NDLI: Chavalier I.i. Iyyappan & Anothers Vs. The Dharmodyam Company

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	fiduciary position company Indian Easements Act 1882 director a trustee
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Act(s) Referred	Indian Easements Act, 1882 (5 of 1882)
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Dismissed
Headnote	Company—Director a trustee and in a fiduciary position— Trust if could be created on anothers hand—License—of irrevocable where there has been change of purpose —Indian Easements Act 1882 (5 of 1882), Ss. 60 (b), 62(f). ;The respondent, a Company with charitable objects owned certain lands and the appellant who was the Chairman of the Board of Directors, was asked to construct a building on the said land. It was subsequently found that the cost would be more than the estimated amount, which probably the Company was not prepared to spend. At that stage the appellant made an offer that he would finish the construction of the building at his own cost and hand it over to the Company as trust property of which the Directors of the company would be the trustees and the Company will manage the affairs in accordance with the conditions laid down in his offer. The offer was accepted, but for some reason or other certain members of the Company were not prepared to stick to the original arrangement and some of the members filed a suit and obtained an injunction against the appellant and the company not to execute the trust deed as proposed by the appellant. Thereafter the appellant resigned from Chairmanship and also ceased to be a Director, two days before his resignation the appellant registered a trust deed and made himself the first trustee with powers to appoint other trustees, The trust deed inter alia, recited that a rent of Rs. 88/- per annum was to be paid to the Company for the compound where the building had been erected. Thus the appellant created a trust by which the trust became a tenant of the respondent Company without any transfer from the Company to the trust. The respondent Company called upon the appellant to hand over the building to the Company and filed a suit for possession of properties, damages and mesne profit. The respondent Company’s case was that the appellant had wilfully contravened the terms of his offer, and the right of the appellant therefore was only to recover the money from the Company to the extent to which he may be entitled in equity and the trust deed was inoperative.The defence of the appellant inter alia was that the respondent company was estopped from claiming the building after having accepted the aforesaid offer pursuant to which the appellant had invested a large sum of money in constructing the building; and that as the offer of the trusteeship of the property in dispute made by the appellant and accepted by the Board of Directors had afterwards been cancelled as a result of the resolution passed by the general body of members, the appellant could not constitute the respondent, company as trustee and therefore he was entitled to implement his original intention by executing the deed of trust. In the Supreme Court, the appellant relied on the plea that he had been granted a license and acting upon the license he had executed a work of permanent character and incurred expenses in the execution thereof and therefore under s. 60(b) of the Indian Easements Act, 1882, the license was irrevocable.Held, That a Director is also a Trustee of the assets of the company and is in a fiduciary relationship with the company; therefore he could not do anything in regard to the assets of the Company which would prejudicially affect its rights. :A person cannot create a trust in regard to land which belonged to another person nor could he by an unilateral act create a lease in his own favour in regard to the land over which he has raised a super-structure.The offer and the acceptance of the terms of the trust deed being wholly different from what had been executed by the appellant and from the manner in which the new trust had been constituted into a lessee of the company without the company’s agreement it was not possible for a Court in equity to accept the new trust as a bar to the respondent’s claim for possession and there are no equities in the appellant’s favour which he is entitled to enforce by way. of defence to the suit,Held, further, that no case of license really arises but if it does, the license was to construct the building and hand it over to the respondent company as trust property. There was no license to create another kind of trust which has been sought to be created. It cannot be said, therefore, that there was an irrevocable license which fall under s. 60(b) of the Indian Easements Act. Even such a license is deemed to be revoked under s, 62(f) of the Act where the license is granted for a specific purpose and the purpose is attained or abandoned or becomes impracticable.
Judge	Hon'ble Mr. Justice J. L. Kapur
Neutral Citation	1962 INSC 109
Petitioner	Chavalier I.i. Iyyappan & Anothers
Respondent	The Dharmodyam Company
SCR	[1963] 1 S.C.R. 85
Judgement Date	1962-03-27
Case Number	565

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Chavalier I.i. Iyyappan & Anothers Vs. The Dharmodyam Company

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