L. Janakirama Iyer & Ors Vs. P. M.
Nilakanta Iyer & Ors [1961] INSC 309 (26 October 1961)
GAJENDRAGADKAR, P.B.
SINHA, BHUVNESHWAR P.(CJ) DAYAL, RAGHUBAR
CITATION: 1962 AIR 633 1962 SCR Supl. (1) 206
CITATOR INFO :
R 1965 SC1153 (50,30,48) R 1967 SC1440 (11)
RF 1977 SC1680 (7) R 1980 SC 17 (27,29,30)
ACT:
Trust-Debtors conveying property to three
trustee for repayment of Debts-Administration suit by debtors dismissed on
withdrawal subsequent suit on behalf of general body of creditors if barred by
res judicata Limitation claim for possession- Maintainability sale deed
executed by two of the three trustees validity Amendment of decree by High
Court after admission of appeal by Supreme Court-Award of net profit to trust
estate and internal to alienation in favour of person intermeddling with trust
estate Trustee de son tort Indian Trusts Act 1882(2 of 1882) ss 48,63- Code of
Civil Procedure, 1908 (Act V of 1908) ss. 11, 151 and 152 Indian Limitation
Act, 1908 (IX of 1908) Arts 134, 120.
HEADNOTE:
These appeals arose out of a representative
suit filed on behalf of the creditors of defendants I to 6 who hat executed a
trust deed on August 26, 1936, conveying their properties to three trustees
with authority to dispose of the one and distribute the ale proceeds ratably
amongst the creditors. The trust deed required "the three trustees to act
according to the decision arrived at either unanimously or by majority."
The trustees accepted the trust and conveyed all the properties except the
family house in administration of the trust. Two of the sale deeds in favour of
two of the creditors, defendants 13 and 14, a mortgagee creditor, in the suit
were executed by only two or the trustees .
In a suit brought by the said defendants 1 to
6 for administration of trust the trial court passed a preliminary decree. The
High Court on appeal remanded the matter to the trial court for a finding as to
the market value of the lands sold.
The trial court submitted its finding. At
this stage defendants 1 to 6 withdrew the suit which we dismissed. The present
suit under O. I, r. 8 of the Code of Civil Procedure we filed on October 29, 1947, before such withdrawal. The claimed made therein, inter alia, were for a
declaration that the properties in question were still impressed with the
trust, for the removal the surviving trustee and appointment of an a
administrator to realise the amount, recover position of the properties and
re-sell them. The trial Judge passed a decree infavour of the plaintiffs . The
High Court in substance confirmed that decree but modified it by awarding
simple interest 207 instead of compound Interest decreed in favour of defendant
14. The two sale deeds, executed by only two of the trustees, were declared
invalid and it was found that the third trustee did not give his consent to it.
The sale deed in favour of defendant 12 was declared invalid on the ground that
he had intermeddled with the trust estate and had thus become a trustee de sou
tort. The courts below also rejected the pleas of limitation and res judicata
raised on behalf of the defendants.
Some of the creditor detendants appealed.
After the appeals had been admitted by this Court the High Court amended the
decretal order by substituting the words 'mesne profits' by 'net profits' under
ss. 151 and 152 of the Code of Civil Procedure.
^ Held, that the question whether Art. 120 or
Art. 134 of Indian Limitation Act applied to a case had to be decided on the
case made in the plaint, read as whole and properly construed.
Since the present suit was not one for a mere
declaration but for possession of property, having been valued and framed as
such, deliverable to the administrator, it was governed by Art. 134 and not by
Art. 120 of the Act and was thus within time.
It was not correct to say that s. 63 of the
Indian Trust Act was exhaustive as to the remedies available to a beneficiary
under a private trust or that claim for constructive possession, such as was
made in the present suit, was prohibited under that section.
Rani Chhatra Kumari Devi v. Prince Mohan
Bikram Shah, (1931) I. L. R. 10 Pat. 851, distinguished.
Subbaiya Pandaram v. Mohammad Mustapha
merachayar , (1923) L. R. 50 IE A. 295, A Subramania Iyer v. P. Nagarathna
Naicker , (1910)20 Mad. L. J. 151 and Masjid shahid Ganj v.
Shiromani Gurdwara Prabandhak Committee
Amritsar (1940) L. R. 67 I. A. 251, referred to.
Nor could the suit be said to be barred by
res judicata since it did not fall within the scope of s. II of the Code of
civil Procedure. The suit being one under o. 1, r. 8 of the Code, it could not
be said that defendants I to 6, plaintiff in the earlier suit, and the
creditors, plaintiffs in the present suit, where the same party or parties
claiming through each other.
Clause 23 of the trust deed, properly
construed, conformed to the provision of s. 48 of the Trusts Act that where
there are more trustees than one, they must all join in the execution of the
trust, and did not provide for an exception to that rule, even though it
provided that decisions by the trustees need not a ways be unanimous but could
be by majority as well. Such sale deeds as had been executed by 208 two of the
trustees only must therefore fail. The alternative. case of consent given by
the third trustee to the transaction could be of no avail since it could not be
substantiated by evidence Lala man Mohan Das v. Janaki Man Prasad, (1944) L. R.
72 I. A. 39, referred to.
The High Court had jurisdiction under ss. 151
and 152 of the Code of Civil Procedure to correct the obvious error in the
decretal order even though the appeals from the said decree had already been
admitted by this Court. Nor could the amendment be challenged on merits.
Although a successful plaintiff would not normally be entitled to mesne profits
for more than three years in view of Art. 109 of the Limitation Act, the court
had jurisdiction in the case of a trust to make appropriate direction in the
decree, while awarding net profiles to the trust and interest to the mortgagee,
in adjustment of the equities between them.
Salgur Prasad V Har Narain Das (1932) L.R.
59 I. A. 147, Bhagwat Dayal Singh v. Debi
Dayal Sahu, (1908) L. R. 35 I. A. 48 and Jagannath Prasad Singh Chowdhury v.
Surajmal Jalal , (1926) L. R. 54 I. A. 1, referred to.
Even slight intermeddling with the trust
estate is sufficient to make a person trustee de son tort. Since in the instant
case, the acts of intermeddling by one of the defendant covered a fairly long
period, the courts below were right in holding that the sale in his favour must
be set aside as one in favour, of a trustee de son tort.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 62 and 77 of 1959.
Appeals from the judgment and decree dated
March 25, 1953, of the Madras High Court in A. S. Nos. 731 and 720 of 1950.
M. C. Setalvad, Attorney general for India
and M.S.K. Sastri for the appellants Nos. 2 to 8 and also for legal
Representatives of appellant No. 1 in C. A. No. 62 of 1959.
A. V. Viswanatha Sastri, M. K. Ramamurthi and
S. T. Venkataraman, for respondents Nos. 2 and 10 (in C. A. No. 62 of 69) and
respondents Nos. 2 and 16 (In C. A. No. 77/59).
209 R. Ganapathy Iyer and G. Gopalakrishnan
for appellant No. 2 and also for legal Representative of appellant No. 1 (in C.
A. No. 77 of 1961) C. R. Pattabhi Raman and G. Gopalakrishnan, for appellant
No. 3 in (C. A. No. 77/59).
1961. October 26. The Judgment of the Court
was delivered by GAJENDRAGADKAR, J.-These two appeals have been brought to this
Court by two sets of defendants with a certificate of the Madras High Court and
they arise out of a suit instituted under o. 1, r. 8 on behalf of the general
body of creditors for administration against the trustees and alienees of the
properties which belonged to their debtors. Defendant 14 and his sons
defendants 18 to 24 are the appellants in Civil Appeal No. 62 of 1959 while
defendants 12, 13 and 16 are the appellants in Civil Appeal No. 77 of 1959.
Defendants 1 to 6 are the debtors. They were members of an undivided Hindu
family known as Kalakkad Pannayar family in Tirunelveli District.
The family was doing Commission agency
business in petrol, kerosene and crude oil. It had secured agency rights from
the Burmah-Shell Company. The members of the family became heavily indebted by
about June, 1936, and as a result there was a pressure from their creditors. In
order to meet the said pressure a deed of composition was executed (EX. B. 2)
on July 8, 1936. As a result of this composition 56 out of the creditors of the
family agreed to a scheme for settlement of their debts. Under this deed
defendant 7 was constituted as a trustee and as such was empowered to take over
the assets of the debtors, sell them to the best advantage and distribute the
proceeds rateably amongst all credit. . It appears that before the scheme under
the competition could be successfully or effectively worked out one of the
creditors, Ayyah Ayyar, filed an insolvency petition, No. 26 of 1936, in the
Sub-Court at Tirunelveli on July 30, 1936. By this 210 petition the creditor
wanted defendants 1 to 6 to be r adjudged insolvent. During the pendency of
these a proceedings, on August 26, 1936 defendants 1 to ff executed a deed of
trust, (Ex.B.7); by this document they conveyed all their movable and immovable
properties including (J the outstanding due to them to three trustees. These
were defendant 7 Subbarayalu Reddiar, Veerabahu Pillai and Narayana Pillai. Tho
trustees were authorised to dispose of the assets of (defendants 1 to 6 and
distribute the proceeds rateably amongst the creditors. Narayana Pillai died in
February, 1938.
Veerabahu Pillai died some time before the
present suit was instituted. Defendants 9 and 10 are the undivided sons of
defendants 7, whereas defendant 11 is the widow and defendants 12 and 13 are
the step-brothers of Veerabahu Pillai. The trustees accreted the trust and
entered upon their duties.
They took possession of the immovable
properties covered by the trust. They paid off the secured creditors, and in
regard to unsecured creditors they arranged to pay 50% of their dues by selling
the immovable properties either to the creditors themselves or to third parties
directing them to discharge the secured debts, and the unsecured debts to the
extent of 50% of their value. It is common ground that except their family
house in which defendants 1 to 6 resided all other immovable properties
belonging to them were conveyed under the trust deed.
Defendant 14 was a secured creditor in whose
favour a mortgage of the first schedule properties had been excelled for a sum
of Rs. 30,000 on June 3, 1935 (Ex. B- 95). This mortgage carried 10%, compound
interest. It appears that he had also lent a sum of Rs. 3,000 on a promissory
note on July 17, 1935 [Ex. B- 95(a)]. This note carried interest at 12%. The
promissory note was supported by the pledge of the mortgage deed. In order to
pay off the debts thus due to defendant 14 the trustees conveyed to him
schedule I mortgaged properties for Rs. 42,000 on May 22, 1937 (EX. B 94) 211
Out of the said consideration the amount due under the mortgage as well as the
amount due under the promissory note were satisfied leaving a balance of Rs.
3,030 in the hands of the purchaser. He was directed to utilise this balance
for repaying 50% of the dues of purchaser and 3 who have brought the present
suit. The sale deed in favour of defendant 14 was executed by only two out of
the three trustees,, defendant i and Veerabahu Pillai.
Defendants 18 to 24 are the son of defendant
14.
As we have already seen defendant 14 and his
sons are the appellants in (Civil Appeal No. 62 of 1959.
Defendant 7 who was one of the trustees, was
a creditor of the trustees to the extent of Rs.
6,000. His daughter-in-law was a creditor to
the extent of Rs. 2,000\-. In satisfaction of 50% of the debt due to these two
persons the trustees conveyed schedule III properties to defendants 8, 9 and 10
who are the undivided sons of defendant 7 (Ex. B. 8). This document executed on
December 16, 1936, for Rs. 4,000. The purchasers in their turn sold the
properties to defendant ]7 on May 30, 1947.
Defendant 12 is the step-brother of the
trustee Veerabahu Pillai and he purchased schedule V properties on November 7,
1941, for Rs. 2,000 (Ex. B-90). Defendant 13 who is the brother of defendant 12
purchased schedule II properties for Rs. 15,000 on August 29, 1937, (Ex. B. 37).
B. 37). This document was executed only by two out of the three trustees.
Another sale deed was passed in favour of defendant 13 in respect of schedule
properties (Ex. B. 79) on February , 1942, for Rs. 2,000. Defendant 16 who is
the son-in-law of defendant 13 purchased two sets of properties schedule VII
and schedule VII-A on May 7, 1943, and June 4, 1943, (Exs. B-104 and B-105) for
Rs. 8,000 and Rs. 600 respectively The properties thus conveyed to the
respective purchasers were put into their possession. It is with the sale deeds
executed in favour of defendant 14 and those executed in favour of 212
defendant 12, 13 and 16 that we are concerned in a the present appeals.
Defendants 12, 13 and 16 are the appellants in Civil Appeal No. 77 of 1959.
In 1943 defendants 1 to 6 brought a suit, o. s.
. No. 30 of 1943 in the Sub Court at Tirunelveli for the administration of the
trust created by them, for account from the trustees and for recovery of the
trust properties. To this suit they impleaded the surviving trustees and the
alienees as defendants. In this suit a preliminary decree for account was
passed by this Sub Court.
Their claim, however, for the recovery of
immovable properties was not Granted. This decree gave rise to three appeals
before the Madras High court, one by defendants 1 to 6 and the others by the
trustees and the alienees respectively. These appeals were appeals A. S. No.
473, 510 and 544 of 1944. The three appeals were heard together and on December
20, 1944, a common judgment was delivered. The High Court confirmed the ending
of the trial court that the trustee were liable to render account for the
management of the trust, and it remanded the suit for a finding as to the
market value of the lands covered by the respective sale deeds which had been
challenged by defendants 1 to 6 The High Court thought that in determining the
validity of the claim made by defendants 1 to 6 it was necessary to find out
the proper value of the properties at the relevant time for that alone would
enable the Court to decide whether the alienations had been effected by the
trustees for grossly inadequate price as alleged by defendants 1 to 6. In the
course of its judgment the High Court observed that it was not open to the
authors of the trust to challenge the validity of the transaction which was
permitted by them by the instrument of trust, for it was clear that under the
said trust deed the trustee were empowered to convey properties to the
creditors in the discharge of their duties. After remand the Subordinate Judge
took 213 evidence, made his findings and submitted them to the High Court. It
was at that stage that defendants 1 to 6 filed a petition for withdrawal of the
litigation. This petition was allowed on December 12, 1947, with the result
that the suit filed by defendants 1 to 6 O.S. No. 30 of 1943, was dismissed
with costs throughout.
Whilst the proceedings in the said three
appeals were pending in the High Court and before defendants 1 to 6 were
allowed to withdraw the litigation the present suit was filed on October 29,
1947, by the three plaintiff who are the creditors of defendants 1 to 6 and who
purported to act on behalf of the general body of creditors.
Leave was granted to the plaintiff under o.
1, r. 8 and the suit has, therefore, been conducted as a representative suit.
In the suit the plaintiffs ask for an account from defendant 7 and defendants
11 to 13 who are the legal representatives of Veerabahu Pillai on the
allegation that the trustee have been guilty of wilful default. They also claim
a declaration that the properties described in schedules I to VII-A and VIII
are still impressed with the trust and they ask for an order for the
administration of the trust by removing defendant 7 and appointing an
administrator to realise the amount due from the trustees on such account and
to recover possession of the properties mentioned in the said schedule, re-call
them and distribute the sale proceeds rateably amongst the unsecured creditors.
Several defences were raised to this suit by
the several defendants. It was denied that the trustees were negligent in the
matter of collecting the outstandings and that the alienations effected by them
were for inadequate considerations and otherwise improper and unjustified. It
was urged that the present suit was barred by res judicata as a result of the
withdrawal of 0. S. No. 30 of 1943. It was further alleged that the suit was
not maintainable, that it was bad for non-joinder of 214 parties and was barred
time. The respective by alienees pleaded that the transfers in their favour
were valid and binding. Defendant 7 Defendant specifically urged that he was
not guilty of any breach of trust; J and a plea was also raised that the
creditors who . had filed the present suit had acquiesced in some of the dealings
. Defendant 12 resisted the plaintiffs' case that he had intermeddled in the
management of the trust estate and was therefore liable as a trustee de son
tort. An objection was raised about the proper valuation of the suit and it was
urged that the proper court fee had not been paid. It was denied that sale
deeds executed by only two out of the three trustees were invalid. On these
pleadings twenty nine issues were framed by the learned trial judge.
In substance the trial judge rejected the
plaintiffs' claim for account, but he passed a decree declaring that the
properties described ill schedules I to III, V, VII, I to and VIII continued to
be impressed with the trust imposed upon them by the trustees. The decree
directed the removal of defendant 7 and the appointment of the advocates
instead as administration. It further directed defendants is, 13,14, 16 and 17
to deliver possession of the properties in their respective possession and
asked the administrators to re-sell the said properties and distribute the
proceeds amongst the creditors and to pay the surplus, if any, to defendants 1
to 6. Under the decree defendants 12, 13, 14 and 16 were held entitled to
receive the respective consideration of the sales and mortgages together with
interest and they were also liable to render account for profits of the
properties in their possession.
This decree gave rise to three appeals before
the High Court. Appeal A. S. No. 720 of 1949 was filed by defendant 14 and his
sons defendants 18 to 24. Appeal A. . No. 731 of 1949 was filed by defendants
12, 13 and 16; and Appeal A. S. No. '21 215 of 1950 by defendants 8, 9, 10 and
17. Ill substance the High Court has confirmed the decree passed by the trial
court and dismissed all the three appeals. The High Court has, however,
modified the trial court`s decree in regard to the interest which the decree
had ordered to be paid to the alienees. The High Court took the view that in
adjusting equities between the alienees, the alienations in whose favour were
found to be invalid, and the trust, the contract rate of interest need not be
awarded. Subject to the modifications made in regard to the payment of interest
the rest of the decree has been confirmed. Defendants X, 9 and 10 and the legal
representative of defendant 17 who died pending the proceedings before the High
Court have not challenged the decree passed by the High Court in their Appeal
A. S. No. 21 of 1950. Defendants 14 and 18 to 24 as well as defendants 12,13
and 16 have, however, challenged the decision of the High Court and have
obtained a Certificate from the said High Court in that behalf It would thus be
seen that in the two appeals before this Court we are concerned with six
transactional. B - 94 which is executed in favour of defendant 14, Ex. 13-90
which is executed in defendant 12, Exs. B. 37 and B. 79 which are executed in
favour of defendant 13 and Exs. B-104 and R-105 which are executed in favour of
defendant 16. Broadly stated both the Courts below have found that all these
alienations were effected for inadequate consideration. It has also been found
that Exs. B-94 and B-37 are invalid for the reason that they have bee executed
by only two out of the three trustees, whereas the transfers under EXS. B-12,
B-13 and be 16 held to be invalid as they are transfers in favour of the
relations of one of the trustees Veerabahu. It has further been found that
defendant 12 intermeddled with the estate of the trust and must therefore be
regarded as trustee de son tort and therefore the transfer made to him is 216
invalid as a matter of law. Both the Courts have rejected the plea of res
judicata and limitation raised by the defendants. There are some of the points
of law which are common to both the appeals and it would be convenient to deal
with them in a the order in which they have been raised before .
The First point argued before US by the
learned Attorney-General on behalf of the appellants in Civil Appeal No. 62 of
1959 (defendants 14 and 18 to 24) is one of limitation.
He contends that on a fair and reasonable construction
the present suit attracts the application of Art. 120 and is therefore barred.
On the other hand, Mr. viswanatha Sastri, for
The plaintiffs, contends that the plaint clearly showed that the plaintiffs are
not asking merely for a declaration but they are also claiming that a new
administrator should be appointed and a direction should be issued that the
property in question should be delivered to him. Such a claim, according to
him, obviously attracts Art. 131. It is common-ground that if Art. 120 applies
the suit is beyond time, whereas if Art. 134 is applicable the suit is within
time.
The decision of this question would naturally
depend upon the construction of the plaint. Is the claim made in the plaint one
of declaration, or is it a claim for possession of immovable properties? The
plaint sets out all the material facts which constitute the background to the
present litigation, marks material allegations in respect of all the alienation
impeached in the plaint, and by paragraph 35 it prays, inter aha, that
schedules I to VII-A and should be adjudged as still impressed as trust imposed
on them by the deed of August 26, 1936, and direct their re-sale.
That is cl.(c) of paragraph 35. By cl.(d) it
is prayed that the Court should order the administration of the trust by
removing defendant 7 if need be and appointing an administrator or officer of
court (1) to realise the 217 amounts mentioned in cl. (a), (b) to recover
possession. and re-sell the properties referred to in paragraph (c), (3) to distribute
the proceeds rateably amongst the unsecured creditors and perform such other
acts and functions as may be necessary to 6 effectuate the trust in question.
The learned Attorney General contends that cl. (c) asks for adjudication or
declaration that the properties in question are impressed with the trust and
that is no mere than a declaration, and according to him cl.(d) prays for the
appointment of an administrator to realise the amounts and to recover
possession of the properties and re-sell them. He suggests that on a fair
construction of cl. (d) all that the plaintiff pray for is the removal of
defendant 7 and the appointment of an administrator with power to realise the
amounts specified and to recover possession of the properties indicated and to re-
sell them. This is not a claim that possession should be delivered to the
administrator in the present suit. It may be conceded that if read by itself
alone cl.(d) may be capable of the construction which the learned
Attorney-General seeks to put on it; but in construing the plaint we must have
regard to all the relevant allegations made in the plaint and must look at the
substance of the matter and not its form. It is significant that the plaintiffs
have valued the suit for the purpose of court fee and jurisdiction at Rs.
23,745 and this valuation includes several items ill respect of different
properties valued under s, 7(5) of the Court Fees Act. The valuation made in
respect of the different items of properties under s.7(5) is obviously and
clearly valuation made on the footing that a claim for possession is made. In
fact the Plaint specifically avers that the plaintiff valued the suit for
possession covered by covered and D-2 under . 7(5) as indicated in the plaint.
Thus there can be no doubt that the plaint has been valued on the basic that a
claim for possession of the properties covered by the schedules Is intended to
be made. Besides, 218 it is also significant that in regard to the claim made
be the plaintiff in respect of the transfer in favour of defendant 14 his sons
defendant 18 to 24 have been joined specifically on the ground that since the
plaintiffs claim possession of the said property the said defendants are
necessary parties as it is found that they are in possession of the said properties.
In other words, the joinder of defendants 18 to 24 to the present suit is based
solely on the ground that a claim for possession is made in the plaint and
defendants 18 to 24 being in possession are necessary parties to the suit.
Therefore, in our opinion, reading the plaint as a whole it would be
unreasonable to construe cl. (d) in paragraph 35 in the manner suggested by the
learned Attorney- General. The prayer which the clause really purports to make
is that as administrator should be appointed and that an order should be passed
against the respective defendants asking them to deliver possession of the
properties to the said administrator. If that we so the plaint cannot be
construed as one in which a mere claim for declaration is made. It is a plaint
in which a declaration is no doubt claimed but based on the said declaration or
adjudication a further claim for possession to the administrator is also made.
The result, therefore, is that the argument
that the prayer made in the plaint attracts Art. 120 must be rejected.
The next continuation urged is that the
plaintiffs cannot sue for possession but must Confine themselves only to a
claim for declaration. It is not disputed by the learned Attorney-General that
in regard to public charitable trusts the beneficiaries are entitled to sue for
setting aside alienations of the trust properties improperly effected by the
trustees, and to ask for the restoration of possession of the said trust
properties to the trustees newly appointed. Indeed, there is ample judicial 219
authority in support of this position. In A.
Subramania Iyer v. P Nagarathna Naicker (1),
it was held by the Madras High Court that in a suit by the worshippers of a
temple to have the alienation of the trust property by some of the defendants,
trustees. to the other defendants declared invalid and for possession to the
trustees, the proper decree to be made if the Court be of the opinion that the
alienation is invalid is to decree possession to those defendants who are
trustee. It was further held that the trustees need not be referred to a
separate suit for the purpose. In masjid Shahid Ganj v. Shiromani, gurdwara
Parbandhak Committee, Amritsar (2) the Privy Council has recognised this right
in these words: 'The right of a Muslim worshipper may be regarded as an
individual right, but what is the nature of the right It is not a sort of
easement in gross, but an element in the general right of a beneficiary to have
the waqf property recovered by its proper custodians and applied to its proper
purpose. Such an individual may, if he sues in time, procure the ejectment of a
trespasser and have the property delivered into the possession of the Mutawali
or of some other person for the purposes of the waqf ".
The argument, however, is that in regard to
private trustee which are governed by the Indian Trusts Act such a course is
not open to the beneficiary because of the provisions of s.63 of the Trustee
Act. Section 63 provides that where trust property comes into the hands of a
third person inconsistently with the trust, the beneficiary may require him to
admit formally, or may institute a suit for a declaration, that the property is
comprised in the trust. The learned Attorney-General contends that the only
remedy available to a beneficiary under a private trust is that prescribed by
863 and no other. He can either require the alienee to admit that the property
is comprised in the trust, or if the alienee refuses to make the admission the
(1) (1910) 20 Mad. L, J, 151. (2) (1940) L. R.
671. A. 251, 267, 220 beneficiary may bring a
suit for a declaration in that behalf In support of this contention strong
reliance has been placed on the decision of the Privy Council in Rani (Chhatra
Kumari Devi v.
Prince Mohan Bikram Shah (1). In that case
the respondent had claimed title to the properties as owner in various ways and
had sued as the proprietor of the properties covered by the action. All these
grounds were rejected and it was held that the respondent could claim no title
as a proprietor at all. Even so, while dealing with the question of limitation
the Privy Council made certain observations and it is those observations which
are pressed into service by the learned Attorney General. Article 144 on which
the respondent relied in that case, it has been held, is applicable only to a
possessory suit by the owner of the property claimed against a person holding
adversely to him without title, and the plea made by the respondent that he was
the owner on several grounds was rejected; but in the course of its judgment
the Privy Council assumed that by reason of the contract pleaded by the
respondent the properties were impressed with the continuing trust in favour of
the respondent, and observed that even so their Lordships were unable to hold
that "this would entitle him to sue for possession as owner". Sir
George Lowndes, who delivered the judgment of the Board, referred to the fact
that "the Indian law does not recognise legal and equitable estates. By
that law, there can be but one owner, and where the property is vested in a
trustee, the owner must, their Lordships think, the trustee, and so the right
of a beneficiary is, in proper case, to call upon the trustee to Convey to
him". It is in that connection that Sir George Lowndes further observed
that the enforcement of this right would, their Lordships think, be barred
after six years under Art. 120 of the Limitation Act, and if the beneficiary
has allowed this period (1) (1931) I.L.R. 10 PAT. 851 221 to expire without
suing he cannot afterwards file a possessory suit, until conveyance he is not
the owner. It is clear that such a trust as is relied upon in the present case
would not fall within s.10 of the Limitation Act as it would be impossible to
hold that the properties which vested in the appellant under the terms of the
wills which have been proved were so vested for the specific purpose of making
them over to the respondent". It would thus be seen that these
observations mean no more than this that the beneficiary under a private trust
cannot claim to recover possession of the property from the trustee so as to
attract the application of Art.
144 of the Limitation Act. He can make the
claim for a declaration which would be governed by Art.
120. It is quite clear that the question as
to whether in a proper case the beneficiary can. not apply for the removal of
the trustee, for the appointment of a new trustee, and for the delivery to the
new trustee of the property improperly alienated by the previous trustee did
not fall to be considered in that case. All that the Privy Council was called
upon to consider was whether a beneficiary can bring a suit for possession
against a trustee and whether such a suit can be governed by art. 144; and in
holding that such a suit cannot be brought by the beneficiary the Privy Council
pointed out that Art. 144 postulates a suit by the owner and a beneficiary is
not an owner under the Indian Law of Trusts. We are, therefore, satisfied that
the observations on which reliance is placed by the learned Attorney General
cannot be said to amount to a decision that in no case can a beneficiary claim
that the trustee appointed under the trust should be removed and new trustee
should be appointed and the trust properties improperly alienated by the
previous trustee should be ordered to be delivered into the possession of the
new trustee. Section 63 no doubt provides for the two remedies which are
available to the beneficiary, but in our opinion 222 s. 63 cannot be treated as
exhaustive on the subject and so it cannot be urged that a claim for
constructive possession like the one made in the present suit is prohibited by
8. 63. Prima facie s. 10 of the Limitation Act seems to contemplate an action
by a beneficiary under a trust to which
8. 10 applies and provides that in such an
action the beneficiary may follow the property and ask for a proper order
&8 to the delivery of the said property to the Dew trustee. If that be so,
the provisions of s. 10 would suggest that the remedies prescribed by 8. 63 are
not exhaustive.
Besides, it would be relevant to observe that
if s. 63 is held to be exhaustive as to the remedies available to &
beneficiary it would lead to very anomalous results. If a trustee improperly
alienates the trust property the only remedy which would on that view be available
to the beneficiary is to obtain a declaration. How would this declaration be
effective to bring back to the trust the property improperly alienated?
Strictly and literally construed s. 63 dose not refer to the remedy for the
appointment of a new trustee either, so that on a literal construction of s. 63
even that remedy may be outside its purview but assuming that a beneficiary can
ask for a declaration that the property alienated is impressed in the trust and
also add a prayer for the appointment of a new trustee that only means that
after the new trustee is appointed he will have to sue the alienee for
possession and very often this suit would be defeated by the alienee's plea of
adverse possession. It is hardly necessary to emphasis that when the beneficiary
sues for a declaration as required by s. 63 and the alienee resists the said
suit the adverse possession of the alienee is emphatically brought out and the
pendency of the beneficiary's suit would not affect that position so that on
the view that a.
63 is exhaustive more often than not the
beneficiary's claim would in substance be defeated by the adverse possession of
the alienee.
223 In Subbaiya Pandaram v. Mahamad Mustapha
Maracayar (1), this is exactly what happened. In, the presence of the purchaser
it was declared that the trust have been validly created and that the property
was in fact a trust property. Their Lordships pointed out that "at the
moment when the said decree was passed the possession of the property was
adverse and the declaration that the property had been properly made subject to
the trust disposition, and therefore ought not to have been seized, did not
disturb or affect the quality of his possession ; it merely emphasised the fact
that it was adverse. No further step was taken in consequence of that
declaration until the present proceedings were instituted when it was too
late." We would like to add that if for bringing back to the trust the
properties improperly alienated by the trustees two suits are required to be
filed we apprehend that the second suit by the newly appointed trustee for
obtaining possession of the properties would almost always be too late, and so
s. 63 cannot be read as exhaustively dealing with all the remedies available to
the beneficiary. We must, therefore, reject the argument that the suit for
possession in the form in which the prayer has been made by the plaintiffs is
incompetent.
That takes US to the question of res
judicata. The argument is that on general grounds of res judicata the dismissal
of the suit (O. S. No. 30 of 1943) filed by defendants 1 to 6 should preclude
the trial of the present suit. It has been fairly conceded that in terms s. 11
of the Code cannot apply because the present suit is filed by the creditors
defendants 1 to 6 in their representative character and it conducted as a
representative suit under o. 1, r. 8; and it cannot be said that defendants 1
to 6 who were plaintiffs in the earlier suit and the creditors who have brought
the present suit are the same parties or parties who claim (1) [1923] L.R 50
I.A. 295.
224 through each other. Where s. 11 is the
thus inapplicable it would not be permissible to rely upon the general doctrine
of res judicata. We are dealing with a suit and the only ground on which res
judicata can be urged against such a suit can be the provisions of s. 11 and no
other. In our opinion therefore, there is no substance in the ground that the
present suit is barred by res judicata.
The next question which falls to be
considered is the most important question in these appeals. We have already
seen that three trustees were appointed under the trust deed executed by
defendants 1 to 6 and two of the impugned sale deeds have been executed by only
two out of the said three trustees. The Courts below have held that two out of
the three trustees could not convey a valid title and so on that ground alone
the two transfers are invalid. It is urged before us that this conclusion is
not justified on a fair and reasonable construction of cl. 23 of the trust
deed. Be. fore considering this point it is necessary to state the legal
position in the matter under the Trusts Act.
Section 48 of the Trusts Act provides that
when there are more trustees than one, all must join in the execution of the
trust, except where the instrument of trust otherwise provides. It is thus
clear that all acts which the trustees intend to take for executing the trust
must be taken by all of them acting together. Therefore, there can be no doubt
that if the validity of the alienations effected by the trustees falls to be
considered only in the light of s. 48 the fact that out of the three trustees
only two have executed the sale deeds would by itself make the transactions
invalid and would not convey title to the alienees. This position is not in
doubt.
Lewin on "Trusts" has observed that
"in the case of co-trustees the office is a joint one.
Where the administration of the trust is
vested in 225 Co-trustees they all form as it were but one collective trustee,
and therefore must execute the duties of the office in their joint capacity. it
is not uncommon to hear one of several trustees spoken of as the acting trustee
but the Court knows no such distinctions, all who accept the office are in the
eyes of the law acting trustees.
If anyone refuses or be incapable to join it
is not competent for the others to proceed without him, but the administration
of the trust must in that case devolve upon the Court. However, the act of one
trustee done with the sanction and approval of a co-trustee any be regarded as the
act of both. But such sanction or approval must be strictly proved (1) If one
of the trustees refuses to join in the execution of the trust, under the Indian
law s. 34 of the Trusts Act provides for the remedy. The other trustees can
apply to the Court as contemplated by 8. 34 and the trust may accordingly be
executed.
As we have seen s. 48 contemplates that its
provisions will not apply where the instrument of trust otherwise provides. In
other words, if a trust deed under which more trustees than one are appointed
expressly provides that the execution of the trust may be carried out not by
all but by one or more then of course the matter world be governed by the
special provision of the trust deed. The argument urged by the learned Attorney
General is that cl. 23 of the trust deed in suit makes such a provision. Both
the Courts below have rejected this plea but it is urged that the said
conclusion is based on a misconstruction of the relevant clause.
Clause 23 has been thus translated by the
High Court: "In all the proceedings to be taken in connection with this
estate, you three, either unanimously or according to the decision of the
majority, shall act". In the earlier litigation stated by defendants 1 to
6 this clause was thus translated:
(1) Lewin on trusts, 15th ed., p. 190.
226 "All the steps to be taken in
connection with this estate should be according to the unanimous opinion of all
the three of you or as decide(1) by the majority". The learned trial judge
has made this translation of the clause in the present proceedings: "In
all the proceedings to be taken in connection with the estate all the three
should act either unanimously or according to the decision of the
majority". The learned Attorney- General has supplied us with the literal
translation of the clause which reads thus: "In connection with this
estate, in all proceedings to be taken you three unanimously or according to
the decision of the majority shall act". We have carefully compared all
the translations, and we feel no difficulty in holding that the translation
supplied in the earlier litigation is somewhat inaccurate, whereas all the
three translations made in the present proceedings substantially agree. Taking
the translation supplied by the learned Attorney-General it is clear that what
this clause requires is that the three trustees shall act, and it provides that
they shall act according to the decision which may be reached either
unanimously or by majority. "You three," that is to say the three
trustees, is the subject of the predicate shall act"; and the words
between the subject and the predicate indicate how the decision has been
reached. Reading the clause as a whole it is difficult to accept the argument
that this clause allows two of the three trustees to act without joining the
third trustee in the actual action to be taken in the execution of the trust.
It is not necessary under the clause that in the matter of executing the trust
every decision must he unanimous. The clause recognises that in some matters
decision may be by majority;
but nevertheless it requires that once a
decision is reached either unanimously or by majority, in giving effect to the
decision and in taking any given action in the execution of the trust all the
three must act. Thus read this clause conforms to the statutory provision 227
contained in 8. 48 of the Indian Trusts Act and is not intended to provide for
an exception to the said provisions at all. It is urged that if no departure
was intended to be made from the principles laid down in s. 48 the clause need
not have been added at all. This argument is wholly inconclusive. There are
General other clauses in the trust deed which also bring out provisions
corresponding to the relevant provisions of the Trusts Act and this argument
may apply to the said clauses as well. The authors of the trust, while creating
the trust, have made elaborate provisions in respect of the trust, while
creating the trust, leave made elaborate provisions in respect of the several
matters concerning the execution of the trust, and the whole scheme of the
trust deed is consistent with the operative cl. 23 in that it seems to require
all the trustees to act together even though the decisions which they seek to
give effect to may have been majority decisions and not unanimous decisions.
Therefore, in our opinion, the Courts below were right in holding that cl. 23,
like the main provision of s. 48, requires that all the trustees should have
joined in the execution of the sale deeds in question. That being so, Exs.
:B-91 and B-37 which are respectively executed in favour of defendant 14 and
defendant 13 are invalid and can pass no title to the alienees on the ground
that only two out of the three trustees have executed them [Vide: Lala Man
Mohan Das v. Janki Prasad (1)].
In support of the validity of these transfers
an alternative argument has been urged before US.
It is pointed out that according to Lewin on
Trusts, if the act to the two trustees has been done with the sanction and
approval of the third trustee then it may be regarded as an act of the three
trustees, and it is urged that in the present case the third trustee had
consented and shown his approval to the transactions in question. The two sale
deeds have been executed by defendant 7 and Veerabahu (6) [1944] L. R. 72 T. A.
39.
228 Pillai, and they do not bear the
signature of Narayana Pillai but this. alternative contention proceeds. on the
assumption that though Narayana Pillai did not sign the document (Ex. B-94) he
had in fact consented to it and had shown his approval to the transaction. This
argument, however, cannot be accepted having regard to the concurrent finding
recorded by the Courts. below on this point. Dealing with this question the
trial court has referred to the discrepant versions given for Narayana Pillai
not joining in the execution of the sale deed. He points out that no mention
is.
made in the sale deed as regards. the
circumstances under which the third trustee did not join. Then he examines the
evidence given by defendant 7 and points out the infirmities in the said
evidence. He compares. the evidence given by defendant 13 in the previous. suit
and observes that the explanations. given are inconsistent. One of the
explanations was that Narayana Pillai declined to come to the Sub-Registrar's office
as he was. heavily involved and that people would think that he was selling
his. property. The other explanation was that Narayana Pillai wanted come
accommodation, and when his co-trustees refused to agree he declined to join
the execution of the document. The trial court has observed that there was
nothing to show that Narayana Pillai was financially involved at the relevant
time, and he points. Out that in fact Narayana Pillai had gone to the
sub-Registrar's. Office near about that time in connection with another
transaction. That is how the trial court has rejected the argument that
Narayana Pillai was a consenting party to the transaction in question. The High
Court has concurred with this conclusion. In dealing with this question the
High Court has preferred to believe the evidence of the first defendant that
Narayana Pillai considered the prices fixed for Ex. B-94 as very low and for
that reason refused to be a party to it. It has contrasted this reason with the
other reasons given on behalf of the alienees, and it has recorded its
conclusions in these words:
229 "Whatever may be the reason it is
certain that Narayana Pillai was not a consenting party to the transaction and
there being no other evidence by way of minutes of any meeting of the trustees
had decided with the knowledge of Narayana Pillai, though he had dissented, we
are unable to hold that there has been such a decision of the majority as would
bind the dissenting trustee". It does appear the original draft of Ex.
B-94 was made on the assumption that all the trustees would join in the
execution of the document but the hope and anticipation formed by the two
trustees was believed and so the document was ultimately executed by two of
them without Narayana Pillai joining. We have considered the evidence to which
our attention was invited in this connection, and we see no reason to interfere
with the concurrent conclusion recorded by the Courts below that Narayana
Pillai was not a consenting party to the transfer in question. 'that being so,
the alternative ground made in support of Ex. B-94 fails. If the transfers in
favour of defendant 14 (Ex. B-94) as well as Ex;. B-37 in favour of defendant
13 fail on this ground it is really not necessary to consider the further
question as to whether both the said transfers were effected for grossly
inadequate consideration.
The next question which has been raised on
behalf of defendant 14 is in regard to the amendment made by the High Court in
its decretal order. It is urged that this amendment was made after the appeals
to this court had been admitted and so it is without jurisdiction. It appears
that the certificate was granted by the High Court to the respective defendants
who have come to this Court as appellants on November 26, 1954, and the appeals
were admitted on December 4, 1955, whereas the amendment has been made after
the appeals were admitted. The application for the amendment in question was
made under s. 151 and 152 of the Code; and it became necessary because the
decretal order drawn in the High Court referred to the profits 230 of which
accounts were directed as mesne profits.
The use of the words "mesne
profits" would have inevitably brought ill the period of three years
beyond which accounts could not be claimed. By r J their application the
plaintiffs alleged that the use of "mesne profits" in the decretal
order was inconsistent with the judgment which had directed accounts of the net
profits as so they claimed that the decretal order should be corrected in cl.
III, sub-cl.(3). According to the prayer thus
made it was suggested that the clause should read as follows "that the
defendants 12, 13 and 14 are liable for the net profits of the properties
purchased by them under schedule V, schedule II and schedule I respectively"
The word "net profit" was used in the place of "mesne
profits" originally introduced ill the order. When this application for
amendment was argued before the High Court the defendants pleaded that the use
of the words "mesne profits" was proper and should not be changed. It
was urged on their behalf that in its judgment the High Court had introduced
the words "mesne profits" deliberately and so the decretal order was
perfectly correct. This contention has been negatived by the High Court, and in
our opinion rightly. It appears that in the earlier portion if his judgment
Krishnaswami Naidu, J., summarised ill one paragraph the effect of the decree
passed by the trial court; and in giving this summary he observed that under
the decree defendants 12, 13, 14 and 16 were held entitled to be paid the
respective considerations of the sales and mortgages together with interest
they being liable to account for mesne profits as per the terms of the decree.
Two things are clear.
Th s part of the judgment does not contain
the decision of the High Court at all. It is really concerned with the
narration of the relevant facts and it purports to summarise the effect of the
decree and nothing more. Besides, the use of the words "mesne
profits" in the context is obviously the result of inadvertence because
the decree of the 231 trial court had in the relevant clause used the words
"net profits" and not "mesne profits". Thus, there can be
no doubt that the decretal order drawn in the High Court through error introduced
the words "mesne profits" and such an error could be corrected by the
High Court under ss. 151 and 152 of the Code even though the appeals may have
been admitted in this Court before the date of correction.
But apart from this technical argument about
the jurisdiction of the High Court to make the correction the point in question
has been raised on the merits before us; and it is urged that the plaintiffs
are not entitled to anything more than three years' profits from the respective
defendants. The argument is that Art. 109 of the Limitation Act applies to such
a claim and the claim is confined to three years under that article. Article
109 deals with claims for profits of immovable property belonging to the
plaintiffs which have been wrongfully received by the defendants and it
prescribes there years' period of limitation commencing from the time when the
profits were received. Normally there is no doubt that a successful plaintiff
would be entitled to mesne profits for three years and not more; but in the
present case we are dealing with a claim made by the plaintiffs on behalf of
the trust and the decision in their favour has rendered it necessary to adjust
equities between the trust and the respective alienees alienations in whose
favour have been set aside as invalid. We have already seen that having set
aside the alienations in favour of defendant 14 and others the Courts below
have directed that the alienees should get the amounts due to them from the
trust. It has also been directed that interest at the rate awarded by the
decree should be paid to them on the said amounts. This clearly is an equitable
relief granted to the alienees. Having held that the alienees should get
interest on the amounts due to them from the dates of their respective
mortgages or 232 sales the Courts in fairness have directed that the alienees
in turn should give an account of the net profits of the properties which were
wrongfully in their possession commencing with the date when 7 they got
possession. If the technical argument based on Art. 109 is upheld as a matter
of law there would be no scope for giving equitable relief to the alienees as
all and they may be driven to file fresh actions to recover their claims and
such actions would have to face the possible plea of limitation. That is why the
High Court has observed that the question about the net profits awardable to
the trust and interest awardable to the alienees involves considerations of
equitable adjustment, and it is by way of an equitable adjustment that the
relevant directions have been issued by the decree. It is not disputed that the
Court had jurisdiction to make such an equitable adjustment.
Indeed, in many cases of this type Courts
have made equitable adjustments between rival parties Vide: Satgur Prasad v.
Har Narain Das (1); Bhagwat Dayal Singh v. Debi Dayal Sahu (2). The principal
and interest ordered to be paid to defendant 14 and the profits ordered to be
paid by him are thus integral parts of on equitable adjustment between the
plaintiffs and defendant 14.
It is also urged on behalf of defendant 14
that the High Court was in error in modifying the decree passed by the trial
Court by changing 10 1/2% interest at compound rate to 10 1/2% simple interest
in favour of defendant 14. The contention if that under the mortgage executed
in favour of defendant 14 (Erg. B-95) the contract rate was 101 compound
interest and as mortgagee defendant 14 was entitled to that rate. In support of
this argument reliance is placed on the decision of the Privy Council in
Jagnnath Prasad Singh Chowdhury v. Surajmal Jalal (a). In that case the Privy
Council has held (1) (1932) L. R. 59 1. A.A. 147. (2) (1908) L. R. 35 I. A. 48,
59.
(3) (1926) L.R. 54 I. A. 1.
233 that on a preliminary decree for
foreclosure or sale under O. XXXIV ,rr. 2, 4 of the Code, a mortgagee is
entitled to interest at the rate and with the . rests stipulated in the
mortgage, down to this date filed for redemption by the decree.
This position 6 cannot be disputed; but the
answer to the plea is that the present decree is not passed in an action
instituted by defendant 14 as a mortgagee. The present decree is passed while
adjusting equities between defendant 14 the alienation in whose favour is set
aside; his rights as mortgagee are equitably recognised and thereby further litigation
is avoided. Since the decree by which defendant 14 is allowed to recover his
mortgage dues has been passed for giving him equitable relief it was open to
the High Court to consider whether compound interest should be paid to him or
not. As the High Court has pointed out, while adjusting equities between the
parties the mortgage does not become revived as such but the relief granted to
the 14th defendant is based on equity and justice, and so the High Court
thought that the interests of justice would be met if he is paid out of the
sale proceeds the principal amount of the mortgage with simple interest at 10
1/2%. We have carefully considered the contention' raised by the learned
Attorney-General in this behalf but we do not think that we would be justified
in interfering with the modification made by the High Court in the decree
passed by the trial court. In the result Civil Appeal No. 62 of 1959 files by
defendants 14 and 18 to 24 fails and is dismissed with costs.
We now turn to Civil Appeal No. 77 of 1959
filed by defendants 12, 13 and 16. We will take the case of defendant 12 first.
We have already seen that in favour of defendant 12 a sale deed has been
executed on November 7, 1941 (Ex. B-90).
This sale deed has been set aside on two
grounds- one that it is executed in favour of a person who by intermeddling
with the estate of the trust has 234 become trustee de son tort, and second
that the properties covered by the document have been sold for inadequate
consideration. It is conceded by Mr. Ganapathy Iyer that if we confirm the J
finding recorded by the Courts below against defendant 12 on the first point
that it self would invalidate the transfer in his favour. He has, however,
argued that the said finding is erroneous. Having carefully considered the
relevant material we see no reason to interfere with the finding in question.
In this connection it would be enough if we briefly refer to the relevant
evidence bearing on this point. Defendant 12 wrote to Pichu Ayyar Avergal,
defendant 15, who was a clerk of the trust estate on August 20, 1936, in these
words: request you that Pathai properties may be checked, that Piramanayakam
Pillai coming (there) may be consulted with regard to all matters and
settlement made and that you may also come here on Monday morning and render
necessary assistance". The tone of the communication and its contents are
significant. It is not the language of a person who is merely assisting the
trustee. He is issuing directions to the clerk of the trust. Defendant 12 was a
creditor of defendants 1 to 6. It is, however, common-ground that when sale
deed (Ex. B.12) was executed in favour of defendant 13 on December 19, 1936,
defendant 13 who is no other than the brother of defendant 12 had undertaken to
satisfy defendant 12s debt and so as from that date defendant 12 had ceased to
be a creditor of the estate. Even so, he was intermeddling with the estate
throughout. On October 14,1938, he wrote to the Agent of the Travancore
National and Quilon Bank suggesting that he would pay a sum of Rs.
10,000 for the entire amount payable to the
bank by the debtors and he requested the Bank to have the debt discharged in
that manner. Then he added that "as the price of the lands have gone down
very much owing to conditions at the present time" he requested that the
sum of Rs. 10,000 may 235 be received and that the entire debt should thus be
discharged. It, would be noticed that at this date defendant 12 was not a
creditor of the estate and he had, therefore, no business to write to the Bank.
This letter, like the earlier one which we have already seen, clearly indicates
that defendant 12 had taken it upon himself to administer the trust. To the
same effect is another letter written by him to the official Liquidator of the
said Bank on January 9, 1939. In this letter defendant 12 says that "the
trustees are arranging for several settlements in deference to the wishes of
Mr. Ayyah Sastri, but owing to the nature of time the matter stands unsettled
even though both are agreed willingly ". Then he refers to the proposal to
settle all the debts and promises that "the matter will be finally settled
if the trustees meet you personally". "I, therefore, request you ',
says defendant 12, to kindly excuse the little delay and pray to fulfill the
great task", and he adds " I am also coming there". Then
followed a suit by the Bank, No. 12 of 1939 to which defendants 12 and 13 were
impleaded and in this suit defendants 12 and 13 entered into a compromise with
the plaintiff Bank and obtained a compromise decree. It is unnecessary to refer
to the terms of the compromise decree. What is material is the conduct of
defendant 12 in entering into compromise with the Bank. Defendant 13 may have
been justified in entering into the compromise but defendant 12 could have done
to only as an intermeddler. This decree was passed on February 14, 1941. Ex.
P-7 is also relevant on this point. This is a notice issued to defendant 12 by
one of the creditors of the estate. It appears that this creditor had given to
defendant 12 a receipt signed by him in order to enable defendant 12 to draw
the amount from defendant 14 to be paid to the said creditor.
The notice further recites that "it now
transpires that about the middle of July, 1937, you drew the said amount of
Rs.455 from the said Janakirama Iyer and have 236 failed till now to account
for the same to my client". In other words, this notice shows that
defendant 12 had promised to pay to the creditor Rs. 425 due to him from the
estate and had failed to do so. The result was the suit by the creditor (Small
Cause Suit No. 58 of 1940). This suit again was compromised by defendant 12.
There is yet another document Ex-121 which
shows how defendant 12 was intermeddling with the estate. This is a receipt
passed by the clerk of the estate to one Subbayyar Avergal on March 9, 1937. It
reads thus: "According to the order directed by defendant 12 I have
received from you on this date Rs. 400 from the sale of the current Pisanam
paddy produce from the estate of M. R. Ry. P.S. Krishnaswami Ayyar Avergal
vagaira, Kalakkadu Pannai". It is clear that the clerk of the estate
Pichandi Ayyar who passed the receipt had been directed by defendant 12 to
receive Rs.400 from Subbayyar Avergal. The had accordingly received that amount
and passed a receipt in that behalf.
Now, is. defendant 12 directed the clerk of
the estate to receive a certain amount for and on behalf of the estate it
clearly amounts to intermedding with the estate and it makes him trustee de son
tort. Defendant 12 had given evidence in the earlier litigation in which he had
stated that he, defendant 13 and Veerabahu Pillai were members of an undivided
family. In the present proceedings defendant 12 has gone back upon his
admission that he and his brothers constituted an undivided family. The trial
court has accepted this latter plea and the High Court has not differed from
it; but that apart, the several statements made by defendant 12 in the said
evidence clearly show that he was taking as much active part in the affairs of
the trust as his brother Veerabahu.
There is yet another fact to which reference
may be made. As the High Court has pointed out, the sale in favour of defendant
12 was executed on 237 November 7, 1941, and yet the properties covered by the
said document appear to have been put in his possession as early as 1937. In
other words, defendant 12 entered into possession of the properties nearly four
years before the sale was executed in his favour. It is in the light of these
facts that the Courts below have held that defendant 12 is a trustee de son
tort. As is observed is Williams on Executors and Administrator(1) "a very
slight act of intermeddling with the goods of the deceased will make a person
executor de son tort". In the present case the acts of intermeddling by defendant
12 spread over a fairly long period and cannot in any sense he regarded as
minor and insignificant. We would accordingly hold that defendant 12 is in the
position of trustee de son tort and to the sale deed executed in his favour
(Ex.B-90) is bad on that account alone.
In regard to defendant 13 there are two
transactions in his favour, Ex. B-37 and Ex.B-79.
Ex. 37, as we have already seen, is invalid
for the reason that it has been executed by two out of the three trustees. That
leaves Ex. B-79; but before we deal with that transaction it would be relevant
to refer to a general consideration which applies to all the transfers in
favour of defendants 12, 13 and 16. Defendants 12 and 13 are the step brothers
of Veerabahu and defendant 16 is the son-in-law of defendant 13. It is quite
clear that under s. 52 of the Trusts Act "no trustee whose duty it is to
sell trust-property, and no agent employed by such trustee for the purpose of
the sale, may, directly or indirectly, buy the same or any interest therein, on
his own account or as agent for a third person". This position is thus
stated by Lewin on Trust: "A trustee is absolutely and entirely disabled
from purchasing the trust property whether it be real estate or a chattel
personal, land, or a ground rent, in reversion or possession, whether the
purchase be made in the trustee's own name or (1) Williams of Executors and
Administrators, 14th ed., Vol. 1, p. 28, 238 in the name of a trustee for him,
directly or indirectly, as to a purchaser upon a contract or understanding
(amounting to more than mere expectation) that the purchaser shall re-sell to
the trustee, by private contractor public auction, from himself as the single
trustee, or with the sanction of his co-trustees(1). Thus, the alienations by the
trustees in favour of the near- relatives of one of the trustees would be bad
for this reason. Besides, under s. 47 of the Indian Trusts Act a trustee cannot
delegate his office or any of his duties either to a co. trustee or to a
stranger, unless the instrument of trust so provides, or the delegation is in
the regular course of business, or the delegation is necessary, or the
beneficiary, being competent to contract, contents to the delegation. The trust
did impose upon the trustees the obligation to sell the properties of the trust
at the highest price recoverable and to distribute the sale proceeds amongst
the creditors of the authors of the trust. The documents in favour of
defendants 13 and 16 seem to leave it to the respective purchasers to pay the
debts and that map be another infirmity in the transaction.
Going back to Ex.B-79 which is a transfer in
favour of defendant 13 it is evident that this transaction is inevitably
connected with another transaction Ex. B-25. Ex. B-79 has been executed for a
consideration of Rs.2,000 and odd and it relates to 3 acres and 14 cents of
schedule VIII property. It appears that defendant 13 had obtained another sale
deed Ex. B-25 on April 19, 1937 This sale deed consisted of 51 items of
property belonging to the trust which had spread over five villages. These
items consisted of house-sites and lands. The sale deed was for Rs.
5,000. Defendant 13 in his turn proceeded to
sell the said property by different lots to respective buyers. Amongst the
creditors of the estate was Lakshmi (1) Lewin on Trusts, 15th ed, p. 797.
239 Ammal to whom Rs. 800 was payable on the
basis of 50% of return of debt. Defendant sold to I..
Lakshmi Ammal 64 cents out of the lands
purchased by him under Ex. B-25. It, however, appears that in respect of the 3
acres and 14 cents which ,7 was the subject-matter of Ex. B-25. Original Suit
No. 32 of 1941 was instituted by persons who claimed title to the said
property. To that suit Lakshmi Ammal was impleaded as to defendant and so was
defendant 13. Ultimately the said suit was decreed and the property in question
was held to belong to the plaintiffs in that suit and not to the estate of
defendants 1 to s. It was as a result of this decree that Ex. B-79 came to be
passed in favour of defendant 13. This document purports to convey 3 acres and
14 cents of another property to make good the lose to him by reason of the
decree in Suit No. 32 of 1941. Thus, it would be seen that the transaction
evidenced by Ex. B-70 can stand only if the transaction by evidenced by Ex.
B-26 is valid and not otherwise. The Courts below have held that this latter
transaction is obviously and patently invalid. In our opinion, this conclusion
is right. It is true that Ex. B-25 is not directly challenged in the present
suit because the properties covered by it have been sold to different
purchasers by defendant 13 and they have not been impleaded. Even so, since Ex.
B-25 is the very foundation of Ex. B-79 it is
open to the plaintiffs to contend that the validity of Ex 26 should be
considered for determining the validity of Ex. B-79, and that is what the
Courts below have done. Now, one has merely to look at the broad features of
Ex. B-25 to be satisfied that it is an invalid transaction. It is patent that
no attempt was made to value the properties individually. The properties
numbering 51 and spread over five villages were all grouped together and sold
for Rs. 5,000 without making any serious efforts to determine the value 240 of
the lot. The purchaser was told to sell the properties to the respective
creditors of the estate and thus satisfy them. The in substance is delegation
of the functions of the trustees which they could not J delegate to defendant
13. The stamp paper for the sale deed Ex. B.25 stands in the name of Veerabahu
Pillai and defendant 13 was unable to explain how the stamp paper came to be in
that name. Defendant 13 admitted that he did not inspect the property before
its purchase and that he had no idea about its value. As the trial court had
observed, the transaction cannot be regarded was a bona fide sale because the
property consists of odd assortment of punja lands and house sites in Pathi,
Padmaneri and Sivalpuri villages". Therefore, we have no difficulty
whatever in agreeing with the conclusion of the Courts below that Ex. B-25 was
invalid; if that be so Ex. B-79 must be held to be invalid for that reason
alone. Incidentally, we may refer to the fact that defendant 13 admitted in the
earlier suit that he had not refunded the purchase money to Lakshmi Ammal and
that substantially destroys the basis of Ex. B-79 because defendant 13 not
having paid anything to Lakshmi Ammal had no right to retain the property
conveyed to him.
The last transactions which have yet to be
examined are those in favour of defendant 16. In regard to these transactions
the trial court has found that evidence adduced by the plaintiffs shows that
the consideration for which properties were sold were grossly inadequate. The
vendee, defendant 16, did not care to examine himself.
Besides, as we have already pointed out he is
a close relation of defendants 12 and 13. The High Court has concurred with the
trial court's conclusion. The only point which was attempted to be made by Mr.
Pattabhiraman in challenging the correctness of this concurrent conclusion is
that the Courts appear to have assumed that the agricultural lands conveyed to
defendant 16 were all double crop lands. On this assumption he suggested that .
241 the calculation made about the true value
of the said properties errs on the side of overstatement.
It is not disputed that of the lands conveyed
3 1/2 acres and 24 cents are single crop while approximately 3 acres are double
crop. On looking at the judgments of both the Courts below, however, we are
satisfied that the argument is misconceived because neither judgment proceeds
on the assumption that the whole of the agricultural property is double crop
land. In fact the discussion in the judgment of the trial court on Issue No. 27
quite clearly negative the assumption made by Mr. Pattabhiraman. that being so
as the Courts below have observed, evidence led by the plaintiffs in support of
their case that the transfers were effected for grossly inadequate price has
remained unrebutted. The question about the value of the property has been
determined on the evidence, documentary and oral, led in the case, and both the
Courts have found in favour of the plaintiffs and against the alienees.
Incidentally, we may point out that Mr.
Viswanatha Sastri appears to be right when he suggests that schedule VII refers
to the properties both at Thirukurunkudi as well as Padmaneri though the
heading of the schedule refers only to Thirukurunkudi. In the result Civil
Appeal No. 77 of 1959 preferred by defendants 12, 13 and 16 fails and is
dismissed with costs.
Appeals dismissed.
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