Matching Fragments
Later on the Settlor Company filed a suit being suit No.40
of 1945 in the Court of Civil and Sessions Judge, Kanpur
under Section 31 of the Specific Relief Act, 1877 for
rectification of the Trust Deed so as to bring it in
conformity with its real intention to create a public
charitable trust. It was alleged in the plaint that having
regard to its Memorandum of Association, the Settlor Company
intended to settle the properties mentioned in the Trust
Deed and transfer them to the trustees for the purposes of
creating a public charitable trust including the benefits of
its own employees, but the operative part of the Trust Deed
was found to be less comprehensive than what was intended by
the parties thereto at the time when instructions were given
for preparing a draft of the same and when they executed the
Deed of Trust. The Settlor Company further alleged that
through a misunderstanding on the part of the draftsman and
through a mutual mistake the Deed of Trust did not truly
express their intention. It was asserted that the real
intention of the parties was to create a public charitable
trust, but the Company was advised that it was doubtful
whether the Trust Deed on a strict construction thereof
might not exclude from its benefits the rest of the public
apart from the employees of the company and residents of the
said settlement. In order to give effect to the said
intention the company submitted that certain amendments by
way of rectification of the deed should be made in the
Object Clause 2 of the Trust Deed. The learned Civil Judge
by his judgment dated 18th August 1945 ordered the Deed of
Trust to be rectified as prayed for in the Plaint. We will
refer to the relevant rectified paragraphs of the Trust deed
as per the aforesaid order of the Civil Court a little
later.
We shall now deal with the aforesaid six contentions
canvassed for our consideration seriatim:
Contention No.1
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So far as jurisdiction of the Civil Court to grant
rectification of the Trust Deed is concerned the relevant
provision is found in Section 26 of the Specific Relief Act,
1963 which had succeeded the prior Specific Relief Act of
1877. Under the earlier Act an analogous provision was found
in Section 31 of the Act. As per these provisions a suit
could be filed before competent Civil Court for
rectification of an instrument when through fraud or a
mutual mistake of the parties a contract or other instrument
in writing does not express their real intention. It is
obvious that a Trust Deed is not a contract in the strict
sense of the term but it would certainly be covered by the
expression 'other instrument in writing'. It could,
therefore, not be urged with any emphasis that competent
Civil Court which was approached by the Settlor Company for
rectification of the instrument of trust, was not having
requisite jurisdiction to entertain such proceedings.
However, Dr. Gauri Shankar, learned senior counsel for the
Revenue pitched his faith on a decision of the Andhra
Pradesh High Court in the case of Trustees of H.E.H. the
Nizam's Pilgrimage Money Trust v. Commissioner of Wealth-Tax
(1988) 171 I.T.R. 323. In that case the trustees of H.E.H.
Nizam's Pilgrimage Money Trust had applied to the Chief
Judge, City Civil Court, Hyderabad, under Section 34 of the
Indian Trusts Act, 1882 seeking his opinion, advice and
directions with respect to the utilisation of the income of
the trust fund in terms of the resolution. By the said
resolution the trustees contrary to the objects of the trust
had resolved to utilise the income of the trust fund for
charitable purposes in India when the settlor had clearly
laid down in the Trust Deed that the trust fund and unspent
accumulations, if any, were to be utilised for religious or
charitable objects at Hedjaz and/or Iraq. It was, therefore,
held that the resolution of the trustees was invalid and the
order of the Chief Judge permitting the trustees to spend
the trust income in India was equally inoperative and
without jurisdiction. It was also held that the Trust Act
applied only to private trusts and not to public trusts. And
that after the death of the settlor, the trust had become a
public trust. Moreover, Section 34 of the Trust Act provided
only for a summary enquiry and order with respect to
management or administration of the trust property other
than questions of detail, difficulty or importance. We fail
to appreciate how the aforesaid decision can be of any
assistance to the learned senior counsel for the Revenue in
the present case. On the facts of the case before Andhra
Pradesh High Court the City Civil Court, Hyderabad, had no
jurisdiction under Section 34 of the Trust Act to bring
about any changes in the objects of trust which had become a
public trust. On the facts of the present case Section 31 of
1877 Act (Specific Relief Act) or the corresponding
provisions of Section 26 of 1963 Act could be effectively
invoked for rectification of the instrument of trust. Such a
court does not suffer from any inherent lack of
jurisdiction, like the City Civil Court in the Andhra
Pradesh case which had no such jurisdiction under Section 34
of the Indian Trusts Act. The first contention must,
therefore, be rejected.
In the case of Laxminarain Lath Trust v. Commissioner
of Income-tax (1988) 170 I.T.R. 375 a Division Bench of
Rajasthan High Court speaking through S.C. Agrawal, J., as
he then was, had to consider the question whether any
rectification of the Trust Deed which changed character of
the private trust into public charitable trust could be
relied upon before the Income Tax authorities for claiming
exemption under Section 11 of the Income-tax Act, 1961 by
the assessee-trust. In that case the original Trust Deed
executed in August 1948 did not bring out the real intention
of the settlor to create a public charitable trust on
account of certain sub-clauses of Object Clause No. 2. It
was, therefore, felt necessary to rectify the mistake in the
original settlement deed so as to put on record the true
intention of the settlor and of the trust created by him. It
was held by the Rajasthan High Court that it was permissible
for the settlor to clarify his intention increating the
trust under the original settlement deed by executing the
supplementary deed. Even in the original deed, a discretion
had been conferred on the trustees to apply the income of
the trust in rendering aid to persons belonging to the L
family and it was permissible for the trustees not to apply
the income of the trust for the said object and in fact the
income of the trust had never been applied for that object.
It could not be said that the beneficiaries under clause
2(vi), namely, persons belonging to the family of L, had an
enforceable right to the application of the income of the
assessee for the object mentioned in clause 2(vi), and in
these circumstances their consent was not necessary before
altering the terms of the Trust Deed. In any case although
the supplementary deed was executed in May 1958, none of the
persons belonging to the family of L had challenged the
validity of the same in a court of law. After the execution
of the supplementary deed, it was not open to the trustees
to apply the funds of the assessee for non-charitable
purposes. The assessee-trust had acquired the status of a
trust wholly for charitable and religious purposes after the
amendment of the Trust Deed in May 1958. It was entitled to
exemption under Section 11 of the Income-tax Act, 1961. The
doctrine of cy pres was also invoked in the said case by
observing that in respect of christie the courts apply the
doctrine of cy pres which envisaes that if a clear
charitable intention is expressed, it will not be permitted
to fail because the mode, if specified, cannot be executed
and the law will substitute another mode cy pres, i.e., as
nearly as possible to the mode specified by the donor. The
said doctrine is applied on the principle that the court
would lean in favour of charity and where a general
charitable goal is projected and particular objects and
modes are indicated, the court, acting to fulfil the broader
benevolence of the donor and to avert the frustration of the
good to the community, reconstructs, as nearly as may be,
the charitable intent and makes viable what otherwise may
die. The aforesaid decision of the Rajasthan High Court also
takes a view which is almost parallel to the view taken by
the Delhi High Court though the binding nature of the
rectification order of the civil court on the Income Tax
Officer is not highlighted as no such occasion arose for
Rajasthan High Court to pronounce on the same on the facts
of that case. However, the fact remains that after due
rectification of the original Trust Deed either by the
settlor himself by executing a supplementary deed or by
getting it rectified through competent civil court under the
relevant provisions of the Specific Relief Act, the trustees
would be bound to carry out the amended and rectified
objects of the trust and if they fail to do so they would be
guilty of breach of trust for which even proper proceedings
can be initiated against them under Section 92 of the Code
of Civil Procedure. For all these reasons, therefore, it
must be held that when such rectified Trust Deed is pressed
in service before the Income-tax authorities in assessment
proceedings concerning the relevant assessment years the
Income-tax Officer will have to interpret such rectified
instrument for finding out its correct legal effect. But it
will not be open to the Income-tax Officer to refuse to look
at such rectified instrument of trust and to insist that the
trustees of the trust should ignore the said rectified
objects and should stick to the instrument as it existed
prior to its rectification. The Income-tax officer will have
to take the instrument as it exists in its actual amended
form when it is pressed in service for framing the
assessment concerning the relevant assessment year in which
such rectified instrument holds the field. The second
contention, therefore, fails and is rejected.
(e) To use and spend the income of the Trust properties or
the corpus of any funds or donations given or endowed for
the benefit of these trusts for the objects herein
mentioned."
A mere look at the aforesaid objects of the trust which
remained operative and kicking after the second
rectification of 1955 shows that each of the objects
mentioned in clauses (b), (c), (d) and (e) of Object Clause
2 clearly partakes the character of a charitable disposition
meant for the benefit of a well demarcated mass of humanity.
There is not much dispute on this aspect, so far as paras
2(a) and (b)(ii) to (iv), (c), (d) and (e) are concerned.
However learned senior counsel for the Revenue vehemently
submitted that leaving aside the objects mentioned in para
2(b), sub-paras (ii), (iii) and (iv) so far as sub-para (i)
of clause (b) of para 2 is concerned, at least that object
does not create a public charitable trust as the object
mentioned therein namely constructing residential quarters,
chawls or buildings for the workmen in the town of Kanpur
and surrounding areas was a very vague object. It was next
contended that though the object is so widely worded, it in
substance is meant to benefit only the workmen of the
company if the entire history of the trust from 1941 onwards
is minutely scrutinised. It was submitted by Dr. Gauri
Shankar that initially when the two pieces of land were
obtained on concessional rates from the Improvement Trust,
Kanpur in 1941 by indentures of 19.10.1936 and 2.2.1938
respectively, they were meant to be utilised for the
construction of colonies of workmen of the Settlor Company
itself. That the original Trust Deed of 1941 without latter
rectifications of 1945 and 1955 clearly indicated that the
beneficiaries were only the employees of the Settlor Company
and there was no whisper about the benefit to humanity at
large or to members of the general public. Thus it was
clearly a private trust. That though by rectification of
1945 the term 'workmen in general' was introduced for
indicating the class of beneficiaries, in substance the
benefit was reserved to the workmen of the Settlor Company
itself, and that even after 1955 rectification, the words
'workmen in general' in Kanpur and surrounding areas and
extensions remained a mere camouflage. It is not possible to
agree with the aforesaid submissions of the learned senior
counsel Dr. Gauri Shankar, for the Revenue. The reasons are
obvious. It cannot be said that the indicated beneficiaries,
namely, the workmen in the town of Kanpur and surrounding
areas and extensions are so vague as to make the object of
the trust inoperative or options. Workmen in town of Kanpur
and the surrounding areas and extensions formed a clearly
earmarked class or category of members of general public and
they were certainly a part and parcel of the general public.
It is also not possible to countenance the submission that
the words 'surrounding areas and extensions of Kanpur town'
introduced vagueness, in the identification of
beneficiaries. Surrounding areas and extensions would
naturally include those areas which are on the periphery of
Kanpur town, and which are adjacent to Kanpur town. They
would not obviously include any areas which are
geographically far removed from and situated at long
distance from Kanpur town and which could not be said to be
in the vicinity of the Kanpur town. The words 'surrounding
areas and extensions of Kanpur town' indicate proximity of
such areas with the Kanpur town and have a clear nexus with
the geographical boundary of Kanpur town. It is also easy to
visualise that the trustees will have to make available the
benefit of the clause only to those workmen in the town of
Kanpur and surrounding areas and extensions and to their
respective families and dependents who on account of poverty
are in need of help and really deserve help. Any provision
made for a poor class of public well earmarked as recipient
of such benefits would certainly make the object of such
bounty a charitable one. In fact Dr. Gauri Shankar fairly
stated that if one only goes by the verbiage of the clause
as found in 1955 rectified deed then it would appear to be a
public charitable trust. But he submitted that we have to X-
ray the clause and try to find out as to who are the real
beneficiaries of the said trust. It is difficult to
countenance even this submission. In order to find out
whether the relevant clauses of a trust deed create a public
charitable trust or not we have to go by the express words
employed by the Trust Deed. In our view for finding out the
real intention of the settlor, the words used in the Deed
would be the real vehicle of thought of the settlor
expressing his intention in cold print. This would be much
more so when such recitals in the Trust Deed are not
challenged on the ground that they are a camouflage or a
result of a colourable device. As we have noted earlier,
contention regarding colourable device was not pressed by
Dr. Gauri Shankar for the Revenue and rightly so as it did
not arise out of the judgment under appeal. On the other
hand, on the express language of clause 2(b)(i) of the 1955
rectified deed, it cannot be said that it does not create a
public charitable trust. On the contrary it becomes clear on
a close reading of relevant provisions of this clause that
the objects are specific and charitable in nature. The
beneficiaries are also clearly indicated. There is also no
ambiguity about the trustees or the trust properties. Thus
all the basic requirements for creation of a public
charitable trust do exist on the express language of the
relevant sub-clauses of clause (2) of 1955 rectified deed.
Dr. Gauri Shankar, learned senior counsel for the Revenue
then submitted in any case absolute discretion is vested in
the trustees under the Trust Deed to utilise the trust
income for the benefit of any of the sub-classes of workmen
in the town of Kanpur and they were likely to divert the
entire benefit to their own workmen. To say the least it is
merely a discretion left to the trustees and not an
obligation of the trustees that they must necessarily spend
the income of the trust for the workmen of the settlor
company itself and not for the benefit of any other outside
worker. We shall deal with this aspect in greater details
when we will refer to Contention No. 6 canvassed by learned
senior counsel for the assessee trust that even apart from
the rectification of 1955 the earlier rectification of 1945
did create a public charitable trust. However so far as the
second rectification of 1955 is concerned it has clearly
indicated that only a discretion is vested in the trustees
to utilise the trust income for benefit of poor workmen in
the town of Kanpur and in the surrounding areas and
extensions and that may include even poor and needy workmen
of the settlor company itself. In this connection Shri Verma
also rightly invited our attention to Section 92 of the Code
of Civil Procedure and clause (i), sub-clause (b)(iv)
whereby trustees in their discretion could provide for
advancement of other similar objects of general public
utility. Relying on a series of decisions of this Court in
Commissioner of Income-Tax, Madras v. Andhra Chamber of
Commerce (1965) 55 ITR 722; Ahmedabad Rana Caste Association
v. Commissioner of Income-Tax, Gujarat (1971) 82 ITR 704;
Abdul Sathar Haji Moosa Sait Dharmastapanam v. Commissioner
of Agricultural Income-Tax, Kerala (1973) 91 ITR 5; Sole
Trustee, Loka Sikshana Trust v. Commissioner of Income-Tax,
Mysore (1975) 101 ITR 234; Yogiraj Charity Trust v.
Commissioner of Income-Tax, New Delhi (1976) 103 ITR 777;
and Commissioner of Income-Tax, Madras etc.etc. v. Andhra
Chamber of Commerce etc.etc. (1981) 130 ITR 184 it was
submitted that objects of general public utility would
clearly indicate that they are meant for public benefit and
would create a public charitable trust. That in the light of
the objects of the trust as rectified in 1955 even a workmen
who is not an employee of the settlor company could in
appropriate case seek direction under Section 92, Code
of Civil Procedure, from competent civil court against the
trustees to act according to the object of the trust and
give benefit to such an applicant beneficiary if the
circumstances so permit and the income of the trust is
sufficient to cater to his needs.
