Hindu Joint Family

In Hindu social system, Dharmasastras do not separate the spiritual from the secular,
therefore, in the grasthasrama a person is given the training to lead a complete and
meaningful life for the benefit and welfare of those who left and those who are present and
those who will be born. It is a unique phenomenon of Hindu philosophy that the Hindu family
has been thought of as one of the most important institutions because all other institutions
like brahmacharya, vanaprastha and sanyasha depend on it. Hence, the importance of the
family is advocated in the Dharmasastras.

Formation and Duration of Hindu Joint Family Business:

The Hindu joint family exists as a result of sapinda bonds between its members (Gopal
[1958] 1964, 526). Sapinda bonds are formed as a result of birth, adoption, or marriage and
are necessary for the existence of the joint family.1 There is no limit to the number of
coparceners, who are heirs inheriting an undivided interest in an estate2 that may be
included in a Hindu joint family business (Gopal [1958] 1964, 526). The Hindu joint family
business is an appendage of the Hindu joint family and is governed by the same set of rules
that apply to other assets held jointly by members of the Hindu joint family (Gopal [1958]
1964, 554). There is also no limitation on the duration of a Hindu joint family business: its
existence is not contingent upon the life of a particular member of the joint family and it may
continue to exist indefinitely (Gopal [1958] 1964, 526).3 A Hindu joint family may only
cease to exist if it is partitioned, or if it there are no living members who may add new
members to it (Gopal [1958] 1964, 526-527).

Participants in the Hindu Joint Family Business

All coparceners, including minors, are members of the Hindu joint family business. Females
and males who are not coparceners have the same rights to the Hindu joint family business as
they do to other property of a Hindu joint family (Gopal [1958] 1964, 554-555). Outsiders
may be brought into the Hindu joint family business via a separate partnership agreement
(Gopal [1958] 1964, 556).

The shares of the coparceners in a Hindu joint family business are not fixed proportions.
Instead, the share of each coparcener is contingent upon the total number of coparceners and
may thus fluctuate according to births, deaths, and partitions (Gopal [1958] 1964, 554).

Powers and Responsibilities of the Karta

The Hindu joint family business is headed by the karta or eldest adult male coparcener.
The karta has the considerable authority to make decisions for the benefit of the Hindu joint
family business. He has the power to do the following:

1
2
The Readers Digest Great Encyclopedic Dictionary, s.v. coparcener
3
Borrow money, pledge family property and credit, authorize the means of raising additional
capital for the family business, sue to enforce contracts, and alienate portions of family
property (Cornish 1937, 45-46).

The karta does not need explicit approval from other members of the joint family for taking
any of the abovementioned actions. The other members of the Hindu joint family business
are not entitled to demand accounts from the karta and may not hold him liable for gross
negligence or mismanagement (Gopal [1958] 1964, 557). Hindu law assumes that other
members of the joint family give implicit approval to the kartas actions unless one of them
specifically calls for a partition (Cowell 1895, 10).

However, the karta uses family funds to participate in business activities outside of the
familys ancestral business, he must obtain approval of other members of the Hindu joint
family (Gopal [1958] 1964, 557). For example, the karta of a Hindu joint family engaged in
the retail of clothing may not use the familys funds to start a dairy plant without the approval
of other members of the joint family.

The karta and other members of a Hindu joint family business also have the right to alienate
family funds for family necessity (Cornish 1937, 47-48; Cowell 1895, 10). This will be
discussed in greater depth further below.

The karta may also assign duties and tasks to other members of the joint family. He may
voluntarily relinquish his position and appoint a junior member of the joint family to this
position (Gopal [1958] 1964, 555).

Joint Consumption

The profits from a Hindu joint family business become jointly held property of the family
(Cornish 1937, 41) and may be consumed by other members of the family. Hindu law does
not have formal rules in regards to dealing with members who engage in free riding.

Liability and Debts

The liability of the karta is unlimited. The liability of other coparceners is limited to the size
of their share in the family business (Anant and Mitra 1998, 5). The karta is responsible for
his share of the joint family business but property held by him individually may be taken in
order to cover his liability. The son and grandson of the karta may also be held liable for
both business and personal debts not paid by the karta during his lifetime. Some exceptions
apply to this rule. Firstly, a son of the karta who partitions away his share of the joint family
property before the liability was incurred will not be responsible for this liability. Secondly,
if the karta accumulates debts as a result of expenditure on vices or acts considered immoral
by Hinduism, such as gambling, then his sons will not incur liability (Cornish 1937, 51-57;
Cowell 1895, 25-31;Gopal [1958] 1964, 548-555).

Coparceners who are not descendants of the karta are responsible for debts contracted by the
karta for running the joint family business. However, they are not responsible for personal
debts of the karta. The liability of other coparceners in the Hindu joint family business is
limited to their share of business and does not extend to their separately held property (Gopal
[1958] 1964, 555).

Use of Business Assets for Family Necessity

Assets of the joint family may be used by members for purposes of family necessity. The
term family necessity encompasses avoidance of calamities affecting the whole family,
unavoidable duties, and actions necessary to support the family (Cornish 1937, 46). Some
examples of this include use of funds for the dowry for marriage female members of the
family, legal defense of a family member, and performance of funeral rites for a family
member (Cornish 1937, 48).

There is no clear demarcation in Hindu law between the assets of the familys business and
other assets held jointly by the family (Gopal [1958] 1964, 555). Furthermore, there are no
formal rules in Hindu law to prevent members of the joint family from exploiting the family
business funds for personal purposes. We will discuss the means by which the Hindu joint
family prevents misuse of business funds further below.

From the brief discussion above, we can see that the Hindu joint family possesses two
characteristics in common with modern corporations. First, the Hindu joint family is a
durable institution. Its existence is not contingent upon the existence of any particular
member and it may only dissolved under special circumstances. A second similarity between
the Hindu joint family and the modern corporation is that both may branch out their business
activities into new areas.

These two similarities acquire crucial importance because an individual using the Hindu joint
family for business would have the experience and the skill set required for operating in an
institution that is durable and can branch out into different types of businesses.

The Impact of Hindu Inheritance System on Capital Accumulation in Families

It has been acknowledged that the inheritance laws of Hinduism allowed for wealth to be held
collectively by a joint family for long durations and encouraged capital accumulation (Bagchi
1985, 26-28; 1999, 50; Leonard 1981, 197). Hindu inheritance law is divided into two
branches: the Mitakshara and Dayabagha. We concern ourselves with the former because it
used throughout South Asia, while the latter is restricted to the province of Bengal. As a
consequence, wealthy Hindu families could hold on to and augment their stock of capital
over the course of many generations.

We will now examine the Hindu and Muslim inheritance codes in greater detail in order to
get a deeper understanding of the process by which wealthy Hindu families were able to
accumulate capital. In order to do so must the nature of the Hindu joint family must be
investigated.

The Hindu Joint Family

A Hindu joint family consists of the male ancestor with his lineal descendants in the male
line, along with the unmarried daughters, wives, and widows of the ancestor and his
descendants. The existence of this male ancestor is not necessary: the joint family may be
composed solely of his descendants. The tie binding members of the joint family is known as
the sapinda, which may arise as a result of birth, adoption, or marriage. Sapinda relationships
are necessary for the formation of the joint family. There is no limit to the size of a joint
family. This number of members may change due to births, adoptions, marriages, deaths,

partitions, and severance of ties. A Hindu joint family continues to exist indefinitely, unless
it is partitioned, or if it has no living members who can add another member to it (Gopal
[1958] 1964, 526-527).

Property in Hindu joint families is classified into two broad categories: joint property and
separate property. Joint property is held collectively by the family. It is divided into two
categories: ancestral property and non-ancestral property.

Ancestral property can only be obtained by two means: inheritance and partition, while
property gained through other means is not considered ancestral. Therefore, the profits from
a business owned by the joint family would not be considered ancestral property since they
were not obtained via inheritance or partition.

Ancestral property is further divided into two sub-categories: unobstructed heritage and
obstructed heritage. The male members of the family acquire rights to the former by virtue of
birth, while rights to the latter are acquired by male members as a result of the death of the
last male owner. An example of obstructed heritage would be the individual property of a
sonless uncle. This property may go to his nephews provided that he does not have a son.
The presence of a son would obstruct the passage of this property to his nephews (Cornish
1937, 36-39; Gopalakrishnan 1959, 88-91).

Separate property refers to property that is held exclusively by a particular individual. Other
members of the joint family do not have rights to this property. Separate property has a
tendency to become joint property over time: unless the possessor of separate property
disposes of it as such upon his death, it will enter the common pool and be classified as joint
property (Cornish 1937, 36).

How is the distinction between joint and separate property made? Two principles play roles.
The first is the presumption of joint-ness. Property is assumed to be joint property, unless
explicitly stated otherwise. Property acquired by members of the joint family and gifts given
by strangers to members of the joint family are assumed to be joint family property. The
second principle involves the source of origin of the funds for acquiring assets. If joint
family funds were used to acquire particular assets, then those assets are included in joint
family property. On the other hand, if the funds used to acquire assets have their origin in
separate property then those assets will not automatically become joint family property
(Cornish 1937, 40-41). Thus it can be seen that wealth tends remain in the common pool
unless other forces act upon it.
An example of an event that would lead to the dilution of the common pool is the partitioning
of the joint family. Partitions typically occur during three occasions:

The male head of the family can call for partitioning of the joint family property; one of the
sons may request it; and after the death of the father (Cowell 1895, 41-42).

In the event of a partition, brothers must receive equal shares (Cornish 1937, 63-64). It is
very important to note that partitions are frowned upon by the general society and a familys
reputation may suffer as a result of a partition. The act of partitioning is usually viewed as a
sign of weakness and may limit the familys social and business options (Dutta 1997, 97).

The male descendants up to the fourth generation of a Hindu joint family are considered
coparceners. While male descendants acquire the title of coparcener upon birth, they cannot
receive their respective shares until the partitioning of joint family property. The share of
each coparcener is not constant. It may change with the birth or death of other male
coparceners. Coparceners hold the property collectively with other members of the joint
family until a partition occurs (Cowell 1895, 8; Gopal [1958] 1964, 527-528). Members of
the joint family who are not coparceners have the right to maintenance but do not have shares
in joint family property. During a partition property is divided per stripes and not per capita
(Cornish 1937, 66; Cowell 1895, 8).

Female members of the joint family are not coparceners. In the event the female member of a
joint family has no sons or brothers, she is granted the right to maintenance. Widows are
encouraged by Hindu law to live very frugally. While the right to maintenance is not a fixed
share, it is assumed that the female members will be granted enough property to allow them
to live within reasonable means. Classical Hindu law discouraged women from owning
property and only grudgingly conceded a separate form of property for the maintenance of
women (Gopalakrishnan 1959, 100).

Capital Accumulation in Hindu Families

What makes the Hindu joint family an effective vehicle for the accumulation of capital? Two
fundamental characteristics of Hindu joint families that have been discussed above are highly
conducive to capital accumulation. For one thing, joint family property can be held
collectively for an indefinite period until a partition occurs. Since a joint family does not
have to divide its capital with the passing of every generation, the pool of capital can grow
indefinitely. For another, a joint family is not limited in terms of the number of members that
are included in it. This characteristic allows joint families to expand through marriages,
births, and adoptions.

The ability of the joint family to accumulate capital is buttressed by some important aspects
of Hindu inheritance law. First, Hindu inheritance law encourages separate property to
become joint property. In the process, the pool of jointly held property grows over time.
Second, Hindu inheritance law grants coparceners inchoate titles to joint property until a
partition occurs. Coparceners may not use substantial portions of joint property without the
approval of other members of the family. This places a check on an individual coparceners
tendency to abuse family property, because his rights to its disposal are limited. Third, since
partitions occur per stripes and not per capita, tendencies for excessive fragmentation of
capital are discouraged. The underlying logic is as follows: in per stripes division, the
number of fragments into which capital is partitioned is limited to the number of sons the
karta has. In a per capita partition of capital, however, the number of fragments into which
capital is partitioned can increase because grandsons of the karta whose father is deceased
will also each receive a share. Therefore, the fragmentation in a per capita partition is likely
to be greater than in a per stripes partition. Finally, by limiting the share of non-coparceners
to maintenance, Hindu inheritance law places limits on the number of eligible heirs.

A look at specific case can provide us with a more complete picture of how some wealthy
Hindu families were able to successfully retain capital by avoiding partitioning of their
estates. A case study of Hindu joint family is discussed below. This particular case study
was not chosen randomly from the literature on Hindu joint families but was instead chosen
because they reflect successful utilization of Hindu inheritance law in order to prevent
partitioning of family estates and encourage the accumulation of capital for a considerable
duration of time. While there is no study that provides statistics on how frequently Hindu
joint families were partitioned in the past, these case studies can be utilized to get an idea of
the durations for which Hindu joint families could potentially avoid partitioning their estates.

Case Study:4

The Travadis

History:-

The family business of Travadis was founded by Arunji Nathji in the early eighteenth
century. Nathji had access to the Mughal court and started his business career as a
moneylender. He was able to combine business acumen with a shrewd understanding of
political conditions to amass a fortune. Nathji was succeeded by his son Shrikrishna who
successfully established a family network throughout India. Shrikrishna maintained a cordial
relationship with the British provided them with capital during their military campaigns in
India. Before his death in 1822, Shrikrishna appointed his adopted grandson Mani Kisan
Dube as head of the business. Shrikrishnas relatives disputed the legality of Dubes claim to
leadership and a crisis of succession eventually led to the collapse of the business (Mehta
1991, 153-168).

Analysis

The history of the Travdis family is interesting because it gives us insight into causes of both
the ascendancy and demise of a family business. The Travadises were able to use Hindu law

4
Money-lending businesses run by the Hindu joint family are often referred to in the literature as
banking firms (Leonard 1982; Chatterjee 1989, 289). These businesses are not a collection of
persons who have entered into a partnership for the purposes of sharing the profits of a business
carried on by all or any of them (Gopal [1958] 1964, 554) and hence are not firms. Instead, these
businesses exist as a result of the sapinda bond between their members.
to successfully avoid a partitioning of the family fortune when Arunji Nathji passed away.
Shrikrishnas leadership was not disputed and members of the joint family cooperated with
him in establishing a network of branches throughout India. However, Shrikrishnas
appointment of Dube as his successor created resentment that resulted in the demise of the
family business. The succession crisis following Shrikrishnas death indicates that the head
of the family business could not disregard the wishes of other members of the joint family
without consequence and these members could exercise the option of partitioning the
business when they felt their interests were not properly looked after.

Our discussion of Hindu inheritance legal system has helped to illustrate the impact of the
respective legal system had on capital stocks within families. We saw that Hindu legal code
acknowledges the existence joint property and creates a framework for the preservation of
this property, attempts to limit the number of heirs and gives the option of retaining or
partitioning estates.

The Rise of Hindu Business Families and the Role Played by Capital and the Managing
Agency System

Introduction

In December 1993, there were 297,000 joint stock companies in India. The combined paid-
up capital on these companies was approximately $25 billion. Of these 297,000 joint stock
companies, 294,000 were family run businesses. In enterprises such as these, business
families often retained control of a company while floating shares in order to attain additional
capital. The majority of the remaining 3,000 joint stock companies were foreign or
government owned companies (Dutta 1997, 30). From these statistics we can see that the
overwhelming majority of Indian joint stock companies are closely tied to family businesses.
The prevalence and spread of joint stock companies in India does not imply that joint stock
companies have replaced the traditional family centered model of business; instead joint
stock companies have become a useful appendage or extension of the traditional family
business. A close look at the history of the joint stock company in India will illustrate that
the history of this Indian institution is in many ways intertwined with the history of family
businesses in India.

The Hindu merchant castes of India were able to use this institution to move beyond their
traditional niches of banking and retail, and enter manufacturing. Hindus of non-mercantile
backgrounds, such as Brahmins and landowners, were also able to adopt this institution and
move from their traditional venues into manufacturing.

In the late nineteenth century, the managing agency model was adopted by many leading
families from Hindu merchant castes who used this institution to enter the manufacturing
sector of the economy. Managing agencies were also adopted during this period to a lesser
extent by some Hindu families from non-mercantile backgrounds.

This chapter will attempt to demonstrate that the Hindu families were able to adopt the
managing agency model successfully and float joint stock companies for two reasons.
First, Indias capital markets were underdeveloped and Hindu merchant castes were one of
very few groups endowed with capital. Second, Hindu families were able to transition into
the managing agency model and apply it to their own business context because this model
was not alien to them. A traditional Hindu joint family business often functioned as a sort of
informal managing agency; it would collectively manage firms in diverse fields while
retaining control of these firms. In many ways the managing agency was a parallel
institution: one managing agency would manage joint stock companies in diverse fields as
well. Hindu families who did not belong to the merchant castes were also familiar with many
aspects of the managing agency model because the various members of the family worked in
different fields but the family functioned as one unit and often held wealth as a single unit for
many generations.

Indian managing agencies can be seen as extensions of the joint family. The members of the
managing agency were usually members of the same family and the eldest male had the
highest position of authority. A joint family would launch a joint stock company and the
shares would be bought by family members and individuals belonging to the familys caste
(Tripathi 2004, 112-113). The shareholders would agree to a contract by which the family
launching the venture would maintain control of the joint stock company as managing agents
of the company. This allowed the family to raise capital while still retaining control of the
company (Tripathi 2004, 112-113). Through a managing agency, a single family could
control several different companies. The managing agency firm would use the first company
launched by the family as base, and float other joint companies throughout different
industries. The funds from the older company would be used to ensure that the original
family retained control of the new companies (Tripathi 1990, 26-27). Families divided
responsibilities among members according to geographical considerations or industry (Lamb
1955, 102). If an Indian managing agency needed to recruit partners from outside its pool of
family members, it recruited individuals from the familys caste (Brimmer 1955, 558).

The history of the Sarupchand family offers an example of how Hindu inheritance law and
the joint family structure could allow for a relatively easy transition to the managing agency
model. The roots of the family lie in northern India and it has been involved in money-
lending for many centuries. In 1789, one of the familys members, Seth Pusaji, migrated to
central India and used the capital at his disposal to enter the retail business in the city of
Indore. Seth Pusajis sons and grandsons managed the familys enterprises collectively and
held them as one unit. One of his grandsons, Magniram, was a very dynamic businessman
and managed to expand the family business into the fields of banking and opium marketing.
After Magnirams death in 1872, the family business was jointly managed by his three
brothers. The family business continued to be successful and on the eve of the twentieth
century its assets were worth Rs. 3 million. It was only in 1913 that the familys fortune was
partitioned. Despite the partitioning of family fortunes, the different branches of the family
continued to have ample capital and provided assistance to each other. In 1916, one of
Pusajis descendants, Hukamchand, had built three textile mills in Indore. Hukamchand also
used his share of the familys capital to build the first one of the largest Indianowned jute
mills in Calcutta in 1919. The family business was also registered as a managing agency in
1919 and controlled joint stock companies in many areas such as textiles, precious metals,
and agricultural products (Taknet 1986, 80-81; Timberg 1978, 216-217).

Hindu inheritance law allowed the Sarupchand family to hold its assets collectively from
1789 to 1913. At least four generations passed form Seth Pusaji to Hukamchand. Under
Islamic law, the familys wealth would have been split up with each passing generation.
Hindu inheritance laws helped to assure that as long as the males of the family did not
partition the fortune, it could be held jointly. This played a particularly important role in a
capital-scarce environment such as India. The family had enough capital to expand into new
areas such as opium and banking. And when the partition of the familys fortune finally took
place in 1913, Hukamchand had enough funds at his disposal to enter industry. Since
Pusajis descendants managed the families businesses jointly in different areas, Hukamchand
was conceptually familiar with the model of one central unit managing numerous enterprises.
This allowed him to set up a managing agency that controlled numerous joint stock
companies. If Hukamchand had been only acquainted with Islamic partnerships, he would
not have the same conceptual framework and skills to grasp how one central unit ran
numerous businesses.

From the above discussion, we can see that Hukamchand benefited greatly from two factors.
Firstly, Hindu inheritance law allowed his family to retain capital. This capital allowed the
family to expand its operations into other areas. Despite the partitioning of the family,
Hukamchand had the capital to launch a cotton mill. Secondly, the business culture and
experience of the joint familys business made the managing agency framework less alien to
Hukamchand.

From the discussion above, we can draw some key lessons about gradual move from the
Hindu joint family into the managing agency model. One lesson is that access to capital
played a key role in shaping the history of the business family. We saw that how Hindu law
made it possible for Hindu families to use the managing agency system to raise capital,
maintain control of numerous joint stock companies, and diversify into multiple business
ventures.
DEBTS UNDER HINDU LAW

Under the Hindu Law, a son is under a pious obligation to discharge his father's debts out of
his ancestral property even if he had not been benefited by the debts, provided the debts are
not avyavaharika. The sons get exonerated from their obligation to discharge the debt of their
father from the family assets only if the debt was one tainted with immorality or illegality.

The duty that is cast upon the son being religious and moral, the liability of the son for the
debt must be examined with reference to its character when the debt was first incurred. If at
the origin there was nothing illegal or repugnant to good morals, the subsequent dishonesty of
the father is in not discharging his obligation will not absolve the son from liability for the
debt.

In Hindu law there are two mutually destructive principles, one the principle of independent
coparcenary rights in the sons which is an incident of birth, giving to the sons vested right in
the coparcenary property, and the other the pious duty of the sons to discharge their father's
debts not tainted with immorality or illegality, which lays open the whole estate to be seized
for the payment of such debts. According to the Hindu law givers his pious duty to pay off
the ancestors' debts and to relieve him of the death torments consequent on non-payment was
irrespective of their inheriting any property, but the courts rejected this liability arising
irrespective of inheriting any property and gave to this religious duty a legal character.

What is son's pious obligation- history

If a debt contracted by the father has not been repaid during his lifetime, by himself, it must
be restored, after his death, by his sons. Should they separate, they shall repay it according to
their respective shares. If they remain united, they shall pay it in common, or the manager
shall pay it for the rest, no matter whether he may be the senior of the family or a younger
member, who, during the absence of the oldest, or on account of his incapacity, has
undertaken the management of the family estate.

Mukherjea J., delivering the judgment of the Supreme Court in Sidheshwar v. Bhubaneshwar
Prasad , has once again discussed this question. According to the learned Judge, the doctrine
of pious obligation. "has its origin in the conception of Smriti writers who regard non-
payment of debt as a positive Sin, the evil consequences of which follow the undischarged
debtor even in the after world. It is for the purpose of rescuing the father from his torments in
the next world that an obligationis imposed upon the sons to pay their father's debts."

A series of decisions in the courts of modern India have changed the traditional interpretation
of the liabilities of the son, grandson, and great-grandson. The traditional distinction was that
the son was liable to pay the principal and the interest, the grandson was liable to pay only
the principal but no interest, and the great-grandson was liable only to the extent that the
paternal estate came into his hands. The son, grandson, and the great-grandson are liable
equally for ancestral debts, but not personally liable, and that their liability is co-extensive
and confined to the extent that they have joint property in their possession.

It was not essential for the son to prove criminal liability against the father in respect of the
debt in question in order to claim exemption from payment of such debt. The learned Judge
pointed out that the son can claim immunity only when the father's conduct is utterly
repugnant to good morals or is grossly un-iust or is flagrantly dishonest.

Avyavaharik debts
In this section we will look as to what is meant by Avyavaharik debts. Colebrooke defined it
as a liability incurred for a cause repugnant to good morals. If it is unrighteous or wholly
improper they cannot be called vyavaharika or legal debts. It may be that the debts incurred
by the father for defending himself against criminal action against others or defending
himself in an action brought by others are legal in several circumstances. If a debt was
incurred to defend the rights of the family and to safeguard its interests, it is certainly legal in
nature. If a debt is not tainted with illegality at its inception it may be binding on the son. The
son may not be able to claim immunity from the debts in such cases. But, where the father's
conduct which prompted the incurring of the debt, is utterly repugnant to good morals or is
grossly unjust or flagrantly dishonest, then certainly the son can claim immunity from its
liability. The learned author Mulla of Hindu Law (at pp, 350 and 351 in l3th edition) places
any debt which is avyavaharika which is rendered by Colebrooke as equivalent to a debt for a
cause "repugnant to good morals'' in the list of Avyavaharika debts. It is further stated that the
fundamental rule is that the sons are not liable for the debts
incurred by father which are Avyavaharika. Colebrooke translates it as "debts for a cause
repugnant to good morals." Aparaka explains it as not righteous or proper.

In a decision of a Full Bench in Bombay High Court it was held that Avyavaharika debt
means illegal, dishonest or immoral one. It is not essential for the son to prove criminal
liability of the father in order to claim exemption. So, where a person in possession of
property, to which he is not entitled, disposes of that property and deprives the rightful owner
of that property, his conduct is dishonest and the son is not liable for the debts arising out of
such conduct Lord Dunedin of the Privy Council defined the antecedent debts as antecedent
in fact as well as in time i.e. not a part of transaction impeached. Thus two condition are
necessary:
1. The debts must be prior in time and
2. The debts must be prior in fact.
A son could claim immunity only where the debt in its origin was immoral by reason of the
money having been obtained by the commission of an offence; but not where the father came
by the money lawfully but subsequently misappropriated it. It is only in the former case that
the debt answers the description of an Avyavaharika debt. If originally the taking was not
immoral, i.e., if it did not have a corrupt beginning or founded upon fraud, it could not be
characterised as an Avyavaharika debt and the son could not be exempted from satisfying that
debt. The supervening event, namely, the misappropriation later on would not change the
nature of the debt. The vices should be inherent in the debt itself.

Immoral debts are those which are taken in furtherance of an immoral purpose such as for
prostitution or for keeping of concubine. Thus the expenses of the marriage of concubine's
granddaughter or to bribe to hindu women so that she may take one of his son in adoption or
purpose of gambling will be for illegal purpose .the debts resulting from the highly tortuous
act which at their inception are tainted with an evil purpose are avyavaharika. Father's power
of alienation for antecedent debts

The father himself can alienate the joint family property property for the discharge of his
personal debt and son can challenge it only if the debts are tainted. This means that the father
can do it indirectly also. The pious obligation of the son to pay off the father debt exits
whether the father is alive or dead. It is open to father during his life time , to convey joint
family property including the interest of the son to pay off antecedent debts not incurred for
family necessity or benefit provided the debts are not tainted with immorality. The father can
not do so after filing of the suit for partition.

Burden of proof that the debts is tainted is on sons

The obligation on son to pay off their father's personal debts is religious obligation and if
they want to wriggle out of it? they can do so only if the debts are tainted the son also have to
show that creditor had the notice or knowledge that the debts was tainted. The Apex Court
in Luhar Marit Lal Nagji v. Doshi Jayantilal Jethalal, relying upon the judgments of the Privy
Council referred to (supra), enunciated the principles thus : "the sons who challenge the
alienations made by the father have to prove not only that the antecedent debts were immoral
but also that the purchasers had notice that they were so tainted."

The learned judge points out that the doctrine, as formulated in the original texts, has indeed
been modified in some respects by judicial decisions. That under the law as it now stands, the
obligation of the sons is not a personal obligation existing irrespective of the receipt of any
assets, and that it is a liability confined to the assets received by him in his share of the joint
family property or to his interest in the same. The obligation exists whether the sons are
major or minor or whether the father is alive or dead. If the debts have been contracted by the
father and they are not immoral or irreligious, the interest of the sons in the coparceners
property can always be made liable for such debts.

The proposition laid down in Brij Narain's case is founded upon the pious obligation is that a
Hindu son limited to his interest in the joint family property to pay the debt contracted by the
father for his own benefit and not for any immoral or illegal purpose. By incurring the debt,
the father enables the creditor to sell the property in execution of a decree against him for
payment of the debt. The son is under a pious obligation to pay all debts of the father,
whether secured or unsecured.

In Venkatesh Dhonddev Deshpande v. Sou. Kusum Dattatraya Kulkarni, the observations of

the Supreme Court are as follows:
Whether father is the Karta of a Joint Hindu family and the debts are contracted by the father
in his capacity as manager and head of the family for family purposes, the sons as members
of the joint family are bound to pay the debts to the extent of their interest in the coparcenary
property. Further, where the sons are joint with their father and the debts have been
contracted by the father for his own personal benefit, the sons are liable to pay the debts
provided they are not incurred for illegal or immoral purposes.

When a mortgage has been created by the father A Full Bench of the High Court gave the
following answer :
"In the case of a Hindu joint family consisting of a father and sons when a mortgage has been
created by the father of joint property, and a decree has been obtained on the basis of the
mortgage, the only ground on which the sons can challenge the mortgage and the decree is
that the debt was incurred for illegal or immoral purposes and that for this purpose it is
immaterial whether the mortgaged property has actually been brought to sale in execution of
the decree or not."

It may be mentioned here that the distinction between a father manager and a brother
manager cannot be lost sight. In the case of debts contracted by the father manager, the son is
bound to discharge the same on account of the doctrine of pious obligation notwithstanding
the fact that the debt was contracted for no legal necessity, nor for the benefit of the family.
The doctrine of pious obligation has no application in the case of the brother manager.
Therefore, the debt contracted by the brother manager binds the other members the joint
family only when it was for legal necessity and for the benefit the family. The doctrine of
pious obligation has no application when the debt contracted by the father was for any illegal
or immoral purposes.

In Hemraj v. Khem Chand , the Court referred to the Judicial Committee's view which held
that the translation of the term 'avyavaharika' as given by Mr. Colebrooke makes the nearest
approach to the true conception the term as used in the Smrithi text, and that the term does
not admit of a more precise definition. The term commonly used in decisions and text books
to describe those debts the father for which the son is not liable is 'illegal or immoral'. The
expression was doubtless originally meant to render 'avyavaharika' but it has come to be used
as a compendious temi to cover all the cases enumerated in the smiritis. It is, therefore,
expedient to use the term 'illegal or immoral' purposes then 'avyavaharika' which as discussed
by me supra eludes any precise definition.

No pious obligation is involved in the said debt inasmuch as it is not the personal debt neither
the father nor the debts contracted for the benefit of the family. As understood the legal
position is so clear that so long as the purpose is not tainted with the element of illegality or
immorality the sons are liable under thedoctrine of pious obligation. In Keshav Nandan Sahay
Vs. The Bank of Bihar it was said that sons are liable under the theory of pious obligation for
the preparation debts incurred by the father. The doctrine of pious obligation cannot apply to
the wife and she, therefore, cannot be liable to the creditors on the principles applicable to the
sons. On a partition between a coparcener and his sons, a share is allotted to the wife in her
own right and she cannot be treated as mere representative of the husband. The principle is
based upon ancient Hindu texts which do not mention the wife in the category of the sons and
there is no statutory enactment ex- tending that doctrine so as to include her.

Ramasamayyan v. Virasami Ayyar ((1898) I.L.R. 21 Mad. 222).

Even where the mortgage is not for legal necessity or for payment of antecedent debt, the
creditor can, in execution of a mortgage decree for the realisation of a debt which the father is
personally liable to repay, sell the estate without obtaining a personal decree against him.
After the sale has taken place, the son is bound by the sale, unless he shows that the debt was
non-existent or was tainted with immorality or illegality.

Apentala Raghavaiah Vs. Boggawarapu Peda Ammayya

In this case, the plaintiff's father Yellamanda did Tobacco business with the respondent and
thereby became indebted to him and because of which the father sold the property to
defendant for paying off the debts.The respondent contested the petition by filing his counter
contending that the Tobacco business was done by the father the petitioner for the benefit the
joint family and the debt contracted by him is not 'Avyavaharika debt' that the petitioner is
liable to discharge such debt incurred by his father in connection with such business.
In the decision of the Supreme Court reported in Manibhai v. Hemraj,
also it is observed in para-38, after referring to various earlier decisions of the Supreme Court
as well as some other High Courts, as follows:
"Even if "any loan is taken by the father for his personal benefit which is found as vyavaharik
debt and not avyavaharik, the sons are liable to discharge their father's debt under the
doctrine of pious obligation and in this view the matter if any alienation the joint family
property is subsequently made to discharge such antecedent debt or loan of the father, such
alienation would be binding on the sons.''

Analysis
The Hindu Undivided Family system is a unique feature of the Indian society and the concept
of pious obligation acts as a thread which binds the family together and prevents it from
disintegration. Pious obligation includes both spiritual as well as material aspects and makes
the heir(s) responsible/liable for spiritual duties, like performing the last rites of the deceased,
paying back debts accrued by the deceased and also fulfilling other responsibilities left
incomplete in respect of the joint family. Once pious obligation is abrogated, the concept of
joint family also suffers a blow.

RULE OF DAMUDAT

In Hindu Law, the rule of Damdupat deals with the debts. According to this age old rule of
Hindu Law, the amount of interest recoverable at any one time cannot exceed the principal.
This rule may not be in use very effectively but it has not been totally done away with. In
fact, legislation in certain states affecting transactions of money lenders prohibits recovery of
interest in excess of the principal amount. The above rule is based upon a sound socio-
economic ideology to prevent a situation once a debtor always a debtor. In an era in which
it is necessary to maintain such socio economic equilibrium, the levy or addition of such a
high amount of interest exceeding the principal amount originally due cannot be considered
to be a healthy practice in the eyes of law.5

Conclusion
"The doctrine of pious obligation under which sons are held liable to discharge their father's
debts is based solely on religious considerations; the doctrine inevitably postulates that the
father's debts must be vyavaharik. If the debts are not vyavaharik or are avyavaharik the
doctrine of pious obligation cannot be invoked." The principle relating to the liability of the
sons for debts incurred by the father may be briefly recapitulated.

# In respect of debts contracted by the father, even for his personal benefit, at a point of time
when he is joint with his sons, the sons are liable to pay such debts, unless the debts were
incurred for immoral or illegal purposes.

# This liability of the sons, which had its origin in an obligation of piety and religion, has
since metamorphosed into one of legal liability but this 'does not, however, extend to debts
tainted with immorality.

# The liability is not, however, personal in the sense that the creditor of the father cannot
proceed either against the person or separate Property of the sons, but such liability is
Restricted to the interest of the sons in the family property.

5
Joshi 2005, Gandhi (2003), p. 143
# It is settled that if the debt is contracted by the father after partition, the son cannot be made
liable
# If, however, the debt is a pre-partition debt, the share of the sons would be liable even after
partition, if the debts of the father are not immoral or illegal and the partition arrangement
does not make any provision for the discharge of such debts.
# In case a creditor institutes a suit for the recovery of a debt against the father before
partition and obtains a decree, the sons would be liable to discharge the decree passed against
the father even after the partition.
# Even in respect of a pre-partition debt, if a suit is instituted against the father, after
partition, but he dies and his separated sons are impleaded as legal representatives, the
remedy of the decree-holder against the shares allotted to the sons on partition, would be in
execution and not by way of an independent suit.
# If, however, after partition, a suit is instituted against the father on a pre-partition debt and a
decree is obtained against him, such a decree cannot be executed against the sons and a
separate suit has to be brought against the sons in order to enable creditor to realize the
amounts out of their shares.

Thus the liability of the interest of the sons in such cases to discharge the debts incurred by
the father is undisputed, though the method and manner of its enforcement by the creditor
would vary and the sons must be afforded every opportunity, be it in a suit or execution
proceedings to question the binding nature of the debt' or liability.

After amendment of 2005

After the commencement of the Hindu Succession (Amendment) Act, 2005, no court shall
recognize any right to proceed against a son, grandson or great-grandson for the recovery of
any debt due from his father, grandfather or great-grandfather solely on the ground of the
pious obligation under the Hindu law, of such son, grandson or great-grandson to discharge
any such debt.
Womens Rights under modern Economic thought.
Womens rights and economic development are highly correlated. Today, the discrepancy
between the legal rights of women and men is much larger in developing compared to
developed countries. Historically, even in countries that are now rich women had few rights
before economic development took off. Is development the cause of expanding womens
rights, or conversely, do womens rights facilitate development? We argue that there is truth
to both hypotheses. The literature on the economic consequences of womens rights
documents that more rights for women lead to more spending on health and children which
benefits development. The political economy literature on the evolution of womens rights
finds that technological change increased the costs of patriarchy for men, and thus
contributed to expanding womens rights.6
The property rights of the Hindu women are highly fragmented on the basis of several factors
apart from those like religion and the geographical region which have been already
mentioned. Property rights of Hindu women also vary depending on the status of the woman
in the family and her marital status: whether the woman is a daughter, married or unmarried
or deserted, wife or widow or mother. It also depends on the kind of property one is looking
at: whether the property is hereditary/ ancestral or self-acquired, land or dwelling house or
matrimonial property.

Prior to the Hindu Succession Act, 1956 Shastric (Hindu Canonical) and customary laws
that varied from region to region governed the Hindus. Consequently in matters of succession
also, there were different schools, like Dayabhaga in Bengal in eastern India and the
adjoining areas; Mayukha in Bombay, Konkan and Gujarat in the western part and
Marumakkattayam or Nambudri in Kerala in far south and Mitakshara in other parts of India,
with slight variations.

The Hindu Succession Act enacted in 1956 was the first law to provide a comprehensive and
uniform system of inheritance among Hindus and to address gender inequalities in the area of
inheritance it was therefore a process of codification as well as a reform at the same time.
Prior to this; the Hindu Womens Rights to Property Act, 1937 was in operation and though
this enactment was itself radical as it conferred rights of succession to the Hindu widow for
the first time, it also gave rise to lacunae which were later filled by the Hindu Succession Act
(HSA). HSA was the first post-independence enactment of property rights among Hindus it
applies to both the Mitakshara and the Dayabhaga systems, as also to persons in certain parts
of South India previously governed by certain matriarchal systems of Hindu Law such as the
Marumakkatayam, Aliyasantana and Nambudri systems.

6
Kennedy School of Government, Harvard University
Under the old Hindu Law only the streedhan (properties gifted to her at the time of
marriage by both sides of the family and by relatives and friends) was the widows absolute
property and she was entitled to the other inherited properties only as a life-estate with very
limited powers of alienation, if at all. Even under the 1937 Act, the concept of limited
estate continued. Section 14 of the Hindu Succession Act removed the disability of a female
to acquire and hold property as an absolute owner, and converted the right of a woman in any
estate already held by her on the date of the commencement of the Act as a limited owner,
into an absolute owner. The provision is retrospective in that it enlarged the limited estate
into an absolute one even if the property was inherited or held by the woman as a limited
owner before the Act came into force. The only exception, in the form of a proviso, is for the
acquisitions under the terms of a gift, will or other instrument or a decree, or order or award
which prescribe a restricted estate. In the case of V. Tulasamma & Ors. versus V. Sesha
Reddi7, the Supreme Court of India clearly laid down the scope and ambit of Sections 14(1)
and (2) of the HSA, in which a fine distinction was made by the court recognizing the
womans right to property through her pre-existing right to be maintained. The Court applied
the exception only for the cases where an instrument created an independent and new title in
favour of females for the first time and ruled it out where the instrument concerned merely
confirmed, endorsed, declared or recognized pre-existing rights, like the right to maintenance.

The second important change has been brought about by Section 6 of the HSA by virtue of
which on the death of a member of a coparcenary, the property devolves upon his mother,
widow and daughter, along with his son, by testamentary or intestate succession, as the case
may be, and not by survivorship. This rule confers on the women an equal right with the male
member of the coparcenary. However, when the proviso to Section 6 applies, there is no
disruption of joint family status the proviso creates a fiction so that persons who are to
inherit are identified.

While the Hindu Succession Act may be said to have revolutionized the previously held
concepts on rules of inheritance, it has its own flaws while dealing with property rights of
women since it still does not give the right to the daughter of a coparcener in a Hindu joint
family to be coparcener by birth in her own right in the same manner as the son or to have
right of claim by birth.

Also, there is a provision in Section 23 which states that when the coparcenary property
includes a dwelling house, the rights of a daughter to claim partition of the dwelling house
shall not arise until the male coparcenars choose to divide their respective shares and the
daughter shall be entitled to a right of residence therein. This fails to take into account that
the right to claim partition of dwelling houses is one of the basic incidents of ownership by
women. Under this provision in its present form a daughter has to wait till the male members
seek a partition.

Though an amendment by the Central Government, to address these anomalies, is on the

anvil and is likely to be introduced in the Parliament in this session, in five southern States in

7
(1977) 3 SCC 99
India namely, Kerala, Andhra Pradesh, Tamil Nadu, Maharashtra and Karnataka necessary
amendments have been made. As per the law of four of these states, except Kerala, in a joint
Hindu family governed by Mitakshara law, the daughter of a coparcener shall by birth
become a coparcener in her own right in the same manner as the son. Kerala, however, has
gone one step further and has abolished the right to claim any interest in any property of an
ancestor during his or her lifetime founded on the mere fact that he or she was born in the
family. In fact, the Kerala Act is the only law that has abolished the Joint Hindu family
system altogether in the state including the Mitakshara, Marumakkattayam, Aliyasantana and
Nambudri systems. The approach of the Andhra Pradesh, Tamil Nadu, Maharashtra and
Karnataka state legislatures is different from that of Kerala and these states have not
abolished the coparcenary and the right by birth, while broadly removing the gender
discrimination inherent in Mitakshara coparcenary.

After the Hindu Succession (Amendment) Act, 2005 Section 6 provides for parity of rights in
the coparcenary property among male and female members of a joint Hindu family on and
from 09-09-2005. Thus on and from 09-09-2005 the daughter is entitled to a share in the

ancestral property and is a coparcener as if she had been a son. The proposed amendments

are on the lines of hose carried out by the four southern states.

We will now examine the Hindu inheritance codes in greater detail in order to get a deeper
understanding of the process by which wealthy Hindu families were able to accumulate
capital. In order to do so must the nature of the Hindu joint family must be investigated.

The Hindu Joint Family

A Hindu joint family consists of the male ancestor with his lineal descendants in the male
line, along with the unmarried daughters, wives, and widows of the ancestor and his
descendants. The existence of this male ancestor is not necessary: the joint family may be
composed solely of his descendants. The tie binding members of the joint family is known as
the sapinda, which may arise as a result of birth, adoption, or marriage. Sapinda relationships
are necessary for the formation of the joint family. There is no limit to the size of a joint
family. This number of members may change due to births, adoptions, marriages, deaths,
partitions, and severance of ties. A Hindu joint family continues to exist indefinitely, unless
it is partitioned, or if it has no living members who can add another member to it.8

Property in Hindu joint families is classified into two broad categories: joint property and
separate property. Joint property is held collectively by the family. It is divided into two
categories: ancestral property and non-ancestral property.

8
Gopal [1958] 1964, 526-527
Ancestral property can only be obtained by two means: inheritance and partition, while
property gained through other means is not considered ancestral. Therefore, the profits from
a business owned by the joint family would not be considered ancestral property since they
were not obtained via inheritance or partition.

Ancestral property is further divided into two sub-categories: unobstructed heritage and
obstructed heritage. The male members of the family acquire rights to the former by virtue of
birth, while rights to the latter are acquired by male members as a result of the death of the
last male owner. An example of obstructed heritage would be the individual property of a
sonless uncle. This property may go to his nephews provided that he does not have a son.
The presence of a son would obstruct the passage of this property to his nephews.9

Separate property refers to property that is held exclusively by a particular individual. Other
members of the joint family do not have rights to this property. Separate property has a
tendency to become joint property over time: unless the possessor of separate property
disposes of it as such upon his death, it will enter the common pool and be classified as joint
property (Cornish 1937, 36).

Partition

An example of an event that would lead to the dilution of the common pool is the partitioning
of the joint family. Partitions typically occur during three occasions:

The male head of the family can call for partitioning of the joint family property; one of the
sons may request it; and after the death of the father.10

In the event of a partition, brothers must receive equal shares. It is very important to note that
partitions are frowned upon by the general society and a familys reputation may suffer as a
result of a partition. The act of partitioning is usually viewed as a sign of weakness and may
limit the familys social and business options.11

Partition and right of maintenance

The male descendants up to the fourth generation of a Hindu joint family are considered
coparceners. While male descendants acquire the title of coparcener upon birth, they cannot
receive their respective shares until the partitioning of joint family property. The share of
each coparcener is not constant. It may change with the birth or death of other male
coparceners. Coparceners hold the property collectively with other members of the joint
family until a partition occurs. Members of the joint family who are not coparceners have the

9
Cornish 1937, 36-39; Gopalakrishnan 1959, 88-91
10
Cowell 1895, 41-42
11
Dutta 1997, 97
right to maintenance but do not have shares in joint family property. During a partition
property is divided per stripes and not per capita.12

Female members of the joint family are not coparceners. In the event the female member of a
joint family has no sons or brothers, she is granted the right to maintenance. Widows are
encouraged by Hindu law to live very frugally. While the right to maintenance is not a fixed
share, it is assumed that the female members will be granted enough property to allow them
to live within reasonable means. Classical Hindu law discouraged women from owning
property and only grudgingly conceded a separate form of property for the maintenance of
women.13

12
Cowell 1895, 8; Gopal [1958] 1964, 527-528
13
Gopalakrishnan 1959, 100