Case: Vithal Das Vs. Rupchand &amp; Ors

rent from the tenants. If the co-owner is to he clothed with the status of a trustee it must be shown that he has gained some advantage in derogation of the other co-owners interested in the property and that he gained such an advantage by availing himself of his position as co-owner. In the present case, there is no allegation made by the plaintiffs that the defendant has gained any advantage in derogation of the rights of the plaintiffs, nor is there any finding of the lower Courts that the defendant gained any advantage by availing himself of his position as co-owner. We shall, however, assume in favour of the respondents that the defendant is in the position of a constructive trustee in view of the provisions of S. 90 of the Trusts Act. Even upon that assumption we are of opinion that the defendant is not liable to pay interest to the plaintiffs for their share of the rent of the properties. The reason is that the trustee is liable to pay interest only if he commits a breach of trust under S. 23 of the Trusts Act. There is also the restriction contained in S. 23 of the Trusts Act, namely, that a trustee committing a breach of trust is not liable to pay interest except in the cases mentioned in that section. It was argued by Mr. S. P. Sinha for the respondents that the defendant was liable to pay interest under S. 23 (b) of the Trusts Act because there was unreasonable delay in paying the trust money to the beneficiary. We are unable to accept this argument as correct. In our opinion, S. 23 (b) contemplates cases where there is an obligation on the part of the trustee to pay the trust money to the beneficiary at fixed intervals or on demand. In our opinion, there is no question of breach of trust on the part of the defendant in the present case and the provisions of S. 23 (b) of the Trusts Act are not attracted. The view that we have expressed is borne out by several authorities. In Blogg v. Johnson, (1867) 2 Ch A 225, Lord Chelmsford, L. C. stated that "the Court will not charge an executor who has been guilty of delay in accounting, with interest on arrears of income unpaid by him". In that case, I, wag entitled to a life income from the estate of her husband, and died in 1861. A bill was flied by her executor, in 1862 against the executor of her husbands will, Who had been his partner in business, for an account of income due to her estate: in 1863 accounts were directed. In 1866 a certificate was made, finding that a large sum was due from the husbands executor. It was held by Lord Chelmsford, L. C. that he was not chargeable with interest before the date of the certificate. Again, in Silkstone and Haigh Moor Coal Co. v. Edey, 1900-1 Ch 167, it was held by the Chancery Court that upon the setting aside of a sale by a trustee of trust property to himself, and the reconveyance of the property to the beneficiaries, it is not the practice of the Court to charge the trustee with interest on the rents and profits received by him since the date of the sale. Interest was, however, charged on arrears in some cases as in Melland v. Gray, (1845) 63 ER 741 (744) and Gilroy v. Stephen, (1882) 46 LT 761, but these cases fall within the range of another principle of equity that where an executor or a trustee unnecessarily detains money in his hand which he ought either to have invested or to have paid over to the person entitled to it, he will have to pay interest for it. As Lord Chelmsford, L. C. observed in (1867) 2 Ch A 225 at p. 228 :Where money is thus improperly retained, it appears to me to be immaterial how the sum has arisen, whether from a legacy, or a distributive share, or a residue, or the arrears of income. In the latter case, the claim for interest is not made on account of the arrears, but for the improper keeping back of a sum of money, from whatever source derived, which the executor or trustee ought to have paid over." 7. We have already given reasons for holding that the provisions of S. 23(b) of the Trusts Act do not apply to the present case and the plaintiffs are not entitled to claim any interest on arrears of rent and the High Court has fallen into an error in granting such interest. 8. The next contention raised on behalf of the appellant is that the Commissioner examined the accounts and submitted his report from July 2, 1937 to December 31, 1954 and the High Court was not justified in granting a decree to the plaintiffs for the subsequent period from January 1, 1955 to April 11, 1957 on the basis of the figures found from the Commissioners report. It was argued that the High Court had no basis for assuming that the same rental income was received by the defendant for the period from January 1, 1955 to April 11, 1957 as for the prior period. In our opinion, there is great force in this argument and we should, in the normal course, remand the case to the High Court for a finding as to the accounts of the subsequent period. Mr. Sinha, however, pointed out that the litigation commenced in 1942 and has already been protracted too long. We do not, therefore, wish to remand the case to the High Court for further inquiry. Having examined the evidence on record of this ease, we consider that, in the circumstances a sum of Rs. 2,400 (instead of Rs. 3,100) for the period from January 1, 1955 to April 11, l957 should be granted to the plaintiffs as their share of profits.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]6. We do not agree with the contention of the respondents that S. 90 of the Trusts Act applies to this case. A co-owner in possession of all the joint properties does not become a trustee by the mere fact of his collection of the full amount of rent from the tenants. If the co-owner is to he clothed with the status of a trustee it must be shown that he has gained some advantage in derogation of the other co-owners interested in the property and that he gained such an advantage by availing himself of his position as co-owner. In the present case, there is no allegation made by the plaintiffs that the defendant has gained any advantage in derogation of the rights of the plaintiffs, nor is there any finding of the lower Courts that the defendant gained any advantage by availing himself of his position as co-owner. We shall, however, assume in favour of the respondents that the defendant is in the position of a constructive trustee in view of the provisions of S. 90 of the Trusts Act. Even upon that assumption we are of opinion that the defendant is not liable to pay interest to the plaintiffs for their share of the rent of the properties. The reason is that the trustee is liable to pay interest only if he commits a breach of trust under S. 23 of the Trusts Act. There is also the restriction contained in S. 23 of the Trusts Act, namely, that a trustee committing a breach of trust is not liable to pay interest except in the cases mentioned in that section. It was argued by Mr. S. P. Sinha for the respondents that the defendant was liable to pay interest under S. 23 (b) of the Trusts Act because there was unreasonable delay in paying the trust money to the beneficiary. We are unable to accept this argument as correct. In our opinion, S. 23 (b) contemplates cases where there is an obligation on the part of the trustee to pay the trust money to the beneficiary at fixed intervals or on demand. In our opinion, there is no question of breach of trust on the part of the defendant in the present case and the provisions of S. 23 (b) of the Trusts Act are not attracted. The view that we have expressed is borne out by several authorities. In Bloggv. Johnson, (1867) 2 Ch A225, Lord Chelmsford, L. C. stated that "the Court will not charge an executor who has been guilty of delay in accounting, with interest on arrears of income unpaid by him". In that case, I, wag entitled to a life income from the estate of her husband, and died in 1861. A bill was flied by her executor, in 1862 against the executor of her husbands will, Who had been his partner in business, for an account of income due to her estate: in 1863 accounts were directed. In 1866 a certificate was made, finding that a large sum was due from the husbands executor. It was held by Lord Chelmsford, L. C. that he was not chargeable with interest before the date of the certificate. Again, ine and Haigh Moor Coal Co. v. Edey, 1900-1 Ch167, it was held by the Chancery Court that upon the setting aside of a sale by a trustee of trust property to himself, and the reconveyance of the property to the beneficiaries, it is not the practice of the Court to charge the trustee with interest on the rents and profits received by him since the date of the sale. Interest was, however, charged on arrears in some cases as ind v. Gray, (1845) 63 ER 741 (744) and Gilroy v. Stephen, (1882) 46 LT761, but these cases fall within the range of another principle of equity that where an executor or a trustee unnecessarily detains money in his hand which he ought either to have invested or to have paid over to the person entitled to it, he will have to pay interest for itWe do not, therefore, wish to remand the case to the High Court for further inquiry. Having examined the evidence on record of this ease, we consider that, in the circumstances a sum of Rs. 2,400 (instead of Rs. 3,100) for the period from January 1, 1955 to April 11, l957 should be granted to the plaintiffs as their share of profitsA certified copy of the judgment was delivered to the plaintiffs on May 4, 1957 but the endorsement on the certified copy with regard to the date was fraudulently made. An application was made by the defendant to the High Court on November 20, 1961 drawing the attention of the High Court with regard to the endorsement on the certified copy of the judgment. There is however, no reference in the judgment of the High Court on the question of limitation and it should, therefore, be taken that the point was not pressed on behalf of the defendant at the time of the hearing of the appeal by the High Court. It is, therefore, not possible for us to entertain the argument of the appellant at the present stage, in the absence of any finding of the High CourtIt was said that the High Court was wrong in holding that the defendant was liable as a trustee for the rents he ought to have realised even though there was no letting of the building. The Solicitor-General may be right in his argument that the defendant cannot be held liable as a constructive trustee for the rent he has not realised from the tenants and for the premises which were not let out to tenants and which had been lying vacant, but the ground upon which the High Court has made the defendant liable is different. The High Court has taken the view that the defendant has not kept proper accounts of the income of the rents realised from the shops. In the absence of proper accounts it is not possible to accept the case of the defendant regarding the vacancies. In our opinion, the finding of the High Court on this point is not vitiated by any error of law and the argument of the Solicitor-General must be rejected on this aspect of the caseIn our opinion, the contention put forward by thel is well founded and must be accepted as correct7. We have already given reasons for holding that the provisions of S. 23(b) of the Trusts Act do not apply to the present case and the plaintiffs are not entitled to claim any interest on arrears of rent and the High Court has fallen into an error in granting such interest.