Legal Representatives Are Not Liable To Discharge Obligation Which Had To Be Discharged By Deceased Person In His Personal Capacity: SC

The Supreme Court held that the legal representatives are not liable to discharge the obligation which had to be discharged by the deceased person in his personal capacity.

The Court held thus in a batch of appeals filed by the legal representatives of a sole proprietor against the common final judgment of the National Consumer Disputes Redressal Commission (NCDRC).

The two-Judge Bench comprising Justice B.V. Nagarathna and Justice Ujjal Bhuyan said, “… we hold that the legal representatives of the deceased opposite party-appellants herein are not liable to discharge the obligation which had to be discharged by the deceased opposite party in his personal capacity and hence that portion of the impugned orders of the NCDRC, State Commission and District Forum are set aside. Needless to observe that the direction for payments shall be made by the legal representatives from the estate of the deceased opposite party if not already satisfied.”

The Bench observed that in the case of a personal obligation imposed on a person under the contract and on the demise of such person, his estate does not become liable and therefore, the legal representatives who represent the estate of a deceased would obviously not be liable and cannot be directed to discharge the contractual obligations of the deceased.

Advocate Aniruddha Deshmukh appeared on behalf of the appellants while Advocate Abhishek Yadav appeared on behalf of the respondents.

In this case, the appellants were the legal heirs of the original opposite party in the consumer complaint before the District Forum and the respondents were the complainants. The complainants had entered into a Development Agreement with the opposite party and as per the agreement, they were entitled to receive eight residential flats and Rs. 6,50,000/- as consideration. Allegedly, the opposite party failed to fulfil the payment obligations and hence, the complainants alleged breaches of the agreement, including deviations from sanctioned plan, non-construction of a compound wall impacting parking and issues regarding access and unauthorized constructions beyond sanctioned plan, subsequently sold to third parties.

They also noted defects in the building construction, such as cracks, in the building, terrace work being not completed and the absence of provision for electricity meters. Despite notices issued by the complainants, the opposite party denied the allegations asserting that the complainants owed them Rs. 8,60,000/- for construction and amenities. Therefore, they filed a complaint before the District Consumer Forum and being aggrieved by its order, both parties approached the State Commission. The State Commission partly modified the order by setting aside the directions to pay Rs. 1.85 lakhs and Rs. 1.65 lakhs as the said claims were held to be time-barred but upheld the direction to pay Rs. 1.5 lakhs. Then, a revision petition was filed and NCDRC upheld the order of payment of Rs. 1.65 lakhs and 1.85 lakhs along with interest.

The Supreme Court in view of the above facts noted, “The question is: what would happen to the obligations imposed personally on the original opposite party on his demise? No doubt, the estate of the original opposite party would be liable for any monetary decree or directions for payment issued in the present case. However, what about the obligations which had to be performed under the Development Agreement such as certain construction to be made and certain approvals etc. to be obtained by him on completion of the construction. Can the legal representatives be liable to comply with those obligations under the Development Agreement on the demise of the original opposite party?”

The Court further said that where the decree or order is not against the estate of a deceased sole proprietor but based on the skills and expertise of the sole proprietor, the obligations which had to be performed by the sole proprietor would come to an end on his demise and the same cannot be imposed on his legal heirs or representatives.

“… in the case of sole proprietorship, which is a common form of business in India, when a legal obligation arises under a contract which has to be discharged personally by the sole proprietor, who is since deceased, had entered into the agreement, such as, in the case of a Development Agreement in the instant case, can such obligations be imposed on his legal representatives or heirs who are not parties to the Development Agreement and where the obligations under such an agreement per se cannot be fulfilled inasmuch as they neither have the skills nor the expertise to do so and those obligations depend purely on the skills and expertise of the deceased sole proprietor?”, it also asked.

The Court noted that a proprietorship firm is not a separate legal entity as compared to the proprietor and his estate would become liable only to satisfy a decree or an order in monetary terms on his demise. It said that if the estate of the deceased becomes liable then the legal representatives who in law represent the estate of a deceased person or any person who intermeddles with the estate of the deceased and where a party sues or is sued in a representative character, the person on whom the estate devolves on the death of the party so suing or sued is liable to the extent the estate has devolved.

“… what is crucial is that the estate of a deceased person which becomes liable and the legal representatives must discharge their liability to a decree holder or a person who has been granted an order to recover from the estate of the deceased which they would represent and not beyond it”, it added.

The Court concluded that any decree which is relatable to the extent of the property of the deceased which has come to the hands of the legal representatives and has not been duly disposed of, the same would be liable for execution by a decree holder so as to compel the legal representatives to satisfy the decree. It observed that even a decree for preventive injunction can also be executed against the legal representatives of the deceased judgment-debtor if such a decree is in relation to the property or runs with the property if there is a threat from such legal representatives.

Accordingly, the Apex Court allowed the appeals.

Cause Title- Vinayak Purshottam Dube (Deceased) Through LRs v. Jayashree Padamkar Bhat & Others (Neutral Citation: 2024 INSC 159)

Appearance:

Appellants: AOR Aniruddha Deshmukh.

Respondents: AOR Braj Kishore Mishra, Advocates Abhishek Yadav, Ruchit Mohan, Priyadarshi Kumar, and Mini Kishore.

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