Manisha Commercial Ltd. vs Shri N.R. Dongre & Anr.
1999 Latest Caselaw 1271 Del

ORDER

Vikramajit Sen, J.

I.A. No. 5961/1999

1. This application under Order XXXIX, Rules 1 and 2 contained a prayer for the issuance of mandatory injunction against Defendant No. 1, directing him to vote in favour of the Resolution proposed in the notice for the A.G.M. scheduled to be held on June 10, 1999 or any adjourned meeting thereof and/or to give a proxy in favour of the Plaintiff's representative for the A.G.M. for that date. Since this application came up for consideration before me after this date, the Plaintiff filed a subsequent application being I.A. 9803/1999. The present application has therefore, not been argued since the subsequent application was considered to be comprehensive. Without in any way prejudicing the Plaintiff's cause, and subject to all just exceptions, this Application is dismissed, with no order as to costs.

I.A. 9804 of 1999.

2. The facts of the present case pose little controversy. This situation has prompted the presentation of an application for the passing of a decree on admissions, under Order XII, Rule 6 of the Code of Civil Procedure, 1908. Shri Shanti Bhushan, learned Senior counsel appearing on behalf of Plaintiff has submitted that admittedly the Plaintiff is the sole beneficiary of the Manisha Benefit Trust, that Defendant No. 1 is its Sole Trustee, and that the corpus of the Trust comprises 11 per cent of the shares of Defendant No. 2 of which the remaining 49 per cent is held by the Charat Ram Group and 40 per cent by Defendant No. 1. He also conceded that it is not the Plaintiff's case that Defendant No. 1 had committed any acts that tantamount to breach of the trust reposed in him, or that Defendant No. 1 had not paid the usufruct of the Trust to the sole beneficiary.

3. The Trust was established on 22.11.1991 by a Deed of that date in which the Settler had handed over a sum of Rs. 10,000/- to the Trustee (Defendant No. 1). It is from these funds that the 11 per cent shareholding of Defendant No. 2 has been acquired for the Trust. The Deed then mentions that Defendant No. 1 shall be the Trustee and that the objects are the receipts of income, dividends, interest and donations etc. which are to be given to the beneficiary (Plaintiff). It is significant to note that the duration of the Trust is explicitly stated to be for a period of 99 years or such earlier period as may be determined by the Trustee. He has also been empowered to nominate a Trustee in his stead, which is indeed an unusual term. Interpreted along with the fact that the Trust was stated to be irrevocable it is prima facie clear that the intention of the Settler was that the Trust should be exclusively managed by its Trustee/Defendant No. 1. The prayers contained in the plaint and in the application are therefore irreconcilably contrary to the terms of the Trust Deed.

4. Dr. A.M. Singhvi, learned Senior Counsel for Defendant No. 1 has invited my attention to facts surrounding the geneses of the Trust, other than those available from a perusal of the Deed. His contention is that the Trust was formed as an acknowledgement of the services rendered by Defendant No. 1 to Lala Charat Ram. He requests that the true beneficiary of the Trust till its dissolution as envisaged in the Trust Deed is Defendant No. 1 since the corpus of the Trust (11 per cent of the shareholding of Defendant No. 2) was carved out on the earlier 19 per cent held by the Plaintiff. It is further submitted that undoubtedly no grounds for interference of the Court, on equitable considerations, has been made out, since it was not even alleged against the Trustee that he had committed any misconduct or had transgressed his fiduciary obligations in respect of the fulfilllment of the duties cast upon him under the Trust Deed. It is also his submission that during the duration of the Trust it is the Trustee who is the real owner of the assets of the Trust.

5. The question to be decided at the threshold is whether the Plaintiff is entitled to obtain a judgment because of the absence of any traverse in respect of the facts pleaded in the plaint. Two provisions of the Code of Civil Procedure were relied on by learned Senior counsel for the Plaintiff Order XII, Rule 6 and Order XV, Rule 1, which read as follows :

"Order XII, Rule 6, Judgment on admissions. _ (1) Where admissions of fact have been made either in the pleading or otherwise, whether orally or in writing, the Court may at any stage of the suit, either on the application of any party or of its own motion and without waiting for the determination of any other question between the parties, make such order or give such judgment as it may think fit, having regard to such admissions.

(2) Whenever a judgment is pronounced under sub-rule:- (1) a decree shall be drawn up in accordance with the judgment and the decree shall bear the date on which the judgment was pronounced."

"Order XV, Rule 1. - Framing of issues. _ (1) Issues arise when a material proposition of fact or law is affirmed by the one party and denied by the other.

(2) Material propositions are those propositions of law or fact which a plaintiff must allege in order to show a right to sue or a defendant must allege in order to constitute his defense.

(3) Each material proposition affirmed by one party and denied by the other shall form the subject of a distinct issue.

(4) Issues are of two kinds.

(a) Issues of fact.

(b) Issues of law.

(5) At the first hearing of the suit the Court shall, after reading the plaint and the written statements, if any, and after examination under Rule 2 of Order X and after hearing the parties of their pleaders, ascertain upon what material propositions of fact or of law the parties are at variance, and shall thereupon proceed to frame and record the issues on which the right decision of the case appears to depend.

(6) Nothing in this rule requires the Court to frame and record issues where the defendant at the first hearing of the suit makes no defense.

6. The former provision falls in the category of 'Admissions' made by any party in its pleadings or otherwise and casts a duty on the Court to consider, at that very stage, whether an order of judgment ought to follow. The Apex Court has observed that it is a futile exercise, and a serious miscarriage of justice, if parties are compelled to undergo a full trial where the lis can be brought to an earlier and quicker culmination on the foundation of admissions made by a party (which obviously is usually the defendant). The Apex Court has enjoined the Trial Court to meaningfully fulfill this judicial exercise. Order XII, Rule 6 in fact prescribes this duty shall be a suo moto exercise. This Rule however, predictably invests discretion with the Court - that is - even if there is an unequivocal admission by a party but the passing of a judgment would work injustice on it, judgment could be declined. In the case at hand, even though counsel for the Defendants have not denied that there is no controversy concerning the factual matrix, there is a serious dispute regarding the interpretation to be given to the legal regime (found in the Indian Trusts Act). A conjoint reading of this Rule with Order XV, Rule 1 renders the position free from doubt. Could it be reasonably argued that the parties are not at issue with each other in the present case. I think not. Even on the admitted facts it is highly debatable whether the judgment should be delivered as pleaded for in the plaint. The only option for the Court is to frame issues, and since facts are not in contest, possibly dispense with the 'Trial' and proceed directly to the stage of 'Final Arguments'. But it would be wholly inappropriate to permit any party to employ Order XII, Rule 6 in those instances where vexed and complicated questions or issues of law have arisen. A perusal of the provisions of Order XIV, Rule 1 clarifies that issues are of two kinds - issues of fact and issues of law and the following Order XV contains guide-lines on how the issues are to be decided. Rule 3 thereof is yet another provision that emphasises that no injustice should be caused to any party by "proceeding with the suit forth with". Justice hurried may be justice buried.

7. Section 11 of the Trusts Act which is found in Chapter III thereof, dealing with the "Duties and Liabilities of Trustees" is as follows :

"11. Trustees to execute trust. _ The trustee is bound to fulfill the purpose of the trust, and to obey the directions of the author of the trust given at the time of its creation, except as modified by the consent of all the beneficiaries being competent to contract.

Where the beneficiary is incompetent to contract, his consent may, for the purposes of this section, be given by a principal Civil Court of original jurisdiction.

Nothing in this section shall be deemed to require a trustee to obey any direction when to do so would be impracticable, illegal or manifestly injurious to the beneficiaries.

Explanation. - Unless a contrary intention be expressed, the purpose of a trust for the payment of debts shall be deemed to be (a) to pay only debts of the author of the trust existing and recoverable at the date of the instrument of trust, or, when such instrument is a will, at the date of his death, and (b) in the case of debts not bearing interest, to make such payment without interest."

8. It was argued on behalf of the Plaintiff that the Section firstly empowers the beneficiaries in unison to modify the trustees duty to fulfill the purpose of the trust, and even to deviate from or disobey the directions of the Author/Settlor; and secondly, predicated on the second paragraph, that the Civil Court has unrestricted power, where the beneficiary is incompetent to contract, to also carry out modifications to the terms of the Trust. Learned Counsel distilled these provisions to premise that the directions contained in a Trust Deed are not immutable. The argument proceeds that since the beneficiary - Plaintiff, has demanded that the Trustee Defendant No. 1, should not exercise his voting rights although empowered so to do by the Settler/Author of the Trust, these demands and dictates must be implemented'. He further submits that it is within the powers of the beneficiary to insist on the transfer of the shares even in the face of contrary provisions contained in the Trust Deed. At the present stage, I am unable to accept such a wide proposition and to hold that this Section, contained in Chapter III, which deals with the Duties and Liabilities of the Trustees, envisages the carrying out of even those modifications as are effectively an extinguishment, dissolution or accelerated ending of an irrevocable and time-bound Trust. The illustrations to the Section infact manifest that, under the guise of modification, actions totally opposed to the terms of the Trust, cannot be taken.

9. Shri Shanti Bhushan, learned Senior Counsel for the Plaintiff, cited the case of Prince Muffakham Jah Bahadur & Ors. Vs. H.E.H. Nawab Mir Barkat Ali Khan Bahadur Prince Mukarram Jah & Ors., in which a Division Bench of that Court had given its imprimatur to a joint proposal by the trustees and the beneficiaries to dissolve the Trust. In my opinion this case is of little assistance since there is a serious dispute between the Trustee and the Beneficiary before me. Since there was no such dispute in the case before the learned Division Bench they did not think it necessary to give reasons beyond a reliance of the particular sections of the Trust Act, including Section 11. That the interests of Trustee and his resistance and opposition to the premature dissolution of the Trust (well before 99 years and even in the life time of the Trustee) require careful consideration, and not at the present stage of the litigation, is borne out from the following extract from that judgment. In the present case, Defendant No. 1 is undisputably one of the parties concerned with the Trust.

"The above provisions make it abundantly clear that the trust need not be retained in its Original form and it can be varied, modified, revoked or dissolved subject to the conditions mentioned therein namely, that all the beneficiaries who are competent to contract, consent for such procedure. In a petition under Section 34 seeking its advice the only consideration that would weigh with the Court is whether the arrangement pleaded is beneficial to all parties concerned. It should not result in injury to any of the parties. If these conditions are satisfied, we do not see any reason why the Court should refrain from granting its approval.

This type of actions are not unknown to law and Courts. The question how far the necessary benefits if financial, may be obtained at the expenses of revenue, and how far the courts will approve such arrangement principally designed to save tax was considered in several cases.

10. Section 11 of the Trusts Act is therefore of no avail to the Plaintiff in successfully sustaining the application under Order XII, Rule 6.

11. Shri Shanti Bhushan, learned Senior Counsel for the Plaintiff has thereafter invoked the provisions of Section 51 of the Act which prohibits a Trustee from using or dealing with the trust-property for its own profit or for any other purpose unconnected with the trust. He argued that Defendant No. 1 was motivated in resisting the beneficiaries demand for a transfer of the corpus of the Trust and/or that Defendant No. 1 should not exercise the voting powers only because that would divest Defendant No. 1 from his control over Defendant No. 2. However since this argument necessarily throws up contentions matter which cannot be decided at this stage, and because it has been conceded on behalf of Plaintiff that for the purpose of disposal of this application misconduct or breach of fiduciary duties is not being predicated, further consideration of these arguments are not called for.

12. The gravamen of the arguments on behalf of the Plaintiff are premised on Section 56 of the Trusts Act, which is contained in Chapter VI of the Act dealing with the Rights and Liabilities of the Beneficiary. It reads as under :

"56. Right to specific execution. _ The beneficiary is entitled to have the intention of the author of the trust specifically executed to the extent of the beneficiary's interest.

Right to transfer of possession _ Where there is only one beneficiary and he is competent to contract, or where there are several beneficiaries and they are competent to contract and all of one mind, he or they may require the trustee to transfer the trustproperty to him or them, or to such person as he or they may direct.

When property has been transferred or bequeathed for the benefit of a married woman, so that she shall not have power to deprive herself of her beneficial interest, nothing in the second clause of this section applies to such property during her marriage."

12. However, he contended that Defendant No. 1's action were not bona fide, and were self serving inasmuch as he had assiduously retained control of Defendant No. 2 through the combined deployment of his own and the Trusts shareholding. Keeping in view the provisions of Sections 11, 51, 56 and 61 of the Indian Trusts Act, 1882, it was contended by him that a judgment could be pronounced forthwith vis-a-vis the prayers contained in the plaint.

13. Dr. Singhvi, learned Senior Counsel appearing on behalf of Defendant No. 1 contended to the contrary that even though the facts of the case were not in dispute, Plaintiff's prayers were seriously challenged. Therefore, a decree could not be passed at this stage of the suit, since the provisions relied upon by the Plaintiff had thrown up controversial questions of law which could properly be decided only at the final disposal of the suit. In particular, he has trenuously assailed the interpretation sought to be given to Section 56 of Trusts Act by learned Senior Counsel for the Plaintiff. He further submitted that the present 11 per cent Trust's holding was devised with the specific intent of ensuring that Defendant No. 1 retained control of the management of Defendant No. 2. In particular he emphasised the fact, which is also not in controversy that the 11 percent shareholding in Defendant No. 2 had been culled out the initial 19 per cent holding of the Plaintiff in Defendant No. 2, by Lala Charat Ram primarily as an acknowledgement of the services rendered to him by Defendant No. 1.

14. Shri Shanti Bhushan, learned Senior counsel for the Plaintiff, has argued that the provisions of the Trust Act are explicit and admit of no controversy and hence Order XII is the appropriate avenue to take. In retrospect this was not so, as would be apparent from the complex, intricate and detailed arguments addressed by both sides, who also declined my suggestion that the arguments be taken as 'Final Arguments'.

15. Shri Shanti Bhushan submitted that the beneficiary had an unfettered right to demand the transfer of the corpus of the Trust and that this unqualified right had been given statutory protection in terms of this Section. He contended that the terms of the Trust Deed need not be gone into. He emphasised that whilst the beneficiary was entitled to the execution of the trust according to the intention of its author, no such restrictions or trammels existed in its rights to obtain a transfer by the Trustees of the trust property. He further submitted that a perusal of the Illustration would only fortify his argument that the dissolution of the present Trust could be legally demanded even before 99 years or even in the life time of the Trustee, Defendant No. 1 Shri Shanti Bhushan's stand is that the only exception this unfettered and untrammelled right for transfer of trust-property is in the case of a Trust established for the benefit of a married woman, as is envisaged in this section itself. In reply to these submissions, Dr. A.M. Singhvi contended that since the Trust was irrevocable and for a period of 99 years, the plaintiff had only a contingent interest therein, and such a inchoate interest should not be considered for the passing of the far-reaching and irreversible orders as were being prayed for. Secondly, if a narrow interpretation was to be given to the Section, it itself recognises that where the beneficial interest was to be enforced, it should be done in accordance with the terms of the Trust Deed.

However, since the words employed by the Section, pertaining to the transfer of possession specifically relate to trust-property", this would be the sum of Rs. 10,000/- as settled by the author. He further submitted that Section 56 cannot also be construed in such a manner as to override and/or render nugatory the objects and terms of the Trust. He also submitted that the Illustrations to the Section could not be assistance for the Plaintiff since it was competent to contract even when the Trust was established; that only a contingent interest had been created; and that the Deed itself mentioned the Trust to be irrevocable for a period of 99 years.

16. Obviously these are intricate questions of law which cannot and ought not to be decided prior even to the framing of issues. Where facts are not in dispute, and the legal contentions can easily be decided, a judgment under Order XII can be appropriately delivered. None of the sections relied upon by the Plaintiff are unequivocal in their language and lead to the undisputed conclusion of non-suiting the Defendant. Since the case is at the interlocutory stage I think it inexpedient and unfair to the Defendant to arrive at a final conclusion about the statutory provisions relied upon.

17. The decision of the Apex Court in Life Insurance Corporation of India Vs. Escorts Ltd. & Ors., which concerned the rights of a buyer of shares would not have such direct application to the facts of the present case as would lead to the inescapable position of passing a summary decree. The facts of that case are dissimilar, and the decision was predicated, in substantial measure, on the provisions of the Companies Act. The Supreme Court was of the opinion that a constructive trust had come into existence in favour of the buyers of the shares which entitled it to enjoy its beneficial interest. Since these beneficial interests could not be enjoyed unless the transferor voted according to the wishes of the transferee, the former would become a trustee of these shares and could not act contrary to the transferee's interests. Shri Shanti Bhushan, learned Senior Counsel submitted that these principles applied afortiori to the present case but I am unable to agree with him. What is being dealt with here is an express trust, the terms of which explicitly envisage that the Trustee (Defendant No. 1) would have dominion and control over the Trust for a period of 99 years or during his life time or till such time as he had appointed his nominee as the Trustee in his stead. There is neither room nor reason for overriding these express terms of the Trust Deed, on the strength of the Escorts case (supra).

18. In the view that I have taken, that is that the application under Order XII, Rule 6 is not maintainable, and that it would not be appropriate to pass a judgment in the facts and circumstances of the case, presently prevailing. I do not think it necessary to mention or deal with all the cases cited before me by learned counsel for the parties.

19. The application is accordingly dismissed.

I.A. No. 9803/1999.

20. In this application under Order XXXIX, Rules 1 and 2 the Plaintiff has prayed that Defendant No. 1 be directed to deposit the original share scripts of 10846 equity shares of the trust and further that this Defendant be restrained from exercising any voting rights whatsoever in respect of the meetings of the share holder or Defendant No. 2.

21. It is not in dispute that Defendant No. 1 is the owner of 40% of the shares of Defendant No. 2. Therefore, he cannot be injuncted in any manner from exercising his rights in respect of these shares. I will, therefore, assume that what is prayed for in this application is that this Defendant be restrained from exercising any voting rights in respect of the 11% shares of which is a trustee. In the interest of justice, therefore, the prayer in this application is moulding to this effect.

22. Before a party is entitled to the grant of a temporary injunction it has to: (a) establish the existence of a prima facie case in favour of the applicant, (b) show that the balance of convenience for the grant of the relief claimed for is in its favour and against the opposite party, and (c) that the applicant will suffer irreparable injury if the temporary injunction prayed for is not immediately passed.

23. This application was also filed by the Plaintiff seeking the pronouncement of the judgment and decree in terms of prayer (c) of the Plaint. This prayer was for the passing of a decree of a mandatory injunction in favour of the Plaintiff and against Defendant No. 1, directing this defendant to transfer these 10846 equity shares held by Manisha Benefit Trust in the name of Defendant No. 1 as its trustee in Defendant No. 2 Company. After considering the rival contentions raised in that application I had arrived at the conclusion that it would not be appropriate, and in the interest of justice, that a judgment should be passed forthwith, even though there was no disputes in respect of the factual matrix of the case. Since, in my opinion, complicated and vexed questions of law had arisen and were in issue between the parties, the passing of a judgment in a summary manner, as envisaged in Order XII, was not in the interest of justice. I had rejected the application. The obvious corollary of this rejection is that in my view, a prima facie case had not been established by the Plaintiff. The reasons for this rejection would be germane also to the consideration of whether a case exists justifying the passing of the temporary injunction. The orders passed in the application under Order XII should be read in conjunction with these orders so that prolixity can be avoided.

24. Keeping in perspective the fact that there has been no change in the factual matrix since the creation/inspection of the Trust, almost a decade ago, it was incumbent on the Plaintiff to establish a "overwhelmingly" obvious prima facie case if the temporary injunction was to be granted after the passage of so much time. Certainly, no such case has been made out before me which would warrant and convince me to ignore the forensic history of this case and pass orders which would totally change the rights of the parties.

25. Coming to the considerations of whether the balance of convenience is in favour of the grant of the temporary injunction. I have not been convinced of the arguments addressed by the Learned Counsel for the Plaintiff. As has been stated above the existing practice is almost a decade old. The 11% shareholding within the trusteeship of Defendant No. 1 was created from the shareholding of the Plaintiff. Whatever be the reasons for this creation, since there is no allegation of misconduct or failure to perform the duties and obligations cast on Defendant No. 1 by the trustee, the balance of convenience is clearly against the Plaintiff. If the temporary injunction is granted the fundamental object and purposes of the trust would be irretrievably altered. The trustee, Defendant No. 1 would in effect lose control over the management of Defendant No. 2.

26. Although it is necessary for the Plaintiff to establish each of the three constituents, and even though in my considered view it has failed to prove the first two, it has not succeeded in establishing that irreparable injury would be caused to it. The Plaintiff as well as Defendant No. 1 have candidly submitted that the flight in this litigation is over control of the 11% shareholding of the trust since the consequences of a change in this control would be the shift in the management of Defendant No. 2 from Defendant No. 1 to the Plaintiff. Till now, during the passage of almost a decade, the Management of Defendant No. 2 has been in the hands of Defendant No. 1. He has undisputably made over the usufruct of the trust to the beneficiaries i.e. the Plaintiff. The concept of irreparable injury, as is envisaged by the provisions of Order XXXIX, Rule 1 is totally missing, attracted in the facts of the present case. Beyond the argument that the granting of the relief claimed therein would result in the transfer of the management of Defendant No. 2 to the Plaintiff no ground for damage, leave alone irreparable damage, has been effectively and conclusively been made out. As has been stated above there are no accusations against the Defendant No. 1 of misconduct or mismanagement or for breach of his fiduciary duties.

27. Since the Plaintiff has failed to convince me of the existence of any of the three concomitants inherently required for passing of the prayer contained in this application, the application is dismissed with costs of Rs. 10,000/-, half of which would be paid to the Chief Ministers Relief Fund, Orissa, Bubaneshwar.