduct and evidence: The court remarked that it was suspicious that the plaintiff was not examined by Commission or otherwise and had not affirmed that she was unaware of or not consulted about the mortgage.
  11. Final analytical position: Because the plaintiff neither offered to pay the debt nor established she was not bound by the pledge, the court affirmed the lower court's decree and dismissed the appeal with costs.
  12. Comment on territorial law difference: Although earlier the court noted doubt under Mitakshara authority, it found no reason to distinguish between Mitakshara and Dayabhaga on the point given the present facts, and additionally stated it did not agree with the lower judge's doubt about whether the plaintiff's suit would lie at all, since under Dayabhaga the plaintiff would be entitled to a definite share in the joint property.

Holding and Implications

Holding: The appellate court CONFIRMED the decree of the Court below and DISMISSED the appeal with costs.

Direct consequences and implications explicitly stated in the opinion:

  • The plaintiff is held liable for the business debt and is bound by the equitable pledge (mortgage) executed by the managing member for necessary business purposes.
  • Because the plaintiff made no offer to pay or redeem the debt, the court would not exercise equitable relief in her favour; had she offered to pay, the court indicated there might have been scope to re-open the decree and re-take accounts to allow redemption.
  • The court did not find it necessary to decide whether the plaintiff is bound by the actual decree in the prior mortgage suit to which she was not a party; the court rested its decision on her liability for the debt and being bound by the pledge itself.
  • The court expressed that it did not concur with the learned Judge below who doubted whether the plaintiff's suit would lie at all, stating that under Dayabhaga the plaintiff would be entitled to a definite share in the joint property (but this did not change the outcome in favour of the plaintiff given her lack of offer to pay the debt).

The opinion does not assert that it establishes a new broad legal principle beyond applying extant partnership and family-manager principles to the facts; its directive is limited to the present factual combination of a family share engaged in partnership business, continued participation of adult members in that business, and the manager's equitable pledge for necessary business purposes.

    Bemola Dossee v. Mohun Dossee

    Pontifex, J.:— The question we have to decide in this appeal is, whether two adult ladies, who are the widows of two members of an undivided Hindu family, governed by the law of the Dayabhaga, are bound by a mortgage of joint family property made by the surviving brother and managing member of the family, as to which they allege they were not consulted; and by the subsequent decree for sale in a suit by the mortgagee against the managing member as sole defendant.

    The plaintiff, who is one of the two ladies above mentioned, the other of them being a defendant in the same interest with the plaintiff, by her plaint prays, that her rights in the mortgaged premises may be ascertained and declared; that it may be declared that her share is not affected by the mortgage; that the decree in the mortgage suit may be declared fraudulent and void as against her; that an account may be taken of rents and profits, and her share ascertained and paid; and that the mortgaged property may be partitioned.

    If the case turned on a question of joint family property, pure and simple, it would be doubtful whether, apart from consent, the plaintiff would be bound by a mortgage made by the managing member alone, or by a decree on the mortgage obtained against the managing member as sole defendant, even though the mortgage was made for a debt in respect of which she was liable jointly with the managing member.

    It is certainly doubtful under the law of the Mitakshara, where a member of a joint family before partition has no definite share, whether an adult would be bound by the mortgage or alienation for necessary purposes by the managing member of the family—see Suraj Bunsi Koer v. Sheo Prosaud Sing, L.B, 6 I.A, 101; and if there is any difference in this respect between the law of the Mitakshara and the law of the Dayabhaga, it would seem to be still more doubtful under the latter.

    The question to be determined in this case, however, is not, in our opinion, a question of joint family property, pure and ample, for it is materially affected by other circumstances.

    Ramlochun Soor was the father of Obhoychurn, Sreechurn ??? Gourchurn.

    During his lifetime Ramlochun carried on business in ??? in partnership with a third person, whom and whose representative we shall hereafter refer to as the independent partner. During Ramlochun's life the properties, to which this suit relates, were purchased; and two of those properties were actually purchased in the names of Ramlochun and the independent partner.

    Ramlochun died more than 14 years ago, intestate; and his property and his share in the partnership business were inherited by his three sons, who conducted and managed the same.

    Obhoychuru, the plaintiff's husband, died in 1868, intestate and without issue, and Sreechurn died in 1872, intestate and without issue, leaving a widow who is a defendant to this suit, in the same interest with the plaintiff.

    After the death of Obhoychurn and Sreechurn, Gourchurn continued to manage the family share in the partnership, and the joint family property; and he and his brother's widows continued to live as an undivided family, the profits of the family share in the business being blended with the income of the joint family property and employed for the benefit and maintenance of the joint family; for we agree with the lower Court in altogether disbelieving the evidence adduced by the plaintiff, meagre as it is, as to her withdrawing from the business or altering her position with respect thereto.

    The business had for years been financed by the defendants.

    In 1874, the amount due to them was over Rs. 21,000.

    The business had pressing need of further advances, and application was made to the defendants, who agreed to make advances, but insisted upon having security for the Rs. 21,000, and for further advances up to Rs. 31,000 on the whole.

    In March 1874, Gourchurn and the independent partner executed a mortgage accordingly, which not only covered the joint family property, in respect of which this suit is instituted, but also property of the independent partner.

    Upon the execution of the mortgage a further advance was made.

    In June 1876, there was a balance due on the mortgage of over Rs. 29,000.

    On the 8th June 1876, the mortgagees instituted a suit on the mortgage against Gourchurn and the independent partner; and on the 17th August they obtained a decree, and under it one of the properties purchased by Ramlochun has been sold, but the purchaser has not been made a party to this suit.

    This suit in fact, except so far as it asks for partition, which we consider is asked for merely as a secondary relief, seeks only for a declaratory decree.

    It is apparent from the foregoing circumstances, therefore, that this is not simply a case in which Gourchurn mortgaged joint family property as the managing member of the family. These ladies continued to be interested in the business; they must be taken to have known that it was financed by the defendants, and that it required advances; they allowed Gourchurn to stand forward as the ostensible owner of the family share; they participated in and were maintained out of its profits; and they were, in our opinion, certainly liable for the debts of the business. As authorised manager of the family share in the business Gourchurn was clearly capable of making all necessary business contracts. Did it lie within his power as such manager to raise monies necessary for the business, (as to which there is no question) by mortgaging the joint family property?

    If the joint family property can be considered as partnership property belonging to the family share of the business, we think there would be no doubt that he could pledge it. Mr. Justice Lindley, in his book upon Partnership, states that the English law, which in this respect is founded on reason and convenience, is as follows:—

    “The writer is not aware of any decision in which an equitable mortgage made by a partner by a deposit of deeds relating to partnership real estate, has been upheld, or the contrary; he can, therefore, only venture to submit, that such a mortgage ought to be held valid in all cases in which it is made by a partner having an implied power to borrow on the credit of the firm” (p. 229, 1st Edn.)

    In this case Gourchurn certainly had an implied power to borrow on the credit of the joint family as partners in the firm; also we think he had power to borrow on the credit of the joint family as a joint family for the purposes of the firm.

    A joint family carrying on business is necessarily a peculiar kind of partnership; it does not cease on death, but the shares in it are inheritable along with the shares in the joint family property.

    We agree with the decision in 1 Bom. H.C.B Appx. 51,— Ramlal Thakursidas v. Lakhmichand Muniram (approved in the case of Johurra Bebee v. Sree Gopal Misser, I.L.R, 1 Cal., 471.) In that case the following propositions were stated as law, pp. 71 and 72. “The power of a manager to carry on a family trade necessarily implies a power to pledge the property and credit of the family for the ordinary purposes of that trade. Third parties, in the ordinary course of bona fide trade dealings, should not be held bound to investigate the status of the family represented by the manager whilst dealing with him on the credit of the family property.

    “Were such a power not implied, property in a family trade, which is recognised by Hindu Law to be a valuable inheritance, would become practicably valueless to the other members of an undivided family wherever an infant was concerned; for no one would deal with a manager, if the minor were to be at liberty on coming of age to challenge as against third parties the trade transactions which took place during his minority.

    “The general benefit of the undivided family is considered by Hindu Law to be paramount to any individual interest, and the recognition of a trade as inheritable property renders it necessary for the general benefit of the family that the protection which the Hindu Law generally extends to the interests of a minor, should be so far trenched upon as to bind him by acts of the family manager necessary for the carrying on and consequent preservation of that family property, but that infringement is not to be carried beyond the actual necessity of the case.”

    In the present case the question of necessity or propriety does not arise. And we can see no difference in respect of the law an Laid down between families governed by the law of the Mitakshara and the law of the Dayabhaga.

    But it is objected that the Bombay case relates only to the power of the manager to bind infants; and that it is no authority for the proposition that he can also bind adults, and no doubt that it is so.

    But having regard to the observations in that case as to the peculiar nature of a joint family business, and the opinion expressed by Mr. Justice Lindley in his book, with which we also agree, we think that the manager had at least power, for the necessary purposes of the business, to make an equitable pledge of the joint family property which would bind the plaintiff.

    The circumstances of the case do not, in our opinion, render it necessary for us to express an opinion whether the plaintiff is bound by the decree in the suit to which she was not a party. The plaintiff is, in our opinion, distinctly liable for the debt and bound by the pledge. She now sues without making any offer to pay off the debt. She is seeking the aid of equity, without offering to do equity.

    If she had made such offer, she might perhaps have been entitled to have the decree re-opened and the accounts re-taken, for the purpose of giving her an opportunity of redeeming.

    She is either bound by the decree in the mortgage suit or not. If she is bound, we cannot interfere; and if she is not bound, we ought not to interfere by making any declaration except upon the condition of her offering to pay the debt for which she is liable. As she has made no such offer, we must confirm the decree of the Court below, and dismiss the appeal with costs.

    We may add that we are the more inclined to arrive at this conclusion, because we think it a highly suspicious circumstance that this lady was not examined by Commission or otherwise, sad has not ventured to affirm that she was not cognisant of and consulted with respect to this mortgage. Although we confirm the decree of the Court below, we think it is necessary for us to say that we do not concur in the doubt expressed by the learned Judge at the end of his judgment as to whether the plaintiff's suit would lie at all; for this case being governed by the Dayabhaga the plaintiff would be entitled to a definite share in the joint property.

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    Bemola Dossee v. Mohun Dossee
    (Mar 9, 1880)