REGIONAL MANAGER, UNION BANK OF INDIA vs MAHARAJA SAWAI JAI SINGH BENEVOLENT TRUST

AFTER hearing the Counsel appearing on both sides and carefully considering all the materials produced on record we are clearly of opinion that there is no merit in this appeal and it has only to be dismissed.

THE appellants before us are the Regional Manager, Union Bank of India, Jaipur, and the Branch Manager of the said Bank at its branch in Santokaba Durlabh Ji Hospital Compound, Jaipur. The Respondent before us"Maharaja Sawai Jai Singh Benevolent Trust, through its Honorary Secretary, Maharaja Prithvi Singh, Jaipur was the complainant in Complaint Case No. 123 of 1990 on the file of the State Commission, Rajasthan at Jaipur out of which this appeal has arisen. The Respondent"Maharaja Sawai Jai Singh Benevolent Trust"is a public Trust registered under Rajasthan Public Trust Act 1969. The Trust had an account with the Appellant Bank in one of its branches in Jaipur. Amounts had been deposited with the Appellant Bank (hereinafter called the ''Bank'') by the Complainant Trust under three fixed deposits evidenced by FDR 591/938 for Rs. 75,000/-, FDR 592/939 for Rs.1 lakh and FDR 5?>3/940 for Rs. 3 lakhs. The first two deposits were to mature on 22nd January, 1988 and the last one on 13th October, 1988. The interest accruing on these FDR has been arranged to be credited in the Savings Bank Account No. 3951 which the Trust had with the Bank. The Trust subsequently took two loans against the fixed deposit receipts to the tune of Rs. 50,000/- and Rs. 20,000/- respectively on two occasions. The grievance put forward by the Complainant before the State Commission was that after the Complainant Shri Maharaja Prithvi Singh assumed charge as the Secretary of the Trust on" 16.3.1990 he found on studying the affairs of the Trust that huge amounts were due to the Trust from the Banks in respect of the three FDRs which had matured for payment and the proceeds thereof had not been credited by the Bank to the Savings Bank Account of the Trust. Hence, he wrote a letter to the Branch Manager of the Bank at Jaipur calling upon him to pay to the Trust the full amount outstanding under the three Fixed Deposit Receipts after adjusting the two loans taken by the Trust to which reference has already been made. In reply to the said letter the Complainant was informed by the Bank that since the Fixed Deposit Receipts had been pledged with the Bank by Rajmata Gayatri Devi and Shri Raghuvendra Singh by way of security for certain amounts which were borrowed from the Bank by a firm by name M/s. Durries Incorporated of which Smt. Gayatri Devi and Shri Raghuvendra Singh were the partners, the Bank had adjusted the entire amount due by way of principal and interest on the three Fixed Deposit Receipts towards the loan amount of M/s. Durries Incorporated and transferred the little balance that remained to the Income-tax Department which had issued an order of attachment over the same to the Bank. The Complainant thereupon protested to the Bank stating that such pledge, if any, was not by or on behalf of the Trust and no resolution had been passed by the Trust at any time authorising Smt. Gayatri Devi and Shri Raghuvendra Singh to create any such pledge over the Fixed Deposit Receipts which constituted valuable assets of the public Trust. The Bank was informed by the Complainant in that letter that though Smt. Gayatri Devi and Shri Raghuvendra Singh happened to be the Trustees of the Trust, they had no authority to enter into transaction of pledge on behalf of the Trust in the absence of any resolution by the Trust conferring such power and authority on them and the transaction of pledge must have been entered into by the above named only in their individual capacity and it cannot legally bind the Trust in any manner. After pointing out that the so called adjustment made by the Bank was totally illegal and unauthorised and the Bank cannot take cover under the said illegal act for refusing payment to the Trust of the amounts lawfully due to it under the three Fixed Deposit Receipts. In subsequent correspondence the Bank reiterated that no amount belonging to the Trust was in its possession inasmuch as the entire proceeds of the three Fixed Deposit Receipts had been validly adjusted by it against the dues outstanding by M/s. Durries Incorporated on the strength of the transaction of pledge entered into by the said two persons who besides being partners of the firm, M/s. Durries Incorporated, were also Trustees of the Trust and hence there was no liability at all on the part of the Bank to pay any amount to the Complainant. In view of this persistent stand taken by the Bank, the Complainant approached the State Commission, Rajasthan with the complaint petition praying for the issuance of a direction to the Bank to pay to the Trust the amount representing the proceeds of the three Fixed Deposit Receipts which had long ago matured for payment.

BEFORE the State Commission, the Opposite Party (the Bank) in the statement of objections filed by it reiterated its stand that there had been a valid adjustment of the amounts due under the three Fixed Deposit Receipts against the liabilities which the firm. M/s. Durries Incorporated owed to the Bank under the transaction of over-draft loan sanctioned to the said firm on the faith of the pledge of the three Fixed Deposit Receipts made by the two partners of the firm who are also trustees of the Maharaja Sawai Jai Singh Benevolent Trust. The Bank produced before the State Commission the correspondence that had passed between the Bank and Shri Raghuvendra Singh and Smt. Gayatri Devi in relation to the grant of the over-draft facility to the firm M/s. Durries Incorporated of which they were the two partners. No other evidence was adduced by the Bank. Strangely enough, the Bank did not produce before the State Commission any resolution of the Trust which authorised Smt. Gayatri Devi and Shri Raghuvendra Singh, the then Trustees to enter into the transaction of pledge in favour of the Bank in respect of the three Fixed Deposit Receipts.

THE State Commission after elaborately discussing analytically the whole documentary evidence came to the conclusion that the Maharaja Sawai Jai Singh Benevolent Trust had not authorised any transaction of pledge to be entered into by the trustees with respect to its valuable assets, namely, the three Fixed Deposit Receipts and hence the pledge of the three FDRs which Smt. Gayatri Devi and Shri Raghuvendra Singh purported to make in favour of the Opposite Party Bank for securing an over-draft loan to be sanctioned to'' M/s. Durries Incorporated which was a partnership firm of which these two persons were partners had to be treated only as a transaction entered into by them in their individual capacity and it would not bind the Trust or its assets in any manner. , The State Commission further held that Smt. Gayatri Devi and Shri Raghuvendra Singh had acted totally without authority when they gave consent to the Bank for the appropriation of the proceeds of the three Fixed Deposit Receipts belonging to the Trust towards the dues outstanding against their firm M/s. Durries Incorporated. The transaction of pledge was void from its very inception since the two partners who also happened to be trustees of the Complainant Trust had no power or authority whatever to deal with the assets of the Trust in their individual capacity to the detriment of the interests of the public Trust. Taking this view, the State Commission recorded the finding that the Opposite Party, Bank, had acted wrongfully and contrary to the normal banking practice and procedure in treating the three Fixed Deposit Receipts as having been pledged to the Bank for the loans of a firm in which the two trustees were partners in their individual and private capacity without any resolution of the Trust expressly authorising the creation of such a pledge having been submitted to the Bank to satisfy it that the pledge was one duly authorised by the Trust. The State Commission held that the action of the Bank in denying payment of the amounts due under the FDRs to the Complainant in his capacity as Trustee and Secretary of the Trust on the ground of the alleged adjustment against the liability of the aforesaid firm constituted "deficiency in service" as envisaged by Section 2(1)(g) of the C.P. Act. In view of the said finding the State Commission passed an order directing the Bank to deposit in the savings account of the Complainant Trust the full amount representing the proceeds of the three FDRs after adjustment of the two loans outstanding against the Trust and also the sum that was paid by the Bank to the Income-tax authorities pursuant to the attachment order issued against the Complainant Trust. It is against the said order of the State Commission that this appeal has been preferred by the Bank before us.

IN our opinion, the conclusions recorded by the State Commission are perfectly correct in law and fully justified by the evidence available on record. It is true that Smt. Gayatri Devi and Shri Raghuvendra Singh were trustees of the Complainant Trust in October, 1983 when they purported to enter into the contract of the pledge of the three Fixed Deposit Receipts in favour of the S.D.H.C. Branch of the Appellant Bank, Jaipur as security for an overdraft loan that was being advanced by the Bank to M/s. Durries Incorporated. Trustees can deal with the properties and assets of the Public Trust only for the purpose of the Trust and that too only on their being authorised to enter into the particular transaction by a formal Resolution of the Trust. No document was produced by the Bank before the State Commission to show that there was any such authorisation conferred by the Trust. After this appeal was heard in part, we granted the appellant''s Counsel an adjournment of the case for some days to enable him to produce before this Commission, atleast at this stage of this appeal, any resolution that may have been passed by the Trust authorising the trustees to create the pledge over the three FDRs which constitute valuable assets of the Public Trust. Despite the grant of sufficient time to the Bank, the Bank has not been able to produce any such document before us and the position that obtains is that there was absolutely no resolution of the Trust authorising Smt. Gayatri Devi and Shri Raghuvendra Singh to enter into a transaction of pledge in favour of the Bank with respect to the three FDRs belonging to the Trust. As already noticed, the Complainant Trust is a public Trust and it was not open to the individual trustees to deal with the properties of the Trust to its disadvantage in the absence of any resolution authorising them to enter into the transaction of pledge. In the letter dated 19.8.1987 sent by the Branch Manager of the Bank to the Honorary Secretary of the Trust it is stated that the Bank had to accept the transaction of pledge of the deposit receipts and allow the over-draft to the firm since "it was for the benefit of the Trust". We fail to see how the pledge of the FDRs which formed a very valuable asset of the public Trust can conceivably be regarded as being a transaction for the benefit of the Trust when it had been entered into only in order to enable the business firm of which the persons who also happened to occupy the position of trustees of the Trust were partners in their individual and private capacity. Before accepting the pledge and sanctioning the over-draft to the Firm the Bank ought to have taken legal advice in respect of the matter and if only that elementary precaution had been observed, it would have been clear to the Bank that in purporting to create transaction of pledge without any resolution having been passed by the Trust authorising the same to be done, the two individual trustees were acting totally without authority and in clear breach of trust. In the light of what we have stated above, it must be held that the so called transaction of pledge was not legally binding on the Trust and the Complainant was, therefore, fully entitled to ignore the same and call upon the Bank to pay to the Trust the proceeds of the three Fixed Deposit Receipts. The action purported to be taken by the Bank to adjust the proceeds of the Fixed Deposit Receipts belonging to the Trust against the over-draft liability of the firm, M/s. Durries Incorporated was manifestly wrong, illegal and unauthorised. Hence, we have no hesitation to agree with the findings entered by the State Commission to the said effect and to uphold the impugned order passed by it against the Bank. In the light of foregoing discussion we dismiss this appeal with the direction that the appellant shall pay a sum of Rs. 5,000/- by way of costs to the Respondent.