PRIVY COUNCIL

                     Sanyasi Charan Mandal

                     Vs.

                                      Krishnadhan Banerji
(Lords Buckmaster, Atkinson, Carson, Mr. Ameer Ali and Sir Lawrence Jenkins.JJ.)

                     17.1.1922

                     JUDGMENT

Lords Buckmaster J.

1. These are consolidated appeals from two decrees of the High Court of Judicature at
Fort William in Bengal, passed in separate suits on the 31st January, 1919, reversing
two decrees of the Subordinate Judge of the 24th Parganahs, dated the 23th February,
1916.

2. In each suit a money-decree was sought against the present appellant, who was a
minor at its institution. One suit was brought on a hand note signed by the minor's
three adult brothers; the other on a hathchitta signed by his four adult brothers, the
youngest of them having then attained majority.

3. The ground of liability stated in the plaint is that the defendant and his, brothers are
owners and partners in ancestral businesses, and the money claimed was borrowed by
the brothers for the purposes of the businesses.

4. The minor defended in each case by his guardian for the suit.

5. The defendant and his brothers ware the five sons of Bhuban Mohan Mandal, a
Hindu governed by the Dayabhaga School of Law. He died in November, 1899, and at
that time his two younger sons were minors. Nil Ratan, the eldest brother and the
Karta of the family, was appointed their guardian under Act VIII of 1890.

6. Bhuban Mohan had two businesses, one for fuel wood at Munshigunj, and the other
for rice and other articles at Kalibazar. Each devolved as an ancestral business on the
five sons, and was carried on by Nil Ratan as the Karta, assisted by his adult brothers.
After the father's death a new business in rice was started by Nil Ratan at Orphangunj,
and it is the defendant's case that the money sued for was borrowed exclusively for the
purpose of this business, and that the business was not ancestral.

7. The Subordinate Judge decided in the defendant's favor and dismissed the suits.
The High Court on appeal apparently took the same view in the first instance, but as
the result of a re-argument, set aside the Subordinate Judge's decrees and directed
certain accounts against the defendant not because his liability was established but for
the purpose of determining whether or not he was liable. It is from these decrees of the
High Court that the present appeals have been preferred.

8. A preliminary objection was taken that the appeals did not lie " because the order
was not final," but their Lordships did not give effect to it and the appeals have been
heard.

9. The businesses were conducted by Nil Ratan and his adult brothers for many years
with success. Ultimately, however, there were financial difficulties, and on the 19th
February, 1912, proceedings under the Provincial Insolvency Act, 1907, were
commenced by a creditor against all five brothers in the Court of the District Judge at
Alipur.

10. It was established to the satisfaction of the Judge that the defendant was a minor
and so could not be adjudicated insolvent, and that the minor was a joint owner in the
family business inherited from his father. There was, however, an adjudi- cation
against the adult brothers, " they being the members of the firm Bhuban Mohan
Mandal and Nil RatanMandal."

11. A Receiver was appointed under Section 18 (1) of the Act, and the property of the
insolvents thereupon vested in him. He was ordered to realise not only the four-fifths
share of the insolvents in the joint property, but also the minor's share in the joint
properties acquired after the father's death. As a result of his insolvency, Nil Ratan
was removed from the guardianship of the minor, and MatiLal Roy was appointed in
his place.

12. On the 19th August, 1912, with the sanction of the Judge, MatiLal Roy and the
Receiver agreed to appoint an arbitrator to effect a partition of the immoveable
properties, and on the 8th October, 1912, an award was made under which the minor
got one-fifth in both ancestral and after-acquired properties, MatiLal Roy having
claimed that the after-acquired properties were purchased out of the income of the
ancestral properties. On the 14th January, 1912, a decree was passed in terms of the
award.
13. In the meanwhile cross-appeals had been preferred by MatiLal Roy and the
Creditors from the orders of the Judge in Insolvency, and on the 17th March, 1914,
they were heard by the High Court with the result that the order refusing to adjudicate
the minor an insolvent was affirmed, but so much of the order as directed the Receiver
to realise the minor's share was set aside, and in lieu thereof it was ordered that the
Receiver should " take possession of four-fifths share of the business, and four-fifths
share of all the properties purchased since the death of Bhuban Mohan Mandal, and
also four-fifths share of the other properties jointly held by the infant and his
brothers."

14. It is in these circumstances that the present suits were commenced, as the dividend
received by the plaintiffs in this insolvency fell short of the amount due.

15. It is established by concurrent findings by the Lower Courts, first, that the money
now in suit was borrowed exclusively for the purpose of the Orphangunj business,
and, secondly, that this business was neither ancestral nor an extension of the ancestral
business. These findings must now be deemed conclusive, and this strikes at the very
root of the case The distinction between an ancestral business and one started like the
present after the death of the ancestor, as a source of partnership relations is patent. In
the one case these relations result by operation of law from a succession on the death
of an ancestor to an established business, with its benefits and its obligations. In the
other they rest ultimately on contractual arrangement between the parties. The
inability of a Karta to impose on a minor co-parcener the risks and liabilities on a new
business started by himself, is fully discussed by both Courts and their Lordships
agreeing with the conclusion at which they have arrived on this point, do not deem it
necessary to enter on a further discussion of this aspect of the case.

16. What has to be seen in the peculiar circumstances of this dispute is not merely
whether the minor has come under any liability in respect of the debts of the
Orphanganj business, but whether that liability can be enforced by the plaintiffs in the
suits as constituted.

17. It is important at this point to bear in mind (a) that at the institution of the suits the
defendant was a minor; (b) that in the written statement filed in each suit on his behalf
by his guardian for the suit, it was denied that he was a co-sharer in the business, or
had any responsibility with regard to it; (c) that when at a later stage of the litigation
the minor attained majority, he adopted these written statements ; and (d) that at the
time the business of the firm had ceased.
18. The ancestral character of the Orphanganj business being negatived, the plaintiffs
have attempted to formulate other grounds of liability. Before the Subordinate Judge
the claim seems to have been rested on general principles rather than on the specific
provisions of the Contract Act. Thus in the grounds of appeal it is contended that the
defendant and his four brothers having all along lived as members of an undivided
Hindu family, and properties having been acquired with the joint funds and the
defendant having got some of those properties in his share on partition with the
Receiver, the learned Subordinate Judge ought to have passed a decree against the
defendant at any rate so far as the assets of the firms allotted to his share are
concerned.

19. The answer to the case thus mala is given by the Subordinate Judge towards the
close of his careful and well-reasoned judgment, and their Lordships are in complete
agreement with what is there said. In the High Court, however, reliance was evidently
placed on the Contract Act, for its provisions are mentioned and discussed. It becomes
necessary, therefore, to examine the Act so far as it bears on the question now in
contest. Section 247 provides that a person, who is under the age of majority
according to the law to which he is subject, may be admitted to the benefits of
partnership but cannot be made personally liable for any obligation of the firm; but the
share of such minor in the property of the firm is liable for the obligations of the firm.

20. To bring this section into play it must be proved that the minor has been admitted
to the benefits of the partnership. This is a fact to be established by evidence, and
though it was neither pleaded nor made an issue at the trial, the High Court, without
inviting evidence specifically directed to this point, held the admission proved, and
thus set up a new case in appeal. The defendant has just ground of complaint as to
this, and the procedure is not one to be commendad; still in the view their Lordships
take, they will deal with the case on the basis of the High Court's finding without
expressing an opinion as to its correctness. Under the section, liability is limited to the
share of the minor in the property of the firm.

21. In Section 239 there is a definition of the word "firm." It is there said that persons
who have entered into partnership with one another are called collectively a " firm." In
the earlier part of the section it is enacted that " partnership" is the relation which
subsists between persons who have agreed to combine their property, labor or skill in
some business and to share the profits thereof between them.

22. A person under the age of majority cannot become a partner by contract,
MohoriBibee v. DhurmodasGhase1and so according to the definition he cannot be one
of that group of persons called a " firm." It would seem, there. fore, that the share of
which Section 247 speaks is no more than a right to participate in the property of the
firm after its obligations have been satisfied.

23. Though there may be this right, in fact it is not claimed by the defendant. On the
contrary, the written statements deny his membership of the partnership; this denial
was made on his behalf during his minority, and it was adopted by him when he
attained his majority. This attitude he still maintains, and it can only be regarded as a
relinquishment of all claim to a share in the property of the firm. It is still the property
of the firm and is liable as such to the obligations of the firm.

24. But all the property of the firm vested in the Receiver on the making of the order
of adjudication (Provincial Insolvency Act, Section 16), and if any part of it has got
improperly into the possession of the minor, the right to recover it is in the Receiver.
This is not disputed by the defendant; and it is only by its coming into the hands of the
Receiver that its ratable distribution among the general body of creditors can be
secured. Nor does it make any difference that the business was conducted by the male
adult members of a Hindu family governed by the Dayabhaga; the rights and liabilities
of a minor member of such a family would be measured by similar principles for the
purpose now under consideration.

25. The learned Judges in the High Court seem to have thought that the judgment on
appeal in the insolvency proceedings put a bar in the way of a recovery by the
Receiver, and so justified the plaintiffs' suits; but this proceeds on a misconception of
what was actually decided.

26. It is quite true that in that judgment it was said that "the essence of the matter is
that the share of the infant has not vested in him and he is consequently not entitled to
deal with it......But whatever remedies may be available hereafter to the Receiver or to
the Creditor, it is clear that the properties of the infant cannot be dealt with by either of
them in these proceedings." This was a correct statement of the legal position; but it in
no way justifies the conclusion in the judgment now under appeal that in consequence
of it " the defendant cannot now contend that it is only the Receiver (and not any
individual creditor) who can deal with his share of the partnership properties." No
property belonging to the minor could vest by the adjudication in the Receiver, but
what would vest in him would be the right (if it existed) to recover from the minor
property in his possession belonging to the firm.
27. It was then urged that any suit now instituted by the Receiver would be barred by
limitation; but when Counsel for the plaintiffs was asked whether to obviate this, he
was prepared to add the Receiver as a party, so that any assets realized could come
into his hands for ratable distribution, he declined the offer, and frankly admitted that
it would be of no use to his clients unless they could recover for their own exclusive
benefit.

28. The absence of the Receiver from the suits is not an objection taken for the first
time at this stage of the litigation. It was pleaded as a defect in the written statement,
and an issue was framed on the point.

29. The plaintiffs do not now contend that the defendant has become personally liable,
and so it is unnecessary to discuss the terms of section 248.

30. In their Lordships' opinion, therefore, these suits constituted as they are, as
misconceived. In the circumstances the Receiver is a necessary party to any
proceeding for the purpose of realizing assets liable for the firm's debts, and the
proceeds of any realization would be applicable not towards the exclusive discharge of
any individual debt as the plaintiffs desire but for ratable distribution among the whole
body of the firm's creditors.

31. Their Lordships will, therefore, humbly advise His Majesty that the appeals be
allowed, and that in each suit the decrees of the High Court dated the 31st January,
1919, be discharged, and the decrees of the Subordinate Judge, dated the 28th
February, 1916, be restored, and that the respondents to each appeal do pay to the
appellant the costs of the appeals in the High Court. They will also pay the costs of
these appeals.

Appeal allowed.

Cases Referred.

1.(1903) 30 Cal 539 : 30 IA 114 : 5 Bom LR 421 : 7 CWN 441 : 8 Sar 374 (PC)