These observations are really obiter for the guardian in that case where the mother was the natural guardian of the Hindu minor. But these observations of the Privy Council were followed in India and de facto guardian’s alienations were also upheld so long as they were supported by the doctrine of “necessity or benefit to the estate”.1 Section 11 of the Act of 1956 has completely altered the legal position. Now there can be no alienation of property by a de facto guardian.
(ii) In Regard to Execution of Negotiable Instruments:
A Negotiable Instrument (e.g. Promissory Note) is under the Negotiable Instruments Act, 1881 an “unconditional promise to pay money”. A number of presumptions are made in regard to such instruments. Against a holder in due course, the promisor cannot set up defences which he might have set up against the original promisee.
A manager of the minor’s estate (whether he be the natural guardian or only a de facto guardian) can incur liabilities on behalf of the minor only conditionally the condition being that the transaction is for meeting a necessity or for the benefit of the minor’s estate.
So it follows that the guardian cannot execute a negotiable instrument so as to make the minor’s estate liable on that instrument. The guardian can incur a personal liability and if he excluded this expressly under the instrument the payee has no remedy at all. He cannot certainly proceed against the minor’s property.
This was decided by the Federal Court in Sriramulu v. Pundarikakshudu, 11 FCR 65. In that case A gave his minor son in adoption to a widow B, in 1926. So he ceased to be the natural guardian. Â was the natural guardian. She executed a promissory note in favour of X (the defendant) in April 1928 in respect of earlier debts binding on the estate of the minor. She died in November, 1928.
In June 1931, a purporting to act as guardian of the minor renewed the promissory note of April 1928 in favour of X. Later in 1932 he conveyed the suit property to defendant in satisfaction of that debt. In 1937, the boy became a major and brought the suit to set aside the transfer.
The Federal Court held that the consideration for the transfer was the promissory note of June, 1931. But on the Promissory Note the minor or his estate can have no liability and so the transfer itself is void and can be set aside by the Plaintiff, the quondam minor.
(iii) Acknowledgement of Debt by De Facto Guardian:
In the above mentioned case before the Federal Court, the defendant’s learned counsel (Mr. Ch. Raghava Rao who later became a Judge of the Madras High Court) urged that the promissory note of 1931 was only a renewal of the de jure guardian’s promissory note of April, 1928 and therefore it may be treated as an acknowledgment of the de jure guardian’s earlier promissory note debt keeping alive the de jure guardian’s debt (which was itself supported by prior binding debts) and could, therefore, support the sale deed.
The Federal Court pointed out that under the Limitation Act acknowledgment may be made by a ‘lawful guardian’ but since the guardian in question (A) was only a de facto guardian he cannot validly acknowledge the debt.
A natural guardian, being a lawful guardian, may acknowledge and keep alive a debt binding on the minor’s estate, but a de facto guardian cannot do so. This is because of the special statutory provision, contained in the Limitation Act.
(iv) Contracts by De Facto Guardian:
In Sriramulu’s case before the Federal Court it was argued that the promissory note of the de facto guardian may be treated as evidence of a debt contracted by him and if the debt is for a justifying purpose (Necessity or benefit) it binds the minor and can support a subsequent alienation. If the debt arises out of necessaries (food, clothes etc.) supplied to the minor, then the creditor can proceed directly against the minor’s estate.
This is by virtue of s. 68 of the Indian Contract Act, 1872. Here the case is not of that kind. In other cases, Mukherjee, points out that the creditor can reach the minor’s estate only on the principle of subrogation.
If the creditor makes the guardian liable and the guardian in his turn can claim an indemnity from the minor’s estate for his dealings, the creditor can claim to be substituted to the position of the guardian and in that way standing in the guardian’s shoes reach the estate of the minor for satisfying his claim.
This is what is called the principle of subrogation. Neither the de facto guardian under the Promissory Note of 1928 nor the de facto guardian under the Promissory Notes of 1931 had any personal liability. So the creditor cannot have recourse to the estate of the minor on the principle of subrogation. Thus there was no subsisting liability of the minor’s estate that could furnish consideration for the sale deed. The sale deed was accordingly set aside.