2007 (3) TMI 378 - SC - Companies Law

Whether the trustees have been able to discharge their entire liabilities? Held that - Appeal allowed. The learned Division Bench as well as the Single Bench which passed the impugned judgment erred in holding that the purpose of the Trust still exists and remains valid. Consent letters have been given by 140 employees of the Company and the others concerned have also been paid off. The only one remaining is Shri M.D. Shukla, who was the Managing Director for 38 months and who claims pensionary benefits of over Rs. 45 lakhs after having changed the Trust rules just before his retirement in order to become a beneficiary. His claim is disputed by the company. In my opinion, even if there is a genuine dispute about the claim of Shri M.D. Shukla of about Rs. 45 lakhs, this amount could have been set aside for adjudication in a suit and the balance amount of the Trust fund should have been ordered to be returned to the Company. In view of section 83, the money lying with the Trust/fund should be returned to the Company. There is no employee/beneficiary left who is entitled to get any pension out of the Trust in issue, which material fact has been ignored by the courts below.

Summary

Issues Involved:
1. Interpretation of Section 34 of the Indian Trusts Act, 1882.
2. Application of Section 83 of the Indian Trusts Act, 1882.
3. Jurisdiction and powers of the court under Section 34.
4. Maintainability of the Letters Patent appeal.
5. The fate of surplus funds after the fulfillment of the trust's purpose.

Detailed Analysis:

1. Interpretation of Section 34 of the Indian Trusts Act, 1882:
The primary issue in the appeal was the interpretation of Section 34 of the Indian Trusts Act, 1882. The court analyzed whether the jurisdiction under Section 34 was limited to providing opinion, advice, or direction on questions respecting the management or administration of the trust property. The court held that the jurisdiction under Section 34 is confined to opinion, advice, or direction and does not extend to adjudicating the rights of the parties involved. It emphasized that the questions must not be of detail, difficulty, or importance, which are not proper for summary disposal.

2. Application of Section 83 of the Indian Trusts Act, 1882:
The appellants argued that Section 83 was applicable, which mandates that if a trust is completely executed without exhausting the trust property, the trustee must hold the remaining property for the benefit of the author of the trust or his legal representative. The court, however, found that the application of Section 83 involved disputed questions of fact and could not be determined in a summary proceeding under Section 34. The determination of whether the trust had been fully executed and the surplus funds should revert to the company required a detailed examination of facts, which was beyond the scope of Section 34.

3. Jurisdiction and Powers of the Court under Section 34:
The court reiterated that the jurisdiction under Section 34 is consultative and does not extend to making binding orders or adjudicating disputes. The court's power is limited to providing guidance to trustees on the management or administration of trust property. The court cannot exercise jurisdiction to decide on the extinction of the trust or the distribution of surplus funds, which are matters of detail and importance, requiring a full trial.

4. Maintainability of the Letters Patent Appeal:
The Division Bench of the High Court had opined that a Letters Patent appeal was not maintainable. However, the Supreme Court did not delve deeply into this issue, as the main focus was on the interpretation and application of Sections 34 and 83 of the Act. The Supreme Court noted that the jurisdiction of the court must be determined based on the purport and object for which such jurisdiction is conferred.

5. Fate of Surplus Funds after Fulfillment of the Trust's Purpose:
The appellants contended that the surplus funds should be returned to the company as the purpose of the trust had been fulfilled. The court, however, found that this issue involved significant factual disputes, including the validity of amendments to the trust deed and the creation of additional trusts. The court held that these matters could not be resolved under the summary jurisdiction of Section 34 and required a full trial.

Separate Judgments:
- S.B. Sinha, J.: Held that the application under Section 34 was not maintainable for deciding the fate of surplus funds and the trust's extinction. The jurisdiction under Section 34 is limited and does not extend to adjudicating disputed questions of fact or determining the rights of the parties. The appeal was dismissed.
- Markandey Katju, J.: Dissented, opining that the surplus funds should be returned to the company under Section 83 of the Act, as the trust's purpose had been fulfilled. He suggested invoking Article 142 of the Constitution to direct the return of funds, avoiding further litigation. He allowed the appeal.

Conclusion:
The Supreme Court, through a split judgment, dealt with the interpretation of Sections 34 and 83 of the Indian Trusts Act, 1882. The majority opinion held that the application under Section 34 was not maintainable for deciding the fate of surplus funds, emphasizing the limited jurisdiction under Section 34. The dissenting opinion favored returning the surplus funds to the company, invoking broader constitutional powers. The matter was referred to a larger bench due to the difference in opinions.