Framroze Dadabhoy Madon Vs. Tehmina - Court Judgment

Leonard Stone, C.J.

1. This is an appeal from the judgment of Mr. Justice Chagla, dated July 11, 1946, upon an originating summons, raising questions as to the validity of the trusts of a settlement of June 28, 1938, made by Bai Tehmina, who is one of the respondents in this Court. By the settlement Bai Tehmina settled a sum of Rs. 47,000, representing the proceeds of sale of diverse investments, made on her behalf by her father, Dadabhoy Sorabji Madon, upon trusts in favour of herself, for life, and after her decease and subject to a power of appointment, exercisable by will or codicil only, amongst her issue born during her lifetime; in trust for all her children who being sons, 'shall attain the age of 18 or being daughters shall attain that age or marry under that age in equal shares.' In default of issue there is a general power of appointment with regard to part only of the trust funds to be exercised by will or codicil, and, 'subject to the foregoing trusts and powers', the trustees are to hold the trust funds in trust for the said Dadabhoy Sorabji Madon, his heirs, executors and assigns.

2. These apparently simple arrangements, in favour of the issue of Bai Tehmina, have been held by the learned Judge to be void by reason of Section 13 of the Transfer of Property Act, 1882, as have also the subsequent trusts, with the result that a declaration has been made that there is a resulting trust of the settled funds in favour of the settlor.

3. In coming to that conclusion the learned Judge held that the case of Sopher v. Administrator General, Bengal : (1944)46BOMLR865 , which is a decision of the Privy Council upon the trusts of a will, declared to be void under Section 113 of the Indian Succession Act, 1925, applied, and he followed a decision of Mr. Justice Blagden in the case of Ardeshir Baria v. Dadabhoy Baria (1944) 47 Bom. L.R. 287 who also applied Sopher's case to the trusts of a settlement.

4. Before the Transfer of Property Act, 1882, there was practically no law as to real property or, I think, as to personal property, in India. A few points had been covered by regulations, and the Acts, which were repealed either wholly or in part by Section 2 of the Transfer of Property Act but for the rest of the law, the Courts, in the absence of any statutory provision, adopted the English law as the rule of justice equity and good conscience. This was not satisfactory, for the rules of English law were not always applicable to social conditions in India, and the case law became confused and conflicting. To remedy this state of affairs, a Commission was appointed in England to prepare a Code of substantive law for India, and the Transfer of Property Act, though drafted in 1870, was the last of these drafts to become law: see the introduction to Sir Dinshah Mulla's Transfer of Property Act, second edition.

5. By the private laws of Hindus and Mahomedans dispositions of property in favour of unborn persons could not be made, but no such embargo on anticipatory benevolence attached to the private laws of other communities, including Christians, Parsis and Jews, to whom English law was applied, to the extent that estates tail could be created: see the Modes of Conveying Land Act, 1854. The Indian Succession Act, 1865, was the first Act, which curtailed the right of the other communities to dispose of property by will to unborn persons, by modifying the English law: but so far as the transfer of property inter vivos was concerned, English law continued to be applied to the other communities, until the passing of the Transfer of Property Act in 1882, and by statutes of 1914, 1916 and 1921. Hindu private law, which prohibited any disposition in favour of an unborn person, was amended so as to bring into operation the two groups of sections concerning dispositions in favour of unborn persons contained respectively in the Indian Succession Act, 1865, and the Transfer of Property Act, 1882.

6. These two groups of sections do not codify restrictive regulations which are in pari materia with the English law, though it is clear from their terms that it is the English law to which they owe their origin and inspiration. The present confusion, which we are told, the decision in Sopher's case has plunged the legal profession of this city, appears to arise from the fact that for many years precedents of English wills and settlements have been followed in Bombay, without any close appreciation of the precise restrictions placed on the freedom of disposition by the Indian Succession Act and the Transfer of Property Act.

7. The first point which we must consider is whether in the case under appeal, and the earlier case before Mr, Justice Blagden, the learned Judges were right in assuming that Sopher's case applied to the trusts of a settlement inter vivos. I advisedly say, 'in assuming', because in neither case does the point appear to have been taken or argued. Not only are the circumstances attaching to dispositions of property by will, which speaks from a future date, that is to say, the death of the testator, fundamentally different from those which prevail in the case of transfer of property by an instrument inter vivos, which speaks from the monent of its execution, but the language and scheme of the group of sections intituled 'Of void bequests' in the Indian Succession Act, 1865, now the Act of 1925, is substantially different from the corresponding group of sections of the Transfer of Property Act, 1882. This is, I think, clear when the divergences in the language of the two groups of sections are studied. Far from creating one Code or one system with regard to dispositions in favour of the unborn generally, two different sets of restrictive regulations have been placed on the statute book, the earlier directed to imposing restraint on testamentary dispositions which become operative only on the death of the owner of the property, and the latter on the freedom of transfer of property inter vivos, which must always be for some consideration, be it pecuniary or for natural love and affection.

8. None of the Regulations and Acts repealed by Section 2 of the Transfer of Property Act touched upon the subject of dispositions of moveable property in favour of unborn persons. So that during the 17 years which elapsed between the passing of the Indian Succession Act of 1865 and the Transfer of Property Act, 1882, the law with regard to dispositions of property by will and transfers of property inter vivos was entirely different, the latter being unrestricted, except only by the application of the principles and rules of English law, and except also by the private laws of Hindus and Mahomedans, as Hindu law then stood. It is certainly strange that if in 1882 what was intended by the Legislature was to impose on the freedom of the transfer of property inter vivos the same restrictive regulations as had already applied for 17 years to testamentary dispositions, the Transfer of Property Act, 1882, did not, either, expressly so say, or did not re-enact the existing sections of the Succession Act with the slight amendments only, which would have been necessary to fit the case of a transfer inter vivos.

9. On the contrary, the groups of sections which became operative in 1865 and those of 1882 respectively, are very different.

10. Section 113 of the Indian Succession Act, 1925 (formerly Section 100 of the 1865 Act), corresponds to Section 13 of the Transfer of Property Act, 1882, and not only is the word, 'comprises', in the former Act, replaced for the word, 'extends' in the latter Act, but to the latter section there is but a single simple illustration, whereas Section 113 of the Succession Act has four illustrations of a Wider and more complex character. Further, the important Section 20 of the Transfer of Property Act, 1882, finds no place either in the Succession Act of 1865 or the Act of 1925. In my judgment Sopher's case has been wrongly applied to the trusts of a settlement, for except for the passage at p. 869 hereinafter quoted, it does not lay down any general principle which could be applied to the Transfer of Property Act or for the construction of any other than the Indian Succession Act, 1925, This is, I think, clear from the judgment of the Judicial Committee delivered by Viscount Maugham in which their Lordships say (p. 868):-

Section 113 of the Act raises or may raise questions of very great difficulty, and their Lordships do not propose to attempt to express their views on questions of construction which are not relevant to the present appeal, and on which they have not the advantage of knowing the opinions of the learned Indian Judges.

And at p. 869:

The construction of Section 113 of the Act does not appear to have been much considered in reported cases, and the diligence of counsel has only resulted in the Board being referred to a single case which will now be referred to. The case is that of Putlibai v. Sorabji Naoroji Gamadia 25 Bom. L.R. 1099. It was decided in 1923 and related to Sections 99, 100, 101 and 102 of the Indian Succession Act (X of 1865) then in force. Section 100 is reproduced in the modem Indian Succession Act as Section 113. The case is valuable as deciding that in interpreting wills with reference to Sections 113, 114 and 115 of the present Act, which are applicable to several different systems of jurisprudence, it is necessary to bear in mind that the words used must be understood with reference to the current meaning of the words apart from such technical considerations as are only appropriate in English law. Their Lordships propose in accordance with this view to construe the words of Section 113 in the light, so far as that may be proper, of the various sections contained in Chapter VII of the Act relating to 'void bequests' (where Section 113 is found) according to their natural meaning without regard to the numerous decisions of the Courts in this country.

And finally at p. 870:

That is the conclusion at which their Lordships have arrived on the words of the section read in conjunction with the other sections relating to void gifts.

11. The industry of counsel, to whose able arguments we are much indebted, has been unable to find any reported case on the relevant sections of the Transfer of Property Act of 1882. That in itself is remarkable in view of the fact that the Transfer of Property Act has been in operation for 65 years, and it is common knowledge that very many settlements have been made, in which trusts in favour of the unborn had been executed without challenge.

12. I will therefore proceed to consider the construction which ought to be placed on the relevant sections of the Transfer of Property Act, 1882, and apply them to the trust of the settlement before us.

13. The guidance with which I am assisted from Sopher's case is, in my opinion, that in interpreting settlements inter vivos with reference to the relevant sections of the Transfer of Property Act, 1882, the following passage from Sopfier's case with regard to interpreting wills and the Indian Succession Act is equally applicable (p. 869):

it is necessary to bear in mind that the words used must be understood with reference to the current meaning of the words apart from such technical considerations as are only appropriate in English law.

14. The sections, which expressly or by reference touch and concern the transfer of property or some interest therein to persons unborn at the date of the execution of the instrument of transfer, are Sections 13, 15, 16 and 20. These sections are restrictive in character and limit the freedom of disposition. They must be read in conjunction with Sections 19 and 21, which define a vested interest and a contingent interest, and also in conjunction with Section 22 which deals with class gifts which vest at a particular age, also Section 14, which may be conveniently described as the regulation against perpetuities.

15. So far as the unborn are concerned, Sections 13 and 20 form the basis of the restrictive scheme. They provide:

13. Where, on a transfer of property, an interest therein is created for the benefit of a person not in existence at the date of the transfer, subject to a prior interest created by the same transfer, the interest created for the benefit of such person shall not take effect, unless it extends to the whole of the remaining interest of the transferor in the property.

20. Where, on a transfer of property, an interest therein is created for the benefit of a person not then living, he acquires upon his birth, unless a contrary intention appears from the terms of the transfer, a vested interest, although he may not be entitled to the enjoyment thereof immediately on his birth.

16. In my opinion, the parenthetical exception contained in Section 20, 'unless a contrary intention appears from the terms of the transfer,' only emphasises what is not expressly stated in Section 13, viz. what is given to the unborn person need not necessarily vest in him at his birth, and shows that the word 'extends' in Section 13 is confined to the subject-matter of the transfer and not to its vesting, whilst the illustration to Section 13 makes it clear that the trust, for trust there must be in the case of benefits conferred on persons not in existence, must create a beneficial interest which is absolute in quality. There is no equivalent section in the Indian Succession Act, 1925, to Section 20 of the Transfer of Property Act, 1882, though illustrations (ii) to (V) of Section 112 of the Indian Succession Act indicate that that section may be intended to have a similar result.

17. The completeness of every disposition of property depends in part on its covering the whole subject-matter and in the interest conferred being absolute in character: and in part on there being a recipient, in whom the whole of the subject-matter can vest.

18. If all these elements, are to be present in the case of a transfer inter vivos, which speaks from the moment of its execution, it will mean that there never could be a transfer of property in favour of the unborn, after a prior life interest, at all; because there must always be the possibility that the prospective unborn person might never come into existence and so the transfer would fail for completeness, because it might not vest in a recipient the absolute interest in the whole property. In my judgment this is not the effect of Sections 13 and 20. Read together, and giving the words their current meaning apart from such technical considerations as are only appropriate in English law, these sections show that in Section 13 the word 'extends', contained in the expression 'extends to the whole of the remaining interest of the transferor in the property', is directed to the extent of the subject matter, and to the absolute nature of the estate conferred and not to the certainty of its vesting. Vesting must, however, take place within the limits prescribed by Section 14, which provides:-

No transfer of property can operate to create an interest which is to take effect after the life-time of one or more persons living at the date of such transfer, and the minority of some person who shall be in existence at the expiration of that period, and to whom, if he attains full age, the interest created is to belong.

19. This section is assisted by Section 19, which accelerates the vesting, when the time at which it is to take place is not specified, unless a contrary intention appears from the terms of the transfer.

20. Section 15 shows that a gift to unborn persons may be made to a class of such persons, since it contemplates the failure of some of the members of the class to take by virtue of Section 13. Formerly the failure of the disposition to some of the members of the class, by virtue of Sections 13 or 14, destroyed the transfer to all the members of the class; but by the Transfer of Property (Amendment) Act, 1929, failure of the dispositions in favour of some of the members of a class is limited to such persons only, and not in regard to the whole class.

21. If this be the correct interpretation to place upon the sections I have already referred to, it is I think clear that if in the settlement before us, the trust subject to the life interest of Bai Tehmina had been to all her children, each of the children would have taken a vested interest at birth; alternatively, if after the life interest it had been to all her children living at her death, the vesting would have been deferred until the death of the settlor, and would then only have taken place amongst the children then living. But in the case before us (I will pass over for the moment the power of appointment amongst the issue,) vesting is to take place amongst the children of Bai Tehmina, who being sons attain the age of 18 or being daughters attain that age or marry under it, and this qualification can be achieved as well before as after the death of Bai Tehmina. This is no infringement of the restrictions of Section 14 of the Act, since all the children whether already qualified or not must be living at the death of Bai Tehmina

22. Section 22 is in these terms:

Where, on a transfer of property, an interest therein is created in favour of such members only of a class as shall attain a particular age, such interest does not vest in any member of the class who has not attained that age.

23. So far, in my judgment, there is nothing to render the trusts in favour of the unborn incapable of taking effect, but there is the power of appointment given to Bai Tehmina to appoint amongst her issue in these terms:-

In trust for all or any of her children or any issue born during her life of any of her child or children at such ages or times or age or time (not being however earlier as to any object of this power) being a male than his age of eighteen years or being a female than her age of eighteen years or day of marriage in such shares if more than one upon such conditions and in such manner as she the said Bai Tehmina shall by her will or codicil appoint.

24. Having regard to the terms of the maintenance clause and to the disposition in favour of children in default of appointment, I think that the reference to the marriage of a daughter is to be construed as marriage before attaining the age of 18, and that the word 'earlier' is a mistake for the word 'later', but even if this be not so, so that the power authorises an appointment which might infringe Section 14 of the Act, it is a power and not a trust, and it may be exercised within due limits or it may never be exercised at all, so that the children will take in default of appointment. If the power is exercised by the will of Bai Tehmina, it must be read into the settlement to ascertain what its result may be. We expressly state that we make no pronouncement in anticipation of the exercise of this power.

25. The result is that the trusts in favour of unborn persons extend to the whole of the property and provide for the absolute disposal of that property, and in my judgment their failure by virtue of there never being any qualified object to take, which will is ascertainable within the limits prescribed by Section 14, does not render these trusts incapable of taking effect. Accordingly this appeal must be allowed, and there must be a declaration in the terms of question No. 1 of the originating summons, that is to say, a declaration that the interests created in favour of the unborn persons, mentioned in Clause 3 of the indenture of settlement, dated June 28, 1938, are valid and effectual; but this declaration is to be without prejudice to any question which may hereafter arise with regard to the exercise of the power.

26. With regard to costs, we see no reason to interfere with the order as to costs made by the learned Judge in the Court below, whereby he directed them to come out of the estate, and we propose to make a similar order with regard to the costs of this appeal; since it has raised questions of considerable importance and complexity, with regard to which up to the present there is no authority.