TaxTMI 
TaxTMI 
1952 (12) TMI 38
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.... endorsements being marked as 2A, 2B, 3A and 3B respectively. Defendant 4, 10 and 11 contested the suit. The other defendants were ex parte. Defendant 1 did not file any written statement though he appeared in Court. The plea urged on behalf of the defendants (other than defendant 1) was that defendant 1, Damodar Sahu, had no power to borrow on behalf of the family and that neither the hand notes nor the endorsements purporting to have been made thereon by him, would make the other defendants liable for the plaintiff's claim. 2. The learned Judge granted a decree to the plaintiff only against defendant 1 and dismissed the suit as against the other defendants. 3. Mr. M. S. Mohanty appearing for the plaintiff-appellant has raised two contentions in sup port of this appeal. His first contention is that defendant 1 being the manager of an undivided Hindu family was competent to borrow for family purposes and for the family business which admittedly was an ancestral family business, and keep the debts alive by making partial payments towards the discharge of those debts. Secondly, he urged that defendant 1 had been clothed with the power to borrow by virtue of the registered p....
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....egistered at Aska Sub-Registration Office, from Gopinath Sahu and others, to Sri Ananda Pati, resident of Aska, is as follows: 'As I am in need for my Sugar factory at Aska I have borrowed Rs. 3000/- from you in cash. I shall repay it with interest at 1/4 per cent per month, on demand by you or your order. I have received the consideration in cash. I consent to this promissory note.' Rupees three thousand only (on stamp) Sd/- Damodar Sahu 9-6-1941." The two endorsements made by Damodar Sahu on the promissory note are also signed by Damodar Sahu, but without any description of the capacity in which he made the payments or signed the endorsements. 5. The plaintiff's suit was based; firstly on the negotiable instruments as such and secondly on his claim for recovery of the debts contracted by defendant 1 as the manager of the family. He alleged that all the defendants were benefited by the loan, as the loan was incurred for family purposes and for legal necessity of the family. He also alleged that they were liable on the hand note as the....
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....du joint family can borrow for purposes of the family and that he can bind the other members for the debts thus incurred by him. He is the representative of the family and can bind the other members for necessary purposes. His authority to incur expenditure and contract loan is determined by family necessity and family benefit. While, therefore, the members of the family, of which he is the manager, are liable for the debts and their interests in the family property can be attached for the realization of the debts, they are not personally liable either for the debts, or upon a negotiable instrument executed by the manager. There is, however, no presumption that the borrowing was not for his own private purposes and that the other members of the joint family are not liable on the promissory notes, in the absence of satisfactory evidence that the money was borrowed for purposes of family business. See --'Abdul Majid Khan v. Saraswati Bai', (A), it is unnecessary here to discuss whether benefit to the estate can only be inferred when there is pressure on the estate and whether the pressure or danger could not be removed except by resort to borrowing. It is also unnecessary to ....
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....ase. Section 21, Limitation Act deals with acknowledgments or payments by one of several joint contractors. Section 21 (3) (b) says: "Where a liability has been incurred by or on behalf of a Hindu undivided family as such, an acknowledgment or payment made by or by the duly authorised agent of, the manager of the family for the time being, shall be deemed to have been made on behalf of the whole family." It is clear therefore that "the manager of the family for the time being" can acknowledge or make a payment on behalf of the whole family. The words "manager of the family for the time toeing" indicate that at the time of making the acknowledgment or payment, the person making the endorsement should be the manager of the family. While there can be no doubt, therefore, that the manager has the implied authority to contract a loan on behalf of the family, he cannot make any payment and keep the debts alive as against the entire family, unless it is shown that he is also "the manager of the family for the time being", that is, at the time of making the payment. The argument on behalf of the respondents is that by virtue of the notice dated 6-10-1942, whe....
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....e notice dated 6-10-1942. There is no evidence as to how the family business was carried on after the receipt of the notice of partition and even if, as a fact, defendant 1 carried on the business of the sugar factory that by itself would not be sufficient to show that he was acting as manager of the family. In fact, if the' evidence of D. W. 1 Kasinath Sahu, were to be accepted defendant 1 was not the karta of the' family even at the time of contracting the loan. He was no more than an authorised agent or power of attorney holder of the family. D. W. 2. also gave evidence to show that defendant 1 was only a formal agent and not a manager. Exhibits 1 and 1-A expressly state that for facility of administration of the joint estate of the members of the family,- defendant 1 was appointed their agent. There is no express mention of his having. been empowered to act as manager of the family, in any of these documents. But even if it be assumed that he was also the manager of the family at the time of the execution of the suit promissory notes, there is clear evidence that he ceased to-be so at the time he made the endorsements of payment on 21-5-43. It must accordingly he held t....
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....indu family are not such persons though their interest in the family property is liable to be attached for the debt contracted by the manager for the benefit of the estate. But it would be doing violence to the language of that Section, to say that they are the persons actually liable to pay the debt. Nor could such persons be brought under the provisions of Section 19. That section says that the acknowledgment should be signed by the party against whom such right is claimed or by some person through whom he derives title or liability. It is obvious that the coparceners do not derive their title through the manager. Nor does the creditor claim any right against them as such. The claim Is against the joint family assets in their hands. I am, therefore, inclined to the view that neither Section 19 nor Section 20 would apply to the case of an acknowledgment or payment made by the manager so as to bring in the junior members of the joint family. As I have stated already, the relevant Section is Section 21 where the expression "agent duly authorised in this behalf" is explained rather than defined. And Section 21 (3) (b) makes express provision for such cases. Unless, therefore, the pay....
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.... power conferred is limited to execution of document for liquidation of old and subsisting debts and renewal of old debts and obligations. If the plaintiffs seek to invoke the power conferred by Ex. 1 to make the other defendants also liable for the 'debts, one would expect a more unambiguous recital in the deed than is legitimately inferable from the words used by the executant in this case. But assuming that the alleged power does exist, the question is whether the donee of the power was acting within the limits of his-power and purported to act on behalf of his principals when he executed Exs. 2 and 3. 11. Section 27, Negotiable Instruments Act provides that a person capable of entering into a contract can bind himself or be bound by a duly authorised agent acting in his name : and further provides : "A general authority to transact, business and. to receive and discharge debts does not confer upon an agent the power of accepting or indorsing bills of exchange so as to bind his principal." The last clause of the Section says : "The authority to draw bills of exchange does-not of itself import an authority to indorse." ....
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....al was also affixed to the note. Cockburn C. J. delivering the judgment of the Court said : "Where parties in making a promissory note or accepting a bill of exchange describe themselves as directors, or by a similar form of description, but do not state on the face of the document that it is on account, or on behalf, of those whom they might be otherwise-considered as representing -- if they merely describe themselves as directors, but do not state that they are acting on behalf of the company -- they are individually liable." It was further observed that so far as the written portion of it went, it was totally, without any such qualifying expression, and the fixing of the seal of the company upon the note, was "simply for the purpose of ear-marking the transaction or, in fact showing to the directors that, as between them and the company, it was for the company that they were signing the note and that it was a transaction in which the proceeds to be received upon the note would operate to the, benefit of the company; but there is no case that goes the length of saying that the fixing of the seal where the parties otherwis....
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.... signed by one Shamlal in the following form : 'Shamlal' Pro. Radhakishen & Sons. Their Lordships held that the use of the word "Pro." indicated that the executant was the proprietor of Radhakishen & Sons and that it was only descriptive of the executant and was not legally sufficient to fix any liability on the firm of Radhakishen & Sons. In ---'Sitaram v. Chimandas', (J), a hundi was signed by one G. V. Athale, managing proprietor, Gangadhar & B, Friends, Sanderson Road, Bombay. The Court held that the person liable on the hand note was the person named Athale and not any firm, alleged to have been styled as "Ganga dhar & B. Friends". In the matter of --'Jajodia Cotton Mills, Ltd.', (K), the promissory note ran as follows : "We promise to pay to....or order the sum of ...... for value received." and it was signed by two directors of the company, and below the signatures was given their description as directors, and below these signatures, again, was the signature of the managing agents. The ....