TaxTMI 
TaxTMI 
2013 (9) TMI 252
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....a, Adv. With Fatima Diamondwala, Ashraf Diamondwala, Hamza Tatli i/by M/s. Diamondwala & Co. for Defendant no.17 to 19. Mr. Janak Dwarkadas, Sr. Adv with Mr. Devitji, Sr. Adv. JUDGMENT Plaintiff who has filed suit for declaration that the plaintiff is entitled to 1/10th share of the assets and properties set out in the plaint, and for partition of the said properties by metes and bounds on the ground that all such properties were properties of the joint family, has prayed in this notice of motion for appointment of the Court Receiver in respect of the properties described in Exh. B and injunction in respect thereof. Some of the facts which emerge from the pleadings and documents filed by both the parties and which are relevant for the purpose of deciding this notice of motion are as under : 2. CASE OF THE PLAINTIFF : (a) Plaintiff and defendant nos.1 to 8 are children of one Mr. Bhagwandas Ahuja who expired on 14th April, 1996 (hereinafter referred to as the "said deceased"). Defendant Nos. 1 to 4 are the brothers of the plaintiff. Defendant nos. 5 to 8 are sisters of the plaintiff. Defendant no. 9 to 11 are the children of the deceased sister of the plaintiff and defen....
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.... M/s. Kanayalal Rameshkumar was carrying on the business. Defendant Nos. 1, 3 and 4 and plaintiff became partners of the said firm. It is the case of the plaintiff that the funds of the said partnership firm came from the surplus sale proceeds of the flat in Jolly Maker Apartment from the amount left after purchase of the said flats at Versova. In the year 1985, plaintiff and defendant nos. 1 to 8 started construction business in the name of United Development Agency at Vardhaman Market, Sector 17, Vashi. Kirana Merchants Association allotted plot at Navi Mumbai to the said firm M/s. United Development Agency in view of M/s. Kanayalal Rameshkumar and M/s. Rameshkumar Gopaldas being its members. The said firm started its first project for construction on the said plot alloted to the said firm and also stared other business of Marble processing, spice business etc. In the year 1985, flat No. 601B at Versova Woodland Coop. Hsg. Andheri was purchased in the name of plaintiff out of the funds of Kirana commission Agency run by M/s. Rameshkumar Gopaldas. On 21st November, 1985, M/s. Rameshkumar was reconstituted. Defendant nos. 3 and 4 voluntarily retired from the said firm. In the year ....
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....andwala Extension. (f) On 12th December, 1999 various family concerns executed MOU whereby defendant no. 15 company was empowered to act as common pool company for various companies. In the year 2001, M/s. Ahuja Construction was converted into "Ahuja Housing & Development Pvt. Ltd" Plaintiff had 40% shareholding of the said company. In the year 2002, plaintiff mortgaged his flat situated at 12th Floor Peri Cross Road, Bandra and A3, Rajpipla CHS Linking Road, Santacruz West in favour of Cosmos Bank for creating working capital and settling slum dwellers in a joint family project being Ahuja Towers at FP No. 1087 and 1088 situated at Raja Bhave Desai Marg, Prabhadevi. On 3rd December, 2002, Defendant No. 17 i.e. Shree Ahuja Properties Pvt. Ltd addressed a letter to the slum dwellers at Prabhadevi making an offer to develop the property which was occupied by the slum dwellers. In the year 2003, defendant no. 1 firm formed 3 partnerships i.e. (1) Ahuja Properties, (ii) Ahuja Resources Management (iii) Ahuja Properties & Associates. In the year 2003, Defendant no. 1 got a letter of appointment from Prabhadevi Property issued in the name of M/s. Shree Ahuja Properties, the firm of....
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....d addressed a letter to the firm M/s. Rameshkumar Gopaldas informing about the freezing of the account by defendant no. 1. By letter dated 1st June, 2010, addressed by plaintiff to defendant no. 1 and his wife, plaintiff called upon them to resolve the issues between them. By letter dated 2nd August, 2010 defendant no. 1 and his wife called upon by the plaintiff asking him not to deal or dispose of the properties of the firm Rameshkumar Gopaldas and also not to finalize the balance sheet as on 31st March, 2010 until the same was approved by them. (i) On 1st November, 2010, plaintiff addressed a letter to defendant no. 1 and his wife fixing the date of 4.11.2010 for meeting and resolving the issues pertaining to the family business of Kirana, Construction and marble by letter dated 3rd November, 2010, defendant no. 1 raised various excuses without disputing the plaintiff's right in the said family business of kirana commission agency, construction and marbles. On 16th February, 2011, plaintiff once again called upon the defendant no. 1 to sort out the issues by appointing Mr. Girish Dave for resolving their dispute. On 24th June, 2011, the Income Tax Appellate Tribunal passed an ....
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....nterim injunction is granted in respect of the residential flat being occupied by other brothers and sisters. Defendant nos. 16 and 17 were directed to earmark those portions in the concerned plans and to place a copy of such plans on record of the notice of motion with an affidavit within one week from the date of the order. It was also directed that transferees of those portions of the properties will be informed in writing about the said order passed by the Division Bench. It was clarified that the said order was passed without prejudice to the rights and contentions of the parties keeping all the contentions open. (k) By an order dated 10th May, 2013 passed by the Supreme Court in Special Leave to Appeal (Civil) No. 17155 of 2013 filed by Shree Ahuja Properties and Realtors Pvt. Ltd impugning the order passed by the Division Bench on 16th April, 2013, Supreme Court declined to interfere with the order passed by the division Bench of this court since it was an ad interim order and dismissed the said Special Leave Petition. The Supreme Court however directed that the Notice of Motion be finally decided within a period of two months from the date of the order. By an order dated....
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....was also partner of Rameshkumar Gopaldas along with defendant no. 1. The audited balance sheet of Kirana and construction business would indicate that there was transfer of funds from one account to another account and the funds were utilized for the common purpose of Ahuja Family. (b) Plaintiff and his wife had mortgaged their ownership flats in favour of the banks to secure facilities availed of by various firms and companies. In most of the companies who were parties to this proceedings, plaintiff or his wife are share holders and or directors. Plaintiff and or his wife are also partners in some of the firms. Reliance is placed on capital account of Kirana business firm in support of his submission that the capital introduced by the other partners of the said firm including defendant no.1 was not equal to the capital introduced by the plaintiff. Even the order passed by the Income Tax Appellate Tribunal in respect of one of the company, finding was recorded that there were internal transfers of amount across Ahuja family concerns without payment of interest. It is submitted that the joint family nucleus funds were used to acquire property situated at A1 Rajpipla, Santacruz (W....
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....es which are described in Exh. C to the plaint. (e) Mr. Shah placed reliance on the brochure/profile got printed by the first defendant and submits that defendant no. 1 himself has described the construction business as family business. Mr. Shah, also strongly placed reliance on paragraph 5 of the affidavit in reply filed by defendant no.1 on 14th June, 2013 in this notice of Motion in which according to learned senior counsel it was admitted by defendant no.1 that he used the profits generated by M/s. Kanayalal Rameshkumar for other business. Learned senior counsel placed reliance on the judgment of the Supreme Court in the case of Appasaheb Chandgade Vs. Devendra AIR 2007 SCC 218 and in particular paragraphs 9, 10 and 11 in support of his submission that if it is established that the family possessed some joint property which from its nature and relative value may have formed sufficient nucleus from which the property in question may have been acquired, the presumption arises that it was the joint property and the burden shifts to the party alleging selfacquisition to establish affirmatively that the property was acquired without the aid of the joint family. Mr. Shah submits t....
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....f status", or an actual division among them by allotment of specific property to each one of them which is described as "division by metes and bounds". A member need not receive any share in the joint estate but may renounce his interest therein; his renunciation merely extinguishes his interest in the estate but does not affect that status of the remaining members visavis the family property. A division in status can be effected by an unambiguous declaration to become divided from the others and that intention can be expressed by any process. Though prima facie a document clearly expressing the intention to divide brings about a division in status, it is open to a party to prove that the said document was a sham or a nominal one not intended to be acted upon but was conceived and executed for an ulterior purpose. But there is no presumption that any property, whether moveable or immovable, held by a member of a joint Hindu family, is joint family property. The burden lies upon the person who asserts that a particular property is joint family property to establish that fact. But if he proves that there was sufficient joint family nucleus from and out of which the said property coul....
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....matively that the property was acquired without the aid of the joint family. Therefore, on survey of the aforesaid decisions what emerges is that there is no presumption of a joint Hindu family but on the evidence if it is established that the property was joint Hindu family property and the other properties were acquired out of that nucleus, if the initial burden is discharged by the person who claims joint Hindu family, then the burden shifts to the party alleging selfacquisition to establish affirmatively that the property was acquired without the aid of the joint family property by cogent and necessary evidence." (f) Mr. Shah also placed reliance on the judgment of the Supreme Court in case of Surjitlal Chhabda Vs. Commissioner of Income Tax, AIR 1976 SC 109 and in particular paragraph 9 in support of his submission that the joint Hindu family under Dayabhaga is like a Mitakshara family, normally joint in food, worship and estate. In both systems, the property of joint family may consist of ancestral property, joint acquisitions and/or self acquisitions thrown into the common stock. Paragraph 9 of the said judgment reads thus : "9. The appellant is governed by the Mita....
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....u law, 11th edn., the legal position has been neatly stated thus at p. 347 : "So long as a family remains an undivided family, two or more members of it, whether they be members of different branches or of one and the same branch of the family, can have no legal existence as a separate independent unit; but all the members of a branch, or of a subbranch, can form a distinct and separate corporate unit within the larger corporate family and hold property as such. Such property will be joint family property of the members of the branch inter se, but will be separate property of that branch in relation to the larger family. The principle of joint tenancy is unknown to Hindu law except in the case of the joint property of an undivided Hindu family governed by the Mitakshara law. " The legal position may be stated thus : Coparcenary is a creature of Hindu law and cannot be created by agreement of parties except in the case of reunion. It is a corporate body or a family unit. The law also recognizes a branch of the family as a subordinate corporate body. The said family unit, whether the larger one or the subordinate one, can acquire, hold and dispose of family property subject to the....
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.... the tenant has created nuisance), 12(1)(f) (for bona fide requirement of landlord for nonresidential purposes) and 12(1)(g) (bona fide requirements of landlord to carry out repairs) of the M.P. Accommodation Control Act, 1961. The relevant parts of section 12 of the Act are set out as under: "12. Restriction on eviction of tenants.( 1) Notwithstanding anything to the contrary contained in any other law or contract, no suit shall be filed in any civil court against a tenant for his eviction from any accommodation except on one or more of the following grounds, only, namely3 (a) ( b) x x x (c) that the tenant or any person residing with him has created a nuisance or has done any act which is inconsistent with the purpose for which he was admitted to the tenancy of the accommodation, or which is likely to affect adversely and substantially the interest of the landlord therein: (d) ( e) x x x (f) that the accommodation let for nonresidential purpose is required bona fide by the landlord for the purpose of continuing or starting his business or that of any of his major sons or unmarried daughters if he is the owner thereof or for any person for whose benefit the accommodation is held a....
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....arrying on business with his two brothers and the partition took place long after the acquisition of that building. In that partition that building was allotted to Laxminarayan alone......" 12. The appellants further relied on Mudi Gowda Gowdappa Sankh v. Ram Chandra Ravagowda Sankh (1969) 1 SCC 386 wherein this Court held that, of course, there is no presumption that merely because the family is joint so the property is also joint. So the person alleging the property to be joint family property must prove it. In that case, this Court further held that the burden of proving that any particular property is joint family property is, therefore, in the first instance, upon the person who claims it to be coparcenary property. But if the possession of a nucleus of the joint family property is either admitted or proved, any acquisition made by a member of the joint family is presumed to be joint family property. The Court carved out an exception and observed that, "this is, however, subject to the limitation that the joint family property must be such as with its aid the property in question could have been acquired. It is only after the possession of an adequate nucleus is shown, that....
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....rest of the family other coparceners still can constitute a joint Hindu family. Learned senior counsel also submits that if the business was joint and the property was acquired from earnings of joint business, it must be presumed that each of the members has his equal share unless otherwise shown. Learned senior counsel submits that defendants have failed to show that any of the properties which are subject matter of this suit, were selfacquired property. Paras 8 to 10 of the said Judgment read thus : "8. Thus, they contend that they constitute a joint Hindu family. In fact, law presumes that every Hindu family is a joint family unless otherwise shown. In the instant case, however, the controversy seems to have arisen because the father does not live with the family. Normally, a joint family consists of father, mother and sons and their wives. Here, admittedly, father had long back turned the plaintiffs and defendant No.2 out of the house and he is living separately. The question is whether the mother and two sons could constitute a joint family and that seems to be the question of law raised. I see no reason why they cannot. If two brothers, upon death of father, can constitute....
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.... two shops at two different places. It is therefore, difficult to accept that defendant No.2 alone could run both the shops at the two different places. The theory of the plaintiffs that the shops were joint and run by all has, therefore, to be accepted. There is another strong reason why the property has to be teated as joint ly acquired property. Defendant No.1 had filed the suit against defendant No.2 and plaintiff No.1 in respect of recovery of rent of shop of plaintiffs and defendant No.2. The certified copy of the plaint in that suit is Exh.36. In plaint para No.2, following averments are made. " Defendant No.2 is the mother of defendant No.1 and they constitute joint family. Defendants carry on retail grocery business.". These contents are admitted in the written statement filed at Exh.37. Obviously, defendant No.2 admitted in that suit that the shop was a joint family business. Even in para 17 of the said written statement there is a clear averment that defendants were running the shop and house was reconstructed by the defendants. DW 1 Vitthal in crossexamination admits that he had filed such a written statement and that he had stated therein that house belonged to j....
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....ct of the properties in question in 1942. It at least indicates that even according to the contesting defendants, some settlement of the property amongst the members of the family was necessary which had already taken place earlier i.e. to say existence of joint property cannot be denied. Once their case of settlement in respect of the same property having taken place earlier has been disbelieved, there remain hardly any ground to resist the claim of the plaintiff for partition and 1/5th share in the properties. The case of the defendant that after the settlement the brothers have been residing separately and they have been carrying on their business separately, hence there remained nothing which was joint amongst the members of the family which could be partitioned is rightly held to be untenable. 6. We find that after appreciation of the evidence the High Court has arrived at a finding that no such settlement had taken place in 1942. Learned counsel for the appellant has vehemently urged that Exhibit B3 is the deed of settlement which should have been given due weight by the High Court while considering the evidence. He has also submitted that the High Court has not taken into....
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.... falls through." 8. Mr Dhakephalkar, learned senior counsel submits that the third defendant is also entitled to 1/10th share in the properties and business described in ExhibitD & C, defendant No.3 being a member of the joint family. 9. Defendant No.6 has filed separate affidavit supporting the case of the plaintiff and adopts the arguments advanced by the plaintiff and defendant No.3. SUBMISSION OF MR ASPI CHINOY, LEARNED SENIOR COUNSEL ON BEHALF OF DEFENDANT NO.1 : 10. Mr Chinoy, learned senior counsel submitted that defendant No.1 at the age of 17 started business as a broker in spices and earned profits. It is submitted that in the year 1969, firm of M/s Moolchand and Co. in which father was partner, had stopped business as it had suffered large losses. Father had liabilities of Rs.25 lacs and did not carry on any other business. In 1969, the firm M/s Kanayalal Rameshkumar was started in partnership with M/s Kanayalal Lokram and others. Defendant No.1 introduced in the said firm the amounts he had earned from his brokerage business. Defendant No.1 was the eldest and the only earning member also introduced/admitted the plaintiff and defendant Nos.2 to 4 who were the....
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....he first defendant entered into partnership with eight other partners in the name and style of CAMS India Corporation which included the plaintiff and certain non family member. Mr Chinoy submits that as far as mortgage of flat No.601B standing in the name of plaintiff is concerned, the said flat was given as security in favour of State Bank of India for securing the loan given to CAMS Developers. At the request of the first defendant, plaintiff being a partner of CAMS India Corporation, plaintiff mortgaged his flat. It is submitted that in 1990, plaintiff started carrying on construction business in the name and style of Mahavir Constructions with certain outsiders and non family members. In 1991 defendant No.1 and plaintiff started partnership business in the name and style of Ahuja Constructions. 11. During the period between 1991 to 2003, the plaintiff and his wife have been partners and shareholder in diverse partnership firms and companies set up by first defendant to undertake business initially as construction contractors and later as developers. Plaintiff and his wife hold shares in different companies. Mr Chinoy submits that other family members i.e. defendant Nos.2 to....
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....d not mean that it would be a family business. No other members participated in the business. There was no family contribution in any of the businesses which are claimed as joint family business. Since 1970, parties were not residing together and were separate. Since 1984, apart from plaintiff, no other family members have been participating in Kirana shop or construction firm. There is no plea of the plaintiff that since 1984, any distribution of the property in any of the business had taken place amongst the family members. There is also no plea of the plaintiff that any other family members other than partners in such business were given any share and/or demanded by such family member. It is submitted that there is neither joint family nor any joint participation or issuing of profit or liability between the plaintiff and defendant Nos.1 to 8. Mr Chinoy submits that since father had no income of any nature whatsoever and had no investments and had not started any business as admitted by father himself in his statement recorded in insolvency proceedings since 1969 and had suffered a huge loss, there was no question of the father investing any amount or starting any business in th....
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....ral presumption of joint family. It is submitted that independent businesses are never proved otherwise by cogent and clinching evidence. It is submitted that participation in business by labour service, funding and issuing of profit and loss has to be proved. Mr Chinoy, learned senior counsel relied on Judgment of Madras High Court in case of R. Selvaraj v. R. Radhakrishna reported in AIR 1976 Madras 156 in support of his submission that the contribution of labour, service or money by one member of the joint family to the other should be so conspicuous and impressive that on a prima facie examination of such material, a reasonable and prudent person should gain the impression that the two members were so associated with the common object of exploiting a commercial activity to the advantage of the joint family. It is submitted that there is no presumption that a business conducted by a member of the joint family is a joint family business. The presumption on the other hand has to be contrary. Learned counsel placed reliance on paras 1,2, 6 and 11 of the said judgment which read thus : 1. The unsuccessful plaintiff in O.S. No. 3 of 1968 on the file of the Court of the Subordinate....
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....ethird share, though such a demand was made through mediators, he had to file the present action claiming a onethird share in the plaint A to D schedule properties. A schedule properties deal with the materials in the photo studio; B schedule refers to a house in Thiruvarur town. C schedule deals with the agricultural lands and the D schedule refers to a deposit of a sum of Rs. 10,000 made by the first defendant in the Indian Overseas Bank at Thiruvarur. 2. In the first defendant's written statement he admits that the plaintiff was living with him till April, 1967. Thereafter the plaintiff was living separately with his wife. It is denied that the photo studio called Sri Krishna Photo Studio is a joint family business and the properties mentioned in the various schedules to the plaint arc joint family properties. Rajagopal Pillai, the grandfather of the plaintiff was a public servant employed as a clerk in the SubRegistrar's Office in the first instance and later in the railways. Rajagopal Pillai thereafter started a business in watch and clock repairs and later learnt photography and was carrying on a mere photography business at Nagapattinam and Thiruthuraipundi and was not ev....
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....ediation. Though the plaintiff signed a copy of such deeds and affixed his signature thereto, he wriggled out of the situation and at the instance of his friends, has filed this suit on false allegations. The plaintiff's claim of onethird share in the schedule mentioned properties is denied. 6. The foundation of the appellant's case is that it was the grandfather Rajagopal Pillai, who started the photo studio and the ancillary photographic business. If this basis or hypothesis on which the edifice of this argument is built, is taken out, then the plaintiff should naturally fail. Rajagopal Pillai was a Government servant. He was working in the SubRegistrar's office for sometime and later on in the railways. He was for sometime doing business in watch repairs. Thereafter he got a camera on a hire purchase and was taking photos. He was later adjudicated insolvent in 1927. This by itself is sufficient to discredit the story of the plaintiff as well as his witnesses that there was ancestral nucleus left by Rajagopal Pillai for the first defendant to continue the same. Exhibit B90 is the insolvency petition. Exhibit B91 is the affidavit filed by Rajagopal Pillai pleading inability to ....
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...., that would make the resultant activity, a joint family activity. The contribution of labour, service or money by one member of the joint family to the other should be so conspicuous and impressive that on a prima facie, examination of such material, a reasonable and a prudent person should gain the impression that the two members were so associated with the common object of exploiting a commercial activity to the advantage of the joint family as a whole and in general. In the instant Case, the grandfather was writing accounts acknowledging that the father was the sole proprietor of the Thiruvarur photo business. The grandfather also accepts that he was receiving a salary for such service rendered. The surrounding circumstances also belie the tall story of the plaintiff that the grandfather and the father so associated themselves so as to make their joint activity a joint family venture. In the absence of such essential features, which would make such contribution by one member to the other a commercial activity the intendment and purpose of which is to make it a joint family trade, it is hazardous to infer that such unisoned activity between the members should be equated to a coo....
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....s conducted by a member of the joint family is a joint family business. On the other hand the presumption is to the contrary. The person alleging such a state of affairs should prove the same by acceptable and clinching evidence. The fact that the business started by one of the members was of the same nature as the business which was carried on by his ancestors will not by itself be a sufficient discharge of the burden Of proof on the part of the person alleging that such business is ancestral business. Even if it is assumed that the first defendant out of his generosity associated for certain purposes the plaintiff and put him in administrative charge of a part of his affairs, it does not tantamount to a relinquishment or abandonment of his exclusive rights in his business and conversion of his separate business into joint family business. Even if the first defendant trained the plaintiff for acquisition of the necessary knowledge as a photographer that would not be a telling feature to prove blending or intentional abandonment of his exclusive rights in the photographic business and trade. One other feature very strongly relied upon by the plaintiff is that when the account book ....
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....titution of a Hindu joint family. A family which does not own any movable or immovable properties may nevertheless be a joint family, for, there is always a presumption in Hindu customary law that a Hindu family is a joint family. Such a family consists of all persons lineally descended from a common ancestor, and includes their wives and unmarried daughters. There is no presumption much less irrebuttable presumption that a Hindu joint family at all times possesses joint family properties. Be it also noted that every Hindu joint family is not a Hindu coparcenary. The latter is a narrower body and includes only those persons like sons, grandsons and great grandsons of the holder of the joint family property, who acquire an interest in the coparcenary property by birth. 43. Even in a situation where a undivided Hindu family joins in worship and food, the members of a family who constitute a Hindu joint family may have their own avocation and may acquire separate and individual estate, but still share the community activities like common mess, common worship etc. Likewise, even where a Hindu joint family provenly owns and possesses joint family properties, a member with an undivide....
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.... does not affect the status of the remaining members visavis the family property. A division in status can be effected by an unambiguous declaration to become divided from the others and that intention can be expressed by any process. Though prima facie a document clearly expressing the intention to divide brings about a division in status, it is open to a party to prove that the said document was a sham or a nominal one not intended to be acted upon but was conceived and executed for an ulterior purpose. But there is no presumption that any property, whether movable or immovable, held by a member of a joint Hindu family, is joint family property. The burden lies upon the person who asserts that a particular property is joint family property to establish that fact. But if he proves that there was sufficient joint family nucleus from and out of which the said property could have been acquired, the burden shifts to the member of the family setting up the claim that it is his personal property to establish that the said property has been acquired without any assistance from the joint family property. 50. The conspectus of the above pronouncements is that there is a presumption in H....
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.... that the business wax carried on as a family business, by proof that the profits were treated as joint family property being brought to one account or divided among the members. 84. The Privy Council also observed that adverse inference against a member of the joint family that business carried on by him was not his individual business cannot be drawn merely on proof that he treated his younger brothers with ordinary kindness, supporting them when they were not earning, helping them to start business and, seeing to their marriage and so forth. P.W.1 and D.W.2 repeatedly say that Buggaiah brought some amount from Agapalli which formed a nucleus for the firm Veesamsetti Buggaiah and all other businesses were slatted from out of the profits of the first firm. They also in one voice stale that defendants 1 to 5 had no money to invest in the business. Even assuming that if it is Buggaiah who gave money to sons to start business the same does not lead to an inference that all the businesses were started by Buggaiah. It is well settled that when the family has a joint family business, the partners in the said business are not allotted share of their own and there is no apportionment o....
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....uncil 13. Relevant paragraph of the Judgment at page Nos.16 and 17 is extracted as under: "The first question to be considered is whether the Chief Court were right in reversing the trial Judge's finding that it was not proved that the business carried on at Macandrewganj by Gobardhan under the style Gobardhan Das Tota Ram belonged to the joint family - that is to say, to Moti Ram's descendants. On this their Lordships would premise that though a business, if it belong to a Hindu joint family, is an item of joint family property, special considerations apply to the question whether or not a business belongs to the family or to the individual member who carries it on. If it be a joint family business, then all the members of the family are liable for its debts upon the terms and to the extent laid down by the Hindu law. Whether or not it can be said that if a joint family is possessed of some joint property, there is a presumption that any property in the hands of an individual member is not his separate individual property but joint property, no such presumption can be applied to a business. Bord Buckmaster delivering the judgment of the Board in A.I.R. 1929 P.C. 1 at p.2 put th....
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....t they were not debarred from "casting the burden of proving that the business was separate in its inception upon the defendant who asserts it." In that case each of five brothers was actively engaged int eh management of a bank of the same bank. They constituted a joint Hindu family, and by a partition deed it was clear that they all had an equal interest and that all the branches were one business, accounting together as one business. There was no evidence of an agreement of partnership and, as jointness was undeniable, it was held that the business belonged to the five as joint family property. In these circumstances the conclusion could not be resisted merely on the ground of the obscurity which surrounded the beginnings of the business and the means by which the brother Deeranath had first laid its foundations. In the present case, as in that case, jointness may be proved by evidence that the business was carried on as a family business, by proof that the profits were treated as joint family property being brought to one account or divided among the members. It might be, for example, that Tota Ram and Ram Gopal were engaged in the business of of Gobardhan Das Tota Ram as repre....
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....esumption under Hindu law that a business standing in the name of any member of the joint family is a joint family business even if that member is the manager of the joint family. Paragraphs 1 to 3 and 5 of the said Judgment read thus : 1. The plaintiff G. Narayana Raju filed O. S. 34 of 195152 in the Court of District Judge, Mysore for partition and separate possession of suit properties mentioned in the various schedules of the plaint. The first defendant is the brother of the plaintiff. The second defendant is the widow of Muniswami Raju, the eldest brother of the plaintiff. The third defendant is the legal representative of the plaintiff's mother. She is now the appellant having been brought on record as the legal representative of the deceased plaintiff. The case of the original plaintiff was that he, the first defendant and Muniswami Raju (husband of the second defendant) were the sons of one Gopala Raju and were all members of the joint family. Gopalaraju died in May 1931 and after his death the plaintiff and his brothers continued to be members of the joint family. The joint status of the family was served by the issue of a registered notice by the first defendant to the....
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....he other properties and that all properties except item No. 1 of Schedule 'A' were the self acquisitions of Muniswami Raju, that Muniswami Raju never blended his properties with that of the joint family, that the plaintiff was only an employee under Muniswami Raju and therefore he was not entitled to the alternative relief claimed by him. Accordingly, the District Judge granted a preliminary decree holding that the plaintiff was entitled to 2/7ths share in item No. 1 of Schedule 'A'. The plaintiff took the matter in appeal to the Mysore High Court. By its judgment dated March 25, 1960 the High Court affirmed the decree of the trial court with the modification that besides item No. 1 of Schedule 'A' item No. 2 also should be held to be joint family property and the plaintiff was entitled to partition of his share in this item also. The High Court cancelled the direction of the District Judge that the plaintiff should account for the moneys and properties of Muniswami Raju in his hands before he is given possession of his share. 2. This appeal is brought by certificate on behalf of the plaintiff from the judgment of the Mysore High Court dated March 25, 1960 in R.A. No. 155 of 195....
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....rship with Krishnaswamy Chetty & Co. In the year 1925 the partnership with Krishnaswamy Chetty & Co. was dissolved by a document Ex. D. The entire business with all the assets and liabilities was taken over by Muniswami Raju while the widow and son of Krishnaswamy Chetty were given a house estimated by the appellant himself at Rs. 3,000/and furniture worth Rs. 400/. Muniswami Raju changed the name of the shop after taking it over into Ambika Stores and continued the business as is apparent from Exs. XVIII, XXVI and XXVI(A). There is also evidence that at the time when Ambika Stores was started other members of the family were not in a financial position to make any contribution to purchase such a business. The appellant joined Wesley Press in 1912 on a salary of Rs. 8 or Rs. 9 p.m. and he was drawing Rs. 27 p.m. in 1927 when he resigned from the Press. The first defendant joined Wesley Press in 1910 on a salary of Rs. 10 p.m. and he was continuing to work there till the institution of the present suit. The income of the property item No. 2 of Schedule 'A' was Rs. 15 p.m. and the income from pounding rice for which there is no satisfactory evidence was also negligible. Therefore, th....
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....any member of the joint family is a joint family business even if that member is the manager of the joint family. Unless it could be shown that the business in the hands of the coparcener grew up with the assistance of the joint family property or joint family funds or that the earnings of the business were blender with the joint family estate, the business remains free and separate." SUBMISSION OF MR BALSARA, LEARNED COUNSEL FOR DEFENDANT NOS.17 to 19 : 17. Mr Balsara invited my attention to share holding pattern in defendant Nos.17 to 19 in support of his submission that individuals were allotted specified shares. It is submitted that properties owned by a private limited company cannot be considered as joint family property. There is no joint family business as claimed by the plaintiff. SUBMISSION OF MR B.N. VAISHNAV, LEARNED COUNSEL FOR DEFENDANT NO.8 : 18. Defendant No.8 is married sister of plaintiff and defendant Nos.1 to 5 and has filed supporting affidavit in favour of defendant No.1 and adopted the arguments of defendant No.1. SUBMISSION OF MR G.S.GODBOLE, LEARNED COUNSEL FOR DEFENDANT NOS. 2, 4, 5, 7 9 to 11. 19. Defendant No.2 and defendant No.4 are br....
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....ucted by the first defendant. Mr Dwarkadas also invited my attention to para 36 of the rejoinder filed by the plaintiff in support of his submission that even in his rejoinder, the plaintiff has individually claimed shares in defendant No.17 company. Plaintiff has claimed 50% share in the company in his individual capacity and not on behalf of all the family members. Mr Dwarkadas submits that plaintiff himself has been carrying out several businesses in his individual capacity in his own name or in the name of his wife and son and also owns immovable properties and makes huge profit. Neither plaintiff has considered any business or his personal properties as properties of joint family nor the defendants have rightly claimed any share in those properties as family properties and/or business. Mr Dwarkadas would submit that even in kirana business, the plaintiff has claimed 50% share, claim and profit and never admittedly distributed any profit amongst family members except partners. Even statement of accounts produced by the plaintiff including capital account would disclose that the plaintiff as well as defendant No.1 was having 50% profits and liabilities in kirana business. There ....
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....s in which the deceased and the first defendants were equal partners. Payments were made directly out of the partnership account or out of the partnership fund transferred by the first defendant into his personal account. The suit premises were in fact purchased from payments made out of the partnership funds and not out of the personal account of the first defendant as alleged. The wealth tax returns of defendant No. 1 consistently showed debit balances in his capital accounts in the two firms. On the other hand the bank statements of the deceased do not show transfers of any significant amount into his personal account. Similarly numerous instances were quoted where the amounts have been transferred from the partnership account to the personal account of the defendant No. 1. According to the Counsel, these averments do not advance the case of the plaintiff to show that defendant No. 1 was coowner of the suit premises with the deceased. With regard to the agreement with Saraswati Narayan Singh it is stated in the rejoinder that the agreement was entered into between the defendant No. 1 and Singh, treating defendant No. 1 as the head of the family. Defendant No. 1 was at all time a....
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....ntenance bills had been paid by the defendant No. 1. Share certificates show that there are two owners of flat No. 31 and Flat No. 32. Agreement with Chase Bright was entered into by defendant No. 1. The entire amount of compensation paid by Chase Bright has been deposited in the personal account of defendant No. 1. All the outgoings with regard to suit property has been paid by defendant No. 1. Valuation report of flat No. 32 shows that defendant No. 1 is the sole owner of the suit flat No. 31. The income tax returns show that the rent has been received in favour of flat No. 32. It is further the submission of Mr. Chagla that the submissions and admissions made in the Small Causes Court are not binding on the defendant No. 1. In fact, there is no admission in the Small Causes Court to the effect that defendant No. 1 and deceased are coowners. There is also no admission to the effect that they are equal coowners. If anything, at best, it could be said that deceased is the owner of flat No. 32nd defendant No. 1 is the owner of flat No. 31. In fact, the deceased himself has been representing that he is the owner of flat No. 32. He has continuously declared a sum of Rs. 6,000/received....
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....ghs the income tax returns, Exs. 310, 311 and 314, in which the status of the assessee is shown as H.U.F. The High Court was therefore, not wrong in holding that all these documents taken together do not show "that the family of the defendants had continued to be joint." Reference has already been made to Ex. 316, an order dated June 20, 1950, of the Incometax Officer showing that defendants 1, 2 and 3 were being assessed on the basis that each of them had l/3rd share in the business. In a joint Hindu family business, no member of the family can say that he is the owner of onehalf, onethird or onefourth. The essence of joint Hindu family property is unity of ownership and community of interest, and the shares of the members are not defined. Similarly, the patterns of the accounts of a joint Hindu family business maintained by the Karta is different from those of a partnership. In the case of the former the shares of the individual members in the profits and losses are not worked out, while they have to be worked out in the case of partnership accounts. 38. In view of all that has been said above, we are of opinion that the concurrent finding of the courts below to the effect,....
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....ity and to make acknowledgements or partpayments in respect of the same so as to extend the period of limitation. With great respect to the learned Judge, we do not think that this is a correct enunciation of the law on the point. Firstly, the legislature has, in its wisdom, excluded joint Hindu trading families from the operation of the Partnership Act. Section 4 of that Act defines 'partnership' as "the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all". Section 5 further makes it clear that this Act governs only that relation of partnership which arises from contract and not from status such as the one obtaining among the members of a joint Hindu family trading partnership. Secondly, the question whether an acknowledgement made by the karta of an erstwhile joint Hindu family after its severance, would extend limitation against all the former members of that family, turn primarily on an interpretation of Clause (b) of Subsection (3) of Section 21 read with Section 19 of the Limitation Act, 1908. Clause (b) of Section 21 (3) provides: Where a liability has been incurred by or on behalf of a Hindu undivided f....
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.... which he holds the shares if and when the company declares, subject to the articles of association, that the profits or any portion thereof should be distributed by way of dividends among the shareholders. HE has undoubtedly a further right to participate in the assets of the company which would be left over after winding up but not in the assets as a whole as Lord Anderson puts it. The High Court expressed the view that until a dividend is declared there is no right in a shareholder to participate in the profits and according to them the declaration of dividend by the company is the effective source of the dividend which is subject to tax. This statement of the law we are unable to accept. Indeed the learned AttorneyGeneral conceded that he was not prepared to subscribe to that proposition. The declaration of dividend is certainly not the source of the profit. The right to participation in the profits exists independently of any declaration by the company with the only difference that the enjoyment of profits is postponed until dividends are declared. It was argued that the position of shareholders in a company is analogous to that of partners inter se. This analogy is whol....
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....o be considered and not in 1982. Nucleus has to be seen of the year 1969 and not 1982. Mr.Shah submits that the plaintiff has prima facie demonstrated nucleus and thus onus is shifted to defendants to show that properties were self acquired or individual properties which onus the defendant has failed to prove. Defendant no.1 has not furnished any details as to what was his income arising out of alleged business started by him in 1967 with any documentary evidence and such allegation is totally vague. Out of five brothers, two brothers participated in kirana business, others three participated in construction business. Defendant has to show that all the properties were acquired by the individual income/self acquired which the defendants have failed to prove. It is submitted that in so far as insolvency proceedings are concerned, though statements were made by father in those proceedings, the fact remains that commencement of insolvency proceedings and commencement of business in 1969 was together. The fact that all family members were joined as partners would show that the joint family business was started. It is submitted that defendant no.1 was born in 1950 and thus there was no q....
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....f participation and this court shall lift the corporate veil of those companies which are started by using the funds and income of the joint family business. In so far as judgment reported in AIR 1943 Privy Counsel 40 relied upon by Mr.Dwarkadas is concerned, Mr.Shah submits that at this stage, the court has to only see prima facie whether all brother were involved by the father in the joint family business or not. In so far as letter dated 1st June, 2010 addressed by the plaintiff to the 1st defendant is concerned, Mr.Shah submits that plaintiff has not given up his share in the joint family properties. It is submitted that reading of letter would not conclude that the plaintiff has no claim in the family business and/or properties. As far as shareholdings of Citi Bank in defendant no.16 company is concerned, Mr.Shah submits that financial arrangements arrived at between the said company and the Citi Bank indicates that the said company had an option to buy back those shares. As far as statement of Mr.shah that he has no objections if all the properties and businesses which are standing in the name of the plaintiff or his wife or his sons are also considered as joint family ....
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....rown into a common stock or blend with the joint family property in which case the said property becomes the estate of the joint family. If if it not done, the said property would be his or their self acquisition and succession of such property will not be governed by the law of joint family but only by the law of inheritance rights inter se between the members who have acquired such property and would be subject to the terms of the agreement whereunder it was acquired. There is distinction between the joint family property and property acquired by the joint efforts. Court has to see whether it is a jointly acquired property or not. (c) Partnership Act, 1932 excludes joint Hindu trading family from the operation of the Partnership Act. The said Act governs only that relation of partnership which arises from the contract and not from the status such as one obtaining amongst member of the joint Hindu family trading partnership. (d) There is no presumption that business carried out by a member of the joint family with the stranger is joint family business. It is a matter for evidence. (e) In case of immoveable property standing in the name of the individual member, there woul....
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....f majority when the said partnership firm was started by the father. According to the plaintiff the said M/s. Kanayalal Rameshkumar was reconstituted on 20th February, 1970 w.e.f. 5th December, 1969 when the plaintiff and defendant nos. 2 to 4 were minor and were admitted to the benefits of the said firm. According to the plaintiff even if the said firm was not started by the father out of his own funds and out of the profit generated from the joint family business, the other businesses were started by the family members. In the alternate, the said business started in the year 1969 in the name of M/s.Kanayalal Rameshkumar was joint family business started by the plaintiff and defendant nos. 1 to 4. It is the case of the 1st defendant which is supported by all other defendants except defendant nos.3 and 6, that the 1st defendant had already started business as a broker/trader of spices, dry fruits and other commodities in or around the year 1967 when he was 17 years old. It is case of the defendants except defendant nos. 3 and 6 that the business run by the father in the name of Moolchand & Co. was already stopped in the year 1969 in view of the said deceased and other partners of M....
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....oolchand & Co., he had no other income. Neither the said firm nor he had any post office savings bank account. He had deposed that in his personal capacity, he did not have to recover any money from anybody. He did not own any motor car or cycle or scooter nor any gold, silver or jewellery. He did not own any share of any joint stock companies or government securities. He also admitted that he had not invested any money with any firm or relations and did not have any private investments. It is further deposed that he had not transferred or gifted any property to anyone during the course of last two years when the said statement was recorded. By an order dated 9th October, 1973, this court ordered that Mr.Kishandas Mulchand Ahuja, Mr.Baldevdas Daryanomal Ahuja and the said deceased were adjudicated as insolvents and ordered that all the estate and effects of the said debtors vest in the Official Assignee of Bombay. 31. On perusal of Form E submitted by the said deceased and partners of M/s.Moolchand & Co. i.e. particulars of description of property in possession of the party, it is revealed that the said firm M/s.Moolchand & Co. had Rs.221/as bank balance with Bank of India, Mand....
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.... said deceased and other partners of the said firm and has declared each of such parties to those proceedings including the said deceased as insolvents and has ascertained the properties, assets and liabilities and has adjudicated upon the assets of the said firm M/s.Moolchand & Co. In my prima facie view such statement made on oath by the father of the plaintiff and defendant nos. 1 to 8 in this court and the order passed by this court declaring father and other two parties as insolvents based on such admissions cannot be ignored by this court in this proceedings. The said statement made by the father would equally bind the parties claiming through the father. 34. The entire foundation of the plaintiff's case that out of income generated by the father from his past business conducted prior to 1969, father had started the said firm M/s.Kanayalal Rameshkumar as joint family business in my prima facie view falls to the ground. In my prima facie view, plaintiff is not able to establish any nucleus on which it can be proved that the subject properties may have been acquired and/or such business may have been started out of income generated by the said business M/s.Kanayalal Rameshku....
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....the said firm M/s.Rameshkumar Gopaldas & Co. in the year 1985. Plaintiff and defendant no.1 continued to be the partners of the said firm M/s.Rameshkumar Gopaldas & Co. Mr.Shah, learned senior counsel appearing on behalf of plaintiff invited my attention to the capital account, other account statement and the balancesheet of M/s.Rameshkumar Gopaldas & Co. in support of his submission that there was huge difference in the balance in capital of the plaintiff and defendant no.1 in the said firm M/s.Rameshkumar Gopaldas & Co. Learned senior counsel laid emphasis on the said accounts in support of his submission that the amount withdrawn by defendant no.1 out of the said business was much more than the amount withdrawn by the plaintiff as was reflected in the capital account of plaintiff and defendant no.1. On perusal of the capital account of the partners in said firm capital balance would reflect different amount, in my view due to the withdrawal of the different amount by each partners from his capital account. Difference in the capital account would not prove that the amount withdrawn by the 1st defendant from such business was utilised for starting other businesses and as a result ....
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....operties and/or claimed to have been received any profit and/or loss from the said businesses nor has shown any liabilities of any such company and/or firm as that of the plaintiff in his personal income tax returns and books of accounts. In my view, Mr.Dwarkadas, learned senior counsel is right in placing reliance on the judgment of this Court in case of Shivani S.Roy (supra). In my view admissions made by a party before wealth tax and income tax authorities cannot be ignored and the same would be against the public policy. It is held that if a party has not claimed before revenue authority that he was owner of a particular property, he cannot be permitted to approbate and reprobate. I am not inclined to accept the submission of Mr.Shah, learned senior counsel appearing for the plaintiff that though no amount of profit and/or loss was distributed by various partnership firms controlled by defendant no.1 or other defendants and/or private limited company controlled by defendant no.1 to the plaintiff and/or other members of the family, it would have no bearing on the issue whether such properties/businesses would be Hindu undivided property or not and distribution of such profit or ....
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....ame of the plaintiff, his wife and son were also acquired out of the joint family fund and/or joint family properties and as joint family properties and/or businesses. 41. Mr.Dwarkadas, learned senior counsel invited my attention to the letter dated 1st July, 2010 addressed by the plaintiff to the 1st defendant and his wife (Ex.I5 of the plaint). Mr.Dwarkadas, learned senior counsel laid emphasis on the contents of the said letter in support of his submission that the plaintiff had accepted the position that he was partner with the 1st defendant in one of the partnership firm in his individual capacity and was entitled to share of profit in that partnership firm. It is also alleged in the said letter that defendant no.1 had not shared any profit from the construction and marble business though plaintiff was alleged to be partner. On perusal of the said letter dated 1st June, 2010, in my prima facie view, the plaintiff had represented the 1st defendant that plaintiff was having 50% share in the various businesses as equal partner with 1st defendant and such claim was not on the basis of such business/properties being Hindu undivided family businesses/properties. It is not the cas....
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....laint are jointly acquired by the members of the family or any of the self acquired properties by the plaintiff and/or by defendants are thrown into a common stock. In my prima facie view, plaintiff has been unable to show even prima facie that any of the properties described in Exs.B, B1 and C and/or businesses mentioned therein have been started out of the joint funds or any of the properties standing in the name of the individual partnership firm and/or companies were ever considered as joint Hindu undivided businesses and/or properties. No profit and/or loss has been distributed by any of this firm and/or to parties partners and/or shareholders. I am therefore prima facie not inclined to accept the submission of Mr.Shah, learned senior counsel that any of such businesses and/or properties standing in the name of individual members and/or firm and/or companies are to be treated as joint family properties or the same having been thrown into the common stock. Supreme Court in case of Bhagwan Dayal (supra) has approved the legal position summarised in Mayne's Hindu Law, 11th Edition that one or more members of the family can start business or acquire properties without the aid of t....
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....trated in the insolvency proceedings had no income that could be used for starting business in 1969. I am bound by the principles of law laid down by the Supreme Court in the aforesaid judgment that there can be no presumption drawn in case of business by the court that the business standing in the name of the individual member and/or partnership firm or company were joint family businesses. On perusal of the judgment in case of N.Raju (supra) which is relied upon by Mr.Chinoy, learned senior counsel appearing for the 1st defendant, it is clear that the Supreme Court was considering a similar situation as in this case and had held that there was no evidence to show that the family supplied any money or that the father had enough money who could have started a business with any fund with him. In this case also deceased father himself had admitted in his evidence that he had no other income and/or business and/or assets. He was not a partner or had invested any amount in any of the businesses. In my view, the judgment of the Supreme Court in case of G.Narayana Raju (supra) squarely applies to the facts of this case. 46. Privy Counsel in case of Bherumal (supra) relied upon by M....
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....artnership firm constituted with the members of the joint family, the share in the profit is apportioned. A member of the joint Hindu undivided family can make apportionment of property for his own benefit. In my view, merely because plaintiff or his wife or son are admitted as partners in some of the partnership firm started by defendant no.1 or by other parties or merely because plaintiff, his wife or son are allotted shares in some of the companies, no inference can be drawn by the court that such businesses in which family members are partners has to be a joint family business. In my view, such family members having partnership under a separate contract entered into by way of partnership deed, their rights, obligations, entitlement and duties would be governed by such contract and no inference can be drawn that being a joint family business. 48. In so far as shareholding of the plaintiff, his wife and/or son in other companies are concerned, all the properties acquired by the said company are properties of the company and does not belong to the shareholder. Company is a separate legal entity. Plaintiff as shareholder of such company if has any grievance in respect of the aff....
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.... for defendant No.3 in support of his submission that merely because if a family carries on number of businesses, some of the businesses are being carried on in different names and styles and often constitutes difference companies or partnerships for better handling of business, there is no proof of separation of Hindu undivided family is concerned, perusal of the said Judgment relied upon by Mr Dhakephalkar will indicate that the said Judgment was based on oral evidence led by the parties. In this case, prior to 2010, plaintiff has not made any claim in respect of any of the businesses and/or properties standing in the name of such firms and/or companies as joint family business. 52. Mr Chinoy, learned senior counsel appearing for the first defendant invited my attention to the averments made in affidavit in reply of the first defendant that the plaintiff was partner with the first defendant in a construction business. In the year 2001, the real estate market had collapsed and contracting jobs had come to a standstill. The said firm had losses of Rs.35 crores. Plaintiff wanted to exit from the said business and wanted to ensure that he should not be exposed to such large liabil....