Case: Shiva Nath Prasad Vs. State Of West Bengal

Madhav Prasad Birla (MPB) and Smt. Priyamvada Devi Birla (PDB) were one of the richest and the wealthiest couples who had no issues during their lifetime. MPB was one of the famous industrialists from the Birla family. The couple executed mutual wills in 1981. In 1982, the couple executed mutual wills revoking the earlier mutual wills. In 1988, during their lifetime, Smt. Birla formed four trusts and MPB formed the fifth trust. These trusts, 5 in number, covered corporate assets. On 30th July 1990 MPB died.2. On 10.9.1990, Smt. Birla gave directions in respect of MP Birla Trust under clause 6(b) and made nominations of beneficiaries in respect of her four trusts under clause 7(a) of the trust deeds in favour of three named public charitable institutions, viz., Hindustan Medical Institution (HMI), East India Education Institution (EIEI) and MP Birla Foundation. In terms of the said nominations made after the demise of MPB, the assets of the five trusts estimated at Rs.2400 crores stood settled for the benefit of HMI, EIEI and MP Birla Foundation. However, on 15th April 1999 PDB purported to revoke all the five trusts (stood dissolved). On 18th April 1999, Smt. Birla executed her will by which she bequeathed all her properties (including the estate of MPB) to accused no.1, R.S. Lodha and after him his son, the value of which is around Rs.2400 crores. Smt. Birla died on 3rd July 2004. R.S. Lodha was a trustee of MP Birla Foundation (one of the three public charitable institutions). He was also a trustee of HMI and EIEI prior to the dissolution of the five trusts w.e.f. 15.4.1999.3. Appellant herein, Shiva Nath Prasad, accused no.2 was also a trustee in the five trusts. Accused no.3, Dr. V.Gauri Shanker was a trustee in HMI, EIEI and MP Birla Foundation. He was also a trustee in three out of five mutual trusts referred to above. Respondent no.2 herein (complainant), a former employee working in MP Birla Group, claiming to be a close associate of late MPB and his wife, petitioned a complaint in the court of Chief Judicial Magistrate, Alipore in case no.C/4693 of 2004 alleging offences under the aforestated sections, viz., 120-B read with 406, 420, 467, 417 and 204 of the IPC, inter alia, on the ground that he was a witness to the intention and the wishes of the couple during their lifetime to leave their estate to charity which decision was made known to everyone close to the couple including the other members of the Birla family. According to the complainant, the couple had accordingly executed mutual wills on two occasions, first in the year 1981 and subsequently in 1982. According to the complainant, when the mutual wills were executed in 1981 and 1982, he was consulted and he had taken part in the discussion with MPB. According to the complaint, the couple had decided to dispose of their assets to charity after their demise. Respondent no.2 herein has further alleged in the complaint that in 1988 the couple created five mutual and reciprocal trusts under which the estate went to charity as the remainder beneficiary. Respondent no.2 further alleged that he was involved in the discussion relating to formulation of the terms and conditions to be mentioned in the five trust deeds. He was consulted in the matter of drafting of the said deeds. He was also a witness to the mutual and reciprocal agreements between MPB and PDB in regard to the five trusts. He was also a formal witness to the deeds.4. He was also a witness to the instrument of nominations of the beneficiaries of the five trusts. He was also a witness to the deed of appointment of trustees of the five trusts. According to respondent no.2, the said five trusts were created by the couple as mutual and reciprocal trusts by which the couple had mutually agreed to leave their estate, after their death, to charity and pursuant to that decision they had nominated the charitable institutions in which the assets held by the five trusts worth Rs.2400 crores would vest. According to respondent no.2, the said five trusts were irrevocable and the three public charitable institutions nominated by the couple as beneficiaries were HMI, EIEI and MP Birla Foundation. Respondent no.2 was also, in turn, associated as honorary secretary of HMI, EIEI and MP Birla Foundation. Respondent no.2 herein has alleged in the complaint that he was stunned when he came to know, on the demise of PDB, that the first accused R.S. Lodha had claimed that the estate of PDB, which included the estate of MPB, belonged to him under the above will dated 18th April 1999 made by the deceased PDB. In his complaint, respondent no.2, has stated that when he came to know that R.S. Lodha had made a claim to the entire estate of the Birlas, he made enquiries which revealed to him that R.S. Lodha had criminally conspired with the other accused in criminally misappropriating assets worth Rs.2400 crores vested by the above five mutual trusts in the above three charitable institutions and that the accused had converted the charitable endowment for personal gain. Respondent no.2, in his complaint, has further stated that the accused had attempted to create false evidence to show that the five trusts stood revoked and dissolved on 15th April 1999 which is three days before the alleged will dated 18th April 1999 executed by PDB and thereby the assets which had vested in the charitable institutions had been criminally misappropriated by fraud and conspiracy in which the other accused had participated actively.5. Respondent no.2 herein has further stated in his complaint that the accused have conspired to create false evidence in support of their claim that the five trusts stood dissolved during the lifetime of PDB herself. In his complaint, respondent no.2 has further stated that R.K. Choudhury, one of the trustees in the three out of five trusts was not even aware of the alleged revocation/dissolution of the five trusts by Smt. Birla during her lifetime, as alleged by the accused. According to the complaint, there was no revocation of the five trusts, as claimed by the accused. Respondent no.2 is a chartered accountant. In his complaint, he has pointed out the reasons for the couple deciding to vest the shares of group holding companies of MPB in the above three public charitable institutions, namely, HMI, EIEI and MP Birla Foundation. Respondent no.2 has stated that it was tax planning advised by respondent no.2 and by R.K. Choudhury. The purpose of choosing the three institutions was to make them a vehicle to promote the charitable activities of MPB group. Respondent no.2, in his complaint, has categorically alleged that R.S. Lodha is a qualified chartered accountant, who had won the confidence of the couple and who solely planned his way and eliminated all those who had worked with the couple so as to make Smt. Birla hopelessly dependent on him. According to the complaint, R.S. Lodha was the exclusive advisor and consultant of Smt. Birla personally. He was a director, auditor and the trustee of different companies. According to the complaint, in the last couple of years prior to 1999, R.S. Lodha had come to occupy the central place in the scheme of things of MPB group of companies and charitable endowments.6. Respondent no.2 has further alleged that similarly Shiva Nath Prasad was a close confidante of late Smt. Birla, having completed 50 years of service with MPB group of companies. He dealt with all the tax matters of Smt. Birla. He filed her tax returns. He entered into correspondence on her behalf with Income Tax Department. He was given a power of attorney to sign, on her behalf, the tax returns. He was a trustee of all the above five mutual trusts. He was a trustee in the three public charitable institutions. He was also a member of the managing committee of HMI and EIEI. Respondent no.2 has further alleged that Dr. Gauri Shanker was a trustee of all the above three public charitable institutions. He was also a trustee of three of the five mutual trusts, viz., M.P. Birla Trust, Priyamvada Birla Trust and Priyamvada Birla Kosh. Similarly, respondent no.2 has stated in his complaint that the fourth accused, Sushil Kumar Daga, was a long standing employee of the MP Birla Group. He was a member of the managing committee of HMI and EIEI. He was also a trustee of MP Birla Foundation. In his complaint, respondent no.2 herein, has alleged that Shiva Nath Prasad and S.K. Daga are the witnesses to the letter dated 15.4.2003 addressed by late Smt. Birla to R.S. Lodha which has been tendered as codicil in the probate proceedings pending before the High Court. Respondent no.2, in his complaint, has alleged that Shiva Nath Prasad and S.K. Daga are the witnesses to the said letter which was created in pursuance of the criminal conspiracy to misappropriate the property of the public charitable institutions. In his complaint, respondent no.2 herein, has relied upon one more circumstance in support of his contention that the couple had always desired to leave their estate, after their demise, to charity.7. In this connection, respondent no.2-complainant has placed reliance on the biography of MPB written by Dr. Gauri Shanker in which a graphic description of the visit by the couple to Tirupathi has been mentioned. In the said book, Dr. Gauri Shanker has mentioned how he had taken the draft trust deed of MP Birla Foundation to His Holiness the Sankaracharya and got it approved by him. In the said book, it is allegedly stated that in the last years of his life, MP Birla had desired that his entire estate should go to charity. In the said book, it is further recited that MP Birla Foundation was the foremost institution formed on 23rd January 1986, its trustees were the three daughters of K.K. Birla, brother-in-law of MP Birla, two professionals from the industrialist group etc. and later Smt. Birla also joined its board as the chairperson and as the trustee. According to the biography, the couple expressed their desire to give their wealth and properties to God and accordingly Dr. Gauri Shanker was requested to translate that idea into reality by drawing a deed of trust. The final draft was prepared. It was taken to Kanchipuram. It was placed before His Holiness Sankaracharya and accordingly the deed was sanctified. This book was published in 1993. This circumstance is relied upon in the complaint to show that Dr. Gauri Shanker was aware of the decision of MPB and PDB to dedicate their entire wealth to charity and yet he took part in the conspiracy to divert the endowment worth Rs.2400 crores from charity to the personal kitty of R.S. Lodha and after him, his son. According to the complaint, R.S. Lodha, alongwith Shiva Nath Prasad and Dr. Gauri Shanker were the trustees of the said three public charitable institutions whose property stands criminally misappropriated by the first accused pursuant to a criminal conspiracy by the other accused who committed criminal breach of trust. This was possible by virtue of the power and influence of R.S. Lodha and by reason of the long familiarity of the other accused with the couple. According to the complaint, MPB died on 30th July 1990. Upto the time of his death, he had done nothing to show the slightest inclination to change his charitable intentions or to put an end to the mutuality expressed wills of 1982 and the trust deeds of 1988 and on the contrary in January and February 1989, the couple had agreed on the final nominations in favour of three public charitable institutions in the presence of the complainant, Shiva Nath Prasad and R.K. Choudhury.8. Respondent no.2 has categorically stated that after the demise of MPB on 10th September 1990, Smt. Birla, in fact, executed the nominations in accordance with the pious wish of her husband and that the said nominations were mutually agreed nominations of the five trusts duly executed by her. The legal effect of the said nominations were explained by R.K. Choudhury in the presence of the complainant and in the presence of Shiva Nath Prasad to Smt. Birla. Respondent no.2 has further stated that Smt. Birla was told by R.K. Choudhury that the said nominations were irrevocable and that the said Shiva Nath Prasad was fully aware, along with Smt. Birla, that the five trusts along with the nominations were mutual and reciprocal and were irrevocable even by Smt. Birla (survivor) except in terms of clause 19 which provision was common in all the deeds. Respondent no.2 has alleged that in terms of the nominations agreed between MPB and PDB, during the lifetime of MPB and made after the demise of MPB, as explained above, the assets of the five trusts estimated at Rs.2400 crores stood finally settled in the three public charitable institutions as remainder beneficiaries. Respondent no.2, in his complaint, has stated that in the second week of April 1999, R.S. Lodha started misleading Smt. Birla. She was made to sign documents which had the effect of misappropriating the assets dedicated to and vested in the three public charitable institutions through the medium of the five trusts. Pursuant to the said conspiracy, on 18th April 1999 which was a Sunday, R.S. Lodha separately called three persons to Birla Park, residence of Smt. Birla and persuaded each one of them by false representations and fraud to attest a document signed by the deceased Smt. Birla. This document is the impugned will by which all the properties of the couple under the five trusts stood diverted from charity. They were converted to become the personal property of R.S. Lodha. The three persons were P.L. Agarwal, Dr. Madan S. Vaidya and Mahabir Prasad Sharma. Accordingly, respondent no.2 has complained that the above acts constituted massive fraud on Smt. Birla and on the five trusts; that, the said fraud constituted a criminal breach of trust on the three public charitable institutions which are deprived of endowments worth Rs.2400 crores and accordingly in the complaint respondent no.2 has alleged that R.S. Lodha had cheated and defrauded Smt. Birla into believing that she was making a document to leave the property to charity as she and her husband had desired and declared from time to time since 1981-82. Respondent no.2 has lastly stated in his complaint that four years after the execution of the will dated 18th April 1999, a letter dated 15th April 2003 termed as codicil is brought into existence by R.S. Lodha in conspiracy with Shiva Nath Prasad and S.K. Daga to fortify the will.9. It contains a direction in respect of four residential properties which are now directed to R.S. Lodha and after him, his son. Respondent no.2 has alleged that this letter dated 15.4.2003 is created as a supporting evidence to the will of 1999. Respondent no.2, in his complaint, has stated that Shiva Nath Prasad prepared the balance sheets of the five trusts as on 15.4.1999 in June 2000 only to show that the five trusts stood dissolved through deeds prior to the making of the alleged will dated 18.4.1999. Respondent no.2 has pointed out that R.K. Choudhury was a trustee. He had never resigned from the trusts. He had never ceased to be a trustee. He is not even aware of the dissolution of the trusts on 15.4.1999. In the circumstances, in his complaint, respondent no.2 has alleged that there was no revocation, oral or in writing, on 15.4.1999 or at any time later on. Respondent no.2 has further pointed out in his complaint that the accused have communicated about the dissolution of the trusts to the Income Tax Department only on 27th June 2000 when a letter was addressed by Smt. Birla to the Joint Commissioner of Income Tax, Calcutta, stating that the five trusts have been dissolved on 15.4.1999 and that the assets have been transferred to her as the sole beneficiary. The balance sheets of the five trusts as on 15.4.1999 prepared by second accused in June 2000 only to show that the trusts stood dissolved w.e.f. 15.4.1999. Respondent no.2 has alleged that the accused have conspired to create records by entering into correspondence with Income Tax Department. Respondent no.2 has accordingly relied upon the aforestated circumstance in support of his allegation of conspiracy to create ante-dated documents to show retro-active revocation of the five trusts. Relying upon the aforestated circumstances, the complainant has alleged in his complaint that the accused had entered into a criminal conspiracy, the ultimate object of which was to misappropriate dishonestly the charitable estate and converting the said estate to their own use. Respondent no.2 has further alleged that the object of the alleged will of 1999 was to destroy the interest of the three public charitable institutions in which the estate had irrevocably vested; that, the purported dissolution of the trusts was a step in the execution of criminal conspiracy; that, the modus operandi of the accused was to attain this illegal object fraudulently by showing that the five trusts were dissolved during the lifetime of Smt. Birla who was fraudulently induced and cheated as she had no legal knowledge nor access to independent legal advice; that, Smt. Birla was a lay housewife who had no knowledge of legal intricacies; that, she was deceived into executing a fraudulent will on 18.4.1999.10. That the three attesting witnesses were also deceived and finally the accused have even deliberately suppressed the facts relating to the five trusts from the application for probate made to the High Court in respect of the alleged will dated 18.4.1999. Respondent no.2 has stated in his complaint that a trustee becoming a party to the dissolution of an irrevocable trust is dishonest and guilty of criminal breach of trust; that, there was nothing to show that Smt. Birla was advised to convert the properties dedicated to public charities to personal properties and on the contrary by filing and signing balance sheets of five trusts the accused have sought to create evidence of the dissolution of the trusts and thereby they have aided and abetted misappropriation of the properties belonging to public charitable institutions. The accused have used their dominant position in the five trusts and in the three public charitable institutions to illegally revoke the five trusts and thereby dishonestly misappropriated the properties of the three public charitable institutions which constituted offence punishable under section 120-B read with section 406 of IPC. In execution of the conspiracy, the accused, in fact, misappropriated the properties of the public charitable institutions by illegally showing that the five trusts stood revoked and by transferring the properties held by five trusts or the three public charitable institutions to Smt. Birla as her personal properties as is evidenced from the balance sheets filed on behalf of the five trusts by the second accused. Hence, respondent no.2 has alleged that the accused were also guilty of substantive offence of criminal breach of trust under section 406, IPC. Respondent no.2 has also alleged in his complaint that R.S. Lodha was liable for offence punishable under section 420, IPC inasmuch as he was the instrumentality of procuring the will dated 18.4.1999 by inducing Smt. Birla by false representation to sign the said will, divesting the properties from charity and converting it to the assets of the first accused. Lastly, respondent no.2 has alleged that accused nos.2, 3 and 4, all of whom were trustees and/or members of managing committee in one or more of the three public charitable institutions had connived both by positive acts of commission and omission to aid and abet accused no.1 R.S. Lodha in the offence of criminal breach of trust for which they are liable to be punished under section 109 read with section 406, IPC. Accordingly, respondent no.2 vide his aforestated complaint prayed for issuance of process under section 120-B read with sections 406, 420, 467, 417 and 204, IPC and also substantive offences under sections 120-B, 406, 420, 417 and 204 of IPC. To complete the chronology of events, suffice it to state that vide order dated 05.10.2004, CJM Alipore held that a prima facie case for offence under sections 120-B/406/417/420 IPC was made out against the accused. Accordingly, cognizance was taken. Accordingly, accused were summoned on 29.11.2004. Aggrieved by the said order dated 05.10.2004 of CJM Alipore, accused no.2-Shiva Nath Prasad moved the High Court under section 482 of Code of Criminal Procedure (Cr.PC) for quashing the proceedings vide complaint case no.C4693/04 pending before CJM Alipore under sections 406/417/420/120-B, IPC. By the impugned judgment, the High Court has refused to intervene and set aside/quash the criminal proceedings. Hence, the accused have come in appeal to this court.

Court's reasoning:
20. A will on its own terms is inherently revocable during the lifetime of the testator. However, "mutual wills" and "secret trusts" are doctrines evolved in equity to overcome the problems of revocability of wills and to prevent frauds. Mutual wills and secret trusts belong to the same category of cases. The doctrine of mutual wills is to the effect that where two individuals agree as to the disposal of their assets and execute mutual wills in pursuance of the agreement, on the death of the first testator (T1), the property of the survivor testator (T2), the subject matter of the agreement, is held on an implied trust for the beneficiary named in the wills. T2 may alter his/her will because a will is inherently revocable, but if he/she does so, his/her representative will take the assets subject to the trust. The rationale for imposing a "constructive trust" in such circumstances is that equity will not allow T2 to commit a fraud by going back on her agreement with T1. Since the assets received by T2, on the death of T1, were bequeathed to T2 on the basis of the agreement not to revoke the will of T1 it would be a fraud for T2 to take the benefit, while failing to observe the agreement and equity intervenes to prevent this fraud. In such cases, the Instrument itself is the evidence of the agreement and he, that dies first, does by his act carry the agreement on his part into execution. If T2 then refuses, he/she is guilty of fraud, can never unbind himself/herself and becomes a trustee, of course. For no man shall deceive another to his prejudice.21. Such a contract to make corresponding wills in many cases get established by the Instrument itself as the evidence of the agreement [See: Law of Trusts and Equitable Obligations by Robert Pearce and John Stevens pages 320 and 321]; See also : Re Dale (Deceased) reported in 1993(4) All. ER page 129]. In the case of mutual wills generally we have an agreement between the two testators concerning disposal of their respective properties. Their mutuality and reciprocity depends on several factors. Mutual wills and trusts are evidenced by the Deeds themselves (the recitals, terms and conditions mentioned therein) as also by the surrounding circumstances, namely, the simultaneity and the similarity of the terms of the wills/trusts, the pattern of successive wills, the reciprocity of one to the other, the age of the settlors, the value of the estates, dying of the settlors without any issues, making of the last will without reference to the revocation of previous wills. Lastly, in law we have the concept of accessory liability for having assisted in a breach of trust. In such a case the accused is not charged for having received trust income or assets for his own benefit but for having acted as an accessory to a breach of trust.22. We have referred to the doctrine of mutual and reciprocal wills and trusts only to understand the basis of the complaint. At this stage we are required to read the complaint as it is. Suffice it to state at this stage of the matter that the couple had executed mutual wills in 1981 and 1982; followed by reciprocal trusts in 1988 which are in almost identical words. The scheme of the mutual deeds read together is almost identical. It is not disputed that a mere declaration can create a trust obligation, particularly when the settlor is the sole trustee under the trust. Before us what is argued by the appellants is that there is no valid creation of trust; that, there was no "vesting" of the assets in the three public charitable institutions; that, the act of Smt. Birla in revoking the trusts and/or treating them as her own property was within her competence; that, the trusts were revocable; that, at the highest it is case of failure of the second charity and that predominantly the dispute is a civil dispute. At this stage, we may point out that what is complained of in the complaint filed by respondent no.2 herein is regarding the acts of management including dissolution of the trusts and making of the will by which trust properties have been allegedly converted dishonestly into personal properties of R.S. Lodha constituting an offence of criminal misappropriation under sections 405 and 406 and cheating under section 420, IPC.accused.23. In the complaint, respondent no.2 herein has averred that he was present and consulted when the couple opted for mutual wills in 1981, 1982 and even in 1988 when mutual and reciprocal trusts were executed. The complaint is based on the alleged oral agreement and understanding between the husband and wife regarding disposal of properties on their demise. Suffice it to say that these facts in issue are matters ofstated above, in this case we have mutual wills and mutual and reciprocal trusts in 1981, 1982 and 1988; clauses 7(b) and 8 of the trust deed reflect charitable intention coupled with nominations of 1990. What we would like to stress is that the complaint is based on an important aspect of mutual trust. The allegation is that the beneficial interest (enforceable not against the assets but against the trustees) is dishonestly misappropriated by the accused. The complaint is about dishonestly setting up personal title to the trust property.Before us, number of judgments have been cited in support of the case that respondent no.2 (complainant) is the disgruntled employee of the MP Birla Group of Companies and that he has been put up by the Birlas, hence, the complaint is based on malafides and should, therefore, be dismissed. We need not go into the said judgments as the basic principle settled in the citations is that the question of malafides has to be decided on the facts of each case. At the outset, we reiterate that credentiality of the complainant at this stage is not relevant. As stated above, in this case, what is alleged by the complaint, inter alia, is that he was a privy to the discussions and consultations and thinking which went into making of the mutual wills and the mutual trusts; that, he was a formal witness to some of these deeds and that he was aware that the couple had mutually agreed to the disposal of the property to charity after their demise. In the facts and circumstances of this case, at this stage, we are not inclined to accept the argument that the complaint should be dismissed at the initial stage on the ground of alleged malafides of the complainant.