Lachhmi Prasad And Ors. vs Bahraich Ram And Anr. on 23 August, 1940
(3) Where the business is a 'family' business but is either new or "newish" see Ram Prasad v. Bishambhar Nath ('36) 23 A.I.R. 1936 All. 607; no such presumption in favour of the mortgagee arises but the question becomes one of fact whether there has been "benefit to the estate or family." In that case, when no actual benefit is positively proved, the mortgagee has to show that he made reasonable enquiries as to the purpose for which the loan was required and was reasonably satisfied that the purpose was beneficial. What are, in any given case, 'reasonable enquiries,' must, I conceive, vary but I do not think that a mortgagee can be required to do more than to satisfy himself that the manager is acting bona fide and he is not, I think, required to prove the actual application of the money borrowed, provided he has lent it in good faith. He could not, I think, be asked to scrutinise a judgment of the manager or to substitute a judgment of his own for any bona fide judgment of the manager upon a question of what are the technical needs of the business, and
(4) Finally, where it is shown that the business in question is the 'mainstay' of the family, in the sense that it is all, or practically all, the family has to depend upon, then, I think, the authorities justify the conclusion that the proposed mortgagee is entitled to accept that fact as prima facie evidence that a loan taken for the purposes of that business is a transaction for the benefit of the estate or family. I do not think he can be required to go further and to enquire into the technical business necessity for raising the money. In these observations, I have confined myself, of course, to those transactions which relate to money raised in relation to a business and have not considered those transactions which relate to the raising of money in connexion with specific property as for instance to rebuild or repair a particular house which are in the nature of cases of 'salvage' and which stand upon a different, and more obvious, footing.