Case: Sri Chandre Prabhuji Jain Temple And Ors Vs. Harikrishna And Another

1. One Gopalakrishna Raju (hereinafter called Raju) died in Madras an or about November 13, 1941, leaving behind him his widow Manorama, one minor son and two minor daughters. On March 25, 1941, Raju had executed a will whereby he appointed Manorama the executor of the will and the guardian of his minor son and. daughters and bequeathed all his properties to the minor son with directions as regards the maintenance and marriage of his daughters. On June 7, 1948, Manorama mortgaged certain properties to raise a loan of Rs. 7,000/- for the purpose of meeting the marriage expenses of her elder daughter. Thereafter, she filed an application under Sections 7 and 10 ofthe Guardians and Wards Act, 1890, hereinafter called the Act, on August 26, 1943, before the High Court of Madras to appoint her as the guardian of her minor children. In that petition she did not disclose that Raju died after executing a will, but said that Raju died leaving two houses Nos. 18 and 18A in Egmore, Madras and that she was the owner of one half of the houses and that her minor son was the owner of the other half. She also said that no guardian had been appointed of the person or the property of the minors. Along with the petition for appointing her as guardian, she also filed an application seeking permission of the court to raise a loan of Rs. 7,000/- by mortgaging the two houses. On September 9, 1948, the Court passed an order appointing Manorama as the guardian of the person and property of the minor son and daughter and, by another order, granted her permission to raise a loan of Rs. 7,000/- by mortgaging the two houses. On the basis of these orders, she borrowed a sum of Rs. 7,000/- on September 24, 1948, by mortgaging the two houses. Thereafter, she filed another application on January lg. 1950, seeking permission of the High Court to raise a loan of Rs. 40,000/- on the security of the two houses. On January 23, 1950, the application was allowed under S. 29 of the Act permitting her to raise a loan of Rs. 30,000/- on the security of the two houses belonging to the minor. On the strength of this order, Manorama borrowed on March 4, 1950, a sum of Rs. 30,000/- from the trustees of Shri Chandra Prabhuji Jain Temple, the appellants before this Court, by executing a mortgage of the two houses. She again applied on April 24, 1950, to the Court for raising a further loan of Rs. 15,000/- on the security of these two houses but sanction was accorded to raise a loan of only Rs. 10,000/-. On the basis of this order she borrowed a further sum of Rs. 10,000/from the appellants by executing a mortgage on May 31, 1950, of the same properties. Manorama filed yet another application praying for permission to sell one of the houses with a view to enable her to discharge the amount due to the appellants under the two mortgages. The permission was granted and the Indian Bank Limited purchased one of the house properties for a sum of Rs 41,500/-. It would appear that subsequent to the execution of the sale, the bank came to know that Raju had executed a will. So the bank applied to the High Court to have the sale set aside. This was done. When the existence of the will executed by Raju was brought to the notice of the Court, Krishnaswami Nayudu, 1 directed the Administrator-General to take immediate possession of the estate of Raju and to apply for Letters of Administration. The Administrator-General obtained Letters of Administration and took possession of the estate. In the course of the administration, the Administrator-General, after obtaining the sanction of the Court, put up for sale one of the houses in question. The Indian Bank purchased it for Rs. 39,200/-. The sale proceeds are being retained by the Administrator-General2. The appellants filed the suit on the original side of the High Court out of which this appeal arises, to recover the money due under the two mortgages executed in favour of the appellants by Manorama as guardian3. The respondents, namely, the Administrator-General and the minor son, contended that Manorama had no authority to execute the mortgages and that she obtained the sanctions to execute the mortgages by practising fraud upon the court. They also contended that the appellants had not acted with due care, that the sanctions to mortgage given by the court were only prima facie evidence that the transactions were beneficial to the minors but that they would not cure any inherent defect that existed in the transactions, that the enquiry conducted by a court in granting sanction was of a summary character. and that as the existence of the will has not been brought to the notice of the court, the sanctions to raise the loans were invalid and did not bind the minor4. Balakrishna Ayyar, J. who tried the suit held that Manorama deliberately suppressed the execution of the will by Raju and therefore the orders authorising her to raise the amounts by mortgaging the properties of the 2nd respondent were obtained by fraud. The learned Judge, however, held that since the orders were only voidable and as the appellants were not parties to the fraud and as they were not required to go behind the orders, the appellants were entitled to recover the amount from the properties mortgaged and passed a preliminary decree5. Against this decree the respondents appealed and the appeal was referred to a Full Bench as there was conflict of opinion on the question whether an order under S. 31 (2) of the Act granting leave to a Guardian for alienating the property of the ward was conclusive proof that the alienation made in pursuance thereof was supported by necessity or benefit of the minor6. The Full Bench held that an order under Section 31 (2) of the Act can be relied on by an alienee as a substitute for an honest enquiry to be made by him: but that it will be open to the minor challenging the alienation to show that the alienee was nut on notice at the time of the alienation of matters ,which would show the defects in. the transaction or that the alienee did not act bona fide. It also held that where there is no evidence to show that there existed circumstances exciting suspiciion as to the way in which an order under S. 31 (2) was obtained, the alienee would be entitled to rely on it to support his title but that an order under S. 31 (2) cannot be treated always as conclusive as to the existence of necessity or benefit and that even as to the sufficiency of the enquiry to be made by the alienee. it would be competent for the minor to prove that the alienee did have sufficient reason not to rest on the mere order of the court. The Court said further that if the minor proves that the alienee knew more or did not himself rely on the order but made independent enquiries- the onus being on the minor to prove it- the order of the court will not afford conclusive evidence on the question of enquiry. However, if the alienee is not a party to any fraud and has no knowledge of any fraud, the mere fact that the guardian was guilty thereof will not disentitle him to rely on the order of the-court as proving an honest enquiry by him. The court further found that the orders of sanction were valid even though they were mace under S. 31 (2) of the Act notwithstanding the fact that Manorama was appointed guardian under the will of her husband. The further finding of the court was that the mortgages could be enforced only against one-half of the mortgaged properties as Manorama was appointed guardian only in respect of that half. The court was of the view that the sanctions to execute the mortgages in respect of the two properties were only in respect of one-half share therein. The Court, therefore, passed a decree for recovery of the amounts from one-half of the properties mortgaged7. It is against this decree that this appeal by certificate has been preferred.

Court's reasoning:
19A. It is no doubt true that the respondents cannot be allowed to impugn the decree passed by the High Court in favour of the appellants as they did not file any appeal from that decree. But we think that there is no reason why they should not be allowed to urge the plea that the orders of sanction were invalid when the appellants want not only to maintain the decree passed by the High Court but also to get a decree charging the entire properties.In other words, the bar against urging the plea of the invalidity of the orders of sanction would apply only if the respondents seek to impugn the decree already obtains d by the appellants but not when the appellants seek to obtain further reliefs in the appeal on the basis of the orders. In such a case we are not aware of any rule of law which would preclude the respondents from urging the plea21.The position that emerges from this discussion is: under-the will Manorama had no power to alienate the properties. As the existence of the will and the curb on her powers of alienation were not disclosed to the court when she applied for sanction and as the court did not by order in writing remove the fetters on her power of alienation, the sanctions cannot be regarded as having been obtained under Section 28; nor could the sanctions, as they were given under Section 31 (2) on the applications filed under Section 29, be regarded as valid, as Section 29 has no application when there is a will appointing a person as guardianWe think that there is no reason why, when in defence to the claim by the appellants for a decree charging the entire interest in the properties, in the appeal, the respondents should not be allowed to show that the orders of sanction were invalid notwithstanding the fact that they were not set aside in a suit instituted by the 2nd respondent. If the court were to refuse to pass a decree allowing the appellants to recover the money on the rest of the minors interest in the properties, the basis of that refusal would be on a ground destructive of the decree passed by the High Court. In other words, the High Court granted the decree on the basis that the orders of sanction for mortgaging the properties were valid. If we are to refuse to pass a decree for recovery of the mortgage money from the entire interest of the minor in these properties, on the ground that the orders sanctioning the mortgages were invalid, that would be contradictory to the finding of the High Court on the basis of which it passed the decree. Order 41, rule 33 of the Civil Procedure Code clothes the appellate court with the power to pass any decree or order which the trial court ought to have passed or made and to pass or make such further or other decree or order as the Justice of the case may require24. Though the respondents are entitled to avoid the orders of sanction in defence without the necessity of filing a suit, it is dust and proper that as a condition for doing so, they must give restitution. The High Courts in this country have taken the view, and we think rightly that as condition for setting aside a disposal of immovable property made in contravention of Sec. 28 or Sec. 29 which is voidable under Sec. 30, it is just that there must be restitution of the benefits received25. In this view, we do not think it necessary to express any opinion on the correctness or otherwise of the view of the High Court on the nature and effect of an order passed under Section 31(2). Suffice it to say that different views have been expressed by the High Courts.