A.Khandelwal & Sons, (Huf) vs M/S Sardar Mall Alok Kumar (Huf
2008 Latest Caselaw 2219 Del

         *IN THE HIGH COURT OF DELHI AT NEW DELHI

     +         EAs No. 292 & 293/2008 in Execution 214/ 2007.


     %11.12.2008                          Date of decision:11.12.2008


     A.KHANDELWAL & SONS, (HUF)...........Decree Holder
                                  Through: Mr. V. Sudeer, Advocate

                                    Versus

     M/S SARDAR MALL ALOK KUMAR (HUF)...Judgment Debtor
                        Through: Mr. P.D. Gupta, Mr. Kamal
                        Gupta, Advocates
                        Mr. Pankaj Gupta, Advocate for the
                        Objector Mr. Alok Jagwayan in EAs
                        No.292-293/2008
                        Mr. R.S. Kela, Advocate for the
                        Objectors, Santosh Kumar, Taramani &
                        Suman Jain.


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1.  Whether reporters of Local papers may
    be allowed to see the judgment?       YES

2.       To be referred to the reporter or not?     YES

3.       Whether the judgment should be reported
         in the Digest?                        YES

RAJIV SAHAI ENDLAW, J.

1. The objection to the execution raises for adjudication legal

issue, as to what is the liability of the individual co-parcener in a

decree against a Hindu Undivided Family carrying business -

whether it is to the extent of their share in the assets of the said

joint Hindu Undivided Family only or does it extend to their

personal assets also.

2. The factual matrix in which the aforesaid legal issue has

arisen is as under. The decree holder, itself a Hindu Undivided

Family through its Karta instituted CS(OS) No.1129/2002 under

Order 37 of the CPC in this court against "M/s Sardar Mall Alok

Kumar, HUF through Shiv Dayal Jagwayan, Karta" for recovery

of Rs.27,09,905/- with future interest. It was inter-alia stated in

the plaint that:

"the defendant is a Hindu Undivided Family with Shiv Dayal as its Karta his wife Champa Jagwayan as its member and sons Ashish and Alok Jagwayan as co-parceners".

3. It was further stated that the decree holder/plaintiff had

over a period of time disbursed interest (@ 18% p.a.) bearing

loan to the defendant; that the defendant was giving interest to

the plaintiff till 31st March, 2001 by crediting the same to the

account of the plaintiff; that the plaintiff had disbursed the loan

to the defendant as defendant‟s Karta was a friend of the Karta

of the plaintiff and was in need of money; that as on 30th June,

2002 a sum of Rs.27,09,905/- inclusive of interest was due from

the defendant to the plaintiff.

4. The defendant in that suit applied for leave to defend

which was considered by this court on 10th December, 2006. A

letter dated 18th March, 2002 written by the defendant to the

plaintiff in acknowledgment of debt is referred to in the order

dated 10th February, 2006. In the said letter Mr. Shiv Dayal

Jagwayan, Karta of the defendant had written to the Karta of the

plaintiff as under:-

"My dear Ashok Ji,

You have been a family friend for over 25 years. Your family, friends and you had advanced to my firm M/s. Sardar Mall Alok Kumar Kumar over Rs.35,00,000/- as at 31/03/2001 (With Interest), you have been asking for repayment of these funds. I assure you that I shall repay the same to your

shortly. You are aware that I have various properties in my name or in the name of my family members. Before any of the properties is sold I shall repay the loan. In case I am unable to pay immediately I shall transfer the land and Godawn at Siraspur to you for Rs.20,00,000/-, Godawn at Samaipur for Rs.15,00,000/- before 30/6/2002. The balance amount shall be repaid.

I confirm the loan outstanding as at 31/03/2001 with M/s. Sardar Mall Alok Kumar with following details:

              1. A. Khandelwal & sons             2285253
              2. Kamla Khandelwal                   217143
              3. Sunita Khandelwal                  442205
              4. Ashok Kr. Khandelwal               278480
              5. Geeta Khandelwal                   161617
              6. Ajay Khandelwal HUF                141414
                                                   -------------
                                                  3526112

                     With Best Wishes


                     (SHIV DYAL JAGWAYAN)

5. What is of significance to be noticed for the present

purposes is that the Karta of the defendant had in the aforesaid

letter referred to M/s Sardar Mall Alok Kumar as a "firm".

6. It is also recorded in the order dated 10th February, 2006

aforesaid that other suits filed by other family members of the

Karta of the plaintiff against the defendant had been decreed.

The counsel for the defendant on 10th February, 2006 also

submitted that the decree be passed for the principal amount

against the defendant and keeping in view the financial

difficulty being faced by the defendant, interest should be

minimal possible. The principal amount claimed in the suit

being Rs.17,60,000/-, this court vide order dated 10th February,

2006 passed a decree in favour of the plaintiff and against the

defendant/judgment debtor for recovery of Rs.17,60,000/- along

with interest at 6% per annum w.e.f. 31st March, 1997, pendente

lite and future.

7. The plaintiff aforesaid filed execution No.214/2007 for

execution of the aforesaid decree, the total amount due till then

being Rs.26,20,609/-. In column 9 of the execution application,

against column "the name of the persons against whom the

execution of the decree is sought" , the decree holder stated "

(i) Mr. Shiv Dayal Jagwayan, the Karta of the above named

judgment debtor and (ii) Mr. Alok Jagwayan one of the co-

parceners (iii) Mr. Ashish Jagwayan one of the co-parceners".

The decree was sought to be executed by attachment and sale of

movable and immovable properties of the judgment debtors,

details whereof were given in schedule to the execution petition

and also inter-alia by attachment of commission receivable by

Mr. Alok Jagwayan from LIC as detailed in the Annexure „C‟ to

the execution/petition.

8. This court vide order dated 17th August, 2007 issued

warrants of attachment with respect to the properties detailed

in schedule „B‟ to the petition. Vide order dated 13th November,

2007 this court also issued notice to the LIC to show cause as to

why the commission payable to Mr. Alok Jagwayan, co-parcener

of M/s Sardar Mall Alok Kumar, HUF be not attached. On 5 th

May, 2008 a further order was made of issuance of letter to LIC

for sending commission payable to Mr. Alok Jagwayan to this

court by way of pay order in the name of the Registrar General

of the court. In response thereto that E.As. No.292 & 293/2008

came to be filed by Shri Alok Jagwayan and which fall for

consideration.

9. The contention of Mr. Alok Jagwayan is that the judgment

debtor in the execution is only "the HUF firm" M/s Sardar Mall

Alok Kumar and the objector Mr. Alok Kumar Jagwayan is not a

party to the execution; that the commission payable to him by

the LIC is not liable to be attached towards the satisfaction of

the decree because he has no liability to pay any sum to the

decree holder or to the judgment debtor; because the liability

of the objector as a member/co-parcener of M/s Sardar Mall

Alok Kumar is limited and confined to the assets/property

received by him as his share of the properties of the said joint

family or to his interest therein; that he has not received any

property nor any share in the property owned by or belonging

"to the said HUF firm"; that the said "HUF firm has no movable

or immovable property in its name"; "the commission payable by

Life Insurance Co. of India and receivable by the

applicant/objector is his self earned income which is his

separate property and is not liable to be considered as property

of the above mentioned HUF firm"; that his personal and

separate property is not capable of being attached towards the

satisfaction of the said decree. It may be highlighted that the

objector has also referred to the judgment debtor as the HUF

firm and not HUF only.

10. The decree holder has in reply stated that the objector

Mr. Alok Kumar has and is acting as the Karta/Manager of M/s

Sardar Mall Alok Kumar, judgment debtor; that the cheque

dated 23rd January, 2002 for Rs.1 lac issued to the decree holder

by M/s Sardar Mall Alok Kumar during the pendency of the suit,

was signed by the applicant Mr. Alok Kumar in his capacity as

Karta/Manager for M/s Sardar Mall Alok Kumar; that from the

issuance of the aforesaid cheque it was evident that the objector

Mr. Alok Kumar was party to the contract requiring the

judgment debtor HUF to pay back the dues of the decree holder

and thus the contention that the objector was merely a

co-parcener was false; that even otherwise being an adult

co-parcener and having ratified the contract by subsequent

conduct by making part payment of the loan by cheque signed

by him as Manager, the objector was liable to be treated as a

contracting party; reliance was placed on an extract from

Mulla‟s Hindu Law in this regard to contend that such a co-

parcener is liable as a contracting party.

11. The objector filed a rejoinder reiterating its stand; with

respect to cheque for Rs.1 lac, the issuance thereof was not

denied but it was stated that he had never acted as the Karta

and in the year, 2002 owning to the ill health of his father Mr.

Shiv Dayal Jagwayan, for sometime he was given authority to

issue cheques from the bank account maintained for and on

behalf of the judgment debtor firm and it was in these

circumstances that the cheque was signed by him as

Karta/Manager of the judgment debtor. It was otherwise

contended that the objector in the year 1997 when the

transaction commenced as per the decree holder, was a minor

and had attained majority subsequently. It was further

contended that the objector was not a party to the suit.

12. The legal position, as far as in relation to a Hindu

Undivided Family is concerned, admits of no conflict. It is

settled that a decree against Hindu Undivided Family can be

executed only against the assets of the Hindu Undivided Family

and not against the personal assets of the co-parceners of the

said HUF. The question which arises is, whether the position is

to be different when the Hindu Undivided Family is carrying on

trade/business and what is commonly known as a HUF firm or a

joint Hindu family firm. It has to be first noticed that neither in

the plaint nor in the decree there is reference to the

defendant/judgment debtor as a HUF firm. It is only in the

letter dated 18th March, 2002 set out in the order dated 10th

February, 2006 passing the decree that the said HUF is referred

to as a firm. In the execution proceedings, again, it is the

objector who has in his objection petition described the

judgment debtor as a HUF firm. The objector having done so,

the law to be applied is as applicable to a HUF firm.

13. As far as a partnership firm within the meaning of the

Indian Partnership Act is concerned, again there is no ambiguity

that a decree against the firm is executable against the partners

personally also and not limited to their share in the partnership

firm. Whether the same principles are to be applied to a HUF

firm also. Section 5 of the Partnership Act clarifies that the

same principles cannot be applied to a HUF firm on the basis of

the provisions of the Partnership Act. The apex court in

Nanchand Gangaram Shetji Vs. Malappa Mahalingappa

Sadarge AIR 1976 SC 835 has held that the legislature in its

wisdom excluded joint Hindu trading families from operation of

the Partnership Act and thus the principles thereof cannot be

applied to joint Hindu trading families. It has to be, thus, seen

whether without reference to the provisions of the Partnership

Act, what is the liability of various constituents of such families.

The determination thereof would also entail determination of

what is the private property of such constituents and what is the

family property.

14. The privy counsel was faced with the latter proposition in

Amar Nath Vs. Hukam Chand Nathumal AIR 1921 P.C.35.

In that case the appellant, though a member of the Joint Hindu

Family carrying on business took no part in the business, was

not privy to the debts incurred, in his youth was absent from

India for education and joined the Indian Civil Services and was

earning salary. But he never severed himself from the Joint

Hindu Family The privy counsel held that in such families the

rule is that acquisitions of members are joint property and

partible i.e. liable to be shared with other members of the family

and impartibility is the exception. It was further held that

property acquired by possession of special science or learning is

a recognized exception. However it was further laid down that

where such acquisition of special science or learning is paid for

at the expense of the family or to the detriment of the family, it

is regarded as the family investment and the emoluments

earned by the possessor are joint property of the family or the

fruits of investment made in one member of family. Applying

the said principles it was held that the training and appointment

of appellant in civil services was to the detriment of the family

and thus money decree against him was upheld and his appeal

dismissed. The privy counsel while holding that it would be

impractical to distinguish between personal and family element

in ultimate gains i.e. the salary in that case, however left the

question to be determined in execution.

15. The Hindu law as enunciated above was changed by the

Hindu Gains of Learning Act, 1930. By Section 3 thereof no

gains of learning is to be held not to be exclusive and separate

property of the acquirer for the reason of such learning having

been acquired with the aid of family funds or for the reason of

his having been maintained or supported from family funds.

The Apex court in Chandrakant Munilal Shah Vs. C.I.T. AIR

1992 SC 66 held the definition of learning in the said Act to be

very wide and encompassing within its sweep every acquired

capacity which enables the acquirer of the capacity to pursue

any trade, industry, profession or avocation in life.

16. In the light of the aforesaid position, the earnings of the

objector of commission from LIC would be his self acquired

impartible property and not the property of the judgment

debtor.

17. Also there is no averment on behalf of the decree holder

that the commission payable by the LIC is an income of the

judgment debtor. This is all the more relevant since the Karta

of the plaintiff/decree holder was the Chartered Accountant of

the defendant/judgment debtor. It is for this reason only that

the plaintiff/decree holder could in the suit assert that the

defendant/judgment debtor has also in its books of account

admitted liability of the amounts claimed by the plaintiff/decree

holder and readily furnished list of properties to be attached

and details of the income of the objector from commission

payable by LIC. The Karta of the plaintiff/decree holder having

been the Chartered Accountant of the defendant/judgment

debtor, if the commission payable by the LIC had been shown in

the books as the income of the defendant HUF, would have

certainly stated so.

18. I do not, therefore, consider it necessary to put the matter

to trial on this aspect.

19. With respect to the liability of various constituents of the

joint Hindu Trading families, Krishan Gopal Vs. Suraj Mal

AIR 1964 Raj. 218 (DB), Shiv Bhagwan Moti Ram Saraoji Vs.

Onkarmal Ishar Das AIR 1952 Bom 365 (DB), Shivcharan

Das Vs. Hari Ram AIR 1937 Lah. 247, Rm. L.M.L.V.

Alagamai Achi Vs. VR. PL. M. Palaniappa Chettiar AIR

1940 Mad 580, V.R.C.T.V.R. Chidambaram Chettyar Vs.

C.A.P.C. Mutaya Chettyar AIR 1936 Rangoon 160 have inter-

alia held that where the manager of a joint family business has

incurred debts, the other co-parceners, whether they be adult or

minors are liable but to the extent only of their interest in the

joint family property - they are not liable personally unless in

the case of adult co-parcenrs, the contract sued upon, though

purporting to be entered into by the manager alone, is in reality

one to which they are actual contracting parties or one to which

they can be treated as contracting parties by reason of their

conduct, or one which they have subsequently ratified.

20. With due respect to the judgments (Supra) of different

high courts, I am of the view that all constituents of a trading

Joint Hindu Family are liable for debts thereof not only from

their share in properties of Joint Hindu Family but also from

their personal, self acquired properties for the following

reasons:-

i) the trading Joint Hindu Family being merely a

compendious name in which all constituents thereof

are trading, there is no rationale for discriminating

between the manager and other co-parceners, in the

matter of debts/liabilities.

ii) there is no reason why, when the co-parceners have a

share in the profits of the business as per their share

in the family, they should not share the losses and

debts also in the same proportion.

iii) a manager or the Karta is merely by his position as

eldest in the family and by such position does not

become entitled to any extra share in the profits of the

business and there is no reason to make his personal or

self acquired properties liable and exclude those of

others.

iv) a third party dealing with such trading Joint Hindu

Family may not know its actual constitution as a Joint

Hindu Family and not a partnership and is likely to give

credit thereto on the strength of the financial capacity

of all persons appearing to be having a share therein.

In this regard it is significant that there is no statutory

compulsion for such trading Joint Hindu Family to affix

the words "HUF" to its trading name, as is in the case

of a limited company under the Companies Act. Most

of such trading families are known not to affix HUF to

their trading name, though it is not so in the present

case. Order XXX Rule 10 of CPC also permits a HUF

carrying on business under any name to sue and be

sued in such name or style as if it were a firm name.

To make only the manager‟s private properties and the

Joint Hindu Family properties liable for debts/liabilities

can given a tool in the hands of unscrupulous families

of arranging their affairs in a manner to defeat

debts/liabilities.

v) it is not essential for a Joint Hindu Family to carry on

business. However, if they do carry on business

they/its constituents need no special protection.

vi) the reason given in judgments (Supra), which are all of

more than half century ago for protecting

private/personal/self acquired properties of co-

parceners was that the said co-parceners were then

considered as subservient to and having no say

whatsoever in the matter or affairs of the family or

against the will or say of eldest member of the family.

However, the social fabric has drastically changed

since then. Neither is Joint Hindu Family the norm nor

do considerations of regard, respect today deters

youngers in the family from putting forth their views. In

fact the youngsters in the family are today consulted in

all matters and considered to be more knowledgeable

and having the pulse of the time. Today the single unit

or maximum two generations staying together is the

norm. In the circumstances there is no compulsive

trading Joint Hindu Family and the trading Joint Hindu

Family may be adopted as a trading vehicle for

commercial and other reasons. In today‟s time a

younger member of family does not feel shy to severe

relationships. In today‟s context, if there is a trading

Joint Hindu Family, all constituents thereof ought to be

made liable for debts/liabilities of business and out of

their self acquired properties also. In today‟s times it is

impossible to believe that a co-parcener would

compulsorily allow another to act as manager and if he

does so, he ought to be bound by his actions. Law is a

living organ and has to evolve with the time and

changing social conditions.

vii) all the judgments (Supra) refer to Manager and not to

Karta of the HUF. Manager of business is not

necessarily the Karta of the HUF. The Apex court in

Narindra Kumar J. Modi Vs.CIT AIR 1976 SC 1953

has held that with the consent of others, even a junior

member of the family can act as Karta. It was so held

by this court also in Nopany Investments Pvt. Ltd.,

Vs. Dr. Santokh Singh (HUF) RSA 209/ 2005 decided

on 19th April, 2007 and appeal where against was

dismissed by Apex Court. If that be so, there is no need

to subject self acquired properties of Manager only to

attachment and sale for debts/liabilities of the business

of the family.

21. In my view the only exception to the rule of making all

constituents of trading Joint Hindu Family liable personally also

to debts thereof, ought to be when a particular transaction

incurring debt/liability to third party is entered into by a

constituent thereof in collusion with such third party and to

cause detriment to other members.

22. However, in the facts of the present case, I find that even

applying the law with which I have respectfully differed, the

objector is personally liable.

23. The decree holder in the suit claimed interest @ 18%

perannum. However, in view of the statement of the

defendant/judgment debtor for concession in the matter of

interest owing to financial difficulties this court in the order

dated 10th February, 2006 granted interest @6% per annum

only, not only pendente lite and future but also for the period

prior to the institution of the suit. The said order dated 10th

February, 2006 though not expressly recording the consent of

the parties is in the nature of a consensual order and in fact

records the presence of Mr. Shiv Dayal Jagwayan, Karta of the

judgment debtor in the court. When the judgment debtor has on

10th February, 2006 already availed concession aforesaid, when

the objector was adult constituent thereof and prior whereto

admittedly was acting as Karta/Manager thereof, the objector is

deemed to be a contracting party and/or to be treated as a

contracting party to the transaction by reason of his conduct

and/or which he has ratified. The objector is thus personally

liable.

24. The issuance of the cheque for Rs.1 lac under the

signatures of the objector shows that the objector was fully in

the know of the debts towards the decree holder and was then

admittedly also acting as the Karta/Manager of the defendant.

Nothing has been stated or placed on record as to when

thereafter the objector ceased acting as the Karta/Manager. It

is, thus, not as if the suit or the order dated 10th February, 2006

therein was behind the back of the objector. The objector has

himself stated that his father who was the Karta of the HUF was

suffering ill health at that time necessitating his taking over the

affairs of the HUF.

25. The next important fact relevant for the present purposes

that it is the plea of the objector himself that the judgment

debtor firm has no movable or immovable assets. The

attachment orders which were issued with respect to the

immovable properties have invited objections with respect to

each of the said properties. Can a decree holder who has been

awarded a concessional rate of interest for not only the period

during the pendency of the suit and future interest but also for

prior to the institution of the suit in the hope of the early

satisfaction of the decree can be left high and dry. The

judgment debtor was carrying on business of its own volition

and with the volition of the adult co-parceners. Not only the

Karta/Manager but all including the objector reaped benefits of

the profits/earnings of the said business/trade of the judgment

debtor. The objector himself in the present case has pleaded

that the judgment debtor firm and the family is now left with no

income but the commission from the LIC. The same is indicative

of the business being carried on by the judgment debtor firm

being the main source of income of the family. When the co-

parceners have enjoyed the profits of the business not limited to

their share as in a partnership firm, there is no reason why in

the matter of debt they ought to be heard to say that they are

not liable personally for the debts. In this regard, it is also

relevant to note that the various sales tax State Acts have made

provision in this regard whereunder each and every

co-parcener of the HUF firm is treated as a dealer for the

purposes of recovery of the sales tax dues, if any, from such a

firm.

26. The judgment of the Apex court in Sidheshwar

Mukherjee Vs. Bhubneshwar Prasad Narain Singh AIR

1953 SC 487 relied upon by the counsel for the objector is not

applicable and nowhere lays down the position in relation to an

HUF firm as the judgment debtor in the present case is.

Similarly, the other judgment of the Apex court in Kapur

Chand Shrimal Vs. Tax Recovery Officer AIR 1969 SC 682

relied upon by the objector merely holds that the manager of a

HUF is not liable to be arrested and detained for failure to

satisfy the tax dues by the HUF, under the scheme of the

Income Tax Act.

27. I therefore do not find any merit in the objections and the

same are also not found to raise any triable issue. Both the

applications are dismissed, however, with no order as to costs.

The attachment of commission payable by the LIC of India to Mr

Alok Kumar Jagwayan to continue and the LIC of India be

directed to continue remitting the said commission to this court

by cheque in the name of the Registrar (General) of this court.

RAJIV SAHAI ENDLAW JUDGE

December 11, 2008 PP