The judgment established that members of a joint Hindu family involved in a family business are not personally liable for the business debts if they do not partake in its management. It also clarified that acts of insolvency must be expressly authorized or acquiesced in by family members to be imputed to them.

Stodart, J.

1. This is an appeal against an order in insolvency by which the learned District Judge, Bellary, adjudicated seven persons insolvent. The first five of these are brothers, the sons of Ayyanna Gowd, deceased. The sixth and seventh are sons of another brother Mallanna Gowd who died in 1915. The first and third do not appeal. They had already filed an insolvency petition when the present petition was filed. The others are the appellants in this appeal. The petition was filed on 29th July 1936 by four creditors. The admitted facts are that Ayyanna Gowd had a shop in Bellary and that was a family business carried on for the benefit of the joint family consisting of himself and his sons; and on his death this shop was continued by the first and second sons Ranganna Gowd and Narasanna Gowd trading under the name of Ranganna Gowd and brothers. The four petitioning creditors based their right to file this petition on debts due to them by this firm. They alleged that the other three brothers and two nephews (the present five appellants) took an active part in the business of the firm and so were also personally liable to them in respect of the said debts; and one of the questions we have to decide is whether the appellants did in fact take a part in the management of the business. Secondly, the petitioners contended that certain acts of insolvency were committed which must be deemed to be the acts of all the seven persons aforesaid. The learned District Judge held in effect that all seven counter, petitioners participated in the business and were personally liable for its debts and from this finding it would follow that they were jointly indebted to the petitioners. As for the acts of insolvency the Judges finding is not very clear. He found that the execution of a sale deed, Ex. G of a large portion of the family lands by the two nephews (appellants 4 and 5) less than three months before the petition was filed, was an act of insolvency, and that the other members of the family took part in it. He said:

Ex. G is an act of insolvency and the respondents took part in it apart from their liability on account of the other acts of insolvency - the closing of the business.

2. Various acts of insolvency were alleged by the petitioners but the learned District Judge has recorded no clear finding whether, in his opinion, any or all of them were committed except in the sentence just quoted. In one part of his judgment he states that after the business was finally closed there was some difficulty in tracing respondents 1 and 3 and in discovering the accounts and the first counter-petitioner was ultimately found with the accounts in a building attached to a ginning factory, where he was apparently secreting himself.

3. In another part, referring to Ex. G, he states that it was executed at the time the shop was closed, or closing, and there appeared no reason for its execution unless it was really for the purpose of protecting the property against the creditors of the business. The only acts of insolvency therefore which appear to have been relied on by the learned District Judge are (1) that respondents 1 and 3 absented themselves and secluded themselves and (2) that respondents 6 and 7 executed Ex. G in order to defeat the creditors of the firm in circumstances which show that. Ex. G was the act of all the members of the family. These appellants now appeal on the grounds : (1) That they are not indebted to the petitioner. (2) That they have not committed any acts of insolvency. (3) That they are not affected by any act of insolvency which may have been committed by Ranganna Gowd and Narasanna Gowd.

4. It may be stated at the outset that the plea of partition advanced by these appellants and negatived in the Insolvency Court has not been pressed before us. The facts are, that these appellants with Ranganna Gowd and Narasanna Gowd formed a Hindu joint family, that they owned landed property and that Eanganna Gowd and Narasanna Gowd h