HUF recovery of loan : Karta of HUF can enter into contract for mortgage of undivided share of his minor son for legal necessity

The undivided share of the appellant in the joint Hindu
family was mortgaged by his father as karta for family business and for legal
necessity. At the time of availing of the loan, the appellant was a minor. The
respondent bank filed the original application against five borrowers for
recovery of Rs.67 lakhs. The Debts Recovery Tribunal held in favour of the bank.
Thereafter, the bank proceeded to recover the due amount by putting to auction
the mortgaged property. The appellant preferred objections before the Recovery
Officer. Which were rejected by the Recovery Officer.

On appeal, the Debt Recovery Appellate Tribunal dismissed the
appeal, holding that the debt had not been raised by the appellant’s father as a
karta for his personal benefit and had not been taken for immoral or illegal
purposes. The loan and credit facilities were availed of by the appellant’s
father as karta of the joint Hindu family very much for legal necessity that is
family business. The appellant could challenge the mortgage with regard to his
share only on establishing that the mortgage had been created without legal
necessity or that it was tainted with illegaility or immorality. The mortgage
was binding on the appellant.

The property belonging to a joint family is ordinarily
managed by the father or other senior member for the time being of the family.
The manager of a joint Hindu family is called the karta. So long as the members
of a family remain undivided, the senior member of the family is entitled to
manage the family property. The karta or manager has the power to contract debts
for family purpose and family business. A joint Hindu family may have no
business at all, and yet debts may be contracted by the manager for a joint
family purpose. Such debts are binding on other members. Besides the power to
contract debts for the family business, the manager has the power of making
contracts, giving receipts and compromising or discharging claims ordinarily
incidental to the business. Indeed without a general power of that kind, it
would be impossible to carry on the business. The power of the manager of a
joint Hindu family to alienate the joint family property is analogous to that of
a manager for an infant heir. The manger of a joint Hindu family has the power
to alienate for value, joint Hindu family property, so as to bind the interest
of both adults and minors in the property, provided that the alienation is made
for legal necessity for the benefit of the estate.