Karta Can Be Personally Liable if HUF Assets Are Not Enough: Bombay High Court

The Bombay High Court has ruled that if a Hindu Undivided Family (HUF) does not have enough assets to satisfy an arbitral award, its karta can be personally held liable for the remaining amount.

Justice R.I. Chagla clarified that under Hindu law, a karta’s liability for HUF business debts is personal and unlimited, especially when the HUF is engaged in commercial activities. This responsibility can be enforced at the execution stage, even if the arbitral award does not clearly mention personal liability.

The Court also rejected the argument that execution proceedings must be filed only where the HUF’s assets are located. It held that the court at the seat of arbitration has jurisdiction to execute the award, even if the assets are situated elsewhere.

In this case, an arbitral award of over ₹12.5 crore was passed against a HUF, with a substantial amount remaining unpaid. Since the HUF’s assets were insufficient, the Court allowed the award-holder to proceed against the karta’s personal assets and appointed a court receiver over certain properties.

The ruling makes it clear that the legal status of an HUF does not shield the karta from personal liability when the family’s assets cannot meet lawful dues.