# SHANTI VIJAY & CO. ETC v. PRINCESS FATIMA FOUZIA & ORS. ETC - **Citation:** [1980] 1 S.C.R. 459 - **Court:** Supreme Court of India - **Decided:** 1979-08-31 - **Case number:** Civil Appeal Nos. 1105, 1245 and 1269 of 1978 - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/shanti-vijay-co-etc-v-princess-fatima-fouzia-ors-etc-7776 - **Pages:** 28 ## Headnote ( 459 SHANTI VIJAY & CO. ETC. v. PRINCESS FATIMA FOUZIA & ORS. ETC. August 31, 1979 '[S. MURTAZA FAZAL ALI, P. S. KAILASAM AND A. P. SEN, JJ.] Indian Trusts Act 1882 (2 of 1882)--Ss. 47, 48 & 49-Trust-Deed of rtnut stipulating sale of trust property by trustees in their absolute discretion~ Absence of specific provision authorising execution to be carried out not by , 1(1[{, but by one or more or majority of trustees-Applicability of s: 48. Where trustees cannot delegate duties they 1n11st personally perfonn-Exer- .cise of individual judRment and discretion-Necessity of. Discretionary power not exercised reasonably and in good faith-lnter- .jerence by court under s. 49-Validity of-Duty of trustees to act t-vith prudence B c '). ,.as a body of reasonable men. j . -~ • The late H.E.H. Nlliwab :fyiir Sir Osn1an Ali, the Nizan1 of Hyderabad by ;an. indenture dated March 29, 1951 created the trust called H.E.H. the Nizam's Jewellery Trust in respect of 107 items of extremely valuable, rare and priceleii jewellery for the benefit of his two sons, two grand sons, tv.'o grand daughters, daughter and step son. The nominee of the Government of India 'R. N. Malhotra, Addl. Secretary to the Government of India, Ministry of Finance, Department of Economic Affairs ¥:as made the Chairman of the ·Board of Trustees. In· addition to the Chairinan, there were four trustees and a Secretary for the Trust. Clause 13 of the trust deed provided that after a "Period of three years from the date of the death of the settlor and bis eldest son the trustees may sell the trust 1 property in their absolute discretion either, in India or in any foreign country without their being liable or accountable to any ·person whomsoever for the propriety of or justification for such sale, or for reaionableness or otherwise of the price or consideration or other tenns in res- ·pect of the sale. Prince Azam Shah the eldest son of the Nizam died in October, 1970 and .the trustees on July l, 1972 submitted a memorial to the Prime 1Iinister to acquire the je\vellery as they were of great historical and culturnl value and 1ceep the same intact as part of the national heritage. The Government -0f India appointed an Expert Committee to advise whether any part of the jev.rellery should be acquired as antiques under the Antiquity and Art Treasures Act 1972 and in pursuance to its report acquired eighteen selected pieces of "jewellery at ~ mutually negotiated price. of Rs. 1.17 crores . It appears that the beneficiaries of the trust v.'ere in very straitened cir- ··curnstances due to abolition of privy purse, heavy incidence of income-tax and wealth-tax and being thus heavily indebted, pressed upon the Board of Trustees to effect an immediate sale of 37 items of jewellery. D E F G On January 9, 1978 the Chairman conveyed to the trustees that the GoH vernment of India were not likely to acquire any of the 37 pieces of jewellery \With regard to whiCh the negotiations were being made. The Board of Trustees 460 SUPREME COURT REPORTS [1980] I S.C.R. A accordingly passed a resolution to sell the jewellery immediately. Pursuant to the resolution of the Board, the Secretary of the Board decided upon the procedure to be adopted for the sale of the 37 items of jewellery and eventually on March 9, 1978 the tenders that were submitted in respect of the sale of those items were opened by the four .trustees, in Bombay, the Chair~ man R. N. Malhotra being absent due to official pre-occupation at New Delhi. B t c D E F G B On March 10, 1978 the first respondent in the appeal who was one of the beneficiaries of the Trust and a grand daughter of the Nizam instituted proceedings under S. 74 of the Trust Act for removal of the trustees alleging dereliction of duty, negligence and mismanagement on their part in respect of the 37 items of jewellery belonging to the Trust which were brought to sale. An application for injunction under Order 39, Rule 1 of the Code of Civil Procedure was filed for restr ## Text _Characters 0–39,956 of 76,930. This is a partial read: ask again with offset=39956 for what follows._ ( 459 SHANTI VIJAY & CO. ETC. v. PRINCESS FATIMA FOUZIA & ORS. ETC. August 31, 1979 '[S. MURTAZA FAZAL ALI, P. S. KAILASAM AND A. P. SEN, JJ.] Indian Trusts Act 1882 (2 of 1882)--Ss. 47, 48 & 49-Trust-Deed of rtnut stipulating sale of trust property by trustees in their absolute discretion~ Absence of specific provision authorising execution to be carried out not by , 1(1[{, but by one or more or majority of trustees-Applicability of s: 48. Where trustees cannot delegate duties they 1n11st personally perfonn-Exer- .cise of individual judRment and discretion-Necessity of. Discretionary power not exercised reasonably and in good faith-lnter- .jerence by court under s. 49-Validity of-Duty of trustees to act t-vith prudence B c '). ,.as a body of reasonable men. j . -~ • The late H.E.H. Nlliwab :fyiir Sir Osn1an Ali, the Nizan1 of Hyderabad by ;an. indenture dated March 29, 1951 created the trust called H.E.H. the Nizam's Jewellery Trust in respect of 107 items of extremely valuable, rare and priceleii jewellery for the benefit of his two sons, two grand sons, tv.'o grand daughters, daughter and step son. The nominee of the Government of India 'R. N. Malhotra, Addl. Secretary to the Government of India, Ministry of Finance, Department of Economic Affairs ¥:as made the Chairman of the ·Board of Trustees. In· addition to the Chairinan, there were four trustees and a Secretary for the Trust. Clause 13 of the trust deed provided that after a "Period of three years from the date of the death of the settlor and bis eldest son the trustees may sell the trust 1 property in their absolute discretion either, in India or in any foreign country without their being liable or accountable to any ·person whomsoever for the propriety of or justification for such sale, or for reaionableness or otherwise of the price or consideration or other tenns in res- ·pect of the sale. Prince Azam Shah the eldest son of the Nizam died in October, 1970 and .the trustees on July l, 1972 submitted a memorial to the Prime 1Iinister to acquire the je\vellery as they were of great historical and culturnl value and 1ceep the same intact as part of the national heritage. The Government -0f India appointed an Expert Committee to advise whether any part of the jev.rellery should be acquired as antiques under the Antiquity and Art Treasures Act 1972 and in pursuance to its report acquired eighteen selected pieces of "jewellery at ~ mutually negotiated price. of Rs. 1.17 crores . It appears that the beneficiaries of the trust v.'ere in very straitened cir- ··curnstances due to abolition of privy purse, heavy incidence of income-tax and wealth-tax and being thus heavily indebted, pressed upon the Board of Trustees to effect an immediate sale of 37 items of jewellery. D E F G On January 9, 1978 the Chairman conveyed to the trustees that the GoH vernment of India were not likely to acquire any of the 37 pieces of jewellery \With regard to whiCh the negotiations were being made. The Board of Trustees 460 SUPREME COURT REPORTS [1980] I S.C.R. A accordingly passed a resolution to sell the jewellery immediately. Pursuant to the resolution of the Board, the Secretary of the Board decided upon the procedure to be adopted for the sale of the 37 items of jewellery and eventually on March 9, 1978 the tenders that were submitted in respect of the sale of those items were opened by the four .trustees, in Bombay, the Chair~ man R. N. Malhotra being absent due to official pre-occupation at New Delhi. B t c D E F G B On March 10, 1978 the first respondent in the appeal who was one of the beneficiaries of the Trust and a grand daughter of the Nizam instituted proceedings under S. 74 of the Trust Act for removal of the trustees alleging dereliction of duty, negligence and mismanagement on their part in respect of the 37 items of jewellery belonging to the Trust which were brought to sale. An application for injunction under Order 39, Rule 1 of the Code of Civil Procedure was filed for restraining the trustees from taking any further steps towards the finalisation of the sale1 of the jewellery. The City Civil Court grant· ed an ad~interim injunction restraining the trustees from taking any steps to 4 wards the finalisation of the sale of the jewellery, which was got vacated by one of the trustees. On March 28, 1978, the first respondent filed an appeal in the High Court which directed that status quo ante be maintained. In the meanwhile, the 8th respondent made an offer to purchase the 37 items of jewellery in one lot for Rs. 20.25 crores and also applied to be impleaded as a party in the appeal. On April 18, 1978 the appellant, who was one of the successful bidders also applied to be impleaded as a party respondent. The High Court impleaded the appellant aS a party to the appeal, and in order to test the bona fides of the 8th respondent directed that he should deposit the offered amount within one· week.· On such deposit being made, the 8th respon 4 dent was allowed to inspect all the items of jewellery. The first respondent filed · an application to withdraw the appeal which was heard but before· any orders could be passed, her sister, the second respondent applied for permission to be impleaded as appellant No. 2, as there was a danger of the entire body of the beneficiaries being deprived of an amount of Rs. 5.78 crores. The first respondent was permitted to withdraw and the second appellant was brought on record. The High Court set aside the alleged sale of 37 items of jewellery by the Board of Trustees in favour of the appellant and other successful tenderers on the ground that there was no concluded contract between the parties and instead accepted the offer of the eighth respondent. On appeal to this Court the matter was remitted to the High Court for impleading all the tenderers and affording an opportunity to the appellants to substantiate their claim that there was a concluded contract for the sale of the jewellery to them for Rs. 14.43 crores. The High Court impleaded the ether tenderers, respondents Nos. 7 to 17 and after giving opportunity to substantiate their claims held that no binding contract came into existence. In appeals to this Court on the questions- (1) Whether there was a concluded contract effected between the appellants and the other successful bidders on the one part and the Board of Trustees on the other, for the sale of the 37 items of jewellery for Rs. 14.43 crores by the alleged acceptance of their bids by the four trustees on March 19, 1978. • ' / .... • SHANTI VIJAY & co. v. PRINCESS FATIMA (Sen, 1.) 46 I (2) Whether there was frustration of the contract in that the ad-interim A injunction of the. City Civil Cou 0 rt on March 14, 1978 made further performance of the alleged contrticts in1possible; and ( 3) Whether the exercise of the discretionary power of sale exercised by the trustees conferred on them by cl. 13 of the trust deed, ought not to be set aside under s. 49 of the Trusts Act as an improvident sale because of the fact that an amount of Rs. 20.25 crores for the 37 items of jewellery had been offered by the eighth respondent. HELD : I. The High Court was justified in setting aside the alleged sale of 37 items of jewellery belonging to H.E.H. the Nizam's Jewellery Trust affected by the Board of Trustees in favour of the appellants and other tenderers for Rs. 14.43 crores on the ground that there was· no concluded contract between the parties. [480 DJ 2. The contract was frustrated by the grant of an ad-interim injunction by the Court of the Chief Judge, City Civil Court, Hyderabad on March 14, 1978. The grant of such injunction prevented the performance of the alleged contracts. The appellants could not, have tendered 90 percent of the tender B c amount, i.e., the balance of the price, by the stipulated date or taken delivery D of the jewellery so long tis the injunction lasted. [481CJ 3. The High Court had come to a definite conclusion that the improvident sale of the jewellery at such a low price without due public notice was not a bona fide exercise of power, conducive of beneficial management. There is no reason to come to a different conclusion. When one deals with another's property, it n1atters little to him what price the property fetches. But in the case of a trust there arises the duty of the trustees to act with prudence and as a body of reasonable men. [485E, DJ 4(a). In the case of a private trust, where there are more trustees than one,. all must join in the execution of the trust. The concurrence of all is in\ general necessary in a transaction affecting the trust property, and a majority cannot bind the trust estate. In order to bind the trUst estate, the act must be the act of all. They constitute one body in the eye of law, and ·an must act together. This is, subject to any express direction given by the settlor. [473EJ Lala Mohan Das v. Janki Prasad, LR (1944) 72 IA 3~; L. Jankirama Iyer & Ors. v. Neelakanta Iyer & Ors., [1962) Supp. I SCR 206; Lewin's Law of Trusts, 15th Ed. 198 referred to. 4 (b). Where there are several trustees they must act unanimously in making a sale or a contract of sale, unless it is provided otherwise by the terms of the· deed. In exercising the power of sale, as in the exercise of the other pov.'ers, a trustee cannot, therefore, properly delegate the perforr:Ilance of the acts which he ought personally perform. Although a trustee may listen to the opinion and wishes of others, he· must exercise his own judgment. A trustee for sale of property, cannot leave the whole conduct of the sale11-531 SCI/79 E J! G H 462 SUPREME COURT REPORTS (1980] 1 S;C.R. A to his co.trustees. The reason for this is that the settler bas entrusted the trust prope1iy and its management to all the· trustees, and the beneficiaries are entitled to the benefit of their collective wisdoni and experience. [474CD] B c D H Uruletbill's Law of Tmsts and Trustees, 12th Ed., pp. 434, 442-443, Scot on Trust•. Vol. 2, p. 1033, 5. All acts wliich the trustees intend to take for executing the trust must be taken by all of them acting together, as provided by s. 48 of the Trusts Act, 1882. Where there are more trustees than one, all must join in the execution of the tn1st, except where the instrument of trust otherwise provides. . If the validity of an alienation affected by the trustees falls to be considered only in tbe light of s. 48, the fact that out of the three trustees only two have executed the sale deed would by itself make the transaction invalid and would not convey a valid title to the transferee. [474E-G] · 6. The High Court rightly observed, there is no clause in the trust deed authorising the execution of the trusts to be carried out not by all but by one or more or n1ajority of the trustees. Jn the absence of such a specific -provision, the general law envisaged in s. 48 of the Act would govern the rights of the parties. The alleged contracts of sale entered into by the four trustees were not binding and of no legal effect, and could not be enforced. It must necessarily .follow that the alleged contracts for sale entered into by them could not ripen into concluded contracts so as to bind the entire body of beneficiaries. [4 7 4H-4 7 5B] 7. Section 48 is a corollary of s. 47. If the trustees cannot delegate their duticsi it fol_lows that they must all personally perform those duties, and not appoint one of themselves to manage the business of the trust; for the settler has trusted all his trustees, and it behoves each and every one of them to exercise his individual judgment and discretion on every matter, and not blindly to leave any questions to his co-trustees or co-trustee., The view taken by the High Court of the resolution of the Board of Trustees dated March 8, 1978 was right. The language used in the resolution is perhaps not of a trained draftsman, but it clearly does not, in terms, confer 'authorisation' upon the remaining four trustees to accept the bids, or any of them. [475D-F] 8. The statement of Malhotra that it was decided at the meeting on March 8, 1978 that 'the trustees were free to accept the highest tenders, if they did not see any reason to reject the same' and also that 'if the trustees. felt that a higher amount could be obtained they could negotiate with the tenderer and obtain a higher price' is of little consequence. Perhaps that is what the trustees meant, i.e., the rema.ining four trustees, were fully authorised to deal with the matter in all its aspects. But that intention of the trustees is not at all manifested in the said resolution, the terms of which are, clear and explicit. [476B-C] 9. In this case of a trust, the 'authorisation' must be express, specific and in the clearest of ternlS. The words "be examined and decided" in the first part of the resolution n1ay mean anything, and are not necessarily susceptible of the only construction as contended for, namely that of 'acceptance'. The expression "to negotiate for OOile" in relation to the authority of an estate agent, has a definite legal connotation. He gets an authority to find a purchaser, t '( . .. Ji ' '1\ ' )I. - ~ • ( ) j • SHANTI V!JAY & co. v. PRINCESS FATIMA (Sen, J.) 463 but he cannot bind the principal by entering into a conract r'f sale. There is A a substantial difference between 'to sell' and 'to find a purchaser'. [476D-E] Chadbum v. Moore, (1892) 67 LJ Ch. 674; Rosenbaum v. LR (1900) 2 Ch. 267. Abdul Ahmed v. Animendra Kissen Mitter, SCR 30 referred to. Belsen, [1950] 10. If the second part of the resolution has to be construed with reference to the first, as is contended for, then their authority was limited to find purchasers for the je\vellery, and then place the matter before a meeting of the Board of Trustees, for acceptance. of their bids. When the trustees took care in drafting the second part which relates to rejection of bids, there wao; no reason for their leaving any ambiguity in the first part. It is not permissible to spell out something which is not explicit, by merely saying that it i& implicit, when the language is clear and it does not bear out any such construction. A view which would be prejudical to the entire body of beneficiaries is not to be taken. There is no reason why the \Vords 'be examined and decided' in the first part, should not have their plain meaning that the tenders \vere to be opened and examined by the remaining four trustees to see if they were valid tenders. The first part did not, give uny 'authorisation' to the remaining trmtees to accept any of the tenders. If they did not :find a satisfactory offer or offers for any of the items offered for sale they could on1y under the second part reject the tenders submitted. Delegation must be express. The trend of cross· examinatio~ of Malhotra, also shows that his c.oncurrence was necessary. [476F, 477BJ 11. The Secretary drew up the note, dated March 14, 1978 Ex. B 124 in undue haste despite the Court's order granting the injunction. [478D] 12. The minutes of the meetings held on ~.farch 5, 1978 and of I\.farch 8, 1978 are there. Thereafter appears the minutes of a meeting held on May 15, 1978, Ext. B. 125. But there are no minutes of a meeting held on March 9., 1978. lt is thus clear that no· meeting of the Board of Trustees was. held at all on March 9, 1978. The absence of any minutes of the aUeged meeting held on March 9, 1978 must, as it should, clearly excite suspicion about the genuineness of the sale. Ex. B 123 is the tabular statement prepared by the Secretary containing acceptance of bids by the four trustees. The authenticity of this document is not beyond question. It is a tabulox chart running into 34 large sheets with minute details.. On each "of the sheets there is a letter 'A' encircled against the highest tender, an~d at the foot appear the alleged initials of three tn1stees bearing the date March 9, 1978. None of the remaining trustees except M. A. Abbasi have entered the witness-box and none of the t.rustees has proved the initials at the foot of the document, Ex, B 123, Nothing is known ,as to when the initials were put and by whom. Though the -0ther three trustees are a11eged to have put their initials at the foot of the statement on March 9, 1978, there is nothing on record to show that all this was done that day, at one sitting, at the same time. [478F, 478H-479D] I 3 .If the four trustees. with the assistance of the Secretary, could prepare these large tabular charts there was no reason why they could not record the B D E (I' G H A B c D E F B 464 SUPREME COURT REPORTS [1980] 1 S.C.R. minutes of the meeting, if any held on that day showing that there was acceptance of t.he bids by them. The Minutes Book is the primary evidence, and the chart cannot form the basis for a finding that there was any acceptance of the tenders on March 9, 1978. [479E-FJ In the instant case, els. 11 and 12 of the conditions of sale embodied the ternis of the contract. By cl. 11, time is made the essence of contract. Clause 11 cannot be read in isolation, but both els. 11 and 12 must. be read together because they form an integral part of the contract. These clauses in addition to making time the essence of contract, clearly provided that in the event there was a failure to pay 90 percent of the tender amount, the balance of the price "the contract would be deemed to have been cancelled.'' On a reading of both els. 11 and 12 together there can be no doubt that the passing of the property was dependent upon the tender of the balance of the price and the taking delivery Of the goods upon payment. [480H-481B] 14. It was certainly open to the Board of Trustees to effect a sale of the 37 items of jewellery under cl. 13 of the deed. But the power, although discretionary, must be exercised reasonably and in good faith. The power conferred on the Board . of Trustees is no doubt discretionary, but the prln.~ ciple embodied in s. 49 is that when such discretionary power is not exercised reasonably and in good faith, such power may be controlled by a court. There was no warrant for the suggestion made by the Board of Trustees before the High Court that the power is absolute. [482E-GJ Underhill's Law of Trusts & Trustees, 12th Ed. 472 p. 472, referred to 15. On the totality of the evidence, the High Court rightly came to the conclusion that though there were no mala fides, corrupt motives, fraud or mis~representation on the part of the trustees and they · acted honestly, the trustees in the fi;1.cts and circumstances of the cnse, did not act reasonably and in good faith i.e. with due care and attention. [485F] 16. Upon the finding that there was no concluded contract between the parties within the meaning of s. 2(h) of the Contract Act, tl)e High Court accepted the offer of the eighth respondent for -Rs. 20.25 crores for the purchase of the 37 items of jewellery, but this part of the order is set aside as acceptance of his bid without calling for fresh tenders would be subject to the same infirmity. From the evidence on record that no body knows the actual value of the jewellery and it may be well worih more than Rs. 20.25 crores, and therefore reauction ordered. [485G, 486E, GJ CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1105, 1245 and 1269 of 1978. From the Judgment and Order dated 12-6-78 of the Andhra Pradesh High Court in appeal against Order No. 14 7 /78. AND SPECIAL LEAVE PETITION (CIVIL) NOS. 3648-3649/178 In the matter of H.E.H. The Nizam's J ewel!ery Trust. t } ( _, \ ; -'{ SHANTI VIJAY & co. v. PRINCESS FATIMA (Sen, 1.) 465 Rajni Patel, Malini Kapadia, P. G. Gokhale, B. R. Agarwala and Gujarat & Co. for the Appellant in C.A. 1105 and for Respondent No. 3 in CA 1269 /•78. 0. P. Verma, B. V. Singh, Anil B. Diwan, B. Parthasarathi and J. V. Suryanarayan R,~o for Respondent in CA 1105/78. S. V. Gupte, S. T. Desai and A. Subba Rao for RR 4, 6 and 7 in C.A. 1105/78 and Appellant in CA 1269/78. A. K. Sen, Anil B. Diwan, S. S. Hussaine, 1. B. Dadachanji, K. J. John and A. G. Menses. for Respondent No. 8 in CA 1105/78, 1245/78 and 1269178. F. S. Nariman, P. R. Mridul, B. Jaivalu, Dhimimt Thakkar, P. H. Parekh, C. B. Singh, Miss Vl~neta Caprihan and B. L. Verma for the Appellant in CA. 1245/78. B. A. Zaibala, Dhimant Tf(akkar, P. H. Parekh and Miss Kamlesh Bansal for. the Petitioner in SLP 3648/78. B. A. Zaibala, Dhimant Thakkar, P.H. Parekh and Mukul MudgaJ for the Petitioner in SLP 3649/78. The Judgment of the Court was delivered by SEN J.-In these appeals, one of which is by special leave and the other two on certificate, brought from a judgment of the Andhra Pradesh High Court dated June 12, 1978, the short question is whether that Court was justified in setting aside the alJeged sale of 37 items of jewellery belonging to H.E.H. the Nizam's Jewellery Trust, effected by the Board of Trustees, in exercise of their discretionary power of sale under cl. 13 of the trust do~ed in favour of the appellants and other successful. tenderers for Rs. 14.43 crores, and accepting instead the offer of the eighth respondent, Peter Jansin Fernandez for Rs. 20.25 crores made during the pehdency of the appeal before it. The facts of the case, so far as they are material, are not now in dispute, and are as follows : The late H.E.H. N awab Mir Sir Osman Ali Khan Bahadur, the Nizam of Hyderabad, by an indentnre dated March 29, 1951, created a trust called H.E.H. The Nizam's Jewellery Trust, in respect of 107 items of extremely valuable, rare and priceless jeweilery of exquisite design and beauty studded with emeralds, diamonds, sapphires, rubies etc·. of the highest quality and purity belonging to him, specified in the First Schedule, and Government secu,ities of the aggregate face value A B c D E II G H • 466 SUPREME COURT· REPORTS [1980] 1 S.C.R, A . B of Rs. 10 la.khs, specified in the Second Schedule, for the benefit of his two sons, Prince Azam Jab and Prince Muazzam Jab; two grandsons, Prince Mukarram Jab and Prince Muffakham Jab; two granddaughters, Princes Fatima Fouzia and Princess Amina Mirzia; daughter Shahzadi Begum, and his step-brother Sahebzada Nawab Basalat Jab Bahadur . Clause 13 of the trust deed, Ex. 'A', confers upon the trust~es the power of sale of the Jewellery, the material portion of which is in these terms : "13. Subject to the Trusts afov~said in respect of the c articles referred to i'n clause 3(c), (d), (e) and (f) hereof, during the lifetime of his eldest son Prince Azam Jab (if and so long as the Dynasty of the Settlor continues and Prince Azam Jab succeeds him as \)le Nizam of Hyderabad) it shall be at the option of the trustees either to keep the said jewels and· other articles mentioned fa the first Schedule hereD under written unsold or to sell the same or any part thereof at such time or times a'nd in such manner as they may in their discretion think fit, but subject as aforesaid, after death of the ~ttlor as well as of the said Prince Azam Jah the Trustees shall sell the said jewels and other articles E F· specified in the First Schedule hereunder writ~~n within a period of three years after the date of the death of the survivor of the s-~ttlor and the said Prince Azam J ah and any such sale as aforesaid shall be effected by the Trustees at such price or prices or for such ·consideration and on such terms as the trustees may in their absolute discMion think fit and either in India or in any foreign country without the trustees being liable or accountable to any person whomsoever for the propriety of or justification for any such sale or for the reasonableness or otherwise of the price or consideration or other terms in respect of the sale of any of the said articles." G The said jewellery is kept in the safe deposit vault of the Mercantile Bank Ltd. at Bombay. R. N. Malhotra, Addi. Secretary to the Government of India, Minis.try of Finance, Department of Economic Affairs, is the Cha;r- . man of the present Board of Trustees of HE.H. The Nizam's Jewel- & lery Trust, as a nominee of the Government of India. The other four trustees are : Prince Muffakham Jah, Zaheer Ahmed, Ataur Rehman and M. A. Abbasi. M. A. Ashtuff is the Secretary of the Trrn;t. j ) l I • SHANTI VIJAY & co. v. PRINCESS FATIMA (Sen, J.) 467 It appears that Prince Azam Jab died in October 1970 and thereafter, on July 1, 1972 the trustees submitted a memorial to the then Prime Minisl\:r of India to acquire the jewellery as they were of great historical and cultural value and keep it intact as a national hedtage, and not allow it to pass into the hands of people who were interested only i"n their moμey value. It appears that the trusrees acted upon legal opinion that there was no objection to the sales being arranged through negotiation on the basis of valuation by two independant valuers. The Gowrnment of India constituted an Expeits Committee whose fu"nction was purely of an advisory natnre, with a view to guide the Government whether any part of the jewellery should be acquired as antiques under the Antiquity and Art Treasures Act, 1972. It was required to select and eyaluate such items of antique jewellery as had to be acquired in the national interest. The Experts Committee inspected the jewellery at the vault of the Mercantile Bank. During these proceedings the Government appointed a Committee of Valuers which by its report dated January 3, 1976, valued all the 107 items of jewellery at Rs. 6,62,58,500 while Vithaldas, RW 6, the valuer appointed by the trustees, by his valuation report dated March 18, 1976 valued these 37 items of jewellery at Rs. 10,26,30,000. Eventually, the Government of India acquired 18 selected pieces of antique jewellery for their cultural and historical importance at a mutually negotiated price of Rs. 1.17 crores. It has been represented thau the beneficiaries are in very straitened circumstances due to the abolition of privy pnrse, heavy incidence of income-tax and wealth-tax, and are heavily indebted due to the trustees applying the income of the trust largely towards payment of taxes, making it increasingly difficult to maintain themselves. The beneficiaries were, therefore, pressing the Board of Trustees to effect an immediate sale of the 37 items of jewelfory. · On January 9, 1978 it is alleged that there was a meeting of the Board of Trustees. Malhotra, who is the Chairma·n, conveyed to the trustees that the Government of India were not likely to acquire any of the 3 7 pieces of jewelkry with regard to which negotiations were being made. The Board of Trustees accordingly passed a resolution to sell the jewellery immediately. Tl>~ next meeting of the Board was held on January 25, 1978 but Malhotra could not attend it. A B c D E p G Pursuant to the resolution of the Board of January 9; 1978, the ll Secretary of the trust applied to the Director of Archaeolo~ical Survey of India, for the grant of clearance for sale of the said jewellery; and B c D E .. G R 468 SUPREME COURT REPORTS (1980] 1 S.C.R. in consultation with Dinshaw Jehangir Gazdar, RW 3, a noted jeweller of Bombay, with .the concurrence of M. A. Abbasi decided upon the procedure to be adopted for the eventual sale of these 37 items of jewellery. It appears that the conditions of sale, Ex. B-49, were got drafted by M. A. Abbasi, one of the trustees, and M. A. Ashruff, Secretary, through a firm of solicitors. Conditions 11 and 12, which formed an integral part of the coll.tract of sale, arc as follows : "11. Tenders will be opened by the Trustees ·on the date announced at the time of inspection and the party whose tender is accepted will be notified soon thereafter. The jewellery shall on acceptance of the tender become immediately the property of the buyer and shall be available for delivery to the buyer immediately thereafter on payment of the bala:O.ce of 90% of the tendered amount as specified in para 12 below. If delivery is not taken at that time the jewellery will be held for and on behalf of the tenderer at his risk. 12. !enderers whose offers are accepted will be required to deposit in full the tendered amount (after deducting the amount of 10% deposited as per clause 4 above) on the date or dates to be announced o:O. the day of inspection bdore taking delivery. It is hereby agreed that if the tenderer fails to pay the balance amount within the stipulated period, the sale shall stand cancelled and the earnest money paid by him to the Trust shall be forfeited by the Trustees and the Trustees shall be at liberty to offer the same jewellery at the next sale and any deficiency arising at such sale together with all expenses arising from the subsequent . sale shall be borne by the tenderer who shall also pay interest at the rate of 10% per annum to the Trust until the completion of the resale." On January 31, 1978, Gazdar sent intimations (Bxs. B.130-133) to some foreign and Jndia:O. nationals abroad regarding the in!ended sale of the jewels. It appears that M. A. Ashruff, Secretary, also addressed letters dated February 8/10, 1978 (Exs. B.72-87) and also sent telegrams dated February 25, 1978 (Exs. B:88-100) to 29 reputed dealers, seven of whom were jewellers from abroad and the remaining 22 in the country, as p·~r list Ex. B-46. The letters of the Secretary, as far as material, read : "The unique collection of the fabulous oriental jewellery of the once richest man of the world, HEH the Nizam t ) ) ' SHANTI VIJAY & co. v. PRINCESS FATIMA (Sen, J.) 46 9 of Hyderabad and Berar, the erstwhile premier prince of India, is coming up for sale in Bombay sometime during the first or second week of March 1978. The exact dates. will be notified later." The telegrams sent by him mentioned that : 'inspection of the jewellery could be had from March 6 to 9'. It would thus appear that the B intending buyers were not notified the date of sale. The 37 items of jewellery put up for sale were divided into 16 groups. Inspection of these 3 7 items of jewellery was to be offered to the intending biddern from March 6 to March 9. During the course of inspection, however, the trustees decided to restrict the period of C inspection till March 8 and they informed the intending bidders accordingly, and asked them to give their bids before a particular hour on March 9. On the 8th of March, Malhotra was present throughout, at the Mercantile Bank Ltd., and there was also a meeting of the Board of Trustees. The resolution of the Board of Trustees of March 8, 1978 (Ex.· R 106) was in these terms : "!. To confirm the minutes of the last meeting. The Minutes of the last meeting of the Trustees held on 5th March, 1978 were confirmed. 2. Consideration and decision on w1ders received. Resolved that the tenders received be examined and decided by the Trustees present at the meeting to be held for the purpose on 9th March, 1978. And further resolved that in case such Trustees did not :find a satisfactory offer or offers in respect of any of the items offered for sale, they may reject the tendered offers and negotiate· the sale of any item with any party for a higher price. 3. Delivery of articles sold. Resolved that the delivery cf articles sold be arranged on dates convenient to the Trustees preferably not later than 25th March 1978." The Chairman of the Board of Trustees, Malhotra was admittedly D E F G not present in Bombay on March 9, 1978 when the tenders were H opened by the remaining four trustees. He had to he away from Bombay on the morning of 9th and 10th March due to official A B c 470 SUPREME COURT REPORTS [l 980] l s.c.R. preoccupation at New Delhi. He was busy at Delhi heading a group which was ir.gotiating with a high-powered Russian delegation to settle the rupee-rouble exchange ratio and connected matters. He could not leave Delhi from March 9 to 23, during which period the talks commenced earlier on January 28, 1978, had entered a crucial stage. These talks required his personal presence at Delhi, because they were matters of national importanoo. On March 9, 1978, the remaining four trustees are alleged to have opened the tenders and accepted aU the highest tenders except in respect of item No. 16 of Group XIV, which was negotiated on the next day for a higher price of Rs. 6.92 crores. On March 10, 1978, tlN Secretary addressed letters of acceptance Exs. B.54-65, to the appellants and other successful bidders, requiring them to pay the balance of 90 per cent of the tender price on or before March 21 and 22, 1978 as the case may be, and to take delivery of the items of jewellery purchased by them. In respect of the appellants M/s. Shanti Vijay D ,& Co. the date fixed was March 17, 1978. E F G H On March 10, 1978, the first respondent, Princess Fatima Fouzia, one of th~ beneficiaries and a grand-daughter of the Nizam, instituted the present proceedings, being O.P. No. 141 of 1978 in the Court of the Chief Judge, City Civil Court, Hyderabad, under s. 74 of the Trusts Act for removal of the present trustees for alleged dereliction of duty, negligence and mismanagement o'n their ·part, with particular reference to the manner in which the 37 items of j·~wellery belonging to the trust were brought to sale. She also filed an application for temporary injunction under Ord. 39, r. 1 of the Civil Procedure Code for restraining the trustees from taki'ng any further steps towards the finalization of the sale of jewellery. The application was taken up by too Court on March 14, 1978, and the learned Judge on the same day, granted an ad interim injunction restraining the trustees from taking any steps to finalise the sale of the jewellery. On March 16, 1978, M. A. Abbasi, one of the trustees filed a coun~~r