1962 (3) TMI 95 - SC - Indian Laws

Summary

Issues Involved:
1. Possession of properties described in schedules A & B
2. Damages and mesne profits with interest
3. Validity of the trust deed (Exhibit X)
4. Claim for compensation for improvements and extensions
5. License and its irrevocability under Section 60(b) of the Indian Easements Act, 1882
6. Fiduciary duties of the appellant as a director and trustee

Issue-wise Detailed Analysis:

1. Possession of Properties Described in Schedules A & B:
The plaintiff sought possession of properties described in schedules A & B. The trial court allowed the plaintiff to recover possession of these properties. The High Court modified this decree, emphasizing that the appellant could only claim compensation for the structure he erected, amounting to Rs. 46,686-2-0. The Supreme Court upheld the High Court's decision, stating that the appellant's actions, including the creation of a new trust, were not in accordance with the original agreement and thus did not entitle him to retain possession.

2. Damages and Mesne Profits with Interest:
The High Court awarded the respondent mesne profits against the appellant at the rate of Rs. 88/- per annum until the recovery of property mentioned in schedule A and B, and at the rate of Rs. 1500/- per annum for schedule B buildings. The Supreme Court affirmed this award, noting that the appellant's unilateral actions did not negate the respondent's entitlement to mesne profits.

3. Validity of the Trust Deed (Exhibit X):
The appellant argued that the trust deed (Exhibit X) was valid. However, the Supreme Court found that the appellant, as a director and trustee, could not unilaterally create a new trust that deprived the company of its rights. The court emphasized that the appellant's fiduciary duties required him to act in the company's best interest, and his actions in creating the new trust were not in line with these duties. Thus, the trust deed was deemed invalid.

4. Claim for Compensation for Improvements and Extensions:
The 5th defendant claimed Rs. 20,000 and Rs. 1019 for improvements and extensions made to the building. The trial court permitted the 5th and 10th defendants to remove their constructions within two months without causing damage to the plaintiff's properties. The High Court modified this, allowing only compensation for the structure, which the Supreme Court upheld.

5. License and Its Irrevocability Under Section 60(b) of the Indian Easements Act, 1882:
The appellant contended that he had an irrevocable license under Section 60(b) of the Indian Easements Act, 1882, as he had executed a work of a permanent character and incurred expenses. However, the Supreme Court noted that this plea was not raised in the trial court and was inconsistent with the appellant's original defense. The court held that the license, if any, was to construct the building and hand it over to the respondent as trust property, not to create a new trust. Thus, the license was not irrevocable, and the appellant's plea was rejected.

6. Fiduciary Duties of the Appellant as a Director and Trustee:
The Supreme Court highlighted that the appellant, as a director and trustee, had fiduciary duties towards the respondent company. The appellant's actions in creating a new trust and attempting to lease the company's property to the trust were in breach of these duties. The court cited legal principles establishing that directors are trustees of the company's assets and must act in the company's best interest. The appellant's failure to adhere to these principles invalidated his claims.

Conclusion:
The Supreme Court dismissed the appeal, affirming the High Court's judgment. The appellant's actions were found to be inconsistent with his fiduciary duties and the original agreement with the respondent company. The trust deed (Exhibit X) was invalid, and the appellant was not entitled to retain possession of the properties or claim an irrevocable license. The respondent was entitled to recover possession, mesne profits, and compensation for the structure erected by the appellant. The appeal was dismissed with costs.