The Madura Etc. Deva... v. R. Doraiswami Nayudu...

JUDGMENT

(Delivered by Abdur Rahman, J.)

This appeal arises out of a suit brought by the Madura Meenakshi Devasthanam for a sum of Rs. 7673-12-10 by way of damages against two persons, the first of whom is the ex-trustee and the other an execution clerk of the Devasthanam. The claim against the first defendant, with whom we are concerned in the present appeal, was made on account of gross negligence alleged to have been committed by him between the 12th November 1930 and the 11th November 1935 when he held the office of a trustee. The negligence is said to have consisted,

(a) In allowing certain rents to become barred by limitation without instituting suits for their recovery;

(b) in permitting the second defendant (the execution clerk) to withdraw certain amounts for the expenses of suits or executions which were never spent and some of which were drawn twice over; and

(c) in tendering no explanation with reference to certain items when called upon so to do.

The 1st defendant who was a Tahsildar in Government service and whose services were lent by the Government to the Devasthanam commented in his written statement on the absence of any averment in the plaint as to any wilful default or conscious omission of his in collecting and recovering amounts due to the Devasthanam. He pleaded that he had “discharged his duties to the best of his abilities in furtherance of the interests of the Devasthanam” and urged that in a big institution like the Madura Devasthanam which possessed extensive properties in several villages and towns and derived an income of about two lakhs of rupees annually, it was “impossible for any trustee to be conversant with each and every detail of the workings of the several departments and branches.” It was pointed out by him in his written statement that the margin of non-collection and arrears that had to be written off was too low and “would compare favourably with such percentage in other similar institutions and even in Government departments.” In short, he denied that he had been guilty of any negligence for which he could be held responsible or that the Devasthanam had suffered any damages in consequence of his conduct. In view of the various pleas raised by the defendants, several issues were framed but we are mainly concerned with the second issue which reads as follows:

“Whether all or any of the amounts mentioned in schedules A and B of the plaint were lost to the Devasthanam and how and when; if so, who is responsible for the same.”

Finding that the plaintiff Devasthanam was governed by a scheme as framed by the District Court of Madura in O.S No. 4 of 1922 and modified by this Court in A.S Nos. 209 and 210 of 1925 (Ex. R.) and that the trustee was being governed by the rules framed thereunder, the trial Court was of the view that inasmuch as “the entire administration of the Devasthanam was vested in the trustee” and as “he was in full and exclusive control over all the servants and officials of the Devasthanam” it was his (the 1st defendant's) duty to keep regular accounts of all receipts and disbursements and his contentions that he had relied on his subordinates performing their duties properly and was immune as long as his attention was not invited to any particular irregularity could not be accepted. The same conclusion was drawn by the learned Subordinate Judge from S. 48 of the Hindu Religious Endowments Act and from S. 15 of the Indian Trusts Act. Holding that “a trustee is bound to conduct the business of the trust with the same care which an ordinary prudent man of business would take having regard to the interests of those for whom he feels bound to provide and that it was his duty to realise all the debts due to the endowment as soon as possible” except when he considered an action to be fruitless or inexpedient, he proceeded to consider the various items claimed by the Devasthanam from the point of view whether the 1st defendant had used that degree of diligence and care which was expected of an ordinary prudent man of business and coming to the conclusion that the 1st defendant did not so act in regard to some of the items, the learned Subordinate Judge found the 1st defendant to be liable for Rs. 2069-7-6. The rest of the claim was negatived. The plaintiff has appealed and wants the 1st defendant to be made liable for the entire amount claimed against him by way of damages. The 1st defendant has, on the other hand, filed cross-objections asking for the suit against him to be dismissed entirely.

In proceeding to decide this case on correct legal principles, it must not be overlooked that this is a suit for damages and the plaintiff came to the Court with the allegations that it has suffered damages as a result of gross negligence of the 1st defendant. Whatever might have been the case if this were a suit for accounts and the defendant had been called upon to render accounts in respect of monies which had come into his hands or which might have come into his hands but for his “wilful default” of which there is no allegation in this case, not to say of its proof on the record, the position is substantially different when a defendant is attempted to be made liable for damages alleged to have been suffered by a plaintiff as a result of the former's negligence. In that case, the mere proof of negligence (if negligence is found established and as to which we say nothing at present) is not sufficient to make the defendant liable. It should be definitely proved that the plaintiff had suffered damages in fact as a result of the defendant's negligence. That is why the second issue was framed, we take it, in the form which it bears. And in spite of a definite issue no evidence was led on behalf of the Devasthanam to show whether the monies due from the tenants would have been recovered if suits had been instituted against them within the period of limitation prescribed by law.

Learned Counsel for the appellant however contends that the onus of proving that no money would have been recovered even if suits had been instituted against the tenants was not on the plaintiff Devasthanam but on the 1st defendant who was admittedly a trustee, who must be taken to have committed a breach of duty in not instituting suits and who had allowed the rents due from the tenants to be barred by time. Reliance was placed in support of this contention on the decision in In re Brogdon Billings v. Brogdon(1). It is admitted on behalf of the appellant that the trustee had ample discretion not to institute suits if he were shown to have considered the matter and to have decided against their institution. But in the absence of any allegation or proof of the fact that he had deliberately refrained from filing the suits, the 1st defendant must be, it is contended, mulcted in damages and held liable for the amounts that he has allowed to be barred by limitation.

To contend that the 1st defendant must be held liable for the amounts for which the suits were not instituted by him without any proof on the record that if such suits had been instituted these sums would have been recovered and that by the non-institution of these suits, the plaintiff Devasthanam has lost in fact, (not in getting the decrees, but in not realising the amounts which it would otherwise have), would be tantamount to saying that there was no distinction between the securing of decrees and recovering the amounts for which decrees would have been passed although we know, and as observed by their Lordships of the Privy Council in The General Manager of the Raj Durbhanga v. Maharaja Kumar Rampat Singh(2), that “the difficulties of a litigant in India begin when he has obtained a decree.” A great gulf exists between obtaining decrees and their realisation and, unless it is shown that the decrees would have been realised if passed, it cannot be found that the Devasthanam had really lost any money or suffered any damage in consequence. In fact, if the tenants happen to be paupers, as a majority of them in this country unfortunately are, the non-institution of suits might have saved some good money from being thrown after bad and the Devasthanam would, in that case, be a gainer and not a loser. In giving his decision in In re Brogdon Billings v. Brogdon at 557 cited by learned Counsel for the appellant, North J. observed as follows:

“But the second and equally important question remains for consideration whether, if the defendant Budgett had used due diligence in attempting to recover the trust funds any good would have resulted therefrom. It is clear that the Court will not punish a trustee pecuniarily for his breach of trust except so far as loss has resulted therefrom to the trust estate. In other words, if no loss has been incurred…………there is nothing remaining for the trustee to make good……………”

And this proof of loss must be adduced by the plaintiff who asks for a decree for damages against the defendant. There is moreover no allegation in this case that there had been any wilful default on the part of the trustee. It is in evidence in this case that the Devasthanam owned 54 villages and possessed considerable wet and dry lands in several villages lying in the Districts of Madura, Ramnad, Trichinopoly and Tinnevelly. There were about 10,000 pattadars in these villages, and it is not surprising that with an annual income of two to three lakhs, the work of the office was being carried on by four sections (a) Revenue, (b) Law, (c) Treasury, and (d) General. The fact whether any rents or decrees were getting barred by time would, “in the ordinary course have to be reported by the law section.” There is nothing to suggest that any report was made by that section to the defendant. How was the 1st defendant to know that the department was not doing its work properly? Relying on the observation in the judgment of the Court of Appeal In re National Bank of Wales Ltd., to that effect that,

“Business cannot be carried on upon principles of distrust. Men in responsible positions must be trusted by those above them, as well as by those below them, until there is reason to distrust them. We agree that care and prudence do not involve distrust; but for a director acting honestly himself to be held legally liable for negligence, in trusting the officers under him not to conceal from him what they ought to report to him, appears to us to be laying too heavy a burden on honest businessmen.”

which was confirmed by the House of Lords in the case reported under the name of Dovey v. Corey. Romer, J. laid down in In re City Equitable Fire Insurance Co.(3) as follows:

“In respect of all duties that, having regard to the exigencies of business, and the articles of association, may properly be left to some other official, a director is, in the absence of grounds for suspicion, justified in trusting that official to perform such duties honestly.”

There is nothing in the rules framed under the scheme which may lead us to infer that the 1st defendant was not to allow the work to be carried on by the law department or was not to repose confidence in the working of its officers. To hold the 1st defendant liable merely because he failed to devise “some method or device by which the 1st defendant as the controlling officer could have detected acts of delay on the part of his staff”, as stated by the lower Court, is, in our opinion, to extend the scope of the rules to an extent that they were never intended to have and to place a burden on the 1st defendant which he could not possibly be allowed to shoulder.

Moreover there is no allegation in this case, as we said before, of any wilful, that is to say, intentional default by the 1st defendant. In order to be wilful it must have been shown that the 1st defendant knew that certain claims or applications for execution of decrees were going to be barred by limitation and that he had intentionally allowed them to be so barred. Learned Counsel for the appellant contended that even independently of the rules framed under the scheme, it was the 1st defendant's duty to keep himself informed as to whether rent or execution applications were going to be barred and that he should be held liable for his ignorance which should be, in the circumstances, regarded as culpable. This is virtually the same argument although put in different words as had found favour with the lower Court. But we did not and do not agree with its soundness. It is almost impossible to conceive that a person in position of the 1st defendant could have kept himself personally acquainted with the working of the minute details in every department when the institution was of the magnitude as the plaintiff Devasthanam happens to be and he could not but have reasonably acted on the assumption that the law department would do its duty and bring such matters to his notice. After all the law department was not acting in the capacity of an agent for the first defendant. But even if it were, it would be plaintiff's duty to show some wilful default of his before he could be held liable. In overruling the decision by Chitty J. in In re Brider, Brier v. Evison(4) the Lord Chancellor observed,

“Now, it appears to me here, that the person on whom the onus probandi lies has failed to inform the Court of the circumstances which it was absolutely necessary for the Court to know, before it could come to the conclusion that the loss by the agent's insolvency was due to some wilful default on the part of the executors.”

For the above reasons we are of opinion that the onus probandi of proving actual loss and circumstances which would have rendered the 1st defendant liable was on the plaintiff Devasthanam and in the absence of any evidence on the record that the Devasthanam had suffered any loss and that the 1st defendant had been guilty of wilful default, no decree should have been passed against him merely because certain items or execution applications had become barred by limitation.

This is not however all. We are not satisfied in this case that the sums of money which are alleged to have been barred were really due from the tenants. It seems that new survey rates were introduced but they were decided by the Courts to be unlawful. But when the previous trustee, one Ramalinga Mudaliar, attempted to set right the accounts, he was not allowed so to do with the result that they (i.e the accounts) were thrown into confusion. It was not easy in the circumstances to ascertain whether the monies shown to be due by the tenants in the Devasthanam books were really due.

The second ground on which the 1st defendant was attempted to be made liable, was that the second defendant was permitted to withdraw certain amounts for the expenses of suits or executions which were not shown to have been spent by him and in some cases monies are stated to have been drawn twice over for the same purpose. Mr. Rajah Iyer, learned Counsel for the appellant, contended that the 1st defendant should be held liable for lack of supervision; but the contention cannot be accepted when we find that the vouchers had been scrutinised by the various clerks in the law department which was under the control of a law graduate and brought to the 1st defendant in the ordinary routine. There was nothing to excite his suspicion that the 2nd defendant (who was not the 1st defendant's agent or servant) was trying to embezzle money by preparing false vouchers. As soon as the 2nd defendant came under suspicion he was first of all transferred and then suspended and eventually prosecuted but before any further steps could be taken to remove him, the 1st defendant's period of office came to an end. The 1st defendant could not be held liable, in these circumstances, even if the test that a trustee is expected to devote the same care and attention to the business of the trust as an ordinary man would use in dealing with the interests of those which he is bound to protect is applied to the present case.

As to the items for which the 1st defendant was stated to have given no explanation in spite of the denials made on behalf of the Devasthanam, our decision must be the same as there is nothing on the record to show that the items in regard to which explanations were asked for were due in fact. For the above reasons, the plaintiff's appeal is dismissed with costs.

As for the cross objections filed on behalf of the respondent, the 1st item to which exception had been taken is item 10 for a sum of Rs. 1862-14-5. We have already referred towards the close of our judgment in the main appeal to the confusion in the Devasthanam books in regard to arrears and we are not satisfied that the arrears of kist for faslis 1337 and 1338 were really due by the tenants. The lower Court's reasoning that the explanation given by the 1st defendant in Ex. Q was “on the footing that the said sum of Rs. 1862-14-5 was a real arrear”, is based on a misapprension. It was not admitted in the document that this money was due in fact. The objections in Ex. Q were apparently advanced on the assumption that if the arrears were found to be really due, the 1st defendant could not be, even in that case, held liable for the reasons given by him. It is clear from what has been stated in the last three lines of the first paragraph of Ex. Q. In the absence of a proof that these sums of money were really due from the tenants, the question of their capacity to pay does not arise. We would therefore hold that the 1st defendant is not liable for this amount. As for item 9 which is for a sum of Rs. 20-7-0, the 1st defendant must be held liable as he, on his own showing, received the money on behalf of the temple and failed to remit it to the Devasthanam treasury. It may be that he had paid this money to the 2nd defendant for being credited to the treasury; but inasmuch as it was not a portion of the 2nd defendant's duties to take any money from the 1st defendant and to deposit it into the treasury on his behalf, we are of opinion that this item was rightly allowed against the 1st defendant. As for the two applications for execution for Rs. 31-7-6 and Rs. 13-7-0 which form part of item 3 and in regard to the other seven cases which form part of the 5th item of B schedule, we are, for the reasons given in our judgment in the appeal, of opinion that the 1st defendant could not be held liable in the absence of any proof of his wilful default and of the fact that the monies would have been recovered from the judgment-debtors if decrees were executed against them. The cross-objections in regard to all the items except item 9 should therefore be accepted. The plaintiff, will, in the circumstances, pay the costs of the 1st defendant both in this and in the lower Courts.

Appeal dismissed.

N.R.R