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1960 DIGILAW 308 (KER)

Narayanan v. Padmanabha Iyer

1960-08-02

M.S.MENON, S.VELU PILLAI

body1960
JUDGMENT M.S. Menon , J. 1. The 1st defendant in O. S. No. 249 of 1123 of the District Court, Ernakulam, is the appellant before us. The suit was to set aside Ext. I, a sale deed dated 21-6-1119 (3-2-1944), in favour of the appellant in so far as it affects the plaintiff's share in the item sold and for the partition and delivery of his share to him. Defendants 5 to 11 in a joint written statement and defendants 12 and 13 in another written statement supported the plaintiff and claimed their shares in the suit property. 2. The plaintiff and defendants 2 to 13 are the members of a Hindu Mithakshara family. The 2nd defendant is the father of the plaintiff and defendants 3 to 11. The 3rd defendant is the father of defendants 12 and 13. 3. In paragraph 6 of the Trial Court judgment it said : "There can be no doubt that the plaint property is ancestral property and that plaintiff and defendants 3 to 13 have acquired a right by birth in that property when the sale deed was executed." This finding is not challenged before us. 4. Ext. I was executed by defendants 2, 3 and 4, the major members of the family on the date of its execution. The 2nd defendant was fifty-four years of age on that day, the 3rd, twenty-four, and the 4th twenty. All the sons of the 2nd defendant, other than defendants 3 and 4, were minors on the date of Ext. I. The 2nd defendant acted as their guardian in the execution of the document. 5. The consideration paid for the sale of the property-643/4 cents in this town was Rs. 14,362-8-0. There was no specific issue as to whether the price paid was adequate. In paragraph 10 of the judgment under appeal, however, the Trial Court considered the evidence on record - Exts B, III, IV, VIII, XV, XVI, XVII and XVIII-and said: "Ext. I works out at Rs. 222 per cent. The plaintiff no doubt swears that the property was worth Rs. 40,000/-. But considering the documents produced on either side the price fixed in Ext. I cannot be said to be less than the price then prevailing in that locality and therefore may be accepted as reasonable." We see no reason to differ from this conclusion. 6. The reasons for the execution of Ext. 40,000/-. But considering the documents produced on either side the price fixed in Ext. I cannot be said to be less than the price then prevailing in that locality and therefore may be accepted as reasonable." We see no reason to differ from this conclusion. 6. The reasons for the execution of Ext. I as given in that document are embodied in the following passages : "xxx" No property was as a matter of fact acquired with the sale proceeds in the 2nd defendant's native place or elsewhere and the sole question for determination in this case is whether the 1st defendant can sustain the document on the basis of the enquiries made by him before he purchased the property and paid the consideration. 7. The leading case on the subject is Hanoomanpersaud Panday v. Mussumat Babooee Munraj Koonweree. (6 Moore's Indian Appeals 393). In that case the Privy Council said that the power of the manager under the Hindu law is "a limited and qualified power", that "it can only be exercised rightly in a case of need, or for the benefit of the estate", that "the actual pressure on the estate, the danger to be averted, or the benefit to be conferred upon it, in the particular instance, is the thing to be regarded", and : "Their Lordships think that the lender is bound to inquire into the necessities for the loan, and to satisfy himself as well as he can, with reference to the parties with whom he is dealing, that the Manager is acting in the particular instance for the benefit of the estate. But they think that if he does so inquire, and acts honestly, the real existence of an alleged sufficient and reasonably credited necessity is not a condition precedent to the validity of his charge, and they do not think that, under such circumstances, he is bound to see to the application of the money." To the same effect is S.38 of the Transfer of Property Act, 1882: "Where any person, authorised only under circumstances in their nature variable to dispose of immovable property, transfers such property for consideration, alleging the existence of such circumstances, they shall, as between the transferee on the one part and the transferor and other persons (if any) affected by the transfer on the other part, be deemed to have existed, if the transferee, after using reasonable care to ascertain the existence of such circumstances, has acted in good faith." 8. In AIR 1917 PC 33 the Privy Council said that the decided cases gave no indication as to what is "the precise nature of the things to be included under the description 'benefit to the estate'," and : "It is impossible, their Lordships think, to give a precise definition of it applicable to all cases, and they do not attempt to do so. The preservation, however, of the estate from extinction, the defence against hostile litigation affecting it, the protection of it or portions from injury or deterioration by inundation, these and such like things would obviously be benefits. The difficulty is to draw the line as to what are, in this connection to be taken as benefits and what not." As pointed out by Raghavachariar this passage made the Allahabad High Court take the view in its earlier cases that a transaction to be valid on the ground of benefit to the estate must be of a defensive nature calculated to protect the estate from possible danger or destruction (Hindu Law, Fourth Edition, Page 297). 9. The later view, however, embodied in AIR 1928 Allahabad 454 (FB) is different. 9. The later view, however, embodied in AIR 1928 Allahabad 454 (FB) is different. In that case the court referred to AIR 1917 PC 33 , said : "It is true that the three or four instances given by their Lordships are all instances where the transaction was of a defensive nature, but we think there is no justification for the suggestion that their Lordships meant to say that transactions justifiable on the principle of 'benefit to the estate' are limited to those transactions which are of a defensive nature."; and held that if a transaction was to the benefit of an estate and was such as a prudent owner would have carried out with the knowledge that was available to him, it cannot be set aside. The judgment adds : "We have already indicated that the degree of prudence would be the prudence which an ordinary man would exercise with the knowledge available to him : and that the transaction would have to be judged not by its results, but by what might have been expected to be its results at the time it was entered into ; and that the degree of prudence which might fairly be required from a person who was not the sole owner of the property might naturally be somewhat greater than that which might be expected in the case of a sole owner. The degree of prudence to be demanded might well be held to be that which would be demanded in ordinary cases from a trustee." In an earlier case, AIR 1925 Allahabad 618, the manager of a Hindu family had sold property which yielded a small profit and was difficult to manage, and applied the sale proceeds to the extention of the existing family business. It was contended that the business failed subsequently and that the sale was not binding on the sons. The court said : "The business was not of a speculative nature and the subsequent failure of that business if it did fail, affords no criterion for determining whether the transaction was originally a prudent transaction, which the manager of a Hindu family, and especially a father, was entitled to make for the family benefit." 10. The court said : "The business was not of a speculative nature and the subsequent failure of that business if it did fail, affords no criterion for determining whether the transaction was originally a prudent transaction, which the manager of a Hindu family, and especially a father, was entitled to make for the family benefit." 10. In AIR 1934 Lahore 615 Dalip Singh J. (with whom Abdul Qadir J. agreed) said that there was no difference between a sale for legal necessity and a sale for the benefit of the family "qua the question of the use to which the money is put", and : "It has again and again been held that the vendee is not responsible to see to the application of the money in cases of legal necessity. All he has got to do is to inquire whether the legal necessity exists and it seems to me similarly that in case of the benefit of the family all that the vendee has to do is to see whether at the time a real intention exists to employ the money in such methods as are likely to be for the benefit of the family." In AIR 1957 Andhra 744 the court pointed out the fact that the manager's power of alienation being a limited and qualified one the burden of proof was on the alienee to show that the transaction came within that power, that he was entitled to succeed only if he proves : "1. Either that there was in fact legal necessity or benefit to the family or discharge of antecedent debts justifying the alienation; or 2. That he honestly satisfied himself after proper and bona fide inquiries as to their existence"; and: "The alienee must address himself the question whether the alienation is one which a prudent owner would enter into, in order to meet the legal necessity or antecedent debts or for the benefit of the estate. He should make reasonable inquiries for this purpose. That he honestly satisfied himself after proper and bona fide inquiries as to their existence"; and: "The alienee must address himself the question whether the alienation is one which a prudent owner would enter into, in order to meet the legal necessity or antecedent debts or for the benefit of the estate. He should make reasonable inquiries for this purpose. If, after making such inquiries he is satisfied that the father or manager is acting within his powers and he himself acts honestly in the transaction the question whether he was deceived and the legal necessity or benefit or antecedent debts really did not exist and the further question whether the consideration was applied for them are immaterial, and it is a case of the sale itself being justified by legal necessity or benefit. No general rule can be laid down as to the extent to which an alienee should pursue his inquiries or as to the evidence necessary to prove that he acted in good faith. These are questions of fact to be determined on the circumstances of each case." 11. In the light of what is stated above the only question that we have to decide in this case is whether the 1st defendant did or did not make the enquiries that a prudent purchaser would have made and satisfy himself that the sale proposed was a sale which a prudent manager or trustee would undertake in similar circumstances. We think he did so and that he is entitled to succeed on that account. 12. That the 2nd defendant was nearing his retirement on superannuation at the time he executed Ext. I, that he had a large family which he was struggling to support on his meagre salary, that he originally hailed from Tinnelveli and wanted to return and settle down in Tinnelveli after his retirement for economic reasons, that his idea was to purchase land there with the sale proceeds, that the item sold was yielding only an annual income of about Rs. 200/- and that its management after his departure from this area would have been difficult are facts which are either admitted or established in this case. The evidence of the 1st defendant as D. W. 3 shows that he was satisfied that the proposed sale was a beneficial transaction as a result of what he gathered from his lawyer and the 2nd defendant himself. The evidence of the 1st defendant as D. W. 3 shows that he was satisfied that the proposed sale was a beneficial transaction as a result of what he gathered from his lawyer and the 2nd defendant himself. 13. The lawyer was examined as D. W. 2. He says that the 1st defendant requested him to investigate the title, that he did so and assured the 1st defendant that it was good, that he was a pupil of the 2nd defendant and had known him for many years, and that the reasons the 2nd defendant gave him for selling the property appeared to him to be real, truthful and proper. 14. There can be no doubt that the reasons given by the 2nd defendant for the sale and the fact that both his major children were prepared to join in the execution of the document would have induced any prudent purchaser to conclude that the sale proposed was beneficial and in the best interest of the family. The source of the information, however, was the 2nd defendant himself and the further question that arises for consideration is whether the 1st defendant and his lawyer were wrong in confining the enquiry to him even though his position as the headmaster of a school and the long acquaintance of the lawyer with him were sufficient to induce them-or any other prudent man in the circumstances of this case-to accept his statements as correct. 15. In AIR 1935 Lahore 42 the court quoted with approval the following passage of Gour's Hindu Code (3rd Edition, page 787) as to the nature and scope of the enquiry that should be undertaken : "Assuming however that the lender does inquire, the next question that arises is what should be the nature and extent of the enquiry. It is obvious that such inquiry must be made from one who is in a position to know. It is equally obvious that it must be made from an independent source, and not from one who is interested in upholding the manager. The question must, of course, depend upon the facts of each case, the nature of the necessity, and the avenues of information available to the lender. It is equally obvious that it must be made from an independent source, and not from one who is interested in upholding the manager. The question must, of course, depend upon the facts of each case, the nature of the necessity, and the avenues of information available to the lender. He is not bound to sit in a star chamber, but at the same time he owes a duty to himself and to his absent obligors whose estate he seeks to bind, that he should conduct his inquiry in a prudent and businesslike way." We are not prepared to say that a representation by a manager, however good his reputation for truth and dependability may be, is invariably insufficient by itself to satisfy the test and support an alienation. All that one can say is what was said in ILR 35 Madras 108 : that the interests of the manager may in many cases be opposed to the interests of those whom he represents, and that in such cases an enquiry to be reasonable should not be limited to the representations of the manager himself. In this case we entertain no doubt that the 1st defendant and his lawyer had every justification to accept the statements of the 2nd defendant as correct, and that their enquiry though restricted to the 2nd defendant was bona fide, proper and sufficient. 16. A. S. No. 533 of 1104 of the High Court of Travancore a summary of the judgment appears in 21 TLJ Short Notes, page 66 - is a somewhat similar case in which all the adult members of a tarwad joined in the execution of a sale deed and it was subsequently challenged as not binding on the tarwad. The court said: "We have no reason to think that they- the adult members- would deliberately enter into a transaction which was not advantageous to them to defeat the plaintiff. It is true that the defendants have not proved that the money was actually used for the purchase of any property. But that cannot effect the rights of the purchaser who bona fide advanced money on the faith of a representation made to him by all the adult members of the tarwad jointly." 17. In the light of what is stated above Ext. I has to be upheld and the appeal allowed. But that cannot effect the rights of the purchaser who bona fide advanced money on the faith of a representation made to him by all the adult members of the tarwad jointly." 17. In the light of what is stated above Ext. I has to be upheld and the appeal allowed. We do so with costs here and in the court below.