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In Re: Shirinbai Merwanji Dalal - Court Judgment

LegalCrystal Citation
SubjectTrust and Societies;Property
CourtMumbai
Decided On
Judge
Reported inAIR1919Bom119; (1919)21BOMLR41
AppellantIn Re: Shirinbai Merwanji Dalal
Excerpt:
trust-property, sale of--trustee having no power to sell immoveable property-emergency--sanction by court under us extraordinary jurisdiction--indian trusts act {ii of 188,1), sections 20, 36, 40.;in cases of real emergency not provided for by the trust instrument and not within the reasonable contemplation of the author of the trust, the court has power under its extraordinary jurisdiction to sanction the trustees doing acts which are necessary for the protection of the trust estate although not expressly authorized by the trust instrument. but this jurisdiction is of an extremely delicate character and must be exercised with the greatest caution.;accordingly, where house property was subject to a large set-back under the municipal regulations and was in urgent need of sanitary and other..........act, 1882. that section gives power to trustees to vary investments and the argument is that the trust land in an investment which the trustees may vary and for that purpose may sell. if that argument is correct, all trustees would have power to sell land and no leave of the court would be necessary. section 40 runs as follows:--a trustee may, at his discretion, cull in any trust-property invested in any security and invest the same on any of the securities mentioned or referred to in section 20, and from time to time vary any such investments for others of the same nature: 7. now, i think, anybody reading those words must be struck by their inaptitude to deal with the case of the sale of land. to say that a sale of land settled by the settlement itself is a calling in of trust.....
Judgment:

Marten, J.

1. This is an adjourned petition which raises the question whether trustees of land who have no express power of sale in the instrument creating the trust have power to sell that land either with or without the consent of the Court. The parties concerned are all Parsis.

2. The trust instrument in question is a settlement made on the 11th February 1898. The settlor was one Bai Gulbai since deceased and the trustees were her two daughters Shirinbai and Batanbai, the present petitioners. It was a voluntary settlement, and the only property settled was a certain immoveable property in Meadows Street, Bombay, mentioned in the Schedule. The trusts were for the settlor for life with remainder as to one moiety for Ratanbai for life with remainder, to use the exact words of the instrument, 'for the issue of the body of the said Ratanbai in the shares prescribed by law as if the said Ratanbai had died possessed of the said share intestate leaving such issue only as her right heirs and in default of such issue upon the trusts hereinafter declared in regard to the other half of the said premises.'

3. The other moiety went to the other daughter Shirinbai for life with a limitation over to her issue similar to that contained as regards Ratanbai's moiety. There is an ultimate gift over of all the property to charity in case there should be no 'person living entitled to take the said premises under the trusts hereinbefore declared.' The petitioner Ratanbai is forty-seven and unmarried. Shirinbai, I am told, is fifty-two and has six children viz., two daughters and four sons, all of whom consent to the proposed sale.

4. Stopping for a moment at the trust I have read, I do not propose to say what is the meaning of the trust 'for the issue of the body of the said Ratanbai in the shares prescribed by law' and so on. I think for the purposes of this case it is sufficient to say that it is not clear that the grand children of Shirinbai--or for the matter of that of Ratanbai if she married and had children--might not take in certain events, e. g., if the parents of those grand children predeceased the tenant for life. Shirinbai or Ratanbai as the case might be. Accordingly, I do not think it can be said with certainty that I have now before me all beneficiaries, who can in any possible circumstances be entitled to the property, for it is possible that when the settlement comes finally to be construed and the trusts wound up some child or grand child, at the present moment unborn, may be entitled to a share in the property. The case, therefore, cannot be disposed of on the lines that the trustees only propose to do something with the consent of all the beneficiaries.

5. Now what the parties wish to do is this. For reasons which I will mention later, they wish to sell the property and have accordingly entered into an agreement for sale at what is considered to be an advantageous price. Very naturally the purchaser declined to accept the title without the sanction of the Court: and accordingly the trustees have presented the present petition asking for that sanction. All the children of Shirinbai have given their written consent to the sale.

6. The first point that arises is the question of jurisdiction that I have referred to, viz., whether in a case such as I have before me, the trustees have any power to sell the land, and, if not, whether the Court has any jurisdiction to give them that power. Mr. Kanga for the petitioners has referred me to Section 40 of the Indian Trusts Act, 1882. That section gives power to trustees to vary investments and the argument is that the trust land in an investment which the trustees may vary and for that purpose may sell. If that argument is correct, all trustees would have power to sell land and no leave of the Court would be necessary. Section 40 runs as follows:--

A trustee may, at his discretion, cull in any trust-property invested in any security and invest the same on any of the securities mentioned or referred to in section 20, and from time to time vary any such investments for others of the same nature:

7. Now, I think, anybody reading those words must be struck by their inaptitude to deal with the case of the sale of land. To say that a sale of land settled by the settlement itself is a calling in of trust property invested in any security is hardly, I think, what the Legislature intended when they drafted Section 40. To start with you do not speak of 'calling in land.' Nor is it usual or correct to speak of land as 'property invested in any security.' Of course a mortgage of land is referred to as a real security but a power to invest in real securities as in the English Trustee Act, 1893, Sections 1 (b) and 5, will not give power to invest in the purchase of land but only in the mortgage of land. This illustrates the importance of the word 'security' in Section 40 of the Indian Trusts Act. I do not think any other section of the Indian Trusts Act that I have been referred to have much or any bearing on this point, except possibly Sections 20 and 36. Section 20 gives power to invest on certain securities and the securities mentioned are those ordinarily described as securities, namely, debentures, mortgages and so on. I cannot help thinking that that was the sort of security that the Legislature had in mind when they referred in Section 40 to calling in trust property in any 'security.'

8. Section 36 provides that--.a trustee may do all acts which are reasonable and proper for the realization, protection or benefit of the trust property, and for the protection or support of a beneficiary who is not competent to contract.

9. Stress was laid on the word 'realization,' and it was said that this authorized a sale, particularly if it was clearly for the benefit of the beneficiaries. However, if the case had depended on Sections 40 and 36 alone, I should have felt the greatest difficulty in holding that there was any general power for trustees to sell land under both or either of these sections or that the Court had any power to sanction such a sale. There does not appear to be any Indian reported case on the point, but Mr. Kanga was good enough to mention an un-reported case he had before my brother Macleod J. where, I understand, the Court felt very much the same difficulty as I do about the meaning of Section 40 and in that particular case refused to sanction the sale.

10. But, I think, in the present case it is unnecessary for me finally to decide whether the trustees have any power under Section 40 or Section 86, because, I think, this particular case may be decided on another ground, namely, under the extraordinary jurisdiction of the Court which it can exercise in certain cases of what I may call 'emergency.' I think that class of jurisdiction is exemplied at its highest in In re New [1901] 2 Ch. 534, a decision of the English Court of Appeal, the head note of which runs as follows :--

Where in the administration or management of a trust estate by the trustees, especially where the estate consists of a business or of shares in a mercantile Company, there arises an emergency or a state of circumstances which it may reasonably be supposed was not foreseen or anticipated by the author of the trust and is unprovided for by the trust instrument, and which renders it desirable and perhaps even essential, in the interests of the beneficiaries, that certain acts should be done by the trustees which they themselves have no power to do, and to which the consent of all the beneficiaries cannot be obtained by reason of some not being sui juris or not yet in existence, the Court will exercise its general administrative jurisdiction by sanctioning, on behalf of all parties interested, those acts being done by the trustees....

11. I will only say by way of warning that as pointed out in that case this jurisdiction is of an extremely delicate character and has to be exercised with the greatest caution. The case should be read at the same time with In re Tollemache [1903] 1 Ch. 457, where Lord Justice Cozens-Hardy, as he then was, said (at page 956):--

I will only add that, in my opinion, In re New constitutes the high-water mark of the exercise by the Court of its extraordinary jurisdiction in relation to trusts.

12. Now, have I got here a case of an emergency such as is contemplated in In re New? So far I have not dealt with the facts which have led to the proposed sale. This is not a case where the parties from some mere caprice, or from an ordinary desire to change of investments, or to increase their income, are desirous of settling the property. The facts are that this property is at the corner of two streets and is liable to a set-back and that if that set-back arose, which would happen on any occasion when it might be necessary to go to the Municipality for their approval of plans, the property would be very seriously depreciated. Then, further, the property is an extremely old one and repairs in the near future are undoubtedly required. Amongst other things it is entirely defective as regards sanitary conveniences and any moment the trustees might be served with a sanitary notice from the Municipality. This notice would be extremely difficult to comply with and would probably result in the set-back being enforced. I will not go into all the details of the affidavit of the Engineer, Mr. Nowroji Hormusji Katrak, but he sums up the situation in the last para in which he says:

In these circumstances 1 consider it most desirable that the property should now be sold for Rs. 33,000 and if it is not sold for 33.000 I should consider that the property is allowed to be ruined and that the beneficiaries' interest would be very adversely affected partly on account of their disability to do the repairs within the regular lines of the streets and partly on account of the inevitable monetary loss.

13. That being so, I think there is an emergency hero within the meaning of In re New. Certainly the settlor here never contemplated the possibility of a set-back nor of these municipal requirements and the possible disastrous effect might they have on the beneficiaries under the trust instrument. I think really this is a case where it would be almost pedantic on my part to say that the letter of the trust must be kept to and the spirit disregarded and that as it is land which is settled, land it must remain. I accordingly consider that I may properly exercise in this present case the extraordinary jurisdiction which I have and that accordingly the sale ought to be sanctioned.

14. I notice that the two trustees are the two tenants for life, and usually I do not think that is a very desirable trusteeship. It is true that they were the trustees appointed by the settlor herself, but she settled land and now the trust property may consist of easily convertible investments. If, therefore, there is any desire by the children of Shirinbai that a third trustee should be appointed, I think it would be a proper case to apply in Chambers to have that third trustee appointed. But, as far as the present application is concerned, I am not going to make that a term of my order. As regards the reinvestment of the sale-proceeds, I think that the trustees will have power to invest the proceeds in any investment for the time being authorized by law for the investment of the trust funds and will have power to vary such investment. I also think that I ought to give liberty to the trustees to apply to reinvest the proceeds in the purchase of land if so advised. It is perhaps unnecessary to say that the sale-proceeds will devolve in the same way as the land would have done, but, if desired, a provision to this effect can be inserted in the order as was done in the order on the files of this Court made by Sir Lawrence Jenkins in In re Manilal Hurgovan I.L.R.(1900) . 25 Bom. 353, where he dealt with the extraordinary jurisdiction of the Court to sanction the sale of a minor's interest in Hindu joint family property. Accordingly the order will be as prayed, but the petitioners will have their costs of the petition out of the trust estate between solicitor and client, and, having regard to my order and the letter of consent of 2nd August 1918, there will be no necessity for the children of Shirinbai to join in the conveyance. The title of the petition and order will be amended by adding 'and Extraordinary Civil Jurisdiction' after 'Ordinary Original Civil Jurisdiction', and there will be liberty to apply as to re-investing in land and generally.


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