Sometimes, it is the differences that make law interesting to deal with, especially when it is between two Supreme Court judges trying to settle the law. I recently got the chance to work in one such case[1], wherein, two Supreme Court judges differed in their opinions over several questions that arose on extinguishment of a trust under Indian Trusts Act, 1882 (Act). With the judges differing in their views, the matter at present stands referred to a larger bench for its final settlement.
Facts of the Case
The petitioner in the case represents the trust created by Dunlop India Ltd., for the purposes of providing pension, annuities and other benefits to the executive management staff of the company. In the meanwhile the company became sick and is declared as such by the BIFR. The trustees of the trust so created made an application under Section 34 of the Trusts act seeking appropriate directions and/or advice and/or opinion with regard to the money that is lying with the trust. It was stated in the application that the purpose of the trust stands fulfilled without completely exhausting the property held by the trust. Out of some 25 Crores and odd money that was held by the trust for its beneficiaries, an amount totalling Rs.3,99,55,682/- was deposited with LIC to purchase annuities to pay the beneficiaries their dues in the future. With that the purpose of the trust is stated to be exhausted and directions were sought for the rest of the money to be returned to the author of the trust, which is the Company itself. The application was dismissed by single judge of the High Court stating that payment of pension was to be made not only to the existing members but also to the widows and dependants and just by making an advertisement in two newspapers consent of all the members of the trust could not be held to have been obtained impliedly. This is in effect a refusal on the part of the judge to exercise the jurisdiction under Section 34. The intra court appeal made against the dismissal also came to be dismissed subsequently. The appellate court opined that the purpose of trust shall exist until the last surviving employee of the company receive his benefit from the trust fund and therefore the remaining funds lying with the trust cannot be taken by the company.
Before the Supreme Court
The primary question that was up for the consideration of the apex court is the scope of powers under Section 34 of the Act.
34. Right to apply to Court for opinion in management of trust property—Any trustee may, without instituting a suit, apply by petition to a principal Civil Court of original jurisdiction for its opinion, advice or direction on any present questions respecting the management or administration of the trust property other than questions of detail, difficulty or importance, not proper in the opinion of the Court for summary disposal.
A copy of such petition shall be served upon, and the hearing thereof may be attended by, such of the persons interested in the application as the Court thinks fit.
The trustee stating in good faith the facts in such petition and acting upon the opinion, advice or direction given by the Court shall be deemed so far as regards his own responsibility, to have discharged his duty as such trustee in the subject-matter of the application.
The costs of every application under this section shall be in the discretion of the Court to which it is made.
The lower courts refused to entertain the application on the premise that the powers vested in a civil court of original jurisdiction under the section is only to tender opinion, advice or direction for the management of the trust property and it shall not mean that a direction can be issued under the section for the extinguishment of the trust as a whole, confining the powers by literal interpretation of the statute. Upholding the reasoning of the lower court, Sinha J. held that an application under Section 34 may be maintainable only when the question involved are not questions of detail, difficulty or importance, not proper in the opinion of the Court for summary disposal. In the present case there involved the right of a member of the trust to receive pension, for, admittedly on facts, there were cases with several employees pending adjudication over the issue. In order to adjudicate such an issue would require the interpretation of trust deed which cannot be done under the summary jurisdiction so conferred under the section. Segregating Chapter IV (of rights and powers of trustees), under which Section 34 is listed, from other sections involving the extinguishment of a trust (Section 77 and Section 83 under Chapter VIII and IX respectively), he stated that the court cannot exercise a jurisdiction which is not vested with it.
The contention of the petitioner over the application of Section 83, since in this case the trust became incapable of being executed without exhausting the trust property, was not accepted by him since, according to him, firstly, involves seriously disputed question of fact; secondly, the court under the summary jurisdiction cannot finally determine the rights and obligations of the trustees and the beneficiaries thereon and thirdly, even if a few persons opposed the extinction of the trust it should be treated to be sufficient for the court to refuse to exercise its summary jurisdiction under Section 34 of the Act.
The Disagreement
In his judgement, differing from the conclusions arrived at by Sinha J., Markandey Katju J. held that, since all the beneficiaries being paid off, through the payment made to LIC, without exhaustion of the funds of the trust, the trust no longer is under any liability or obligation towards its beneficiaries. Therefore, the balance amount lying with the trust is to be returned to the company, being the author of the trust, in view of Section 83 of the Act. Interestingly enough, he agrees with Sinha J. over the maintainability of an application under Section 34, for a different reason, stating that the words “management and administration of trust property” would not apply when the purpose of the trust itself is exhausted and the question is over the remaining funds. however, in an interesting turn, he invokes the power under Article 142 of Constitution to refund the balance amount to the company.
Syllogism of Powers under Section 34
To the extent that there seems to be no other provision under the Act to govern such piquant situations, it is untenable to hold that an application under Section 34 is not maintainable, upon the premise that it is a summary jurisdiction. This is especially the case when the application so made is governed by principles such as Res Judicata is made applicable. This leaves the author of the irrevocable trust in a piquant situation that even after the exhaustion of all the mandates of the trust, it is still not open to manage the properties of the trust as it deems fit. Sinha J. argument that the application is not maintainable is solely based upon the reasoning that it involves important issues to be adjudicated, which cannot be done under summary procedure, may not be altogether tenable, since the only issue that could possibly arise for adjudication is whether the purpose of the trust is exhausted or not. Since in the present case a sum for those purposes has been set aside in clear terms, the petition can be held to be maintainable for all purposes. Though Katju J. disagrees over the management of trust money, he concurs to the extent that the application under Section 34 is not maintainable. The alternative remedy as proposed is of a suit to be instituted. However, they have failed to take note of the option that has been conferred upon the trustee to go for a remedy under Section 34. A pari materia provision is provided under Section 7 of Charitable and Religious Trusts Act, 1920, which does not have the option “without instituting a suit”, making clear that there exists a option in the hands of the trustee to choose this remedy.
Moreover, the reference of the issue to a larger bench, hearing for which is yet to happen, raises several interesting questions on its own, other than the above stated issues. The inevitable question over the exercise of powers under Article 142 apart, the scope of hearing by the larger bench so referred to will be an interesting aspect to be dealt with. Whether the larger bench can hear the matter afresh or whether they should limit themselves only to the question upon which there has been a disagreement? It will be much more interesting to go into this aspect. I comment on this conclusively at this stage. I shall post on this soon with adequate information.
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