Hajee Siddick Hajee Sumar Sait and anr. Vs. Mahomed HussaIn Sait, Minor, by His Next Friend Zaccharia Ismail Sait - Court Judgment

Abdur Rahim, Offg. C.J.

1. The suit in which this appeal has arisen, was instituted by the plaintiff through his next friend, his maternal uncle, Zaccharia Ismail Sait.

2. The facts of the case are, the plaintiff's father and the defendants in the suit, were partners carrying on business in piece goods. The partnership commenced on 16th June 1901, and it appears that the accounts used to be settled from time to time. The last settlement of accounts in the lifetime of the plaintiff's father was in February 1907. The plaintiff's father died on 5th October 1907. The suit is now brought for an account to be taken of the share of the plaintiff's father in the business and for recovery of what may be found due. The shares of the different partners were fixed, the plaintiff's father's share being one-half of the profits. He contributed Rs. 7,500, to the capital; 1st defendant contributed a similar amount, the 2nd defendant bringing in no capital. It also appears that in addition to the capital found by the plaintiff's father he also contributed his labour and skill to the business. The defence to the suit is that after the plaintiff's father died on the 13th November 1907 an account was taken of what was due to the representatives of the deceased on account of his share and two gentlemen of respectable position belonging to the same community as the parties to the suit took accounts on behalf of the plaintiff's mother who was acting as his de facto guardian; and it was ascertained that a sum of Rs. 16,000, in round figures was due on the date of settlement. I might mention that the plaintiff at the date of his father's death was only one year old and he had no paternal relatives, so far as can be gathered from the record, of a near degree. A formal deed of release was drawn up reciting that Rs. 16,000 were due to the estate of the plaintiff's father and, pending investment of the money in immoveable properties, it should remain in the business in the hands of the defendant and that the amount was to carry interest at the rate of 7 1/2 per cent. The settlement was arrived at, not only with the help of two independent men of respectable position in the community but of the maternal grandfather of the plaintiff. Interest at 7 1/2 per cent, amounted to Rs 100 a month and it is admitted by Mr. Barton, the learned Counsel for the respondent, that this amount was regularly paid until about April 1915. The plaintiff is still Under age and the suit, as I have stated, was instituted by a maternal uncle of his, who, according to the evidence1 of the plaintiff's mother herself, used to receive1 the interest payable on Rs. 16,000, every month and make over the amounts to the mother. It is stated by the mother in her evidence that she was receiving the interest on Rs. 16,000 and that it was utilized for her and the minor's maintenance. The last time that payment was received according to the settlement was a few months before the institution of the suit. The suit is instituted on the allegation that very large profits have been earned in the business carried on by the defendants since the plaintiff's father's death and, therefore, it is alleged that if an account be taken of the profits so earned and of what was attributable to the plaintiff's father's share in the assets at the time of his death, it will be found that a very large sum is payable to the plaintiff. The defendants paid the whole of Rs. 16,000 into Court, while the appeal was pending and they claim that all that the plaintiff is entitled to is interest at 7 1/2 per cent, on this amount as arranged under the settlement

3. Mr. Justice Bakewell who tried the suits has held that under the Muhammadan Law which governs the question, as to who is the legal guardian of the minor in this suit, the mother is not such guardian, therefore, the so called settlement is of no effect in law, and is not binding upon the minor. He, therefore, held that an account must betaken from the date of the last settlement during the lifetime of the plaintiff's father of the profits earned in the business and that the defendants are liable to pay what has been earned by the user of tike amount due on account of the share of the plaintiff's father. As regards the Rs. 100, which the plaintiff's mother has been receiving from month to month he refused even to give credit for them because the maternal uncle or the maternal grandfather had no power in law to grant receipts, that is to say, they did not properly represent the minor.

4. The parties are Kutchi Memons and so far as succession and kindred questions are concerned they are governed by the Hindu Law. But with reference to guardianship it is the Muhammadan Law that applies to them. No doubt under that law the mother of an infant is not the legal guardian. The learned Judge held on the authority of Mata Din v. Ahmad Ali 13 Ind. Cas. 976 (1912) M. W. N. 183 : 14 Bom. L.R. 192 : 23 M. L.J. 6. that a mother is not a legal guardian and, therefore, any act which she purports to do on behalf of the minor is of no legal effect although such act might be purely for the benefit of such minor and necessary in his interests. I do not think, however, that the ruling of the Judicial Committee goes so far as that. The whole question was fully considered by Mr. Justice Ayling and myself in a case reported in Hyderman Kulti v. Syed Ali 15 Ind. Cas. 576. in which all the rulings on the subject including Mata Din v. Ahmad Ali (1) and also the original authorities of Muhammadan Law have been discussed. Nothing has been urged to-day which would make me doubt the correctness of the proposition of law laid down there. What is laid down is: 'In cases of urgent and imperative necessity, or where the transaction from its nature must necessarily be beneficial to the minor, a de facto guardian can alienate the property of the minor whether moveable or immoveable.' And it was also held that other acts o a de facto guardian, if of a similar nature, are binding. This case has been followed in this Court in Abdul Hussain Rowthan. v. Mahomad Ibrahim Rowthar 35 Ind. Cas 243. The Rule of law as enunciated above was also recognised by the Allahabad High Court in Abid Ali v. Imam Ali 32 Ind. Cas. 177.

5. Now the position of affairs on the plaintiff's father's death was this. The plaintiff who was only one year old, had no paternal relatives of any near degree. He had no other property and, so far as it appears, his mother also had no means of subsistence. All the property which the minor inherited from his father was his share of the assets of this business. Therefore it was absolutely necessary that whatever was due to the plaintiff from the defendant's firm should be available to him at once for his maintenance as well as for the maintenance of his mother. The mother was entitled under the Hindu Law, which governs her rights in this respect, to maintenance from the property inherited by her son. It does not appear that she had the wherewithal to institute a suit and even if she had, the law does not say that she was bound to institute a suit if she could recover the money due to her infant son by means other than a suit. Under the circumstances she acted not only in the best interests of her infant child and herself but was compelled by necessity to have the matter settled out of Court if possible. She sought the advice of her own father and, I suppose, also of her brother, and with the help of men of commanding position and influence in the community, an account was taken up of what was due to the estate of her deceased husband. It will be seen that the plaint entirely ignores the settlement though the settlement, is evidenced by a registered deed and though the next friend who has taken upon himself the responsibility of instituting the suit has been for years receiving the moneys due under the settlement and must have been fully cognizant of it. It is not alleged that the men who acted as arbitrators did not discharge their duties fairly and properly. In fact as I have stated the whole settlement is ignored. Even at the trial no definite issue was raised questioning the conduct of the arbitrators or suggesting that more was due to the estate of the deceased than what was arrived at, at the settlement. The learned Judge has set aside the settlement merely holding on the question of law, that the mother was not the legal guardian and, therefore, has no authority to come to a settlement in this matter. That view of the law, in my opinion, is quite erroneous and as there is really no allegation that the settlement was not bona fide or that the account so settled is impeachable because of any substantial errors, I see no reason why the settlement should not be held binding. If that is so, no further question really arises.

6. It was argue by Mr. Barton that 7 1/2 per cent, interest was not good enough and that another partner received 9 per cent, on what he lent to the firm. But if the settlement arrived at was a bona fide one, and advantageous to the minor, it is no ground for impeaching it that greater advantage might possibly have been secured to the plaintiff. The plaintiff asks that the whole account be re-opened, that a fresh account be taken of whatever profits accrued to the business and that what may be found to be due on account of the assets of the deceased partner should be awarded to the plaintiff. It may or may not be that the business which was continued after the plaintiff's father's death brought in more profits than what would be represented by interest at 7 1/2 per cent. I am, however, satisfied that the suit instituted by the next friend of the plaintiff is not bona fide. He was fully cognizant of the settlement for all these years and never thought of questioning it; he received interest from time to time and that has not been denied by the learned Counsel for the plaintiff. In a case of this nature, even if we could hold that the settlement ought to be re opened, I should be unwilling to grant a decree for an account. Accounts for a number of years would have to be examined and in a business such as this it would be difficult to ascertain how much of the profits was due to the user of the deceased partner's assets and how much to the labour and skill of the defendants. It might very well be that if an account was taken---and it is sure to be very costly---the minor would be a loser and I have not been convinced that in a case such as this the Court would be bound to order an account at the instance of the plaintiff's next friend. The defendants were, I may mention, always willing to hand over the money that was in their hands and have been regularly paying the stipulated interest. The minor's next friend or the minor's mother has yet taken no steps for the appointment of a guardian. It seems to me an untenable position that, the settlement having been accepted and acted upon for so many years by the minor's mother, and his maternal grandfather and by the plaintiff's next friend himself, the next friend should now be allowed to turn round and say that it was unauthorised and, therefore, should be set aside, without even alleging that the settlement was not fair and bona fide or that it was liable to be opened on account of errors.

7. I would, therefore, set aside the decree passed by the learned Judge. There will be a decree instead for Rs. 16,000 and for interest at the rate of 7 1/2 per cent, for the months during which interest has not been paid. It is conceded that interest should cease from the date on which the money was deposited in Court, i.e., 11th February 1916. Interest at Rs. 100 a month will, therefore, be payable from 1st April 1915 to 11th February 1916.

8. As regards costs, we find that the defendants alleged that the plaintiff's mother had been appointed guardian. That plea they were unable to make good. On the other hand, the suit was clearly ill-advised and the responsibility for it lies with the plaintiff's next friend. The order will be that each party should bear his own costs throughout and the costs of the minor plaintiff be borne by his next friend.

Seshagiri Atyar, J.

9. I entirely agree, but I wish to say a very few words in addition to what has been said by the learned Officiating Chief Justice. It was conceded that those who acted on behalf of the minor were justified in seeking a settlement of accounts after the death of the minor's father. There is no allegation in the plaint that any undue advantage was taken of those that acted on behalf of the minor; and having regard to the fact that persons most interested in the welfare of the minor took part in the settlement, I am of opinion that the settlement should not be reopened. Upon another ground also I am of opinion that the decree of the learned Judge should be set aside. The amount settled by the father before his death, in February 1907, was Rs. 13,777. In the settlement in November of that year, six months after, a sum of nearly Rs. 2,000 was added to the settlement and the total of Rs. 16,000 was arrived at. Prima facie it looks as if that was the correct amount due to the minor on the date of the settlement. As I said before, inasmuch as there is no allegation, that this settlement was not come to after careful scrutiny of the accounts there is no reason to doubt that this sum did not represent the actual amount due to the minor on the date of the settlement. Granting for a moment that the mother of the minor and his maternal grandfather were not competent legally to settle the affairs of the minor, if I am correct in thinking that Rs 16,000 represented the amount actually due to the minor on the death of his father, I see no reason why plaintiff should be given a share in the profits of the concern which, by law, was dissolved on the death of the father of the minor.

10. Mr. Barton contended that an option should be given to the minor either to accept a share of the profits proportionate to the amount utilised by the surviving partners or to claim interest, whichever may be profitable to him. In my opinion there is no absolute Rule that a minor who is entitled to the assets of his deceased father in the partnership, is entitled to claim as of right, a share in the profits of the concern. There is nothing in the Indian Contract Act to that effect. In a case decided by the House of Lords, Knox v. Gye (1872) 5 H.L. 656, Lord Westbury points out that there is no fiduciary relation between the surviving partners and the legal representatives of the deceased partner. It is a case of pure contract in which a legal relationship is substituted on the death of the deceased partner. The learned Lord seems to suggest that the amount due to the deceased partner is a loan and nothing more. In Section 43 of the English Partnership Act of 1890, this is how the law is stated, 'Subject to any agreement between the partners, the amount due from the surviving or continuing partners to ah outgoing partner or the representatives of a deceased partner in respect of the outgoing or deceased partner's share, is a debt accruing at the date of the dissolution or death.' Sir Frederick Pollock in commenting upon this Section says 'The claim of the representatives against the surviving partner is in the nature of a simple contract debt and is subject to the Statute of Limitations, which runs from the deceased partner's death.' If we look at Section 241 of the Indian Contract Act, the same idea seems to underlie the provision in that Section. I am, therefore, of opinion that, even assuming that there was no legal settlement of accounts, if the sum of Rs. 16,000 represents what is due to the minor and if that was left in the hands of the surviving partners, it is only a debt upon which the minor will be entitled to a proper rate of interest, but in regard to which the minor is not entitled to claim, as of right, a share in the profits of the concern. As pointed oat by Wigram, V. C, in Willett v. Blanford. (1842) 1 Hare 253 : 6 Jur. 274. there are innumerable difficulties in the way of an account being taken as regards the share of the profits due on the amount left by the deceased partner and which has been utilised for purposes of the trade. The learned Vice Chancellor says 'The nature of the trade, the manner of carrying, it on, the capital employed, the state of the account between the partnership and the deceased partner at the time of his death, and the conduct of parties after his death, may materially affect the rights of the parties.' To these considerations may be added the fixing a value on the skill and labour employed by each of the partners in making the concern a successful one. Under these circumstances it must always be a very difficult process to find out to what exactly are the profits earned in the trade due, whether it is to the capital left by the deceased partner or to the capital brought in by the partners who continue the trade or whether these are negligible considerations as compared with other circumstances. I, therefore, think that the discretion must be in the Courts in such matters to see whether under all the circumstances it is not desirable to fix a rate of interest on the minor's share in the property. That, I understand is the principle acted on by the Judicial Committee in the case of Ahmed Musaji Saleji v. Hashim Ebrahim Saleji 28 Ind. Cas. 710 : 17 M.L.T. 312 : 17 Bom. L.R. 432 : (1915) M. W, N. 435. The learned Counsel who appeared for the respondent in that case said that the Courts below exercised their discretion properly in awarding a rate of interest instead of a share of the profits. And in another case to which Mr. Barton drew our attention, namely the case on the Original Side, Mr. Justice Wallis (as he then was) fixed a particular rate of interest instead of a share of the profits of the concern. Under these circumstances I am of opinion that where the amount due to a minor has been ascertained, the proper course in the interests of the minor would ordinarily be to fix a rate of interest and not to direct the accounts to be taken.

11. Considerable reliance was placed by the respondent upon illustration (f) to Section 88 of the Trusts Act. The first observation that occurs to me in connection with that illustration is that it goes further than the operative portion of the Section itself. Under the Section, there must be some act on the part of the person which is unauthorised and which aims at gaining an advantage to himself at the expense of the minor. The illustration is 'A and B are partners. A dies. B, instead of winding-up the affairs of the partnership, retains all the assets in the business. B must account to A's legal representative for the profits arising from A's share of the capital.' It may be that the illustration contemplates cases where the partner acts manifestly to his own advantage and with a view not to benefit the minor. But if the illustration, as it stands is regarded as laying down that, in every case where after the death of a partner the money is left outstanding in that partnership the legal representative of the deceased partner is entitled to a share of the profits, I am not prepared as at present advised to accept it as sound law, especially having regard to the observations of Lord Westbury already referred to, that there is no fiduciary relationship between the parties.

12. I have some little doubt as to whether in this case interest at 9 per cent, should not be given to the minor. I have, in mind, the fact that one of the partners who was allowed to bring in capital was himself given 9 per cent, interest. But having regard to the fact that the mother, and the maternal grandfather and two members of the community to which the arties belong, have considered that 7| per cent, would be a fair and reasonable rate of interest, I see no justification fcr varying that rate of interest and awarding 9 per cent. I, therefore, agree with the Officiating Chief Justice in the order proposed.Appeal allowed. V