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Hasanali Mahomedali Vs. Esmailji Sulemanji - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
Decided On
Case NumberO.C.J. Suit No. 327 of 1904
Reported in(1907)9BOMLR606
AppellantHasanali Mahomedali
RespondentEsmailji Sulemanji
indian trusts act (ii of 1882), sections 88, 96 -executor-trustee-surviving partner, liability of, when carrying on the trade-lialility to account to the legal representative of the deceased partner-relation between surviving partner and legal representative of deceased partner-co-executor-transfer of business to the surviving partner-good faith of co-executor in the transaction-onus of proving good fath-evidence act (1 of 1872), section 11-good will-survival of good will.;under sectoin 88 of the trusts act 1882, a person, who occupies the poaition either of an executor or a partner, mast hold for the benefit of any person, whose interests ho is bound to protect, every pecuniary advantage he has gained for himself in each of the following cases : (1) if he has gained the advantage by.....batty, j.1. the plaint in this case prays (1) for the administration of the estate of one mahomedali who died on 18th december 1896, (2) for the setting aside the sale to the first defendant, an executor of mahomedali's, of mahomedali's interests in a partnership, (3) for the ascertainment for the true value of that interest at date of mahomedali's death and for the profits made by the first defendant's use in his business of mahomedali's moneys, (4) for an account against both defendant 1 and defendant 2, executors of mahomedali, on the footing of wilful default and (5 & 6) for the appointment of a receiver to get in assets in the hands of the executors, to pay maintenance thereout to the plaintiffs and to sue the first defendant. the plaintiffs are the minor sons of mahomedali suing by.....

Batty, J.

1. The plaint in this case prays (1) for the administration of the estate of one Mahomedali who died on 18th December 1896, (2) for the setting aside the sale to the first defendant, an executor of Mahomedali's, of Mahomedali's interests in a partnership, (3) for the ascertainment for the true value of that interest at date of Mahomedali's death and for the profits made by the first defendant's use in his business of Mahomedali's moneys, (4) for an account against both defendant 1 and defendant 2, executors of Mahomedali, on the footing of wilful default and (5 & 6) for the appointment of a Receiver to get in assets in the hands of the executors, to pay maintenance thereout to the plaintiffs and to sue the first defendant. The plaintiffs are the minor sons of Mahomedali suing by their next friend Hussanali Jeevabhai.

2. The first and second defendants are executors appointed by the will of Mahomedali, executed on the 17th December 1896, the day before his death. The third defendant is Mahomedali's daughter. The fourth is Mahomedali's widow. It is common ground that the deceased Mahomedali and the first defendant were the partners in a wholesale umbrella business, that Mahomedali had an eight annas share therein and that this constituted practically the whole of his estate which in the will is estimated at Rs. 65,000 to Rs. 70,000. The plaintiffs allege that annual profits were Rs. 30.000, that the defendant executors instead of winding it up, realizing the best prices and setting apart the testator's share, made the whole business over to the first defendant at a gross under estimate, the only valuation of stock being made by the son of defendant 1 and nothing being allowed for the goodwill, that profits for the year of Mahomedali's death were understated at little more than a third of their real amount, that stock was undervalued and outstandings which were recoverable were ignored, that a deduction of 5 p. c. was made from the invoice prices wrongly taken as the basis of valuation and that a sum of Rs. 5756-11-0 due from one Nurbhai was among outstandings taken over by defendant 1 and that defendant I had set off a legacy of Rs. 3000 to Nurbhai against this debt and had debited Mahomedali's estate'with the balance, that the first defendant had for nearly four years used in his own business Rs. 71,387-4-6 which stood to the credit of the testator's capital account and was therefore liable for all profits thereby made or interest at 9 p. c. with yearly rests on that amount. The plaintiffs admit that on the remonstrances of defendant 2 a sum of Rs. 10,053-13 had been credited to the estate as interest for the use of testator's moneys to October 1900 and Rs. 1000 as for the goodwill, but assert that these arrangements made by the friends of the defendants are not binding on the plaintiffs.

3. The first defendant in his written statement denies that the business in question was of great value and that annual profits approached Rs. 20,000 and while he admitted that he had purchased the partnership stock, denied that it had been uuderesti-mated and that the valuation And been made by his own son who he alleged had only assisted in ascertaining the correct figures. The written statement further alleged that the stock had deteriorated in value and could not have been sold at auction without great loss and had been taken over by him at invoice prices after pressure from the testator's family, that neither the stock nor the profits had been underestimated, that the goodwill was of no value and that the business had been carried on by him entirely in his own name after his purchase of testator's share. With reference to the debt due from Nurbhai the first defendant's statement was that as Nurbhai was a brother of the testator the loan made to him out of the partnership moneys was one for which Mahomedali alone was responsible and the legacy had therefore properly been set off against it and the balance properly debited to the estate instead of to the partnership. With regard to the moneys alleged to have been used by him the written statement alleged that for half the partnership debts and liabilities amounting to Rs. 87,395, testator's estate was liable and that this sum must therefore be deducted from the Rs. 71,387-4-G standing to testator's credit.

4. Further that the first defendant had used the testator's moneys by the desire of defendant 4 and the next friend and others acting in the interests of testator's family, under an agreement for interest at 4 per cent and had paid defendant 4 when required and in Samvat 1956 had allowed interest at 6 per cent and Rs. 1000 as for the goodwill, but denied that the second defendant had made any remonstrances or been, as suggested, in any way his tool. The fourth defendant had, the written statement alleged, on behalf of the minor plaintiffs and herself, acted in this settlement and it was therefore binding on all. The written statement concludes with the offer to hand over, as the Court may appoint, Government Promissory Notes of Rs. 51,000 and a sum of Rs. 2645-1-11 as the only assets in his hands and contends that this suit is unnecessary and vexatious.

5. The second defendant in his written statement does not admit that the goodwill was of any value or that the profits were Rs. 20,000 per annum and states that having been absent from Bombay he did not intermeddle for ten months when ho learnt that the 1st defendant had valued testator's share and taken over the business, Rs. 74,077 being found due to testator's estate; that on pressure from him defendant 1 joined in obtaining probate and defendant 2 had taken no active part in administration and had handed over to first defendant a note of Rs. 1000 as part of a legacy due to testator's brother Kamrudin and was ready to hand over as directed a balance of Rs. 9,732 in his hands which sums were all he had handled of the estate. In repudiating any charge of breach of trust, wilful default, or negligence made, the second defendant referred to correspondence showing that he had remonstrated with the first defendant with the result that interest at 6 per cent, (amounting in the aggregate to Rs. 10,053) and Rs. 1000 as for goodwill had been paid as a fair settlement and claimed that the first defendant, on whom he had relied, should indemnify him should he be held in any way liable.

6. The defendants 3 and 4 joined in the contentions raised by the plaintiffs.

7. On these pleadings issues were raised on behalf of defendants as follows :-

Mr. Kirkpatrick raised issues :-

1. Whether the estate of said Mahomed Ali & Co. has not already been fully administered by the executors of his will and whether this unit was necessary ?

2. Whether the accounts of the firm of Esmailji Mahomed Ali were not adjusted and settled by the said Mahomed Ali Kalikhan shortly before his death, viz. on 5th November 1896 and whether the said adjustment and settlement was not binding on plaintiffs ?

3. Whether share of the said Mahomed Ali Kalikhan in the said firm was not finally adjusted and set apart on 25th October 1897 ?

4. Whether the said firm of Esmailji Mahomed Ali was not finally wound up and dissolved on the said 25th October 1897 and a new firm constituted by this defendant under the name of Esmailji Sullemanji ?

5. Whether the transfer to this defendant of the stock-in-trade of the firm of Esmailji Mahomsd Ali was made otherwise than for the purpose of winding up The said firm and for The purpose of realising the share of the said Mahomed Ali Kalikhan therein and whether the said transfer was otherwise than bonafide and beneficial to the estate of the said Mahomed Ali Kalikhan and whethor the same was not made at the request of defendant 2 and other persons acting on behalf and in interest of the family of the said Mahomed Ali Kalikhan and whether if so it would be binding on the plaintiffs ?

6. Whether any and which of the allegations in the 5th para of the plaint with reference to the valuation of the stock for the purposes of the said transfer are or is true P

7. Whether the allegations in para 6 of the plaint are true.

8. Whether the plaintiffs are entitled now to have the said transfer set aside ?

9. Whether The moneys representing the share of the said Mahomed Ali Kalikhan in the said firm of Esmailji Mahomedali were retained by this defendant in his business until September 1901 as alleged in para 7 of the plaint?

10. Whether subsequently to 25th October 1897 the said moneys were in the hands of this defendant or of his firm of Esmailji Sulemanji otherwise than as a deposit at interest P

11. Whether the said deposit was not made at request of next friend of plaintiffs and with knowledge and consent of defendant 2 and of 4th defendant as mother and natural guardian of plaintiff and was not beneficial to the estate of Mahomed Ali Kalikhan ?

12. Whether The accounts relating to the second deposit were not duly adjusted and settled at end of Section 1956 as in 6th para of this defendant's written statement alleged and whether the said adjustment and settlement are not binding on plaintiffs and defendants 3 and 4 ?

13. Whether the mother and the daughter of Mahomed Ali Kalikhan have acquiesced and assented to the bequest of the residue as alleged in para 10 of the plaint ?

14. Whether the mother of the said Mahomed Ali Kalikhan and his daughters other than the 3rd defendant ought not to be parties to this suit P

15. Whether the provisions of the will of the said Mahomed Ali Kalikhan are operative to any and what extent according to Mahomedan Law ?

16. Whether this defendant has in his possession or is liable for any assets belonging to the estate of the said Mahomed Ali Kalikhan other than those mentioned in para 9 of this defendant's written statement ?

The Advocate General for defendant 2 raised issues :-

17. Whether defendant 2 is liable to account to plaintiffs on footing of wilful default ?

18. Whether defendant 2 has been guilty of devastation ?

19. Whether defendant 2 can be made liable for any devastation of defendant 1 which may be established in this suit ?

20. Whether if The defendant 2 is held to be under such liability he is not entitled to he indemnified in respect of such liability by the defendant 1 ?

Mr. Bhandarkar raised no issues for defendants 3 and 4. Mr. Padshah raised issues:-

21. Whether defendant 1 being a n executor of The will of Mahomed Ali Kalikhan could legally transfer to himself the share of the deceased in the stock-in-trade in the business of Mahomed Ali ?

Whether the said transfer was for a proper value and fair and whether it is binding in any way on the plaintiffs. [In lien of this issue No. 3 is modified by addition. ]

22. Whether the defendant is not bound to account for the profits which he made by use of the moneys and stock in trade belonging to the estate of Mahomedali Kalikban ?

23. Whether the defendant 1 is not liable to pay 9 per cent, interest for the use of the moneys belonging to the estate of Mahomed Ali Kalikhan in the event of his not being liable to account for the profits ?

24. Whether the defendants or any of them is not liable to refund to The estate of Mahomed Ali Kalikhan the losses sustained by the estate in consequence of their failing to recover from the Official Assignee the dividend from The estate of Nurbhai ?

25. Whether defendant 1 was entitled to throw on the estate of Mahomed Ali Kalikhan the burden of the indebtedness of the said Nurbhai ?

26. Whether the amount of Rs. 1,000 allowed by defendant 1 for the goodwill of the business of Mahomed Ali was a fair and adequate amount P

27. General issue : Whether plaintiffs are entitled as against the defendant to relief prayed for ?

8. With reference to Nos. 13 to 15 both inclusive of the above issues as to acquiescence by the mother and daughter of the testator in the bequests of residue and as to the necessity for their joinder, Exs. A, B and C were not disputed and those points were therefore not pressed. On the last 'day of hearing when the plaintiffs' counsel had commenced his reply Mr. Kirkpatrick for defendant 1 raised the following special issue.

Whether the sale on the 25th October 1897 was a sale to the executor, or to his sons 1

9. Mr. Padshah for plaintiffs objecting, The issue was accepted with this addition 'and can this contention be raised at this stage.'

10. Notwithstanding this portentous array of issues the main contentions plaintiffs' counsel states may be reduced to three points as follows:-

I. Was there a sale of 25th October 1897 to the first defendant or his sons, and, if so, was it not liable to be set aside ?

II. If there has been a sale, has the first defendant accounted for the sale proceeds and has he not embarked them as in his own business and thereby become liable to account for all profits thereon ?

III. Whether the defendants or either of them be not liable for Rs. 3,756 to refund that amount as wrongly debited to Mahomedali's estate ?

11. Each side has, I think, overrated its legal position and each side has appealed to English cases, none of which precisely touch the points really involved.

12. For, on the one hand, the plaintiffs contend that no purchase by a surviving partner who is also an executor can be upheld. On the other hand, the defendants, relying mainly on In re Houghton (1904) l Ch. 622, claim that good faith on the part of defendant 2 would not only exonerate him, but would moreover so validate any arrangement made by him as to secure to the first defendant any advantage he may have gained thereby.

13. Neither of these extremes can be accepted without qualification. No doubt passages from English cases may be cited which detached from their context may appear to favour the one or the other extreme.

14. Thus, for instance, in Wedderburn v. Wedderburn (1856) 22 Beav. 84 it was said ' Executors cannot buy at any price the shares of their testator. Such a transaction is wholly void. '

15. And in Cook v.Collingridge (1822) Jac. 621 it was stated as 'one of the most firmly established rules that persons dealing as trustees or executors must put their own interests entirely out of the question and this is so difficult to do in a transaction in which they are dealing with themselves, that the Court will not enquire whether it has been done or not, but at once says that such a transaction cannot stand.' And again (ibid, 619) ' if it were clear that according to the articles of partnership the stock was to be valued and sold at a valuation, it would be difficult even then to Bay that the sale could stand if in truth, whatever were the form, it was a sale by one executor who was a partner to another executor who was also a selling party and who was about to become a partner. '

16. So again in Collinson v. Lister (1855) 20 Beav.356 it was said ' an executor cannot carry on the trade of his testator except for the purposes of winding it up. A contract requires two parties to it and the man in one character can with difficulty contract with himself in another character. '

17. And to like effect in Wedderburn v. Wedderburn (1838) 4 My. & Cr. 45 'the union of the two characters in one and the same person rendered any binding settlement extremely difficult.'

18. So also Williams on Executors (p. 707) states the rule that 'an executor cannot be allowed either immediately or by means of a trustee to be the purchaser from himself of any part of the estate but shall be considered a trustee for the persons interested in the estate and shall account for the utmost extent of advantage made by himself of the subject so purchased' citing Hall v. Hallet (1784) 1 Cox 134 and Watson v. Toone (1820) 6 Madd. 153. Or the instance of Sanderson v. Walker (1807) 13 Vesey 601 might be cited to show that a sale would be voidable not merely when the person who purports to purchase is solely entitled to sell, but even when a trust for sale is vested in him along with others and though the sale be without fraud and by auction. Or to take a later case, Beningfield v. Baxter (1886) 12 App. Cas. 167 might be quoted where the purchase by an executor though openly at auction (palam et suh-hafta) was declared voidable at suit of the testator's widow and universal legatee, These and many other English cases may appear to support the suggestion that the purchase by an executor of his testator's share in a business is unsustainable. And plaintiffs' counsel further relies on Section 91 of the Probate and Administration Act 1881, to support his contention. But Section 91 declares a sale in such case only to be voidable at the instance of persons interested in the property sold. This corresponds with Section 370 of the Indian Succession Act 1865.

19. Henderson, in his Commentary on that Section, states that an executor or administrator shall not be permitted to be the purchaser from himself of any part of the assets and cites as authority, Hall v. Hattet (1784) 1 Cox 134. I think, however, there is danger in thus citing English cases as explanatory of an Indian enactment without special reference to the wording of that enactment.

20. For the phrase ' voidable at the instance of any other person interested in the property sold, ' implies that the Courts will only sot aside the sale in the interests of beneficiaries or others (such, e.g., as creditors) injuriously affected. And where, as in this case, the persons interested are mostly minors, it is hardly conceivable that the Court should act on any other principle.

21. If it turn out that the transaction impugned was as beneficial to the interests of those concerned as any that could be substituted for it, it would seem irrational for a Court bound to act in those interests, to set the transaction aside and a gratuitous hardship to all parties to insist on long and costly proceedings that could benefit nobody merely because an executor was the purchaser.

22. Indeed the English cases insist on no such doctrinaire technicality.

23. Thus in Wedderburn v. Wedderhurn (1855) 22 Beav. 84 it was held indeed the plaintiffs were entitled to say either that they would take the valuation at the amount the executors put on it or repudiate and ascertain what the real value then was. But in that particular case it appeared the real value was practically nil at date of transaction impugned and the course adopted was the only course which could then have been adopted to prevent the annihilation of the interests of the infants under the will of the testator. And therefore the case was treated as one in which profits should not be charged, though they would have been charged if the testator's share had consisted of moneys in hand or been capable of easy realization and had been used by the executors for their own advantage and exposed by them to the risks of trade. And even in Cook v. Gollingridge (1822) Jac. 621, though the Court in a passage above quoted said that it would not inquire whether the executors had put their own interest entirely out of question but would at once say 'that such a transaction cannot stand. ' Yet the very next sentence adds the consideration of the interests of the beneficiaries. It runs: 'Therefore it being admitted that it will be more beneficial to the persons interested in the testator's estate that the partnership should be considered as not having been terminated, I think they are entitled to have it so considered. They will be entitled to an account of the profits and to have the stock sold.'

24. Had it appeared to be more beneficial to those interests to allow the sale to stand the Court apparently would have acted as those interests demanded. So again in Sanderson v. Walker (1867) 13 Vescy 601, the Lord Chancellor, Lord Eldon, said : 'If it is for the benefit of the infants that the purchase shall not be disturbed the Court will not disturb it and will disturb it if it will be for their benefit.'

25. Thus English cases, if indeed it be necessary or even permissible to appeal to them, would make the essential test, the interests of those beneficially concerned and negative the contention of the plaintiffs that no purchase by an executor of his deceased partner's share can stand. But while the rule which the plaintiffs would ask the Court to enforce seems unreasonably strict, that which the defendants seek to deduce from English cases seems to be no less erroneous in the other direction.

26. They rely on Garrett v. Noble (1834) 6 Sim. 504, Chambers v. Howell (1847) 11 Beav. 6, In re Hougldon (1904) 1 Ch. 623, Lindley on Partnership, page 532, Section 43 of the Indian Trusts Act 1882 and for the defendant 3, Sub- Section 26 and 27 of the same Act.

27. Now Garrett v. Noble was not a case of purchase by an executor. It was one in which executors directed to call in the testator's personal estate with all convenient speed, continued his trade for some years. But as the executors had acted bona fide and according to the best of their judgment the Court refused to charge them with the considerable loss ultimately sustained. It was not a case in which executors had for their own benefit exposed their testator's estate to the risks of trade. They were not therefore morally culpable and they had derived no benefit to themselves from the estate, They were therefore not financially liable.

28. It does not follow that because executors in certain cases may not be liable for losses that therefore they would not be answerable for profits. The cases of Broivn v. De Tastet (1821) Jacob 284 and Me Donald v. Richdrdson (1855) 1 Giff. 81, illustrate this.

29. In the former it was said (p. 293): 'Those who choose to employ the property of a minor for the purposes of this trade exposing it to all the risks of insolvency or bankruptcy, have no right to say that the account shall not be taken, if it can be taken without incurring difficulties which would embarass the house to such an extent as to make it unjust to demand it. '

30. In the latter case (Me Donald v. Richardson) it was held ' where an executor has improperly employed the assets of his testator in trade he will be made to account for and pay the profits, although the persons in partnership with whom he had made these profits were not before the Court as parties to the suit or in any other character than that of witnesses to prove the amount of the profits received by the executor.' The liability of partners who are not executors, it was said, could only result from privity of contract (p. 88) unless there was collusion with the executor or they refused to produce the books (p. 89). Flockton v. Banning (1872) L.R. 8 Ch. App, 323n. (reported in a note to Vyse v. Foster) shows the respective liability of executors and partners, where the former embark and the latter accept, with notice of its source, trust money as part of the capital in a trade which they carry on together. There it was said to be ' rather worse to acquire the property in breach of trust than merely to retain it, because in retaining it the person might have said 'I was acting under some necessary obligation. It was not possible to do otherwise than I did' Vyse v. Foster (1872) L.R. 8 Ch. App. 323.

31. So here if the executor instead of purporting to acquire for himself the testator's share in the business, had in good faith and acting to the best of his judgment, merely carried on the business in the interests of those concerned, his conduct and immunity might not have been open to question. For as laid down in Dowse v. Gorton (1891) A.C. 190, 199 ' Executors would no doubt be entitled to carry on a business of the testator for such reasonable time as were necessary to enable them to sell his business property as a going concern.'

32. Chambers v. Howell, the next case relied on for defendants, affords no support to their contention. It is cited in Ashburner on Equity (pp. 426-7) and in Lindley on Partnership (p. 530, 7th edition; p. 487, 5th Edition) as showing that if executors who are entirely distinct from the surviving partners, sell or lend the assests to those partners without complying strictly with the terms of the will, the partners though they had notice of such incomplete compliance do not become constructive trustees of those assets. They are, says Ashburner, simply purchasers of or debtors to the testator's estate, bound to the executors in accordance with the terms of the contract of purchase or loan, but not accountable for the profits made by the assets to the persons beneficially interested in the testator's estate. The case is different when one of the surviving partners is himself an ex-ecutor.' (Ashburner on Equity, p. 427). It may be noted that in the case of Chambers v. Howelli (1847) 11 Beav. 14, 16 the Court observed: ' I do not conceive it to have been seriously contended that an executor of a deceased partner may not employ the surviving partners as his bankers and deposit money with them even at interest, without subjecting the surviving partners to an account of all the profits which they may thereby make in their business. If this be an improper agreement, if the surviving partners have availed themselves of their relation and the inequality of their knowledge to give an advantage against the estate of the testator, the Court may interfere on that ground and prevent the administratrix from exercising her legal powers.'

33. This passage is of importance as showing that even in dealings between an executor who has no connection with the purchase and the testator's surviving partners, the Courts will not over-look the position of exceptional advantage occupied by the surviving partners and will interfere if they avail themselves of it.

34. To the like effect it was observed in Wedderburn v. Wedderburn (1856) 22 Beav. 84. 'Had such an arrangement been made with the executors not being the partners it would have been a good and valid arrangement on the assumption that full disclosures had been made '

35. So in Williams on Executors' (p. 707), it is said:-''The executor of a deceased partner is warranted in equity as well as in law in selling the share of a deceased to the surviving partners if this can be done fairly and properly. Though when such a relation subsists between the parties Courts of Justice will look at such transaction with close attention, for in dealings between the executors of a deceased partner and the surviving partners there may be an inequdlity in respect of knowledge which may be taken advantage of in such a way as to lead to inequitable and unfair results.' Thus it is evident that where the surviving partner is the purchaser of a testator's share from an executor who has no interest except as executor in the transaction, it is the duty of the surviving partner, even though he is not himself one of the executors, to make full disclosure and to remove all inequality of knowledge that might otherwise exist between him and the executor. If he does not, it is at the peril of having the transaction set aside.

36. But the defendants rely on the next case cited by them, In re Houghton (1904) 1. Ch. 639 and on the comment on that case in Lindley on Partnership (page 532), as authority for the position that the good faith of one executor who is not a partner would validate the purchase of the testator's share by a co-executor who is also a surviving partner. The passage cited from Lindley, after stating the difficulties of a sale by an executor to himself, runs:- 'If one executor is not a partner the difficulty of coming to a settlement is not so great because an executor has power to settle a claim by his co-executor against the testator's estate.' And In re Houghton is given in the footnote as the authority. In Houghton's case the question was not as to the saleable value of a testator's share in a business but; as to whether a claim of the co-executor against the estate could be contested. That question depended mainly, upon past facts. Whereas the saleable value of the testator's assets must depend mainly on the state of the market and the existence and possible effect of outside competition. But this is excluded from consideration where the only offer considered is that of the co-executor.

37. In Houghton's case moreover all ascertainable facts appear to have been disclosed to the executor who admitted the claim. And the co-executor who made that claim does not appear to have had any exceptional opportunities of withholding information as would have produced such inequality of knowledge as might be expected in the case of a partner dealing with an outsider. Howghtons case proceeded upon the wording of an English enactment 56 & 57 Vict. c. 53, Section 31 of which empowers an executor to compromise, compound, abandon and settle debts, accounts claims & c. without being responsible for any loss occasioned by any act or thing done by him in good faith. But neither that enactment nor Houghton's case nor Lindloy's comment goes so far as to say that such good faith would not only exonerate the executor acting in good faith, but would also so validate the transaction as to secure to a co-executor as surviving partner the full advantage of all he might gain by availing himself of his dual character.

38. Lindley's comment is authority for saying that an executor purchasing from a disinterested co-executor would be in a less difficult position than in purchasing from himself alone. But it is to me inconceivable that he would be on a more secure footing than a surviving partner who was not an executor and who purchased from a disinterested executor. And the position of ordinary surviving partners in such case is, as I think appears from authorities above cited, one which entails on them the duty of full disclosure. Houghton's case contains no reference to such a duty. But this in no way indicates that the duty is dispensed with in cases of the present kind.

39. Then the defendants pray in aid Section 43 of the Indian Trusts Act, 1882. That enactment is somewhat to the same effect as the English enactment applied in Houghton's case except that it does not, as does the English section, make mention of executors. It is somewhat remarkable that the counsel for defendant 1 has taken exception to that Act being cited for the plaintiffs and the second defendant. It has been pointed out by counsel for the first defendant and I think correctly, that Section 3 of the Indian Trusts Act 1882, defines a trust and trustee in words clearly inapplicable to the case of an executor and that where the intention is to affect executors, they have been separately and distinctly mentioned as in Sub- Section 87 and 38. These two sections last mentioned and Section 91 of the Probate and Administration Act 1881 and Section 370 of the Indian Succession Act, are, counsel for the first defendant contends, the only enactments by the legislature in this country, that affect executors in this connection.

40. The Honourable the Advocate-General has, on behalf of the second defendant, also appealed to Section 38 of the Trustees' and Mortgagees' Powers Act 1866 authorising executors to compromise, compound and submit to arbitration all debts, accounts and things section without responsibility for loss, no mention being made therein of good faith. But I think in the first place it is very doubtful whether this case is one within the purview of the Trustees' and Mortgagees' Act indicated in its preamble and that the mere citation of English authorities would not show that it was. And, secondly, if the section conferred on executors in this case the very large and irresponsible powers contended for, the Section has by implication so far boon repealed or modified by subsequent legislation in the Trust Act of 1882 as to make that power subject to the restrictions, consequences and liabilities entailed by Ch. IX of the Act of 1882.

41. The Indian Trusts Act 1882 was extended to the whole of this Presidency under powers conferred by Section1 thereof by notification No. 4802, Bombay Government Gazette, 1891, Part I, page 743.

42. And this being the case, it seems to mo that it is neither necessary nor permissible to have recourse to English authorities, for The purpose of determining The liabilities defined in that Act of the legislature. Bank of England v. Vagliano Brothers (1891) A.C. 107.

43. Turning therefore now to Section 88 of the Indian Trusts Act, 1882, I find that a person who occupies either of the positions held by the first defendant, viz., that of executor or of partner, must hold for the benefit of any person whose interests he is bound to protect, every pecuniary advantage ho has gained for himself in each of the following cases :-

(1). If he has gained the advantage by availing himself of either character.

(2), If he has gained the advantage by entering into any dealings under circumstances in which his own interests are, or even may be, adverse to those which he is bound to protect.

44. Thus in both cases one essential condition of liability is ' an advantage gained '.

45. In the first-there must also be unconscientious conduct. In the second-that is not necessary if there were a possibility of conflict between interest and duty. So far as Section 88 is concerned there is no saving clause for cases of good faith. That section taken by itself, therefore, would not validate the purchase by the first defendant, either on the ground of bona fide assent by the second defendant or of good faith in the first defendant himself who under this section could not retain an advantage, even though unconsciously obtained in the transaction, where his interest and duty were in conflict. Turning then to Section 95 of the same Act we find that an executor can only employ his testator's capital in trade on reasonable remuneration, but cannot as such purchase. A surviving partner, being a person who holds the property by virtue of a contract, may buy without permission of a Court under proviso (b). But inasmuch as his interests in the transaction may conflict with his duty, he is even then precluded by Section 88 from retaining for himself any advantage he may have acquired by the bargain.

46. That is he must give full value or what he could reasonably believe to be full value.

47. Throughout, there is no exception in favour of a co-executor or surviving partner who transgresses these limits with the assent of a bona fide executor. And I am unable to read into the section any such saving clause on the strength of Houghton's case or of 56 & 57 Vic, c. 53, Section 21. The only gaving clause which protects the executor or surviving partner transgressing these limits from the liabilities attaching to an ordinary trustee is that contained in Section 96.

48. Section 96 applies to all the various classes of so called constructive trustees described in Ch. IX and differentiates them from trustees properly so called, by declaring that nothing in the chapter relating to them shall impair the rights of transferees in good faith for consideration. And that is the only provision that saves an executor buying his testator's assets from liability for an advantage gained unwittingly in the bargain and a surviving partner purchasing under proviso (b) of Section 95 is yet subject to the latter part of Section 88 and could only retain an advantage thereby gained on proof of good faith as well as of consideration. The good faith must be good faith in the transferee. The good faith of a co-executor will not avail him.

49. From illustration (f) to Section 88 it would appear that the section demands from a surviving partner the same uberrima fides as regards the interests of a deceased partner as was due before death had dissolved the partnership, so far as the profits arising from the capital of the deceased are concerned. For these he must account to the legal representative, though no doubt when he has done so, there is nothing then to prevent him from receiving the assets in purchase or loan from such representative. But so long as he is under that liability to account, he is evidently within the meaning of the phrase which classes him with 'other persons bound in a fiduciary character to protect the interests of another.'

50. Next comes the question of onus.

51. At the commencement of the case I ruled that it was for the first defendant to begin with reference to the question whether the sale was liable to be set aside.

52. No authority to the contrary was cited and I understood that the first defendant had accepted the onus.

53. Counsel for second defendant at the end of the case, however, suggested that the onus was on the plaintiffs, but on full reconsideration I still think that so far as concerns the first defendant Section 111 of the Indian Evidence Act applies.

54. His position as executor may not have been one of active confidence in relation to his co-executor.

55. But as surviving partner he was bound to account to his testator's legal representative.

56. The question whether a surviving partner could properly be described as a trustee and whether he stands in a fiduciary relation to the deceased partner's representatives, was much discussed in Knox v. Gye (1872) L.R. 5 H.L. 656. Lord Westbury complained of the inaccurate use of the term trustee and stated that ' there is nothing fiduciary between the surviving partner and the deceased partner's representatives. ' The last position was vehemently controverted by Lord Hatherley. The Indian legislature in Chapter IX of the Indian Trusts Act of 1882 has recognised the objection of Lord Westbury to classing surviving partners with trustees, but has in Sub-section 80, 88 and 95, clearly recognised that they are subject to obligations in the nature of a trust and classed them with persons bound in a fiduciary character to protect the interests of others, and, as already noted, the same duties liabilities and disabilities, so far as may be, attach to them as to the trustees, subject to the provisos in Section95 and the saving provisions of Section 96.

57. I think as the question of good faith arises under Section 90 of the Indian Trusts Act 1882, Section lllof the Evidence Act clearly applies. And this view is taken by Sir Whitley Stokes in his comments on the Act. (Anglo Indian Codes, Vol. 1, page 831, paras (h) & (i) and also page 878 note on Section 95 citing Chambers v. Howell). Chambers v. Howell and other authorities above quoted suggest reasons for imposing this burden on surviving partners in respect of their dealings with their deceased partner's executors. Those reasons are, the more intimate relation of partners to the business, their greater knowledge and their opportunities of withholding essential information. The fact that in this case the suit is brought by the beneficiaries and not by the executors dealt with, is not, I think, material. It is a suit to set aside a contract made on their behalf by the executors representing their interests.

58. And '' when a plaintiff claims rescission of a contract on the ground that the defendant, when the contract was entered into, owed a duty to him, it is only necessary for the plaintiff to prove the existence of the duty and the burden is then thrown upon the defendant of showing that he made such disclosure as is necessary to support the transaction.' Ashburnor on Equity, page 449, citing Cavendish BentincK v. Fenn (1887) 12 App. Cas. 652.

59. It may be otherwise when the claim is to recover specific sums. But the relief in rescission of a contract is merely the restoration of the status quo ante. And even in a suit for account as against the trustee on the footing of wilful default it generally suffices to establish a single instance. (Ashburner on Equity, p. 193, p. 580).

60. The first defendant, in his dual capacity as executor entrusted with the assets and surviving partner employing them in his business and cognizant of their value and productiveness, was specially bound to that ample disclosure of every thing material to his contract, which, as Ashburner says (on Equity p. 390), is required of an agent dealing with a principal and of a trustee with the cestui que trust.

61. And the main-and at this stage almost the only question so far as he is concerned-is, has he shown that he made it ?

62. The line of defence somewhat evades this question.

63. It suggests that the period of the sale was one of great commercial depression owing to the exodus on account of plague.

64. [His Lordship then discussed the evidence in the case at great length and continued :-]

Indeed defendant No. 1. seems to have felt his position somewhat embarrassing. If the liability to recover Noorbhai's debt was not transferred to the new firm in 1897, the executors as such would have to account on the footing of wilful default on their admitted failure to take any steps towards recovery. If on the other hand this new firm did accept responsibility for the un-recovered debt, Lukmanji and his brothers would have to account on their own allegation of purchase, as the second defendant's counsel contends, for the balance improperly debited to Maho-medali's estate. The apparent effort of the first defendant to exonerate the new firm indicates, I think, his continued interest in it and his professed ignorance and uncertainty about it may perhaps be due to a misgiving that it might be more to his interest, if the liabilities were to attach to second defendant and himself as executors as for wilful default than if the new firm, alone were held liable. I have no doubt that the first defendant did in 1897 accept the debt as recoverable by the new firm and that the second defendant understood that the first defendant had accepted sole responsibility for it. On the sale being set aside the first defendant as executor must be held accountable for non-recovery of the moiety of the unrecovered balance of Noorbhai's debt on the footing of wilful default. No doubt he induced the second defendant to believe and I have no doubt the second defendant did in good faith believe, that the firm of Ismailji Sullemanji took over the recovery of that debt and had given or would give full value for it and I see no reason why under Section 27 of the Indian Trusts Act 1882 the second defendant, who is less guilty than his co-executor, should not compel the first defendant to make good the loss. In dealing with the accounts of the firm, the remaining moiety of the unrecovered balance, must, I think, be treated as an irrecoverable outstanding due to the first defendant alone.

65. I now proceed to the question of goodwill. The first and second defendants apparently wish the Court to accept as final the decision of the referees Abdoola Hoosein and Sarafalli on this if not on all other matters. These defendants also contend that th3 question of goodwill in such a case as the present is one of the greatest difficulty and that it is most doubtful whether any value at all can be said to attach to the continuance of the business apart from the personal activity and energy of the manager conducting it. As to the first point I have no doubt that the second defendant acted in perfect good faith in calling in the referees and in acting on their opinion. And in my opinion that circumstance must be taken into account in considering how far the second defendant can be exonerated. But I do not think the decision of the referees can bind the present plaintiffs. No authority was cited to mo, except that of Section 38 of the Trustees' and Mortgagees' Act, 1866, to show that such a reference would be conclusive in a case like the present. I am not satisfied that the Trustees' and Mortgagees' Act 1866 is applicable in this case. And I do not think either, that Section or Section 43 of the Indian Trusts Act 1882, operating under Section 95 of that Act, could apply in a case where the power of submission, being exerciseable by the executors as trustees acting together, has been exercised to decide a question arising between one of the executors as representing the estate and the other executor as representing an adverse interest which in this case was his own interest. That would seem to me a transaction of the nature described in the latter part of Section 88. And its validity would depend therefore on the question whether it resulted in an advantage to the executor whose duty was in conflict with his interest.

66. Moreover if the referees could be taken by their decision to have validated the transfer of 1897, it could only be on the condition that the question was submitted to them and that the facts were fully placed before them. But it appears they were invited only to consider the questions whether Lukmanji should give interest for three years and whether Noorbhai's debt was to be treated as due to the estate alone or to the firm, (vide Abdool Hoosain's depositions.) Sarafali speaks of the Bale as made to Lukamanji a point not at that time mooted. Abdool Hoosain states that they did not even see the invoices. And it is manifest that the referees had no opportunity of inspecting or appraising the stock or ascertaining whether the lists were exhaustive. As to outstandings other than Noorbhai's they made no inquiry. And I think it is quite clear that they did not decide and were not asked to decide whether the sale then regarded as a completed transaction was one which should stand. They dealt with the question of interest on the assumption that the sale was unimpeachable or at least unimpeached and that the only point to determine was what interest should be fixed on the unpaid purchase money treated as a loan. And thus their decision was only conditional and provisional in its character. It could not determine what the liability of the first defendant would be for using the assets of his testator if he had not purchased them.

67. And their decision, therefore, even if the submission were within the powers of the executors, cannot conclude the questions arising in this suit. The question of goodwill is one which was raised by Abdool Hoosein of his own motion, Sarafalli, the brother in law of first defendant's son (p. 138 of Book 4), opposing him. This decision was on a point not submitted to them. It was also based on the assumption that the sale was not voidable. It could not stand if the sale were void. It was also in apparent ignorance of the fact now disclosed that the first defendant had, by then, withdrawn his share from the firm and therefore could not claim any interest in the goodwill. I think therefore that the settlement on which these referees decided must fall together with the sale on which it was based. In the absence of agreement the goodwill does not survive : In re David and Mathews (1899) 1 Ch. 378. And I think the first defendant must account for the full value of his testator's rights in the business which the first defendant carried on. The referees clearly attached some value to the goodwill: Abdulla spontaneously, Sarafalli with reluctance. It is unnecessary to discuss its probable value now, that being a matter which must arise in the administration of the estate. In Cook v. Collingridge (1822) Jac. 623 inquiry was directed to the most beneficial mode 'of disposing of the testator's share and if such a direction does not result in a sale, the value of the goodwill may be ascertained as in Smith v. Everett (1857) 27 Beav. 446.

68. A further matter for inquiry is the reasonable remuneration for trouble, skill and loss of time, which should be allowed for the management and conduct of the business. It has been suggested that Lukmanji received only Rs. 100 per mensem during Mah-medalli's life and would be amply remunerated by one or two hundred rupees a month for his services since. I am not prepared to decide on mere conjecture. In Brown v. de Tastet (1821) Jac. 298 the master was directed to make all just allowances to the parties and it was said a great deal may be included under the head of such just allowances which, till the master has thoroughly sifted it, the Court cannot determine.

69. If the business has largely expanded under the present management, the allowance should, I think, be much more liberal than if it remained stationary or proved retrogressive. But in estimating the value of the services of Lukmanji and others, it must be borne in mind that the business was a very nourishing one in Mahomedalli's life-time. If since his death it has been going on merely owing to the momentum given to it in his life-time, the allowance for its subsequent management should not, I think, exceed what would be given ordinarily to the manager of such a business. But if it should appear from great increase in the returns or otherwise to have received a fresh and extraordinary impulse from the energy or capacity of those in charge, a higher rate of remuneration may fairly be allowed. The first defendant claims much more than this. It was contended in his behalf that the business could have been carried on with equal success by Lukmanji on the strength of his own credit. This, it is impossible to assume, nor could it, if true, excuse the retention and use of the testator's capital in the business. Then it is contended that this capital was deposited by the executors with Ismail Sullemanji at interest at first at 4 per cent and later in 1900 at 6 per cent. There is I think no credible evidence of any deposit at 4 per cent. Ex.D 1 contains no sug' gestion of such arrangement. The first defendant says he does not know if interest was allowed though Lukmanji says the first defendant was a party to the agreement as well as defendant 2 and the next friend.

70. Lukmanji admits that he never credited any interest in his books in pursuance of such agreement and kept no account in the names of the executors. The letters of 1900 and the affidavit Ex. V are silent on the subjects. Abdool Hoosein says Lukmanji offered 4 per cent, at date of reference but the executors refused and that Lukmanji admitted he had paid no interest for three years. The second defendant says he thought 9 per cent, should be allowed on Mahomedalli's moneys but there was no arrangement made.

71. Thus I entirely disbelieve Lukmanji's statement that he took over the business on the terms that he should pay only 4 per cent, on Mahomedalli's share. Nor do I think that the subsequent arrangement for 6 per cent, in 1900 can be upheld. For it was not part of the terms in which the arrangement of the business was handed over. It was a retrospective compromise relating to the three preceeding years. It could not be said that first defendant or Lukmanji was induced to enter in the management by the terms of that arrangement. Moreover, it was based entirely on the supposition that Mahomedalli's share had been irrevocably sold to the first defendant, that his right to the profits was indisputable and that he was liable only for the purchase money and could refuse payment of anything further except interest at such rate as might be settled. Tha rate at which Mahomedalli had drawn interest on his share of capital during his life was admittedly 9 per cent., a fact of which it seems the referees were not aware. Their decision, for reasons already stated, cannot be treated as given on a binding submission to arbitration: nor do I think that the consent of second defendant as executor can give validity to it as an agreement on which those who had notice of the breach of trust could rely.

72. Section 83 of the Trusts Act 1882 applies with as much force to the arrangement for 6 per cent, interest as it does to the sale which that arrangement pre-supposed. And therefore on failure to prove the good faith of the sale, the first defendant is liable to account for the nett profits and can at most be allowed such reasonable remuneration as is contemplated in proviso (a) to Section 95.

73. Counsel for the defendants contend that the rate of interest should be limited to that allowed in England. The cases of Piety v. Stace (1899) 4 Ves. 620, Docker v. Somes (1834) 2 My. & K 655 and Jones v. Foxall (1852) 21 L.J. ch.725, allowed 5 per cent, in such cases. The tendency of the recent cases in England is to lower the rate in accordance with the small returns now yielded to capital. But I think Section 23 of the Indian Trusts Act 1882 governs such cases in India and that compound interest with half yearly rests at 6 per cent, should be allowed in this case. There are no exceptional reasons in favour of the first defendant for directing otherwise, having regard to the large profits which the business realised and the 9 per cent, which in addition Mahomedalli in his life drew on his share of capital.

74. It has been contended that no account of profits should be directed. Counsel for the defendant 1 objects that inquiry will be difficult, lengthy and expensive.

75. A similar objection was taken in Docker v. Somes (1834) 2 My. & K. 055. But there the Court said, where did any wrong-door ever yet have ' the hardihood to plead in aid of his escape from justice, the extreme difficulties he had contrived to throw in the way of pursuit and detection, saying you had better not make the attempt for you will find I have made the search very troublesome The answer is ' the Court will try'.'

76. So, in this case I cannot but think that the last person who can be heard to argue '' the difficulty of tracing the profits of the misapplied fund is the man whose breach of trust has caused the difficulty '. In that case the danger of dispensing with an account of profits is discussed at some length. And inter alia the Court referred to the grave consequence which would ensue from proclaiming to 'executors and trustees that they have only to invest the trust money in speculations and expose it to the hazard of their own commerce and be charged 5 per cent, on it and then they may pocket 15 or 20 per cent, by a successful adventure.' In the present case the annual profits in testator's life-time approached 30 per cent, more nearly than 15 or 20 per cent and judging from the admitted profits of Samvat 1955 the firm of Ismail Sullemanji had profited on a similar scale. Much has been said on the attitude of the next friend in this case and on his failure to offer himself as a witness. No doubt had he been himself a plaintiff such comment would have had much force. But I cannot see that his ignorance or inaction should prejudice the minor plaintiffs, or Ratanboo. And this remark applies also to his omission to call on the executors earlier for account. It seems probable that the full value of the testator's business was not known to outsiders. But those in a fiduciary position are not entitled to complain of results induced by their non-disclosure of the facts and I do not think that the plaintiffs ought to suffer if, as the defendant's counsel suggests, their next friend failed to disclose at the outset the details which required investigation. The suit has been characterised by the defence as a fishing and a speculative suit and the next friend is accused of having launched a torpedo and of looking quietly on to watch its effect. It is not clear what else he could have done. No personal animus or hope of private gain is imputed to him. But if he be to blame, that cannot affect the rights of the wife or minors. Throughout the dealing with the estate seems to have been completely under the control of the first defendant and his sons and on the death of the testator no one else seems to have been in a position to ascertain fully what were the assets or in what form they were embodied. This leads me to the consideration of the second defendant's position, with reference to the transactions of 1897 and 1900.

77. His good faith has not been impugned.

78. Plaintiffs' counsel urges that the second defendant had acted honestly since 1900, but that before that he was negligent.

79. No attempt has been made to point out the provisions of the Indian Trusts Act, 1882, under which his liability could be gauged in the circumstances of this case. Under Sub-sectio 23 and 95 of that Act an executor is liable to make good loss sustained by a breach of trust committed by him. And a breach of trust is defined in Section 3 as a breach of duty imposed by law. But under Section 30 he is not liable save as provided in Sub- Section 23 and 26, for moneys, etc. which he has not actually received, or for involuntary losses. So far as his own conduct is concerned and apart from his liability under Section 20 no active breach of duty is alleged against second defendant. The only section s imposing on him duties which he can be said to have personally neglected, are, I think, Sub- Section 12,13 and 15. As to Section 12, I think, the second defendant ought not to be held liable for property, the existence of which was concealed from him by the first defendant. If the latter secreted or suppressed details of part of the stock, by withholding, as he appears to have done, invoices and information as to goods purchased with moneys realised on the assets of the old firm, I think the second defendant should, so far as such stock is concerned, be exonerated from liability on the principles laid down in Candler v. Tillett (1856) 8 D.M. & G. 291 and in Ex parte Geaves (1855) 22 Barn.. 257. The second defendant had apparently no reason to suspect, at the time when the lists were made out, the honesty of the first defendant, the surviving partner of the testator who had selected the first defendant as one of his executors. The result arrived at by the usual stock-taking approximately corresponded with the estimate of assets in the will and in the last balance sheet and the invoices which seem to have been kept out of sight, relate chiefly to goods purchased out of the profits made since the testator's death. No doubt a professional outsider might have been called in, but it is not denied that this would have been unusual if not at the time impracticable. With regard to Noorbhai's debts and other outstandings the second defendant is in a different position. He certainly knew of the existence of these debts due to the estate. As to Noorbhai's debt no attempt was made for recovery. No explanation is given for its non-recovery up to the order of discharge in 1902.

80. The second defendant would explain his own inaction since 1897, by setting up the transfer to defendant in that year of all liability for the recovery of outstandings. But even had first defendant purchased the debt by a valid contract, he certainly never paid for it and the second defendant took no steps whatever to make him. There can be no question that in this instance a loss has been sustained owing to the second defendant's negligence and I am unable to exonerate him in respect thereof. He must be held liable to account for the moiety of the balance still due to the late firm from Noorbhai, i, e. Rs, 1878. With regard to the other outstandings treated as irrecoverable and amounting to Rs. 17,383-5-6, there is absolutely no evidence to account for non-recovery. Whether the debtors were insolvent or whether the claims were time-barred or whether Ismailji could and did recover them on his own account the second defendant seems to know nothing and except in one letter to have asked nothing, He has acquiesced in their loss to the estate. And whether he has caused the loss by taking no steps to recover them himself, or by letting first defendant take them over for nothing, or by failing to insist on his paying for them in pursuance of the contract for purchase seems to me immaterial. I think in respect of these outstandings also he must be declared liable to account on the footing of the wilful default and he cannot be exonerated in respect of any such outstandings as he is unable to prove were irrecoverable or were reasonably believed to be so: In re Brogden (1888) 38 Ch. D. 546. In respect of these outstandings as well as of Noorbhai's debt, however, I think that the second defendant was less guilty than his co-executor and that if he has to refund the loss, there is no reason why he should not compel the first defendant under Section 27 to make good such loss.

81. I now proceed to discuss the liability of the second defendant in respect of the transfer to the first defendant of the stock-in-trade in 1897.

82. Looking to Ex. D 1, to the second defendant's letter of 5th November 1900 and to the additional terms thereafter imposed on the first defendant, I should incline to the view that in 1897, the second defendant did not understand that the testator's share had been irrevocably sold to the new firm and that he was over persuaded in 1900 to accept the representations of the first defendant who in the interval had been satisfied, with the continued prosperity oft he business. It may be, and, I think, it would be, more consistent with the documentary evidence that the first defendant was only left in charge of the business from 1897 to 1900, to carry it on as a going concern, for disposal when better times came. But the second defendant has not relied on this as his defence nor has the plaint suggested that the transactions were of this nature. And it must therefore be taken that the second defendant gave his assent to the sale in 1897.

83. The section s of the Indian Trusts Act, 1882, on which the second defendant's liability could seem to depend in these circumstances appear to be Sub- Section 13, 15, 23 and 26. That is to say, the questions for consideration are whether the second defendant was bound at once to realise his testator's share by sale, whether he acted with the care of a man of ordinary prudence in selling to the first defendant, whether or not he is liable either for profits or interest and to what extent he is liable for allowing the first defendant to retain the assets without paying for them.

84. As to the first point, I think, the second defendant acted in perfect good faith and according to the best of his judgment in allowing first defendant to continne the business. The year 1897, though as events have proved, not so disastrous as the defence would represent it, was very probably a period of anxiety and depression and may well have been regarded as not very favourable for the disposal of a wholesale business.

85. The cases of Dowse v. Gorton (1891) A.C. 199 and Garrett v. Noble (1834) 6 Sim, 504 show that it would have been quite legitimate to allow the business to be carried on for a time by the surviving partner. But such a course would have exposed the estate to some risk and even if the second defendant consciously assented to an immediate out and out transfer to his co-executor, I think he could hardly be blamed provided that he took reasonable means to secure a fair price. It is true that there was no advertisement of the sale. But the second defendant had before him what he supposed to be an exhaustive statement of the assets prepared in the usual form of an annual taking of stock which seem to be borne out, as already observed, by the testator's own estimate in his will and in his last balance sheet and had the information rendered available been complete, I think that, except as regard outstandings, the estimated value of Mahomedalli's share was open to no very grave objection. The referees called in three years later who gave some attention to the invoice prices considered the arrangement a fair and reasonable one. They were not aware a nor apparently could the second defendant at the time have been aware, that between January and October 1897, much more than a lac of the old firm's assets had been expended on new stock which did not appear in the list. It may be that the second defendant, if he had seen any reason to doubt the honesty of his co-executor, might have made more searching inquiry. But I doubt if it would have thrown much more light on the matter. For, the first defendant and Lukmanji would, it seems, have been prepared to deny, as throughout this suit they have strenuously denied, that there was any property belonging to the old firm which was not included in their lists. Taking those lists as the basis of valuation the terms for the stock were not perceptibly so inequitable as in a season of trade depression to give grave ground for refusing a convenient offer. Now allowance for expenses, etc., on French goods and the charge of discount on the cash balance made a difference of only Rs. 1000 and were not such obvious overcharges as to excite suspicion. They passed unnoticed by the referees in 1900 and seem only to have been detected on the very close scrutiny given to Ex. D 3 in the progress of this case. I therefore think that the second defendant cannot be held lible for disposing of the assets mentioned in the lists for the sum at which they were valued. In arriving at this conclusion I have had regard to the very different position in which the second defendant stands from the first defendant. The good faith of the second defendant is not impugned and he derived no personal advantage from what was done. Lastly arises the question whether having assented to the sale at such price the second defendant was justified in allowing the first defendant, to withhold the purchase money for nearly four years, I have no doubt that he was not. The principal was at risk. The new firm might for all the second defendant knew have become insolvent any day. If the moneys had been lost the second defendant would no doubt have been answerable. In 1900, however, the second defendant awoke to a sense of his responsibilities and so far as the purchase money and the interest due on it are concerned, no loss, which under the first para of Section 23 the second defendant would have to make good, appears to have been sustained. The balance of purchase money for recovery of which the second defendant was responsible has been produced in Court and no question has been raised in the case, as to the accuracy of account of moneys paid to or on behalf of the plaintiffs. I do not think that under Section 23 or Section 26, the second defendant can be held liable in respect of the purchase money beyond the amount which he has already admitted and which is now forthcoming.

86. Paragraphs (a) to (e) of Section 23 do not apply as the interest on the purchase money is forthcoming and para (f) does not apply as the second defendant has not personally employed the money in trade or business. His liability arose under Section 26; but inasmuch as no loss appears to have been sustained by his allowing his co-executor to retain the purchase money, I think his liability is limited to the losses to which I have above referred in connection with outstandings left by him unrecovered. The case of In re Stevens, Cook v. Stevens (1897) 1 Ch. 422 shows as stated in Ashburner on Equity (p. 194) that a general account on the footing of wilful default is unnecessary as against the second defendant, in the circumstances and that it suffices to direct special inquiry into the particular transactions in question. Counsel for second defendant urged that the second defendant was not liable for profits and that therefore the first defendant could not be made liable for profits either. No authority was cited in support of that proposition which seems to me inconsistent with the spirit of Section 26 of the Indian Trusts Act of 1882.

87. The first defendant appears to me liable to a general account on the footing of wilful default. The sale to him is set aside and he must account for all profits received by him from his employment in business of the sums which as principal or as profit should have been credited to the estate of the testator. The defence which he has set up of a sale to his sons Lukmanji and others appears to me utterly fraudulent and to be one which can in no way avail him.

88. I reoord formal findings on the issues as follows :-

1. On the first issue the estate has not been fully administered and this suit was necessary.

2. The accounts of Ismail Mahomed Ali were adjusted by Mahomedalli beiore his death on 5th November 1896, but do not prove to the extent of his interest in October 1897.

3. The share of Mahomedalli was not set apart in the sums, that it was in the hands of the executors. It was used for the purposes of making profits in trade.

4. The old firm was not wound up on 25th October 1897.

5. The transfer of Mahomedalli's share in October 1897 was not entered into by the transferee in good faith. The second defendant acted in good faith in assenting to it. But no other persons on behalf of Mahomedalli's family are referred to have desired it nor would their requests if made have been binding on plaintiffs and defendant 4.

6. The allegations in the 5th para of the plaint are substantially correct.

7. The other allegations of fact in the plaint are substantially correct.

8. The plaintiffs are entitled to have the sale set aside.

9. The share of Mahomedali was retained by first defendant in his business as alleged in the plaint.

10. The moneys due to the estate of Mahomedalli were not deposited at interest in the hands of the first defendant from October 1897.

11. No such request, knowledge or consent is proved or would have been binding or for benefit of estate.

12. There was no final adjustment or settlement binding on the plaintiffs or defendants 3 or 4.

13. 14 and 15. Not pressed. Further joinder is unnecessary: no objection exists to the will.

16. The first defendant is in possession of assets of Mahomedalli Khan other than those mentioned in para 10 of his written statement.

17. The second defendant is liable to account to plaintiffs, on footing of wilful default in respect of all outstandings nnre-covered.

18. 19 and 20. The second defendant is entitled to be indemnified for all liability by defendant 1.

21. The transfer could have been supported only if in good faith and for valuable consideration.

22. Defendant one is bound to account for the profits.

23. Not necessary.

24. The defendants are liable,

25. In the negative.

26. The amount allowed for good-will is not shown to have been fair.

27. The first defendant has not proved and could not be allowed to rely on the alleged sale to his sons.

28. The plaintiffs are entitled to relief as given.

89. The estate must be administered as prayed in the plaint, the first and second defendant being removed from all connection therewith and Mr. R.D. Sethna, subjectto permission of the Chief Justice, is appointed Receiver for the purposes stated in paras 5 and 6 of the prayer in the plaint and with all powers mentioned in Section 503 of the Code of Civil Procedure.

90. Reference to the Commissioner for taking accounts mentioned in the judgment.

91. The first defendant to pay plaintiffs' costs and the costs of defendant 3 and 4.

92. The second defendant to bear his own costs without prejudice to any claim he may have to be indemnified by the first defendant.

93. All further costs and further directions reserved : liberty to apply.

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