Delhi High Court
Delhi Land And Finance Universal Ltd. ... vs Arjun Singh And Ors. on 13 December, 1985
Equivalent citations: AIR1986DELHI381, 1986(10)DRJ200
JUDGMENT D.K. Kapur, J.
(1) This appeal is directed against a judgment dated 2nd November, 1981. deciding Suit No. 373/67 (on the Original Side of this Court). The Suit in question was instituted by three residents of Model Town, Delhi, to claim a declaration and injunction concerning some land situated in Model Town. It maybe recalled that Model Town was developed as a colony by M/s. Delhi Land and Finance Private Limited. The name of that company was changed later to Dlf United Private Limited and now the present appellant is Dlf Universal Limited, which is described as the successor company. In that colony, plots were sold to various persons for building their private houses. In the lay-out plan of the colony, certain land had been set aside for various purposes, such as streets, parks, schools, markets, and. so on. Two of the sites which were shown as 'ear-marked for public building' and measured 05 were the subject-matter of the Suit from which this appeal has arisen.
(2) These two plots were sold by Dlf (for short) to M/s. Lal Chand Public Charitable Trust by a sale-deed dt. 28th October, 1965. In the Suit, the trustees of that Trust are imp leaded as defendants Nos. 12, 13 and 14. The said trustees had executed a lease-deed dated 30th September, 1966, in favor of Jain Sabha Dharamarth Trust and Aggarwal Dharmarth Trust concerning one of the plots. The trustees of these Trusts are imp leaded as defendants No. I toll in the Suit. The remaining defendant is the Delhi Land and Finance Private Limited. The other plot was retained by the Lal Chand Public Charitable Trust.
(3) As discussed in the judgment under appeal, the question in the Suit was whether M/s. Dlf were entitled to sell land which was ear-marked for public building in the lay-out plan. According to the learned Single Judge, the car-marking of the land in this manner created a trust and M/s. Dlf were not entitled to sell the land. It is also the undeniable case that the land was sold for a sum of Rs. 10,000.00 .
(4) Now it has to be seen why the Court held that there was a trust. According to the learned Judge, reference to the Delhi Municipal Corporation Act, 1957, is necessary. Reference was made to Sections 312 and 313 of the Act, which shows that a lay-out plan has to be sanctioned by the Municipal Corporation of Delhi. In Section 313(1)(b) of the Act, it is provided that the owner shall show in the lay-out plan the reservation of plots for streets, open space, park, recreation ground, school, market or any other public purpose. According to the learned Single Judge, the setting aside of the land for any public purpose creates a trust.
(5) Though elaborate reasons have been given by the learned Single Judge, we fail to understand how a trust can be created in this manner. In order there be a trust, there has to be a confidence reposed in some other. The nature of a trust requires a transfer to the trustees to hold property for a particular purpose. A mere declaration by the owner that he will hold land for a public purpose does not mean that a trust is created. There is no transfer, there is no confidence and there is no beneficiary. All the features that are requisite for a trust are lacking.
(6) The learned Single Judge realised this difficulty and, therefore, turned to the definition of a constructive trust. According to him, a constructive trust is one which comes into being by operation of law. It is then observed that the present arrangement is more of a resulting trust. Various judgments of the English Courts have been referred to concerning the features of a constructive trust and a resulting trust. According to the learned .Single Judge: "ITS forms and varieties are practically without limit. It is raised by a court of equity whenever it becomes necessary in justice and good conscience that such a trust should exist. The categories of constructive trusts are never closed."
According to the learned Judge, it would be against conscience to bold that no obligation was annexed to the ownership of the reserved sites.
(7) The learned Single Judge then applied himself to the question whether there was a charitable trust and came to the conclusion that this is a charitable irust.
(8) Having held that a trust exists, the Court came to the conclusion that M/s. Dlf cannot sell this land and, therefore, the sale by M/s. Dlf in favor of the Lal Chand Public Charitable Trust was invalid. In the result, the Court held that M/s. Dlf must bold the property for a public purpose and there is a fiduciary relationship subjecting the holder of the property to deal with the same for a common good. Having held that the sale was invalid, the Court then declared that the plots in question cannot be used except for a public building.
(9) We think that this matter is quite a simple one.
(10) A constructive trust cannot satisfactorily be defined according to 'Snell's Principles of Equity'. But, three types of cases are discussed in which a constructive trust has been held to arise. One is when trust property is received by a stranger to the trust. If the trust property is transferred to a person who has actual or constructive notice that it is a trust property, then a constructive trust arises. Even if there is no such notice, if he is not a bonafide purchase and he subsequently gets notice of the trust, he becomes a trustee.
(11) Another example of this type of a constructive trust is when a stranger knowingly assists in a fraudulent design to part with the trust property. All these types of cases are essentially meant for recovering trust property when it is parted with.
(12) The next type of case is when an express trustee receives profits from the use of his fiduciary position. The profits made in such a case are held on a constructive trust. The next type of case is when property has been sold for consideration, but the sale has not been finalised. The vender in such cases becomes a trustee. Another example of this type of a case is when the mortgagee exercises his right to sell the mortgaged property and after liquidating his loan holds its surplus. The mortgagee is a constructive trustee for this surplus fund.
(13) A more detailed analysis of a constructive trust is to be found in Chapter Ix of 'the Law of Trusts' by G.W. Keeton. According to Keeton : "The term constructive trust covers a variety of different relationships, having very few features in common." The definition given by Keeton is as follows :- "Generally, it may be said that a constructive trust is a relationship created by equity in the interests of good conscience and without reference to any express or implied intention of the partics. Wherever a person clothed with a fiduciary character avails himself of it to obtain some personal advantage, such a person becomes a constructive trustee of all profits for the person at whose expense the profit has been made." Thus, the essential features of a constructive trust require that there should be a person holding property in a fiduciary capacity. In order that there is a fiduciary capacity, there must be a relationship between that. person and the person claiming that a trust arises. We cannot in the instant case find any fiduciary capacity between M/s. Dlf and the purchasers of plots in Model Town. The mere declaration of intention as to what use a particular plot has to be put to, does not mean that a fiduciary relationship arises between the owner and a purchaser of any particular plot in the colony. The concept of fiduciary relationship will be discussed a little later, but for the moment, turning to Keeton's words, it is interesting to note that his analysis of a constructive trust has been classified into various categories, which are-A. The vendor as a constructive trustee, which is the same as described by Snell, B-The mortgagee as a constructive trustee which is again the same exercise of power of sale. C-The acquisition of property by a fraud of which.
(14) Certain examples are given which need not be analysed here. D-An express trustee as a described by Snell. E-Misuse of fiduciary relationship, which is similar to a principle set out in the Trusts Act, 1882, which will be discussed later. F-A stranger intermeddling with the trust and other constructive trustees. In this latter category are classified various odd cases like a director receiving a commission from the person dealing with the company and a director diverting company's funds to his own benefit. A promoter of a company retaining amounts for selling property to the company, a solicitor purchasing property from a client, and so on. None of the cases are even remotely close to a person making a lay-out plan and laying that he will use a particular plot for a public building.
(15) Now turning to the law set out in the Trusts Act, 1882. There is a particular Section which deals with this very point. The relevant Section is 88, which has also a large number of illustrations. Per Curiam, that section with its illustrations is reproduced below. "88.Advantage gained by fiduciary.-Where a trustee executor, partner, agent, director of a company, legal advisor, or other person bound in a 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 dealing under circumstances in which his own interests arc, 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. Illustrations (a) A, an executor, buys at an undervalue from B, a legatee, his claim under the will, his ignorant of the value of the bequest. A must hold for the benefit of B the difference between the price and value. (b) A, a trustee, uses the trust-property for the purpose of his own business A holds for the benefit of his beneficiary the profits arising from such user. (c) A, a trustee retires from his trust in consideration of his successor paying him a sum of money. A holds such money for the benefit of his beneficiary. (d) A, a partner, buys land in his own name with funds belonging to the partnership. A holds such land for the benefit of the partnership. (e) A, a partner, employed on behalf of himself and his co-partners is negotiating the terms of lease, clandestinely stipulates with the Lesser for payment to himself of a lakh of rupees. A holds the lakh for the benefit of the partnership. (f) A and B are partners. A dies, B instead of winding up the affairs of the partnership, retains all the assets in the business. B must account to A's legal representative for the profits arising from A's share of the capital. (g) A, an agent employed to obtain a lease for B, obtains the lease for himself. A holds the lease for the benefit of B. (h) A, a guardian, buys up for himself incumbrances on his ward B's estate at an under value. A holds for the benefit of B the incumbrances so bought, and can only charge him with what he has actually paid."
There are other examples in the Act such as those given in Section 84, transfer for illegal purpose, Section 85, Bequest for illegal purpose. Section 86-- Transfer pursuant to rescindable contract. Section 87-Debtor becoming creditor's representative-"Section 89. Advantage gained by undue influence, Section 90-Advantage gained by qualified owner , and finally, Section 94 which deals with constructive trusts. This Section reads :- "94.Constructive trusts in cases not expressly provided for-In any case not coming within the scope of any of the preceding sections, where there is no trust, but the person having possession of property has not the whole beneficial interest therein, he must hold the property for the benefit of the persons having such interest, on the residue thereof (as the case may be), to the extent necessary to satisfy their just demands."
The definition of constructive trust shows that the trust arises when the entire beneficial interest is not held by the owner or having possession of the property. The question that we have to ask is whether M/s. Dlf was a qualified owner or did not hold the beneficial interest in this manner merely because it made a lay-out plan saying that the plot was earmarked for a public building. For one thing, earmarking a plot for a public building does not mean that a public building will not be built on it. If it was so, who is to build the building ? Who is to supply funds for such a building ? What is the manner in which the public building is to be constructed and for what purpose ? Obviously, such an ear-marking is only a step towards the utilisation of the plot. It is an indication that some building of public Utility is likely to be built on the plot. But, by no means can it be laid to be trust. For example, the owner may not use the plot for a public building. He may refuse to build any building on the same or there may be an incomplete building. We do not see what type of trust this can lead to. In fact the ownership of M/s. Dlf would be un-changed and would be unaltered by any such declaration. The above examples show that there can be no constructive trust in such a case (16) The learned Single Judge also thought that there might be a resulting trust. In order to see what is a resulting trust, we have again to refer to the Text Books for convenience. This trust is defined as a trust where there is a presumed intention of the settler which has not been expressed. Some examples of such trusts are given-(a) when the beneficial . interest in the trust property is not exhausted, (b) trusts which are not fully expressed. But the example given by Snell in the case when property is left to a trust to pay the income to B for life without saying what to do with the property on the death of B, a resulting trust is found in law, because after the death of B, the trustee hold the property for the heirs of the original settler. Then there is the case of a purchase benami. In such cases, a resulting trust arises. Some other examples are also given, but none of them are remotely like the present case. In Keeton's Book, the analysis of a resulting trust is somewhat different. He has dealt with the subject as implied and resulting trust and the examples are-(A) purchase in the name of another, i.e., benami purchase, (B) Mutual Wills, (C) Joint purchase and Joint mortgage, (D) Joint accounts of husband and wife, (E) Cases where the beneficial interest is not completely disposed of, and it is to be seen that in every case there is some type of purchase involved.
(17) We have not been able to find a single case where a trust was presumed or implied or a constructive trust was found when no transfer of property was made. In this connection, it is necessary to try to work out some definition of a trust. Clearly, it is a clog on the legal ownership of any property. If 'A' transfers property to 'B' with the provision that the income shall be used for the benefit of his son 'C', then there is a trust by which 'B' is compelled to use the income for 'C' benefit. 'A' is the settler, 'B' is the trustee and 'C' is the beneficiary. The legal ownership of the property will be with 'B', but the equitable or beneficial interest will be of 'C'. There thus have to be three persons -A settler, a trustee and a beneficiary. In the present case, the plaintiffs say the trust arises because the owner has declared that the land in question will be used for a public purpose. There is no transfer and there is no confidence. It is open of course, for an owner to make himself a trustee by creating an express trust. The manner in which this can be done is set out in the Trusts Act, 1882. But, can an owner make himself a resulting or a constructive trustee ? In order for such a relationship to exist, there has to be fiduciary relationship between the two parties. In other words, the confidence must be reposed by 'A' on 'B', which makes 'B' a resulting or a constructive trustee. There is no such relationship in the present case. So, a resulting or a constructive trust cannot be created in law and cannot be implied. If 'A' openly says that he will make a temple on his land and will dedicate it for religious purposes, no trust will arise. Similarly, if 'A' says that he will convert a particular property into a charitable dispensary or a home for orphans, it will not amount to a resulting or a charitable trust. But, if 'A' transfers his property to 'B' for the purpose of setting up a home for orphans, it will be a trust. A trust, therefore, essentially arises only if there arc two persons-one who enters into a transaction with an an intention express or implied and another, who receives the property in question, knowing that express or implied intention. If the intention is express, then it is an express trust If it is implied, then it is an implied or resulting trust. If the advantage is given by a person in a fiduciary capacity, it will lead to a constructive trust. In the present case, there is no relationship of this type, so we are unable to agree that the learned Single was right in coming to the conclusion that there was a constructive and resulting trust and we have to reverse the judgment on this point.
(18) Now, another aspect of this case has to be dealt with, which has come to our notice on an analysis of the facts of the case. M/S. Dlf made a lay-out, plan for the colony which they called Model Town They ear-marked some of the plots for sale to others for residential purposes Some of the plots were marked for markets, some were marked for streets, parks and the plots in question in the Suit were marked for public building. Nobody can say that the plots meant for houses had to be constructed by M/s. DLF. The plots had to be sold to somebody to make houses It was not for the coloniser to make the houses. Similarly, the streets, though ear-marked, had not necessarily to be made by the colonisers. The streets would vest in the Municipal Corporation of Delhi, which would make the roads. The parks, etc., to be set up would also be in the hands of some other public body. Similarly, the markets, etc., set aside under the same Section i.e, Section 313(1)(v) would be markets to be sold for making shops. Though making of a market is a public purpose, it does not mean that the coloniser has to make that market. The reservation of the plots for making a public building is of a similar type. A public building is not to be made by M/s. Dlf, which is a mere coloniser. All that can be done by the colonizer is to sell the land to somebody else for making a public building. Therefore, M/s. Dlf had necessarily to sell the plot to somebody in accordance with the lay-out plan. The purpose of the suit seems to be self-defeating. If the plot is not used for some sort of a public building by somebody, the purpose of the lay-out plan will be defeated. Essentially, a coloniser is a person who is running a commercial project, he purchases land, developes it, earmarks it, makes it ready for public use and then sells the plots. Once the plots are sold, the coloniser merely disappears from the scene. It is now for others to build the houses, the market, the streets and other utilities necessary in the enjoyment of the colony. The public buildings have to be built by somebody else. It may be that the public building is a hospital, it may be that it is a temple, a community hall or a club or a school. The coloniser cannot remain to carry out these activities after the plots have been sold. Therefore, it follows that the purpose of the lay-out plan has to be fulfillled by the transfer of the property to somebody else. In this case. M/8. Dlf transferred the land to the Lal Chand Public Charitable Trust for the purpose of making some public building. There being two plots, one was leased out further to two charitable trusts. What better utilisation of the land for a public purpose can be made ? It can only be given to some other charitable body as a charitable building. Every building which is used for a public purpose will still remain the utilisation of the plot for a public purpose. We have not been able to find any satisfactory answer to the question, we had posed, as to how the plot was to be used by M/s. Dlf for a public purpose if it was not transferred to somebody else to make that public building (19) It is now necessary to point out some other facts that appear from the record. The land situated in Model Town was not owned by M/s. Dlf, but it belonged to Rai Bahadur Suraj Narain and others. The agreement dated 22nd July, 1949, shows that the owners had given a Power of Attorney to M/s. Dlf for dealing with this land. As a result of this agreement, and another agreement dated 2nd May, 1949, M/s. Dlf was to make the colony on behalf of the owners. The sale made on 28th October, 1965, in favor of the Lal Chand Public Charitable Trust was not made by M/s. Dlf, but by Rai Bahadur Suraj Narain and others, who were the owners of the land. There is nothing in the sale-deed to show that the owners had reposed any confidence on the Lal Chand Public Charitable Trust, but the conveyance-deed does state that the sale was for the purpose for which the same was car-marked in the sanctioned lay-out plan. Therefore, there is no violation by M/s. Dlf in the matter of the sale-deed. In fact, M/s. Dlf are not even the sellers of the land and they were not the owners. They were mere representatives of the owners.
(20) Furthermore, the perpetual lease-deed made on 30th September, 1966, is also on record. This lease-deed was made by the Lal Chand Public Charitable Trust as owners of the land. This lease-deed provides that the lessees are philanthropic bodies and are desirous of setting up a public building. It also states in para No 2 thereof that the land has been ear-marked for construction of a public building and the lessees would construct a public building after getting the building plans duly approved and sanctioned. There is an express provision in the lease-deed as below : - "NEITHER the said plot of land nor the buildings to be constructed thereon shall be utilised for private or commercial benefit or gain nor the said plot of land shall be sold as residential or commercial sites nor be parceled out into smaller plots for such. private use or commercial benefits."
From the statement in the lease-deed, it seems that even then there was a Suit pending in the Court of Shri Hira Lal Garg, P.C.S., Sub-Judge, Delhi, concerning this very plot.
(21) The facts that emerge from these documents are that the plots were sold by the owners Rai Bahadur Suraj Narain and others to the Lal Chand Public Charitable Trust for utilisation to construct a public building. There being two plots, one was leased out by the Lal Chand Public Charitable Trust to other charitable bodies to build a public building. There is therefore, no infringement of the lay-out plan involved in the present case.
(22) The whole contention regarding there being a trust and there being no right to sell is based on the contention that M/s. Dlf should itself construct a public building. In fact, M/s. Dlf were never the owners of the land. It was merely the agent of the owners Rai Bahadur Sura) Narain and others. It acted as the coloniser on behalf of the original owners and the land was sold by the original owners. So, the question of M/s. Dlf being the trustees does not in any way arise in the present case (23) We have no hesitation in accepting this appeal and reversing the judgment under appeal. The appeal is allowed. The appellants will be entitled to costs.