RAJAGOPALA AIYER Vs. ANKRAMAN CHETTIAR

JUDGEMENT

(1.) The appellant before us is the 3 defendant in the suit which was brought to enforce a mortgage bond. Exhibit A, dated the 20 May, 1920, executed in favour of the plaintiffs by the defendants Nos. 1 and 2 and by the 3 defendant's mother on his behalf as his guardian, he being then a minor. The plaintiffs who are the mortgagees under Ex. A, are the proprietors of four different firms which have their principal place of business at Madras. Their case is that each of the said firms had dealings with the firms of R. Rangaswami Aiyar & Sons which was carrying on business in Javali or cloths at Madras having also a branch of the same business at Madura. The plaintiffs say that for purposes of the trade of R Rangaswami Aiyar & Sons Hanumantha Aiyar who was the managing proprietor of the said business borrowed moneys from each of them from time to time and also purchased piece-goods from them and that in connection with his Madura branch, the said Hanumantha Aiyar also borrowed moneys from the 1 plaintiff for purchasing a house at Madura and making additions and improvements thereto to make it suitable for the carrying on of the business and also for the residence of his family therein. As a result of the aforesaid dealings the firm was indebted to all the four plaintiffs in the sum of about Rs. 25,000 at the time of Hanumantha Aiyar's death which took place at Madura about four days prior to the execution of the mortgage bond Ex. A. On hearing of Hanumantha Aiyar's death the representatives of the four firms went to Madura for the purpose of realising the amounts due to them from the firm of R. Rangaswami Aiyar & Sons. That firm was an ancestral trading firm which was started by the 3 defendant's grandfather, Rangaswami Aiyar, along with his two sons Hanumantha Aiyar and Ramaswami Aiyar. The father of the 3 defendant, Ramaswami Aiyar, died in 1909 and the business was thereafter continued by Rangaswami Aiyar and Hanumantha Aiyar. Rangaswami Aiyar died in 1912 and the business was thence forward conducted by Hanumantha Aiyar on behalf of himself and his minor nephew the 3 defendant. Hanumantha Aiyar had no son but left a widow who is the 2nd defendant in the suit. The 1 defendant was the sister's husband of Hanumantha Aiyar and he was managing the affairs of the business during the lifetime of Hanumantha Aiyar. The plaintiffs say that their representatives saw the 1 and 2nd defendants and the mother of the 3 defendant and pressed them for immediate payment of the amount due to their firms by R. Rangaswami Aiyar & Sons, The latter thereupon expressed their inability to comply with the plaintiffs demand for immediate payment and asked for time promising to discharge the debt in instalments out of the earnings of the firm and also offering as security a mortgage of the firm's properties. Thereupon an agreement for the liquidation of plaintiffs debts as per the terms set out in Ex. A, was entered into between the parties and the suit mortgage bond was executed by defendants Nos. 1 and 2 and the 3 defendant's mother as his guardian for the re-payment of Rs. 25,000 to all the plaintiffs jointly in the manner and subject to the terms provided therein. The defendants made some payments for interest due on the mortgage-bond but did not pay even a single instalment in respect of the principal amount. The suit was, therefore, brought for the recovery of the amount due on the bond by enforcing the mortgage security and also for a decree against defendants Nos. 1 and 2 personally. The 3 defendant was practically the only contesting defendant in the suit. Defendants Nos. 1 and 2 did not dispute the plaintiffs suit save as to the interest claimed, their plea on that point being that the stipulation in the mortgage bond as to interest was penal and, therefore, unenforceable. On behalf of the 3 defendant, his guardian for the suit denied the plaintiffs claim in toto. His case is, that the business of R Rangaswami Aiyar & Sons was an ancestral trading business of the family and that after the death of the 3 defendant's grandfather the only persons interested therein Were, 3 defendant's paternal uncle Haunmantha Aiyar and the 3 defendant and that on the death of Hanumantha Aiyar, the 3rd defendant became exclusively entitled to the business and its assets and that the 2nd defendant had only a right to maintenance out of the assets of the firm. The 1 defendant was only an employee of the firm under Hanumantha Aiyar and had no interest in the partnership but with fraudulent intention of securing to himself an interest in the said business, he took advantage of the unfortunate position in which the 3 defendant's mother was then placed and got her to execute the suit bond on the false representation that she was only executing a power-of-attorney in his favour in order to enable him to carry on the business of the firm on, behalf of the minor, 3 defendant. The mortgage bond contains a false and fraudulant recital that the 1 defendant was also interested in the business of R. Rangaswami Aiyar & Sons and its assets as one of its partners. The plaintiffs for their own purpose colluded with the 1 defendant in the fraud he practised on the 3 defendant's guardian. The suit mortgage was, therefore not binding on the 3 defendant. The 3rd defendant's guardian also denied that any of the liabilities recited in the mortgage bond were in fact contracted by Hanumantha Aiyar for the purposes of the firm or that there was any necessity for mortgaging the 3 defendant's (minor s) properties, as the debts even if true, and binding could have been discharged out of the liquid assets of the firm. He also pleaded that the rate of interest stipulated in the bond was penal and unenforceable.

(2.) The issues raised in the case relate to the above contentions put forward on behalf of the 3 defendant. The learned Subordinate Judge has, after a careful consideration of the evidence, found all the issues in plaintiffs favour and given a decree for the plaintiffs as prayed.

(3.) At the hearing of the appeal before us, Mr. G. Krishnaswami Aiyar, the learned Counsel for the appellant, contested all those findings on the ground that they were erroneous and not supported by the evidence in the case. We were taken through the material evidence bearing on all those questions.