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1977 Supreme(AP) 25
Andhra Pradesh High Court
Judges : K.A.MUKTADAR, K.JAYACHANDRA REDDY
Gollamudi Siva Kumari - Appellant
Versus
Indian Overseas Bank, Guntur - Respondent
Decided On : 01-31-77
The manager of a joint Hindu family can mortgage the family property for the benefit of the estate, and such a mortgage is binding on the minor members of the family.
Headnote:
HINDU LAW - JOINT FAMILY - MORTGAGE - MANAGER - POWER TO MORTGAGE - NECESSITY - BENEFIT TO ESTATE - TRANSACTION FOR BENEFIT OF ESTATE - MANAGER ACTING AS PRUDENT OWNER - RENOVATION OF BUILDING - NOT STARTING A NEW BUSINESS - MORTGAGE BINDING ON MINOR MEMBER.
Fact of the Case:
Madana Mohana Rao, the manager of a joint Hindu family, mortgaged the family property to secure a loan from the plaintiff bank for the renovation of Durga Bhavan, a hotel building owned by the family. The loan was sanctioned and the money was withdrawn by Madana Mohana Rao. After his death, the plaintiff bank filed a suit for recovery of the loan amount against the defendants, including the minor son of Madana Mohana Rao.
Finding of the Court:
The court held that the mortgage was valid and binding on the minor son as it was for the benefit of the estate. The court found that the loan amount was utilized for the renovation of the hotel building, which would result in increased rental income and benefit the family. The court also held that the renovation of the building did not amount to starting a new business and that Madana Mohana Rao had acted as a prudent owner in mortgaging the property.
Issues: 1. Whether the suit mortgage bond is true and valid? 2. Whether the suit mortgage is not binding on the 2nd defendant? 5. Whether the defendants 4 and 5 are not necessary parties to the suit? 6. Whether the liability of defendants 4 and 5 is not co-extensive with that of principal debtor?
Ratio Decidendi: 1. The manager of a joint Hindu family has the power to mortgage the family property for purposes of necessity or for the benefit of the estate. 2. A transaction is for the benefit of the estate if it is not risky or speculative and is calculated to confer a positive advantage on the family. 3. The renovation of an existing building which is already let out cannot be said to be starting a new business. 4. The manager of a joint Hindu family must act as a prudent owner in mortgaging the family property.
Final Decision: The appeal was dismissed with costs.
( 1 ) DEFENDANTS 1, 2 and 6 in O. S. No. 150/1970 on the file of the Subordinate Judges Court, Guntur, are the appellants in this appeal. The plaintiff-1st respondent, Indian Overseas Bank, laid the suit for recovery of Rs. 70,046-70 ps. due under a mortgage.
( 2 ) THE case of the plaintiff is as follows: The 1st defendant is the wife of one late Gollamudi Madana Mohana Rao, and 2nd defendant is the son, the 6th defendant is the daughter, the 3rd defendant is the mother and the 4th defendant is his brother. Madana Mohana Rao approached the plaintiff-Bank for a cash credit facility of Rs. 65,000. 00 for making additions and improvements to his hotel building Durga Bhavan situated in the 3rd line, Brodipet, Guntur-2. The loan was sanctioned on 8-10-1969 and the same was repayable in monthly instalments of Rs. 1,500. 00, commencing from the month of March, 1970. Defendants 4 and 5 stood as sureties. Madana Mohana Rao executed promissory notes on 8-10-1969 for a sum of Rs. 65,000. 00 with interest thereon at the rate of 91/2% and defendants 4 and 5 signed the guarantee on the same day jointly and severally guaranteeing the payment of debt. On the same day Madana Mohana Rao and his brother the 4th defendant deposited the title deeds creating a security for the money advances made or to be made to the debtor, thereby constituting an equitable mortgage, Madana Mohana Rao opened an account and withdrew the money from time to time. Unfortunately he died in an accident in the month of February, 1970 leaving behind defendants 1 to 3 and 6. As nobody paid the monthly instalments after his death, the plaintiff Bank issued registered notice to the defendants. Defendants 1 and 2 replied on 20-8-1970 stating that the 2nd defendant was a co-parcener of the joint Hindu family consisting of Madana Mohana Rao and himself, that the 2nd defendants share in the joint family properties cannot be mortgaged and that the debt incurred by Madana Mohana Rao was not binding on him. The plaintiff Bank, therefore, filed the suit for recovery of the money due, against all the defendants.
( 3 ) DEFENDANTS 1 and 2 filed a common written statement stating that the 2nd defendant and Madan Mohan Rao constituted joint Hindu family owning valuable large properties. Madana Mohana Rao was young and inexperienced and contacted several vices. His family was an agricultural family all along and it had nothing to do with the hotel business. The 4th defendant with ulterior motive contracted the loan from the plaintiff Bank and after the sudden death of Madana Mohana Rao the 4th defendant, to the detriment of the other defendants, took away all the account books etc. The joint family of Madana Mohana Rao did not derive any benefit from the transaction of the plaintiff Bank and, therefore, the suit debt is not binding on them. It is also stated in the written statement that Madana Mohana Rao had neither authority, nor power to commence any speculative business like the hotel business and bind the joint family with the debts said to have been incurred for the hotel business.
( 4 ) THE 3rd defendant remained exparte. The 4th defendant filed a written statement stating that he is not a necessary party to the suit and that he stood as a surety in view of his relationship. The 5th defendant adopted the written statement filed by the 4th defendant, 6th defendant is the after born daughter of late Madana Mohana Rao and the written statement filed by defendants 1 and 2 was adopted by her.
( 5 ) SOME of the important issues framed by the lower Court are -" (1) Whether the suit mortgage bond is true and valid? (2) Whether the suit mortgage is not binding on the 2nd defendant? (5) Whether the defendants 4 and 5 are not necessary parties to the suit? (6) Whether the liability of defendants 4 and 5 is not co-extensive with that of principal debtor?".
( 6 ) ON the 1st issue the lower Court held that the mortgage bond is true and valid. On the 2nd issue the lower Cour
