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TMI Blog1952 (12) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, 10 and 11 contested the suit. The other defendants were ex parte. Defendant 1 did not file any written statement though he appeared in Court. The plea urged on behalf of the defendants (other than defendant 1) was that defendant 1, Damodar Sahu, had no power to borrow on behalf of the family and that neither the hand notes nor the endorsements purporting to have been made thereon by him, would make the other defendants liable for the plaintiff's claim. 2. The learned Judge granted a decree to the plaintiff only against defendant 1 and dismissed the suit as against the other defendants. 3. Mr. M. S. Mohanty appearing for the plaintiff-appellant has raised two contentions in sup port of this appeal. His first contention is that defendant 1 being the manager of an undivided Hindu family was competent to borrow for family purposes and for the family business which admittedly was an ancestral family business, and keep the debts alive by making partial payments towards the discharge of those debts. Secondly, he urged that defendant 1 had been clothed with the power to borrow by virtue of the registered power of attorney executed by the other defendants on 16-2-1939 (Ex. 1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our order. I have received the consideration in cash. I consent to this promissory note.' Rupees three thousand only (on stamp) Sd/- Damodar Sahu 9-6-1941. The two endorsements made by Damodar Sahu on the promissory note are also signed by Damodar Sahu, but without any description of the capacity in which he made the payments or signed the endorsements. 5. The plaintiff's suit was based; firstly on the negotiable instruments as such and secondly on his claim for recovery of the debts contracted by defendant 1 as the manager of the family. He alleged that all the defendants were benefited by the loan, as the loan was incurred for family purposes and for legal necessity of the family. He also alleged that they were liable on the hand note as they had authorised defendant 1 to contract the debt and as the debt was contracted as their agent. The defendants contest both these claims. They allege that the money borrowed by defendant 1 was not utilised for the benefit of the family and that the power-of-attorney held by him did not authorise him to contract new debts. 6. The learned Subordinate Judge held that the plaintiff had failed to prove that the suit loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebts and their interests in the family property can be attached for the realization of the debts, they are not personally liable either for the debts, or upon a negotiable instrument executed by the manager. There is, however, no presumption that the borrowing was not for his own private purposes and that the other members of the joint family are not liable on the promissory notes, in the absence of satisfactory evidence that the money was borrowed for purposes of family business. See --'Abdul Majid Khan v. Saraswati Bai', (A), it is unnecessary here to discuss whether benefit to the estate can only be inferred when there is pressure on the estate and whether the pressure or danger could not be removed except by resort to borrowing. It is also unnecessary to consider whether every case of benefit must also be a case of necessity, or protection of the estate from the danger. The facts of this case disclose that the manager Damodar Sahu (defendant 1) was in need of funds for running the sugar factory at Aska. But whether that need was of such pressing character that the family business could not have been run, or that it would have been exposed to danger if the borrowing had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manager of the family for the time being can acknowledge or make a payment on behalf of the whole family. The words manager of the family for the time toeing indicate that at the time of making the acknowledgment or payment, the person making the endorsement should be the manager of the family. While there can be no doubt, therefore, that the manager has the implied authority to contract a loan on behalf of the family, he cannot make any payment and keep the debts alive as against the entire family, unless it is shown that he is also the manager of the family for the time being , that is, at the time of making the payment. The argument on behalf of the respondents is that by virtue of the notice dated 6-10-1942, wherein one of the coparceners communicated his intention to separate, defendant 1 ceased to be the manager of the family from that date. It is well-settled that when a coparcener communicates his unequivocal intention to separate to the other coparceners, there is immediately a severance of status in the family, and there is no presumption that the others continue to remain united. An agreement amongst the members to remain united, or to re-unite, should be prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than an authorised agent or power of attorney holder of the family. D. W. 2. also gave evidence to show that defendant 1 was only a formal agent and not a manager. Exhibits 1 and 1-A expressly state that for facility of administration of the joint estate of the members of the family,- defendant 1 was appointed their agent. There is no express mention of his having. been empowered to act as manager of the family, in any of these documents. But even if it be assumed that he was also the manager of the family at the time of the execution of the suit promissory notes, there is clear evidence that he ceased to-be so at the time he made the endorsements of payment on 21-5-43. It must accordingly he held that the defendants other than defendant I are not bound by the endorsements of payment and that the suit as against them seeking to make them liable for the suit debt, assuming it was a family debt, should fail on the ground of limitation. 9. After the arguments had been closed, Mr. Mohanty brought to our notice a case reported. in -- 'Kasiram v. Bhaga', (E), a decision of a single Judge, in which it was held that unless intimation of the severance of the joint status be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some person through whom he derives title or liability. It is obvious that the coparceners do not derive their title through the manager. Nor does the creditor claim any right against them as such. The claim Is against the joint family assets in their hands. I am, therefore, inclined to the view that neither Section 19 nor Section 20 would apply to the case of an acknowledgment or payment made by the manager so as to bring in the junior members of the joint family. As I have stated already, the relevant Section is Section 21 where the expression agent duly authorised in this behalf is explained rather than defined. And Section 21 (3) (b) makes express provision for such cases. Unless, therefore, the payment is made by the manager of the family for the time being, as laid down in that sub-clause the payment cannot be deemed to have been made on behalf of the whole family. Any consideration of the Contract Act or the Partnership Act is, in my view, irrelevant in deciding whether the bar of Limitation is saved by the payment made by the manager of the family. The use of the words for the time being is, I think, a pointer as to the extent to which the payment made by the manager ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the limits of his-power and purported to act on behalf of his principals when he executed Exs. 2 and 3. 11. Section 27, Negotiable Instruments Act provides that a person capable of entering into a contract can bind himself or be bound by a duly authorised agent acting in his name : and further provides : A general authority to transact, business and. to receive and discharge debts does not confer upon an agent the power of accepting or indorsing bills of exchange so as to bind his principal. The last clause of the Section says : The authority to draw bills of exchange does-not of itself import an authority to indorse. Section 28 of the Act provides that an agent who signs his name under a promissory note, without communicating therein that he-signs only as an agent or that he does not intend thereby to incur a personal liability, is-liable personally on the instrument except to those who induced him to sign upon the belief that the principal only will be held liable. On a plain reading of these two sections it is-clear that a general authority to transact business and to discharge debts does not confer upon, an agent the power of endorsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... went, it was totally, without any such qualifying expression, and the fixing of the seal of the company upon the note, was simply for the purpose of ear-marking the transaction or, in fact showing to the directors that, as between them and the company, it was for the company that they were signing the note and that it was a transaction in which the proceeds to be received upon the note would operate to the, benefit of the company; but there is no case that goes the length of saying that the fixing of the seal where the parties otherwise do not use terms to exclude their approval or liability would have that effect. It is, therefore, of the essence of a claim based upon a negotiable instrument that the person executing that document should disclose, on the face of the document itself, that he is not personally liable and that he is executing a promissory note for someone else. In the well-known case of --'Sadasuk v. Kishen Prasad', AIR 1918 PC 146 (H), the hand note ran as follows : By order of Sarkar may his happiness increase. To Mohan Lal, son of Hira Lal. Six months from the date of execution of this hundi, please pay to Seth Sadasuk Janki Das ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lls, Ltd.', (K), the promissory note ran as follows : We promise to pay to....or order the sum of ...... for value received. and it was signed by two directors of the company, and below the signatures was given their description as directors, and below these signatures, again, was the signature of the managing agents. The promissory note also bore the seal of the company. It was, however, held that the promissory note did not bind the company. 12. I have, therefore, no doubt in my mind, on a review of the authorities, that in a suit based on a hand note the person signing the document is the person actually liable, and that no evidence is admissible to prove that it was executed on behalf of an undisclosed principal. Having regard to the character of such instruments, which constantly pass from hand to hand, it would be dangerous to permit evidence to be adduced so as to bind persons whose names are not disclosed on the face of the note itself, or to hold that the person signing the negotiable instrument was only an agent for an undisclosed principal. 13. It is unnecessary in the view that I have taken of the liability created under the suit promissory notes, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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