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Padmavati Vs. Narsilal P. Dalal and ors. - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtMumbai High Court
Decided On
Case NumberSuit No. 296 of 1954
Judge
Reported inAIR1956Bom81
ActsBombay Public Trusts Act, 1950 - Sections 11; Transfer of Property Act, 1882 - Sections 14, 16, 17 and 18; Code of Civil Procedure (CPC), 1908 - Sections 92; Indian Income-tax Act - Sections 4(3)
AppellantPadmavati
RespondentNarsilal P. Dalal and ors.
Appellant AdvocateThakore and ;P.P. Khambatta, Advs.;Mathalone and ;D.M. Rege, Advs.
Respondent AdvocateMistree and ;Sorabji, Advs.
Excerpt:
- - 6. then comes clause 4 (b) set out in para 5.under this clause the trustees are directed toaccumulate and invest the balance of the net income and to utilise the income of such investments at their absolute discretion for such charitable object or objects as they shall think fit, preferably in giving prizes, awards or scholarships to poor and needy students male and female, in giving relief to poor and needy persons particularly widows, in founding or giving donations or other assistance to dispensaries, hospitals and sanitoria, but so that preference shall be given as far as possible first to relatives of the settlor and of his wife kumudsundari and next to lad banias that is members of the caste to which the settlor belongs and further that the names of the settlor and of his.....1. the main question that arises to be answered on this originating summons is whether the deed of trust dated 26-3-1941 made by one lallubhai vrijbhukhandas khandwalla of certain moveable and immoveable properties at santa cruz creates a valid public charitable trust. thereafter certain ancillary questions also arise to be answered in the light of the answer to be given to the main question stated above. the deed of trust is dated 26-3-1941 under which the settlor appointed himself, one purshottamdas harkisandas, defendant 1 and one jehangir hormusji mody as the first trustees. during the life time of the settlor it is stated that these trustees did not in fact act in any manner under the provisions of the deed of trust. the settlor died in bombay on-17-4-1946 leaving a son jayantilal.....
Judgment:

1. The main question that arises to be answered on this originating Summons is whether the deed of trust dated 26-3-1941 made by one Lallubhai Vrijbhukhandas Khandwalla of certain moveable and immoveable properties at Santa Cruz creates a valid public charitable trust. Thereafter certain ancillary questions also arise to be answered in the light of the answer to be given to the main question stated above.

The deed of trust is dated 26-3-1941 under which the settlor appointed himself, one Purshottamdas Harkisandas, defendant 1 and one Jehangir Hormusji Mody as the first trustees. During the life time of the Settlor it is stated that these trustees did not in fact act in any manner under the provisions of the deed of trust. The settlor died in Bombay on-17-4-1946 leaving a son Jayantilal Lallubhai Khandwalla & one grand-son named Ramit and a grand-daughter named Pratibha as his only heirs.

Jayantilal died on 5-6-1948 leaving behind him a widow who is the plaintiff, three sons and one daughter namely Ramit, Bhupendra, Madesh and Pratibha all under the age of 18 years.

2. The relevant clauses which bear on this subject are set out in extenso in the several paragraphs of the plaint and it will be necessary to refer to the several clauses for the purpose of a proper construction of the effect of this deed of trust.

3. In approaching this question, the main points to be decided are what was the dominant intention of the settlor as gathered from the reading of these several clauses in the deed of trust and who are the beneficiaries under this deed of trust. In other words whether the dominant intention was to benefit a section who formed the object of the trusts sufficiently large to be recognised as part of the public and whether the provisions of the deed affect a charitable trust, that is to say whether charity is the main intention as gathered on the clauses of this deed of trust and whether the primary class to be benefited forms part of the public.

4. The first relevant clause is Clause 4(a) of the said deed of trust. It says that the trustees shall utilise the net income or if the net income shall in any year exceed Rs. 600/- per annum in paying there out Rs. 600/- an amount equal to one-fifth thereof to the said Padmavati wife of Jayantilal and in paying the remaining four-fifths in equal shares to the said Pratibha and Ramit, daughter and son of the said Jayantilal or to the legal guardian in the event of either being a minor.

It further says that the trustees are not bound to see to the application of the moneys paid over, but the trustees are at liberty instead of paying any such sum as aforesaid to the minors to apply the said sum or any part or parts thereof for the maintenance, education and benefit of the said Pratibha and Ramit.

5. It is stated by the plaintiff that under this clause the trustees are authorised to give the income of the trust to the plaintiff and the two grand-children of the said settlor in one-fifth and four-fifths shares and it is stated that when the deed of trust was executed the subject matter of the trust brought in hardly an income of Rs. 600/- per year. This statement has not been traversed in the affidavit of the trustees.

The further statement made in para. 4 that after the death of the settlor Jayantilal wholooked after and managed the properties of thetrust considerably improved and made additionsto the properties with the result that the incomeof the trust has increased to about Rs. 10,000/-to Rs. 12,000/- a year is traversed by the trusteeswho in their affidavit state that the income nowis about Rs. 3000/- a year.

6. Then comes Clause 4 (b) set out in para 5.Under this clause the trustees are directed toaccumulate and invest the balance of the net income and to utilise the income of such investments at their absolute discretion for

'such charitable object or objects as they shall think fit, preferably in giving prizes, awards or scholarships to poor and needy students male and female, in giving relief to poor and needy persons particularly widows, in founding or giving donations or other assistance to dispensaries, hospitals and sanitoria, but so that preference shall be given as far as possible first to relatives of the settlor and of his wife Kumudsundari and next to Lad Banias that is members of the caste to which the settlor belongs and further that the names of the settlor and of his wife Kumudsundari shall always be associated with such object or objects.'

7. On this it is argued on behalf of the plaintiff that under this clause the balance of the income is to bs utilised by the trustees for charitable objects mentioned in the said clause subject however that the trustees are expressly directed to give preference to the relatives of the Settlor and of his wife Kumudsundari and thereafter to Lad Banias namely members of the caste to which the settlor belonged.

It is therefore argued that inasmuch as the application is to be in the mode set out above the trust is void, ineffective and not binding on the plaintiff and the other heirs of the said settlor inasmuch as preference is given in the said clause for payment of the balance of the income to the relatives of the settlor and that on a proper construction of the said Clause 4 (b) of the deed of trust, the trust is not a charitable trust and is void and that if it is held void and ineffective then the balance of the income will go to the settlor or his heirs and that the plaintiff and her children as the heirs of the said settlor and of the said Jayantilal are entitled to the balance of the income of the trust for their own benefit.

8. It is further argued that even if the said trust is held valid then on a proper and true construction of Clause 4 (b) of the said deed of trust the plaintiff and her children particularly the children who are born after the deed of trust was created and who are not provided for under the deed of trust are entitled to have a first preference in payment of the net balance of the income of the trust.

9. Thereafter a further provision in the deed of trust is recited in para. 8 of the plaint where under the settlor directed that notwithstanding anything contained in the provisions of the deed of trust the trustees shall be at their absolute discretion, seven years after the execution of the deed of trust, if they find that Jayantilal has not taken any steps in a Court of law or otherwise to dispute the deed of trust or any other trust deed or will made by the Settlor or any other document which the settlor might have executed or any disposition of any part of the settlor's property by the settlor on the ground that this formed part of the joint family property and of all which things the trustees shall be the sole judges to convey at their discretion to the said Jayantilal certain parts of the property as set out in that clause and indicated in Schedule 2 and convey to him absolutely freed and discharged from the trusts under the deed of trust, and the trust deed shall thereupon cease to apply to the said property so conveyed.

It is argued that in any event this part of the property should be conveyed to the heirs of Jayantilal inasmuch as Jayantilal had not contravened any of the conditions set out in this clause and should be paid over to the heirs of Jayantilal. This part of the claim has been denied by the trustees who state that the conduct of Jayantilal as se't out in their affidavit did not justify the trustees in exercising the discretion vested in them in favour of Jayantilal and therefore Jayantilal would not have been entitled to and his heirs are not entitled to the conveyance of this part of the property settled under this deed of trust.

10. Thereafter come the two clauses which are relevant namely Clauses 6 (b) and 5.

11. Under Clause 6 (b) the trustees are direct-ed to set apart out of the balance of the corpus a sum which shall be equal to one-fourth share thereof but so that the sum so set apart shall not exceed the sum of Rs. 12,500/- and to hold the said sum upon the trust set out in Clause 9.

12. Under Clause 9 the trustees are directed after the date of distribution to hold the accumulations of the balance of the net income of the trust property which they shall have made under Sub-clause (b) of Clause 4 and the investments representing the same and the sum which they shall set apart under the provisions of Sub-clause (a) of Clause 6 and to invest all sums not already invested in securities and investments upon trust to utilise the income or the corpus thereof for such charitable object or objects as they shall at their absolute discretion think fit, but preferably in giving prizes, awards or scholarships and monetary assistance to poor and needy students male and female, in giving relief to poor and needy persons preferably widows, or in founding or giving donations or other assistance to dispensaries, hospitals and sanitaria but

'provided that preference shall as far as possible be given first to relatives of the settlor and of his wife and thereafter to Lad Banias that is members of the caste to which the settlor belongs'.

13. It is argued on the reading of these clauses that on a proper construction of these clauses the direction to set aside the sum of Rs. 12,500/- out of the corpus or the accumulated income and utilise the said sum of Rs. 12,500/- for purposes indicated in Clause 9, is void on the same contentions and submissions as set out in connection with Clause 4(b).

14. Apart from these questions the plaintiff has disputed the appointment of the two trustees appointed by defendant 1 namely defendants 2 and 3 as void on the ground that defendant 1 as the sole surviving trustee has no power to appoint defendants 2 and 3 one being the son and the other being the brother, but that the Court alone would be entitled to make such appointments.

15. The trustees have not taken up any contentious attitude in this matter and have submitted to the orders of the Court and as regards appointments of defendants 2 and 3 they submit that in the event of it being held that these appointments are irregular or invalid, the appointments being bona fide the breach should be condoned and defendants 2 and 3 should be appointed by the Court.

16. The objection to the contentions and submissions raised on behalf of the plaintiff come from defendant 4 the Charity Commissioner of Bombay and it is argued on his behalf that taking all the relevant clauses into consideration as set out in the plaint they spell out a valid public charitable trust and that the trust created or attempted to be created by the deed of trust is a good and valid disposition in favour of Charity.

17. As stated by me above for the purpose of arriving at a proper decision it is necessary to see what is the dominant intention of the testator namely who are the real objects of his bequest and secondly whether the purpose is a charitable purpose and whether the class indicated as the object of charity forms at least a section of the public. In arguing this matter Mr. Thakore on behalf of the plaintiff has drawn ray attention to Section 18, Transfer of Property Act. which says that the restrictions set out in Sections 14, 16 and 17 shall not apply in the case of transfer of property

'for the benefit of the public in the advancement of religion, knowledge, commerce, health, safety, or any other object beneficial to mankind.' In other words the 'restrictions set out in Sections 14, 16 and 17 shall not apply where the benefit goes to charity as defined in the words set out in that section which follows the definition of 'charity' based on the English law applicable to charitable trusts and those purposes have been classified by Lord Macnaghten in the leading case of --Income-tax Special Purposes Commrs. v. Pemsel'. 1891 AC 531 (A), namely for the relief, of poverty for the advancement of education, for the advancement of religion and the fourth class embracing purposes beneficial to the community which do not fall under any of the preceding three heads.

Mr. Thakore thereafter referred me to two decisions of the Division Bench of this High Court. Both these cases are cases where this question was discussed under Section 4 Sub-section (3), Indian Income-tax Act and the definition given thereunder. That section was discussed from the point of view whether the said settlements were exempt from income-tax. It was argued on behalf of defendant 4 that these two judgments have no application as they relate only to the particular definition given under Section 4 Sub-section (3), Clause (i).

I am quite aware of that fact, nonetheless the question 'what is a charitable purpose?' has been discussed in these judgments and to my mind the observations made therein are not .only helpful in determining the question but would apply as will appear from a reference to these decisions. The first case was the case of -- 'D.V. Arur v. Commissioner of Income-tax, Bombay' AIR 1946 Bom 44 (B). It was held in that case that a trust the object and scope of which is limited to the education of the members of a family, does not come within the definition of a charitable purpose.

It was held that public utility is always a matter of degree, so that the circumstances must be examined to ascertain whether the section or class or the community to be benefited can be said to be public as opposed to being private, arid therefore trust for the benefit of the members of a family or for the descendants of a named individual imports a conception or notion of something which is private and not something which is public, The definition given under Sub-section 4

3. of 'charitable purpose' is an Inclusive definition and runs as follows:,

'In this sub-section 'charitable purpose' includes relief of the poor, education, medical relief and the advancement of any other object of general public utility.'

It will be observed that the words are 'other object of general public utility'. Under Section 18, Transfer of Property Act the words are 'or any other object beneficial to mankind'. In that case a certain amount was settled and the income there-of was to be utilised' in awarding scholarships to youngmen. and women descended from the Arur family.

Then there was a clause under which, in the case of scholarships to youths who are outside the Arurkar family as denned in Clause 11 (a) the trustees have power in fit case to adopt measure to ensure return by the recipients of money spent on them from the trust and under Clause 15 it was said that the fund of the endowment is intended for help in education in Arts, Science, Industries, Technical subjects like Engineering, Commerce, Agriculture Medicine, etc., and under Clause 18 it was laid down that the trustees shall give due consideration to poverty, moral character, intelligence, aptitude etc., of the applicant.

Sir Leonard Stone C. J., after setting out these clauses observed that looking at the scheme of the trust deed as a whole it was clear that the dominant intention was the provision of scholarships for young members of the Arurkar family and the power to use the surplus income for scholarships for deserving members of the Saraswat Community was also set out and stated that the trust though educational in character was of a private and limited scope. The learned Chief Justice referred to the Transfer of Property Act as well as to the Civil Procedure Code and the Charitable and Religious Trusts Act which talks of trusts 'created for public purposes of a charitable or religious nature'. Thereafter he observed that in his opinion looking at the definitions in the various Acts, a charitable purpose 'which is not of a religious character must contain the element of benefiting the public and that a trust the object and scope of which is limited to the education of the members of a family would not come within the definition of a charitable purpose as set out in the Income-tax Act.

Kania J., later Chief Justice of India, agreed in that construction. He observed that in England there is no definition of 'charity' and the meaning of that word attempted to be extended by Judicial decisions, is not helpful in considering specific sections of the Income-tax Act and that the Privy Council had considered the word 'public' as important in that definition.

He said that the sections of the Transfer of Property Act are also material to be considered, because when the Legislature thought of, saving transfer of property in perpetuity it saved only such transfers whose object was the benefit of public. The Court upheld the contention of the Commissioner of Income-tax that this was not, a trust falling within the class of excepted settlements under Section 4 (3), Indian Income-tax Act.

18. A further decision relied upon by counsel appearing on behalf of the plaintiffs is the case of -- 'Trustees of Gordhandas Govindram Family Charity Trust Navalgadh v. The Commr. of Income-tax (Central), Bombay' : AIR1952Bom346 (C), and this decision to my mind is much more helpful in the present Instance.

In that case there was an indenture of trust which provided that the income should be appliedin giving help or relief to the poor Vaishya Hindoos but this provision was made subject to the conditions and directions that the members of the family of the, settlor were to be the first objects of the charity, both in respect of maintenance and also for marriage expenses, and the condition laid down that it was only after all the members of the family were exhausted that a section of the public, the Vaishyas or Hindoos, would come in for benefit under the trust.

It was held that the trust was not held in trust wholly for charitable purpose and was therefore not exempt from taxation under Section 4 (3). It was held that relief of the poor by itself would not be a charitable object unless it involved an object of general public utility within the definition of 'charitable purpose' in the Indian Income-tax Act. It was held that relief of poverty when that relief is restricted to members of the settlor's or donor's family cannot be a charitable object which is of general public utility.

Of course the expression 'general public utility' is part of Section 4, Sub-section (3) and as I have observed under-the Transfer of Property Act, it is 'any other object beneficial to mankind'. It was observed in that case that in a case in which the primary purpose of the settlor is to benefit the members of his family arid remotely and indirectly to benefit the general public then it cannot be stated that the settlement is for a charitable purpose.

The learned Chief Justice after referring to the clause that was relevant there observed that the relief to poor Vaishyas or other Hindoos is qualified by the conditions which are prescribed in the subsequent clauses. Sub-clause (a) of Clause (3) provided that poor Vaishyas who are members of Sekasaria family shall be preferred to poor Vaishyas not belonging to the said family & poor Vaishyas of Valgadh shall be preferred to poor Vaishya Hindoos of any other place in or outside India.

The learned Chief Justice observed that it was clear, apart from authorities, that in India relief of .the poor by itself would not be a charitable object unless it involved an object of general public utility and on a further analysis in that case the position must result in any charity which was intended for the relief of the poor relatives of the settlor or donor not being a charity that falls' within the definition of the Act, and that the deed made it clear that the members of the family of the settlor were to be the first object of charity.

The learned Chief Justice observed that in England a trust for relieving poverty of relatives of a settlor is a good charitable trust even if no members of the public were to benefit under such a trust, but that was an exception engrafted on the law of charity in England & in a subsequent decision in England it has been observed that that exception namely in favour of a class known as 'poor relations' is allowed only on the ground of stare decisis and the Court of Appeal in England has observed that but for unsettling a long series of settlements made under these decisions this exception would not be allowed to stand.

The learned Chief Justice then referred to the case of -- 'D.V. Arur v. Commissioner of Income-tax, Bombay', (B), and a passage from the judgment of Kania J-, was quoted and relied upon which passage was as follows:

'In my opinion, therefore, to exempt the income from taxation, on the true construction of the settlement in question, the Court must findthat the object of education was for a,, section of public at least. The settlement may claim exemption in that case even though the members of the family may be given preference in the selection of scholars.'

The learned Chief Justice pointed out that those observations were at best obiter and that Kania J., had come to that conclusion on the basis of certain English decisions taut that was due to not keeping in mind the distinction as to what is charity in England and in India. The learned Chief Justice observed that

'It is difficult to see how if preference was given to members of one's family either for educational purposes or for relief of poverty it can possibly be contended that the object of general public utility was satisfied.'

It was stated by the Chief Justice that in fact the view of the most of the High Courts in India is that a settlement or a trust for the maintenance of the poor relatives of the settlor is not a good charity.

19. In the light of these decisions It is obvious to my mind that the condition of giving preference first limited to the relations of the settlor and thereafter limited to the community of Lad Banias is such that in certain circumstances the charity may not reach beyond the relations and in certain circumstances the, charity may not go at all to the community and therefore no benefit or relief may reach to any member of the public at all.

20. I was also referred by counsel appearing on behalf of the Plaintiff to the case of -- 'Comp-ton, In re; Powell v. Compton' 1945 1 Ch 123 (D). In that case the testatrix by her will had provided that

'the moneys left by her were to be invested by her under a trust for the education of C. and P. and M. children but C. and P. children are to take the preference as scholarships for the time thought best by the trustees not over the age of 26 years. It is not to be used as a pension or income for any one and is to be held as scholarships at the pleasure of the trustees. It is to be used to fit the children to be servants of God serving the nation not as - students for research of any kind'.

It was held by the Court of Appeal that the trust was not a valid charitable trust because the beneficiaries were defined by reference to a personal relationship and therefore it lacked the quality of being a public trust, and that the gift for the education of descendants of named individuals must be regarded as a family trust and not as one for the benefit of a section of the community although a gift for education in England would amount to a public charitable trust. A quotation from Tudor on Charities was set out in the judgment namely

'In the first place it may be laid down as a universal rule that the law recognises no purpose as charitable unless it is of a public character. That is to say, a purpose must, in order to be charitable, be directed to the benefit of the community or a section of the community'

and it was observed of course that in the case of many charitable gifts it is possible to identify the individuals who are to benefit, or who at any given moment constitute the class from which the beneficiaries are to be selected and that this circumstance does not deprive the gift of its public character, for instance if there is a gift to, relieve the poor inhabitants of a parish the class to benefit is readily ascertainable.

At page 137 the Master of the Rolls referred to the class of cases known as 'poor relations' cases on the analogy of which the lower Court has held this trust to be a good trust, but they held that although the cases falling in that class must be regarded as good law, they are perhaps anomalous and in the particular circumstance of the case before the Court the learned Master of the Rolls observed that the question arises whether 'we ought to extend the analogy of these decisions, so as to cover a trust of the kind now in controversy'.

21. The next case relied upon by counsel on behalf of the plaintiff is the case of -- 'Ryan v. Forrest 1946 Ch 194 (E). In that case it appears that collections were made weekly from the employees of the company operating three factories, at first informally and later by agreed deductions, from wages towards a war emergency fund. The money was for some time expended in comforts or money payments for ex-employees serving abroad or at home but after 1940 it was decided to use the collected funds for the relief of employees who- had suffered damage and distress from air-raids.

When the fund was closed a summons was taken out for determination as regards the application of the surplus moneys. Cohen J., held that there was 'no public charitable purpose in regard to the fund and on appeal Cohen J.'s, decision was upheld that the fund was not held on any charitable trust and it was a fund collected by employees of a company to provide benefits for themselves and in view of this personal relationship the fund was not applicable for the benefit of the public or any section of the public, nor was there any element of poverty in that case so as to bring it within those cases where trusts which appeared otherwise to be of a private nature were held to be charitable on the ground of relief of poverty.

In concluding his judgment, Lord Greene, Master of the Rolls, observed that he had no criticism to make of the decision appealed from, but he observed,

'I do call attention to the fact which he does not mention, that the private character of this trust is made clear beyond the possibility of doubt by the 'fact that the paramount purpose of the subscription was to provide benefit for the subscribers and for nobody else.'

22. A further case relied upon was the case of -- 'Oppenheim v. Tobacco Securities Trust Co. Ltd.' 1951 AC 297 (P). In that case by a settlement trustees were directed to apply certain income 'in providing for the education of children of employees or former employees' of a British limited company or any of its subsidiary or allied companies. The employees so indicated numbered over 1,10,000/-.

It was held by the House of Lords that though the group of persons indicated was numerous, the common employment of the beneficiaries would not constitute them a section of the community so as to afford to the trust the necessary character to render it charitable and accordingly the trust did not satisfy the test of public benefit requisite to establish it as charitable. The question there was whether the class of employees defined was in fact to be considered not as a private class but as a section of the public. Lord Simonds in his speech said

'it appears to me that it would be an extension of the definition of charity for which there is no Justification in principle or authority to regard common employment .as a quality whichconstitutes those employed a section of the community. It must not be forgotten that charitable Institutions enjoy rare and increasing privileges and that the claim to /come within that privileged class should be clearly established'. The class of 'poor relations' cases was again brought to the notice of the House of Lords as an argument in- favour of a more generous view of what may be charitable, and the learned Lord observed:

'It would not be right for me to affirm or to denounce or to justify these decisions. I am concerned only to say that the law of charity so far as it relates to the 'relief of aged. Impotent and poor people' and to poverty in general, has followed its own lines and it is not useful to try to harmonize decisions on that branch of the law with the broad proposition on which the determination of this ease must rest. It is not for me to say what fate might await those cases if in a poverty case this House had to consider them.'

In this case it was held that the appellants were unable to satisfy the Court that the class of employees defined was in fact to be considered not as a private class, although so large but as a section of the public.

23. Counsel appearing on behalf of the Charity Commissioner has strenuously argued that on a proper construction of the words in Clause 4 (b) and in Clause 9 there is a clear gift to charity, because he says that on reading Clause 4 (b) of the Deed of Trust it says that the trustees shall utilise the income and apply to such charitable object or objects as they shall think fit, preference being given to scholarships, relief to the poor and needy persons particularly widows or giving donations or other assistance to dispensaries, hospitals and sanitaria.

Therefore it is argued that the preference indicated in the second part of the clause does not vitiate the gift made in the first part of the clause and that on a proper reading of all the clauses, the gift is to a section of the public, preference being required to be given to the dispensation of such charity. It was attempted to be argued that the real object of charity here is scholarships to poor and needy students, to widows in needy circumstances and . to dispensaries, hospitals and sanitoria.

It is not proper to dissect the clause and take a section of the clause and base the whole argument on that. The proper approach is to take all the clauses together, to read all the clauses, harmonize them with each other and to deduce therefrom namely from the whole document what is the paramount Intention of the settlor and what is the object of the charity. In arguing this question of preference Mr. Mistree on behalf of the Charity Commissioner strongly relied upon a recent decision of Upjohn J., in the case of -- 'Koettgen's Will Trusts, In re; West Minster Bank v. Family Welfare Association Trustees' 1954 Ch 252 (G), and on that authority, the learned counsel attempted to argue that the condition imposed namely as regards preference did not affect the validity of the disposition in favour of charity.

In that case a testatrix bequeathed her residuary estate on trust 'for the promotion and furtherance of commercial education'. The persons eligible as beneficiaries under the fund were to be persons of either sex who are British born subjects and who are desirous of educating themselves for a higher commercial career and whose means were insufficient andwould not allow of their obtaining such education at their own expense. Thereafter the testatrix further directed that in selecting the beneficiaries 'it is my wish that the trustees shall give a preference to any employees of J.B. & Co. (London) Ltd., or any members of the families of such employees; failing a sufficient number of beneficiaries under such description then the persons eligible shall be any persons of British birth ..... ..... ..... ..... ..... ..... ..... .....Provided that the total 'income to be available for benefiting the preferred shall not in any one year be more than 75 per cent, of the total available income for that year'.

It was held that the gift to the primary class from whom the trustees could select beneficiaries contained the necessary element of benefit to the public and that it was when that class was ascertained that the validity of the trust had to be determined. It was held that the subsequent direction to prefer as to 75 per cent, of the income a limited class did not affect the validity of the trust which was accordingly a valid and effective charitable trust.

It must be remembered that the primaryclass there indicated as eligible for the benefitsunder the fund are British born subjects desiringto educate themselves & who are unable to do sofor lack of means. It is only after that class isascertained that the second stage reaches namelythat there is a direction that out of that primaryclass a selection has to be made as to a part ofthe income and that did not invalidate the trustonce the validity of the primary class had beenestablished.

In fact the gift was clearly to a class namely British born subjects and out of the income so gifted to that class a percentage was carved out for preference. It will be observed that whether it is 5 per cent, or 75 per cent, the primary class is bound to benefit in any event as regards the balance and in those particular circumstances it was held that this did not invalidate the deed of trust as a charitable trust.

To my mind that principle cannot be imported at all into the facts and circumstances of the case before me, because reading the whole of the deed the very first provision is for payment to the wife and children of Jayantilal. Thereafter if there is any surplus that is to be accumulated and the income out of that is in the first instance to be applied to the relations of the settlor and thereafter if there is any surplus that is to be applied for the benefit of Lad Banias and thereafter if there is any surplus that alone may trickle down if at all to dispensaries, hospitals, sanitoria etc.

As I have stated above the main intention and the paramount intention of the settlor was to benefit the members of his family and thereafter the members of his caste who may need assistance from such funds. Therefore the primary class intended to be benefited is formed of members of the settlor's family and the needy relations and members of the Lad Bania community. It is not as if the income is to be applied to a section of the public at large with a reservation that a certain percentage of the income may be applied in preference to the relations of the settlor and thereafter to the members of the Lad Bania community.

24. For the reasons assigned above I have come to the conclusion that the deed of trust does not create a public charitable trust as it fails to satisfy the necessary tests discussed above.

25. On the footing of the argument advanced on behalf of the Charitable Commissioner that the preference indicated in the second part of Clause 4 (b) should not be allowed to vitiate the trust in favour of charity as such circumstances are contemplated under Section 11, Bombay Public Trusts Act, 1950. That section says that a public trust created for purposes some of which are charitable or religious and some are not shall not be deemed to be void in respect to the charitable or religious purpose only on the ground that it is void with respect to the non-charitable or non-religious purpose.

It is difficult to understand the reasoning, advanced. If the whole of the trust fails I do not see how Section 11 at all comes into operation. It is only where a deed creates several purposes some of which are lawful and some are not and if those are distinct and separate dispositions then in my opinion such clauses as embraced valid or lawful purposes would be declared to stand despite the fact that the trust may be invalid as regards the other purposes.

Therefore in my opinion this argument rests upon the reasoning that the clause itself can be split up and the first half of the clause disclosing the first disposition to charity should be upheld. That is an argument which I am not prepared to accept.

(The rest of the judgment is not materialfor the report.


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