What are the Principles laid Down by the Privy Council in Hanuman Prasad’s Case?

With this decision the Privy Council remanded the suit to the lower court for disposal after stating the legal principles applicable to the case. The principles enunciated in the Privy Council by Lord Justice Knight Bruce are as follows:

(i) The guardian has a limited or qualified power to create a burden on the minor’s property.

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(ii) This power can only be exercised in the case of necessity or for the benefit of the estate.

(iii) “The actual pressure on the estate, the danger to be averted or the benefit to be conferred upon it, in the particular instance is the thing to be regarded.” So the lender is not concerned with the precedent mismanagement of the property by the guardian. His transaction cannot be attacked on the ground that the necessity would not have arisen if the manager had prudently managed the property.

(iv) The creditor (or transferee) should act honestly. If he was himself a party to the prior mismanagement of the estate, he cannot take advantage of his own wrong. The transaction can be attacked if the creditor had acted mala fide.

(v) The lender is bound to make inquiries as to the necessity for the loan. He has to satisfy himself by inquiries that the manager is acting for the benefit of the minor’s estate. If after satisfying himself bona fide that the manager is alienating or raising funds to meet a necessity, the creditor lends mortey or takes a transfer, his transaction is protected.

(vi) The lender is not bound to look to the actual application of the money by the guardian of the minor. Even if it turns out that he has been deceived by the guardian and that there is no necessity or the funds were misapplied, instead of being applied for meeting the necessity, the lender’s position is quite safe.