Balmukand vs Kamla Wati and Ors

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 7 of 1962

Decision Date: 27 January, 1964

Coram: J.R. Mudholkar

In the matter of Balmukand versus Kamla Wati and others, the Supreme Court of India delivered a judgment on 27 January 1964, authored by Justice J.R. Mudholkar, who sat with Justice Subbarao K. The case was cited as 1964 AIR 1385 and 1964 SCR (6) 321, and later cited in other reports such as E 1978 SC 300 (8) and D 1980 SC 645 (5). The appellant, Balmukand, had entered into a contract with the karta of a joint Hindu family for the purchase of a fractional share of land that formed part of a large plot belonging to the family. The appellant paid earnest money to the karta, but the karta failed to execute the sale deed. Consequently, the appellant filed a suit seeking specific performance of the contract. The brothers of the karta, who were adult members of the joint family at the time the contract was made, were also impleaded as defendants. The defendants resisted the suit on the ground that the contract was not a legal necessity and did not confer any benefit upon the family. Both the trial court and the High Court accepted these contentions and dismissed the suit. Before this Court, the appellant argued that, even though the contract was not a legal necessity, it was nevertheless for the benefit of the family and that the karta, as a prudent manager, was entitled to enter into such a transaction for that purpose. The Court held that (i) a transaction need not be purely defensive to be considered beneficial to the family; the determination of benefit depends on the facts and circumstances of each case, and the Court must be satisfied from the material before it that the transaction actually conferred or was expected to confer benefit at the time it was entered into; (ii) no portion of joint family property may be alienated or agreed to be alienated by the manager on the claim of alleged benefit when the transaction is opposed by adult members of the family; and (iii) in the present case the plaintiff failed to raise the appropriate pleas and did not lead the necessary evidence. Because the grant of specific performance is a matter of discretion, the lower courts were justified in refusing to order it, and the appeal was dismissed. The judgment referred to several authorities, including Jagatnarain v. Mathura Das, I.L.R. 50 All. 969; Honooman Prasad Pandey v. Babooee Munraj Koonwaree, (1856) 6 Moo. I.A. 393; Sahu Ram Chandra v. Bhup Singh, I.L.R. 39 All. 437; Palaniappa Chetty v. Sreemath Daiyasikamony Pandara Sannadhi, 44 I.A. 147; and Sital Prasad Singh v. Ajablal Mander, I.L.R. 18 Pat. 306.

In this appeal the Court considered the case cited as A. V. Vasudevan and others, minors, reported in A.I.R. 1949 Madras 260. The matter arose under civil appellate jurisdiction as Civil Appeal number seven of 1962. The appeal challenged the judgment and decree dated 14 October 1957 issued by the Punjab High Court in revision filing number 219 of 1950. Counsel for the appellant was led by a senior advocate accompanied by junior counsel. Counsel for respondents numbered one through twelve appeared on behalf of those parties, while separate counsel represented respondents thirteen to fifteen. The judgment was delivered on 27 January 1964 by Justice Mudholkar.

The appellant sought specific performance of a contract for the sale of a three‑twentieths share of land situated in certain fields at Mauza Faizpur, Batala, Punjab. He had originally filed a suit in the Sub‑Judge First Class Court at Batala, which dismissed the suit in its entirety. On appeal, the Punjab High Court affirmed the dismissal of the specific‑performance claim but altered the trial court’s decree in one respect, ordering the defendants to return the earnest money that the appellant had paid when the sale contract was executed with a man named Pindidas. During the pendency of the High Court appeal, Pindidas died, and his legal representatives were substituted in his place. Dissatisfied with the refusal to grant specific performance, the appellant obtained a certificate from the High Court under article 133 of the Constitution and approached this Court. The factual matrix showed that the appellant owned a seventy‑nine‑twentieths share in several numbered Kasras recorded in the zamabandi of 1943‑44 at Mauza Faizpur. On 1 October 1943 he purchased a twenty‑three‑twentieths share from a person named Devisahai, thereby holding a total of seventeen‑twentieths of the land. The remaining three‑twentieths belonged to a joint Hindu family managed by Pindidas, whose brothers Haveliram Khemchand and Satyapal were also members. The appellant claimed to have paid Rs 175 per marla for the portion bought from Devisahai and, to consolidate his holdings, he approached Pindidas to acquire the family’s three‑twentieths share. Pindidas allegedly agreed to sell that share for Rs 250 per marla, and a contract was executed on 1 October 1945, with Rs 100 paid as earnest money. Because the family manager failed to execute a sale deed in the appellant’s favour, the appellant instituted the suit naming Pindidas and his brothers as defendants. All defendants resisted the suit. Pindidas, however, admitted that he had entered into a contract of sale with the appellant on 1 October 1945 and had received Rs 100 as earnest money, though he contended that the contract related to a different parcel of land and that he lacked authority to bind his brothers.

Pindidas acknowledged that he had entered into a contract of sale with the plaintiff on 1 October 1945 and that he had received Rs 100 as earnest money. However, he contended that the contract related to a different parcel of land and not to the land that formed the subject of the suit. He further asserted that he lacked authority to bind his brothers, who are designated as defendants 2 to 4 in the original suit and who now appear before the Court as respondents 13 to 15. The brothers, defendants 2 to 4, denied the existence of any such contract altogether. Even assuming that Pindidas was the karta of the joint Hindu family and that he had consented to sell the disputed share, they argued that the transaction could not bind them because the sale was neither necessary for the family nor for the benefit of the family. The trial courts below accepted the plaintiff’s claim that Pindidas had indeed entered into a contract with him for the sale of the three‑twentieths share of the family land that is the subject of the suit and that Pindidas had received Rs 100 as earnest money. Nonetheless, those courts held that the agreement did not bind the joint family, on the ground that there was no necessity for the sale and that the contract was not for the family’s benefit. It was not contested before the Court, as pointed out by counsel for the plaintiff, that the defendants are persons of considerable means and that there was no pressing necessity for them to sell their interest. The plaintiff’s counsel, however, maintained that the proposed sale was advantageous to the family because the defendants could not effectively utilise their fractional share in the land. By converting the share into cash, the family would obtain a practical advantage. He further highlighted that the market value of the land at the date of the transaction was Rs 175 per marla, whereas the plaintiff had agreed, under the contract, to purchase it at Rs 250 per marla, thereby providing the family with an additional gain. The essence of his argument was that a manager of a joint Hindu family possesses the authority to alienate family property not only for defensive purposes but also where circumstances are such that a prudent owner of property would willingly sell it for a consideration deemed adequate. To support this contention, he relied on three authorities. The first authority cited was Jagatnarain v Mathura Das, a decision of the Full Bench of the High Court, in which the meaning and implication of the expression “benefit of the estate” were examined with reference to transfers made by a manager of a joint Hindu family. The learned judges, in that decision, considered a large number of precedents, including Hanooman Persaud Pandey v Babooee Munraj Koonweree, Sahu Ram Chandra v Bhup Singh and Palaniappa Chetty v Sreemath Daivasikamony Pandra Sannadhi, and held that transactions justified on the principle of benefit to the estate are not confined solely to those that are of a defensive nature.

The Court observed that a transaction need not be exclusively of a defensive nature in order to be considered a benefit to the family estate. According to the High Court, a transaction may be deemed beneficial if, considering the circumstances known to the manager at the relevant time, a prudent owner of the same property would have entered into it, although the manager is required to exercise a degree of prudence that is somewhat greater than that expected of a sole owner. The High Court set out the factual background of the earlier case, stating that the adult managers of the family found it very inconvenient and prejudicial to the family’s interests to retain a piece of property situated eighteen or nineteen miles away from Bijnor, a location whose management they could not properly attend to. Consequently, they concluded that it was advantageous for the estate to sell that distant property and to purchase a more accessible one with the proceeds. The managers actually sold the property on very advantageous terms, and there was nothing on the record to suggest that the transaction would not have resulted in a profitable outcome. The judgment cited several authorities, including I.L.R. 50 All. 969, (1816) 6 Moo. I.A.393, I.L.R. 39 All 437, and 44 I.A.147. The Court affirmed that a transaction may be regarded as beneficial to the family even if it is not purely defensive, but stressed that the determination of what constitutes a benefit must depend on the specific facts of each case. In the Full Bench case, the two managers found the property difficult to manage, leading to apparent losses for the family; selling the property on advantageous terms and reinvesting the proceeds in a profitable manner was therefore clearly beneficial. In the present suit, however, the plaintiff’s pleading contains no allegation that Pindidas sold the property because of management difficulty or because the family was incurring losses by retaining it. Nor does the pleading indicate any intention to invest the sale proceeds in a profitable venture, nor does it suggest that the decision was based on considerations of prudence. The only assertion in the plaint is that the family’s fractional share in the land constituted a very small proportion of the total land held by the plaintiff at the time of the transaction. This small proportion was already the case before the plaintiff purchased the twenty‑three‑one‑twentieth share from Devisahai. The pleading further shows that there is no indication that the family’s position with respect to its share of the land was altered in any manner by the fact that the remaining seventeen‑twentieths interest in the land subsequently came to be owned

In the present suit the plaintiff could not be successful. The Court then referred to the decision in Sital Prasad Singh v. Ajablal Mander (1). That case examined the authority of a manager of a joint Hindu family to alienate a portion of the family’s property for the purpose of acquiring new property. The Court in that case applied the same test that it had applied in earlier authority, namely whether a prudent owner, acting in the ordinary course of management, would enter into the transaction in order to benefit the estate. The Court also accepted the interpretation advanced in the Allahabad case that the phrase “benefit of the estate” carries a broader meaning than a mere compulsion of necessity and is not confined to transactions of a strictly defensive character. While discussing the matter, Chief Justice Harries observed at page 311 that the karta of a joint Hindu family is only a manager and not an absolute owner, and that Hindu law, like other legal systems, imposes certain limitations on his power to alienate property owned by the joint family. He further explained that the law‑givers could not have intended to restrict the karta’s power to the extent that he would be barred from undertaking any action that could improve the family’s condition. Accordingly, the only reasonable limitation, according to the Chief Justice, is that the karta must act with prudence; prudence, he explained, entails caution as well as foresight and excludes hasty, reckless or arbitrary conduct. The Chief Justice also warned that a manager‑entered transaction should not be speculative. He added that, in exceptional circumstances, a court may uphold the alienation of a part of the joint family property by a karta for the acquisition of new property, for example where all adult members of the joint family, possessing the necessary information about the family’s means and requirements, are convinced that the proposed purchase serves the benefit of the estate. Those observations clarify that, when adult members exist, the decision to alienate must reflect the collective judgment of all adult family members, including the manager, rather than the manager’s solitary opinion. In the case before this Court, all of the brothers of Pindidas were adults at the time the contract was executed. The record contains no indication that they consented to the transaction, were consulted about it, or even were aware of it. Consequently, even if the Court were to accept the view expressed by the Chief Justice, that view would not aid the plaintiff because the factual circumstances differ from those contemplated by the Chief Justice. The other Judge who participated in the Sital Prasad Singh decision, Justice Manokarlal, arrived at substantially the same conclusion.

In this case, the Court referred to a third precedent, namely the decision reported as In the matter of A.T. Vasudevan & Ors., minors (A.I.R. 1949 Mad. 260). In that decision a single Judge of the Madras High Court held that the manager of a joint Hindu family possessed the authority to alienate joint family property when the manager was satisfied that the alienation would be clearly beneficial to the estate, even though no strict legal necessity for the transaction existed. The observation was made while the judge was dealing with an application filed under clause 17 of the Letters Patent. The applicant, Thiruvengada Mudaliar, sought appointment as guardian of the joint family property that included the interests of his five minor sons and also asked for approval to sell that property on the ground that the sale would be advantageous to the minor sons. At the time of the application, the petitioner, who acted as the family’s karta, also had two adult sons, a wife, and an unmarried daughter, all of whom were entitled to maintenance under the law. Because the application concerned the petitioner’s request for guardianship and sale approval, the Court indicated that the reasoning in that case was distinguishable from the present matter. Nevertheless, the learned Judge expressly stated that a family manager may sell joint family property if he is convinced that the transaction will benefit the family. In reaching that conclusion, the judge relied principally on the view articulated by Justice Venkata Subba Rao in the earlier case Sellappa v. Suppan (A.I.R. 1937 Mad. 496). In Sellappa the issue was whether a loan secured on a mortgage of joint family property for the purchase of a house could be binding on the family because the loan was purportedly for the family’s benefit. The judges there held that a transaction need not be of a defensive nature in order to be considered beneficial and thus capable of binding the family. However, they also observed that, based on the evidence before them, the particular transaction in Sellappa could not be established as being for the benefit of the family. The Court therefore clarified that for a transaction to be regarded as beneficial it does not have to be defensive, but the court must be satisfied, on the basis of the material before it, that the transaction actually conferred or was reasonably expected to confer a benefit on the family at the time it was entered into.

The present suit, however, did not contain any allegation that the agreement entered into by Pindidas was beneficial to the family at the time of its execution. Moreover, the adult members of the family had firmly opposed the plaintiff’s claim for specific performance, and it was evident that they would not have resisted if they had believed the transaction to be advantageous. It was possible, the Court noted, that the land intended for sale had appreciated in value by the time the suit was filed, which could explain the adult members’ opposition. The adult members also asserted their right to object to any alienation of family property by the manager on the basis of alleged benefit without first consulting them, and no evidence of such consultation was presented. In view of these facts, the Court held that the lower courts were correct in dismissing the suit for specific performance. The Court further observed that granting specific performance is a matter of discretion, and in circumstances such as these the discretion would be exercised in favour of refusing specific performance. While acknowledging that Pindidas himself was bound by the contract he had entered into, the Court affirmed that the plaintiff would have been entitled to the relief provided under section 15 of the Specific Relief Act had the transaction been proven to be beneficial to the family.

In this case the Court observed that the land which had originally been intended to be sold had risen in value by the time the present suit was instituted, and that the increase in value explained why the other members of the family were contesting the plaintiff’s claim. The Court further noted that the adult members of the family were fully within their rights to say that no part of the family property could be parted with or agreed to be parted with by the manager on the basis of an alleged benefit to the family unless the family members were consulted first. The Court pointed out that, as already stated, there was no allegation in the pleadings that any such consultation had taken place. In view of those circumstances the Court held that the courts below had been correct in dismissing the suit for specific performance. The Court added that granting specific performance is always a matter of judicial discretion and that, in a case of this kind, the discretion would be exercised by refusing specific performance. The Court recognized that Pindidas himself was bound by the contract which he had entered into and that the plaintiff would have been entitled to invoke the benefit of section 15 of the Specific Relief Act, which reads: “Where a party to a contract is unable to perform the whole of his part of it, and the part which must be left unperformed forms a considerable portion of the whole, or does not admit of compensation in money, he is not entitled to obtain a decree for specific performance. But the court may, at the suit of the other party, direct the party in default to perform specifically so much of his part of the contract as he can perform, provided that the plaintiff relinquishes all claim to further performance, and all right to compensation either for the deficiency, or for the loss or damage sustained by him through the default of the defendant.” However, the Court observed that in the matter before it there was no claim by the plaintiff that he was willing to pay the entire consideration in order to obtain a decree affecting only the interest of Pindidas in the property. On that basis the Court concluded that the appeal failed and ordered its dismissal with costs. Consequently the appeal was dismissed.