9911796707
TMI Blog1979 (8) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... Khan Bahadur, the Nizam of Hyderabad, by an indenture dated March 29, 1951, created a trust called H. E. H. The Nizam's Jewellery Trust, in respect of 107 items of extremely valuable, rare and priceless jewellery of exquisite design and beauty studded with emeralds, diamonds, saphires, rubies etc. of the highest quality and purity belonging to him, specified in the First Schedule, and Government securities of the aggregate face value of ₹ 10 lakhs, specified in the Second Schedule, for the benefit of his two sons, Prince Azam Jah and Prince Muazzam Jah; two grandsons, Prince Mukarram Jah and Prince Muffakham Jah, two granddaughters, Princess Fatima Fouzia and Princess Amina Mirzia; daughter Shah-zadi Begum, and his step-brother Sahebzada Nawab Basalat Jah Bahadur. 4. Clause 13 of the trust deed, Ex. 'A', confers upon the trustees the power of sale of the jewellery, the material portion of which is in these terms: 13. Subject to the Trusts aforesaid in respect of the articles referred to in Clause 3(c), (d), (e) and (f) thereof, during the lifetime of his eldest son Prince Azam Jah (if and so long as the Dynasty of tine Settlor continues and Prince Azam Jah s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ues under the Antiquity and Art Treasures Act 1972. It was required to select and evaluate such items of antique jewellery as had to be acquired in the national interest. The Experts Committee inspected the jewellery at the vault of the Mercantile Bank. During these proceedings the Government appointed a Committee of Valuers which by its report dated January 3, 1976, valued all the 107 items of jewellery at ₹ 6,62,58,500 while Vithaldas, R. W. 6, the valuer appointed by the trustees, by his valuation report dated March 18, 1978 valued these 37 items of jewellery at ₹ 10,26,30,000. Eventually, the Government of India acquired 18 selected pieces of antique jewellery for their cultural and historical importance at a mutually negotiated price of ₹ 1.17 crores. 9. It has been represented that the beneficiaries are in very straitened circumstances due to abolition of privy purse, heavy incidence of income-tax and wealth-tax, and are heavily indebted due to the trustees applying the income of the trust largely towards payment of taxes, making it increasingly difficult, to maintain themselves. The beneficiaries were, therefore, pressing the Board of Trustees to effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be borne by the tenderer who shall also pay interest at the rate of 10% per annum to the Trust until the completion of the resale. 13. On January 31, 1978, Gazdar sent intimations (Exs. B. 130-133) to some foreign and Indian nationals abroad regarding the intended sale of the jewels. It appears that M. A. Ashruff, Secretary, also addressed letters dated February 8/10, 1978 (Exs. B. 72-87) and also sent telegrams dated February 25, 1978 (Exs. B. 88-100) to 29 reputed dealers, seven of whom were jewellers from abroad and the remaining 22 in the country, as per list Ex. B-46. The letters of the Secretary, as far as material, read: The unique collection of the fabulous oriental jewellery of the once richest man of the world, HEH the Nizam of Hyderabad and Berar, the erstwhile premier prince of India, is coming up for sale in Bombay sometime during the first or second week of March 1978. The exact dates will be notified later. The telegrams sent by him mentioned that: 'inspection of the jewellery could be had from March 6 to 9'. It would thus appear that the intending buyers were not notified the date of sale. 14. The 37 items of jewellery put up for sale were divide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and other successful bidders, requiring them to pay the balance of 90 per cent of the tender price on or before March 21 and 22, 1978 as the case may be, and to take delivery of the items of jewellery purchased by them. In respect of the appellants M/s. Shanti Vijaya Co., the date fixed was March 17, 1978. 18. On March 10, 1978, the first respondent, Princess Fatima Fouzia, one of the beneficiaries and a grand-daughter of the Nizam, instituted the present proceedings, being O. P. No. 141 of 1978, in the Court of the Chief Judge, City Civil Court, Hyderabad, under Section 74 of the Trusts Act for removal of the present trustees for alleged dereliction of duty, negligence and mismanagement on their part, with particular reference to the manner in which the 37 items of jewellery belonging to the trust were brought to sale. She also filed an application for temporary injunction under Order 39, Rule 1 of the Civil Procedure Code for restraining the trustees from taking any further steps towards the finalization of the sale of jewellery. The application was taken up by the Court on March 14, 1978, and the learned Judge on the same day granted an ad interim injunction restraining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncess Fatima Fouzia was permitted to withdraw and her sister Princess Amina Mirzia was brought on record as appellant, No. 2. 21. The High Court by its Order dated June 12, 1978, set aside the alleged sale of the 37 items of jewellery by the Board of Trustees in favour of the appellant and other successful tenderers for a sum of ₹ 14.43 crores in the ground that there was no concluded contract between the parties and instead accepted the offer of the eighth respondent, Peter Jansin Fernandez, for the sale of the aforesaid jewellery to him for ₹ 20.25 chores. 22. When the matter came Up for hearing before this Court, a grievance was made that the High Court had no power to set aside the sale of the jewellery by the Board of Trustees for ₹ 14.43 crores without impleading the other successful tenderers and without affording an opportunity to the appellants M/s. Shanti Vijay Co. to substantiate their claim that there was a concluded contract for the sale of the jewellery to them for ₹ 14.43 crores. Inasmuch as the appellants M/s. Shanti Vijay Co., were alone a party respondent to the appeal and the remaining successful tenderers were not so impleaded, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o interdict the sale and issue necessary directions in that behalf, ought not to be set aside as an improvident sale because of the fact that an amount of ₹ 20.25 crores for the 37 items of jewellery had been offered by the eighth respondent, which showed that the trustees had not acted with prudence and due care or attention, or whether it merely indicates an error of judgment on their part and the sale by them was on a mistaken impression of the actual value of the jewellery. 26. This in the arguments before us has resolved into two subsidiary questions, namely (1) whether in the absence of a provision for the delegation of powers in the trust deed, it was competent for four of the trustees to effect a sale, and if so, whether in the absence of authorisation by R.N. Malhotra, Chairman of the Board of Trustees, the remaining four trustees could exercise the power of sale of the jewellery under Clause 13 of the deed and (2) whether, if there was a valid acceptance of the bids as alleged, by the remaining trustees, on March 9, 1978, the Chairman of the Board of Trustees could not have accorded his approval on the Secretary's note, Ex. B-124, dated March 14, 1978, in vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the opinions and wishes of others, he must exercise his own judgment. Thus a trustee for sale of property, cannot leave the whole conduct of the sale to his co-trustees. The reason for this is the settlor has entrusted the trust property and its management to all the trustees, and the beneficiaries are entitled to the benefit of their collective wisdom and experience: Underbill's Law of Trusts and Trustees, 12th Ed., PP. 434,442-43; Scot on Trusts, Vol. 2, p. 1033. 29. In Janakiram Iyer's case this Court observed that all acts which the trustees intend to take for executing the trust, must be taken by all of them acting together, as provided by Section 48 of the Trusts Act, 1882. Section 48 of the Trusts Act provides as follows: 48. When there are more trustees than one, all must join in the execution of the trust, except where the instrument of trust otherwise provides. 30. It is axiomatic that where there are more trustees than one, all must join in the execution of the trust, except where the instrument of trust otherwise provides. Therefore, as laid down by the Court in Jankirama Iyer's case, if the validity of an alienation effected by the trustees falls ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond part unequivocally confers upon the trustees the power of rejection of bids. It is, therefore, urged that the first part must be construed with reference to the second. It is said that we must correlate the second part to the first, and when so read, the words be examined and decided must, in the context in which they appear, mean the conferment of authority to reach a 'decision', i.e., as to acceptance or rejection of bids. It was also submitted that the words by the trustees present clearly meant the remaining four trustees. It was argued that when the Board of Trustees met on March 8, 1978, the trustees knew full well that R.N. Malhotra, the Chairman could not be present at the meeting of the Board of Trustees to be held on March 9, 1978 as he had to leave Bombay om the morning of the 9th, as his presence in Delhi was required for pressing official business. Upon these premises, it is contended that the resolution of March 9, 1078 cannot but be construed as giving 'authorisation' to the remaining four trustees to accept the bids on March 9, 1978. 36. While we are not oblivious of Malhotra's statement that it was decided at the meeting on March 8, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, should not have their plain meaning that the tenders were to be opened and examined by the remaining four trustees to see if they were valid tenders. The first part did not, in our opinion, give any 'authorisation' to the remaining trustees to accept any of the tenders. If they did not find a satisfactory offer or offers for any of the items offered for sale they could only under the second part reject the tenders submitted. It is needless to stress that delegation must be express. The trend of cross-examination of Malhotra also shows that his concurrence was necessary. 38. What transpired on March 9, 1978 is completely shrouded in mystery. The Secretary's note, Ex. B.-124 dated March 14, 1978 reveals that the tenders were received on March 9, 1978 in sealed covers accompanied by ten per cent of the value of jewellery tendered for, in room No. 305, Ambassador Hotel, Bombay, between 3 and 4 p.m. It asserts that 27 tenders were received and they were opened at 4.30 p.m., on the same day, in the presence of the trustees and except for item No. 16 of group XIV, they accepted the same. As regards item No. 16, of group XIV, negotiations were entered into with the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry drew up the note, Ex. B-124, in undue haste despite the Court's order granting the injunction. 40. It is not disputed that Malhotra had no knowledge of the acceptance of the tenders till March 23, 1978 when the note of the Secretary, Ex. B-124 reached him. It is also not disputed before us that no minutes of the alleged meeting of the remaining four trustees held on March 9, 1978 exist. We have gone through the Minutes Book of the Board of Trustees. It reveals that minutes were regularly kept and indeed each and every meeting began with the confirmation of the minutes of the earlier meeting. The minutes of the meetings held on March 5, 1978 and of March 8, 1978 are there. Thereafter appears the minutes of a meeting held on May 15, 1978, Ex. B-125. But there are no minutes of the alleged meeting held on March 9, 1978. It is thus clear that no meeting of the Board of Trustees was held at all on March 9, 1978. 41. The story of the alleged acceptance of bids by the remaining four trustees on March 9, 1978 appears to be a complete myth. The Secretary's note, Ex. B-124 was intended to mislead R.N. Malhotra, the Chairman of the Board of Trustees in a frantic attempt to ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trustees on March 9, 1978. The allegation that there was such a meeting, is completely belied by the affidavit of M.A. Abbasi, the material portion of which may be extracted: 8. Oat of the 107 items of Jewellery only 37 items were put up for sale in the first instance and tenders invited. About sixty foreign and Indian buyers of repute inspected the jewellery between the 6th and 8th March 1978 at Bombay. On 9th March 1978 the trustees received the tenders and the same were opened on the 10th March 1978. The highest tenders received were accepted and letters of acceptance were issued on the same day to the persons whose tenders had been accepted. In no case has any lower tender been accepted. This tends to suggest that the alleged meeting was held not on March 9, 1978 but on March 10, 1978. He clearly states that the tenders were opened on March 10, 1978, they were accepted on that day and letters of acceptance were sent to the 'persons on the same day whose tenders had been accepted. This is in contradiction with the Secretary's note Ex. B-124. It is quite clear to our mind that either M.A. Abbasi is not speaking the whole truth or that the story of the alleged meetin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the passing of the property was dependent upon the tender of the balance of the price and the taking delivery of the goods upon payment. 48. Even assuming that there was acceptance of tenders by the four trustees on March 9, 1978, as alleged, in terms of the resolution of March 8, 1978, the contract was frustrated by the grant of an ad interim injunction by the Court of the Chief Judge, City Civil Court, Hyderabad on March 14, 1978. The grant of such injunction prevented the performance of the alleged contracts. The appellants could not have tendered 90 per cent of the tender amount, i.e., the balance of the price, by the stipulated date or taken delivery of the jewellery so long as the injunction lasted. 49. It is, however, pointed out that the appellants M/s. Shanti Vijay Co., by their lawyer's notice dated March 15, 1978, Ex. B-66, confirmed that they had sent a telegram making a demand for delivery of the two items of the jewellery purchased by them against payment of ₹ 8.52 crores. It is true that the letter was accompanied with a photostat copy of a certificate of foreign inward remittance of the amount. But the fact remains that in terms of the said n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding a court of law, might consider unreasonable. 51. The learned Judges of the High Court, however, have rightly, in our opinion, repelled the contention. It was certainly open to the Board of Trustees to effect a sale of the 37 items of jewellery under Clause 13 of the deed. But the power, although discretionary, must be exercised reasonably and in good faith. 52. The power conferred on the Board of Trustees is no doubt discretionary, but on the principle embodied in Section 49 viz., that when such discretionary power is not exercised reasonably and in good faith, such power may be controlled by a court. There was no warrant for the suggestion made by the Board of Trustees before the High Court that the power is absolute. The law on the subject is succinctly stated in Underbill's Law of Trusts and Trustees, 12th Edn., p. 472: ...it would seem that, even where trustees claim to exercise their discretion as to investments, the court will, in a proper case, direct an inquiry whether it is for the interest of the beneficiaries that a particular investment should be continued or called in. So, too, where absolute discretion has been given to trustees to do a particular a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the late Nizam for sale of his jewellery, and had also arranged the sale of jewellery belonging to late Salarjung of Hyderabad. Kashmir Chand, RW 4, partner of the appellant firm M/s. Shanti Vijay Co., had participated in the sale of jewellery belonging to the Maharajahs of Gwalior, Darbhanga, Jodhpur and Bikaner. Vithaldas, RW 6, is one of approved valuers appointed by the Government of India, and had valued the jewellery belonging to the Paiga of Khursheed Jah and also some jewels belonging to the late Salarjung. At the instance of the Government of India, he had valued the jewellery belonging to the Nizam as also the Nawab of Rampur. According to these jewellers, the only method of sale adopted in all these sales was to inform reputed jewellers both in the country and abroad, and none of the sales were by advertisement in the press. 57. As regards value of the jewellery, Dinshaw Jahangir Gazdar, RW 3, and M. A. Abbasi, RW 1, want us to believe that ₹ 14.43 crores was the 'best possible price' that the 37 items of jewellery could ever fetch, despite the fact that the eighth respondent, Peter Jansin Fernandez, made an offer of ₹ 20.25 crores for the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting, clarity and lustre, and colour.' 60. Vithaldas, RW 6, also asserts that the price of ₹ 14.43 crores fetched was a 'very good price' in March 1978 for these jewels. When he was confronted with the offer made by the eighth respondent during his cross-examination, he stated that according to him an offer of ₹ 20.25 crores for these 37 items of jewellery was a 'fancy price'. He explains by saying that a fancy price would be higher than the market price. All this evidence was led by the appellants and the other tenderers as well as by the Board of Trustees, in trying to establish that the trustees acted honestly and there was no lack of good faith on their part. 61. It appears that, as so often happens when one deals with another's property, it matters little to him what price the property fetches. But in the case of a trust, there arises the duty of the trustees to act with prudence and as a body of reasonable men. The High Court has come to a definite conclusion that the improvident sale of the jewellery at such a low price without due public notice was not a bona fide exercise of their power conducive of beneficial management. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
