Kartha - Powers and Liabilities

 Powers Of Karta

When we enumerate the powers of karta, the real importance of his legal position comes into clear relief. His powers are vast and limitations are few. The ambit of his powers can be considered under two heads: - (a) power of alienation of joint family property, (b) other powers. In the former case, his powers are limited since a karta can alienate in exceptional cases. In the latter case his powers are large, almost absolute.

First we will discuss the other powers. 

Other powers 

# Powers of management: - As the head of the family, karta’s powers of management are almost absolute. He may mange the property of the family, the family affairs, the business the way he likes, he may mismanage also, nobody can question his mismanagement. He is not liable for positive failures. He may discriminate between the members of the family. But he cannot deny maintenance /use/occupation of property to any coparcener. The ever-hanging sword of partition is a great check on his absolute powers. Probably, the more effective check is the affection and the natural concern that he has for the members of the family and the complete faith and confidence that members repose in him.

# Right to income: - It is the natural consequence of the joint family system that the whole of the income of the joint family property, whosoever may collect them, a coparcener, agent or a servant, must be handled over to the karta .It is for the karta to allot funds to the members and look after their needs and requirements. 

The income given to the karta is an expenditure incurred in the interest of the family.

Jugal Kishore Baldeo Sahai v. CIT (1967) 63 ITR 238

In the present case, both the members of the Hindu undivided family, who were the only persons competent to enter into an agreement on its behalf, considered it appropriate that the karta should be paid salary at the rate of Rs. 500/- per month for looking after its interest in the partnership in which it had a substantial interest because its karta was a partner therein as its representative, and entered into an agreement to pay salary to him for the services rendered to the family. The ratio of the above decision is, therefore, applicable to the present case. Accordingly, the salary paid to him has to be held to be an expenditure incurred in the interest of the family .The expenditure having been incurred under a valid agreement, bonafide, and in the interest of and wholly and exclusively for the purpose of the business of the Hindu undivided family, is allowable as a deductible expenditure under section 37(1) of the Indian Income Tax Act, 1922 in computing the income of the Hindu undivided family.

# Right to representation: - The karta of a joint family represents the family in all matters- legal, social, religious. He acts on behalf of the family and such acts are binding on the family. The joint family has no corporate existence; it acts in all matters through its karta. The karta can enter into any transaction on behalf of the family and that would be binding on the joint family. 

Dr. Gopal v. Trimbak AIR 1953 Nag 195

In this case, it was held that a manager/karta can contract debts for carrying on a family business/ thereby render the whole family property including the shares of the other family members liable for the debt. Merely because one of the members of the joint family also joins him, it does not alter his position as a karta.

# Power of Compromise: - The karta has power to compromise all disputes relating to family property or their management. He can also compromise family debts and other transactions. However, if his act of compromise is not bonafide, it can be challenged in a partition. He can also compromise a suit pending in the court and will be binding on all the members, though a minor coparcener may take advantage of O.32, Rule 7 C.P.C., which lays down that in case one of the parties to the suit is a minor the compromise must be approved by the court.

# Power to refer a dispute to arbitration: - The karta has power to refer any dispute to arbitration and the award of the arbitrators will be binding on the joint family if valid in other respects.

# Karta’s power to contract debts: - The karta has an implied authority to contract debts and pledge the credit of the family for ordinary purpose of family business. Such debts incurred in the ordinary course of business are binding on the entire family. The karta of a non-business joint family also has the power to contract debts for family purposes. When a creditor seeks to make the entire joint family liable for such debts, it is necessary for him to prove that the loan was taken for family purposes, or in the ordinary course of business or that he made proper and bona fide enquiries as to the existence of need. The expression family purpose has almost the same meaning as legal necessity, benefit of estate, or performance of indispensable and pious duties.

# Loan on Promissory note: - When the karta of a joint family takes a loan or executes a promissory note for family purposes or for family business, the other members of the family may be sued on the note itself even if they are not parties to the note. Their liability is limited to the share in the joint family property, though the karta is personally liable on the note.

# Power to enter into contracts: - The karta has the power to enter into contracts and such contracts are binding on the family. It is also now settled that a contract, otherwise specifically enforceable, is also specifically enforceable against the family.

Power of alienation 

Although no individual coparcener, including the karta has any power to dispose of the joint family property without the consent of all others, the Dharma Shastra recognizes it. That in certain circumstances any member has the power to alienate the joint family property. The Mitakshara is explicit on the matter. According to Vijnaneshwara: -

....even one person who is capable may conclude a gift, hypothecation or sale of immovable property, if a calamity (apatkale) affecting the whole family requires it, or the support of the family (kutumbarthe) render it necessary, or indispensable duties (dharmamarthe), such as obsequies of the father or the like, made it unavoidable.

The formulation of Vijnaneshwara has undergone modification in two respects: - 

# The power cannot be exercised by any member except the karta.

# The joint family property can only be alienated for three purposes: -

(a) Apatkale (Legal Necessity)

(b) Kutumbarthe (Benefit of Estate)

(c) Dharmamarthe (Religious obligations)

(a) Legal Necessity: - It cannot be defined precisely. The cases of legal necessity can be so numerous and varied that it is impossible to reduce them into water –tight compartments. Loosely speaking it includes all those things, which are deemed necessary for the members of the family. What need to be shown is that the property was alienated for the satisfaction of a need. The term is to be interpreted with due regard to the modern life. Where the necessity is partial, i.e. where the money required to meet the necessity is less than the amount raised by the alienation, then also it is justified for legal necessity.

Dev Kishan v. Ram Kishan AIR 2002 Raj 370

Facts:- Ram Kishan , the plaintiff filed a suit against appellants, defendants. Plaintiffs and defendants are members of a Joint Hindu Family. Defendant no.2 is the karta, who is under the influence of defendant no.1 has sold and mortgaged the property for illegal and immoral purposes as it was for the marriage of minor daughters Vimla and Pushpa. The defendants contention was that he took the loan for legal necessity.

Judgment: - The debt was used for an unlawful purpose. Since it was in contravention of Child Marriage Restraint Act, 1929, therefore it cannot be called as lawful alienation.

(b) Benefit of Estate: - Broadly speaking, benefit of estate means anything, which is done for the benefit of the joint family property. There are two views as to it. One view is that only construction, which is of defensive character, can be a benefit of estate. This view seems to be no longer valid. The other view is that anything done which is of positive benefit, will amount to benefit of estate. The test is that anything which a prudent person can do in respect of his own property.

(c) Indispensable Duties: - This term implies performance of those acts, which are religious, pious, or charitable.

Vijnaneshwara gave one instance of Dharmamarthe, viz., obsequies of the father and added “or the like”. It is clear that this expression includes all other indispensable duties such as sradha, upananyana, and performance of other necessary sanskars. For the discharge of indispensable duties the karta may even alienate the entire property.

A karta can even alienate a portion of the family property for charitable/pious purposes. However, in this case, the powers of the karta are limited i.e. he can alienate a small portion of the joint family property, whether movable/immovable.

Alienation Is Voidable

It may be taken as a well-settled law, that alienation made by karta without legal necessity / benefit of estate/ discharge of indispensable duties is not void but merely voidable at the instance of any coparcener.

In CIT v Gangadhar Sikaria Family Trust (1983) 142 ITR 677, the Gauhati High Court was called upon to decide whether the Income-tax Officer can challenge the validity of an alienation by the karta of a Hindu undivided family. The High Court held that under the Hindu Law, the karta of a Hindu undivided family has an unfettered right to alienate the joint family property for legal necessity and for the benefit of the estate or the family. It was further held that even if a transfer by the karta were not for legal necessity or for the benefit of the estate, but if it is done with the consent of the coparceners, it would be only voidable and not void ab-initio. It is clear that alienation by the karta or manager of a joint family is voidable, but not void. Hence, a third party cannot repudiate it, except in cases where there is a suggestion that it was in fraud on creditors.

Separate Property

It is now settled that the karta can alienate the joint family property with the consent of the coparceners even if none of the above exceptional cases exist. Alienation without the consent of the coparcener, which is not for legal necessity, is void. 

It is well established that there is no presumption under Hindu Law that a business standing in the name of any member of the joint family is a joint family business even if that member is the manager of the joint family. Unless it could be shown that the business in the hands of the coparcener grew up with the assistance of the joint family property or joint family funds or that the earnings of the business were blender with the joint family estate, the business remains free and separate.

Law as enumerated under Article 222 of Mulla Hindu Law is well settled that a Hindu, even if be joint, may possess separate property. Such property belongs exclusively to him. No other member of the coparcenary, not even his male issue, acquires any interest in it by birth, and on his death intestate, it passes by succession to his heirs, and not by survivorship to the surviving coparceners.

P.S. Sairam v. P.S. Ramarao Pisey AIR 2004 SC 1619

Facts: - P. Eswar Rao had 3 marriages. From his second marriage he had 2 sons: - P. Sadashiv Rao (defendant no.1 he is the karta of the family) and P.E. Panduranga Rao. Sadashiv Rao had 2 wives. Godavari Bai was his first wife. She had 2 sons one of them is the plaintiff, P.S. Ramarao Pissey. Plaintiffs case is that defendant no.1 started a business from the income and property of joint family in the name of M/s Pissey and sons. The contention of the defendants is that the property was his self-acquisition, which he acquired by raising loans from the market.

Judgment: - It was held that it was defendant no.1’s separate property. 

The karta’s powers and liabilities and the karta’s power of alienation of property under the Dayabhaga school are same as that of the Mitakshara karta. The main difference between the two schools is that in case of Dayabhaga the karta must render full accounts at all times, whenever required to do so by the coparcener, while in case of Mitakshara the karta is required to render accounts only at the time of partition or unless there are charges against him for fraud/misappropriation.

Karta’s Liabilities

Karta’s liabilities are numerous and multifarious. 

# Maintenance: - In a joint Hindu family, the right of maintenance of all the coparceners out of the joint family funds is an inherent right and an essential quality of the coparcenery. As Mayne puts it: Those who would be entitled to share the bulk of property are entitled to have all their necessary expenses paid out of its income. Every coparcener, from the head of the family to the junior most members, is entitled to maintenance. A Karta is responsible to maintain all members of the family, coparceners and others. If he improperly excludes any member from maintenance or does not properly maintain them, he can be sued for maintenance as well as for arrears of maintenance.

# Marriage: - He is also responsible for the marriage of all unmarried members. This responsibility is particularly emphasized in respect of daughters. Marriage of a daughter is considered as a sacrosanct duty under Hindu law. Marriage expenses are defrayed out of joint family funds.

Chandra Kishore v. Nanak Chand AIR 1975 Del 175

In this case it was held that Karta is responsible for managing the expenses of the marriage of the daughter from the joint family estate. And in case marriage expenses are met from outside they are to be reimbursed from the joint family funds.

# Accounts at the time of Partition: - Partition means bringing the joint status to an end. On partition, the family ceases to be a joint family. Under the Mitakshara law, partition means two things: - 

(a) Severance of status /interest, and

(b) Actual division of property in accordance with the shares so specified, known as partition by metes and bounds.

The former is a matter of individual decision, the desire to sever himself and enjoy the unspecified and undefined share separately from others while the latter is a resultant consequent of his declaration of intention to sever but which is essentially a bilateral action.

Taking of accounts means an enquiry into the joint family assets. It means preparing an inventory of all the items of the joint family property.

The Mitakshara Karta is not liable to accounts and no coparcener can even at the time of partition, call upon the karta to account his past dealings with the joint family property unless charges of fraud, misappropriation/conversion are made against him.

Ghuia Devi v. Shyamlal Mandal AIR 1974 Pat 68

Facts: - Gokul Mandal was the common ancestor of the family, he had 2 sons: - Gobardhan and Ghoghan. After Gokul’s death Gobardhan was the karta of the family. Shyamlal and Kisan are the sons of Gobardhan. Shyamlal, defendant no.1 is the husband of the plaintiff. In 1951, partition took place between two branches: Shyamlal and Ghoghan. After partition, Shyamlal began to act as karta of the family consisting of the members of Gobardhan’s branch. Appellant is a pardanashin lady. Shyamlal took advantage of her position and misappropriation of property and its income and as a result of it a suit was filed. Plea of appellant was that their client was entitled to a decree for accounts. Their plea was rejected because they could adduce no evidence.

Judgment: - In the suits for partition of a Joint Hindu Family property the manager/karta can only be made liable for revaluation of account if there is a proof of misappropriation /fraud and improper conversion of joint family assets and property. It was said that in the absence of such a proof a coparcener seeking partition is not entitled to require the manager to account for his past dealings with the joint family property.

However, when a coparcener suing for partition is entirely excluded from the enjoyment of property he can ask for accounts.

After the severance of status has taken place, the karta is bound to render accounts of all expenditure and income in the same manner as a trustee or agent is bound to render accounts. This means that from the date of severance of status, the karta is bound to account for all mesne profits.

# Representation: - The karta represents the family. He is its sole representative vis-a vis the government and all outsiders and in that capacity he has to discharge many responsibilities and liabilities on behalf of the family. He has to pay taxes and other dues on behalf of the family and he can be sued for all his dealings on behalf of the family with the outsiders.