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The Supreme Court recently clarified that the Karta of a Hindu joint family enjoys wide discretion in taking a decision on the existence of any legal necessity for disposing of joint family property and as to in what way such necessity can be fulfilled.

It has further held that the exercise of powers given the rights of the Karta on fulfilling the requirement of legal necessity or betterment of the estate is valid and binding on other coparceners.

An appeal was filed wherein the legal issue which arose for consideration was whether the Karta K. Veluswamy (second respondent) has legal authority to execute agreement to sell a suit property for Rs. 29 lakhs to one Beereddy Dasaratharami Reddy (the appellant).

The appeal was contested by the first respondent, namely V. Manjunath, son of K. Veluswamy. 

Reddy had instituted a suit for specific performance of the agreement to sell, impleading both K. Veluswamy and V. Manjunath.

The Court of Senior Civil Judge, Hiriyur decreed the suit rejecting the defence that the agreement was a camouflage for a loan agreement as K. Veluswamy was in need of money for construction of a farm house.

It was held that K. Veluswamy as the Karta of the joint Hindu family property was entitled to execute the agreement to sell, which agreement being on account of legal necessity, is valid.

K. Veluswamy accepted the decision, however, his son preferred the regular first appeal before the High Court of Karnataka and succeeded.

The High Court held that the agreement to sell was unenforceable as the suit property belonged to the joint Hindu family and, therefore, it could not have been executed without signatures of all members. It was further held that legal necessity was not proved.

"What is significant and important is the avowal by the executants that they were in need of funds to meet the domestic necessities and, consequently, had agreed to sell the suit property. If any dispute arises with regard to the sale transaction, it would be solved by the executants personally at their own risk and cost", noted a bench of Justices MR Shah and Sanjiv Khanna.

It was further noted that right of the Karta to execute agreement to sell or sale deed of a joint Hindu family property was settled and is beyond cavil vide several judgments of the top Court including Sri Narayan Bal and Others v. Sridhar Sutar and Others, wherein it was held that a joint Hindu family is capable of acting through its Karta or adult member of the family in management of the joint Hindu family property.

The Court also noted the following points:

1. A coparcener who has right to claim a share in the joint Hindu family estate cannot seek injunction against the Karta restraining him from dealing with or entering into a transaction from sale of the joint Hindu family property, albeit post alienation, has a right to challenge the alienation if the same is not for legal necessity or for betterment of the estate.
2. Where a Karta has alienated a joint Hindu family property for value either for legal necessity or benefit of the estate, it would bind the interest of all undivided members of the family even when they are minors or widows.
3. There are no specific grounds that establish the existence of legal necessity and the existence of legal necessity depends upon facts of each case.
4. The exercise of powers given the rights of the Karta on fulfilling the requirement of legal necessity or betterment of the estate is valid and binding on other coparceners.

Accordingly, the Court held that K. Veluswamy being the Karta was entitled to execute the agreement to sell and even alienate the suit property and absence of signature of V. Manjunath would not matter and was inconsequential.

The Court was further of the opinion that the fact that the joint Hindu family was in need of funds, shows legal necessity.

"....the need for funds is duly reflected and so stated in the agreement to sell dated 8th December 2006 which states that the executants were in need of funds to meet domestic necessities and, therefore, had agreed to sell the suit property."

With this view, the Court went on to allow the appeal and set aside the impugned judgment and decree and restored the judgment and decree passed by the Trial Court.

Cause Title: Beereddy Dasaratharami Reddy vs Manjunath & Anr