Case study on joint Hindu family business
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STUDY ON JOINT HINDU FAMILY
INTRODUCTION
Joint Hindu Family Business is a form of organization which exists only inIndia. It is one of the oldest form of organizations and in existence only insome parts of the country. This form of organization has ownership in thehands of members of a Hindu undivided family. The business is carried outbuy the male members of a undivided family.
As the name suggests, it istype of organization in which all the members of Hindu Undivided Familymanage and control the business with the direction of head of the family. Itis not a Partnership. It is just like a Partnership where only the members of the family can take part.
The business is carried on from generation togeneration.This kind of business is not governed by the Industrial or company Act but itis governed by the HINDU SESSION ACT, which exist under Hindu law.Before 1956, female members of the family were not having equal rightswith male members but the Hindu Succession Act, 1956, has its provisionsfor female members also.
All members of a Hindu undivided family do business jointly under thecontrol of the head of the family who is known as the 'Karta'. Themembers of the family are known as 'Co-parceners'. Thus, the JointHindu Family firm is a business owned by co-parceners of a Hinduundivided estate.There are two conditions for existence of Joint hindu family business.These are:
1.)
Minimum two male members must be there in the family.
2.)
Existence of some ancestral property.Under hindu law there are two systems of inheritance. These are:
1.)
Dayabagiha.
This system prevails all over India in westBengal. Under this system the male as well as femalemembers can become copartners as well as co_parcners.
2.)
Mitakshara.
This system prevails all over India exceptwest Bengal. Under this system only male members canbecome coparcners under joint hindu family business.
FEATURES
(1) Formation:
Joint Hindu Family cannot be formed or created by anycontract or agreement because this organization came into existence by theoperation of the "Hindu Law". It is not formed by any agreement likepartnership firm. Whenever, there is Hindu Undivided Family, there is thescope for Joint Hindu Family Business.
(2) Registration:
It is not at all compulsory to register this organizationbecause it is the result of Hindu Law.
(3) Membership:
There are two types of members i.e Karta and Co-parceners. Karta is the elder male member of the family who controls andmanages the business. The other family members are called as the co-parceners. There is no limit on membership because the membership is bybirth.
(4) Management:
The head of the family has full responsibility of themanagement of Joint Hindu Family Business. He is free to take any decisionwithout any interference of any co-parceners but he can take advice and helpfrom the family members.
(5) Liability:
The liability of Karta is unlimited because he is the onlydeciding authority whereas the liability of co-parceners is limited up to theirshare in the capital of the family. The karta’s liability is unlimited so hispersonal assets can also be used to pay back the debts of the business.
(6) Sharing of Profits and Losses:
According to Hindu Succession Act,1956, all the members of Hindu Undivided Family have equal rights to sharethe profits as well as losses of the business.
(7) Legal Status:
Any organization gets separate legal status only after itsregistration with appropriate authorities. In case of Joint Hindu Family firmregistration is not at all compulsory; hence it does not enjoy any legalstatus.Though, Joint Hindu Family Business is enlarged form of sole trading concernand it has got due recognition by Income Tax Act, 1961, and Joint HinduSuccession Act, 1956, then also it does not enjoy separate legal statusbecause of Joint Hindu Family firm and its members are one and the samethat is inspirable.
(8) Partition:
As Joint Hindu Family Business is totally controlled by Karta,and co-parceners do not have