1. This is an appeal by the defendant Bhola Nath Seal against the judgment of my learned brother, Mr. Justice Page, who gave judgment for the plaintiffs.
2. The suit was brought in the first instance by Sreemutty Khettermony Dassee the widow of Hurry Churn Seal and, upon her death, Bhuthnath San and Preo Nath Sen, the executors of the last will and testament of Sm. Khettermony Dassee, were substituted as plaintiffs.
3. The prayers in the plaint are that a certain deed, dated the 19th of September, 1916 should be cancelled, that the defendant should be directed to convey to the plaintiffs certain premises, namely, 73-A, Baranashi Ghose's Street and 6T, Hidaram Banerjee's Lane, that the defendant should be directed to pay to the plaintiffs the sums he received on account of the profit and interest on certain Government promissory notes which by fraud and misrepresentation he induced the original plaintiff to endorse to him and there is a claim for an account and for a direction on the defendant to pay to the plaintiff what might be found due on the taking of such account.
4. The learned Judge decreed that the deed of trust, dated the 19th of September, 1916 should be cancelled and delivered to the plaintiffs, that the defendant should deliver to the plaintiffs possession of 67, Hidaram Banarjee's Lane and that he should pay to the plaintiffs the sum of Rs. 13,466-8-8 and interest; and it was further ordered and decreed that the defendant should deliver to the plaintiffs certain jewellery.
5. No question arises with regard to the jewellery in this appeal.
6. With regard to the deed of the 19th of September, 1916, the learned Judge based his decision upon two grounds: first that the terms of the deed, dated the 19th of September, 1916 were not understood by Khettermony; and, secondly that the defendant was in a position of fiduciary relationship to Khettermony, that she was not emancipated from the influence which be exercised over her, and that she had no independent advice.
7. I do not think it necessary to state the facts in detail, the learned Judge has stated them in his judgment. I propose to deal in the first place with the question whether the terms of this deed were really understood by Khettarmony.
8. She was a purdanaskin lady over 70 years of age, and at the time the deed was executed she was undoubtedly largely under the influence of the defendant. The deed came into existence at the instance of the defendant; he was the person who gave instructions for its preparation, to the solicitors.
9. The terms of the deed were explained to Khettarmony by Bireswar; it does not, however, follow that she thoroughly understood them; on the contrary, her evidence goes to show that she was under the impression that the deed went no further than to carry out her intentions as expressed in her conversations with Bholanth.
10. I am satisfied from the evidence that Khettermony Dassi did not intend to place the defendant in such complete control of her affairs during her lifetime as is provided in the deed, which divested her of her rights of ownership.
11. There is no doubt that it was Khettermony's intention that the defendant during her life-time should act for her in respect of the collection of rents, and that he should pay the rates and other expenses, but in my opinion she did not appreciate that she was placing the defendant in such a position that he would even be able to decide what sum should be paid to her for her maintenance, and for the expenses of daily and periodical religious ceremonies. The deed provided, in Clause (4) as follows;
That the trustee shall pay out of the income of the trust estate to the settlor during her lifetime a sufficient sum for her maintenance and lot the expenses of the daily and periodical religious ceremonies of her family idol Sree Radha Ballab-Jew which has all along since 1862 been worshipped solely by the settlor and her husband;
12. I am satisfied that Khettermony did not intend such a provision, and did not understand that she was placing the defendant in such absolute control during her life-time as is provided by that clause, without any power of revocation.
13. Having regard to her position as a purdanashin woman it was necessary for the defendant to prove not only the deed was explained to Khottermony but also that Khettermony really understood all the provisions of the deed; and that the defendant has not succeeded in doing to my satisfaction in the respect, which I have mentioned.
14. I am not so clear as to the other point on which the respondents' relief viz., that it was Khettermony's intention to provide that after her death the premises in question should belong to the Thakur.
15. This was not provided in the will which Khettermony had made on the 14th June, 1916. On the contrary, by that will she devised the premises to Bholanath, with a trust, that he should perform the religious ceremonies therein mentioned. Khettermony did not assert that it was her intention to leave the premises to the Thakur after her death either in the plaint or in her examination-in-chief and Mr. J.N. Mittra, her attorney, stated in his evidence that Khettermony did not, at any time before the evidence was taken on commission, express a desire to him that the property should belong to the Thakur after her death. It is also significant that the will, which Khettermony made in favour of the sons on 23rd August, 1919, did not provide that the premises in question should belong to the Thakur after her death. I do not therefore base my judgment on the part of that respondent's case.
16. In my judgment, however, the above-mentioned conclusion that Khettermony did not thoroughly understand Clause 4 of the deed or appreciate its effect and did not intend to make herself a party to such a provision, is sufficient to justify the learned Judge's decision that the deed must be cancelled and delivered to the plaintiffs. The second question in this case relates to the Government promissory notes.
17. The plaintiffs alleged that the defendant obtained the endorsement of Khettermony to Government promissory notes of the face value of Rs. 19,000 and that, with the exception of one Government promissory note of the face value of Rs. 1,000, he appropriated the proceeds of those notes to his own use.
18. The learned Judge has held that Khettermony's endorsement to the G.P. notes was obtained by a fraudulent misrepresentation.
19. The misrepresentation relied upon by the plaintiffs is that which is described in Khetermony's evidence by her answer to question 117 which is set out in the learned Judge's judgment and which I need not repeat.
20. The learned Judge has accepted this statement by Khettermony and has found that she never intended to part with her property in the notes, and that she repeatedly asked for the interest on the notes, but that she did not succeed in obtaining it.
21. It is not easy for any one, who has any experience of G.P. notes and the method of obtaining the interest thereon, to understand how any one could have been misled by such a story as is set out in the above-mentioned answer.
22. It is, however, to be remembered that Khettermony was an old purdanashin lady, with little, if any, experience of business, who had for many years no-doubt been entirely guided by her husband, and it is possible that such a story may have been told to her, and that she may have accepted it as true and have relied upon it, and that she was thereby induced to endorse the G.P. notes and deliver them to the defendant as alleged.
23. I am not therefore prepared to disagree with the learned Judge's finding especially having regard to the way in which the defendant dealt with the G.P. notes and to the evidence given by the defendant, which I am not surprised the learned Judge did not accept.
24. Among other matters it seems to me that the defendant's evidence with regard to the completion of the purchase of the house No. 73-A, Baranashi Ghose's Street is unreliable.
25. It was alleged that be had entered into an agreement on 30th July, 1914 for the purchase of this house for Rs. 9,000 and the conveyance was, dated 20th February, 1917 the purchase price therein being stated as Rs. 7,000. Part of the purchase money was paid by four Government currency notes of Rs. 1,000 each.
26. These notes were obtained by the defendant from the Bank by means of (the sale or pledge of some of the G.P. notes which the defendant obtained from Khettermony. This was on the 16th February, 1917, a few days before the date of the conveyance to which I have referred. The defendant's explanation of this transaction was that he used those notes for the purpose of the purchase in exchange for smaller notes of his own.
27. I find it difficult to accept that explanation. I am not satisfied that he had the smaller notes of his own amounting to Rs. 4,000, and if he had, there would have been no difficulty in obtaining notes of the larger amount, in exchange for his own smaller ones, without selling or pledging the G.P. notes which he had obtained from Khettermony. In short I agree with the learned Judge that the defendant's evidence as to the reasons why the notes were endorsed by Khettermony and delivered to him cannot be accepted.
28. The only other explanation is that given by Khattermony and as already stated I am not disposed to differ from the learned Judge's finding of fact that the endorsement and delivery of the notes by Khettermony to the defendant were obtained by the fraudulent misrepresentation alleged.
29. The learned Judge has awarded the sum of Rs. 13,466-8 8 to the plaintiffs in respect of this part of the claim.
30. This is the amount which the learned Judge held that the defendant had obtained by means of the sale or pledge of the G.P. notes, which were of the face value of Rs. 19,000.
31. The Question which arises on this part of the case is whether any deduction ought to be made from the above-mentioned amount of Rs. 13,466-8-8.
32. In the first place it was argued on behalf of the appellant that Khettermony herself had in her plaint alleged that the defendant had appropriated proceeds of the G.P. notes to his own use.
Save and except one G.P. note of the face value of Rs. 1,000 being 1,31,189 of 1842-3 which was endorsed by the defendant in favour of Morgan and Co. presumably in payment of their costs for making application for probate as aforesaid.
33. It was alleged by Khettermony in her evidence that she had given cash to the defendant for the purpose of the probate find that she had about Rs. 2,500 in cash in the house at the time of her husband's death and out of this she gave Satis Babu Rs. 1,000 for her husband's shradh.
34. A document, however, was put in evidence by the defendant which showed that the cash in the house on the 8th March, 1916, was Rs. 1,305 only and that the document was signed by S.C. Dhar. When asked about this Khettermony said that she had another sum of about Rs. 1,000 in a separate box which she had not mentioned to Satis Dhar.
35. I am not satisfied as to the accuracy of Khettermony's evidence on the point.
36. The inventory in question set out the amount of the G.P. notes, 1 gold mohur, three guineas and the cash and purported to be a complete inventory. This, combined with the statement in the plaint to which I have referred, makes me think that Khettermony is mistaken in saying that cash was supplied by her to the defendant for the purpose of the probate.
37. Messrs. Morgan & Co.'s costs and excess duty amounted to about Rs. 1,642; the learned Advocate-General on behalf of the respondents argued that the defendant had received money for the greater part of that sum, and there was only a small balance in respect of their costs.
38. As I have already stated I am not satisfied as to the alleged payment of cash by Khettermony and I am of opinion that the defendant should have credit for some part of the Rs. 1,642 in respect of Messrs. Morgan & Co.'s costs.
39. It appears however that Rs. 669 of this sum was for preparing the dead of settlement and for duty. Inasmuch as I have decided that the deed should be cancelled, in my judgment the defendant is not entitled to credit for his sum of Rs. 669, deducting therefrom this amount from the total of Messrs. Morgan & Co.'s charges the allowance to which the defendant is entitled is Rs. 973.
40. The learned Judge found that there was a large amount of repairs done to the premises after the defendant took charge. The amount spent in respect of repairs appears to have been Rs. 2,760.
41. It does not seem just and equitable that the defendant should be called upon to refund this amount, in view of the fact that the premises of which the plaintiffs will now recover possession have been improved by the repairs which were executed in respect thereof.
42. It seems almost certain that Khettermony must have known of these repairs being executed and she must farther have known that they could not be paid for out of the income of the estate.
43. The Advocate General for the respondents did not seriously contest the pro-position that the defendant should have credit for this sum, and in my judgment therefore the defendant must receive credit for the said sum of Rs. 2,760.
44. The next item to be considered is a sum of Rs. 2,731 in respect of alleged excess expenditure on leasehold affairs. This sum is referred to by the learned Judge as Rs. 2,770 but it was agreed that it should be Rs. 2,731.
45. The learned Judge said:
The defendant is therefore entitled to set off Rs. 2,770 in all. However, if the notes had not been converted by Bholanath, interest would have been paid upon the Government Promissory notes which would have amounted to something like Rs. 1,800. In my opinion he had no authority from Khettermony and is not entitled to set off any sum in excess of the amount of the interest which would have been received, if the promissory notes had not been stolen.
46. I do not quite understand what the learned Judge intended by this passage. It would appear as if he thought the defendant was entitled to set off at least some amount, but in his final order he did nod allow the defendant any set off and he directed that the defendant should pay the plaintiffs the sum of Rs. 13,466 which was the total proceeds of the G.P. notes of the face value of Rs. 19,000. I am however not satisfied that the defendant is not entitled to credit in respect of this item. Khettermony said that she thought the defendant, with the interest and the rents, would make arrangements and manage.
47. The learned Counsel for the appellant contended that Khettermony could not have expected that the defendant would be able to ' make ends meet ' with the interest and rent only, as the annual income could not be sufficient to meet current expenses.
48. I am not convinced about this: The defendant would be entitled to credit for the interest on the promissory notes for that could legitimately be expended on the household expenses, etc., but the amount of interest is considerably less than the sum claimed in this respect and I am satisfied that Khettermony did not sanction the extra expenditure to anything like the amount which is claimed in respect thereof. I am therefore not prepared to allow the defendant credit for the sum of Rs. 2,731.
49. There is a further sum claimed as the expense of the annual shradh of Khettermony's husband, viz., Rs. 1,992.
50. It was practically admitted by the learned Counsel for the appellant that this sum was excessive and that a much smaller sum should be allowed, and the figure of Rs. 70 was indicated as a proper amount. In my judgment therefore the defendant is entitled to credit for the three sums of Rs. 973, Rs. 2,760 and Rs. 70 making a total of Rs. 3,803, which should be deducted from the sum of Rs. 13,466 and there should be a decree in favour of the plaintiffs for Rs. 9,663, instead of Rs. 13,466.
51. I have still to deal with the cross-objections filed by the respondents.
52. The claim made before the learned Judge was a declaration that the premises 73-A, Baranashi Ghose's Street, should be conveyed to the plaintiffs. In this Court the contention was that the plaintiffs were at any rate entitled to a charge on these premises for the sum of Rs. 4,000 on the ground that it had been proved that the defendant had used 4 Government currency notes of Rs. 1,000 each which he obtained in exchange for some of the G.P. notes received by him (from Khettermony) to enable him to complete the purchase of these premises on the 20th February, 1917.
53. The learned Judge declined to make any order in this respect, on the ground that the defendant was neither a trustee nor an agent of the G.P. notes which he had obtained from Khettermony or of the proceeds thereof.
54. The learned Judge held that the defendant was a thief, and his intention from the beginning was to steal the notes and convert them to his own use.
55. In my judgment the defendant was in a fiduciary position to Khettermony as regards the G.P. notes.
56. This Court, agreeing with the learned Judge, has accepted the evidence of Khettermony that the notes were endorsed by Khettermony, and were handed by Khettermony to the defendant in order that he might obtain the interest due in respect thereof; Khettermony did not intend to part with her property in the G.P. notes, and they were entrusted to the defendant for the above-mentioned purpose, and in my opinion this constituted a fiduciary relationship between Khettermony and the defendant.
57. The plaintiffs-respondents contended that the Court should find that the whole of the purchase-money for the premises, 73-A, Baranashi Ghose's Street, was obtained by the defendant out of the proceeds of Khettermony's G.P. notes. I am not prepared at present to hold that that case has been proved. I am however satisfied that the 4 Government currency notes of the amount of Rs. 1,000 each, mentioned in the conveyance of 20th February, 1917, were the proceeds of some of Khettermony's G.P. notes, and that the defendant used the amount of Rs. 4,000 for part of the purchase money of these premises.
58. If these premises had remained in the possession of the defendant, I have no doubt but that the plaintiffs representing Khettermony's estate would have been entitled to a declaration of a charge on the premises to the extent of Rs. 4,000.
59. The following passage in the well-known case of In re Hallett's Estate (1879) 13 Ch.D. 696 material.
The modern doctrine of equity as regards property disposed of by persons in a fiduciary position is a very clear and well-established doctrine. You can, if the sale was rightful, take the proceeds of the sale, if you can identify them. If the sale was wrongful, you can still take the proceeds of the sale, in a sense adopting the sale for the purpose of taking the proceeds, if you can identify them. There is no distinction, therefore, between a rightful and a wrongful disposition of the property, go far as regards the right of the beneficial owner to follow the proceeds. But it very often happens that you cannot Identify the proceeds. The proceeds may have been invested together with money belonging to the person in a fiduciary position in a purchase. He may have bought land with it, for instance or ho may have bought chattels with it. Now, what is the position of the beneficial owner as regards such purchases. I will, first of all, take his position when the purchase is clearly made with what I will, tall for shortness the trust money, although it is not confined, as I will show presently, to express trusts. In that case according to the now well established doctrine of equity the beneficial owner has a right to elect other to take the property purchased or to hold it as a security for the amount of the trust money laid out in the purchase; or, as we generally express it, he is entitled at his election either to take the property or to have a charge on the property for the amount of the trust money, but in the second case where a trustee has mixed the money with his own, there is this distinction, that the cestui qui trust or beneficial owner, can no longer elect to take the property, because it is no longer bought with the trust money simply and purely, but with a mixed fund. He is, how-ever, still entitled to a charge on the property purchased, for the amount of the trust money laid out in the purchase; and that charge is quite independent of the fact of the amount laid out by the trustee. The moment you get a substantial portion of it furnished by the trustee, using the word trustee in the sense I have mentioned, as including all persons in a fiduciary relation, the right to the charge follows.
60. The learned M.R. then proceeded to point out that there was no distinction between an express trustee, agent, bailee, collector of rents, or any one else in a fiduciary position, and that the moment the juduciary relation is established the modern rules of equity as regards following trust money, apply.
61. In this case I assume, though I do not decide, that some of the purchase money was provided by the defendant himself but I am satisfied that sum of Rs. 4,000, part of the purchase price, was the proceeds of some of Khettermony's G.P. notes, as to which the defendant was in a fiduciary position to Khettermony.
62. The premises were, therefore, on the above assumption, purchased by means of a mixed fund, and the most that the plaintiffs would be entitled to is a charge on these premises for the amount of Rs. 4,000.
63. The question then arises, does the fact that the premises are no longer the property of or in the possession of the defendant by reason of the sale by the defendant to his purchasers, affect the plaintiff's right to have the charge declared. In my opinion it does not. The premises were sold by the defendant to his purchasers on the 4th August,, 1920. This suit was instituted on the 28th August, 1919.
64. Section 52 of the Transfer of Property Act, 1882, provides as follows:
During the active prosecution in any Court having authority in British India, or establishes beyond the limits of British India by the Governor General in Council of a contentious suit or proceeding in which any right to immovable property is directly and specifically in question the property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or order which may be made therein, except under the authority of the Court and on such terms as it may impose.
65. There is no doubt that the right to the premises 73-A. Baranashi Ghose's Street was directly and specifically in question in the suit, and that the sale of the 4th August, 1920, by the defendant was during the active prosecution of this suit, which was a contentious suit.
66. The section therefore applies, and the effect of it is, that the transfer of the property by Bholanath, who was a party to the suit to his purchasers, could not affect the right of the plaintiffs under any decree which the Court might make. Reference may be made to the case of Faiz Hussain Khan v. Munshi Prag Narain (1907) 29 All. 339. The passage which I desire to read is at page 105, in Lord Macnaghten's judgment, which is as follows:
The doctrine of lis pendens with which Section 52: of the Act of 1882 is concerned, is not as Turner, L. J. observed in Bellemy v. Sabine (1857) 1 De.G. and J. 566 founded upon any of the peculiar tenets of a Court of Equity as to implied or constructive notice. It is....a doctrine common to the Courts both of law and of equity, and rests...upon this foundation, that it would plainly be impossible that any action or suit could be brought to a successful termination if alienation pendente lite were permitted to prevail. The correct mode of stating the doctrine as Cranworth, L.C., observed in the same case, is that pendente lite neither party to the litigation can alienate the property In dispute so as to affect his opponent.
67. The result is that in my judgment the cross-objection must succeed and a declaration should be made that the plaintiffs are entitled to a charge on the premises 73-A, Baranashi Ghose's Street to the extent of Rs. 4,000 with interest thereon at 6 per cent. from the date when the money was used in the purchase of the premises, viz., 20th February, 1917.
68. Before leaving this case it is necessary, in my opinion, for the Court to express its disapproval of the way in which Khettermony was examined, and cross examined making all allowances for the fact that her evidence was taken on commission, and that the evidence was taken down in long hand, the length of time occupied in the examination and cross-examination in my opinion was unnecessary and unreasonable.
69. The question of costs is in the discretion of the Court, and my learned brother and I, after hearing the learned Counsel, have come to the conclusion that the appellant must pay the respondents costs of the appeal and that there will be no order as to costs of the cross-objection. Amongst other matters one reason for this order is this: The appeal has substantially failed; it failed upon the main question as to whether the deed should be cancelled; it failed also upon the question whether the Government promissory notes were obtained by fraud or misrepresentation from Khettermony. It succeeded in respect of three items only, making a total of about Rs. 3,800. The time taken in this Court in relation to these three matters was small as compared to the time taken in respect of the other matters to which I have referred. The appellant would be entitled to some costs in respect of the appeal by reason of three matters in respect of which he has succeeded. But it would be very difficult to assess these costs. On the other hand, the respondents would be clearly entitled to the costs of the cross-objection in respect of which they have succeeded. We therefore have set off the costs of the cross-objection against the costs to which the appellant would be entitled in respect of the three items, in order that any difficulty as regards taxation may be obviated.
70. The order of the Court of first instance as regards costs will stand.
71. In his judgment concurred in the conclusions arrived at by his Lordship Sanderson, C.J.