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Arjansingh and ors. Vs. Deputy Mal JaIn and ors. - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtDelhi High Court
Decided On
Case NumberSuit Appeal No. 373 of 1967
Reported in22(1982)DLT14; ILR1982Delhi11; 1982RLR60
ActsDelhi Municipal Corporation Act, 1957 - Sections 313
AppellantArjansingh and ors.
RespondentDeputy Mal JaIn and ors.
Advocates: R. Dayal,; A.B. Dayal,; S.L. Bhatia,;
Cases Referred(S. Shanmugham Pillai v. K. Shanmugham Pillai
delhi municipal corporation act 1957 - section 313--dlf set apart certain plots of land for public purposes--it later sold two of these sites to a charitable trust for profit--whether citizens of locality can follow up the properties into hands of purchasers for value with notice.; delhi land & finance pvt. (dlf united pvt. ltd. ) developed a colony known as model town. it sold plots to people who built their house thereon. some land was set apart for public purposes like parks, schools etc; and the dispute in the present case centres round two such sites earmarked for public building'. dlf sold these two plots to a charitable trust lal chand public charitable trust--for rs. 10,000/- by a sale deed. thereafter, defendants 12, 13 & 14 who were trustees, executed a lease deed in.....avadh behari, j. (1) 'of all the exploits of equity, the largest, and the most important is the invention and development of the trust'. so prof. maitland was accustomed to tell his students. (maitland equity p. 23). this case essentially concerns itself with the question of trust. (2) on 27th may, 1967, three inhabitants of a colony known as model town in delhi instituted a suit for declaration and injunction] against a number of defendants, chief of them being delhi land & finance private limited (dlf). later on its name was changed to dlf united private limited. for the sate of brevity i will call it dlf. (3) dlf developed a colony known as model town. this colony supplies the background of the case. dlf sold plots to people who built their houses thereon. some land was set apart for.....

Avadh Behari, J.

(1) 'OF all the exploits of equity, the largest, and the most important is the invention and development of the trust'. So Prof. Maitland was accustomed to tell his students. (Maitland Equity p. 23). This case essentially concerns itself with the question of trust.

(2) On 27th May, 1967, three inhabitants of a colony known as Model Town in Delhi instituted a suit for declaration and injunction] against a number of defendants, chief of them being Delhi Land & Finance Private Limited (DLF). Later on its name was changed to Dlf United Private Limited. For the sate of brevity I will call it DLF.

(3) Dlf developed a colony known as Model Town. This colony supplies the background of the case. Dlf sold plots to people who built their houses thereon. Some land was set apart for public purpose such as street, park, school, market etc. In this suit the dispute centres round such two sites 'earmarked for public building', each measuring O.5 acre in this residential colony of Model Town.

(4) As owner of land, Dlf sold these two' plots to one Lal Chand Public Charitable Trust for Rs. 10,000.00 by a sale deed dated 28th October, 1965. In the schedule to the sale deed the property sold was described as under :

'ALLthe rights, title and interest of the vendors into and upon those two pieces and parcels of land being two sites' earmarked for public building each admeasuring O.5 acre or thereabout in the residential colony known as Model Town near Kingsway at Mall Road, Delhi... ... .. ... ... ...'

The purchaser, Lal Chand Public Charitable Trust, of which defendants No. 12, 13 and 14 are the trustees' executed a lease deed dated 30th September, 1966 in favor of Jain Sabha Dharmarth Trust and Aggarwal Dharmarth Trust in respect of one parcel of land admeasuring O.5 acre earmarked for public building'. Defendants No. I toll are trustees of these two Dharmarth Trusts. The other plot, it appears', Lal Chand Public Charitable Trust has retained with itself.

(5) Admittedly the leased plot of O.5 acre was 'earmrked for public building' in the lay-out plan of the colony which v was sanctioned in 1952 or thereabout by the Notified Area Committee, the then local authority within whose jurisdiction Model Town was situate. The dispute arose between the residents and the Dlf when the latter sold the plots to Lal Chand Trust, a trust created by Ch. Raghvendra Singh defendant No. 12, in the memory of his father Ch. Lal Chand. This was an out and out sale for Rs. 10,000.00 . No interest was retained by DLF. Lal Chand Trust gave it on perpetual lease to Jain Trust and Aggarwal Trust on a premium of Rs. 40,000.00 reserving annual lease money of Re. 1. So profit marking is the particular trademark of these transactions.

(6) The central question in the case is : Could Dlf sell land which is 'earmarked for public building' If not, the sale is invalid. If the sale is invalid, the perpetual lease must automatically fall to the ground. Lal Chand Trust is a derivative owner. They derive their title from DLF. The crucial question is : Was Dlf absolute owner of the land Or are they mere trustees as is the case of the plaintiffs The plaintiffs contend that as bona fide residents of Model Town they have a right to impeach the sale on the ground that the land was earmarked for public building' and Dlf were mere trustees and as such they had no right to sell the land which was set aside for public purpose and of which Dlf were nominal of fictitious owners. If the land in suit is impressed with the character of trust, did Dlf as trustees have the right to sell the plots for a consideration of Rs. 10,000.00 in favor of Lal Chand Trust which, as I have said, was created by Ch. Raghvendra Singh and who himself was a major shareholder in Dlf

(7) The Delhi Municipal Corporation Act, 1957 (the Act) was passed with a view to consolidate and amend the law relating to the Municipal Government of Delhi, Section 312 of the Act says :

'312.If the owner of any land utilises, sells, leases out or otherwise disposes of such land for the construction of buildings thereon, he shall lay down and make a street or streets giving access to the plots into which the land may be divided and connecting with an existing public or private street.'

Then comes the important provision of which the material part is' as follows :

'313(1) Before utilising, selling or otherwise dealing with any land under section 312, the owner thereof shall send to the Commissioner a written application with a lay-out plan of the land .showing the following particulars, namely : (a) the plot into which the land is proposed to be divided for the erection of buildings thereon and the purpose or purposes for which such buildings are to be used ; (b) the reservation or allotment of any site for any street, open space, park, recreation ground, school, market or any other public purpose ; (c) the intended level, direction and width of street or streets; (d) the regular line of street or streets; (e) the arrangements to be made for levelling, paving, metalling, flagging, channelling, sewering, draining, conserving and lighting street or streets.

(8) Before dealing with the land, the owner has to (1) divide the land into plots for purposes of erection of building, residential or commercial, as the case may be, and (2) reserve or allot sites for street, open space, park, recreation grounds, school, market, or any other public purpose. It will, thereforee, appear that sites for public purposes have to be reserved and set aside in the lay-out plan which is' submitted to the Commissioner of the Corporation for his sanction. Section 313(1)(b) postulates two conditions which must be fulfillled before the layout plan can be sanctioned (i) setting apart of a site and (ii) for a specified public purpose. Public Purpose.

(9) The reservation or allotment of sites for a public purpose is essential under s. 313(1)(b). Streets open space, parks, recreation grounds, schools, markets are examples of public purpose. Place of public worship, school, college, hospital, public theatre, public hall, public lecture room, public library or public exhibition room or public place or assembly or buildings constructed for any other public purpose are within the contemplation of the Act. An anthology of public purpose is impossible to make. Public purpose is not a static concept. Winds of change blow over it. As new social needs' arise or old ones become obsolete or satisfied the concept changes with the changing times. 'In ascertaining whether a purpose is public or private the salient point to be considered is whether the class to be benefited or from which the beneficiaries are to be selected constitutes a substantial body of the public'. (Halsbary Laws of England, 3rd ed. vol. 4 p. 209).

(10) A trust of general public utility is open to the whole community yet, by its very nature, advantageous may be to a few. But every one willing to take advantage must be able to do so. Its use cannot be confined to a selected number of persons, however numerous and important. If it is so confined it does not serve the public purpose which by its nature it is intended to serve. [See Inland Revenue Commissioners v. Bad-. delay, 1955 Ac 572 per Viscount Simonds]. This means that the whole community of residents as' distinct from particular individuals have a right to use the land. Each and every member of the community need not be equally interested in such use. If the object is to satisfy a great public want or exigency, that is' sufficient. The person to be benefited must be a substantial body of the public. Public purpose means public usefulness, utility or advantage, or what is productive of general benefit. The purpose must be needful one for, the public, which cannot be surrendered without obvious' general loss or inconvenience.

(11) The key expression in, the statute is- 'public purpose' This is the genus. Open space, park, recreation grounds, schools, markets are species. These are instances. The enumeration is' not exhaustive. Interests of the community very with time and place. Purposes which may be regarded laudable at one time may at other times' be regarded as subserving no useful purpose. What in one community is regarded as beneficial to the community may in another be regarded as useless if not detrimental. (Scott on Trusts vol. 3 p. 1975).

(12) The public purpose can be educational, charitable or religious. But its distinguishing mark is that it must be beneficial to the community or a section thereof. The property is devoted to the accomplishment of purposes' which are beneficial to the community and the persons who are to receive benefits from the trust are not designated. They are sufficiently large. An indefinite class of beneficiaries. Here the inhabitants are interested in the enforcement of the trust. The court scrutinises the dealings' of the trustees critically.

(13) The term 'public purpose' in the setting of the colony is limited to the inhabitants of the colony, but must be in common, and not for a particular individual. The public sites are the corpus of the property which is the subject of the trust. They are affected with public interest. They are devoted to publice use, and their use thereby granted to the public.

(14) These open spaces are set apart in the perspective of the colony and in proportion to its residential requirement. When the colony is founded there must be provision for public purposes. The colony must be perfectly designed if it has to possess positive merits. The colony is an organic whole. It has to provide for the moral and material needs of its inhabitants. There must be schools for education of children. There must be temples, markets, theatres and athletic fields. In parks, recreation grounds, amusement arcades, the residents can pursue their preferred pastimes. They can have a community centre. They can have a gymnasium to give the colony appearance of a masculine habitation.

(15) These sites for public purpose are impressed with the character of trust. They are no longer private fiefs of the coloniser. They are dedicated to a public purpose. They are appropriated to this aim. They are reserved and allcted for it. The 'public purpose' is the appointed goal. That is the end that taw has to reach. This is the 'destination' of these reserved sites. For the accomplishment of this purpose a trust is created by operation of law. The beneficaries are the inhabitants of the locality. They are the 'destinatories', to use Maitland's expression. Few writers have caught so well the flavour and spirit of English trust as Maitland'. (sec his essay on Trust and Corporation) .

(16) It is true that the Act was not in force at the time Model Town colony was raised but by virtue of s. 516(2)(a) the permission of the Notified Area Committee granted prior to the Act shall be deemed to have been granted under the provisions of the Act. That section. 313 applies cannot be disputed. It must, thereforee, be held that the reservation of sites for a public purpose in the lay-out plan will create by implication of law a public trust. Dlf are trustees of these reserved sites. I hey are merely nominal or fictitious owners. The beneficial ownership concurrently vests in the residents of the colony for whose benefit these sites have been reserved in the lay-out.

(17) What must necessarily follow from this' is that the coloniser can sell the plots for profit which are covered by clause (l)(a) of section 313. But in sites reserved or allotted for public purpose he can make up profit by selling the trust property. He cannot sell the sites meant for public purpose. He cannot make profit out of them. If he does, he commits breach of trust. A coloniser is essentially a money maker. He develops the land and divides it info plots and sells them to public. This is the stuff of a coloniser's business. But the sites which he has reserved for public purpose cannot be sold for private gain. They are inalienable by their very nature.

(18) Section 313(1)(b) creates trust some time called 'public trust', meaning that the trust property is to be used to promote some particular purpose rather than to benefit some particular individual or class. In such cases, the ordinary perpetuity rule cannot prevent the property from being tied up indefinitely since there are no individual beneficiaries in whom successive interests are to vest. (See Megarry & Wade on Law of Real Property, Fourth Edition, p. 267). So long as the colony lasts, there will always' be beneficiaries to enforce the trust. Nor docs a trust fail for want of a trustee. What has made the trust so effective is the cooperation of the courts in effect they may be asked to supervise the execution of the trust. Nature of trust.

(19) What is a trust Maitland definies a trust thus : 'Where judges and text writers fear to tread professors of law have to rush in. I should define a trust in some such way as- the following. When a person has rights which he is bound to exercise upon behalf of another or for the accomplishment of some particular purpose he is said to have those rights in trust for that other or for that purpose and he is called a trustee.' (Lectures on Equity 2nd ed. p. 44). Halsbury's Laws of England, Vol. 33, pp. 87-88 (third edition) gives the following definition :

' a confidence reposed in a person with respect to property of which he has pussession or over which he can exercise a power to the extent that he may hold the property or exercise the power for the benefit of some other person or sobject.'

Underhill defines trust in these words:

'Atrust is an equitable obligation, binding a pel son (who is called a trustee) to deal with property over which he has control (which is called the trust property), for the benefit of persons (who are called beneficiaries or cestuique trust), of whom he may himself be one, and any one of whom may enforce the obligation.'

(Underhill's Law of Trust & Trustees 13th ed. p. 1).

(20) UNDERHILL'S definition has been judicially approved m English cases. (See Green v. Russel (1959) 2 Qb 226 per Romer L. J.).

(21) Section 313(1)(b) thereforee imputes or imposes a trust in respect of reserved sites for the accomplishment a particular purpose or purposes'. Dlf have to hold these sites for the benefit of the residents and for the accomplishment of the specified purpose or purposes. The essence of the concept of the trust is the separation of legal and beneficial ownership. The property being legally vested in one or more trustees but in equity held for or belonging to others. Salmond sees 'duplicate ownership in trust. (Salmond on Jurisprudence 12th ed. p. 256). There is a fiduciary obligation laid on the trustees'. It is this fiduciary relationship which is the chief characteristic of sites reserved for public purposes'.

(22) All that the Dlf has to do is to hold these sites lor public purpose as they have been reserved and allotted in the lay-out plan for a specified purpose. Dlf have no power to sell them. Dlf have not to build schools, theatres, markets etc., it is true. They are mere trustees. There is no active duty cast on them. The residents can do it for themselves. They will build temples, schools etc. on the sites reserved for that purpose. Or the Municipal Corporation can do it for them. In case of dispute the court can settle a scheme for the administration of the trust. The sites are devoted to public purpose. Dedication to purposes beneficial to the community are charities. 'Gifts for charity are supported although no particular mode of carrying out the intention is prescribed'. (Tudor on Charities 5th ed. p. 133). If a trust was intended but there is no provision by the donor of machinery to carry his charitable purpose into effect the court supplies the omission. (Tudor on Charities 6th ed. p. 231).

(23) So trust can be passive or active according to the nature of the duty of the trustees. One writer defines a trust in words which are appropriate to this case :

'Atrust is a duty seemed in equity to rest on the conscience of a legal owner. This duty may be either passive, such as to allow the beneficial ownership to be enjoyed the some other person, named the cestui que trust, in which case the legal owner is styled a bare trustee ; or it may be some active duty, such as to sell, or to administer for the benefit of some other person or persons ; such for example. are the duties of a trustee in bankruptcy.'

(Principles of Equity by H. A. Smith, 4th ed. p. 23) Underhill has defined a simple trust as a trust in which the trustee is a mere repository of the trust property, with no active duties to perform. (See Law of Trusts and Trustees 13th ed. p. 23). It is, thereforee, clear that Dlf is a bare trustee. They are a mere passive repository of the estate. They are not called upon to exert themselves actively for execution of the trust. It is the duty of the inhabitants to do something positive in execution of the purpose particularly pointed out in the lay-out. The Dlf are passive trustees. They are not active trustees. The trust is a passive trust. It is not an active trust.

(24) The only necessity in a trust is that property (in Its Widest sense, res) should exist, and that it should be appropriated to the fulfillment of some object. A trustee is not an absolute necessity for a trust ('a trust, shall never fail for want of a trustee') though he is for its proper execution. The lights and obligations of the trustee will vary according to only one thing, his mission. Such mission always consists in insuring that the rest be properly appropriated to the aim to which it has been devted, either by the settler, by the court or by operation of law. The rights that the trustees will have in each particular case depend on his obligations; they are tools given to him for the fulfillment of his duties', and such duties are determined by the appropriation to which the rest has been devoted. (Keeton and Sheridan-Law of Trusts 10th ed. p. 5-6). In this case the public sites have been set aside and segrated from other plots. And they are devoted to a certain function, a certain end, namely, public purpose. Constructive Trust.

(25) The trust created here is a constructive trust. it arises by the construction or operation of law. Law imputes or imposes a trust, such as' where a person is the legal owner of the property but is compelled by the equitable doctrine to hold that property for and on behalf of some other person, the cestui que trust. Such a trust is not a result of an. agreement. It arises from the circumstances of a case.

(26) It is more of a resulting trust. Public benefit is a necessary condition of this trust. It can as well be an implied trust. But we need not bother about the name so long as property is devoted to a public purpose. In Gissing v. Gissing (1971) Ac 886 Lord Diplock said :

'Aresulting, implied or constructive trust and it is unnecessary for present purposes to distinguish between these three classes of trust is created by a transaction between the trustee and the cestui que trust in connection with the acquisition by the trustee of a legal estate in land, whenever the trustee has so conducted himself that it would be inequitable to allow him to deny to the cestui que trust a beneficial interest in the land acquired.'

Equity is not past the age of child bearing. One of her latest progeny is a constructive trust of a new model. A constructive trust is' more than a concept.. It is a remedy. As Lord Denning has said : 'It is an equitable remedy by which the court can enable an aggrieved party to obtain restitution.' (Hussey v. Palmer (1972) 1 Wlr 1286. Constructive trust has been regarded as a remedial process. 'It is a means whereby a person may recover or gain title to that which is unfairly withheld from him to the benefit of the withholder.' (Waters Constructive Trust p. 12). Justice Cardozo once said 'A constructive trust is the formula through which the conscience of equity finds expression.' Constructive trust arises in a variety of situations. It is the result of special circumstances There may be no intention of the parties to create a trust relation. 'A constructive trustee may not know that he is a trustee.' (Maudsley) and Burn Trusts and Trustees 2nd ed. p. 213).

(27) Whenever the circumstances of a transaction are such that the person who takes the legal estate in property cannot also enjoy the beneficial interest without necessarily violating some established principles or equity, the court will immediately raise a constructive trust and fasten it upon the conscience of the legal owner, so as to convert him into a trustee for the partie who in equity are entitled to the beneficial enjoyment. (Hill Trustees p. 166). A constructive trust is thereforee 'a trust to be made out by circumstances.' (Soar v. Ashwell (1893) 2 Qb 390 per Bowen L. J.). Its forms and varieties are practically without limit. It is raked by a court of equity whenever it becomes necessary in justice and good- conscience that such a trust should exist. The categories of constructive trusts. are never closed.

(28) In the present case it would be against conscience to hold that no obligation is annexed to the ownership of the reserved sites. And if there is an obligation it is the duty owned by the trustee to the beneficiaries of the trust. It is' the duty of the trustee to administer the trust solely in the interest of the beneficiaries. He is not permitted to place himself in a position where it would be for his own benefit to violate his duty to the beneficiaries. (Scott on Trusts vol. Ii sec. 170).

(29) Trust is a unique common law institution. Trusts, says He Lepaulle, 'are like those extraordinary drugs curing at the same time toothache, sprained ankles and baldness, sold by pedlars on the Paris boulevards ; they solve equally well family troubles, business difficulties, religious and charitable problems. What amazes the skeptical civilian is that they do really solve them.' (Quoted in Poun Jurisprudence Vol. V p. 237). Here trust concept' has been employed to solve a problem of Municipal government. Charitable Trust

(30) In the leading case of Commissioner for Special Purposes of Income-tax v. Pemsel (1891) A. C. 531, Lord Macnaghten thus expressed the judicial idea of the scops of charitable purposes : ' 'Charity' in its' legal sense comprises four principal divisions : trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts' for other purposes beneficial to the community, not falling under any of the preceding heads.'

(31) A much quoted definition of charitable trust is that of Mr. Justice Cray. He said that 'A charity, in the legal sense, may be more fully defined as a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their minds' or hearts under the influence of education or religion, by relieving their bodies from disease, suffering or constraint, by assisting them to establish themselves in life, or by erecting or maintaining public buildings or works or otherwise lessening the burdens of government.'

(32) The promotion of the happiness and enjoyment (A the members of the community is a charitable purpose. (See Henry Goodman v. Mayor of Saltash, 7 AC 633. The erection or maintenanve to a. community building in a village to be used for the benefit of the inhabitants in a charitable purpose. (See In re Spence (1938) 1 Ch. 96. Scott in his classic treatise on Trust sayg that erection of a public building is a charitable trust. Vol. 3 p. 2015 (1939 ed). The charitable trust. requires no definite beneficiary. It does' not offend against the perpetuity rule. The property is tied to a public purpose in perpetuity so it is inalienable. Dlf have no right to transfer it. The transferee in such a case cannot acquire any title to the property. (Gnanasambanda Pandora Sannadhi v. Valu Pandaram, 27 I.A. 69 and Bonnerji v. Sitanath Das, 49 I.A. 46.

(33) Charitable trusts; are purpose trusts. They have the necessary quality of public benefit. They are created for the common good. Take the case of a public building. It must be available for all the public to be a charity. It is indifferent how many people use it. 'But confine its use to a selected number to persons, however numerous and important. It is then not a charity. It is not of general public utility, for it does not serve the public purpose which its nature qualifies it to serve.' (I. R. Commissioners v. Baddley (1955) Ac 572 per Lord Simonds).

(34) For a chartitable trust the overriding test is whether it is public whether it is for the benefit of the community or an appreciably important class of the community. The universal rule is 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 of a section of the community and not to the benefit of the particular private individuals. The Act uses the term ''publie purpose'. The Income-tax Act uses the expression 'object of general public utility'. Sec. 2(15). (See the recent decision of the Supreme Court : Additional I. T. Commissioner v. Surat Art Silk Manufacturers Association : [1980]121ITR1(SC) . The Transfer of Property Act, 1882 speaks of 'any other object beneficial to mankind' and 'property for the benefit of the public.' (s. 18). They mean the same thing. If the object or purpose promotes the true interests of mankind it is a charity. This is the test'. It is' the extensiveness of the benefit which is the criterion of charity. The word 'public' is of importance. A 'public building' is devoted to a public purpose. It is thereforee a charitable trust. This is the heart of matter. It is in the heart of the province of charity that the real answer can be found to the issue raised in the science dedication of a property to a charitable purpose is complete, a trust in favor of charity is created. Where the property is set apart for a public purpose it means 'the extinction of the private secular character or the properly and its complete dedication to charity.' (Menakuru Dasartharami Reddi v. Duddukuru Subba Rao, Air 1957 Sc 797. Dlf thereforee does not remain the real owner. The annexation of a positive legal obligation to their ownership that the property is to be devoted to substantial social advantage means' 'the extinction of the private secular character' of the plots in. question. If there is no beneficial ownership in Dlf, as a logical corollary it must follow that they have no right to alienate the property.

(35) So the conclasion I come to is this. The reservation, of sites for public purpose is a gift to charity. A 'public building is like a Dharmshala. You cannot sell a Dharamashala. Nor land dedicated to this public charitable object. Because the statute directs that some sites shall be set aside for public benefit. 'Public benefit is the necessary condition of legal charity.' (Halsbury's Laws of England (3rd ed.) vol. 4 p. 209). 'Negatively, a trust is not charitable if it confers only private benefits.' Oppenheim v. Tobacco Securities Trust Co. Ltd. (1951) Ac 297 per Lord Simonds). On this point there is no difference in Indian and English law.

(36) All purposes which are charitable according to the opinion of English law, are also charitable under the Hindu Law. But in addition, there may be purposes which are charitable according to the Hindu ideas, but are not so under the English law. This is particularly true with regard to religious trusts. (Mukherjea Hindu Law of Religious and Charitable Trusts 4th ed. p. 37). Breach of Trust

(37) It has long been established that neither directly nor indirectly may a trustee make a profit from his trust. This rule is part of the wider principle that in order to protect a trustee, against 'the fallibility of human nature' he may not put himself in a position when his duty and interest may conflict. These are cannone of the court of equity which have their foundation not in the actual commission of the fraud but in that hallowed prison 'lead us not into temptation'. (Wormley v. Wormley, 21 Us 421 per Johnson J.). The rule depends not on fraud or mala fides but on the mere fact of a profit made. (Regal Hastings Ltd. v. Gulliver (1942) 1 All Er 378. The trustee mast be non.-receptive to the allurements of avarice. When there is a breach of trust judges write not with a pen but with a broomstick. Because of their pre-occupations with the darker regions of human nature.

(38) The leading case on the subject is Kench v. Gandford (1726) (15) (White & Tudor Leading Cases in Equity page 693). It was held that a trustee cannot make profit for himself. In that case the trustee applied for a renewal of the lease of a market for the benefit of the infant beneficiary. The owner of the market declined to renew it. He did not want to have an intant tenant. Thereupon the trustee renewed it for himself personally, to which the owner agreed. Lord Kink L. C. held that the trustees must hold the lease on trust for the intant. Applying this principle I must hold that the sale to Lal Chand Public Charitable Trust is void. The parties will revert to the position as it existed at the beginning i.e. prior to the making of the sale deed dated 28th October, 1965. The legal title will revert in DLF. They will continue to be passive trustees or bare trustees.

(39) The .plaintiffs in equity have a right to follow the trust property. There can be no difficulty in following the property in this case. We have specified property capable of being identified. Courts of equity employ the technique of tracing in order to give relief to the beneficiaries. The purchaser of the trust property in the present case is not a purchaser for value without notice. Lal Chand Trust cannot say that they have no notice of the trust. In their sale deed it is clearly mentioned that the land is 'earmarked for public building'. Similarly, Aggarwal Trust and Jain Trust very well knew that they were taking lease of a land which is 'earmarked for public building'. It is so stated in the lease deed. Such a land Dlf cannot sell. The Plaintiffs arc, thereforee, entitled to succeed. They are entitled to repossess themselves of which they never ceased to be the beneficial owners'. Equity regards and treats as done what in good conscience ought to be done. Validity of Transfer

(40) The principal question is about the validity of the sale by Dlf in favor of Lal Chand Trust. Though the sale purports to be an absolute sale yet it directs the purchaser to use the plot only for the purposes of 'a public building'. This is a restriction on his right. Under section 11 of the Transfer of Property Act there cannot be a sale with such a condition. The condition to use it as apublic building is repugnant and against law Absolute estate passes to the purchaser. A man cannot create new species of estate or subject his estate to incidents uaknown to law. .Incidents of a novel kind cannot be devised and attached to property at the fancy or caprice of any owner. The result here will be this. The purchaser will hold the land and yet ignore the trust. He becomes the absolute owner. The restriction on its use as 'a public building' cannot bind him. He is free to deal with the property in any manner. Absolute estate has been conveyed. It is an absolute grant. The grant is good and the condition void. (Gopala Menon V. Sivaraman Nair (1981) Scc 586. This is the effect of section 11 T.P. Act.

(41) To say that transfer is permissible if made subject to trust is a false assumption. On this assumption Dlf made the conveyance. The assumption is based on a misinterpretation of the Act. The Act has a social purpose. If the developer acts counter to the policy and purposes of the Act, the action will be declared to be unlawful.

(42) The Dlf cannot have the best of both worlds. They cannot retain real ownership and the absolute right to transfer and earn profit and at the same time maintain without breaking the bond of trust obligation. This in short is the answer to the question posed in this case. Trust ownership and Alienation

(43) ownership consists of innumerable rights over property. Right of alienation is one of them. The right of the owner may all be eaten up by the devotion of the property to a public purpose. Thus the trustee's ownership may be reduced to a mere name rather than a reality. The real ownership vests in the fluctuating body of the inhabitants. 'The trustee is destitute of any right of beneficial enjoyment of the trust property' (Salmond p. 256). He is under a legal obligation to use the property for the benefit of those to whom in truth it really belongs.

(44) If the property is to be applied to a public purpose, whether it is religious or charitable or educational, the secular courts enforce the obligation annexed to the ownership of the property. Whether the trustee is an. individual or a corporation it will make no difference. In 1743 Lord Handwicks said : 'nothing was clearer than that Corporations might be trustees'. (A. G. V. Landerfield (1743) 9 Mod. 286 = 88 E.R. 456.

(45) There can be no abdication of the functions of the trustee by Dlf, unilaterally. We know of no principle of law or precedent which permits such abdication of trust in favor of another body of. persons. (Abdul Kayua v. Alibhai : [1963]3SCR623 ). This is' a confidential relationship which involves a special duty of loyalty to the purpose or object of the trust. The court acts on the conscience of the defendant. The trust obligation is a burden. It is an 'encumbrance as Salmond says. 'A trust is an encumbrance in which the ownership of the property is limited by an equitable obligation to deal with it for the benefit of some one else.' (Salmond p.2 43). The duties of Dlf were in their nature fiduciary, and fiduciary duties cannot be the subject of delegation or transfer. (Bonnerji V. Sitanath 49 is 46).

(46) It must, thereforee, be held that the sale in favor of Lal Chand Trust is void ab initio. Dlf had no right to sell. Lal Chand Trust thereforee got no title. At common law a man who had no title himself could give no title to another. Nemo dat quod non habet (No one gives who possesses not). thereforee, lease created by Lal Chand Trust must also be held to be void. Issues

(47) Dlf, the contesting defendant, contested the suit on a variety of grounds. Their pleas are reflected in the following 23 issues which were framed on their defense on 11th February 1971.

1.Is not the suit filed by the plaintiff in their individual capacity maintainable 2. Is the present suit liable to be stayed under section 10 or section 151 Code of Civil Procedure because of a previously instituted suit No. 613 of 1965 in the court of Shri Hira Lal Garg, Subordinate Judge 1st Class, Delhi 3. Has the suit been properly valued for purposes of court fee and jurisdiction 4. Is the suit bal for multifariousness 5. Is the plaint liable to be rejected on account of prolixity and contravention of the principles of pleadings 6. Does the plaint disclose any cause of action? 7. Is the suit barred under section 92 of the Code of Civil Procedure? 8. Is the suit premature? 9. Is the sale deed dated 28th October, 1965 executed by defendant No. 15 in favor of Lal Chand Public Charitable Trust invalid for reasons stated in paragraphs 46 and 47 of the plaint 10. Did Lal Chand Public Charitable Trust net acquire any right, title or interest in the land by virtue of the sale deed entered into by it with the colonisers 11. If issue No. 10 is not affirmed, are the plaintiffs beneficiaries under the Trust 12. Is the deed of perpetual lease dated 30th Sept. 1966 executed by defendants' 12 to 14 as trustees or the La'1 Chand Public Charitable Trust in favor of Aggarwal Dharamarth Trust or Jain Sabha Dharmarth Trust invalid and not binding on any of these trusts 13. Are the plaintiffs beneficiaries under the Jain Sabha Dharmarth Trust or the Aggarwal Dharmarth Trust as alleged in paragraph 37 of the plaint 14. Does the sanction of the lay-out plan of the colony, constitute a tripartite contract between the plot holders and residents of the colony colonisers and the local authorities 15. Did a trust as alleged come into existence as a resuit of proceedings culminating in the sanction of the layout plan 16. Are the plaintiffs as plot-holders or residents of She colony or as beneficiaries of any of the said four trusts entitled to file the present suit 17. In whom docs the ownership of the land earmarked for the alleged purpose vest 18. What is the effect of the land in suit being outside the controlled area 19. Can the site in dispute be used only for the specified purpose shown in the lay-out plan and not for any other purpose 20. Are the defendants 1 to 11 making any wrongful use of the land in dispute and does the same give rise to any cause of action to the plaintiffs 21. Is it incumbent on the defendants to construct a public building over the land in dispute if so. what is meant by a public building 22. Does the use of the plot by defendants 1 to 11 without constructing a public building amount to breach of trust 33. Relief.

Mr. S. L. Bhatia. counsel for Dlf, has not pressed before me issue Nos. 1, 2, 3, 4, 5, 6, 7, 8, 14. 18, and 19. Only issue Nos. 9, 10, 11, 12, 13, 15 16 17 20 21 and 22 were argued. These issues raise only two questions, namely, whether there is a trust imposed by law and whether the sale was invalid.

(48) Counsel for Dlf sought to support the sale by two arguments. In: the first place he argued that such a sale is valid under section 40 of the Transfer of Property Act. He referred me to Spicer v. Martin (1888) 14 AC 12. In my opinion section 40 has no application, to the present case. The only exception made by section 11 T. P. Act is in view of the restriction made 'for the purposes of securing the beneficial enjoyment of property.' On the sale of land covenants are sometimes' entered into by owners of land with the purchasers of adjoining land, that the purchased land shall not be built upon or planted or so dealt with as to impose other restrictions upon the mode of enjoyment of law in favor of the former, though they may have no right of property or easement over the purchased land. Such a contract binds the land in the view of the court of equity, and will be enforced in cases where the court can properly interfere. There must be in such a case two lands, called the benefited land and the burdened land. Benefited land is the dominant tenament. The burdened land is the servient tenament. The right arises from the relation of two estates one to the other.

(49) But here in the present case there are no two lands. There are two plots of land which were sold by Dlf to Chand Trust, 'to have and to hold the said property described in the schedule hereunder and hereby conveyed, transferred, assigned and assured and every part and parcel thereof together with its every right and appurtenances unto the vendee absolutely and for ever free from all encumbrances.' The sale deed purports to transfer 'absolute interest' in the plots which are the subject matter of the suit, with the restriction that: they are 'earmarked for public building'. There is no question of easement here. The is no question of restrictive covenant. There is no question of benefited or burdened land. There is no dominancy. There no surviency. Section 40 thereforee has no application.

(50) SPICER'S case was a case of a building scheme. If such scheme exists, the covenants given on the sale of each plot are enforceable by the owner for the time being of any plot on the estate. As Lord Macnaghten said: 'Community of interest necessarily ... .requires and imports reciprocity of obligation' The convenants in effect from a sort of local law for the estate, in my opinion this case is of no help to DLF. There are no covenant in the sale deed on which parties can rely. The plaintiffs are in effect saying: 'The statute gives rise to an equity in our favor which is created by circumstances and is independent of contractual obligation.'

(51) Secondly, counsel for the Dlf said that though the two plots of land which are 'earmarked for public building' and which are the subject matter of the present action must be used for the purpose of public building, that does not mean that Dlf have no right to transfer them subject to that condition. In this connection he referred me to section 316 of the Act,

(52) Council contends that unlike a street, the reserved sites do not vest in the Corporation. They continue to remain the property of the owner. I do not agree. Section 316 deals with a public, street. The Commissioner may and on the requisition of the majority of owners shall declare the street to be a public street and thereupon the street shall vest in the Corporation. It is true that the public sites do not vest in the Corporation because there is' no such provision in the Act but they are certainly impressed with the character of trust. An obligation is annexed to the ownership of DLF. The obligation is to. hold the sites for the beneficiaries. The beneficiaries are all the inhabitants, present and future, whether rich or poor. Behind the hedge of trustees the inhabitants can enjoy a community life where they can mix with their fellow citizens.

(53) This is an implied or resulting or constructive trust, call it by whatever name you like. One thing stands out in high relief. It is this. From the accompanying facts and circumstances of this case it is manifest that the beneficial interest is not to go or be enjoyed with the legal title. The Public sites vast in Dlf for the use of the inhabitants. They are committed to their charge for safe keeping. Dlf are the custodian trustees, so to speak. They have a multiple role. Not only are they colonisers and vendors of land. they are also trustees of public utilities.

(54) A somewhat similar of trust concept was adopted by this Court in a writ case (DLF Housing and Construction Pvt. Ltd. v. Delhi Municipal Corporation, (1969) Del 1055. On appeal to the Supreme Court it was held that writ jurisdiction was not the proper forum in a case where facts were disputed and complicated questions of law and fact depended on evidence. As the High Court had considered the matter 'in the abstract' their findings were set aside. (See Dlf Housing Construction Ltd. v. Delhi Municipal Corporation. : AIR1976SC386 ). Now this is a suit and evidence has been led by the parties. The salient facts regarding sale and lease are not in dispute. On concreate and individual facts of this case I have reached the conclusion that there is a trust and the alienation is improper.

(55) The concept of trust revolves round the expression 'public purpose' as used in the Act. What is a 'public purpose' Any purpose in which public has an interest. It means general public use which extends to the rich as well as to the poor. If has the necessary element of public benefit. The person to be benefited must be the whole community; or all the inhabitants of a particular area. The inha.bitants of a georgraphical area is a section of the public in the context. So it is the requirement of public benefit which informs and animates the public purpose, even though public benefit may be confined to persons living in a specified area.

(56) S. 313(1)(b) is providing some of the indispensables of a settled community, such as schools, parks, temples etc. These are works of public advantage. They are for the general benefit and welfare of the residents. It does not matter that it is only a limited number of people who will take advantage of the benefit provided in the colony.

(57) Dlf must hold the property for public purpose. There is a fidiuciary relationship subjecting the holder of property to deal with it for the common good. This is a trust of a public nature; of benefit to the public, and not merely to privatc individuals.

(58) This is a charitable trust because it promotes a public benefit. Public purpose is classed under the fourth category in Lord Macnaughten's definition in Pemsell's case of 'other purposes beneficial to the community' or as phrased by Sir Samuel Romilly in argument in Morice v. Bishop of Durham (1805) 10 Ves 522 : 'advancement of objects of general public utility'. Sites earmarked for a public building like a Dharamsala are a charitable trust. Similarly gift for the establishment of recreation grounds for the public generally or lor the inhabitants of a particular area were upheld as charities in Re Hodden (1932) Ch 133 and Re Morgan (1955) 1 Wlr 738.

(59) The fundamental requirement of a charitable trust is, in my opinion, correctly stated in the following passage in Tudor on Charities (5th ed) p. 11 :

'INthe 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 the purpose must, in order to be charitable, be directed to the benefit of the community or a section of the community.'

The public element is present in 'street, open space, park. Tecreation ground, school, market or any other public purpose.' S. 313(1)(b). So the charity lives for ever. No charitable trust is void merely because the property will become inalienable in perpetuity. Summary and conclusion

(1)The plots in question are trust property. Dlf are trustees. Their power of disposition is 'cabin'd, cribb'd, confin'd, bound in' (Shakespeare : Macbeth Iii, Iv, 24). The trustees hold the land for the use of the beneficiaries. S. 313(1)(b) represents social control of land. It requires the coloniser to set apart land for a public purpose. This is the pre-condition of planning permission. The object is to promote social interest by permitting property to be devoted to the public purpose in perpetuity. The necessary element is public benefit, even though confined to persons living in a specified area. Only by imputing a trust the court can promote the legislative purpose underlying the statutory provision. (2) The principle of equity is that the trustee must not benefit from his position as a trustee. He must not put himself in a position in which his duty to the trust may conflict with his personal interest. He can get no advantage to himself out of the trust relation. He must not make a profit out of his trust. Human nature being what it is, there is' danger, in such circumstances, of the person holding a fiduciary position being swayed by interest rather than by duty, and thus prejudicing those whom he was bound to protect. It has thereforee been deemed expedient to lay down this positive rule. (Bray v. Ford (1896) Ac 44 per Lord Herschell). (3) Equity has' evolved the technique of tracing. This means that the beneficiary may follow the property into the hands of a third party and reclaim it, until it comes into the hands of a bona fide purchaser for value without notice. (See Thomson v. Clydesdale Bank (1893) Ac 282. Analytically, there is an equitable ownership in the inhabitants of the colony against every body who can be reached by a court of equity as well as an equitable right in perscnam as against the trustee. (4) It is an obvious breach of trust for trustees to occasion the destruction of the trust property or to alienate it improperty. (Tuder on Charities 6th ed. p. 445). Dlf have alienated the property. They have made an absolute sale. Thereby trust has been destroyed. An absolute estate and trust are incompatible. They are a contradiction in terms. They are mutually destructive. Paradoxically the trust was destroyed by the founder by its own act. The property passed 'absolutely', as is stated expressly in the sale deed. This is a breach of trust. The beneficiaries have a remedy in cases of breach of trust. They are entitled to follow the property. A charity once established does not die though its nature may be changed. (Commissioner of Inland Revenue v. National Anti-Vivisection Society 28 TC 311 per Lord Simonds). The Court can apply the doctrine of cypres. The newest dodge of the newest statute is subjected to the critical scrutiny of the courts whenever there is complaint of breach of trust. The precise nature of the complaint here is that Dlf are treating the public sites as their private property. Private benefit and public purpose are antithetical. What is held by private individuals and used for their private benefit cannot be said to subserve public purpose. Here public purpose is paramount. The private ownership is eaten away to such an extent that all that remains is a nominal ownership. Private property is converted into a trust by annexing to it the equitable obligation to deal with it for a public purpose. This is the statutory hypothesis of S. 313(1)(b)(5) The edifice of charity is built on the foundations of the statute. S. 313(1)(b). 'Public purpose' is the public element in charity. Dedication of the property to 'public purpose' is complete. As the dedication is complete, a trust in favor of the charity is created. (S. Shanmugham Pillai v. K. Shanmugham Pillai, : [1973]1SCR570 ). The duty to use the property for public good makes if inalienable in perpetuity.

(60) For these reasons the plaintiffs succeed. The sale by Dlf in favor of Lal Chand Public Charitable Trust dated 28th October, 1965 is declared an void. As a result the lease deed dated 30th September, 1966 executed by Lal Chand Public Charitable Trust in favor of defendants Nos. 1 to 11 is also void. The plots in question will not be used except as a public building. The plaintiffs will be entitled to costs of the suit.

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