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PETITIONER: GANGADHARAN

       Vs.

RESPONDENT: JANARDHANA MALLAN & ORS.

DATE OF JUDGMENT:       10/05/1996

BENCH: VENKATASWAMI K. (J) BENCH: VENKATASWAMI K. (J) AHMADI A.M. (CJ) MANOHAR SUJATA V. (J)

CITATION:  JT 1996 (5)    82        1996 SCALE  (4)537

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T K.VENKATASWAMI, J.      Aggrieved by  the judgment  of the High Court of Kerala at Ernakulam  in Second  Appeal No.75/77 dated 19.7.77, this appeal by  special leave  has been  preferred by  the  first defendant in  the said  suit, namely  O.S. No.  27/67 on the file of  Subordinate Court,  Irinjalakuda. The said suit was filed by  the respondent  nos. 1-5 along with one Ramanathan who died  pending  appeal  before  the  District  Court  for partition and  separate possession of their 6/8 share in the property,  namely,   66  cents   with  building  thereon  in Kodungallur (Kerala).  The appellant  (first defendant)  was the purchaser  of the  suit property  from the father of the plaintiffs (respondent  nos.  1-5)  under  sale  deed  dated 2.4.55 (Ex.  P2). The  property sold under Ex. P2 was one of the items  of the  joint family property. When the sale took place, the  plaintiffs were  minors. After  the death of the father and  after 12  years of  the  sale  in  question  the present suit  was filed  attacking the  validity and binding nature of  the sale  on the  ground that  the sale was for a grossly inadequate consideration; that there was no pressing need to  alienate the  property; that  the income from other properties of  the joint  family was  sufficient to wipe off the debts  if any  and  that  most  of  the  debts  for  the discharge of which Ex. P2 was executed were bogus in nature. The sale consideration was for a sum of Rs.9,000/-.      The first  respondent (appellant  herein) resisted  the suit by  contending that  the suit  was speculative one, the vendors were  obliged  to  alienate  comparatively  a  small fraction of  the family property for the purpose of carrying on  the   business;  that   the  income  from  other  family properties  were   not  sufficient   for   discharging   the liabilities   and   that   the   sale   was   for   adequate consideration.      The trial  court after  elaborate  consideration  found

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that out  of sale  consideration of Rs. 9,000/- a sum of Rs. 5,750/-  factually   was  utilised   to  discharge   genuine antecedent  debts   and  sale  consideration  was  adequate. Consequently, the  trial court upheld the validity of Ex. P2 sale deed and dismissed the suit.      The plaintiffs  (respondent nos.  1-5) preferred appeal to the  District Court  and the  learned District Judge also concurred with the findings of the trial court and dismissed the appeal.      The plaintiffs  preferred a  second appeal  to the High Court and  the learned  Single Judge  found that out of sale consideration of  Rs. 9,000/-,  a sum  of Rs. 1,250/-, being part of  the sale  consideration cannot be treated as a debt as the  said amount  was left  with the  vendee to  pay  the future instalment  of ’kuri’subscription.  In view  of that, the High Court held as follows :      "If as  in this  case half  of  the      consideration  is  to  discharge  a      debt which  is an  antecedent  debt      and half  is not  it could  not  be      said that  the  alienation  was  to      discharge antecedent debt. No doubt      the discharge  of  antecedent  debt      was   also    involved   in    such      alienation. Therefore, it cannot be      said  that   in   this   case   the      alienation was  effected to pay off      antecedent debt  of the  father and      as   such    the   alienation    is      supportable."      On the  question whether  there was  pressing necessity for the  sale of  an item  of the joint family property, the High Court remanded the case.      Aggrieved by  the judgment  of  the  High  Court,  this appeal has been filed. Learned Sr. Counsel appearing for the appellant submitted  that the  High Court  erred in  holding that only  half of  the sale  consideration was  utilised to discharge antecedent  debt  and  therefore,  the  alienation cannot be supported. According to the learned Sr. Counsel if the vendee makes genuine enquiry about the necessity for the sale of  the property  before the purchase and pays adequate consideration thereafter it was not necessary for him to see the application  of the money. In this case according to the learned Sr.  Counsel, the  learned District  Judge has found that  the   vendee  (appellant   herein)  has  made  genuine enquiries and  satisfied himself regarding the necessity for sale of the lands under Ex.P2, and major portion of the sale consideration has  been  spent  for  liquidating  antecedent debts. In support of this argument, he cited Sri Krishna Das & Ors. vs. Nathu Ram & Anr. (AIR 1927 PC 37); Ram Sunder Lal & Anr.  vs. Lachmi  Narain &  Anr.  (AIR  1929  PC  143);Ram Krishna Muraji  vs. Ratan  Chand &  Anr.(AIR 1931  PC  136); Radhakrishnadas vs. Kaluram (1963 (1) SCR 648) and Smt. Rani & Anr. vs. Smt. Santa Bala Debnath & Ors. (1970 (3)SCC 722).      Learned Sr. Counsel appearing for the respondents while supporting the judgment of the High Court and the reasonings thereon also contended that in as much as the High Court has remanded the matter on the question of legal necessity, this Court may not interfere with that judgment.      We have considered the rival submissions.      The trial  court after considering each and everyone of the debts  in all  amounting to 13 items recited in the sale deed, found  that except  the debts amounting to Rs. 3,750/- out of  total consideration of Rs. 9,000/-, the other amount was proved  to have  gone into  the discharge  of antecedent

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debts binding  on the  sons. In that view of the matter, the trial  court  upheld  the  impugned  sale  and  consequently dismissed the suit.      Before the  Appellate Court,  it appears  that both the parties  proceeded  on  the  ground  that  Ex.  P2  was  not supported by  antecedent debts  to the  extent of  only  Rs. 3,250/-. The  First Appellate  Court observed in paragraph 7 as follows."      "In fact,  the appellants’  learned      counsel has  accepted  the  finding      recorded in  paragraph  13  of  the      judgment  that   Ex.  P2   was  not      supported by  antecedent debts only      to the tune of Rs. 3,250/-. The 1st      defendant’s  learned  counsel  also      did not make any serious attempt to      show that  Ex. P2  is supported  in      full by  antecedent debts. Both the      parties, therefore,  have proceeded      on the  ground that  Ex. P2  is not      supported by  antecedent  debts  to      the tune of Rs. 3,250/-.  The total      consideration is Rs.9,000/-      Again on  the aspect  of adequacy of consideration, the appellate court has found as follows:-      "Though in  the grounds  of  appeal      the    appellants     attack    the      correctness of the finding that the      consideration shown  for Ex.  P2 is      inadequate. such  a contention  was      not urged  during  hearing  of  the      appeal. The  conclusion reached  by      the Court  that  consideration  for      Ex. P2  is adequate ss on the basis      of the  Commissioner’s Report.  Due      consideration  was   given  to  the      income derivable from the property.      I am  also in entire agreement with      the   Court    below    that    the      consideration for  Ex.  P2  at  the      time it was executed was adequate."      On the  other important  aspect of  legal necessity and enquiry by the purchaser, the lower appellate court observed as follows:      "The lower  court has  found at the      bottom of  page 9  that the  father      was a  prudent manager and that the      family was  not in such an affluent      circumstances  as  claimed  by  the      plaintiff. The  learned  Sub  Judge      observes the position of the branch      of    Venkiteswara    Mallan    was      "pitiable".  That   conclusion   is      warranted by  the request  seen  in      Ex.  D-3.   It  is   in  the  above      background  we  have  to  view  the      debts evidenced  by  the  pronotes.      They   had    to   be   discharged;      otherwise interest  would mount up.      "Legal  necessity   does  not  mean      according  to  1971  Supreme  Court      1028, "actual  compulsion; it means      pressure on the estate which in law      may  be  regarded  as  serious  and      sufficient". The  alienee  says  he

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    made  due   enquiries   about   the      existence   of    necessity.    The      recitals in Ex. P2 corroborates the      evidence  of   the   existence   of      necessity. It  is also  found  that      the  consideration   for  Ex.P2  is      adequate. There  is evidence of the      1st  defendant  making  a  bonafide      enquiry   as    to   existence   of      necessity. What was made was such a      reasonable enquiry as is sufficient      for  a   prudent  man   to  satisfy      himself of  the  existence  of  the      necessity. Thus  it can  safely  be      said that the alienee acted in good      faith."      In the light of findings as extracted above, let us now examine the legal contentions advanced before us. As noticed earlier, the  contention of  the learned  Sr.Counsel for the appellant was that if the purchaser acts in good faith after enquiry, it  is not  obligatory on  his part to make further enquiries into  the application  of surplus.  if any, of the sale consideration.  This question does not appear to be res integra any  more as  it is settled by a number of judgments rendered by  Privy Council  and approved  by this  Court. In Krishna Das  & Ors.  Vs. Nathu  Ram &  Anr (AIR  1927 PC 37) (supra) (supra)  after referring to earlier case in Hunooman Persaud Panday  vs. Musamat  Babooee (6  MIA 393), the Court held that  where the  purchaser acts in good faith and after due enquiry  and is  able to  show that  the sale itself was justified by  legal necessity.  he is under no obligation to enquire  into   the  application  of  any  surplus  and  is, therefore, not  bound to  make repayment  of such surplus to the  members  of  the  family  challenging  the  sale.  This judgment was  referred to  with approval in Ram Sunder Lal & Another’s case (supra) where the ratio was laid down in more clear terms.  It was  held that  where the  sale  of  family property  by   the  father   was   effected   for   adequate consideration after  due enquiry  made by  or on  behalf  of vendee as  to the  legal necessity  and legal  necessity was proved by vendee to the extent of Rs. 1,744/-at least out of a total  price of  Rs. 10.767/-, then the mere fact that the vendee after a long interval of time (14 years) was not able to prove  conclusively how  the surplus  was applied  by the father is  not sufficient ground for setting aside the sale. Again the  Privy Council  in Ram  Krishna Muraji  vs.  Ratan Chand &  Anr. AIR  1(931 PC  136)  after  referring  to  the earlier pronouncements quoted with approval a passage from 6 MIA 393(supra) and observed as follows :-      "Their  Lordships  think  that  the      lender is bound to enquire 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 enquire, 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   circumstance  she  is

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    bound to  see to the application of      the money. It is obvious that money      to be  secured  on  any  estate  is      likely to  be  obtained  on  easier      terms than  a loan  which rests  on      mere personal  security,  and  that      therefore  the   mere  creation  of      charge  securing   a  proper   debt      cannot  be  viewed  as  improvident      management the purposes for which a      loan is wanted are often future, as      respects  the  actual  application,      and  a   lender  can  rarely  have,      unless he enters on the management,      the  means   of   controlling   and      rightly   directing    the   actual      application. Their Lordships do not      think that  a  bona  fide  creditor      should suffer  when  he  has  acted      honestly and  with due caution, but      is   himself    deceived".(Emphasis      supplied)      Now  coming   to  the   decision  of   this  Court   in Radhakrishna Das  and Anr.  vs. Kaluram  (1963 (1) SCR 648), this Court  after referring  to the  Privy Council  decision observed as follows:      "It  is  well  established  by  the      decisions of  the Courts  in  India      and the Privy Council that what the      alienee is required to establish is      legal necessity for the transaction      and that  it is  not necessary  for      him to  show that  every bit of the      consideration which he advanced was      actually applied for meeting family      necessity. In  this connection,  we      may refer  to two  decisions of the      Privy Council.  One is  Sri Krishan      Das Vs. Nathu Ram. In that case the      consideration  for  the  alienation      was Rs.  35,000/-. The  alienee was      able to  prove that there was legal      necessity only to the extent of Rs.      3,000/- and  not for  the  balance.      The  High   Court  held   that  the      alienation could  be set aside upon      the plaintiff’s  paying Rs. 3,000/-      to  the   alienee.  But  the  Privy      Council reversed  the  decision  of      the High  Court observing  that the      High    Court     had    completely      misapprehended the principle of law      applicable to  a case of this kind.      What the  alienee has  to establish      is   the    necessity    for    the      transaction. If he establishes that      then  he   cannot  be  expected  to      establish  how   the  consideration      furnished by him was applied by the      alienor. The  reason for  this,  as      has  been   stated  by   the  Privy      Council in  some  other  cases,  is      that the  alienee can  rarely  have      the  means   of   controlling   and      directing the actual application of

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    the money  paid or  advanced by him      unless   he    enters   into    the      management himself.  This  decision      was followed  by the  Privy Council      in Niamat  Rai vs.  Din Dayal where      at p. 602 and 603 it has observed:      "It appears  from the  judgment  of      the  learned  Judges  of  the  High      Court  that   if  they   had   been      satisfied that the whole of the Rs.      38,400  Paid   out  of   the   sale      proceeds was  paid in  discharge of      debts    incurred     before    the      negotiation  of  sale,  they  would      have been  of opinion that the sale      ought to  have  been  upheld.  With      this  conclusion   their  Lordships      agree, but they are of opinion that      undue importance  was  attached  by      the learned  Judges to the question      whether some  of the  payments made      in discharge  of debts  incurred in      the    interval     between     the      negotiation of  the  sale  and  the      execution of the sale deed. Even if      there  had  been  no  joint  family      business, proof  that the  property      had been  sold for  Rs.  43,500  to      satisfy pre-existing  debts to  the      amount of  Rs.  38,000  would  have      been enough  to  support  the  sale      without showing how the balance had      been  applied,  as  held  by  their      Lordships in  the  recent  case  of      Krishan Das vs. Nathu Ram."      Both  these   decisions  state  the      correct legal position, Mr. Sinha’s      argument   must,    therefore,   be      rejected."      Again in Smt. Rani & Anr. vs. Mrs. Shanti Bala Dev Nath & Ors. (1970 (3) SCC 722), it is observed as follows:      "The   onus    of   proving   legal      necessity may  be discharged by the      alienee   by    proof   of   actual      necessity or  by proof that he made      proper  and   bona  fide  enquiries      about   the    existence   of   the      necessity and  that he did that was      reasonable to satisfy himself as to      the existence of necessity".      The    Court    further    observed      regarding   legal    necessity   as      follows :      "Recitals  in   a  deed   of  legal      necessity  do   not  by  themselves      prove legal necessity. The recitals      are,      however,       admissible      inevidence,  their   value  varying      according to  the circumstances  in      which the  transaction was  entered      into. The  recitals may  be used to      corroborate other  evidence of  the      existence of  legal necessity.  The      weight  to   be  attached   to  the      recitals varies  according  to  the

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    circumstances. Where  the  evidence      which could  be brought  before the      Court and  is  within  the  special      knowledge of  the person  who seeks      to set  aside the sale is withheld,      such evidence  being  normally  not      available  to   the  alienee;   the      recitals go to his aid with greater      force  and   the   Court   may   be      justified in  appropriate cases  in      raising an  inference  against  the      party seeking to set aside the sale      on the  ground of  absence of legal      necessity wholly or partially, when      he  withholds   evidence   in   his      possession.      In  view   of  the  findings  which,  we  have  already extracted  regarding   adequacy   of   sale   consideration, substantial  portion  having  gone  into  the  discharge  of antecedent  debts   and  enquiries  made  by  the  purchaser regarding legal  necessity coupled  with the,  fact that the alienation was  challenged after  12 years  from the date of alienation,  we   find  no   difficulty  in  coming  to  the conclusion that  the High  Court went wrong in upsetting the judgments of  the Trial Court as well as the First Appellate Court. Even though the judgments of the Privy Council and of this Court  were brought  to the  notice of  High Court,  it unfortunately, failed to give due consideration to the ratio laid down  in those cases. The High Court simply observed as follows:      "It may not be possible to lay down      any  strait-jacketted  rule  as  to      what     proportion      of     the      consideration should  be  shown  to      have been  antecedent debt in order      to sustain an alienation by a Hindu      father."      We also do not agree with the contention of the learned Sr. Counsel  for the  respondents that  the High  Court  was justified in  remanding the  matter on the question of legal necessity. The  purchasers have done their best to prove the legal  necessity   and  substantial   portion  of  the  sale consideration went  into the  discharge  of  the  antecedent debts. The  First Appellate  Court has given a clear finding on this.  Having regard  to the  long lapse of time when the suit was  instituted, challenging  the  alienation,  nothing more could  be expected  from the  purchasers to  prove  the legal necessity and the application of sale consideration.      In the view we have taken on the facts of this case, it is not  necessary in  this  case  for  us  to  consider  the correctness of the view expressed by the High Court that the amount  reserved   for  the   discharge/payment  of   future instalments of  ’kuri’  subscription  would  not  amount  to antecedent debt to bind the minor.      In the  circumstances, we  allow the  appeal, set aside the judgement  and decree  of the High Court and restore the judgment and decree of the First Appellate Court, dismissing the suit. However, there will be no order as to costs.