SHAH DAHYABHAI PREMCHAND v. MOHANLAL PITAMBARDAS — 1976 DIGILAW 149 (GUJ)

A. M. AHMADI, J. ( 1 ) THE only point which arises for consideration in this appeal is whether the investment made by the trustee or trustees of Public Trust funds without the permission of the Charity Commissioner otherwise than as provided by sub-sec. (1) of sec. 35 of the Bombay Public Trusts Act 1950 hereinafter referred to as the Act is invalid and void ab-initio? This question has cropped up in this appeal in the following circumstances: ( 2 ) SHAH Dahyabhai Premchand and four others filed a Special Civil Suit No. 47 of 1962 against the present respondents to recover a certain sum of money due from them. In that suit a decree was passed against the present respondents on January 31 1964 The rights of the judgment- creditors under that decree were assigned in favour of the present appell- ants by an assignment deed dated March 25 1968 The appellants are the trustees of Shri Buhari Jain Swetamber Murti Pujak Sang a public Trust registered under the Act. In the execution application No. 36 of 1968 filed for the recovery of the decretal dues of Rs. 5443. 00 by sale of the agricultural lands belonging to the respondents it was contended by the judgment-debtors that the execution was not competent inasmuch as the trustees did not derive any right title or interest under the assignment deed as the trust money was employed for the purchase of the rights of the judgment-creditors under the decree without obtaining the permis- sion of the Charity Commissioner as required by sec. 35 of the Act. The learned Trial Judge upheld this contention and dismissed the Darkhast filed against the present respondents. The appellants having been aggrieved by the said decision of the learned Trial Judge have come in appeal to this Court. ( 3 ) MR. Shelat the learned Advocate for the appellants contended that the view taken by the learned Trial Judge that failure to obtain permi- ssion of the Charity Commissioner before applying the trust fund other- wise than as provided by sub-sec. (1) of sec. 35 of the Act renders the transaction invalid and void is not correct. The relevant part of sec. Shelat the learned Advocate for the appellants contended that the view taken by the learned Trial Judge that failure to obtain permi- ssion of the Charity Commissioner before applying the trust fund other- wise than as provided by sub-sec. (1) of sec. 35 of the Act renders the transaction invalid and void is not correct. The relevant part of sec. 35 of the Act provides as under:35 Where the trust property consists of money and cannot be applied immedi ately or at any early date to the purposes of the public trust the trustee shall be bound (notwithstanding any direction contained in the instrument of the trust) to deposit the money in any Scheduled Bank as defined in the Reserve Bank of India Act 1934 in the Postal Savings Bank or in a Co-operative Bank approved by the State Government for the purpose or to invest it in public securities. Provided that such money may be invested in the first mortgage of immovable property situate in any part of India if the property is not leasehold for a term of years and the value of the property exceeds by one half the mortgage money:provided further that the Charity Commissioner may by general or special order permit the trustee of any public trust or classes of such trusts to invest the money in any other manner. We are not concerned with sub-sec. (2) of sec. 35 of the Act in this case. It will appear on a plain reading of sub-sec. (1) of sec. 35 that where a trust property consists of money and cannot be applied immedi- ately or at any early date to the purposes of the public trust the trustees are enjoined upon regardless of the direction contained in the instrument of trust to deposit the money in any Scheduled Bank in the Postal Savings Bank or in a Co-operative Bank approved by the State Govern- ment or in public securities. This sub-section clearly casts a duty on the trustees to invest the trust money which cannot be immediately or at an early date applied to the purposes of the public trust in the manner set out therein. The first proviso to sub-sec. (1) of sec. This sub-section clearly casts a duty on the trustees to invest the trust money which cannot be immediately or at an early date applied to the purposes of the public trust in the manner set out therein. The first proviso to sub-sec. (1) of sec. 35 however permits the trustees to invest the trust money in the first mortgage of immovable property provided the mortgaged property is not leasehold and the amount invested does not exceed one half the value of the property If such an investment is to be made no permission of the Charity Commissioner is necessary. The second proviso enables the Charity Commissioner to permit the trustees of any public trust or classes of public trust by a general or special order to invest the trust money in any other manner. If the trustees contravene the provisions of sub-sec. (1) of sec. 35 of the Act they would be visited with the penalty provided by sec. 66 of the Act. That section provides that if the trustee commits a default in the invest- ment of trust money in public securities he shall be liable to fine not exceeding Rs. 1 0 Mr. Shelat therefore rightly submitted that if the trustees failed to invest the trust money as provided in sub-sec. (1) of sec. 35 of the Act they would be liable to prosecution and conviction under sec. 66 of the Act. The section however does not say that the transaction shall be void. The object in enacting this regulatory provision is clearly to deter the trustees from investing trust money in private firms or in making risky investments. (See THE STATE OF GUJARAT V. ACHARYA D. PANDE A. I. R. 1971 S. C. 366 ). The section does not provide that if the trustees make an investment in contravention of sub-sec. (1) of sec. 35 of the Act the entire investment shall be void. If such a construction is placed on sub-sec. (1) of sec. 35 of the Act the result would be that the trust would lose the money and would be driven to a litigation against the party to whom the amount has been paid. If sec. 35 (1) of the Act is read in juxtaposition with sec. If such a construction is placed on sub-sec. (1) of sec. 35 of the Act the result would be that the trust would lose the money and would be driven to a litigation against the party to whom the amount has been paid. If sec. 35 (1) of the Act is read in juxtaposition with sec. 36 which provides that notwithstanding anything contained in the instrument of trust no sale mortgage exchange or gift of any immovable property and lease for a period exceeding 10 years in the case of agricultural land or for a period exceeding three years in the case of non-agricultural land or a building belonging to a Public Trust shall be valid without the previous permission of the Charity Commissioner. The language of sub-sec. (1) of sec. 36 is clear and the legislature has in no uncertain terms provided that no sale mortgage exchange or gift of any immovable property belonging to a public trust shall be valid without the previous permission of the Charity Commissioner. It becomes clear on a plain reading of this provision that where the legislature intended that the transaction should be invalid ab-initio it made manifest its intention in clear and unmistakable language. The language of sub-sec. (1) of sec. 35 is however quite different and we do not find sim- ilar words in that provision which would lead us to the conclusion that the investment made in contravention of that section shall be invalid. On the contrary we find from sec. 66 of the Act that the legislature has merely provided that the trustees who violate sub-sec. (1) of sec. 35 of the Act shall do so on pain of being prosecuted and ordered to pay a fine not exceeding Rs. 1 0 No such provision is made in the Act in the case of contravention of sub-sec. (1) of sec. 36 for the obvious reason that the transaction is declared invalid and hence the trust is not a loser in that the purchase money is received by the trust and the title in the property does not pass to a third party. If the transaction under sub-sec. (1) of sec. 35 of the Act is held to be void in the absence of the per- mission from the Charity Commissioner the result would be that the trust would lose the money without deriving any legal right from that transaction. If the transaction under sub-sec. (1) of sec. 35 of the Act is held to be void in the absence of the per- mission from the Charity Commissioner the result would be that the trust would lose the money without deriving any legal right from that transaction. Such cannot be and indeed is not the intention of the legis- lature as is clear on plain reading of sec. 35 (1) of the Act. I therefore hold that the learned Trial Judge was not right in the view that he took on the interpretation of sub-sec. (1) of sec. 35 of the Act. ( 4 ) MR. Sanjanwala the learned Advocate for the respondent vehe- mently argued that under sub-sec. (1) of sec. 35 of the Act the trustees are bound to make the investment as directed therein and if the investment is to be made in any other manner the permission of the Charity Commi- ssioner is absolutely necessary. He therefore submitted that by necessary implication if the trustees contravene the requirements of sub-sec. (1) of sec. 35 and make the investment without obtaining the permission of the Charity Commissioner the investment would be contrary to law and the- refore invalid. This line of reasoning does not appeal to me. As I have pointed out earlier the plain language of sub-sec (1) of sec. 35 does not lead one to the conclusion that the legislature intended that the investment made without the permission of the Charity Commissioner shall be invalid and void ab initio. The only consequence of the failure to adhere to sub- sec. (1) of sec. 35 of the Act is that the trustees render themselves liable to be prosecuted and convicted under sec. 66 of the Act. ( 5 ) THE second submission made in the alternative by Mr. Sanjanwala was that even if this Court comes to the conclusion that sub-sec. (1) of sec. 35 of the Act cannot be attracted the transaction would be void in view of sub-sec. (1) of sec 36 of the Act. There is no merit in this contention for the simple reason that sec. 36 deals with alienation of immovable property belonging to a Public Trust and not investment of trust money. ( 6 ) IN the result therefore the order dated 16-12-71 passed by the learned Jt. (1) of sec 36 of the Act. There is no merit in this contention for the simple reason that sec. 36 deals with alienation of immovable property belonging to a Public Trust and not investment of trust money. ( 6 ) IN the result therefore the order dated 16-12-71 passed by the learned Jt. Civil Judge Surat in Special Darkhast No. 36 of 1968 dismi- ssing the darkhast without any order as to costs is hereby set aside. The darkhast shall be restored to file and shall be disposed of in accordance with law. The respondents shall pay the costs of the appellants in this Court. .