Decided on February 28,1935

H HUNTER Appellant


Lancelot Sanderson, J. - (1.) THESE are six consolidated appeals from decrees of the Chief Court of Oudh, Mr. H. Hunter is the liquidator of the Bank of Upper India, Limited, Lucknow, which is in liquidation, and for the sake of brevity he is hereinafter referred to as " the liquidator. " The Bank appeals against a judgment and decree of the Chief Court, dated December 22, 1930. Rani Kaniz Abid is the beneficial owner of certain decrees obtained in respect of promissory notes executed by Chaudri Shafiz-uz-zaman, hereinafter called " the insolvent" and she appeals against a decree of the Chief Court, dated October 15, 1929. Chaudhri Sharf-uz-zaman is the son of the insolvent, and K. B. Sheikh Matin-uz-zaman, Mohammed Wasim, Chaudri Hyder Husain, Chaudri Ehsan Husain are the trustees of a deed of trust executed by the insolvent and dated January 30, 1912. They are hereinafter referred to as "the trustees". The abovementioned Chaudri Sharf-uz-zaman and the trustees appeal against a decree of the Chief Court, dated August 4, 1930, and the said decree of December 22, 1930, as well as the said decree of October 15, 1929. Pande Piare Lal is a creditor of the insolvent upon certain bonds in respect of which he obtained decrees. He supports Rani Kaniz Abid in her appeal against the said decree of the Chief Court, dated October 15, 1929. The insolvent is the Talukdar of Bhilwal in the Bara Banki district; he succeeded to the Taluqa, on September 19, 1907. Apparently by the end of 1911 he had incurred considerable debts and on January 30, 1912, he executed the abovementioned deed of trust and appointed certain persons as trustees of the whole of his estates. Only three of the named trustees took up the trust. By the terms of the deed all the insolvent's estates as specified in Sch. A of the deed were conveyed to the trustees to be held in trust for the use and benefit of the insolvent's son Sharf-uz-zaman for the objects and on the conditions thereinafter specified. Clauses 15, 16 and 21 are material, and are as follows : Transfer of Estate. 15. That the said trustees shall from the date of this indenture enter upon and take possession of all the estates and properties mentioned in Sch. (A) aforesaid and at once apply for and obtain mutation in their names in place of mine in all the Revenue Records and shall out of the rents and profits of the said estates and properties after deducting therefrom the cost of management, the Government revenue and after public charges payable in respect thereof and the expenses of litigation, if any, incurred in instituting or defending suits in respect of the property aforesaid or in contesting liability for any debt and the necessary repairs of houses maintenance of private roads and the improvements in respect of the aforesaid properties such as sinking of wells, constructing of aqueducts and other improvements which the trustees may in their discretion consider necessary for the improvement and preservation and enhancement of rent of any land or lands in the aforesaid estates and properties, apply the balance to the payment of monthly allowance of : (1) Rs. 400 to me for my personal use and expenses which shall be payable to me during the natural term of my life. (2) Rs. 200 to my aforesaid wife, Mt. Razi-un-nisa, during the term of her natural life for her personal use and expenses. (3) Rs. 100 for the education and bringing up of my aforesaid son Sharf-uz-zaman during the continuance of the trust. But the trustees shall be at liberty to spend more money on the educational advancement of my aforesaid son either in India or abroad. (4) Rs. 80 to my sister Mt. Zarif-un-nisa during the term of her natural life. (5) Rs. 50 to Chaudhri Ehsan Husain, the son of my eldest sister, deceased, during the term of his natural life. (6) Rs. 50 to Ali Haider and Ishtiaq Ahmed, the sons of my sister Mt. Manzur-un-nisa deceased, for the terms of their natural lives jointly or the survivor of them, and other petty allowances which the estate may be liable to pay ; and the balance to be applied towards the liquidation of my debts and liabilities chargeable upon the estate as specified in Sch. (B) and others not so charged as specified in Sch. (C) aforesaid in the manner and the order the trustees may consider proper and beneficial to the estate. Authority to Transfer. 16. That the annual profits available for the payment of the aforesaid' debts and liabilities being insufficient, the trustees are hereby empowered arid given full authority to transfer the whole or part of any of the aforesaid estates and properties by sale, mortgage, Zar-i-peshgi the lease or other beneficial lease of the properties but in the exercise of their discretion in the matter of sale of the aforesaid properties, regard may be had that Sikandarpore and Sharifabad estates may be sold first arid in case it be necessary to sell other properties for the purpose aforesaid, the fractional shares and Pattis of the Khanpur and Bhilwal estates may be next sold and in case the sale of the aforesaid properties be not sufficient and the trustees deem a further sale necessary for the payment of debts, the Khanpur estate' may then be sold and even if this be not sufficient then the remaining villages of Hasanpur estate may be sold. But in no case the villages of Bhilwal and Subeha with their hamlets and appurtenances shall be sold. Nature of Expenses and Investments. 21. That after payment and discharge of all debts and liabilities, the trustees shall, if there are surplus profits, increase my monthly allowance from 4 to 6-hundred and that of my aforesaid wife from 2 to 3 hundred and the surplus if any after meeting the aforesaid expenses shall be accumulated to accrue for the benefit of my aforesaid son, his heir and assign and it shall be lawful for the trustees to invest such surplus in Government Promissory Notes, Railway shares, debentures, village properties, house properties at Lucknow or any other advantageous investments as the trustees may think fit.
(2.) PREVIOUSLY to the execution of the said deed, the insolvent had executed four mortgages in favour of the said Bank, which was shown as a secured creditor in Sch. B of the said trust deed in respect of the said mortgages. This schedule was described as " approximate debts to the extent chargeable upon the estates and properties mentioned in Sch. A. " The debt in respect of which Pande Piare Lal claims to be a creditor of the insolvent was not inclued in the schedules of the trust deed. The name of Rani Kaniz Abid does not appear in either of the schedules, but it was alleged that she had an interest in the debts standing in the names of Raja Bhagwan Bakhsh and Debi Lal Moolchand which appear in Sch. C of the trust deed. Their Lordships are not in a position to express and do not express any opinion upon this last-mentioned allegation. A few months after the execution of the trust deed the insolvent succeeded" in preventing the trustees from managing the estate, with the result that in proceedings instituted by the trustees under Section 145, Criminal Procedure Code, the Magistrate took possession of the properties under Section 146 of the said Code. The trustees then applied to the Court of the District Judge for their discharge, and on August 12, 1912, the District Judge discharged the trustees,, refused to appoint new trustees and held that the trust had become extinguished. The result was that the insolvent resumed management of the estate. In 1913, the aforesaid Bank went into liquidation, and at a later date, viz. , in 1917, Mr. Hunter was appointed liquidator. Shafiz-uz-zaman was adjudicated an insolvent on January 27, 1914 : The Deputy Commissioner of Bara Banki was appointed receiver in the insolvency and he took possession of the properties covered by the deed of trust and other properties belonging: to the insolvent. The trustees of the deed, while in possession of the estate,- had executed a further mortgage on the above-mentioned properties in favour of the Bank to secure advances needed for the management of the estate ; so that at the time of the adjudication of the insolvent, there were five mortgages held by the Bank secured upon the estate of the insolvent.
(3.) ON July 22, 1918, Sharf-uz-zaman, the son of the insolvent, instituted a suit in the Court of the Additional District Judge against the receiver in the insolvency, the insolvent, the liquidator and certain other parties praying for a declaration that the properties which were the subject-matter of the suit,' were comprised in the trust deed and that the deed was binding on the defendants. The District Judge dismissed the suit, but on appeal, the Judicial Commissioner's Court held that the trust was a valid trust. The receiver in the insolvency then applied in the Insolvency Court for an order to annul the deed of trust under Section 53, Provincial Insolvency Act. The result of the proceedings thus initiated was that on April 14, 1924, the Court of the Judicial Commissioner on appeal held that the deed of trust was made in good faith and for valuable consideration and was not voidable as against the receiver. That decision has been accepted by all the parties appearing before their Lordships as a final decision binding upon them, and this appeal therefore has to be decided upon the assumption that a valid trust was created by the deed of January 30, 1912, in respect of the properties specified therein. On August 8, 1924, the insolvent appointed the trustees who are parties to these appeals as trustees of the deed and the properties specified in the deed thereupon vested in the trustees. In 1921, the liquidator, on behalf of the Bank, had instituted a suit on the above-mentioned five mortgages against the insolvent, the receiver in the insolvency and others. He obtained the usual preliminary mortgage decree on May 31, 1923 ; the decree absolute was made on March 11, 1924, and the total decretal amount was Rs. 16,59,929-13-6. In August, 1924, the new trustees applied to the District Judge's Court for delivery of the insolvent's property comprised in the said trust deed to them after removing it from the control of the receiver in insolvency. This application failed : the Judge apparently regarded the Court of Insolvency as a " de facto trustee" and decided that there was no necessity for;

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