A joint Hindu family carrying on trade in a particular commodity may legitimately extend it to another commodity, and whether such an extension would amount to a new business would necessarily depend upon the nature and type of the extended business, and not on the particular commodity in which it does business.
Thus, if the family is a trading family and the extended business is not more hazardous or speculative than the previous one, it will not be regarded as a new business. In determining the question as to whether a particular business is a new business or merely a legitimate extension of the original family business, the material point to be seen is whether the business in question is so closely allied with or similar to, the business previously carried on by the family, so as to constitute a continuation or a permissible extension of such business. (Desu Ratamma v. Narayan, A.I.R. 1974 Mad. 252)
If the managing member of a joint family starts a new business with the aid of the joint family funds, such a business will be considered to be joint family business in the following five cases, viz.:
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(i) Where such new business has been started by the manager with the consent (express or implied) of all the coparceners, all of them being adults, and no minor coparcener is in existence at the time when such business was started.
(ii) Where the new business, though started by the manager alone, has been subsequently adopted as a joint family business by all the coparceners, who continue to enjoy the benefits therefrom, all of them being adults, and no minor coparcener is in existence at the time such business was adopted as a joint family business. (Devendra Ayyar v. Ranga Ayyar, 1935 M.W.N. 480)
(iii) Where the karta (manager) started the new business during the minority of a coparcener, who having enjoyed the benefit thereof, has, on attaining majority, accepted and adopted such business as a joint family business. (Venkatachalam v. Venkateshwara, A.I.R. 1944 Mad. 33)
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(iv) Where the new business has been started by the father, the grandfather, or the great grandfather, and he have no issue born to him or in existence at the time when it is started.
(v) When the new business has been started by a sole surviving coparcener and the other coparceners are born only subsequently.
It is to be remembered that in (i), (iv) and (v) above, the business becomes joint family business from the very start, whereas in (ii) and (iii), it becomes joint family business only when it has been adopted as such by the other coparceners.
It may also be noted that when a business has been started by a sole surviving coparcener or by the manager with the consent of all the coparceners (all of them being adults), the business becomes a family business, and minor members of the family born after the business has been started, cannot say that the risk and liability of a new business cannot be imposed upon them.
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This would be so because newcomers in the family share the risk and liabilities of the business along with the other assets and liabilities of the family. (This is the view of the Allahabad High Court, but a contrary view has been taken by the Patna High Court.)
The karta (manager) of a joint family cannot start a new business or trade, so as to impose upon the other members the risk and liabilities of such new business, – unless, of course, it was started or carried on with their consent, express or implied. Such consent may be presumed if the family is being maintained out of the profits of such business or trade.
Likewise, the karta of a joint family cannot impose upon a minor member, the risk and liability of a new business started by himself along with the other adult coparceners. (Sanyasi Charan Mandal v. Krishnadhan Banerji, 49 I.A. 108). It does not make any difference to this proposition if the karta happens to be the father.
A new business cannot be called ancestral, merely because it is the father who starts such business, unless the father happens to be the sole surviving coparcener of a Mitakshara family. In such a case, such new business is to be regarded as a family business from the very start, and minor members of the family who are subsequently born cannot say that such business risk cannot be imposed on them.