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Judgment
Bopanna, J.-This petition is treated as having been posted for hearing and I have heard the learned Counsel for the parties.
The petitioners are the directors of the second respondent Co-operative Society which is a Milk Producers Co-operative Society. They were elected as Directors of the second respondent society in the elections held on 30-9-1986 under the relevant provisions of the Karnataka Cooperative Societies Act (for short ''the Act''). They in the usual course are entitled to continue in the office for a period of three years from the date of election, that means, upto 30-9-1989. It is not in serious controversy that all these petitioners belong to the rival political party of Congress(I), excepting one who belongs to the Janata Party.
It transpires that some time in the year 1986, the election of the petitioners to the Board of Directors of the second respondent society was set aside in a dispute raised by certain other members of the society. The disqualification was made on the ground that the petitioners were defaulters, in that, they owed certain amounts to the Society and therefore under Section 29-C of the Act they were not entitled to continue as members of the society and consequently their election to Board of Directors was held to be bad in law. This order of disqualification was challenged by the petitioners before the Karnataka Appellate Tribunal. The Karnataka Appellate Tribunal having declined to grant an interim order in their favour, the petitioners challenged the said order of the Tribunal in W.P.No. 7266/87. In that writ petition, this Court on 21-5-1987 made the following interim order:
"Issue notice regarding rule. In the meanwhile, Annexure-B is stayed for a period of four weeks."
When the matter came up again on 22-6-1987, this Court made a further interim order as follows:
"Stay to continue for four more weeks. Respondent-2 (i.e., the Appellate Tribunal) to dispose of the appeal within that time."
Pursuant to this direction made by this Court on 22-6-1987, the Appellate Tribunal disposed of the appeal filed by the petitioners on 31-7-1987. Their appeal was allowed and the order of the Arbitrator setting aside the election of the petitioners was set aside and the matter was remitted to the Assistant Registrar i.e., the Arbitrator for fresh consideration in accordance with law. The finding of the Appellate Tribunal should be noticed for a proper appreciation of the facts in the present writ petition. The Appellate Tribunal observed as follows:
"We are unable to appreciate how the Assistant Registrar of Co-operative Societies came to the conclusion that the appellants were defaulters on 30-9-1986 when the list furnished by the Managing Director indicated that the appellants were defaulters on 29-10-1986 as recorded by the Assistant Registrar himself. And these two dates are very important to determine the fate of dispute before the Assistant Registrar of Co-operative Societies. Since we have no basis to coining to any conclusion in view of the clear conflict between the two dates-particularly because the date of default indicated by the Managing Director was after the election was over, we have no alternative but no remand the matter to the Assistant Registrar of Cooperative Societies, Doddaballapur Sub-Division, Doddaballapur for fresh trial in accordance with law."
That is how the matter was again before the Assistant Registrar. It has now been adjourned from time to time on the request of the parties. So as on the date of filing of this writ petition, the question whether the petitioners are disqualified from being members of the second respondent society and consequently they could not be the directors of the society is pending before the Assistant Registrar.
The subsequent developments which has compelled these petitioners to approach this Court with this writ petition should be noticed. It transpires that the first respondent Deputy Registrar issued a notice to the petitioners under the provisions of Section 30 of the Act which empowers him to make an order of supersession on the grounds specified in Section 30(1) of the Act. The ''show cause'' notice issued by the first respondent Deputy Registrar shows that these petitioners were guilty of certain acts of omission and commission in the discharge of their duties as Directors of the Society and therefore they were asked to show cause why they should not be superseded and an administrator appointed in their place as provided under the law. The petitioners apprehending certain drastic consequences pursuant to this notice, approached this Court by filing this writ petition on 4-11-1987 and obtained interim order by this Court on 6-11-1987 as follows:
"Emergent notice regarding rule. Government Advocate to take notice for respondent-1.
Notice to respondents 2 and 3 returnable by 9-11-1987.
For further orders on 9-11-1987."
No interim order was made against respondent-1 pursuant to the show cause notice issued by him on the ground that he had not made any order in the exercise of his powers under Section 30 of the Act and that he was only proposing to take action by issuing a show cause notice and that is the reason this Court directed the Government Advocate to take notice for respondent-1 so that he would be in a position to make a proper representation on behalf of respondent-1.
This petition was again posted on 9-11-1987. The petitioners were not heard on that day since respondent-2 the Society and respondent-3 the Zilla Parishad President, had not been served. Therefore, the matter was adjourned to 18-11-1987. On that day, the petitioners complained before this Court that the first respondent had passed an order in terms of Annexure-D superseding the Managing Committee and appointing an Arbitrator and they also sought stay of the said order. Interim order was made on that day staying the operation of the supersession order Annexure-D. The matter was called again on 24-11-1987 and on 4-12-1987 and by that time respondent-1 had filed his objections and so also respondents 2 and 3.
The contention taken by respondent-1 is that he acted in accordance with law in the exercise of the powers conferred on him under Section 30 of the Act; that he had given sufficient opportunity to the petitioners to make their representation against the impugned show cause notice and since they were not entitled to personal hearing, he considered their explanation on merits and passed the order of supersession on 13-11-1987. He admits that five of the members of the Managing Committee had made a representation on 13-11-1987 stating that they did make a representation on 13-11-1987 in reply to the reminders issued by him on 8-11-1987 and that they should be given further time to make further representation in view of the petition filed by them in this Court, that is the present petition. The Deputy Registrar after considering the material on record, which according to him, fully proved all the charges against the petitioners made the impugned order of supersession. Now that the impugned notice has been followed by the impugned order, there is no need to refer to the impugned notice. We are mainly concerned with the validity of the impugned order made on 13-11-1987. The petitioners have challenged the said order on the following grounds:
1) that the order is violative of the principles of natural justice since the petitioners were not given sufficient opportunity to putforth their case before respondent-1;
2) that the same is vitiated by extraneous consideration since the petitioners who belong to rival political group and who would have continued as Directors of the Society upto 30-6-1989, were sought to be removed by the authorities who are now controlled by the present Government in power on flimsy grounds and though these charges are the subject matter of certain acts and omissions committed by the previous Managing Committee, those charges are sought to be foisted on them contrary to the declaration of law made by this Court in regard to the power of the Registrar to supersede the present Managing Committee for the acts and omissions committed by the earlier Managing Committee;
3) that the impugned order is vitiated by malafides, in that the authorities having failed to remove the petitioners by raising a dispute against their alleged disqualification to be the members of the Co-operative Society, they have now indirectly resorted to the provisions of Section 30 of the Act by making the petitioners the scapegoat of certain acts and omissions which were the creation of the previous Managing Committee;
4) even otherwise the impugned order is vitiated by non-application of mind; since no reasonable authority could have come to the conclusion on the material on record that these petitioners should be superseded for the alleged acts committed by them.
Out of these four submissions made by the learned Counsel for the petitioners, in my view, the important point that arises for consideration in the background of the earlier litigation between the parties, which ultimately ended in an order of remand by the Tribunal to the Assistant Registrar for considering the alleged disqualification suffered by the petitioners under Section 29-C of the Act is whether the order of the first respondent is violative of the principles of natural justice? It is not in dispute that the provisions of Section 30 of the Act do not provide for a right of personal hearing. It is sufficient if an opportunity is given to the aggrieved party to make a representation against the charges of omission or commission that are sought to be framed and proved against the aggrieved party. The petitioners had given their explanation to the show cause notice. But before any order could be made by the First respondent on their explanation, the petitioners apprehending certain adverse consequences, had approached this Court and sought an interim order against the first respondent restraining him from proceeding further with the matter. In the circumstances, a reasonable apprehension would arise in the minds of the petitioners that the first respondent was not justified in making the order on 13-11-1987 when on the very same day they had requested the first respondent to defer the proceedings in view of the pendency of the writ petition. Mr. Parthasarathi, learned Counsel for the first respondent has relied on the impugned order itself to show that the first respondent did not act either in haste or on an extraneous consideration. He submitted that what all he did was to discharge the statutory duty cast on him under Section 30 of the Act; that he had served the show cause notice on the petitioners well in time and also given them sufficient time to submit their explanation and they had given their explanation and that there was nothing that be could have done except to make an order on merits after considering whether the charges against them were proved by the material on record. He drew my attention to the relevant dates in the impugned order. He submitted that the first respondent Deputy Registrar acted within his jurisdiction having found that the charges against the petitioners had been proved and the findings recorded by him are not open to interference under Article 226 of the Constitution of India.
This contention of the learned Counsel for the second respondent centres round certain facts which preceded the filing of the writ petition. I have already made a brief reference to those facts in the earlier part of this order.
That the impugned order is not so innocuous as is sought to be made out is clear from the return filed by the second respondent Society. In para 2 of its return it has made a reference to the order of the K.A.T. made on 31-7-1987, remanding the dispute relating to the disqualification of the petitioners to the Assistant Registrar. However, in para 3 of the return it is seen that the Managing Director of Sericulturists-cum-Farmers Service Co-operative Society, Nelavagilu, had written a letter to the Administrator of the second respondent-Society in letter No. SCFSCS/Nel/41/87-88 dated 30-11-1987 stating that the petitioners were defaulters to the said Society as on 30-9-1986. The said letter is marked as Annexure-R-1. The date of this letter should be noticed to know the sequence of events in the light of the earlier proceedings before the Assistant Registrar and the pending proceedings now before the very same Assistant Registrar. The question of disqualification or otherwise of these petitioners is now pending before the Appropriate Authority under the Act. The order of the Tribunal had become final in this regard and neither this Court nor any other authority in law could have questioned the correctness of that order. However, the Management of the another Co-operative Society has taken the responsibility of informing the Administrator on 30-11-1987, long after the impugned order was made appointing the Administrator as the Chief Executive of the Co-operative Society, that petitioners 1 to 3 and four others were defaulters of Nelavagilu Society as on 30-9-1986. So on the basis of this letter, an allegation is made in the return that the petitioners were doing their utmost to mislead the Assistant Registrar, the KAT as well as this Court as regards the true state of affairs and the first and second petitioners had continued as President and Director of the second respondent Society despite their knowledge that they were disqualified even to seek election to the post of directors on 30-9-1986. This averment made in para-3 of the counter-statement only shows that the Society or the group of persons who were interested in taking over the management of the Society were keen on obtaining certain material against the petitioners regarding the disputed date of their disqualification which was pending consideration before the Assistant Registrar. That matter has reached its finality by virtue of the order of the Appellate Tribunal and therefore the parties should have been left to their remedies before the Assistant Registrar in regard to the alleged disqualification of the petitioners on the ground that they had become defaulters on 30-9-1986. But the fact that their alleged disqualification is sought to be used in these proceedings in an extra-ordinary manner goes to show that the impugned order is vitiated by extraneous considerations. The averment in para-4 of the return in so far as they are necessary for the purpose of this case read as under:
"Not satisfied with the illegal usurpation of office the petitioners 1 to 3 convened a meeting of the Board on 27-5-1987 and under any other subject, caused the resignation of two members, namely, M. Munichennappa and M Sonnappa son of Pillappa, who were defaulters to the Nelavagilu Society and co-opted petitioners 5 and 7 as directors, over-ruling the objections raised by the duly elected member Sri N.P. Narayanappa to such co-option on the same day. Again, at the meeting held on 6-7-1987, the first petitioner brought up, under any other subject, the resignation tendered by Dombalappa and Narayanaswamy son of Doddamuniyappa and after accepting their resignation co-opted petitioners 4 and 6 as directors, again overruling the objections of the duly elected member Sri N.P. Narayanappa...."
It will be seen thus the disqualified members and other illegally co-opted members that are running the Society in place of defaulting members who resigned. Copies of the resolution dated 6-7-1987 and 27-5-1987 are marked as Annexures R-1 and R-2 respectively.
On these averments, it is possible for this Court to proceed on the basis there were certain forces operating against the petitioners after they succeeded in the earlier litigation in challenging the order of the Assistant Registrar setting aside their elections and those forces were again active by enabling the Registrar to exercise his power under Section 30 of the Act. That is the very reason the petitioners immediately after the show cause notice was issued to them, approached this Court and sought for an interim order of this Court. This Court was fully apprised of the relevant circumstances warranting an interim order but it was reluctant to make an interim order pre-empting the very exercise of powers by respondent-1 under Section 30 of the Act, since he had not made any adverse order at that time and this Court proceeded on the basis that the first respondent would exercise the power for the purpose of achieving the object of the Act and not on extraneous considerations. That is the reason this Court asked the Government Advocate to take notice on behalf of respondent-1 and posted the matter for further orders immediately on 9-11-1987. The petitioners had dutifully made their representation to the first respondent defending as best as they could the charges made against them and what they expected of the first respondent was to grant them some more time for making any further representation in view of the pendency of the writ petition in this Court. But respondent-1 was of the view that they were given enough opportunity and since they had no right of hearing, he made the impugned order on the very date on which they made their representation for extension of time. They must have made their representation during the working hours on 13-11-1987 and the impugned order was made on the very same day. If these sequence of events are taken into cosideration i.e., right from the commencement of proceedings against the petitioners before the Assistant Registrar, before the Revenue Appellate Tribunal and before this Court and again back to the Revenue Appellate Tribunal and to the Assistant Registrar and the second round of litigation under Section 30 of the Act culminating in the impugned order during the pendency of this writ petition, it may not be wrong to take the view that this action was taken with a certain amount of deliberate haste which was not ordinarily warranted in the circumstances of the case. The charges against the petitioners are not of such a grave nature which would have either endangered the existence of the Society or affected its financial position or reputation. This is a Society primarily meant for the benefit of its members who sell their produce i.e., milk to the Society. There are no complaints on record that any member of the Society is put to, in any way, to any hardship or to an apprehension of financial loss by these petitioners and particularly petitioners 1 and 2 by remaining in office by making false representation or by their acts and omissions. Some of these charges were not the doing of the petitioners. Some of them related to the acts of the previous Committee and it is well settled that the Managing Committee of the Society could not be held liable for acts or omissions and commissions of the previous Committee unless it is established that one third members of the previous Committee to continue to be members of the present Managing Committee. Such a case was not put forward either by the State Government or by the second respondent. Therefore, the fact that the first respondent thought it fit to make the impugned order on 13-11-1987 itself, knowing fully well, that the petitioners'' writ petition on the very question touching his powers under Section 30 of the Act was pending consideration, should have made him wiser and put him on guard and he should have taken some time for reflection and satisfied himself whether he would be doing the right thing by making an order of supersession.
The principles of natural justice have received a very extended meaning in the decision of Olga Tellis v. Bombay Municipal Corporation, (A.I.R. 1986, S.C. P. 180). The constitutional guarantee of every citizen even though he be a slum dweller arose for consideration in that case with reference to the principles of natural justice before any action jeopardising his right to live was taken against him. In that connection the Supreme Court had stated the law in para 47 as follows:
"47. The proposition that notice need not be given of a proposed action because, there can possibly be no answer to it contrary to the well-recognised understanding of the real import of the rule of hearing. That proposition overlooks that justice must not only be done but must manifestly be seen to be done and confuses one for the other. The appearance of injustice is the denial of justice. It is the dialogue with the person likely to be affected by the proposed action which meets the requirement that justice must also be seen to be done. Procedural safeguards have their historical origins in the notion that conditions of personal freedom can be preserved only when there is some institutional check on arbitrary action on the part of public authorities. [Kadish,"Methodology and Criteria in Due Process Adjudication-A Survey and Criticism", (1957)] 66 Yale LJ 319, 340. The right to be heard has two facets, intrinsic and instrumental. The intrinsic value of that right consists in the opportunity which it gives to individuals or groups, against whom decisions taken by public authorities operate, to participate in the processes by which those decisions are made, an opportunity that expresses their dignity as persons [(Goldberg v Kelly, (1970) 397 US 254, 264-65 (right of the poor to participate in public processes)].
"Whatever its outcome, such a hearing represents a valued human interaction in which the affected person experiences at least the satisfaction of participating in the decision that vitally concerns her, and perhaps the separate satisfaction of receiving an explanation of why the decision is being made in a certain way. Both the right to be heard from, and the right to be told why, are analytically distinct from the right to secure a different outcome; these rights to interchange express the elementary idea that to be a person, rather than a thing, is at least to be consulted about what is done with one. Justice Frankfurter captured part of this sense of procedural justice when he wrote that the "validity and moral authority of a conclusion largely depend on the mode by which it was reached. No better instrument has been devised for arriving at truth than to give a person in jeopardy of serious loss notice of the case against him and opportunity to meet it. Nor has a better way been found for generating the feeling, so important to a popular Government, that justice has been done" (Joint Anti-fascist Refugee Committee v Mc Grath, (1950) 341 US 123, 171-172). At stake here is not just the much-acclaimed appearance of justice but, from a perspective that treats process as intrinsically significant, the very essence of justice"[See"American Constitutional Law"by Laurence H. Tribe, Professor of Law, Harvard University (Ed. 1978, page 503)].
The instrumental facet of the right of hearing consists in the means which it affords of assuring that the public rules of conduct, which result in benefits and prejudices alike, are in fact accurately and consistently followed.
"It ensures that a challenged action accurately reflects the substantive rules applicable to such action; its point is less to assure participation than to use to assure accuracy". (See Laurence H, Tribe, page 503)".
In my view the facts of this case clearly come within the ambit of the rules of natural justice propounded by the Supreme Court. Though the Supreme Court was not dealing with the right to make a representation as is in this case, the principles enunciated by the Supreme Court on the content of the rule of natural justice are applicable to this case also. No doubt the petitioners did make their representation earlier but they had some hopes of succeeding in the writ petition when they approached this Court when the impugned notice was made and those hopes were belied by the impugned order.
Learned High Court Government Pleader had taken notice for Respondent-1 and he was supposed to make his submission on behalf of respondent-1. But respondent-1 despite the application of the petitioners for granting some time, either for making a further representation or for approaching this Court again for any further reliefs, prevented the Government Advocate from making any representation by making the impugned order. In my view this approach of the Deputy Registrar though factually is not tainted with the vice of mala fide, is vitiated by legal mala fides. What is legal mala fides was explained by the Supreme Court in STATE OF PUNJAB v GURDIAL SINGH AND OTHERS (A.I.R. 1980 S.C. 319). The Supreme Court observed as follows:
"Pithily put, bad faith which invalidates the exercise of power-sometimes called colourable exercise or fraud on power and often times overlaps motives, passions and satisfactions-is the attainment of ends beyond the sanctioned purposes of power by simulation or pretension of gaining a legitimate goal. If the use of the power is for the fulfilment of a legitimate object the actuation or catalysation by malice is not legicidal. The action is bad where the true object is to reach an end different from the one for which the power is entrusted, goaded by extraneous considerations, good or bad, but irrelevant to the entrustment. When the custodian of power is influenced in its exercise by considerations outside those for promotion of which the power is vested the court calls it a colourable exercise and is undeceived by illusion." If the order impugned is vitiated by violation of principles of natural justice, and legal mala fides, it is not binding on the petitioners. So on this ground alone, it is possible for this Court to quash the impugned order. However since, elaborate arguments were advanced by the learned Counsel for parties even on questions of fact it is necessary to make a couple of observation on those facts.
Mr. Subba Roddy for the petitioners contended that even on the material on record there was no case for the authorities to come to the conclusion that the petitioners had committed acts and omissions which warranted supersession under Section 30 of the Act. He relied on a decision of this Court reported in VEERANNAGOWDA R. AND OTHERS v DEPUTY REGISTRAR OF CO-OPERATIVE SOCIETIES, MANDYA & ANOTHER (1983 (2) Kar. L.J. 213). That was a case in which an order made under Section 30 of the Act was quashed by this Court on the ground that there was no proper consideration of the explanation given by the aggrieved persons and the order suffers from non-application of the mind to the relevant material on record.
A division Bench of this Court in VISWANATHAIAH GANGADHARA IAH v JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES & OTHERS (1976 (2) Kar.L.J. 123) has observed that where the charge is one and the finding is another and at times contrary to the accusation, or when there exists no basis either for the charge or the finding, whatsoever, the order holding that the charges proved is vitiated by an error of law apparent on the face of the record. Where the finding was not in accordance with the charge and the Directors had no opportunity to meet the additional grounds on which the charge was sustained, the findings pertaining to the charge would be in violation of the principles of natural justice and cannot be sustained. It is only that Committee that deserves to be superseded whose functions had beer, found to be defective, but. distinction might be made between the previous management and the present management where it is a perpetual management renewing itself every year (by 1/3 of its strength) But in the case of an entirely new Committee (which is shown to have improved the affairs of the Bank), Section 30(1) cannot be attracted for mismanagement by the previous body of management. In my view the explanation submitted by the petitioners called for the application of the principles as laid down by this Court in 1976 (2) Kar.L.J. 123. But on a reading of the impugned order, it appears that the Deputy Registrar had rejected their explanation on the ground that the present Committee was also responsible for the acts of the previous management. Therefore, the impugned order, though it primarily rests on questions of fact suffers from a substantial error of law apparent on the record. On this ground it is possible to come to the conclusion that the impugned order is liable to be quashed and it is unnecessary for me to go into the question of factual malafides.
Mr. Subba Reddy submitted that he was not pressing the charges against respondent-3 and therefore no further enquiry is necessary into that aspect of the case. In the view I have taken it is unnecessary to go into the question of sufficiency of material for reaching the conclusions as found by Respondent-1. Since the said order is violative of principles of natural justice and suffers from legal mala fides, even if it is a correct order, it is liable to be quashed.
It is submitted on behalf of second respondent and also by the Administrator who has been impleaded to these proceedings that he had taken charge of the Society and hasbeen functioning as such since 14-11-1987. The said circumstance in favour of the authorities do not confer on than any legal right. This Court could have restrained the first respondent from making the impugned order. But it left the matter to his good sense But he appears to have taken advantage of the absence of interim order and proceeded to exercise his power under Section 30 which I have found to be not in accordance with law and therefore the elected Directors who would have continued unto 1989 could not be thrown out their office on the basis of an order which is found to be illegal and accordingly the Administrator should hand over charge to the petitioners forthwith.
The undertaking of the learned Counsel for the petitioners that whatever action taken by the Administrator so far bona fide would not either be countermanded or challenged pursuant to the quashing of the impugned order is recorded so that the smooth working of the Society is not disrupted.
With these observation, this petition is allowed, the impugned notice and order are quashed reserving liberty to the first respondent to give an opportunity to the petitioners to make any further representation and thereafter the first respondent shall consider the allegations against the petitioners in the light of the observations made in this order.
Writ Petition allowed.
1987(3)kar.l.j.458
(A) Karnataka Stamp Act, 1957, Sch. Art. 34 - Equitable Mortage - Creation of - Whether requires to be compulsorily registered and stamped if reduced into writing - Stated.
HELD: Equitable mortgage by deposit of title deeds may be created by mere act of depositing deeds of title or even evidence of title like tax receipts evidencing payment of property tax on immovable properties. It is not necessary to reduce to writing the transfer of interest in the immovable property by way of security as in the case of other forms of mortgage. If reduced to writing the creation of equitable mortgage would also attract the same rigour as other mortgages, the stamp duty payment and compulsory registration under the Registration Act.
ON FACTS: A mere reference to creation of joint mortgage of properties in favour of the Bank and other institutions referred to in para 11 of the instrument is not evidence of N.G.E.F. depositing the title deeds. It is the Bank, the executant of the instrument which has stated a fact and no more.....Therefore, we should not hesitate to hold that the instrument is not a deed of mortgage, for the simple reason there is no mortgagor who can be said to have deposited the title deeds relating to any immovable property as owner thereof with any one else as security for loans advanced. On the other hand what is obvious by the reference in para 11 and the contents of the declaration extracted earlier is that the Bank is holding the title deeds for and on behald itself and the other financial institutions and the title deeds relate to immovable properties owned by N.G.E.J. and obviously deposited by N.G.E.F. with the Bank.
(B) Karnataka Stamp Act, 1957, Section 2(1)(a) - Bond - Construction - To be bound Executor expressly undertake to pay money as an obligation arising out of the instrument; It shall not be a matter to be inferred.
ON FACTS HELD: On a close scrutiny of the language employed in the declaration extracted earlier or the conditions that follow the declaration we find thai there is no obligation to pay its funds or out of its funds any thing to U.T.I. towards the unpaid interest or the principal of the debentures in question. The Bank has undertaken to apply the money realised from the enforcement of securities if holds only if and when the securities become enforceable and not otherwise. What it has undertaken to do as Trustee or Debenture Trustee is not payment of money belonging to the N.G.E.F. held by it as such Trustee when the contigency arises. Is has no obligation to pay out of its own funds and therefore falls outside the ambit of the definition ''Bond''.
(C) TRUSTS ACT, 1882 Section 3 - Twits, Requirements of definition.
HELD: In order to satisfy the requirements of the above definition there should be three things; (1) a person whose duty it is to carry out the trust; (2) property which is vested at law in the trustee and which he is bound to deal with in accordance with the provisions of the trust, (3) a person who is entitled to enforce the provisions of the trust.
ON FACTS: The contention as noticed earlier is thai the Bank is the author of the trust as well as the trustee and it holds the securities, the mortgage as well as the deed of hypothication of plants and machineries that are the subject of the trust and U.T.I. is the one to enforce provisions of the trust if the benefit is not given to it.... Mortgage of any kind under the Transfer of Property Act is an acquisition of interest in immovable property capable of being transferred in like manner to others and therefore the mortgage acquired by the Bank jointly constitutes its property and that of he other mortgagees who apparently have agreed that the Bank shall hold the title deeds in its possession and as the Bank ranks pari passu with the other institutions it is capable of realising its securities in its own right. This is obvious to the reader of the instrument in question....Similarly, by deed of hypothication the N.G.E.F. has pledged its machinery and plant with the Bank while retaining possession of the same. But then at law the owner is in possession is only as bailee as the pleadgor and pledgee is the real owner. This becomes clear having regard to Section 172 of the Contract Act.
The Bank is in a position to treat the securities in its possession as properties of the trust it has authored.....That the Bank is to charge a fee for its services as a trustee annually is neither breach of trust nor opposed to any provision of the Indian Trusts Act. It is but legitimate that the trustee has to defray expenses incurred by if or him or her or them while discharging its, his or her or their of obligations under the provisions of the Trust.
(D) TRUSTS ACT, 1882 Creation of Debenture Trusts - Ingredients.
HELD: The debenture trust has to be created expressly by an instrument of trust; author of such trust transfers the properties movable or immovable to the trust and the trustee or the trustees hold such properties in trust for the benefit of the beneficiary, viz., the debenture holder to be used in the event of default of payment of interest or principal amount of debt advanced as per terms agreed by selling such properties in the hands of trustee or trustees.