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1952 Supreme(Ori) 75
HIGH COURT OF ORISSA
PANIGRAHI,MOHAPATRA, JJ.
Pramod Kumar Pati
Versus
Damodar Sahu
First Appeal No.42 of 1946,
Decided On : 09-12-1952
B.K. Ratho, K. Patnaik and M.S. Mohanty, for Appellants; P.C. Chatterji and B. Das, for Respondents.
A severance of the joint family status puts an end to the representative capacity of the manager and that an endorsement of payment made by him after the joint status of the family had been disrupted, would not save the claim from the bar of limitation against the other members.
Headnote:
NEGOTIABLE INSTRUMENTS ACT - SECTION 27, 28 - HINDU LAW - JOINT FAMILY - MANAGER - POWER TO BORROW - ACKNOWLEDGMENT OR PAYMENT BY MANAGER - LIMITATION ACT - SECTION 21(3)(B) - SEVERANCE OF JOINT STATUS - EFFECT ON MANAGER'S AUTHORITY - POWER OF ATTORNEY - CONSTRUCTION - LIABILITY OF PRINCIPAL - UNDISCLOSED PRINCIPAL - PROMISSORY NOTE - LIABILITY OF SIGNATORY.
Fact of the Case:
Plaintiff filed a suit for recovery of a sum of Rs.3700/- on two promissory notes, dated 9-6-1941 and 18-6-1941 for Rs.3000/- each. The suit promissory notes were executed by defendant 1 Damodar Sahu, who was admittedly the manager of the Hindu joint family consisting of himself and the other defendants. He also held a power of attorney, executed by the other members of the family, and was given certain well-defined powers.
Finding of the Court:
The court held that the plaintiff had failed to prove that the suit loans were necessary for the running of the factory business or that they were actually utilised for the same. It also held that the plaintiff had failed to prove that he had made any bona fide enquiry, as a prudent creditor should have done, as to whether there was real family necessity which could not be met except by contracting loans. On the second point, it held that Exs. 1 and 1-A did not authorize defendant 1 to contract the suit loans. The court also held that the endorsements of payment made by defendant 1 on the suit promissory notes, on which reliance was placed by the plaintiff to save the bar of limitation, would not bind the defendants as defendant 1 had ceased to be the manager of the family.
Issues: 1. Whether the manager of a Hindu joint family can borrow for purposes of the family and bind the other members for the debts thus incurred? 2. Whether the manager of a Hindu joint family has the implied authority to contract a loan on behalf of the family? 3. Whether a payment made by a person, purporting to be the manager of a joint family, and is accompanied by an endorsement of such payment made on the promissory note, the question whether the debt is kept alive and limitation is saved as against the entire family would depend not upon the liability of the non-executing members for the debt, but upon a proper interpretation of the provisions of the Limitation Act which governs the case? 4. Whether the manager of a Hindu joint family can 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? 5. Whether a severance of the joint family status puts an end to the representative capacity of the manager and that an endorsement of payment made by him after the joint status of the family had been disrupted, would not save the claim from the bar of limitation against the other members? 6. Whether a general authority to transact business and to discharge debts does not confer upon an agent the power of accepting or indorsing bills of exchange so as to bind his principal? 7. Whether an agent who signs his name under a promissory note, without communicating therein that he signs only as an agent or that he does not intend thereby to incur a personal liability, is liable personally on the instrument except to those who induced him to sign upon the belief that the principal only will be held liable?
Ratio Decidendi: 1. The manager of a Hindu joint family can borrow for purposes of the family and bind the other members for the debts thus incurred. 2. The manager of a Hindu joint family has the implied authority to contract a loan on behalf of the family. 3. A payment made by a person, purporting to be the manager of a joint family, and is accompanied by an endorsement of such payment made on the promissory note, the question whether the debt is kept alive and limitation is saved as against the entire family would depend not upon the liability of the non-executing members for the debt, but upon a proper interpretation of the provisions of the Limitation Act which governs the case. 4. The manager of a Hindu joint family can 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. 5. A severance of the joint family status puts an end to the representative capacity of the manager and that an endorsement of payment made by him after the joint status of the family had been disrupted, would not save the claim from the bar of limitation against the other members. 6. A general authority to transact business and to discharge debts does not confer upon an agent the power of accepting or indorsing bills of exchange so as to bind his principal. 7. An agent who signs his name under a promissory note, without communicating therein that he signs only as an agent or that he does not intend thereby to incur a personal liability, is liable personally on the instrument except to those who induced him to sign upon the belief that the principal only will be held liable.
Final Decision: Appeal dismissed.
Judgement
PANIGRAHI, J. :- This appeal by the plaintiff arises out of a suit for the recovery of a sum of Rs.3700/- on two promissory notes, dated 9-6-1941 and 18-6-1941 for Rs.3000/- each. The suit promissory notes were executed by defendant 1 Damodar Sahu, who was admittedly the manager of the Hindu joint family consisting of himself and the other defendants. He also held a power of attorney, executed by the other members of the family, and was given certain well-defined powers. The suit was filed on 22-1-1946 and the plaintiff relied upon two endorsements of payment made on each of the promissory notes, to save limitation. These endorsements were made on 1-1-1942 and 24-1-1943 by defendant 1 on the hand-notes (which are marked as Exs.2 and 3) the endorsements being marked as 2A, 2B, 3A and 3B respectively. Defendants 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 handnotes nor the endorsements purporting to have been made thereon by him, would make the other defendants liable for the plaintiffs 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 support 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 power of attorney executed by the other defendants on 16-2-1939 (Ex.1) and by virtue of a similar power conferred on him by Gopinath Sahu under Ex.1-A D/-22-2-1939. These two documents it is pointed out empowered the donee to borrow for the family and also to make payments and endorsements.
4. In order to appreciate the force of the above contentions, it is necessary to state a few more facts at this stage. Defendant 1 was undoubtedly the managing member of the defendants family which owned a sugar factory at Aska, and he was constantly in need of funds to run the business. The family had also contracted several other debts from various persons. The members of the family had, therefore, authorised defendant 1 to carry on the business on their behalf, and in particular, to liquidate the family debts. The exact extent of the power conferred on defendant 1 as defined in Exs.1 and 1-A is as follows:
"We authorise you to raise loans in any shape to encumber, sell, or otherwise alienate any of our properties, either moveable or immovable, execute the necessary documents on our behalf for the following among other purposes that you, as the head of our joint Hindu family, have to meet and act:"
(1) to liquidate old and subsisting debts or liabilities incurred by you or your father on account of our joint family trade and business;
(2) to undertake or carry on new business and enter into or conduct commercial and industrial enterprises within India or abroad;
(3) to renew old debts or obligations and
(4) for the furtherance of any other purpose that you consider in your discretion necessary in the best interests of our family concern."
In exercise of the power conferred by these deeds defendant 1 executed the suit promissory notes (Exs.2 and 3) which are identical in terms, in favour of the plaintiffs father. Exhibit 2 runs as follows:
"Promissory note executed by Sri Damodar Sahu who holds power of attorney by document 11 dated 16-2-1939 registered at Berhampur, Sub-Registration Office, and document 8 dated 22-2-1939, registered at Aska S
