GOPI NARAIN Vs. KUNJ BEHARI LAL

JUDGEMENT

(1.) This appeal arises out of a suit on foot of a mortgage, dated the 19th of June, 1887. The mortgagor was one Fateh Chand, and the mortgagee was one Abdul Kafil. The mortgage was for Rs. 50,000 at 14 annas per cent, per mensem interest. It is clear now that Abdul Kafil was not the real mortgagee, but was only benamidar for one Abdul Jalil, a pleader in Cawnpore. This mortgage was subsequently attached and sold in execution of a simple money decree which Gaya Prasad had obtained against Abdul Jalil and which was being executed against the representatives of the latter. The certificated auction purchaser of this mortgage was Babu Kunj Behari Lal, the plaintiff in the present suit. This bond has been the subject of a good deal of litigation which, in the view we take of the case, it is not material to refer to. It was made, as already stated, by Fateh Chand in favour of his pleader, and one of the defences taken in the present suit is the plea that there was no consideration for the bond. The bond, no doubt, was of a very suspicious nature, made as it was in favour of the pleader of Fateh Chand. Fateh Chand was a man who managed to dissipate what must originally have been an estate of considerable value, and had the suit been one between Fateh Chand and Abdul Jalil, we might have had great difficulty in holding that anything like the full principal sum of Rs. 50,000 was due. We think, however, for reasons which we shall presently state, that the defendants appallants in the present appeal cannot be allowed to say that the bond was not for its full face consideration. Three villager were mortgaged, one called Pali Khurd, another called Pali Kalan, and third called Sadikpur. A one-third share in each of these villages has been sold in satisfaction of prior mortgages, but two-thirds of Pali Khurd was purchased by the defendant Abdul Hamid and two-thirds of Pali Kalan was purchased by Gaya Prasad, both in execution of simple money decrees. Sadikpur was purchased by Sheo Dayal. The price paid for Pali Khurd by Abdul Hamid must clearly have been based upon the property being subject to a heavy incumbrance. In a written statement by Abdul Hamid in certain litigation between one Sheo Prasad and himself and others, he expressly admitted that at the sale of this property the mortgage of the 19th of June, 1887, was proclaimed and that he purchased the property subject to that mortgage. Pali Kalan was also purchased at a price which would have been an absurdly low value unless the property was subject to a heavy incumbrance. After the death of Gaya Prasad the defendants, Gopi Narain and the other trustees (who are the defendants appellants and are hereinafter referred to as "the trustees"), in their application for probate of the will of Gaya Prasad placed a very small value on the property and expressly stated that it was subject to this mortgage for Rs. 50,000 and interest. Neither the trustees nor Abdul Hamid have given any affirmative evidence of the want of consideration. Under these circumstances we think that the decision of the learned Subordinate Judge that the bond had been given for full consideration must be accepted.

(2.) It is now necessary to state some further facts upon which the other pleas taken in the suit are. based. Gaya Prasad was a man possessed of considerable wealth. He made a will on the 13th of July, 1899, and thereby appointed certain persons to be his trustees, and amongst them the plaintiff in the present suit, Kunj Behari Lal. He named as president of the board of trustees the defendant appellant Gopi Narain and the respondent, Kunj Behari Lal, selected by his co-trustees as vice-president of the board. Under the will of Gaya Prasad both Kunj Behari Lal and Gopi Narain took considerable benefits. After some litigation the will was duly proved, and it was at the instance of the trustees that the decree already mentioned against Abdul Jalil was being executed against the latter s widows: It must be borne in mind that the trustees were at the time of the execution of decree in possession of the village of Pali Kalan under the will of Gaya Prasad, and that the mortgage which was attached in execution of the decree against Abdul Jalil affected this village as well as the other two villages already mentioned. The trustees executed a power of attorney on the 30th of January, 1900, in favour of Kunj Behari Lal. This document will be found at page 75 of the appellant s book. It sets forth that the trustees other than Kunj Behari Lal have other engagements and have no time to attend court in a body and look after and contest cases, and they then proceed to appoint Kunj Behari Lal, their general attorney, to act for them in all court matters; he was not, however, empowered to purchase or take property in mortgage or borrow money in their names. On the 7th of January, 1905, Kunj Behari Lal wrote to Gopi Narain, as president of the committee, a letter, which will be found at page 45 of the respondent s book. In this letter he points out that the mortgage of the 19th of June, 1887, would be sold on the 24th of January, 1905, and that in his opinion it would be most advisable for the trustees to purchase this bond. He says in the letter:--" If any stranger purchases this village and is successful in his suit the whole of the share in mauza Pali Kalan will be lost." He says further that if the trustees do not buy the bond, he himself would do so. No one can doubt the soundness of the advice given in this letter. Granted that the bond was a little shady and that some claim was being made to it by the widows of Abdul Jalil, it was still most advisable to purchase it. Kunj Behari lived at Etawah, the other trustees lived at Cawnpore. In the ordinary course of events the letter would reach Gopi Narain about the 8th of January and on the 10th of January an application was made in the execution case that the trustees should be permitted to bid for the bond of the 19th June, 1887, which was to be sold in execution of Gaya Prasad s decree. The will of Gaya Prasad provided for the holding of meetings of the trustees at stated times, and in the letter of Kunj Behari Lal to which we have already referred, he suggested that an extraordinary meeting of the committee should be called to consider the question of purchasing the bond. It appears from the evidence that a notice of a meeting was sent out and that on the agenda the question of the purchase of the bond was expressly mentioned. It also appears that there was no quorum at the meeting which was summoned for the 22nd of January, that is to say, two days before the sale. It therefore appears that there was no express resolution on the part of the trustees on the subject of the purchase of the bond. Kunj Behari Lal attended the sale. He never obtained any express leave on his own account to bid at the sale, although undoubtedly he was one of the decree-holders. It does not appear from the evidence whether any order was made on the application of the trustees for leave to bid, and strictly speaking, Kunj Behari Lal had no right to bid at the sale either on hid own behalf or on behalf of the trustees without leave of the court, but he nevertheless attended the sale, and it appears that he and one Sheo Prasad bid at intervals from the commencement of the sale, and that the last bid was made by Sheo Prasad. We may here mention that Sheo Prasad was also a general attorney for the trustees. He was also attorney for Kunj Behari Lal. The bond was knocked down for the sum of Rs. 3,115. Kunj Behari Lal was examined and he states that the purchase was made by Sheo Prasad for him, that he had not money with him and that he borrowed it from Gopi Narain. Gopi Narain lent him the money not out of the trust fund but out of private moneys of his own, and the amount was subsequently repaid to him. He says also that after he had purchased the document, that is to say, the bond in question, Gopi Narain asked him to give the document to the committee " and I said that I would not give it." A number of the notices issued for the subsequent meetings of the trust committee have been put in evidence, and these show that time after time amongst the list of business to be transacted is the question of the purchase of the bond, but no resolution was ever come to on the subject either by the trustees to surrender any rights they might have or for the taking of any steps against Kunj Behari Lal. The matter finds a place in the agenda for the last time in the notice, dated the 2nd of July, 1905. Kunj Behari Lal did not obtain a sale certificate for some three years after the date of purchase, and in the meantime the bond had been claimed by the widows of Abdul Jalil. In our opinion the inference to be drawn from the evidence is that Kunj Behari bid for the bond in the first instance possibly with the intention of allowing the trustees to have the benefit of it. It is equally possible that when he found that before the sale the trustees had come to no resolution, he bid for the bond on his own behalf intending to keep it for himself. We do not believe that the trustees as a body ever intended that Kunj Behari Lal should purchase the bond for himself, and we are satisfied that they never gave him such permission. The application for leave to bid strongly suggests that the trustees at once saw the soundness of the advice given them by Kunj Behari Lal, namely, that it would be advantageous to purchase the bond. We are satisfied also that after the purchase had been made they would have been glad to take over the purchase from Kunj Behari Lal. This is shown by the fact that time after time the question of the bond is placed upon the agenda of the meetings of the trustees, and also by the fact that Gopi Narain asked Kunj Behari Lal to let the trustees have the bond. We think that it is most probable that Kunj Behari Lal having succeeded in getting the property knocked down to him or to his attorney at a very low price, determined to keep it himself, and that the trustees thought they could not compel him to give it up. Kunj Behari Lal was probably supposed to know more of court matters than his co-trustees and they considered that they were at his mercy.

(3.) The question then arises, can Kunj Behari Lal under those circumstances retain the benefit of his purchase ? We are of opinion that he cannot. Section 88 of the Indian Trusts Act provides:--"Where a trustee, executor, partner, agent, director of a company, legal adviser, or other person bound in a fiduciary character to protect the interests of another person, by availing himself of his character, gains for himself any pecuniary advantage or where any person so bound enters into any dealings under circumstances in which his own interests are, or may be, adverse to those of such other person and thereby gains for himself a pecuniary advantage, he must hold for the benefit of such other person, the advantage so gained." Illustration (h) is as follows:--"A, a guardian, buys up for himself incumbrances on his ward B s estate at an under value. A holds for the benefit of B the incumbrances so bought and can only charge him with what he has actually paid." This Section incorporates and codifies the law which prevails in England on the subject of purchases made by trustees. The authorities will be found collected in Lewin on Trusts, page 304, 11th Edition, Williams on Executors, page 488, 10th Edition, and Coote on Mortgages, Vol II, page 841.