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PETITIONER: K. V. NARAYANAN

       Vs.

RESPONDENT: K. V. RANGANANDHAN & ORS.

DATE OF JUDGMENT12/03/1976

BENCH: SINGH, JASWANT BENCH: SINGH, JASWANT GUPTA, A.C.

CITATION:  1976 AIR 1715            1976 SCR  (3) 637  1977 SCC  (1) 224

ACT:      Hindu Law-Joint  family and  partition-Allotment  to  a member of  properties for discharge of family debts-When may be regarded as his exclusive property-Managers liability for account-From which date.

HEADNOTE:      The  appellant  and  V,  father  of  respondents,  were brothers. They,  together with  their cousin, formed a joint Hindu family.  In  a  partition  in  1929  between  the  two branches, certain properties were given to V for discharging some family  debts. V took over the management of his branch of the family and after discharging the debts, filed in 1956 a suit  for partition  against the appellant claiming, inter alia, that  one of  the items earmarked for the discharge of the debts  which remained  undisposed of,  was his exclusive property as  it was  given to  him absolutely;  and also for accounts on  the ground  that the  appellant took  over  the management from 1938. The trial court negatived the claim in respect of  the property, but directed the appellant to give accounts from  1947 when admittedly he took over management. On appeal,  the High  Court upheld V’s claim with respect to the property  and gave  modified directions  for accounts by the parties.      Dismissing the appeal to this Court, ^      HELD: (1) The properties given to V became his separate properties from  the date  of the partition deed of 1929 and were not liable to partition. [643A]      (a) The  salient features of the deed are, (i) the sole responsibility for  discharge of  the debts was placed on V; (ii) V’s  liability was  not to the extent of the properties but was  irrespective of the sufficiency or otherwise of the properties and  any deficit  or surplus  was to  be  met  or enjoyed by  him exclusively;  (iii) the cousin was no longer liable for  the debts;  (iv) in  case there was a default on V’s part,  and if,  any loss was caused to the cousin he was to be  indemnified by  V; and  (v)  exclusive  dominion  and control over, and enjoyment of, the properties was vested in V in  consideration of  the obligation  undertaken by him to discharge the  debts. The properties were thus given to V in view of  his personal  undertaking to  discharge the  debts,

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and, the  conveyance was  in the  nature of remuneration for services to be rendered by him. [642 C-G]      Raj  Kumar  Singh  Kukam  Chandji  v.  Commissioner  of Income-tax Madhya Pradesh [1971] 1 SCR 748 referred to.      (b) The  arrangement was valid because it was bona fide and its terms were fair. [643E]      Sahu Madho  Das v.  Pandit Mukand  Ram [1955] 2 SCR 22, Maturi Pullaiah v. Maturi Narasimham AIR 1966 SC 1836 and S. Shanmugam Pillai  & Ors.  v. K.  Shanmugam Pillai & Ors. AIR 1972 SC 2069 referred to.      (c) There  was no  blending of the properties by V with other joint  family properties. There was no evidence of any intention on  V’s part  to abandon  his separate rights over the properties.  The mere fact that they were not separately entered by  him in  the account  books or  that no  separate account of  the earnings  from them  was maintained  by  him cannot rob them of their separate character. [644B-C]      Lakkireddi Chinna  Venkata Reddi  & Ors.  v. Lakkireddi Lakshmama [1964]  2 S.C.R.  172 and  G. Narayana  Ram v.  C. Chamaraju & Ors. A.I.R. 1968 S.C. 1276 referred to. 638      (d) If any amount of the joint family funds was used by V for  the discharge  of the  debts, the  respondents (legal representatives of  V) would  be liable  for them,  but that would not affect the character of the properties. [644 C-D]      (2) It  is well-settled that in the absence of proof of misappropriation or fraudulent or improper conversion by the manager, a  coparcener, seeking  partition, cannot call upon the manager to account for his past dealings with the family property.   Since    there   was    no   evidence   of   any misappropriation by V, he was not liable for accounts during his period of management. [644E-F]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1365 of 1968      From the  Judgment and  Decree dated the 8-12-66 of the Madras High Court in Appeal No. 609 of 1961.      K. N.  Balasubrahmaniam and  Miss Lily  Thomas for  the Appellant.      K. Jayaram for the Respondent.      The Judgment of the Court was delivered by      JASWANT SINGH,  J.-This is  an  appeal  by  certificate granted by  the High  Court of  Judicature at  Madras  under Article 133(1)  (a) and  (b) of  the Constitution  of  India against its judgment and decree dated December 8, 1966 in A. S. No. 609 of 1961.      The facts  culminating in  this appeal  lie in  a short compass and may be briefly stated thus:      Kota Venkatachala Pathy whose legal representatives are the respondents  herein and  Kota Narayanan,  the  appellant herein, were  real brothers  being  the  sons  of  one  Kota Rangaswami Chettiar.  Together with their cousin Subramanyam Chettiar, the  son of  Kota Kuppuswami Chettiar, the brother of Kota  Rangaswami Chettiar,  they formed  a  joint  family which was a trading one. Prior to 1927, Subramanyam Chettiar was the  manager and  karta of  the family.  After 1927 Kota Venkatachala Pathy  took over  the management  of the family and its  properties. By  registered deed  dated May 29, 1929 (Exh. A-1)  a  partition  of  joint  family  properties  was effected between  Subramanyam Chettiar  on the  one hand and Kota Venkatachala Pathy and his brother, Kota Narayanan, who was then  a minor,  on the  other, each branch taking a half

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share. As  karta of  the joint  family. Subramanyam Chettiar had, before  November 20, 1927 incurred debts to the tune of Rs. 9,506/-  from several  creditors. Five  items  of  joint family properties  detailed in  Schedule D-1  to the deed of partition were  earmarked for the discharge of the aforesaid debts and were given over to Kota Venkatachala Pathy who was made responsible for the discharge of the debts. These debts were discharged  by Kota Venkatachala Pathy before March 26, 1934. On  September 7, 1956, Kota Venkatachala Pathy brought a suit,  being No.  O. S.  87 of  1956, in  the Court of the Subordinate Judge of Vellore, North Arcot, for partition and separate possession  of 3/4th  of the  properties set out in Schedule ’A’ to the plaint, 1/2 of the properties set out in Schedule A-1  to the  plaint and whole of the properties set out in  Schedule ’B’ to the plaint. One of the items namely, item No. 1 of Schedule 639 ’B’ to  the plaint  which consists  of four  shops  is  what remains  undisposed  out  of  the  properties  mentioned  in Schedule ’D-1’ to the deed of partition which were set apart for the  purpose of discharging the aforesaid debts incurred by Subramanyam Chettiar before 1927.      The case  as set  out by Kota Venkatachala Pathy in his plaint was  that the properties set out in Schedule ’B-1’ to the deed  of partition were given over to him absolutely for the discharge of the aforesaid debts set out in Schedule ’D’ to the  deed of  partition and  it was  provided in the said deed that  either he  would discharge the debts mentioned in the deed or undertake to pay the same himself within a month from the  registration of  the document  and obtain and hand over to  Subramanyam Chettiar  receipts from  the  creditors specifically mentioned  there that  Subramanyam Chettiar was not liable  for payment  of the  aforesaid debts and that if the aforesaid  conditions were  not satisfied by him i.e. by Kota Venkatachala  Pathy and  any loss was occasioned to the former, the  latter would  be liable  for those  losses. The case of  Kota Venkatachala  Pathy further  was that since he had discharged  the debts  detailed in  Schedule ’D’  to the deed  of   partition,  he  was  entitled  to  the  exclusive possession of  item No.  1 of  Schedule ’B’ to the plaint as his self acquired property by virtue of the terms of deed of partition and also to the rest of the properties detailed in the said  Schedule ’B’ as he had purchased the same with his own funds.  Kota Venkatachala Pathy based his claim of 3/4th share in  properties detailed  in Schedule ’A’ to the plaint on the  ground that  he was  entitled to 1/4th by birth as a coparcener and  the rest  of  the  half  share  allotted  to Subramanyam Chettiar  as he  had  purchased  the  same  from auction purchasers.  The relief  for accounts  was based  by Kota Venkatachala Pathy on the ground that there was an oral division in  status in 1938 and it was the appellant who was managing the  properties either as a co-owner or as an agent since then.      The appellant resisted the claim of extra share made by Kota Venkatachala  Pathy and  contended that  the latter was entitled only  to half  share in  all the  suit  properties. According to  the appellant,  the family  debts set  out  in Schedule  ’D’   to  the  aforesaid  deed  of  partition  was discharged by  Kota Venkatachala  Pathy not only by the sale of the  properties set  out in Schedule ’D-1’ to the deed of partition but  also by  substantially utilising  other joint family  properties  available  for  division.  It  was  also contended by  the appellant  that  since  Kota  Venkatachala Pathy acted  as Karta  of his  branch, the aforesaid deed of partition should  be construed  as  meaning  that  any  item

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salvaged or  saved after  the  discharge  of  the  aforesaid family debts  would be  ancestral property and not exclusive property of  the plaintiff.  As regards the properties other than item  No. 1  of Exhibit  ’B’  of  the  plaint,  it  was contended by  the appellant that they were also to be shared half and  half between  him and  Kota Venkatachala  Pathy as they were purchased from the joint family funds. With regard to the  relief for  rendition  of  accounts,  the  appellant contended that  he became  the Karta  of the joint family in 1947 and  Kota Venkatachala  Pathy was  not entitled  to the relief of  rendition of  account till  the date  of the suit when alone there was a division of status and not in 1938 as claimed by Kota Venkatachala Pathy. 640      On a consideration of the evidence adduced in the case, the Trial  Court by  its judgment and decree dated September 12, 1960, held that there was no division in status till the date of  the suit. With regard to item No. 1 of Schedule ’B’ to the plaint, the Trial Court held that the total amount of debts paid  was Rs.  15,669-6-2  and  out  of  D-1  Schedule properties of  the estimated  value of  Rs. 9,506/- only Rs. 2,575/- were  realized from  the sale  of four items thereof and the balance of the debts were discharged from out of the joint family  assets like  jewels, outstandings realized and other immovable properties allotted to Rangaswamy Chettiar’s branch in  1929 partition  and that  the conversion  of such joint family  assets was made by Kota Venkatachala Pathy who was  managing   the  family   till  1957.  The  Trial  Court accordingly held  that the  properties namely  item No. 1 of Schedule ’B’  to the  plaint should  be deemed  to have been salvaged by  detriment to  the paternal  estate.  The  Trial Court also  found that as the defendant-appellant herein was a minor  at the time of 1929 partition and Kota Venkatachala Pathy, the original plaintiff had acted as his guardian, the latter must be deemed to have acted for the former also when he undertook  to discharge the debts and that as between the original plaintiff and defendant to whom the properties were jointly allotted  under Exhibit A-1, there was a position of implied trust  in respect  of properties set out in Schedule ’A’ and  ’B’ to  the plaint. The Trial Court also upheld the appellant’s plea  of blending  of all the properties by Kota Venkatachala  Pathy.   The  Trial   Court  also  found  that properties covered by sale deeds Exhibit B-1 and Exhibit B-4 which originally  formed part  of the half share allotted to Subramanyam  Chettiar   though  purchased  by  the  original plaintiff in  his own  name were joint family properties and as such  were liable to partition in equal shares. The Trial Court negatived  the claim  of Kota Venkatachala Pathy for a share in  excess of one half in the aforesaid properties and held that  he was  entitled to only one half of all the suit properties. The  Trial Court also decreed that the appellant shall render  true and  proper accounts  in respect  of  the income and  expenses regarding half share of the respondents in the  properties mentioned  in Schedule  A, A-1 and to the plaint from  1947 onwards  but did not give directions as to the assets  and funds  of capital  nature withdrawn  by Kota Venkatachala Pathy from out of the joint family utilised for his own separate and independent business.      Aggrieved by  this judgment,  Kota Venkatachala  Pathy, the original  plaintiff, whose legal representatives are the respondents herein, preferred an appeal to the High Court of Judicature of  Madras. By  its judgment  dated  December  8, 1966, the  High Court  allowed the appeal in part, set aside the judgment  and decree  of the Trial Court and decreed the suit brought  by the  original plaintiff with regard to item

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No. 1  of Schedule to the plaint holding that the properties mentioned  in  Schedule  D-1  to  the  partition  deed  were conveyed absolutely to the original plaintiff in lieu of his undertaking to  be liable  to  discharge  the  entire  debts mentioned in  Schedule ’D’ to the partition deed whether the properties were  sufficient or insufficient to discharge the same and  if there  was any surplus out of the properties he was to  have the same absolutely, but if the properties were not sufficient, he was to dis- 641 charge the  debts on  his own  responsibility without making Subramanyam Chettiar  liable for  the same;  that  though  a portion of the debts were discharged out of the joint family funds that  only cast  on the  legal representatives  of the original plaintiff  a liability  to account to the appellant for such  drawings as the original plaintiff might have made and whatever  amount was  found to be so drawn would have to be debited  against his  i.e. the  original plaintiff, after giving him credit for whatever amount he might have put into the common  fund.  The  High  Court  further  held  that  in determining the  net drawals  by the original plaintiff from the joint  family funds,  credit would  be given  to him for drawings made  by the  appellant by way of receipts of rents from item  No. 1  of Schedule  ’B’ to  the plaint;  that the original plaintiff  was not  liable to account for the joint family properties  as there  was no  proof of mismanagement, mishandling  or   improper  application   of  joint   family properties or  funds and  that the  defendant was  also  not liable  to   account  to  the  original  plaintiff  for  the management of  the properties of which he was in charge. The High Court  affirmed the  judgment of  the  Trial  Court  in regard to  the properties  covered by  Exhibits B-1  and B-4 holding that  these were  acquired with  the common funds of the original  plaintiff  and  the  appellant  which  he  was managing. Dissatisfied  with this  judgment and  decree, the defendant has come up in appeal to this Court.      The  learned  counsel  for  the  appellant  has,  while supporting the appeal, strenuously urged that the properties mentioned in  Schedule D-1 to the deed of partition (Exh. A- 1) were  not intended  by the parties thereto to be given to Kota Venkatachala  Pathy as his separate properties but were given  to   him  only   for  a  specific  purpose  viz.  for discharging the  family debts; that the ancestral properties could not  be converted into separate properties by means of an arrangement  arrived at  between Subramanyam Chettiar and Kota Venkatachala  Pathy; that  the character  of a property has to be decided after considering whether it is saved as a result of  detriment to  the paternal  estate and  as in the instant case,  property mentioned  at item No. 1 of Schedule D-1 to  the deed  of partition  was saved by using the joint family assets,  the said  property could not but be regarded as the  ancestral property  of the parties which was subject to partition.  He has  further urged  that in  any event D-1 Schedule  properties   lost  the   character   of   separate properties as  they were  blended by Kota Venkatachala Pathy with the  joint family  properties. He has lastly urged that the directions  given by  the  High  Court  with  regard  to accounting cannot be sustained as they are neither clear nor justified.      The principal  question for  determination in this case is whether  the properties  mentioned in D-1 Schedule to the deed  of   partition  were   separate  properties   of  Kota Venkatachala Pathy  or retained  the character  of ancestral properties. The  answer to  this question depends largely on the construction  of  the  deed  of  partition  (Exh.  A-1),

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material portion whereof is reproduced below for facility of reference:-           "Venkatachala Pathy  the individual  No.  2  shall      discharge the  debts described  in  ’D’  Schedule,  the      debts  payable   to  outsiders  by  Subramanyam  Chetti      amongst us for the 642      amount borrowed  for  conducting  the  family  business      prior to  20-11-27 and individual No. 2 for discharging      the  loans,   shall  enjoy  absolutely  the  properties      mentioned in  Schedule D-1.  Venkatachalapathi  Chetti,      the individual  No. 2  shall either discharge the debts      within a  month from  the date  of registration of this      document and  obtain receipt  for the creditors stating      that Subramanyam  Chetti is not liable to the aforesaid      loans and  shall give  those  receipts  to  Subramanyam      Chetti. If  it is  not done  so and thereby any loss is      caused   to    Subramanyam   Chetti    by    creditors,      Venkatachalapathi Chetti  shall  be  liable  for  those      losses. The  aforesaid Venkatachalapathi Chetti himself      shall get  possession of  D-1 Schedule properties given      to him  in lieu  of  discharging  the  aforesaid  debts      whether those  properties are adjusted to the aforesaid      debts, or  whether there  remain  any  balance  or  any      deficit".      The salient  features of  the deed  as extracted  above are: (1)  sole responsibility  for discharge  of  the  debts detailed in Schedule D-1 to the deed of partition which were payable to  the outsiders  was placed  on Kota  Venkatachala Pathy. (2) The liability cast on Kota Venkatachala Pathy for the discharge  of the  debts was  not to  the extent  of the properties detailed in Schedule D-1 to the deed of partition but was  irrespective of the sufficiency or otherwise of the properties and  any deficit  or surplus  was to  be  met  or enjoyed by  him  exclusively.  (3)  The  debts  were  to  be discharged by  Kota Venkatachala Pathy within a month of the registration of  the deed  and he was required to have it in writing from  the creditors that Subramanyam Chettiar was no longer liable  for the  debts.   (4) In  case, there  was  a default on  the part of Kota Venkatachala Pathy to discharge the debts  as undertaken  by him  and any loss was caused to Subramanyam Chettiar,  to the  former was  to indemnify  the latter. (5) Exclusive dominion, control and enjoyment of the properties mentioned  in Schedule  D-1 was  vested  in  Kota Venkatachala  Pathy   in  consideration  of  the  obligation undertaken by him to discharge the debts.      The aforesaid  salient features  leave  no  manner  for doubt that  the properties  mentioned in D-1 Schedule to the deed of  partition were  given to Kota Venkatachala Pathy in lieu of  the personal  undertaking given by him to discharge the aforesaid  debts. In  other words, the conveyance of the properties to  Kota Venkatachala  Pathy was in the nature of remuneration for the services to be rendered by him. It will be useful  in this  connection to  refer to  the decision of this Court  in Raj Kumar Singh Kukam Chandji v. Commissioner of Income-tax,  Madhya Pradesh where on the question whether the  managing   director’s  remuneration   received  by  the assessee was  assessable in  his individual  hands or in the hands of  the assessee’s  Hindu undivided family, this Court expressed the  view that  the remuneration was assessable as the assessee’s  individual income  and not  as the income of his Hindu undivided family. We are, therefore, of the 643 view that  Schedule D-1  properties were given absolutely to Kota Venkatachala Pathy as his separate properties.

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    Let us  now see as to whether the aforesaid arrangement entered between  the members  of the  Hindu undivided family whereby properties  mentioned in Schedule D-1 to the deed of partition were  made over  to Kota  Venkatachala  Pathy  was valid according  to Hindu  Law. A  reference to  page 426 of Mayne’s Treatise on Hindu Law and Usage (11th Edition) makes it clear  that while  dividing  the  family  estate,  it  is necessary for  the joint  family to take account of both the assets and  the debts  for which  the  undivided  estate  is liable and  to make provision for discharge of the debts. It is also  well settled by the decisions of this Court in Sahu Madho Das  v. Pandit,  Mukand Ram  Maturi Pullaian v. Maturi Narasimham and  S. Shanmugam  Pillai &  Ors. v. K. Shanmugam Pillai Ors.  that if  family arrangements which are governed by a  special equity  peculiar to themselves or entered into bonafide to  maintain peace  or bring  about harmony  in the family  and   the  terms   thereof  are   fair  taking  into consideration the  circumstances of  the case,  every effort must be  made by  the Court  to recognise  and  sustain  it. Examining the  matter in  the light  of these principles, we find that  by the  aforesaid  arrangement  both  Subramanyam Chettiar and  the defendant-appellant  were absolved  of the responsibility to  discharge the  family debts and liability was cast  on Kota  Venkatachala Pathy alone to discharge the same  irrespective   of  the  fact  whether  the  properties mentioned in  Schedule D-1  to Exhibit A-1 ultimately turned out to  be sufficient  or insufficient  to meet  the burden. Thus the  arrangement being  bonafide and  its  terms  being fair,  we  cannot  but  hold  that  it  was  valid  and  the properties detailed in Schedule D-1 to the deed of partition became separate  properties of  Kota Venkatachala Pathy from the date  of the  execution of the deed of partition and are not liable to partition.      This takes  us to the question as to whether there was, as  contended   by  the   appellant,  any  blending  of  the properties  mentioned   in  Schedule  D-1  to  the  deed  of partition with  the rest  of the  properties  of  the  joint family  consisting   of  Kota  Venkatachala  Pathy  and  the appellant. It  is  true  that  property  separate  or  self- acquired of  a  member  of  a  joint  Hindu  family  may  be impressed with  the character of joint family property if it is voluntarily  thrown by  the owner  into the  common stock with intention  of abandoning his separate claim therein but the question  whether a  coparcener has  done so  or not  is entirely a  question of  fact to  be decided in the light of all the  circumstances of  the case.  It must be established that there  was  a  clear  intention  on  the  part  of  the coparcener to  waive his  separate rights  such an intention cannot be  inferred merely  from the  physical mixing of the property with  his joint  family or from the fact that other members of  the family  are  allowed  to  use  the  property jointly with  himself or  that the  income of  the  separate property is  utilised  out  of  generosity  or  kindness  to support persons  whom the  holder is not bound to support or from the failure to maintain separate accounts for an 644 act of  generosity or kindness cannot ordinarily be regarded as an  admission of  a  legal  obligation.  (See  Lakkireddi Chinna Venkata  Reddi &  Ors. v. Lakkireddi Lakshmama and G. Narayana Ram v. G. Chamaraju & Ors..      In the  instant case  we are  unable to find that there was any  intention on the part of Kota Venkatachala Pathy of abandoning his  separate rights  over the properties set out in Schedule D-1 to the deed of partition. The mere fact that these  properties   were  not  separately  entered  by  Kota

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Venkatachala Pathy  in the account books or that no separate account of  the earning from these properties was maintained by him  cannot rob the properties of their character of self acquired properties.  We are  accordingly of  the view  that there was no blending of the properties by Kota Venkatachala Pathy as contended by the appellant.      The mere  fact that some amount out of the joint family funds was  used for  discharge of  the  debts  mentioned  in Schedule to the deed of partition is also of no consequence. If any amount out of the joint family funds was used for the discharge  of   the  outstandings  payable  to  the  outside debtors, the  legal  representatives  of  Kota  Venkatachala Pathy would,  as pointed out by the High Court be liable for them.      There is  also no  substance  in  the  last  contention advanced on  behalf of  the appellant. The legal position is well   settled   that   in   the   absence   of   proof   of misappropriation or fraudulent or improper conversion by the manager of  a joint family a coparcener seeking partition is not entitled  to call  upon the  manager to  account for his past dealing  with the  family property.  The coparcener  is entitled only  to an account of the joint family property as it exists  on the  date he demands partition. In the instant case   there    being   no   evidence   to   establish   any misappropriation  or  fraudulent  conversion  of  the  joint family property by Kota Venkatachala Pathy during the period he acted  as karta of the family, we are unable to interfere with the  direction issued  by the  High Court which is just and proper.      For the  foregoing reasons,  the appeal  fails  and  is hereby dismissed  but  in  the  circumstances  of  the  case without any order as to costs. V.P.S.                                     Appeal dismissed. 645