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Himansu Kumar Roy Chowdhury Vs. Moulvi Hasem Ali Khan and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKolkata
Decided On
Reported inAIR1938Cal818
AppellantHimansu Kumar Roy Chowdhury
RespondentMoulvi Hasem Ali Khan and ors.
Cases ReferredRani Chhatra Kumari Devi v. Mohan Bikram Shah
Excerpt:
- .....put into execution again by the assignees. on 10th december 1930, the judgment-debtor executed a trust deed (ex. 12) by which he appointed the plain-tiff a trustee for the payment of his debts. the material portion of this document is as follows:i execute this trust deed to the following effect: for want of good management my estate is not being properly managed and protected; therefore being involved in debt and being unable to satisfy the same, on 17th sraban 1322 last i appointed babu ganesh chandra das gupta, babu jadab chandra roy and babu indu bhusan sen gupta, pleaders, as trustees of my estate and gave them entire charge. but owing to want of time they being unable to do anything resigned the office of trustees by giving a notice to me on 30th chaitra 1334 rule 8. so i took.....
Judgment:

Nasim Ali, J.

1. This appeal arises out of a suit for possession. The Barisal Loan Company obtained a decree for Rs. 4653 odd against the father of defendant 5 on 9th June 1929. They put this decree into execution on 28th December 1929. Defendants 1 to 4 purchased this decree during the pendency of this execution case and were substituted in place of the Company on 20th February 1930. Thereafter the execution case was struck off on 9th July 1930. On 28th November 1930, the decree was put into execution again by the assignees. On 10th December 1930, the judgment-debtor executed a trust deed (Ex. 12) by which he appointed the plain-tiff a trustee for the payment of his debts. The material portion of this document is as follows:

I execute this trust deed to the following effect: for want of good management my estate is not being properly managed and protected; therefore being involved in debt and being unable to satisfy the same, on 17th Sraban 1322 last I appointed Babu Ganesh Chandra Das Gupta, Babu Jadab Chandra Roy and Babu Indu Bhusan Sen Gupta, pleaders, as trustees of my estate and gave them entire charge. But owing to want of time they being unable to do anything resigned the office of trustees by giving a notice to me on 30th Chaitra 1334 Rule 8. So I took charge of my estate again and commencing to carry on the work I have not been able to pay any part of my previous debts; on the other hand I had to increase the amount of the debt by incurring new loans. Under these circumstances, I having requested you with the view that I might make over to you the charge of my estate, appointing you trustee of my entire estate for paying off my said debts and you having acceded to my request have agreed to become the trustee; therefore by this trust deed I make over my entire estate to your hands; you being my representative as trustee on the strength of this trust deed will manage the 16 annas estate and pay off the debts. A description of the list of the properties of my estate is given below. If through mistake any property has been left out or if any property be acquired with the income of the same or of the estate in future, all of them shall vest in you and from this day you will manage all the said properties exercising all my power of ownership. ' As trustee on the strength of this trust deed you will realize rent, etc. from all tenants amicably or by suit, realize current arrear and future rent, cess, interest and damages due amicably or by suit. In the suits pending in Courts you will get yourself substituted in my place as trustee and continue the suits and execution cases; you will at your will appoint and dismiss the officers, servants and pleaders who are serving under the estate now or appoint new officers according to need; and you will, as trustee, manage and possess the said properties, etc....

You will try to release the estate from debt due to the creditors or superior landlords or other creditors of the estate in any way you think proper, whenever it will be necessary to save limitation by paying interest out of the dues of the said creditors, you will be competent to do so with authority equal to mine....

If in order to pay wholly or in part the said amounts of debt, or for the benefit of the estate or for any other purpose it be necessary to raise loan by mortgaging the properties described in schedule below then you will be competent to do so....

God forbid, if you deem it impossible to pay off the debts with the income of the estate, then in order to pay off the said debts wholly or in part on informing me you, as trustee, with the power equal to mine, shall be competent to and will sell or let out by lease, etc. to others such properties out of the properties described in schedule below as you may deem necessary to do so, by such sale and lease and letting, etc. I and my heirs or representatives shall for ever be bound. I or my heirs shall not be competent and shall have no right to remove you from the office of trustee until the entire debt of the estate is satisfied; but, if you misappropriate any money of the estate, or if any loss be caused to the estate by any fault in your acts, then I shall be competent to remove you on giving two months' notice and you shall be wholly liable for the loss. During the subsistence of this trust deed in force I or my heirs shall not exercise and shall not be competent to exercise my right of ownership in the properties described in the schedule below; nor shall I or my heirs interfere or shall be competent to interfere with the management or realization of the estate in any way, nor shall I or my heirs have any right to do so. For the maintenance, etc. expenses of my family you will pay from the estate such amount as you will decide. After the creation of the trust deed I or my heirs shall not be competent to take any money or papers from any tenant or officer. You will be competent to retire from the office of the trustee at any time on giving me one month's previous notice.

2. Certain properties belonging to the judgment, debtor were attached on 8th September 1931, in the execution case mentioned above and the case was dismissed on that date. On 7th December 1932 the decree was again executed. In the petition for execution (Ex. 2) the plaintiff was added as a judgment-debtor.

3. The properties which are the subject-matter of the present litigation and which were declared by Ex. 12 to be trust properties were thereafter attached in execution of this decree and were purchased by defendants 1 to 4 on 1st May 1934. They obtained delivery of possession through Court on 22nd August 1934. On 25th September 1935 the plaintiff instituted the present suit for a declaration that his title was not in any way affected by the sale at which defendants 1 to 4 purchased. He also prayed for possession. The Subordinate Judge decreed the suit. Hence this appeal by defendant 2.

4. Mr. Gupta appearing on behalf of the appellant urged the following points in support of the appeal : (1) that Section 47, Civil P.C., is a bar to the present suit; (2) that by Ex. 12, no trust was created; (3) that oven if any trust was created, it was illusory; (4) that even if the trust was not illusory, it is void as it is hit by Section 53, T.P. Act, and (5) that even if the trust was a valid trust, defendants 1 to 4 were entitled to seize the trust properties in execution.

5. By Section 47, Civil P.C., all questions arising between the parties to the suit in which a decree was passed or their representatives and relating to the execution, discharge or satisfaction of the decree are to be determined by the executing Court and not by a separate suit. Plaintiff in the present suit is not a representative of the judgment-debtor (father of defendant 5) as the suit in which the decree was obtained did not relate to any property and the trust was created before attachment. So far as the interest created by Ex. 12 in favour of the plaintiff is concerned, he cannot be said to be bound by the decree. It is true that in Ex. 12 he was added as a judgment-debtor along with the author of the trust. The finding of the trial Judge is that the plaintiff was not aware of the execution case started by Ex. 2. I find no reason for holding that his finding is wrong. Much reliance was placed upon Ex. D, the order sheet of the second execution case. In this order sheet it is recorded that the plaintiff filed some application in that case and that he was substituted in place of the judgment-debtor. The contention of the appellant is that he was substituted on his own application. The application alleged to have been filed by the plaintiff has not been exhibited on the ground that it has been destroyed. The plaintiff in his evidence says that he was not aware of this execution case at all. No attempt was made by the defendants to prove that the plaintiff filed any application in the second execution case or that he was aware of it. The addition of plaintiff in the petition for the last execution is inconsistent with the order for substitution of the plaintiff in place of the judgment-debtor in the second execution case. I cannot therefore accept the appellant's case that the plaintiff was substituted on his own application in the second execution case. It is true that where a question arises as to whether any person is or is not the representative of a party such question is to be determined by the executing Court for purposes of Section 47. In this case the question of the plaintiff being the representative of the judgment-debtor did not arise in the execution proceedings. It was neither raised nor determined. I am therefore of opinion. that the present suit is not barred under Section 47 of the Code.

6. I do not find any substance in the second point also. The terms of the trust deed which had been quoted above clearly indicate that a trust was created. Under Section 5, Trusts Act, no trust in relation to immovable property is valid unless declared by a non-testamentary instrument in writing signed by the author of the trust or the trustee and registered and no trust in relation to moveable property is valid unless declared as aforesaid or unless the ownership of the property is transferred to the trustee. Under Section 6 of the Act subject to the provisions of Section 5 a trust is created when the author of the trust indicates with reasonable certainty by any words or acts: (a) an intention on his part to create thereby a trust, (b) the purpose of the trust, (c) the beneficiary, and (d) the trust property, and unless the trust is declared by will or the author of the trust is himself to be the trustee) transfers the trust property to the trustee. Section 6 therefore contemplates that the author of the trust should transfer the trust property. The word 'transfer' is to be found also in the Transfer of Property Act which was passed in the same year. The word 'transfer' has been used in a wider sense. It includes not only sales, mortgages, leases, gifts, but it also includes vesting declarations. In the case of move-able property, the ownership of the property is to be transferred. In the case of immovable property only a declaration is necessary. The declarations of the judgment-debtor in Ex. 12 do not make the plaintiff a mere manager. They vest the properties in the plaintiff as a trustee for the payment of his debts. There is therefore no substance in the second point also.

7. As regards the third point, the contention of Mr. Gupta was that the trust is illusory as it was not acted upon. It was argued that the trustee did not take possession of the Khanabari and the bazar appertaining thereto on the basis of the trust deed and that the author of the trust was in possession of these properties when they were attached and sold. It appears from the evidence of the trustee that after the trust was created, the author of the trust requested the trustee to allow him to reside in the homestead within the Khanabari. The trustee also says that he gave him permission to reside in the homestead and to use the tanks, garden, bazar and the paths and ghats relating thereto. It appears from the evidence of the trustee that he is realizing rent from the tenants on the homestead. The counterfoils (Exs. 13 to 13 (d)) support the evidence of the plaintiff. It further appears that the auction-purchasers (defendants 1 to 4 in the present suit) sued the trustee for rent of some tenure held by the author of the trust under them. It also appears from the evidence in this case that the trustee has paid certain debts after he was appointed trustee. There cannot be any doubt therefore that the trust is not an illusory trust. There is therefore no substance in this point also.

8. As regards the fourth point, the contention of Mr. Gupta is that the trust is a fraudulent transfer within the meaning of Section 53, T.P. Act, as the effect of the document is to delay the payment of the debts to the creditors. A trust deed for the benefit of the creditors is prima facie not fraudulent within the meaning of the statute: 13 Eliz., Chap. V; Godfrey v. Poole (1888) 13 AC 497. But if it is a cloak for retaining a benefit for the debtor at the expense of the creditor, it is liable to be set aside under that statute at the instance of creditors who are not parties to it: Spencer v. Slater (1878) 4 QBD 13. In determining the validity of such trust the deed must be considered as a whole. If it is substantially for the benefit of the creditors a proviso beneficial to the debtor, if consistent with the tenor and object of the trust, will not render the deed void: Alton v. Harrison (1869) 4 Ch A 622. Sub-section (1) of Section 53, T.P. Act, reproduces in substance the provisions contained in 13 Eliz., Chap. V, with some modifications which are not material for the purpose of the present case. The point for determination therefore is whether this trust is simply a device for retaining a benefit for the author of the trust at the expense of his creditors.

9. It may be stated here that this question was not raised in the written statement of the purchasers, It was not raised before the trial Judge. It has not also been raised in the grounds of appeal to this Court. It appears from the terms of the trust deed which have been quoted that the main object of the trust was the payment of the debts of the author of the trust. There is, no doubt, some provision for the maintenance and other expenses of the family of the author of the trust but the amount to be paid for such purposes was left entirely in the discretion of the trustee. There is a definite provision in the trust deed that after the trust, the author or his heirs would not be competent to take any money from any tenant or any officer of the trust estate. The trustee is directed to pay off the debts out of the income of the trust estate and if that is not possible, by mortgage or sale of the trust properties. There cannot be any doubt therefore that the trust is substantially for the benefit of the creditors. A provision about the maintenance of the family is not inconsistent with the tenor and object of the trust. The trust in question is not therefore hit by Section 53, T.P. Act. This contention therefore also fails. As regards the last contention, the argument of Mr. Gupta is that the beneficiary under the present trust is in fact the author of the trust himself as the fact of the execution of the trust was never communicated to the creditors. In support of this contention reliance was placed upon the following passage in Halsbury's Laws of England, Vol. 28, page 38, Article 71:

If a debtor conveys property in trust for the benefit of his creditors who are not parties to the conveyance, and to whom the fact of its execution is not communicated, the conveyance merely operates as a power to the trustee to apply the property in satisfying their claims; and inasmuch as the debtor himself is in fact the only cestuique trust, it is revcoable by him before the property is so applied, and cannot be enforced by the creditors.

10. Our attention was also invited to the following note at the bottom of the said page:

The debtor in executing such a conveyance is merely directing the mode in which his own property shall be applied for his own benefit, and the conveyance has the same effect as i the debtor had delivered money to an agent to pay his creditors, in which case he might recall the money before the agent had made any payment or communication to them.

11. The contention on the basis of the passages cited above is that although the trust was created, the beneficial interest of the author of the trust was still there and was liable to be sold in execution of the decree against him and consequently the purchasers are entitled to the beneficial interest which the author of the trust had in the trust properties. In England

the trusts arising under general assignments for the benefit: of creditors were in a peculiar sense, the objects of equity jurisdiction. But the Bankruptcy Court is now charged with the judicial administration of the property comprised in these assignments by the Deeds of Arrangement Act, 1914 (4 and 5, George, V, C. 47), Section 23. And this subject generally has since the Bankruptcy Act, 1914 (4 and 5 George V, C. 59), lost much of its importance considered as a point of equity jurisdiction, for, by Section 1 (d) of that Act, it is provided that the following (inter alia) should be deemed an act of bankruptcy, namely that the debtor has in England or elsewhere made a conveyance or assignment of his property to a trustee or trustees for the benefit of his creditors generally : Story on Equity, 3rd Edition (English) Article 1037 at p. 431.

12. Under the Trusts Act, Section 78 (c), a trust created otherwise than by a will can be revoked at the pleasure of the author of the trust where the trust is for the payment of the debts of the author of the trust and has not been communicated to the creditors. By Section 6 (a), Provincial Insolvency Act, a debtor commits an act of insolvency if he makes a transfer of all or substantially of his property to a third person for the benefit of his creditors generally. A creditor who is not a party to the trust deed and to whom the trust has not yet been communicated can therefore avail himself of this act of insolvency and get the payment of his debts out of the trust property. But, under the law in India, there can be only one owner of the property when the property is vested in a trustee and trustee is the owner: Rani Chhatra Kumari Devi v. Mohan Bikram Shah . The interest of a beneficiary of a trust as defined in Section 3, Trusts Act, is his right against the trustee as owner of trust property. Whether such beneficial interest can be sold by the creditor is a matter with which I am not concerned in the present case, as in the present case I am concerned only with the question of the title to the trust property and its possession. The ownership of the property having been vested in the plaintiff by the declaration contained in Ex. 12, the sale at which defendants 1 to 4 purchased this property cannot in any way affect his title or possession. The learned Subordinate Judge was therefore right in decreeing the suit. The appeal accordingly fails, and is dismissed with costs.

Henderson, J.

13. I agree that this appeal must be dismissed. I must however confess that I do not appreciate Mr. Gupta's argument on the first point in the same sense as it was appreciated by my learned brother. As I understood it, that argument, put as briefly as possible, was to the following effect. The question whether the plaintiff was a representative of the father of defendant 5 in the suit instituted against him by the Barisal Loan Office is a question which has to be determined by the executing Court under the very terms of Section 47 (3). It is therefore not a question which could be agitated in this suit at all. It was actually raise in the course of certain execution proceedings, and it was decided against the plaintiff. The result of this is that the present suit must fail on the merits. Now, that argument is based upon extremely flimsy material. In fact, there is nothing to support it but the terms of Order No. 5 made in money execution case No. 161 of 1930. The terms of that Order are quite inconsistent with what happened later on. When the documentary evidence with regard to this matter was placed before us, I reached the conclusion that the plaintiff was never substituted for that judgment-debtor but was merely added as a party. I notice that this was the conclusion which was reached by the learned Subordinate Judge. This is perhaps not surprising because it is in accordance with the actual evidence given by the appellant's own witness, Basanta Kumar Das Gupta.

14. I accordingly agree with the conclusion reached by the learned Subordinate Judge. The plaintiff appears to be a transparently honest man. He has no personal interest whatever in this matter except his trivial salary of Us. 75. I accept his evidence that he knew nothing about these execution proceedings and that he did not appear in them. No question of substitution at his request therefore arises. It is not even pretended that the decree-holder made any application for substitution. All that happened was that the plaintiff's name was fraudulently smuggled into the record in order that he might be shown as an added judgment-debtor. No notice was served upon him. He did not appear and nothing was either raised or decided between him and the decree-holders. The result is that there was no decision made by the executing Court to the effect that the plaintiff was a representative of the father of defendant 5. As my learned brother has pointed out he could not possibly be such a representative, and the question could never be seriously raised. Mr. Gupta's argument on this point is therefore based upon nothing and his contention must be overruled. It is therefore not necessary to consider whether such a decision, if made, would bar the present suit.

15. In my opinion Mr. Gupta's second point is prima facie the strongest. It was however never taken at the trial and the defendants themselves actually sued the plaintiff as a trustee. It is therefore clear that they, in practice, did not interpret the deed in the sense which it is now sought to place upon it. The deed is certainly not happily worded, and in its being hastily read through, there might be an impression that the intention was to appoint the plaintiff as a manager. The impression would arise from the fact that there are certain provisions which are quite unsuitable to a trust deed. Redundancies of this kind are how-over a feature of almost every conveyance and, if the document is carefully read, I have no doubt, for the reasons given by my learned brother, that it should be inter-probed in the way in which it has been interpreted by everybody concerned until the present appeal. I expre3sly refrain from discussing the merits of the argument made with regard to Section 53, T.P. Act. That defence was made neither in the written statement nor at the trial. In fact, the defence made was quite inconsistent with this position and was to the effect that the trust deed was a mere paper transaction which was never acted upon. It is true that the learned Subordinate Judge has referred to the fact that some debts have been paid off by the trustee. But this is not sufficient to dispose of this question. The plaintiff himself was questioned with regard to this matter and he stated that without looking into his papers he could not possibly say how much debt he had actually paid off. It is obvious that, if this defence had been specifically raised, the plaintiff would have produced evidence to show the complete transactions with regard to this matter. A defence of this kind, involving, as it must, questions of fact, cannot be raised for the first time in an Appellate Court. On the other points I have nothing to add to what has fallen from my learned brother.


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