Supreme Court: No Presumption of Joint Family Business Merely On Fact That Karta Runs Business in Tenanted Premises

Supreme Court: No Presumption of Joint Family Business Merely On Fact That Karta Runs Business in Tenanted Premises

The Supreme Court (SC) in the case titled Kiran Devi (Appellant) v. Bihar State Sunni Wakf Board (Respondent) ruled that merely because a business was run by a Karta of a Hindu Undivided Family in a tenanted premise, it cannot be presumed that it is a joint Hindu family business.

The SC bench comprising of Justices Ashok Bhushan, S. Abdul Nazeer, and Hemant Gupta ruled that "Even if a male member had taken premises on rent, he is a tenant in his capacity and not as Karta of Hindu Undivided Family in the absence of any evidence that Karta was doing the business for and on behalf of Joint Hindu Family."

The factual matrix of the case is that the plaintiff Devendra Prasad sought a direction to the appellant to vacate the suit premises and hand over the possession to the plaintiff.

It was alleged by the plaintiff that the property belonged to his joint Hindu family. On the other hand, the Wakf Board, in its written statement, asserted that Md. Salimuddin was the duly appointed trustee of the property, and the appellant is the tenant inducted by the Management Committee.

The suit was ultimately transferred to the Wakf Tribunal, which rejected the prayer of the plaintiff, accepting the surrender of the tenancy. This was reversed by the Patna High Court (HC) in revision by the plaintiff.

An appeal was filed against the order of the HC before the Apex Court by a subsequent tenant, as she was directed to be dispossessed by the HC to induct the plaintiff.

Issue before the SC

Whether the business run in the tenanted property was a joint family business?

The SC while setting aside the order of the HC stated that it had erred in concluding that the business run by the tenant was a joint Hindu family business.

The Top Court clarified that the tenancy was an individual right vested in the great grandfather of the plaintiff, which was later surrendered by the plaintiff's grandfather. The tenancy was entered in an individual capacity and not in the capacity as Karta of the Hindu Undivided Family.

The Apex Court relied on the judgments of the case titled G. Narayana Raju (Dead) by his Legal Representative v. G. Chamaraju & Ors. AIR 1968 SC 1276, and it ruled that no presumption under Hindu Law that business standing in the name of any member of the joint family is a joint business even if that member is the manager of the joint family.

It added that no such presumption can be drawn 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 blended with the joint family estate.

According to the Supreme Court, "A contract of tenancy entered upon by great grandfather of the plaintiff. Even if the great grandfather was maintaining the family out of the income generated from the hotel business, that itself would not make the other family members as coparceners in the hotel business. It was the contract of tenancy which was inherited by the grandfather of the plaintiff who later surrendered it in favour of the Wakf Board. The tenancy was an individual right vested with the grandfather of the plaintiff who was competent to surrender it to the landlord. The contract of tenancy is an independent contract than the joint Hindu family business."

According to the Apex Court, even if a male member had taken premises on rent, he is tenant in his individual capacity and not as Karta of Hindu Undivided Family in the absence of any evidence that Karta was doing the business for and on behalf of Joint Hindu Family.

The SC bench further ruled that even if the business was presumed to be a family business, from the facts it was possible to infer that the surrender of tenancy would have been for the benefit of the joint Hindu family.

The SC allowed the appeal and it set aside the judgment of the HC, restoring the order of the Wakf Tribunal.