Trust Petition No.8 of 1995

13th August, 1999

Petitioner Counsel: Ms. SNEHAL PARANJPE with Mr. D.D. JUVEKAR i/b. M/s. GAGRAT & Co.
Respondent Counsel: Ms. B. M. KULKARNI i/b. M/s. HARIA & Co.Ms. ANJALI CHANDURKAR with Ms. U.K. SHAH i/b M/s. K. D. SHAH Mr. A. Y. BOOKWALA with Mr. Z.A. JARIWALA i/b. M/s. THAKORE JARIWALA & ASSOCIATES

Cases Cited:
Devlakshmi Harisukh Vahalia & Ors. Vs. Vishwakant P. Bhatt, AIR 1972 Bom. 103 [Para 6]
Letterstedt (now Vicomtesse Montmort & Broers & Anr.,, Vol. 9 P.C. 371 [Para 6]
Nathabhai Devidas & Ors. Vs. Vaghjibhai Jhaverbhai, AIR 1928 Bom. 20 [Para 6,8]
Patel Vrajlal Bhagwandas Vs. Patel Jamnadas Tribhovandas & Ors., AIR 1956 Saurashtra 51 [Para 6]
Tirathdas Dharamdas & Anr., Vs. Sh. Parmeshwaribai w/o. Kundanmal , AIR (30) 1943 Sind 223 [Para 6]
Khatoon Jannat Bibi Vs. Syed Wali Ullah & Anr., AIR (36) 1949 All. 310 [Para 7,8]

JUDGMENT

JUDGMENT :- The Petitioners - Beneficiaries of the Trust have approached this Court for reliefs against the original Respondents 1 and 2. During the Course of the proceedings, Respondent No.1 expired and his legal heirs have been brought on record. The Petitioners amongst other reliefs, sought removal of Respondents Nos. 1 and 2 as Trustees and consequential relief that some other fit and proper persons he appointed in their place. Relief was also sought seeking accounts from the Respondents 1 & 2; for reimbursement of amounts of Rs.21,398/- alongwith interest, with a further relief that accounts be made and income due and payable to the Petitioner No.1 be paid towards his life interest of the Trust.

2. The removal of the Trustees was sought amongst others on the following grounds :-

(i) That the original Respondent No.1 and Respondent No.2 had become unfit and are personally incapable of acting in the interest of the beneficiaries under the Trust ;

(ii) That they had been acting in a manner inconsistent with the objects of the Trust ;

(iii) That they had failed to execute the Trust ;

(iv) That they had failed to inform themselves of the state of the Trust property;

(v) That they had failed to protect the title of the Trust properties ;

(vi) That they had failed to take care as required by the Trustees, of the Trust Property ; and

(vii) That they had failed to prevent waste of the Trust Property.

Apart from that in paragraph 7, it is mentioned that the Trustees had failed in maintaining proper and/or complete accounts of the affairs of the Trust. In paragraph 23 it is averred that the claim of the Petitioners against the Trustee Respondents arises out of wrong done by them to the Petitioners which is a continuous wrong and hence the Petition.

3. At the hearing of the Petition on behalf of Respondent No.2, the heirs of Respondent No.1 and Respondent No.3, who is son of Respondent No. 2, it is contended that the Petition is not maintainable under Sections 73 and/or 74 of the Indian Trusts Act, as there are contentions issues which cannot be gone into, in an application under Sections 73 and 74 of the Indian Trusts Act and consequently should be dismissed.

On the other hand, on behalf of the Petitioners it is contended that this Court apart from exercising its jurisdiction under the Indian Trusts Act is also exercising jurisdiction in equity. It is contended that under Section 74 the Court can remove a Trustee and the other reliefs are merely ancillary which can be granted by the Court. The Petition was filed in 1995 ; the objection for the first time was raised in 1997. It is submitted that the Court having entertained the Petition should not now drive the petitioners to the remedy of a Suit. Apart from that it is contended that equity would require that this Court consider the matter more so considering the Respondent No. 1 has expired in the course of the proceedings. As a vacancy has arisen which has not been filled up in the manner required by t he Trust Deed, the Court should exercise jurisdiction and appoint a Trustee under Section 74 of the Indian Trust Act. Parties have relied on various authorities in support of their respective contentions.

4. Before I deal with the contentions, it would be appropriate to have a look at the provisions of the Indian Trusts Act. Chapter VI of the Act deals with the rights and the liabilities of the beneficiaries. Under Section 59 a beneficiary, where no trustees are appointed or all the trustees die, disclaim or are discharged, or where for any other reason the execution of a trust by the trustee is or becomes impracticable, may institute a suit for the execution of the Trust, and the trust shall so far as may be possible, be executed by the Court until the appointment of a trustee or new trustee. Under Section 60, the beneficiary has a right that the trust property shall be properly protected and held and administered by proper persons, and by a proper number of such persons. Explanation I sets out as to who are not proper persons within the meaning of this section. They include a person domiciled abroad; an alien enemy; a person having an interest inconsistent with that of the beneficiary; a person in insolvent circumstances and unless the personal law of the beneficiary allows otherwise; a married woman and a minor. Explanation II sets out that when the administration of the trust involves the receipt and custody of money, the number of trustees should be at least two. Illustration (e) to the Section reads as under :-

"(e) A, a trustee for B, refuses to act, or goes to reside permanently out of India, or is declared an insolvent, or compounds with his creditors or suffers a co-trustee to commit a breach of trust, B may institute a suit to have A removed and a new trustee appointed in his room."

Under Section 61, the beneficiary has a right that his trustees shall be compelled to perform any particular act of his duty as such, and restrained from committing any contemplated or probable breach of trust.

Chapter VII deals with vacating the office of a trustee. Section 70 sets out that the office of a trustee is vacated by his death or by his discharge from his office. Section 71 sets out when a trustee may be discharged from his office. The circumstances are (a) by the extinction of the Trust; (b) by the completion of his duties under the Trust; (c) by such means as may be prescribed by the instrument of trust; (d) by appointment under this Act of a new trustee in his place; (e) by consent of himself and the beneficiary; or where there are more beneficiaries than one, all the beneficiaries being competent to contract; (f) by the Court to which a petition for his discharge is presented under this Act.

We then have the two relevant Sections on which much stress has been laid by both the parties viz. Sections 73 and 74. Under Section 73, whenever any person appointed a trustee disclaims, or any trustee, either original or substituted, dies, or has for a continuous period of six months, being absent from India or leaves India for the purpose of residing abroad; or is declared as insolvent, desires to be discharged from the trust, or refuses or becomes, in the opinion of a principal civil court of original jurisdiction, unfit or personally incapable to act in t he trust or accepts an inconsistent trust, a new trustee may be appointed in his place by a person nominated for that purpose by the instrument of trust, if any, or in the manner provided by sub-clause (b).

Under Section 74, whenever any such vacancy or disqualification occurs and it is found impracticable to appoint a new trustee under Section 73, the beneficiary may, without instituting a suit, apply by petition to a principal civil court of original jurisdiction for the appointment of a trustee or a new trustee, and the Court may appoint a trustee or a new trustee accordingly.

5. Therefore, Sections 70, 71, 73 and 74 provide for a situation when a trustee vacates his office and the manner of appointment of a trustee in the place of the Trustee who dies or is discharged from office. The question therefore is what is the scope and extent of Section 74 of the Indian Trusts Act. If Section 74 read in its pristine form would contemplate that a vacancy or disqualification occurs and it is found impracticable to appoint a new trustee under Section 73, the beneficiary can move the principal civil court of original jurisdiction to appoint a trustee. Therefore Section 74 springs into action if an appointment is found to be impracticable under Section 73. Section 73 as pointed out earlier provides for various situations when a trustee can be appointed. I may briefly set them as under :-

a trustee disclaims - dies - original or substitute - is absent for a continuous period of 6 months from India - leaves India to reside abroad - is declared insolvent - desires to be discharged - or refuses or becomes in the opinion of the principal civil court of original jurisdiction - unfit or personally incapable of acting - accepts appointment as a trustee in an inconsistent trust. In these circumstances, a new trustee can be appointed by persons set out therein.

Therefore it is apparent that a vacancy must arise in order to enable the persons set out in clause (b) of Section 73 to appoint a new trustee. It is only in the event where it is found impracticable to appoint a new trustee under Section 73, the beneficiary can move the civil court having the original jurisdiction to fill in the vacancy. In the instant case, this Court being the principal civil court of original jurisdiction which has jurisdiction.

The entire stress in the instant case is for the meaning of the words "unfit or personally incapable". It has been contended that the words "unfit or personally incapable" contemplate two different meanings. Whereas "personally incapable" may mean physical incapability, "unfitness" could also include misconduct or breach of trust by a trustee. It is therefore contended that under Section 74 a beneficiary can move this Court for appointment of a new trustee if a trustee has become unfit.

6. The expression "unfit" or personally "incapable" has been the subject matter of interpretation. I therefore would like to refer to the said judgments to find out the scope and effect of the jurisdiction of this Court under Section 74.

Various judgments have been cited. However, in my opinion, only some of them need to be referred to which are relevant for the purposes of disposing of the preliminary issue. While considering the scope and ambit of the Indian Trusts Act, certain observations of this Court in the case of Devlakshmi Harisukh Vahalia & Ors. Vs. Vishwakant P. Bhatt reported in A.I.R. 1972 Bombay Pg. 103 may be material. A learned Single Judge of this Court observed as under :-

"The Indian Trusts Act was intended to codify the law relating to private trusts and trustees. The use of the expression "define and amend" in, and the omission of the word "consolidate" from, the preamble to the said Act shows that, whilst the Act is exhaustive in respect of any matter specifically provided for in it, not exhaustive of all matters relating to private trusts. In cases covered by the Act, therefore, the provisions of the Act alone must be applied, but in any case not covered by the Act, the Court is entitled to apply rules of English Law, as laid down by judicial decisions in that country which are not inconsistent with the Act, and the rules of justice, equity and good conscience."

In Letterstedt (now Vicomtesse Montmort) and Broers and Anr., Volume 9 and Privy Council Pg. 371 it was observed as under:-

"It seems to their Lordships that the jurisdiction which a Court of Equity has no difficulty in exercising under the circumstances indicated by Story is merely ancillary to its principal duty, to see that the trusts are properly executed. This duty is constantly being performed by the substitution of new trustees in the place of original trustees for a variety of reasons in non-contentious cases."

A Division Bench of this Court, in the case of Nathabhai Devidas and others Vs. Vaghjibhai Jhaverbhai reported in A.I.R. 1928 Bom. Pg. 20 was considering the scope of Sections 73 and 74. It may be mentioned at this stage that as rightly pointed out by the learned Counsel for the Petitioners, the observations therein are obiter as the issue need not have been decided. However, I am referring to the said observations as some other Courts have followed the principles as expounded in the case of Nathabhai. Marten, C.J. observed as under :-

"But I wish to put the matter on rather broader ground by way of warning. Speaking generally, applications for the removal of a trustee should undoubtedly be brought by a suit, and where, as here, it is alleged that the trustees have committed a breach of trust, that suit should ask for the delinquent trustees to make good the breach of trust. Further, the suit should normally ask for the administration of the trust estate by the Court."

The learned Chief Justice referred to some commentaries on Trust. Thereafter the learned Chief Justice observed as under :-

"If, on the other hand, a suit was brought here to remove the trustees, that could be brought by the uncle acting as the next friend of the infant. And if it was alleged that specific breaches of trust had been committed, then those could be inquired into in the ordinary way on oral evidence and not on affidavit evidence without any cross-examination, the course that has been adopted by the learned Judge in the present case."

Thereafter a learned Single Judge of the Saurashtra High Court, in t he case of Patel Vrajlal Bhagwandas Vs. Patel Jamnadas Tribhovandas and others reported in A.I.R. 1956 Saurashtra pg. 51, was pleased to follow the principles laid down by the Division Bench of this Court in the case of Nathabhai Devidas namely that Sections 73 and 74 are not intended to apply to contentious or disputed cases, where proceedings by way of a Suit is appropriate.

The next relevant Judgment is in the case of Tirathdas Dharamdas and anr. Vs. Sh. Parmeshwaribai w/o. Kundanmal reported in A.I.R. (30) 1943 Sind Pg. 223. A Division Bench of the Sind High Court was considering the scope and the powers conferred under sections 73 and 74 of the Indian Trusts Act. The matter arose from a Second Appeal. The District Judge had, under Section 74, directed removal of the trustees. The District Judge held in favour of the Plaintiffs and directed removal of the trustees. That is how the matter reached the Court. A preliminary objection was raised that no appeal lies against an Order passed under Section 74. The said contention was upheld and the matter was considered as an application for revision of the Order. While considering the expression as to what is unfit, Devis, C.J. observed as under :-

"It must be an unfitness or personal incapacity which in the opinion of the Court disqualifies, and when such disqualification exists, a vacancy occurs and a new appointment is to be made."

Thereafter the Division Bench approved the principles laid down by this Court in the case of Nathabhai Devidas and others Vs. Vaghjibhai Jhaverbhai for the proposition that Section 73 is not intended ordinarily to apply to removal of a trustee for breach of trust. Thereafter considering the English law, more specifically Section 41 of the English Trust Act of 1925 which is akin to Section 74 of the Indian Trusts Act 1882, the learned Chief Justice observed as under :-

"bearing in mind the caution always required to interpreting an Indian Statute in the light of the English authority and practice, it does appear that in the case of Indian Trusts Act, it would be proper to interpret the scope and purpose of the Indian Act in the light of the English authority and practice. The trend of English decisions appears to limit proceedings to the removal or discharge of trustees other than by suits to non-contentious, or, as the phrase goes, non-litigious matters."

Thereafter the learned Chief Justice observed as under :-

"Moreover, referring to the words of Section 74 itself, it would appear that a petition is to be made by the beneficiary when a vacancy or disqualification occurs. The petition follows a vacancy or disqualification which is a condition precedent, the existence of which is not dependent upon an adjudication by the Court in the same proceeding. Even in Section 73 the word "opinion" is used. My conclusion in the matter is that Sections 73 and 74 are not intended to apply to contentious or disputed cases, where proceeding by way of suit is appropriate, but to cases appropriate to a summary procedure where the facts are not disputed or cannot reasonably be disputed."

In a separate concurring Judgment, Weston J. observed that Sections 73 and 74 do not provide expressly for the removal of a trustee. They provide for the appointment of a new trustee. But under clause (d) of Section 71, a trustee is discharged by t he appointment, under the Act, of a new trustee in his place. Section 73 deals with such appointment, not by the Court, but by the person nominated for the purpose in the instrument of trust, or if there be no such person, by the author of the trust, if alive, or by the surviving trustee or trustees and so on. Section 74, however, expressly confers upon the beneficiary a right to apply to the Court by petition, not by suit for the appointment of a new trustee, and such appointment may then be made by the Court, not only when a vacancy has occurred because of death or absence from India, but also when any "disqualification" contemplated in Section 73 renders a new appointment necessary. The right to apply under Section 74 is subject to the restriction that an appointment under Section 73 is found to be impracticable, but it seems necessary to hold that in certain circumstances the right to a beneficiary to require that the trust shall be administered by proper persons may be secured not only by suit on ground contemplated in Section 60, but alternatively by application made under section 74. The learned Judge thereafter proceeded to answer the question as to how the Court was bound to form an opinion contemplated in Section 73, when it is sought under that section, or when it becomes necessary on application made under Section 74. The learned Judge observed as under :-

"Some limitation on the scope of inquiry held under Section 73 and 74 seems desirable, for when allegations are disputed, their resolution by suit, if suit lies, undoubtedly is the appropriate procedure. The wording of Sections 73 and 74 does not of itself suggest that investigation is contemplated. No doubt under Section 60 the right of suit must be confined to the beneficiary, but there can be no practical difficulty in all necessary changes in the personnel of the trustees being effected through the beneficiary. It is difficult to believe that, when a remedy by suit exists, a summary investigation should be possible, involving findings of fact which may reflect seriously upon the character of a trustee, from which that trustee will have no remedy by way of appeal."

Thereafter the learned Judge observed as under :-

"But, in my opinion, as the right of suit exists at least to the beneficiary under Section 60, the view that there is no scope within Sections 73 and 74 for what Cotton L.J., described as a litigious decision is founded upon sound principles and should be accepted."

7. A somewhat different view seems to have been taken by a Division Bench of the Allahabad High Court in Khatoon Jannat Bibi Vs. Syed Wali Ullah and another reported in A.I.R. (36) 1949 Allahabad Pg. 310. The Division Bench of the Allahabad High Court held that for the appointment of a new trustee under Section 74 all that is necessary is that a disqualification as specified in Section 73 should have occurred. The Judgment of this Court and of the Sind High Court were distinguished. While considering the issue as to what is contentious and non-contentious and the scope of Section 74, it was observed as under :-

"It will be seen that there is nothing in Section 74 to limit its application only to non-contentious cases. In fact, when Section 74 gives power to the Court to appoint a new trustee on the ground of unfitness or personal incapacity of an existing trustee, the proceeding in its very nature cannot be non-contentious. Indeed, even in the case of appointment of a new trustee in place of a deceased one, the matter may be disputed by rival claimants. It is true that no right of appeal is given by the Act against an order passed under section 74, but the order is revisable. It may be that the Legislature deliberately provided a speedy procedure for the appointment of a new trustee by Section 74. The interests of a trust demand that a trustee should speedily be appointed in circumstances mentioned in Section 73. Section 74 therefore gave a speedy remedy to the beneficiaries to have a new trustee appointed. I express no opinion as to whether or not a regular suit for the removal of a trustee and the appointment of another person in his place is maintainable, but even if such a procedure is available for the removal of a trustee and the appointment of a new one, it is an alternative one. The beneficiary may either move the principal civil Court of original jurisdiction by a petition under Section 74 or may bring a regular suit under Section 9, Civil P.C."

8. A Last Judgment which has to be referred to and on which much stress has been laid down by the Petitioners is the judgment of a learned Single Judge of this Court, Sujata Manohar J., as Her Ladyship then was, in an Unreported case of Adi Rustom Cooper & Ors. Vs. Sheran T. Kevarona & Ors., in Trust Petition No. 12 of 1983 dated 5th November, 1984. In that case, the Petitioners moved for removal of Respondent No.1 and for appointment of some other fit and proper person as a trustee in her place under Sections 73 and 74 of the Indian Trusts Act. The learned Single Judge was considering the expression "Unfit or personally incapable" after referring to the commentary by N. Suryanarayan Iyer in "The Indian Trusts Act", Second Edition, at page 423 and the word "unfit" and "incapable" in Underhill's Law relating to Trusts and Trustees, 13th Edition, at page 613, Article 75. The learned Judge held the word "unfit" under Section 73 can take in its compass such conduct of a trustee as would be contrary to the interests of the trust or of its beneficiaries, although such conduct may or may not amount to misconduct. The learned Judge also referred to the case of the Division Bench in Nathabhai Devidas and Ors. Vs. Vaghjibhai Jhaverbhai (supra). In paragraph 8 the learned Judge held that the ratio of that case had no application to the case before the learned Single Judge. It was further observed that in the Petition, before the learned Single Judge, there was no prayer against any trustee for the recovery of any loss caused to the trust by his or her conduct nor is there any submission made in respect of any breach of trust. The learned Single Judge held that in such situation there was no need to direct the Petitioners to move by way of a suit and that in the Petition under section 74 such a relief could be granted. In paragraph 25, the learned Single Judge held that from the attitude of Respondent No.1 and the encouragement and support given by her to Respondents Nos. 5 & 6, before the Court, it was clear that Respondent No.1 cannot function harmoniously with other trustees of the trust in the management of the trust.

To my mind, this judgment cannot be said to be a judgment for the proposition as to what is a contentious or non-contentious issue. At the highest, the ratio of the judgment will be that the expression "unfitness" will not restrict itself to physical incapacity alone, but to other instances which would render a person unfit from holding the office of a trustee to the detriment of the interest of the trust or of its beneficiary, although the conduct may or may not amount to misconduct.

9. Therefore applying the above tests, the contention may now be decided. At this stage, I may point out that looking at the language of Sections 73 and 74, it is not possible to accept the view taken by the Division Bench of the Allahabad High Court. On the contrary, I would prefer the view taken by t he Division Bench of this Court though an obiter, but accepted by the Saurashtra High Court as also by the Division Bench of the Sind High Court. I say so more specifically bearing in mind that while interpreting the Section, it must be remembered that in some areas the Court may also exercise its equity jurisdiction. The English principle followed is that in contentious matters Section 74 cannot be invoked and the party will have to be relegated to a Suit. The Indian Trusts Act, as pointed out in Section 60, Illustration (e) also provides for such a situation. Apart from that, as pointed out earlier, a look at Section 73 and 74 would indicate that section 74 steps in only when appointment under Section 73 becomes impracticable. The appointment under Section 73 can be made in the event a vacancy arises or principal civil court of original jurisdiction holds that the person is unfit or personally incapable to act in the trust. Who is to decide that a vacancy has arisen. The trustees cannot decide and fill in the vacancy if there are disputes. Can it then be said that as it is impracticable to make appointments under section 73 and therefore appointments are to be made under Section 74. Also if the Court opines that a vacancy has arisen then an appointment can be made by the persons named in the Trust. This opinion in Section 73, or appointment in Section 74 if there is a vacancy should be read with Section 60. Sections in an Act must be read harmoniously. A construction which renders any Section otiose cannot be adopted. The intent of the Legislature must be given effect to. The present Act is a preindependence Act. There is a similar Act in England with similar provisions which has been referred to in the judgment of the Division Bench of this Court and of Sind High Court. It will therefore be safe to accept that interpretation, bearing in mind that this Court can also exercise equity jurisdiction.

10. Having said so, the tests can now be applied. Can it be said that the reliefs prayed for involve non-contentious issues. In paragraph 2 of the plaint, removal of the trustees was sought for various acts as set out therein. These acts, to my mind, would involve the character of the Trustees. The Court therefore will have to examine as to whether in fact the allegations as set out in para 2 are supported by material after evidence has been led. This will require investigation into facts. In para 23 of the Petition, the Petitioners themselves have set out that a Petition arises out of the wrong done by the trustees to the Petitioners which is a continuous wrong. To my mind, therefore, the Petition involves contentious issues and I will have to accept the preliminary objections on behalf of the Respondents that this Court has no jurisdiction in a Petition under Section 74 to decide the contentious issues and relegate the Petitioner to a Suit. I may point out that in the course of the proceedings Respondent No.1 expired. His heirs have been brought on record. This could only be if relief is still available against the original Trustee. Secondly even though a vacancy has arisen it is contended that there are already apart from respondent No.2, two other corporate Trustees, and the Trust can function as it requires minimum two trustees. The Petitioners dispute the same. All these issues also can be decided by way of a Suit and not in a petition under section 74. The reliefs are not consequential.

11. Before parting, however, I may refer to the judgment in Letterstedt (supra). This reference is made as the trustees are appointed so that they would carry on their duties as trustees for the benefit of the beneficiaries. Before the Privy Council, the question arose as to the lack of authorities for the removal of the trustees. I may only quote as under :-

"The reason why there is so little to be found in the books on this subject is probably that suggested by Mr. Davey in his argument. As soon as all questions of character are as far settled as the nature of the case admits, if it appears clear that the continuance of the trustee would be detrimental to the execution of the trusts, even if for no other reason that human infirmity would prevent those beneficially interested, or those who act for them, from working in harmony with the trustees, and if there is no reason to the contrary from the intentions of the framer of the trust to give this trustee a benefit or otherwise, the trustee is always advised by his own counsel to resign, and does so."

I have referred to these observations as, to my mind, there has to be a harmony between the trustees and beneficiaries. The Trustees act for the benefit of the beneficiaries. If there are disputes between the Trustees and the beneficiaries, the observations of the Privy Council are indicative of the course to be adopted.

With the above observation, the Petition is dismissed as not maintainable.

12. The learned Counsel for the Petitioners seeks stay of the Judgment. The operation of this Judgment is stayed for a period of 8 weeks.

Certified copy expedited.

Petition dismissed.