Chhaya Shriram & Anr vs Mrs. Santosh D. Shriram & Ors.
2009 Latest Caselaw 1716 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI
+                         CS(OS) 747/2009
%                Date of Decision: 28th April, 2009

      CHHAYA SHRIRAM & ANR.                   ..... Plaintiffs
                    Through:      Mr. T.K. Ganju, Senior Advocate
                                  with Ms. Divya Kesar and Mr.
                                  Manmohit Puri, Advocates
                 versus

      MRS. SANTOSH D. SHRIRAM & ORS.        ..... Defendants
                     Through:  Mr. N.K. Kantawala, Advocate for
                               defendant No.1
                               Mr. H.L. Tiku, Senior Advocate with
                               Mr. Jasbir S. Bagga, Advocate for
                               defendant No.2
                               Mr. Rajeev Nayyar, Senior
                               Advocate & Mr. Amit S. Chadha,
                               Senior Advocate with Mr. Kewal S.
                               Ahuja, Advocate for defendant No.3
                               Mr. Sudhir Chandra, Senior
                               Advocate with Mr. Kirti Uppal,
                               Advocate for defendant No.4

      CORAM:
      HON'BLE MR. JUSTICE VIPIN SANGHI

      1. Whether the Reporters of local papers may
         be allowed to see the judgment?
      2. To be referred to Reporter or not?
      3. Whether the judgment should be reported
         in the Digest?

VIPIN SANGHI, J. (Oral)

CS(OS) 747/2009

Mr. Sudhir Chandra, Senior Advocate along with Mr. Kirti Uppal

have appeared for defendant No.4. Mr. Uppal has tendered in Court a

communication received from defendant No.4, wherein defendant No.4

has offered to resign from trusteeship, as and when a new trustee is

appointed. Mr. Chandra submits that defendant No.4 is no longer

interested in continuing as a trustee. In fairness to defendant No.4, it

would have been appropriate for the plaintiffs to have approached him

before filing the suit in case they were aggrieved by his appointment

as a trustee of the Mansarovar Trust. In any event, since defendant

No.4 has stated in his communication as also through his counsels that

he would not like to continue as a trustee of the Mansarovar Trust, he

is relieved of his obligations as a trustee of the said trust. Accordingly,

defendant No.4 is deleted from the array of defendants. Amended

memo of parties may be filed by the plaintiff within two days.

Mr. Ganju states that the prayer made in the suit to seek a

restraint against defendant No.1 from appointing any trustee is not

being pressed. He further states that prayer (a) has become

infructuous in view of the resignation tendered by Mr. N.K. Anand,

defendant No.4, in Court. These developments call for amendment of

the plaint. The plaintiffs are permitted, on their oral request, to amend

the plaint to incorporate the resultant changes. Let the amended plaint

be filed within two days.

Issue summons to defendant Nos.1 to 3. Summons are accepted

on behalf of defendant No.1 by Mr. N.K. Kantawala, on behalf of

defendant No.2 by Mr. Jasbir S. Bagga and on behalf of defendant No.3

by Mr. Kewal S. Ahuja. Written statements along with original

documents, if any, may be filed within 30 days. Replication with

additional documents, if any, may be filed by the plaintiff within four

weeks, thereafter. List the matter before the Joint Registrar on

03.08.2009 for admission/denial of the documents.

List before Court for framing of issues on 24.08.2009.

I.A. No.5520/2009

This is an application seeking one week's time to file the court

fees. Counsel for the plaintiff states that the court fees has already

been filed. The Registry is directed to check the same and report with

regard to sufficiency of the same. Application stands disposed off.

I.A. No.5521/2009

1. Issue notice. Counsels for defendant nos. 1 to 3 accept

notice. Reply be filed within four weeks, rejoinder within four weeks

thereafter. List on 24.08.2009. This application under Order 39

Rules 1 & 2 CPC had been filed to seek a restraint against the originally

impleaded defendant No.4 from officiating as a trustee and / or

dealing with the trust property during the pendency of the suit.

Considering the fact that the original defendant No.4, who was

nominated as a trustee by defendant No.3 has resigned today in

Court from his said position, thereby leaving only one trustee

in office viz. defendant No.3, it has become necessary for

the Court to consider the appointment of a provisional trustee pending

the further hearing of the application, as the trust deed itself states

that the total number of trustees shall always remain two. On this

aspect, the learned counsels for the parties have been heard at some

length.

2. The case of the plaintiffs is that Mrs. Santosh D. Shriram,

defendant No.1, and Mrs. Urmila Dongre, defendant No.2, authored the

trust deed dated 17.06.1985 appointing Sh. Lallan Prasad Gupta and

Sh. Subodh Varma as the initial trustees. 10 beneficiaries were named

in the trust. It is submitted by Mr. Ganju, learned senior counsel for

the plaintiffs, that of the 10, the first 9 beneficiaries, who are

beneficiaries to the extent of 60% of the income of the trust, belong to

the Charat Ram Group, whereas beneficiary No.10, Mr. N.R. Dongre, is

the other beneficiary to the extent of 40% of the income of the trust.

The plaintiffs claim that the beneficial interest of the beneficiaries

falling within the Charat Ram Group was transferred by separate

agreements of 29.04.2008 in favour of plaintiff No.2 i.e. Usha

International Limited to the extent of 54%. The remaining 6%

continues to vest in plaintiff No.1. I may at this stage itself notice the

submission of Mr. Chadha, senior counsel appearing for defendant No.3

that the assignment of the beneficial interest in favour of plaintiff No.2

has not been accepted by the trust on account of non-payment of the

stamp duty on the assignment. However, this dispute is not relevant

for the present purpose, as Mr. Chadha does not deny that 60% of the

beneficial interest of the trust vests with members/entities of the

Charat Ram Group.

3. Chapter VI of the trust deed deals with the aspect of

constitution, duties, responsibilities and rights of the trustees. Clauses

1 & 2 of Chapter VI being relevant are reproduced below:

"1.If at any time, any TRUSTEE or TRUSTEES of these presents dies or desire to retire or refuses or become incapable to act as the TRUSTEE hereof, then in every such case, the appointment of TRUSTEES in their respective places shall be in the following manner:

i) In case Shri Lallan Prasad Gupta ceases to be a TRUSTEE in any manner whatsoever, Mr. Santosh D. Shriram, SETTLOR shall appoint a TRUSTEE in his place.

In case Mrs. Santosh D. Shriram is not willing or is/ becomes incapable to appoint a TRUSTEE as above or in the event of her death, the eldest of her male legal heirs, if willing, shall be the TRUSTEE in place of Shri Lallan Prasad Gupta.

In case such eldest male legal heir is not willing, or is/becomes incapable to act as TRUSTEE then the next eldest male legal heir, if willing, shall become the TRUSTEE and so on.

ii) In case Shri Subodh Varma, ceases to be a TRUSTEE in any manner whatsoever, Mrs. Urmila Dongre, SETTLOR shall appoint a TRUSTEE in his place.

In case Mr. Urmila Dongre is not willing or is/ becomes incapable to appoint a TRUSTEE as above or in the event of her death, her eldest of her male legal heirs, if willing, shall be the TRUSTEE in place of Shri Subodh Varma.

In case such eldest male legal heir is not willing, or is/becomes incapable to act as TRUSTEE then the next eldest legal heir, if willing shall become the TRUSTEE and so on. In case there is no surviving legal heir or the last surviving legal heir is not willing, or is/becomes incapable to act as TRUSTEE then any other person so nominated by the said Mrs. Urmila Dongre, in writing, shall be the TRUSTEE in place of Shri Sobodh Varma.

PROVIDED HOWEVER that upon every such appointment of a new TRUSTEE or new TRUSTEES, the TRUST FUND shall be so transferred to become vested in the new TRUSTEE or TRUSTEES jointly with the surviving or continuing TRUSTEES or TRUSTEE or solely as the case may require and every such newly appointed TRUSTEE or TRUSTEES before as well as after such vesting of the TRUST FUND shall act or assist in the execution of the TRUST and powers of these presents as fully and effectually as if he had been constituted as TRUSTEE.

2. The total number of TRUSTEE as aforesaid shall always remain two."

4. Upon the retirement of Mr. Lallan Prasad Gupta as a trustee

in the year 2001, Mrs. Santosh D. Shriram nominated her son-in-law

Mr. Sanjeev S. Das as one of the trustees of the Mansarovar Trust. On

23.03.2009 Mr. Sanjeev S. Das passed away. Within five days, i.e. on

28.03.2009 a communication was issued on the letter head of

Mansarovar Trust by the "authorized official" addressed to plaintiff

No.2 stating that on the demise of Mr. Sanjeev S. Das, Mr. N.K. Anand,

who was originally arrayed as defendant No.4, has been appointed as a

trustee w.e.f. 24.03.2009. A circular to this effect was also issued "To

All Concerned" also signed by the same "authorized official" on the

same date.

5. It is the submission of the plaintiffs that the appointment of

Mr. N.K. Anand, the erstwhile defendant No.4, as a trustee on the

demise of Mr. Sanjeev S. Das was contrary to the terms of the trust

deed as also contrary to the law. It is argued that a perusal of Clause 1

of Chapter VI, as extracted above, as well as clause 4 of the trust deed

would show that the trust was created primarily for two sets of

beneficiaries, namely, those belonging to the Shriram Group and the

Dongre family. The authors of the trust are two ladies who belong to

the Shriram Group and the Dongre family, respectively. The fact that

Sh. Lallan Prasad Gupta was a trustee nominated by Mrs. Santosh D.

Shriram and that Mr. Subodh Varma was nominated by Mrs. Urmila

Dongre, is also evident from the fact that on the demise, retirement or

refusal to act by Mr. Lallan Prasad Gupta and Mr. Subodh Varma, it was

Mrs. Santosh D. Shriram and Mrs. Urmila Dongre, respectively, who

were entitled to nominate the new trustee.

6. Mr. Ganju, learned senior counsel for the plaintiffs has placed

reliance on Sections 60, 73 & 74 of the Indian Trusts Act, 1882 (Trusts

Act). Section 60 states that the beneficiary has a right, subject to the

provisions of the instrument of trust, to ensure that the trust property

is properly protected and held and administered by proper persons and

by a proper number of such persons. Mr. Ganju submits that the

plaintiffs are interested in ensuring appointment of a proper trustee,

since the plaintiffs are beneficiaries to the extent of 60% of the trust's

income.

7. Sections 73 & 74 read as follows:

"73. Appointment of new trustees on death, etc. - Whenever any person appointed a trustee disclaims, of any trustee, either original or substituted, dies, or is for a continuous period of six months absent from Subs. by the A.O. 1950 for "the Provinces" [India], or leaves Subs. by the A.O. 1950 for "the Provinces" [India] for the purpose of residing abroad, or is declared an insolvent, or 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 the trust, or accepts an inconsistent trust, a new trustee may be appointed in his place by-

          (a)      the person nominated for that purpose by
          the instrument of trust (if any), or

          (b)       if there be no such person, or no such

person able and willing to act, the author of the trust if he be alive and competent to contract, or the surviving or continuing trustees or trustee for the time being, or legal representative of the last surviving and continuing trustee, or (with the consent of the court) the retiring trustees, if they all retire simultaneously, or (with the like consent) the last retiring trustee.

Every such appointment shall be by writing under the hand of the person making it.

On an appointment of a new trustee the number of trustees may be increased.

The Official Trustee may, with his consent and by the order of the court, be appointed under this section, in any case in which only one trustee is to be appointed and such trustee is to be the sole trustee. The provisions of this section relative to a trustee who is dead include the case of a person nominated trustee in a will but dying before the testator, and those relative to a continuing trustee include a refusing or retiring trustee if willing to act in the execution of the power.

74. Appointment by court - Wherever 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.

Rule for selecting new trustees - In appointing new trustees, the court shall have regard (a) to the wishes of the author of the trust as expressed in or to be inferred from the instrument of trust; (b) to the wished of the person, if any, empowered to appoint new trustees; (c) to the question whether the appointment will promote or impede the execution of the trust; and (d) where there are more beneficiaries than one, to the interests of all such beneficiaries."

8. It is argued that Section 73 also recognizes the right of the

person nominated for that purpose in the trust deed to appoint a

trustee to fill the vacancy caused, inter alia, on account of the demise

of an existing trustee. He submits that the intention of the

authors/settlers from the aforesaid Clause 1 of Chapter VI is clear that

upon the demise/refusal to act/retirement of a trustee nominated by

one of the settlers, it would be the right of the same settler to

nominate a fresh trustee. He submits that, in any event, under Section

73(b) Mrs. Santosh D. Shriram, being one of the authors/settlers of the

trust is entitled to appoint the new trustee. He submits that defendant

No.3, the other surviving trustee appointed by Mrs. Urmila Dongre had

no right to appoint a new trustee under the trust deed and that

authority is vested in defendant No.1.

9. By reference to Section 74 he submits that the Court is

empowered, upon an application being made by the beneficiaries, to

appoint a new trustee. While appointing a new trustee the

considerations that the Court would keep in mind are the wishes of the

author of the trust as expressed in or to be inferred from the

instrument of trust and the wishes of the person who is empowered to

appoint new trustees. The Court would also consider the question

whether the appointment will promote or impede the execution of the

trust, and where there are more beneficiaries then one, the Court

would also take into consideration the interests of all such

beneficiaries.

10. Counsel for the defendant No.1 has produced in Court an

affidavit of defendant No.1 Mrs. Santosh D. Shriram, wherein, she has

stated that in exercise of her discretion under Chapter VI of Clause 1 of

the Mansarovar trust, she appoints Mr. Siddharth Shriram as the

trustee of the Mansarovar trust in place of deceased trustee Mr.

Sanjeev Saran Das.

11. Mr. Chadha, learned counsel appearing for defendant No.3,

has firstly submitted that the prayer made in the interim application

has become infructuous with the resignation of Mr. N.K. Anand, since

the only substantive prayer made by the plaintiff was to restrain Mr.

N.K. Anand from officiating as a trustee. He further submits that the

power to nominate a new trustee under Clause 1 of Chapter VI of the

trust deed, upon the initial trustee Mr. Lallan Prasad Gupta retiring

from the trust, was a one time power which stood exhausted upon the

appointment of Mr. Sanjeev S. Das. He submits that defendant No.1

was, therefore, not entitled to nominate any further trustees. By

placing reliance on Section 73 as extracted above, he submits that the

surviving trustee, namely, defendant No.3 was, therefore, competent

to fill up the vacancy. He further submits that on account of resignation

of Mr. N.K. Anand, even if the Court is inclined to appoint another

trustee, the nominee of defendant No.1 should not be appointed, and

that the Court may appoint any other independent person to act as a

trustee. He submits that there is no allegation against defendant No.3

in his 25 years as one of the trustees of the Mansarovar Trust of acting

against the interest of any of the beneficiaries. He submits that there

are no two groups of beneficiaries as has been sought to be made out

by the plaintiffs. Each trustee is obliged to protect the interest of all

the beneficiaries.

12. Mr. Tiku, Senior Advocate, who appears on behalf of

defendant No.2 has also supported the submissions made by Mr.

Chadha.

13. Having heard the submissions made by learned counsels I am

prima-facie of the view that there is merit in the submissions of Mr.

Ganju. The two settlers, namely, defendant Nos.1 & 2 each

contributed in equal amount of Rs.5001/- as the corpus of the trust.

Both the settlers are ladies belonging to the Charat Ram Group and the

Dongre family, respectively. The trustees are to hold and possess the

trust's fund. They are to collect all the dividends, interests, rent etc.

and all other income of the trust's fund and to meet all expenses,

including all outgoings. Thereafter, they are to divide and distribute

the income of the trust amongst the beneficiaries enlisted in Clause

1(c) of Chapter VI of the trust deed. It is not disputed that from out of

the corpus of the trust valuable intellectual property had been

acquired by the Mansarovar Trust, which, in turn, is being exploited by

it to generate income for the benefit of the beneficiaries. The

settlers consciously provided for appointment of two trustees initially

and also provided that there would be only two trustees and no more.

It prima facie, appears from Clause 1 of Chapter VI of the trust deed

that Sh. Lallan Prasad Gupta was the nominee of Mrs. Santosh D.

Shriram, as upon his ceasing to be a trustee for any reason

whatsoever, Mrs. Santosh D. Shriram was entitled to appoint a trustee

in his place. Similarly, it appears that Sh. Subodh Varma was the

trustee nominated by Mrs. Urmila Dongre since, upon Mr. Subodh

Varma ceasing to be a trustee for any reason whatsoever, the trust

deed provides that Mrs. Urmila Dongre shall appoint a trustee in his

place. Clause 1 not only sets out the mechanism of filling up the

vacancy caused on the vacation of his office by one of the two

trustees, it further provides that in case one of the two settlers is not

willing to, or becomes incapable of appointing a trustee, or dies, the

eldest male legal heir of the concerned settler, if wiling, shall be the

trustee in place of the original nominated trustee. The settlers

provided the mechanism to meet even further eventualities, in the

event of the eldest male legal heir not being willing or becoming

incapable to act as a trustee.

14. It, prima facie, appears that the intention of the settlers was

to keep to themselves and to their respective branches the power to

appoint trustees in the eventuality of the existing trustee nominated

by each of them ceasing to be a trustee.

15. Though the trust deed does not talk of two different groups,

considering the fact that Mr. Chadha did not dispute the position that

of the 10 beneficiaries the first 9 belong to the Charat Ram Group, and

the 10th to the Dongre family, respectively, prima facie, at this stage, I

am inclined to accept the submission of Mr. Ganju that the intention of

the settlers was to have one trustee nominated from each

branch/group so as to ensure the transparent and uncontroversial

management of the trust for the benefit of all the beneficiaries

belonging to the two groups. Prima facie it seems only logical and

reasonable that the interest of the beneficiaries is equitably

represented in the management of the trust.

16. Prima facie, at this stage, I am of the opinion that the right of

defendant No.1 Mrs. Santosh D. Shriram to appoint a fresh trustee

upon the demise of Mr. Sanjeev S. Das was intact and that it was not a

right which could be exercised only once as contended by the

defendants. To me it appears, at this stage, that defendant No.1 is

entitled to appoint the new trustee by virtue of Clause1 of Chapter VI

read with Section 73(a) of the Trusts Act. It appears that if the case is

covered by Clause (a) of Section 73, there is no question of invoking

Clause (b), unless it is a case of nominated person not being "able and

willing to act". This is clear from the opening words of Clause (b)

which reads: "if there be no such person, or no such

person......................"

17. In any event, defendant No.1 being an author of the trust was

entitled to nominate a fresh trustee upon the demise of Mr. Sanjeev S.

Das by virtue of Section 73(b) of the Trusts Act. The right of the author

of the trust to nominate the trustee takes priority over the right given

to the surviving or continuing trustees to nominate a fresh trustee.

18. I may now deal with the objection of Mr. Chadha that the

prayer made in the application does not survive due to the resignation

of Mr. N.K. Anand. No doubt the first substantive prayer in the

application does not survive, but as pointed out by Mr. Chadha himself

the trust deed provides that there have to be two trustees at all times.

To explain the apparent tearing hurry shown by the defendant No.3 in

seizing the opportunity to appoint a new trustee without even waiting

for the ashes of late Mr. Sanjeev S. Das to cool down, Mr. Chadha

emphasized that a "crisis" would have arisen if the new trustee was

not immediately appointed. It does not, therefore, lie in the mouth of

the defendants to oppose the appointment of a provisional trustee.

The plaintiffs have made a residuary prayer in the application for the

passing of such other or further orders as the Court deems fit in the

facts and circumstances of the case. The Court is not powerless to

mould the relief in changed circumstances for the purpose of

preserving the rights of the parties. Pertinently, Section 74 of the

Trusts Act entitles the beneficiary to apply to the principal civil court of

original jurisdiction for appointment of a trustee or a new trustee

whenever a vacancy of disqualification accrues and it is impractical to

appoint a new trustee under Section 73. For these reasons, I am

inclined to proceed to appoint a provisional trustee till further hearing

of the application.

19. On the application of the considerations enumerated in

Section 74 I am, prima facie, of the view that provisionally the nominee

of defendant No.1, namely, Mr. Siddharth Shriram should be appointed

as a trustee. The same is in accord with the wishes of the author of

the trust, namely, Mrs. Santosh D. Shriram. It is also in accord with the

wishes of Mrs. Santosh D. Shriram, who, prima facie, is empowered to

appoint the new trustee. The original nominee of defendant No.2, Mrs.

Urmila Dongre, namely, Mr. Subodh Varma (defendant No.3) is already

functioning as a trustee of the Mansarovar Trust. It is the nominee

nominated by defendant No.1 Mrs. Santosh D. Shriram, namely, Mr.

Sanjeev S. Das, who has passed away. The appointment of another

nominee of Mrs. Santosh D. Shriram, namely, Mr. Siddharth Shriram

will promote the execution of the trust. On the contrary, the

appointment of a nominee of either defendant No.2 or defendant No.3

would be inequitable, as the plaintiffs, who claim to be beneficiaries to

the extent of 60% of the trust's income, may lose their right to a

proper trustee. As notice above, there are 10 beneficiaries named in

the trust deed of which 9 admittedly belong to the Charat Ram Group

and the interest of these beneficiaries and their assigns would be

better served if the nominee of defendant No.1 is permitted to function

as a trustee, rather than the nominee of either defendant Nos.2 or 3 or

any other independent person appointed by the Court.

20. Accordingly, till further orders, I appoint Mr. Siddharth

Shriram provisionally as a trustee of the Mansarovar Trust, who shall

function along with defendant No.3, Mr. Subodh Varma, as the trustee

of the said trust.

21. Observations made in this order are wholly tentative and

shall not influence the disposal of the present application or the suit

one way or the another. Dasti.

VIPIN SANGHI, J.

APRIL 28, 2009 rsk