SHETH DAHYABHAI CHIMANLAL Vs. SHETH AMBALAL HIMATLAL

JUDGEMENT

(1.) Sir Rustom, Vakil of Ahmedabad died on November 1. 1933, leaving behind him his widow Lady Tehmina. three sons Jehangir. Percy and Toos and his daughters. He had made his last will and testament on November 18, 1924. By this will he appointed five persons as executors and gave a specific direction in clause 8 of the will that certain properties therein specified be settled on trust by executing a trust deed and the executors were to be trustees for the purpose of the trust. A further direction was given that his son Jehangir be appointed as an additional trustee and executor when he attained the age of 21 years. By clause 8-F of the will he directed that during the lifetime of his son Jehangir. Percy end Toos the entire income of the trust properties shall be enjoyed by them in equal shares but that after the lifetime of each son, trust property falling to his 1/3 share interest as well as principal shall go to his children (sons and daughters) in the proportion therein mentioned. After his death there was some litigation between Percy on the one hand and Jehangir, Toos and Lady Tehmina on the other for administration of the estate of the deceased. The litigation ended in a consent decree and pursuant to the terms of the consent decree a trust deed was executed on April 14. 1941, Some of the trustees named by the testator had died in the meantime with the result that the trust deed named Jehangir, Percy. Lady Tehmina and three other persons as trustees. A schedule was annexed to the trust deed specifying the properties which were settled on trust in fulfilment of the direction given in the will of the testator. A reference to the 10th Schedule is necessary for the purposes of this appeal in which shares of a number of companies and the right to specific share in the income of certain managing agency companies was enumerated. By 1948 of the three trustees other than the descendents of the testator only one Sarosh KothawaIa was surviving and he desired to retire as a trustee. Accordingly, by the indenture dated August 3, 1949 Sarosh Kothawala retired as a trustee and Toos one of the sons of the testator was appointed as a trustee. Consequently Jehangir. Percy, Tom and Lady Tehmina were the trustees and from amongst them Jehangir. Percy Toos were also the beneficiaries of the trust.

(2.) On October 12. 1949, Jehangir took a loan of Rs. 1,00,000/- from Ist respondent Sheth Ambalal Himatlal and assigned to him by way of charge to secure repayment of the amount advanced all rights claims and interest over the income payable to him under clause 8-F of the will of Sir Rustom Vakil. On January 7, 1950. Toos borrowed a loan of Rs. 1,00,000/- from the Ist respondent and made an identical assignment of this share of the income in favour of the creditor. On Mar, 28, 1950. Percy borrowed a loan of Rupees 1,00,000/- from the first respondent and made a similar assignment of his share of the income in favour of the income in favour of the Ist respondent. Notice of assignment was given to the trustees in each case on the very day which the advance was made. Jehangir, percy and Toos obtained from Ist respondent creditor extension of time for the repayment of the advance of Rs. 3,00,000/- on the pretext that the income of the year 1949-50 was yet to be recovered by them and by pledging a part of the shares comprised in the trust. Respondent No. 1 asserts that in consideration of the extension of time granted by him the debtors Jehangir, Percy and Toos agreed to be jointly and severally liable for repayment of the whole of the amount of Rs, 3.00,000/- to him. Subsequently on June 14. 1951. Jehangir Percy and Toos borrowed a loan of Rs. 3.00,000/- from the appellant Sheth Dahyabhai and assigned in his favour the right to receive certain dividend and the right to receive the income of the three commission agencies till the debt was fully repaid. A further loan of Rs. 3,00,000/- was borrowed by Jehangir, Percy and Toos from Sheth Dahyabhai and executed an assignment of an identical nature in his favour. The second deed of assignment was impounded by the Collector for adjudging the adequacy of the stamp duty but that is not relevant for the present purpose. The dispute in this appeal is with regard to the priority to claim payment under the assignment in favour of the 1st respondent and the appellant. Respondent No. 1 claims priority in payment over appellant under assignment in his favour. He also made a further claim that he was entitled to priority in payment pursuant to agreement undertaking joint and several liability for the whole of the amount of Rs. 3,00,000/- to him. Appellant Dahyabhai disputed the double priority claimed by the Ist respondent which led to a suit being Civil Suit No. 179/52 filed by the Ist respondent in the Court of Civil Judge (Senior Division). Ahmedabad. To this suit respondent impleaded the present appellant Sheth Dahyabhai the heirs of Jehangir who had died in the meantime the heirs of Percy who also had died in the meantime. Toos and Lady Tehmina and the various companies whose shares were pledged either with the Ist respondent or the appellant as also the official assignee representing the estate of Jehangir and Toos who had been adjudged insolvent in their lifetime and the trustees of the properties at the relevant time. It is not necessary to refer to the various averments in the plaint save and except saying that Ist respondent prayed for a declaration that the transfers made by way of assignment or mortgage in favour of the appellant were not binding upon the Ist respondent and for injunction restraining the appellant from recovering the income which was payable to him. A further declaration was sought that the Ist respondent had a prior and preferential right to the income of the assigned chose-in-action and sought an injunction against some of the other defendants restraining them from acting contrary to his rights under the assignment. A prayer was also made that it be declared that Jehangir. Percy and Toos were jointly and severally liable to the plaintiff for his dues and he had a prior and preferential right even in respect of the joint and several liability of his debtors.

(3.) At some stage of the litigation Union of India had to be joined as a defendant as defendants 4-10 in the suit some of the companies shares of which were the trust property notified that have been served with notice by the Commissioner of Income-tax to pay the dividends and share of income due and payable to the trustees of the trust to the Income-tax Department. After impleading the Union of India as defendant the 1st respondent amended his plaint adding a further prayer that it be declared that the Ist respondent had prior and preferential right as against the Union of India to receive income of the trust properties and for an injunction restraining the Union of India from obstructing or interfering with the right of the plaintiff.