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Gobardhandas and anr. Vs. Gopaldas Modi and ors. - Court Judgment

LegalCrystal Citation
Decided On
Reported inAIR1933Cal286
AppellantGobardhandas and anr.
RespondentGopaldas Modi and ors.
Cases ReferredFordham v. Wallis
- .....and the debts and legacies had not been paid-had borrowed money in the name and on behalf of the estate at delhi and had withdrawn a lakh of rupees out of the estate and that gobardhandas had withdrawn a sum of about rs. 60,000, that they had not repaid the moneys and that the estate was m a bad condition. so she was alleging that, pending the actual proceedings in the suit for administration, the two appellants had been helping themselves to the money of the estate by means of the delhi firm. it may here be explained that, by a resolution of the executors, gobardhandas, who lived at delhi, was made responsible for the cawnpore branch-dinanath being responsible for the delhi branch. as a result of that application, an order was made by consent, by which hansraj who, as one may put it,.....

Rankin, C.J.

1. Two appeals are before us-Nos. 22 and 24 of 1932. They are brought respectively by Lala Gobardhandas and Lala Dinanath, two persons, who, with other three, are the executors of the will of one Raghumull Khandelwal, who died on 5th September 1926, probate being taken of his will on 10th January 1927. Raghumall appears to have died a wealthy man and, by the provisions of his will, he, first of all, directed that the residue of his property should go to certain persons. The two appellants before us were his nephews and they were to get an equal one-fourth share, his wife was to get another and his daughter, married to one Hansraj, was to get another. They were to be entitled to carry on the business in equal shares and were to be entitled to the goodwill and so forth in equal shares, There were various legacies and five persons were appointed executors and trustees-the two appellants, Hansraj, who had married his daughter, one Gopaldas Modi, who afterwards became the plaintiff in this suit, and the widow. These persons were to act by majority, they were to,act by resolutions passed at meetings or by resolutions passed by circulation. The testator having died in September 1926, we find that trouble first began when the plaint in the present suit was brought on 29th July 1929, the plaintiff being Gopaldas Modi, one of the executors. The plaint asks for administration of the estate and the grounds, upon which the administration is asked for, are not only that the executors are quarrelling among themselves and not only that the administration of the estate is not proceeding, but that the estate is getting into difficulties, being unable to meet the claims on it and that the debts and liabilities are not being dealt with.

2. Among other reasons stated in the plaint of July 1929, one is that the executors-the defendants Dinanath and Gobardhandas-are wrongfully withdrawing large sums of money from the estate claiming to be entitled thereto as residuary legatees and to that allegation the appellant Dinanath says that he has not wrongfully withdrawn any money, but that he has taken small loans from the estate with the consent and approval of the plaintiff and his other co-executors and executrix. The appellant Gobardhandas, in his written statement, gives a traverse in which he denies that he ever wrongfully withdrew any money from the estate. Thereafter there was a, petition brought for the appointment of a receiver and the first order that was made on that matter was an order by consent. The application was by the widow, Srimati Bhagabati Debee, who was one of the defendants in the suit, and she made various charges, the gist of which is to be found for the present purpose in para. 27 of her petition. She said that Dinanath in collusion with Gobardhandas-although the suit was still pending and the debts and legacies had not been paid-had borrowed money in the name and on behalf of the estate at Delhi and had withdrawn a lakh of rupees out of the estate and that Gobardhandas had withdrawn a sum of about Rs. 60,000, that they had not repaid the moneys and that the estate was m a bad condition. So she was alleging that, pending the actual proceedings in the suit for administration, the two appellants had been helping themselves to the money of the estate by means of the Delhi firm. It may here be explained that, by a resolution of the executors, Gobardhandas, who lived at Delhi, was made responsible for the Cawnpore branch-Dinanath being responsible for the Delhi branch. As a result of that application, an order was made by consent, by which Hansraj who, as one may put it, was on the side of the plaintiff, and Dinanath were appointed joint receivers and the order gave these receivers liberty to divide the properties amongst the residuary legatees, after providing and securing payment for the liabilities of the estate and payment of general and pecuniary legacies; that order was dated 24th March 1931, and, shortly after that, another order was made removing these two persons as receivers and appointing the Official Receiver to be the receiver in their place and stead and to take possession of the estate immediately, that order being dated 16th June 1931.

3. Thereupon, in January 1932, Srimati Bhagabati Debee, the widow, brought a motion before the learned Judge asking that Dinanath be directed to bring into Court the sum of Rs. 1,49,000 and Gobardhandas the sum of Rs. 54,299. The case made by the affidavit in support of the motion is on the following lines. After the appointment of the Official Receiver, inspection has been obtained of the Delhi books of account and the Delhi books of account are discovered to show that, in the Sambat year 1987, Dinanath, who was in charge of the Delhi firm and whose books of account these are, is debited in that year with Rs. 1,23,339-money which he has taken from that firm. There is another sum debited in the workshop account book and there is a further sum in the account of this year taken from the Calcutta account book and debited to the Delhi office, where it should have been debited to Dinanath's account. It is further brought out that, in the year 1928, a sum of Rs. 7,025 has been paid out on account of Dinanath, though it has been wrongly put in the bad debts account. In this way, there is very nearly one and a half lakhs of rupees shown by Dinanath's own books in the Delhi business to have been taken by Dinanath from the estate. I may here point out that not only is there shown a sum of Rs. 7.025 transferred in the bad debts account, which appears to have been taken in 1928, but the largest item-an item of Rs. 1,23,339 does not come into these books to the debit of Dinanath, until the Sambat year 1987-presumably after that had been concluded-which corresponds to the period from 31st March 1930 to 31st March 1931. In the Delhi books, so far as Gobardhandas is concerned, we find some Rs. 2,000 odd in bad debts account taken in 1928; but the other items which come to his debit in the Delhi books are, first of all, a debit of Rs. 46,000, then afterwards a debit which has come to the Delhi office from Calcutta of some Rs. 5,810. It may here be observed that it is quite clear from these accounts alone that the original allegation in para. 27 of the application for the appointment of a receiver was only too plainly justified, namely that, apart altogether from any small sums that might have been taken in 1928 since the plaint was brought in July 1929, these two people would appear to have been repeatedly helping themselves to as much of the testator's estate as they could very well manage to take, after exhibition had been completely made of the risky condition of this estate and the chance that it would be insolvent in the end.

4. I come therefore on this footing to see whether this Court has power, on the principles applicable to interlocutory orders, to make the order which the learned Judge has made. The learned Judge has taken the view that it is quite impossible still to say whether this estate will turn out to have enough money to pay the debts and the specific legacies. There has been hard swearing on both sides. The applicant says that the valuation for probate of the estate appears to show a deficiency of some Rs. 5,00,000. The appellants, on the other hand, maintain that the assets of the estate instead of being Rs. 11,00,000 will be Rs. 20,00,000 and that there will be a large sum, as they hope, to come to the residuary legatees. The learned Judge regards that, as entirely speculative and he thinks that at all events, he ought to act upon the footing that there is the serious probability to be faced that the prior claims on this estate will more than exhaust the whole of the assets. In these circumstances, he comes to the conclusion that the Court would not withhold some protection to the creditors and others whose interests are really at stake. He says:

With regard to unfairness, it is probable that at one time all the family thought that a surplus would remain and they all agreed to the course upon which these two respondents embarked. At that time the only people likely to suffer, if anybody was to suffer at all, were the creditors and, had this family not fallen out among themselves, no doubt this claim for refund would never have been made.

5. When he comes to make the order, he directs that the present appellants should bring the respective sums taken by them into Court, but he gives them the alternative of finding security for the amounts. This may or may not be a logical alternative; but the learned Judge explains that he does this because the rest of the family 'undoubtedly approved the course that was originally taken' and because 'a refund in cash will undoubtedly be a hardship on the respondents.'

6. I have pointed out that the evidence in this ease goes to show that the great bulk of the money was drawn out after this suit had been instituted and I am not prepared to give the smallest attention to the suggestion that the sums of money, which we have to deal with, are sums in respect of which either of these appellants can, as a matter of fact, apart from the ineffectiveness of such a point in law, take shelter under consent of other parties. There is some evidence, upon which it may turn out to be true, that the appellants were not the only people who had been irregularly helping themselves to the estate of the testator whenever any part of that estate came within reach, but there appears to be not a tittle of evidence in support of the allegation that either of these appellants got the consent of the executors as a body formally or informally to any single one of the drawings in respect of which they are now called upon to refund.

7. In that state of affairs it has been pointed out to us by Mr. Pugh, appearing for Gobardhandas, and Mr. Roy, appearing for Dinanath, that our powers on an interlocutory motion-even in a case where an administration order has already been made in respect of Raghumull's estate-are limited by certain principles. We have been referred to the case of Freeman v. Cox (1878) 8 Ch D 148, where it has been laid down that for interlocutory purposes in such a case as the present the defendant should only be ordered to pay money into Court which he does not dispute to be owing and which he admits to be in his hands. There is a case In re Benson (1899) 1 Ch 39, which Mr. Pugh says is the high water mark of orders of this character, and Mr. Pugh suggests that the order of North, J., in that case was hardly consistent with subsequent decisions in the Court of appeal. We have been asked to consider the case of Hollis v. Burton (1892) 3 Ch 226, and, in particular, the case of Neville v. Mathewman (1894) 3 Ch 345, where it is said that the money must be in the hands of the defendant and that there must not be any bona fide dispute about title and another case of Nutter v. Holland (1894) 3 Ch 408, which turns out however to have reference to another jurisdiction altogether, namely, to the jurisdiction of the Court on an originating summons, the governing condition of which is that, upon an originating summons, the trustee will not be held answerable on the footing of default. Finally, the case of Crompton & Evans' Union Bank v. Burton (1895) 2 Ch 711 has been put before us as an authority for the proposition that the appellant, in a case like the present, would have a complete defence to such a motion by saying 'true, I have had the money; but I have paid it away.'

8. Now, it appears to me that the general teaching of these cases is this: that we have to go to the evidence upon this motion from the point of view of seeing what exactly the facts are according to the appellants themselves. The doctrine is that the plaintiff cannot get a remedy prior to the hearing of the suit by a 'battle of affidavits.' In the present case, there have been affidavits and we have to see exactly how much of 'battle' these affidavits disclose. (His Lordship then considered the affidavit in support of the motion, and that on behalf of Gobardhandas, and proceeded.) We have then to consider whether there is very much in either of the two points that were taken on Gobardhandas's behalf: can we hold our hands on the ground that Gobardhandas has a bona fide dispute of title, or can we hold our hands on the ground that Gobardhandas has satisfied us sufficiently for the present purpose, that, though he took the money, he has not got it now? There is no question about title. It does not matter whether this executor says that he has borrowed the money from the testator's estate or whether he says that he has helped himself in anticipation of his share in the residuary estate. As a mere matter of law, we know that money, if it is in his hands, is money which he has obtained by breach of trust. There is no arguable question as to the right of an executor, who is a residuary legatee, to help himself out of the residuary estate without making provision for the debts and specific legacies and other matters which are prior thereto. It is only after these matters have been cleared that the estate of the testator becomes the property of the residuary legatee.

9. We have been referred to the case of Fordham v. Wallis (1853) 10 Hare 217, where it was said that a payment by the executor to the residuary legatee, while the debts remained unpaid, was an absolute and unqualified breach of trust. In the present case, not only there was a breach of trust on the part of the executor who did it but it was a breach of trust on the part of the executor who took the money for himself. There is therefore nothing in the question of title. It does not matter for the present purpose what this executor disputes on the question of title. (After examining the affidavits, the judgment proceeded.) In these circumstances, it seems to me that we will not be at all straining our powers if we uphold the order which the learned Judge has made. I think that these appeals should be dismissed with costs.

10. As proceedings to enforce the order have already been taken, I think, that it is not necessary to limit too short a time within which the appellants should give security. The appellants are at liberty to complete the securities to the satisfaction of the Registrar within one month from today. This order is not to interfere with any of the execution proceedings unless and until the securities are lodged. When they are lodged, the appellants will have liberty to bring those execution proceedings to an end.

Mitter, J.

11. I agree.

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