1. The present appeal arises out of a dispute in respect of certain lands, which had been acquired by Government in 1865. The question that has to be considered is, whether the lands have come into the possession of respondent 1 in such circumstances, that he must be held to take them as a constructive trustee thereof, on behalf of himself and other persons, or whether he was entitled to take them entirely for himself.
2. The principle that is invoked by the appellant, who contends that respondent 1 is a constructive trustee, is recognized in Section 90 of the Trusts Act.
3. Government, as I have already stated, acquired the lands in 1865; and 47 years later, on 28th December 1912 by a resolution of Government, it was resolved that the lands should be restored to the persons from whom they had been acquired. The resolution is headed; “Subject—Restoration of lands at Baitkhol,” and the operative portion is in para 2 of the resolution, which states that; “Government concur in the opinion expressed by the Collector in para. 5 of his letter” (which precedes it)
“that with the restoration of the lands to their respective owners the concession made by Government to the Karwar Municipality under Government Resolution No. 1390, dated 3rd April 1865, should cease.”
4. Paragraph 5 of the Collector's letter also refers to the “restoration of lands.” Then by Ex. 38, which is dated 5th July 1921, it is stated that the lands in question should be “restored,” to defendants 1 and 2 the second defendants being mentioned first, and defendant 1 in the second place. I need not refer to the details regarding the transference of the lands to the defendants; it took place 56 years after the original acquisition.
5. The question therefore is whether in so far as the transfer to defendant 1 is concerned, the lands may be held by defendant 1 himself, for his own benefit or under the principle of Section 90 of the Trusts Act, they must be held by him also for the benefit of his two nephews, from whom the appellant derives his title.
6. Section 90 of the Trusts Act, comes into operation when a tenant for life, co-owner, mortgagee, or other qualified owner of any property, by availing himself of his position as such gains an advantage, in derogation of the rights of the other person interested in the property.
7. The persons mentioned in the section are a tenant for life, co-owner, mortgagee, or other qualified owner of any property. The position of the respondent does not fall under any of these descriptions: the question therefore that I have to decide in this case is whether the principle of this section applies to a person holding such a position as the respondent holds, and whether there are any other persons interested in the property.
8. The rule in Section 90 of the Trusts Act, is taken from English law, and I think and I ought to guide myself by the decisions of the English Courts with reference to the principle that must govern me. The terms of S. 90 are not exhaustive; this is made clearer by referring to the other sections in the same chapter, and particularly to S. 94.
9. A case in which the rule was considered very carefully is Biss, In re, Biss v. Biss (1). The question there had reference to the renewal of a lease. The authorities were however very fully considered, and the principles and the whole law relating to them were elucidated. It seems to me that it is brought out in that case that while a trustee is absolutely prohibited from using his position, as a trustee, for acquiring a benefit for himself, other relations may arise, which give rise to a presumption more or less strong according to the circumstances against raining such advantage. The basic principle however depends upon whether any duty is owed by the person who obtains the advantage of making over the advantage or sharing that advantage with others. Where the acquisition of the advantage is dependent upon one person holding a position jointly with others, and where that position is in some way entirely under the control of the person deriving the benefit, he may to that extent be subject to the disabilities of a constructive trustee. Or, to take another situation, where the acquisition of a benefit depends upon the holding of a certain position, and that position is in reality held not by one but by several persons, and yet only one of these several persons comes to acquire that benefit, through holding that position, the person acquiring the benefit may be held to be a constructive trustee for those several persons.
10. The general principle applicable to trustees is stated by Lord Wrenbury (Buckley, J., as he then was) in the following terms (p. 43):
“The principle is that the trustee owes it to his cestui que trust to obtain a renewal, if he can do so, on beneficial terms, and that the Court will not allow him to obtain a renewal upon beneficial terms for himself when his duty is to get it for his cestui que trust.”
11. Then, secondly, after referring to the leading case of Keech v. Sandford (2), he applies the principle to one taking a limited interest in the property (p. 44):
“No person taking only a limited interest can avail himself of the situation in which the settlement has placed him to obtain a disproportionate advantage in derogation of the right of others who have similar claims.”
12. The principle is stated at p. 45, with reference, thirdly, to a tenant for life:
“…the tenant for life is a person between whom and the lessor there exists a relationship, and he must not use his position as tenant for life to obtain a renewal, and then say: ‘I have got that for myself’.”
13. The point is, fourthly, brought out by contrast in the following words in which Buckley, J., rejects the contention referred to, holding that it is not based on the true principle (p. 45):
“But I am told that the proposition is larger—that it does not matter whether when he gets his renewal his lessor knows that he is interested or not, or whether it is his interest in the property which has assisted him to obtain the renewal, but that if in point of fact he is interested he must be a trustee for the persons entitled under the will or under the intestacy.”
14. The important point is that which is indicated by the words:
“whether it is his interest in the property which has assisted him to obtain the renewal.”
15. I refer to Buckley, J.'s, consideration of the case, because though the Court of appeal came to a different conclusion, they accepted Buckley, J.'s opinion on the law, he having considered himself bound by a decision that was not binding on the Court of appeal.
16. Then, in appeal, Sir Henn Collins, Master of the Bolls, pointed out that (p. 56):
“…there was nothing in the appellant's conduct which was unfair, or such as to disentitle him to retain the benefit of the renewal.
17. The Master of the Soils mentions, in the first instance, the case of trustees, in regard to whom the presumption of personal incapacity to retain the benefit is one of law, and cannot be rebutted. He next refers to classes of cases in which there is no presumption of law, but at most a rebuttable presumption of fact: to mortgagees, tenants-in-common, and partners. Finally he comes to the case before himself, and says that in the case before him (p. 57):
“… the appellant is simply one of the next of kin of the former tenant, and had, as such, a possible interest in the term. He was not, as such, a trustee for the others interested, nor was he in possession. (p. 58). He did not take under a will or a settlement with interests coming alter his own, but simply got a possible share upon an intestacy in case there was a surplus of assets over debts.”
18. He then proceeds (p. 58):
“It seems to me that his obligation cannot be put higher than that of any other tenant in common against whom it would have to be established, not as a presumption of law but as an inference of fact, that he had abused his position. If he is not under a personal incapacity to take a benefit, he is entitled to show that the renewal was not in fact an accretion to the original term, and that it was not until there had been an absolute refusal on the part of the lessor, and after full opportunity to the administratrix to procure it for the estate if she could, that he accepted a proposal of renewal made to him by the lessor. These questions cannot be considered or discussed when the party is by his position debarred from keeping a personal advantage derived directly or indirectly out of his fiduciary or quasi-fiduciary position; but when he is not so debarred, I think it becomes a question of fact whether that which he has received was in his hands an accretion to the interest of the deceased, or whether the connexion between the estate and the renewal had not been wholly severed by the action of the lessor, before the appellant accepted a new lease.”
19. Later on the Master of the Bolls says (p. 59):
“Public policy, which is said to be the basis of the principle, does not seem to me to require that every person who takes an interest however slight in the estate of an intestate of which a lease formed a part should be under a personal incapacity to hold a renewal of such lease in his own right.”
20. It is to be noted that what is referred to is a total incapacity to take in contradistinction to the other position, stated as being dependent on a question of fact, immediately before.
21. Romer, L.J, delivered a judgment to the same effect. His judgment may be considered as referring to four distinct positions. He first of all rejects the
“supposition that if any person, only partly interested in an old lease, obtains from the lessor a renewal, he must be held a constructive trustee of the new lease whatever may be the nature of his interest or the circumstances under which he obtained the new lease (p. 60).”
22. Then he points out the shades of distinction caused by the variety of relations that may arise, dependent on the circumstances. He says (p. 60):
“…the equitable doctrine I am considering in not limited in its application to cases where the old lease was renewable by agreement or custom, or where the old lease was obtained by surrender or before the expiration of the old lease.”
23. Thirdly, the crucial point to which he refers is this (p. 60):
“There may well be and often is, an advantage, for the purpose of obtaining a new lease, in being in the position of an old lessee; and that advantage may be of appreciable value in the view of a Court administering equity, even though the landlord is under no obligation to grant a new lease to the old tenant. And, further, I may note here that the cases show that, with regard to a person obtaining a renewal who occupies & fiduciary position, it is contrary to public policy to allow him to rebut the presumption that in obtaining a renewal he acted in the interests of all persons interested in the old lease.”
24. Proceeding, fourthly, to consider the case with reference to positions advantageous for obtaining the renewal of leases, he refers first to those occupying a fiduciary position: including an executor, administrator, trustee, or agent, and then adds (p. 61):
“…If a stranger enters into possession of an infant's property, he is to be regarded as acting as a bailiff or agent for the infant in respect of that property.”
25. Then he considers the case of a partner, a mortgagee, and co-tenants, and remarks (p. 63):
“He obtained a renewal by availing himself of the possession of the lease, and by concealing the fact of the previous assignment, and by surrendering the old lease, which still had two lives in existence.”
26. This last remark is with reference to the case of Palmer v. Young (3). That case is further explained by referring to the fact that the defendant had (p. 63):
“‘pretended an interest in the whole,’ and had so obtained a renewal for an extra life to the exclusion of the plaintiff.”
27. The remark of Romer, L.J, which is however most pertinent to the case that I have to decide is as follows (p. 61):
“The cases which really demand full consideration are those where the person renewing the lease does not clearly occupy a fiduciary position. On inquiry into those cases it appears to me, as a result, that a person renewing is only held to be a constructive trustee of the renewed lease if, in respect of the old lease, he occupied some special position and owed, by virtue of that position, a duly towards the other persons interested.”
28. I have considered the case of Biss, In re, Biss v. Biss in such detail, because it has been frequently followed, and it brings out the ultimate principle underlying Section 90 of the Trusts Act, and also indicates the facts, circumstances or considerations in view of which the Court may conclude that a duty exists upon the person who obtains an advantage, of either making over the advantage or sharing that advantage with others.
29. I have in an earlier part of my judgment recapitulated the law as I understand it to be laid down in Biss, In re, Biss v. Biss . In the case of a trustee, it is an absolute, irrebuttable, rule that he is not to derive any benefit by reason of his position as a trustee; but other persons may be placed in a position resembling, to a greater or less extent, the position of a trustee. In their cases, the presumption may be rebuttable, and the strength of the presumption depends upon the degree to which their position approximates to that of a trustee. The appellant in Biss, In re. Biss v. Biss was simply one of the next of kin of the former tenant; so he was held not to be under an absolute incapacity to take the benefit of the renewal of the lease; but it was also held ani this is important in the present case—that unless he proved such facts as are mentioned in the judgments, public policy would not allow of his retaining the benefit of the renewal for himself.
30. Taking these as the principles that are applicable to the present case, it is clear that respondent 1 was not in the position of a trustee, and therefore there is no irrebuttable presumption as against him. It is also clear that he acquired the property under a resolution of Government, by which it was to be restored to the original owner. This leaves no doubt that the restoration must be either to the original owner, or to those who derived their interest from him; and the further order, Ex. 38, refers to the “restoration” of the land, although, no doubt, it contains the names of the present parties, and not the original owners. It was respondent 1's relation to the original owner which entiled and enabled him to get the property; by virtue of that position he owed a duty towards the other persons similarly interested. Not being a trustee, if he had wished to rebut the presumption (that the restoration was for the benefit of all persons deriving a right from the original owner) he would have been entitled to do so.
31. The questions to be decided might now be formulated, adopting the language, as far as possible, of Biss, In re. Biss v. Biss . Did defendant 1 obtain a restoration of the property, upon beneficial terms, to himself, when his duty was to obtain it for himself and his nephews? Did he, availing himself of the situation in which circumstances placed him, obtain a disproportionate advantage, in derogation of others, who had similar claims? Did he use his position as a descendant of the original owner, to obtain the restoration, and then say; “I got the restoration for myself?” Was there anything in his conduct, that was unfair, or has he abused his position? Has it been established against him, not as a presumption of law, but as an inference of fact that he has abused his position?—Not being under a personal incapacity to take a benefit, has he shown, as he was entitled to show, that the restoration was not, in fact, something similar to an accretion to the estate of their common ancestor? Has he shown that it was not, until there had been an absolute refusal on the part of the Government, and after full opportunity to his nephews to share in the restoration, if they could—that he accepted the restoration for himself? Was that which he has received, in his hands, an accretion to the interest of the deceased? Had the connexion between the estate and the restoration been wholly severed?
32. The respondent does not purport, or even attempt, to get findings in his favour, on these questions.
33. He relies, on the other hand, upon two cases: Chokku v. Tatya (4) and Bajaba v. Trimbak Vishvanath (5), in order to show that he acquired this property in his own right, and that he is not bound to share the benefit of it with the other persons, on whom the estate of the original owner may be taken to have devolved.
34. With regard to Chokhu v. Tatya, , the land formed part of joint family property. It was sold by the revenue authorities on account of arrears of revenue, and was purchased by a member of the family out of his self-acquisition. It was held that the land did not revert to the joint family, but became the private property of the purchaser. To such a case neither S. 90, nor the wider principle that I. have derived above, can apply; nor is there any reference to the section, either in the argument of counsel or in the judgment. The point there was whether the consideration for the purchase proceeded from the self-acquisitions of the purchaser. The other case, Bajaba v. Trimbak Vishvanath , referred to the purchase by a member of a joint family, with consideration, which was not part of the property of the joint family and the purchaser did not intend, by the purchase, to merge the property into the joint family property; he, on the other hand, excluded his brother from it. It was held again on the principles of Hindu law, that the property became the exclusive property of the purchaser.
35. These cases and the contention of the respondent do not contain any such rebuttal of the presumption, as is referred to in the judgments of the Master of the Rolls and Romer, L.J The case would have been brought out of the presumption, if the respondent had suggested to the other persons, who were the heirs of the original owner, that they should participate in the restoration of this property: if after such a suggestion the others had refused to participate and he had taken the benefit to himself, his conduct would have been unobjectionable; in that respect his position would have differed from that of a trustee on whom there would have been cast a duty to do acts only for the benefit of the cestui que trust. The position of the respondent 1 is extremely unusual. It could not but be so. It does not often happen that land is restored to the “original owner” fifty-six years after it has been taken from him. But respondent 1's position is comparable from some aspects to that of an executor de son tort.
36. For these reasons, it seems to me that the principle of Section 90 of the Trusts Act, was applicable to the present case: in my opinion, the judgment of the learned District Judge should be set aside, and that of the learned Subordinate Judge restored, with costs throughout.
R.M/R.K
37. Decree set aside.