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Case Number

Original Side Appeal No. 53 of 1936.

Advocates

Messrs. V.V Srinivasa Ayyangar and G. Ramakrishna Ayyar for the Appellant.
Messrs. Srinivasaraghavan and Thyagarajan, S. Nagaraja Ayyar and R. Swaminatha Ayyar for the Respondents.

Judges

Leach, C.J
Abdur Rahman, J.

Acts

Indian Trusts Act.S. 88 of the Indian Trusts Act

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Smart Summary

Summary of Judgment

Factual and Procedural Background

The appellant is the only daughter of Abdul Rahiman Sahib, who died on 18 June 1921 when the appellant was about six years old. Under Sunni law the heirs included the appellant, the deceased's three brothers (Wahab, Majeeth and Hameed — respondents 1 to 3), a second wife Sakina Bi (who later died during the suit), and the deceased's mother Rabia Bi (who died before the suit). The family lived together after the father's death and the three brothers continued the business which the father had carried on in his name.

The day after the father's death respondents 1 to 3 changed the business name to "Abdul Rahiman Sahib and Brothers" and claimed they were partners each entitled to a quarter. They convened a panchayat/arbitration in October 1921 which gave an award (re-stamped in April 1922) distributing assets on the footing that respondents 1 to 3 were partners. That assertion of partnership was found to be false at trial and that finding has not been challenged on appeal. The appellant's grandmother purported to act as guardian during the panchayat proceedings but was not in law the guardian of the minor's property, rendering those arbitration proceedings, as to the minor, a nullity.

The appellant lived with respondents 1 to 3 until 1929 when she left and married Abdul Aziz (then over 15 years old). The brothers alleged Abdul Aziz had removed her from their lawful custody and filed a kidnapping complaint which was dismissed. The appellant instituted the present suit on the Original Side of this Court on 7 March 1930 claiming, inter alia, a one-half share in the estate and in properties acquired out of the business profits after the father's death (properties listed in part 1 of Schedule B to the plaint).

The trial Judge held that the appellant was entitled to a moiety of the estate as distributed by the arbitrators with profits from the date of death, but denied her any share in acquisitions made by respondents 1 to 3 out of post-death business profits on the ground that a co-owner in management "does not per se stand in a fiduciary relation". A preliminary decree was passed accordingly. The appellant appealed only the finding denying her a half share in post-death profits, contending respondents 1 to 3 were trustees/guardians and must account for her half share of profits.

Legal Issues Presented

Whether respondents 1 to 3, in carrying on the deceased father's business after his death and while the appellant was a minor living in their care, stood in a fiduciary position (as trustees/guardians) vis-à-vis the appellant.
If they did stand in a fiduciary position, whether they are liable to account to the appellant for one half of the profits and acquisitions arising from the business after the father's death.

Arguments of the Parties

Appellant's Arguments

The appellant contended that respondents 1 to 3 were in a fiduciary position because she was a minor living with them under their care and control and they took charge of her share in the estate.
She maintained that respondents used the business assets and profits, acquiring properties out of those profits (part 1 of Sch. B), and therefore she is entitled to a half share in those profits and acquisitions.
It was accepted by the appellant's Counsel that if no fiduciary relationship existed then the trial Court's preliminary decree would be correct; therefore the appeal turns solely on establishing fiduciary status.

Respondents' Position (as presented in the opinion)

Respondents 1 to 3 asserted they were partners in the business and adopted the firm name "Abdul Rahiman Sahib and Brothers"; this claim of partnership was submitted to the panchayat/arbitrators and adopted in the award (later held to be false at trial).
They acted and pleaded as the appellant's guardians: the 2nd respondent obtained letters of administration (18 December 1922) for the estate "for her use and benefit till she attained majority", yet the business and assets remained with respondents 1 to 3.
They alleged that the appellant had been kidnapped from their custody (a complaint that was dismissed). These actions were relied upon by the Court as evidence of their asserted guardianship and control of the minor and the estate.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Morgan v. Morgan	Where a person (whether father or stranger) enters upon the estate of an infant and continues in possession, the Court will consider such person as a guardian of the infant.	The Court relied on this principle to support the proposition that persons who take possession of a minor's estate may be treated as guardians (and thus in fiduciary relation) and therefore accountable for profits.
Dormer v. Fortescue	The Court will decree an account from the time the infant's title accrued; "every person who enters on the estate of an infant enters as a guardian or a bailiff."	The Court used this authority to justify ordering an account for the appellant from the time respondents took possession of the estate.
Doe v. Keen	An infant may consider whoever enters on his estate as entering for his use; supports treating entrants on an infant's estate as acting for the infant's benefit.	Invoked to reinforce the general equitable principle that possession by another over an infant's estate imposes duties and accountability in respect of profits.
Muhammad Abdul Rahim Baig Saheb v. Muhammad Abdul Hakim Baig Saheb (Bombay High Court)	Applied the fiduciary principle in the context of a Muhammadan family business where major sons continued the business and used assets of other family members (including minors and widow); assumption of family management created a fiduciary relationship.	The Court considered this local authority directly analogous: family members who assumed management and used assets of other beneficiaries (including minors) were in fiduciary relation; the present case was decided on the same footing.

Court's Reasoning and Analysis

The Court framed the sole question as whether respondents 1 to 3 should be regarded as trustees for the appellant to the extent of one half of the profits made from the business after the father's death. The reasoning proceeded in identifiable steps:

Factual matrix: respondents 1 to 3 took immediate possession of the deceased's business and assets the day after his death, changed the firm name to include themselves, and continued to manage the business while the appellant (a minor) lived in their care and control for about eight years (until 1929). They also caused a panchayat/arbitration award to be made distributing assets on the (incorrect) basis that they were partners.
Legal premise: a trustee (and a guardian of a minor in possession of the minor's property) is not permitted to profit from the trust. The Court cited classic equitable authorities (Morgan v. Morgan; Dormer v. Fortescue; Doe v. Keen) and applied the statutory codification embodied in the Indian Trusts Act (ss. 88 and 90) describing the rule that a person in a fiduciary position who gains a pecuniary advantage must hold that advantage for the beneficiary.
Application of principle to facts: respondents had de facto possession and management of the estate and business, asserted guardianship (pleadings and conduct such as obtaining letters of administration and asserting custody), and made a false claim of partnership to secure a larger share. They used monies and assets belonging to the estate (including the appellant's share) for their own benefit and to acquire properties.
Conclusion from law and facts: because respondents assumed management and possession of a minor's estate while the minor was in their care, they occupied a fiduciary position (akin to trustees/guardians) and therefore were not entitled to retain profits made from the business which rightfully belonged in part to the appellant. The Court explicitly treated their status as trustees irrespective of the fact they were co-owners.
Relief: the Court ordered that the account already taken pursuant to the preliminary decree must be re-taken or varied on the basis that the appellant is entitled to a half share in the profits arising from the business. The preliminary decree would be varied accordingly and the appellant awarded costs payable by respondents 1 to 3.

Holding and Implications

Holding: The appeal is allowed. The Court held that respondents 1 to 3 "were in the position of trustees" and are liable to account to the appellant for her half share in the profits arising out of the business. The preliminary decree is to be varied so that the account is taken on the basis that the appellant is entitled to a one-half share of the profits. The appellant is entitled to her costs to be paid by respondents 1 to 3.

Implications:

The direct effect is that the earlier preliminary decree (which denied the appellant any share in acquisitions made out of post-death profits) is varied and an account must be taken recognizing the appellant's right to one-half of the profits from the business since her father's death.
Respondents 1 to 3 are required to account and pay the appellant her share; they must also pay the appellant's costs of the appeal.
This decision applies established equitable and statutory principles of fiduciary duty (as cited) to the factual situation of family members who assume management of a deceased family member's business while a minor heir remains in their care. The opinion does not purport to announce an entirely novel rule beyond applying these existing principles to the facts of this case.

Disposition: Appeal allowed.

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Kathoom Bi v. Abdul Wahab Sahib And Others S

JUDGMENT

The question involved in this appeal is whether respondents 1 to 3 at times material to the suit stood in a fiduciary position with regard to the appellant. The appellant is the only daughter of one Abdul Rahiman Sahib, who died on the 18th June 1921, when she was about six years of age. The appellant's mother had pre-deceased the appellant's father, who was a Sunni Mohammadan. Under the Sunni Law, his heirs were the appellant, his three brothers, Wahab, Majeeth and Hameed (respondents 1 to 3), his second wife Sakina Bi (who died during the pendency of the suit) and his mother Rabia Bi, who died before the suit was instituted. Abdul Rahiman was a dealer in rope, thread, coir, carpets and other articles. His business was a very successful one and when he died he left a considerable fortune. All the members of his family lived together and the heirs continued to live together after his death. In the year following his death the 3rd respondent married his widow, Sakina Bi, and by her had four children, respondents 4 to 7. After his death the appellant lived with respondents 1 to 3 until 1929 when she left the family house and married one Abdul Aziz. She was then more than 15 years of age. According to the appellant's uncles, respondents 1 to 3, Abdul Aziz removed the appellant from their lawful custody. In fact they filed a complaint charging him with kidnapping the appellant. The complaint was dismissed and the appellant having married Abdul Aziz instituted the suit out of which this appeal arises.

Abdul Rahiman carried on the business in his own name, but the day after he died, respondents 1 to 3 changed the name of the business to “Abdul Rahiman Sahib and Brothers” and set up a claim that they had throughout been partners in the business, each brother having a quarter share. In the month of October 1921, respondents 1 to 3 caused a panchayat to assemble with a view to the panchayatdars distributing the estate on the footing that respondents 1 to 3 were each entitled to a fourth share in the business. The proceedings of the panchayatdars have been referred to here and below as arbitration proceedings and for the purposes of this appeal this description may be adhered to. The arbitrators submitted their award on the 10th October 1921, but as it was unstamped a fresh award was made on the 24th April 1922. It has not been suggested in the proceedings before us that the arbitrators acted improperly. They gave an award distributing the assets of the deceased's estate on the basis that respondents 1 to 3 were partners. So far as the arbitrators were concerned this was not in issue. Respondents 1 to 3 were not in fact partners and the arbitration proceeded on an entirely wrong basis. At the trial of the suit an issue was framed on the question whether respondents 1 to 3 were partners with Abdul Rahiman and the issue was found against them. This finding has not been challenged before us and the appeal has been argued on the footing that it was a false claim. It is not suggested that the appellant is in any way bound by the award. In fact it is conceded that she is not. The appellant's grandmother, Rabia Bi, purported to act as her guardian when the question of the distribution of the estate was before the arbitrators, but she was not in law the guardian of the minor's property and so far as the minor was concerned the proceedings were a nullity.

The appellant filed the suit on the Original Side of this Court on the 7th March 1930. She claimed that on the death of her father she became entitled to one half of his estate, her grandmother to one-sixth, her step-mother to one-eighth, and respondents 1 to 3, to the remaining five-twentyfourth share in all the assets left by Abdul Rahiman. It is not disputed that Sunni Law requires the estate to be distributed in these proportions. The appellant, however, alleges and again the truth of her allegation is accepted, that after her father's death her uncles took charge of all his assets, including the business, which they continued to carry on. The business continued to prosper and out of the profits respondents 1 to 3 purchased the properties set out in part 1 of Sch. B in the plaint. The appellant claimed before the trial Court and contends now that she is entitled to a half share in these properties and in all the accretions to the estate arising from the business. In law the heirs became tenants in common of the estate as it stood at the time of his death and the learned trial Judge held that the appellant was entitled to a moiety of the estate distributed by the arbitrators with profits from the date of her father's death, but he rejected her claim to a half share in the profits made out of the business after her father's death on the ground that a co-owner in management “does not per se stand in a fiduciary relation”. In accordance with his decision the learned trial Judge passed a preliminary decree directing the Official Receiver to take accounts on the basis that the appellant was entitled to a moiety of the properties left by her father, but to no share in the acquisitions made by respondents 1 to 3 out of the profits of the business subsequent to the death of Abdul Rahiman. This meant that the appellant was not to be given any share in the properties set out in part 1 of Sch. B. It is this finding which the appellant challenges. She says that the learned trial Judge should have held that respondents 1 to 3 were in the position of trustees and have given her a half share in all the profits made in the business after the death of her father.

The learned Advocate for the appellant conceded that if there was no fiduciary relationship, the preliminary decree passed by the learned trial Judge was the correct one. On the other hand it is not disputed that if respondents 1 to 3 are to be regarded as being in a fiduciary position the appellant is entitled to succeed in the appeal. Therefore, the sole question which the Court is called upon to decide is whether respondents 1 to 3 in carrying on the business of their deceased brother should be regarded as trustees for the appellant to the extent of one half of the profits. The case of the appellant is that the respondents 1 to 3 stood in a fiduciary position because she was a minor living with them under their care and control and that while she was in this position they took charge of her share in the estate. The facts on which the appellant's case is based do not admit of dispute, and for eight years, that is until 1929, respondents 1 to 3 had the appellant under their care and control. Moreover, they claimed to be her legal guardians as the pleadings in this case show. The 2nd respondent applied for letters of administration to the estate and effects of the appellant's father for her use and benefit till she attained majority, and on the 18th December 1922 obtained a grant of letters but the business and all the other assets of her father's estate remained with respondents 1 to 3.

A trustee is not permitted to make a profit out of his trust and a guardian of a minor is in the position of a trustee when in possession of the minor's property. In Morgan v. Morgan(1), Lord Hardwicke observed that where a person, whether a father or a stranger, enters upon the estate of an infant and continues in possession the Court will consider such person as a guardian of the infant. In Dormer v. Fortescue(2), Lord Hardwicke declared that the Court will decree an account from the time the infant's title accrued, “for every person who enters on the estate of an infant enters as a guardian or a bailiff”, and in Doe v. Keen(3), Lord Kenyon, C.J, said that nothing can be clearer than that an infant may consider whoever enters on his estate as entering for his use. This principle has many times been affirmed and is now embodied in the Indian Trusts Act.

S. 88 of the Indian Trusts Act provides that where a trustee, executor, partner, agent, director of a Company, legal adviser or other person bound in 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 interest 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. S. 90 provides that where a tenant for life, co-owner, mortgagee or other qualified owner by his availing himself of his position as such, gains an advantage in derogation of the rights of the other persons interested in the property, or where any such owner, as representing all persons interested in such property, gains any advantage he must hold for the benefit of all persons so interested the advantage so gained, but subject to repayment by such persons of their due share of the expenses properly incurred and to an indemnity by the same persons against liabilities properly contracted in gaining such advantage.

It is not necessary to review the Indian authorities which are in line with the English authorities, but in the course of the arguments our attention was drawn to the case of Muhammad Abdul Rahim Baig Saheb v. Muhammad Abdul Hakim Baig Saheb where a Bench of this Court (Wallace and Pandalai, JJ.) applied the principle referred to in a case relating to the business of a Muhammadan family. There a Muhammadan cloth merchant died leaving a widow, two major sons, two minor sons, and three minor daughters. The plaintiffs' case was that the major sons on the death of the father continued his business and taking advantage of their position as the eldest male members of the family used in the business the assets of the other members of the family, including the shares of the widow and the minors. The Court held that by this assumption of family management—it did not matter whether the position of the major sons was that of trustees de son tort or executors de son tort—the relationship was essentially a fiduciary one.

We are of opinion that the position of respondents 1 to 3 in this case was essentially a fiduciary one. They took charge of the estate of Abdul Rahiman in which the appellant had a half interest at a time when she was a child and in their care and control and they have continued in possession of the estate. Having got possession of the estate they set up a false claim to be partners in the business in order to get a greater share in the estate than the law allowed and utilised monies belonging to the appellant for themselves When the appellant eventually escaped from their control they alleged that she had been kidnapped from their custody as her lawful guardians and they have acknowledged their guardianship in the pleadings in this suit. On their own showing respondents 1 to 3 were the guardians of the appellant and the minor's property being in their hands they must account in full. The fact that they were co-owners of the estate of Abdul Rahiman does not affect their liability as guardians.

We hold that respondents 1 to 3 were in the position of trustees and are liable to account to the appellant for her half share in the profits arising out of the business. We understand that an account has already been taken on the basis of the preliminary decree. It will now have to be taken on the basis that the appellant is also entitled to a half share in the profits which have accrued from the business, and the preliminary decree will be varied accordingly. The appellant having succeeded she will be entitled to her costs, which will be paid by respondents 1 to 3.

Appeal allowed.

N.R.R

Kathoom Bi v. Abdul Wahab Sahib And Others S

Summary of Judgment

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Respondents' Position (as presented in the opinion)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Kathoom Bi v. Abdul Wahab Sahib And Others S

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