1970 (7) TMI 80 - HC - Indian Laws

Summary

Issues Involved:
1. Legal effect of the Indenture of Release executed by the defendant.
2. Whether the subsequent absolute interest granted to the heirs of the defendant is accelerated.
3. Whether there is a resulting trust in respect of the income payable to the defendant during his lifetime.

Issue-Wise Detailed Analysis:

1. Legal Effect of the Indenture of Release Executed by the Defendant:
The primary issue in this case is the determination of the legal effect of the Indenture of Release executed by the defendant on October 25, 1962, wherein he released his entire right, title, and interest as a beneficiary under the trust. The court was tasked with deciding whether this release accelerated the subsequent absolute interest granted to the heirs of the defendant or resulted in a trust for the income that was payable to the defendant during his lifetime.

2. Acceleration of Subsequent Absolute Interest:
The court referenced several English judicial decisions to elucidate the principle of acceleration. According to Lewin on Trusts (16th Edn) and Halsbury's Laws of England, the principle of acceleration applies when a life interest or similar interest fails or ends prematurely. The court noted that if a prior interest is determined, the subsequent interest takes effect immediately, provided there is no contrary intention expressed by the settlor.

The court examined the Indenture of Trust dated January 18, 1927, and found no contrary intention that would negate the applicability of the doctrine of acceleration. The relevant clause indicated that the heirs of the defendant should be the beneficiaries upon the failure or determination of the defendant's life interest. The court concluded that the interest granted to the defendant's heirs was a vested interest under Section 19 of the Transfer of Property Act, 1882, as it was certain to occur and not contingent on an uncertain event.

3. Resulting Trust in Respect of Income:
The court also considered whether the release of the defendant's life interest created a resulting trust for the income that would have been payable to him. The court found no evidence of a resulting trust, as the doctrine of acceleration applied. The court cited English cases, such as Midland Bank Executor & Trustee Co. v. Morrison and Davies v. Mackintosh, where the principle of acceleration was applied to testamentary dispositions. The court noted that the same principle applies to trusts inter vivos, as recognized in Flower v. Inland Revenue Commrs.

The court further referenced Indian cases, including Commr. of Income Tax v. Kasturbai Walchand Trust, which upheld the validity of a beneficiary renouncing their interest under a trust. However, these cases did not directly address the doctrine of acceleration in the context of settlements inter vivos.

Judgment:
The court concluded that the legal effect of the Indenture of Release dated October 25, 1962, was to accelerate the distribution of the trust funds among the heirs of the defendant as on an intestacy. The trustees were directed to sell the trust property as per the Indenture of Trust dated January 18, 1927, and distribute the proceeds and unapplied income among the heirs of the defendant as if he had died intestate on October 25, 1962.

Summary of Court's Orders:
1. The trustees must distribute the corpus of the trust funds and unapplied income among the heirs of the defendant as on an intestacy.
2. The trustees must sell the trust property and distribute the sale proceeds and unapplied income as directed by the Indenture of Trust.
3. The plaintiffs' and defendant's costs of the Originating Summons are to be paid out of the trust estate.

Conclusion:
The court affirmed the application of the doctrine of acceleration, holding that the release of the defendant's life interest accelerated the subsequent vested interest of his heirs. The trustees were instructed to distribute the trust property and income accordingly.