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PETITIONER: SHANTI VIJAY & CO. ETC.

       Vs.

RESPONDENT: PRINCESS FATIMA FOUZIA & ORS. ETC.

DATE OF JUDGMENT31/08/1979

BENCH: SEN, A.P. (J) BENCH: SEN, A.P. (J) FAZALALI, SYED MURTAZA KAILASAM, P.S.

CITATION:  1980 AIR   17            1980 SCR  (1) 459  1979 SCC  (4) 602

ACT:      Indian Trusts  Act 1882  (2 of  1882)-Ss. 47  48 &  49- Trust-Deed of  trust stipulating  sale of  trust property by trustees in  their absolute  discretion-Absence of  specific provision authorising execution to be carried out not by all but by  one or more or majority of trustees-Applicability of s. 48.      Where  trustees   cannot  delegate   duties  they  must personally  perform-Exercise   of  individual  judgment  and discretion-Necessity of.      Discretionary power  not exercised  reasonably  and  in good faith-Interference  by court  under s.  49-Validity of- Duty  of  trustees  to  act  With  prudence  as  a  body  of reasonable men.

HEADNOTE:      The late  H.E.H. Nawab  Mir Sir Osman Ali, the Nizam of Hyderabad by  an indenture  dated March 29, 1951 created the trust called  H.E.H. the  Nizam’s Jewellery Trust in respect of 107  items of  extremely  valuable,  rare  and  priceless jewellery for  the benefit  of his two sons, two grand sons, two grand  daughters, daughter  and step son. The nominee of the Government  of India  . N.  Malhotra, Addl. Secretary to the Government  of India, Ministry of Finance, Department of Economic Affairs  was made  the Chairman  of  the  Board  of Trustees. In  addition to  the  Chairman,  there  were  four trustees and  a Secretary  for the  Trust. Clause  13 of the trust deed  provided that after a period of three years from the date  of the death of the settlor and his eldest son the trustees may  sell the  trust  property  in  their  absolute discretion either,  in  India  or  in  any  foreign  country without their  being liable  or accountable  to  any  person whomsoever for  the propriety  of or  justification for such sale, or  for reasonableness  or otherwise  of the  price or consideration or other terms in respect of the sale.      Prince Azam  Shah the  eldest son  of the Nizam died in October, 1970  and the  trustees on July 1, 1972 submitted a memorial to  the Prime  Minister to acquire the jewellery as they were  of great  historical and cultural value and ’keep the same  intact as  part  of  the  national  heritage.  The Government of  India appointed an Expert Committee to advise

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whether any  part of  the jewellery  should be  acquired  as antiques under  the Antiquity and Art Treasures Act 1972 and in pursuance to its report acquired eighteen selected pieces of jewellery  at a  mutually negotiated  price of  Rs.  1.17 crores.      It appears  that the beneficiaries of the trust were in very straitened  circumstances due  to  abolition  of  privy purse, heavy  incidence of  income-tax  and  wealth-tax  and being thus  heavily indebted,  pressed  upon  the  Board  of Trustees  to  effect  an  immediate  sale  of  37  items  of jewellery.      On  January  9,  1978  the  Chairman  conveyed  to  the trustees that  the Government  of India  were not  likely to acquire any  of the  37 pieces  of jewellery  with regard to which  tho  negotiations  were  being  made.  The  Board  of Trustees 460 accordingly  passed  a  resolution  to  sell  the  jewellery immediately. Pursuant  to the  resolution of  the Board, the Secretary of  the Board  decided upon  the procedure  to  be adopted for  the sale  of the  37  items  of  jewellery  and eventually on  March 9, 1978 the tenders that were submitted in respect  of the  sale of  those items  were opened by the four trustees,  in Bombay, the Chairman R. N. Malhotra being absent due to official pre-occupation at New Delhi.      On March  10, 1978  the first  respondent in the appeal who was  one of  the beneficiaries  of the Trust and a grand daughter of  the Nizam instituted proceedings under S. 74 of the  Trust   Act  for   removal  of  the  trustees  alleging dereliction of  duty, negligence  and mismanagement on their part in  respect of  the 37  items of jewellery belonging to the Trust  which were  brought to  sale. An  application for injunction under  order 39,  Rule 1  of the  Code  of  Civil Procedure was filed for restraining the trustees from taking any further  steps towards  the finalisation  of the sale of the jewellery.  The City  Civil Court  granted an ad-interim injunction restraining  the trustees  from taking  any steps towards the finalisation of the sale of the jewellery, which was got  vacated by  one of the trustees. On March 28, 1978, the first respondent filed an appeal in the High Court which directed  that   status  quo  ante  be  maintained.  In  the meanwhile, the  8th respondent made an offer to purchase the 37 items  of jewellery  in one  lot for Rs. 20.25 crores and also applied  to be  impleaded as  a party in the appeal. On April 18,  1978 the appellant, who was one of the successful bidders also, applied to be impleaded as a party respondent. The High  Court impleaded  the appellant  as a  party to the appeal, and  in order  to test  the bona  fides of  the  8th respondent directed  that  he  should  deposit  the  offered amount within  one week. On such deposit being made, the 8th respondent  was   allowed  to   inspect  all  the  items  of jewellery. The  first respondent  filed  an  application  to withdraw the  appeal which  was heard  but before any orders could be  passed, her  sister, the second respondent applied for permission  to be impleaded as appellant No. 2, as there was a  danger of  the entire body of the beneficiaries being deprived  of  an  amount  of  Rs.  5.78  crores.  The  first respondent  was   permitted  to   withdraw  and  the  second appellant was brought on record.      The High  Court set  aside the alleged sale of 37 items of jewellery  by the  Board of  Trustees in  favour  of  the appellant and  other successful tenderers on the ground that there was  no concluded  contract between  the  parties  and instead accepted the offer of the eighth respondent.      On appeal  to this Court the matter was remitted to the

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High Court for impleading all the tenderers and affording an opportunity to  the appellants  to substantiate  their claim that there  was a  concluded contract  for the  sale of  the jewellery to  them for  Rs. 14.43  crores.  The  High  Court impleaded the  other tenderers, respondents Nos. 7 to 17 and after giving  opportunity to  substantiate their claims held that no binding contract came into existence.      In appeals to this Court on the questions-      (1) Whether  there was  a concluded  contract  effected between the  appellants  and the other successful bidders on the one part and the Board of Trustees on the other, for the sale of  the 37  items of  jewellery for Rs. 14.43 crores by the alleged acceptance of their bids by the four trustees on March 19, 1978. 461      (2) Whether  there was  frustration of  the contract in that the  ad-interim injunction  of the  City Civil Court on March 14,  1978 made  further  performance  of  the  alleged contracts impossible; and      (3) Whether  the exercise of the discretionary power of sale exercised  by the  trustees conferred on them by cl. 13 of the  trust deed, ought not to be set aside under s. 49 of the Trusts  Act as  an improvident  sale because of the fact that an  amount of  Rs. 20.25  crores for  the 37  items  of jewellery had been offered by the eighth respondent. ^      HELD: 1.  The High Court was justified in setting aside the alleged  sale of  37 items  of  jewellery  belonging  to H.E.H. the  Nizam’s Jewellery Trust affected by the Board of Trustees in favour of the appellants and other tenderers for Rs. 14.43  crores on  the ground that there was no concluded con- tract between the parties. [480D]      2. The  contract was  frustrated by the grant of an ad- interim injunction  by the  Court of  the Chief  Judge, City Civil Court,  Hyderabad on March 14, 1978. The grant of such injunction  prevented   the  performance   of  the   alleged contacts. The  appellants could not have tendered 90 percent of the tender amount, i.e., the balance of the price, by the stipulated date or taken delivery 1 of the jewellery so long as the injunction lasted. [481C]      3. The  High Court  had come  to a  definite conclusion that the  improvident sale  of the  jewellery at  such a low price without  due public notice was not a bonafide exercise of power,  conducive of  beneficial management.  There is no reason to  come to  a different  conclusion. When  one deals with another’s property, it matters little to him what price the property  fetches. But  in the  case of  a  trust  there arises the  duty of the trustees to act with prudence and as a body of reasonable men. [485E, D]      4(a). In  the case  of a private trust, where there are more trustees  than one,  all must  join in the execution of the trust.  The concurrence  of all is in’ general necessary in  a  transaction  affecting  the  trust  property,  and  a majority cannot  bind the trust estate. In order to bind the trust estate the act must be the act of all. They constitute one body  in the eye of law, and all must act together. This is, subject  to any  express direction given by the settlor. [473 E]      Lala Mohan  Das v. Janki Prasad, LR (1944) 72 IA 39, L. Jankiranza Iyer  & ors  v. Neelakanta  lyer &  Ors.,  [1962] Supp. I  SCR 206;  Lewin’s  Law  of  Trusts,  15th  Ed.  198 referred to.      4(b). Where  there are  several trustees  they must act unanimously in  making a  sale or a contract of sale, unless it is  provided otherwise  by the  terms  of  the  deed.  In

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exercising the  power of  sale, as  in the  exercise of  the other powers, a trustee cannot, therefore, properly delegate the performance  of  the  acts  which  he  ought  personally perform. Although  a trustee  may listen  to the opinion and wishes of  others, he  must exercise  his  own  judgment.  A trustee for sale of property, cannot leave the whole conduct of the sale 11-531SCI/79 462 to his  co-trustees. The reason for this is that the settler has entrusted  the trust  property and its management to all the trustees,  and the  beneficiaries are  entitled  to  the benefit of their collective wisdom and experience. [474C-D]      Underhill’s Law  of Trusts  and Trustees, 12th Ed., pp. 434, 442-443, Scot on Trusts, Vol. 2. p. 1033,      5. All  acts which  the trustees  intend  to  take  for executing the  trust must  be taken  by all  of them  acting together, as  provided by  s. 48  of the  Trusts Act,  1882. Where there are more trustees than one, all must join in the execution of the trust, except where the instrument of trust otherwise  provides.   If  the  validity  of  an  alienation affected by  the trustees falls to be considered only in the light of s. 48, the fact that out of the three trustees only two have  executed the  sale deed  would by  itself make the transaction invalid  and would  not convey  a valid title to the transferee. [474E-G]      6. The  High Court rightly observed, there is no clause in the trust deed authorising the execution of the trusts to be carried  out not by all but by one or more or majority of the trustees.  In the  absence of such a specific provision, the general  law envisaged  in s. 48 of the Act would govern the rights  of the  parties. The  alleged contracts  of sale entered into by the four trustees were not binding and of no legal effect, and could not be enforced. It must necessarily follow that  the alleged  contracts for sale entered into by them could  not ripen into concluded contracts so as to bind the entire body of beneficiaries. [474H-475B]      7. Section  48 is a corollary of s. 47. If the trustees cannot delegate  their duties, it follows that they must all personally perform  those duties,  and not  , appoint one of themselves to  manage the  business of  the trust;  for  the settlor has  trusted all  his trustees,  and it behoves each and every  one of  them to  exercise his individual judgment and discretion  on every matter, and not bindly to leave any questions to  his co-trustees  or co-trustee. The view taken by the High Court of the resolution of the Board of Trustees dated March  8, 1978  was right.  The language  used in  the resolution is  perhaps not  of a  trained draftsman,  but it clearly does  not, in terms, confer ’authorisation’ upon the remaining four  trustees to accept the bids, or any of them. [475D-F]      8. The statement of Malhotra that it was decided at the meeting on  March 8,  1978 that  ’the trustees  were free to accept the  highest tenders,  if they did not see any reason to reject the same’ and also that ’if the trustees felt that a higher  amount could be obtained they could negotiate with the tenderer  and  obtain  a  higher  price’  is  of  little consequence. Perhaps  that is what the trustees meant, i.e., the remaining  four trustees,  were fully authorised to deal with the  matter in  all its  aspects. But that intention of the  trustees   is  not   at  all  manifested  in  the  said resolution, the  terms of  which  are  clear  and  explicit. [476B-C]      9. In this case of a trust, the ’authorisation’ must be express, specific  and in  the clearest  of terms. The words "be  examined   and  decided"  in  the  first  part  of  the

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resolution  may  mean  anything,  and  are  not  necessarily susceptible of  the  only  construction  as  contended  for, namely that  of ’acceptance’.  The expression  "to negotiate for sale"  in relation  to the authority of an estate agent, has a  definite legal  connotation. He  gets an authority to find a purchaser, 463 but he  cannot bind the principal by entering into a contact of sale. There is a substantial difference between ’to sell’ and ’to find a purchaser’. [476D-E] ,      Chadburn v.  Moore, (1892)  67 LJ Ch. 674; Rosenbaum v. LR (1900) 2 Ch. 267. Abdul Ahmed v. Animendra Kissen Mitter, [1950] SCR 30 referred to      10. If  the second  part of  the resolution  has to  be construed with  reference to the first, as is contended for, then their  authority was limited to find purchasers for the jewellery, and then place the matter before a meeting of the Board of  Trustees, for  acceptance of  their bids. When the trustees took care in drafting the second part which relates to rejection  of bids, there was no reason for their leaving any ambiguity  in the  first part.  It is not permissible to spell out  something which is not explicit, by merely saying that it  is implicit, when the language is clear and it does not bear  out any  such construction.  A view which would be prejudicial to the entire body of beneficiaries is not to be taken. There  is no  reason why  the words  ’be examined and decided’ in  the first  part, should  not have  their  plain meaning that  the tenders  were to be opened and examined by the remaining  four trustees  to  see  if  they  were  valid tenders. The  first part did not, give any ’authorisation to the remaining trustees to accept any of the tenders. If they did not  find a  satisfactory offer or offers for any of the items offered for sale they could only under the second part reject the  tenders submitted.  Delegation must  be express. The trend  of cross-examination of Malhotra, also shows that his concurrence was necessary. [476F, 477B]      11. The  Secretary drew  up the  note, dated  March 14, 1978 Ex.  124 in  undue  haste  despite  the  Court’s  order granting the injunction. [478D]      12. The  minutes of  the meetings held on March 5, 1978 and of  March 8,  1978 are  there.  Thereafter  appears  the minutes of  a meeting held on May 15, 1978, Ext. B. 125. But there are  no minutes of a meeting held on March 9, 1978. It is thus  clear that  no meeting of the Board of Trustees was held at  all on March 9, 1978. The absence of any minutes of the alleged  meeting held  on March  9,  1978  must,  as  it should, clearly  excite suspicion  about the  genuineness of the sale.  Ex. 123  is the tabular statement prepared by the Secretary  containing   acceptance  of   bids  by  the  four trustees. The  authenticity of  this document  is not beyond question. It is a tabular chart running into 34 large sheets with minute details. On each of the sheets there is a letter ’A’ encircled  against the  highest tender,  and at the foot appear the  alleged initials  of three  trustees bearing the date March 9, 1978. None of the remaining trustees except M. A. Abbasi  have entered  the witness-box  and  none  of  the trustees  has  proved  the  initials  at  the  foot  of  the document, Ex.  123, Nothing is known as to when the initials were put  and by  whom. Though  the other three trustees are alleged to  have put  their initials  at  the  foot  of  the statement on  March 9,  1978, there  is nothing on record to show that all this was done that day, at one sitting, at the same time. [478F, 478H-479D]      13. If  the four  trustees with  the assistance  of the Secretary, could  prepare these  large tabular  charts there

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was no reason why they could not record the 464 minutes of the meeting, if any held on that day showing that there was  acceptance of  the bids by them. The Minutes Book is the primary evidence, and the chart cannot form the basis for a  finding that  there was any acceptance of the tenders on March 9. 1978. [479E-F]      In the  instant case,  cls. 11 and 12 of the conditions of sale  embodied the terms of the contract. By cl. 11, time is made  the essence of contact. Clause 11 cannot be read in isolation, but  both cls.  11 and  12 must  be read together because they  form an  integral part  of the contract. These clauses in  addition to making time the essence of contract, clearly provided  that in  the event  there was a failure to pay 90  percent of  the tender  amount, the  balance of  the price  "the   contract  would   be  deemed   to  have   been cancelled..’ on  a reading  of both  cls. 11 and 12 together there can  be no  doubt that the passing of the property was dependent upon  the tender  of the  balance of the price and the taking delivery of the goods upon payment. [480H-481B]      14. It  was certainly  open to the Board of Trustees to effect a  sale of  the 37 items of jewellery under cl. 13 of the deed.  But the  power, although  discretionary, must  be exercised reasonably  and in good faith. The power conferred on the  Board of Trustees is no doubt discretionary, but the principle embodied  in s. 49 is that when such discretionary power is  not exercised  reasonably and  in good faith, such power may be controlled by a court. There was no warrant for the suggestion made by the Board of Trustees before the High Court that the power is absolute. [482E-G]      Underhill’s Law  of Trusts  & Trustees, 12th Ed. 472 p. 472, referred to      15. On  the totality  of the  evidence, the  High Court rightly came  to the  conclusion that  though there  were no mala fides  corrupt motives,  fraud or mis-representation on the part  of the  trustees  and  they  acted  honestly,  the trustees in the facts and circumstances of the case, did not act reasonably  and in  good faith  i.e. with  due care  and attention. [485F]      16. Upon  the  finding  that  there  was  no  concluded contract between  the parties  within the meaning of s. 2(h) of the  Contract Act,  the High  Court accepted the offer of the eighth  respondent for Rs. 20.25 crores for the purchase of the  37 items of jewellery, but this part of the order is set aside as acceptance of his bid without calling for fresh tenders would  be subject  to the  same infirmity.  From the evidence on  record that  no body  knows the actual value of the jewellery  and it  may be well worth more than Rs. 20.25 crores, and therefore reauction ordered. [485G, 486E, G]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal Nos. 1105, 1245 and 1269 of 1978.      From the Judgment and order dated 12-6-78 of the Andhra Pradesh High Court in appeal against order No. 147/78.                             AND       SPECIAL LEAVE PETITION (CIVIL) NOS. 3648-3649/78      In the matter of H.E.H. The Nizam’s Jewellery Trust. 465      Rajni Patel,  Malini Kapadia,  P.  G.  Gokhale,  B.  R. Agarwala and  Gujarat &  Co. for  the Appellant in C.A. 1105 and for Respondent No. 3 in CA 1269/178.      O.  P.   Verma,  B.   V.  Singh,   Anil  B.  Diwan,  B.

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Parthasarathi and  J. V.  Suryanarayan Rao for Respondent in CA 1105/78.      S. V.  Gupte, S.  T. Desai and A. Subba Rao for RR 4, 6 and 7 in C.A. 1105/78 and Appellant in CA 1269/78.      A. K.  Sen, Anil  B.  Diwan,  S.  S.  Hussaine,  J.  B. Dadachanji, K. J. John and A. G. Menses for Respondent No. 8 in CA 1105/78, 1245/78 and 1269/78.      F. S.  Nariman,  P.  R.  Mridul,  B.  Jaivalu,  Dhimant Thakkar, P.  H. Parekh,  C. B.  Singh, Miss Vineeta Caprihan and B. L. Verma for the Appellant in C.A. 1245/78.      B. A.  Zaibala, Dhimant  Thakkar, P. H. Parekh and Miss Kamlesh Bansal for the Petitioner in SLP 3648/78. n      B. A.  Zaibala, Dhimant Thakkar, P. H. Parekh and Mukul Mudgal for the Petitioner in SLP 3649/78.      The Judgment of the Court was delivered by      SEN J.-In  these appeals,  one of  which is  by special leave and  the other  two on  certificate,  brought  from  a judgment of  the Andhra  Pradesh High  Court dated  June 12, 1978, the short question is whether that Court was justified in setting  aside the  alleged sale of 37 items of jewellery belonging to H.E.H. the Nizam’s Jewellery Trust, effected by the Board  of Trustees,  in exercise  of their discretionary power of  sale under  cl. 13  of the trust deed in favour of the appellants  and other successful tenderers for Rs. 14.43 crores, and  accepting  instead  the  offer  of  the  eighth respondent, Peter Jansin Fernandez for Rs. 20.25 crores made during the pendency of the appeal before      The facts of the case, so far as they are material, are not now in dispute, and are as follows:      The late  H.E.H. Nawab  Mir Sir Osman Ali Khan Bahadur, the Nizam  of Hyderabad,  by ah  indenture dated  March  29, 1951, created  a trust  called H.E.H.  The Nizam’s Jewellery Trust, in  respect of  107 items of extremely valuable, rare and priceless  jewellery  of  exquisite  design  and  beauty studded with  emeralds, diamonds,  sapphires, rubies etc. Of the highest  quality and  purity belonging to him, specified in the  first Schedule,  and Government  securities  of  the aggregate face value 466 of Rs.  10 lakhs,  specified in the Second Schedule, for the benefit of  his two sons, Prince Azam Jha and Prince Muazzam Jah; two grandsons, Prince Mukarram Jah and Prince Muffakham Jah; two  granddaughters, Princes Fatima Fouzia and Princess Amina Mirzia;  daughter Shahzadi Begum, and his step-brother Sahebzada Nawab Basalat Jah Bahadur.      Clause 13  of the trust deed, Ex. ’A’, confers upon the trustees the  power of  sale of  the Jewellery, the material portion of which is in these terms:           "13. Subject to the Trusts aforesaid in respect of      the articles  referred to  in clause 3(c), (d)7 (e) and      (f) hereof,  during the  lifetime  of  his  eldest  son      Prince Azam  Jah (if  and so long as the Dynasty of the      Settlor continues  and Prince  Azam Jah succeeds him as      the Nizam  of Hyderabad)  it shall  be at the option of      the trustees  either to  keep the said jewels and other      articles mentioned  in  the  first  Schedule  hereunder      written unsold  or to sell the same or any part thereof      at such time or times and in such manner as they may in      their discretion  think fit,  but subject as aforesaid,      after death  of the  Settlor as  well as  of  the  said      Prince Azam Jah the Trustees shall sell the said jewels      and other  articles specified  in  the  First  Schedule      hereunder written  within a period of three years after      the date  of the  death of  the survivor of the Settlor      and the  said Prince  Azam Jah  and any  such  sale  as

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    aforesaid shall  be effected  by the  Trustees at  such      price or  prices or  for such consideration and on such      terms as  the trustees may in their absolute discretion      think fit and either in India or in any foreign country      without the trustees being liable or accountable to any      person whomsoever for the propriety of or justification      for  any   such  sale  or  for  the  reasonableness  or      otherwise of  the price or consideration or other terms      in respect of the sale of any of the said articles. "      The said jewellery is kept in the safe deposit vault of the Mercantile Bank Ltd. at Bombay.      R. N.  Malhotra, Addl.  Secretary to  the Government of India, Ministry  of Finance, Department of Economic Affairs, is the  Chair man of the present Board of Trustees of H.E.H. The Nizam’s  Jewellery Trust, as a nominee of the Government of India. The other four trustees are: Prince Muffakham Jah, Zaheer Ahmed,  Ataur Rehmarr and M. A. Abbasi. M. A. Ashruff is the Secretary of the Trust. 467      It appears  that Prince  Azam Jah  died in October 1970 and there  after, on  July 1,  1972 the trustees submitted a memorial to  the then Prime Minister of India to acquire the jewellery as  they were  of great  historical  and  cultural value and  keep it  intact as  a national  heritage, and not allow  it  to  pass  into  the  hands  of  people  who  were interested only  in their  money value.  It appears that the trustees  acted   upon  legal  opinion  that  there  was  no objection to the sales being arranged through negotiation on the basis of valuation by two independent valuers.      The  Government   of  India   constituted  an   Experts Committee whose  function was  purely of an advisory nature, with a  view to guide the Government whether any part of the jewellery should be acquired as antiques under the Antiquity and Art  Treasures Act,  1972. It was required to select and evaluate such  items of  antique  jewellery  as  had  to  be acquired in  the national  interest. The  Experts  Committee inspected the jewellery at the vault of the Mercantile Bank. During  these   proceedings  the   Government  appointed   a Committee of  Valuers which  by its  report dated January 3, 1976,  valued   all  the  107  items  of  jewellery  at  Rs. 6,62,58,500 while  Vithaldas, RW  6, the valuer appointed by the trustees,  by his  valuation report dated March 18, 1976 valued these  37 items  of jewellery  at  Rs.  10,26,30,000. Eventually, the  Government of  India acquired  18  selected pieces  of   antique  jewellery   for  their   cultural  and historical importance  at a mutually negotiated price of Rs. 1.17 crores.      It has  been represented  that the beneficiaries are in very straitened  circumstances due to the abolition of privy purse, heavy incidence of income-tax and wealth-tax, and are heavily indebted  due to the trustees applying the income of the trust  largely  towards  payment  of  taxes,  making  it increasingly   difficult   to   maintain   themselves.   The beneficiaries  were,   therefore,  pressing   the  Board  of Trustees to  effect an  immediate sale  of the  37 items  of jewellery.      On January  9, 1978  it is  alleged that  there  was  a meeting of  the Board  of Trustees.  Malhotra,  who  is  the Chairman, conveyed  to the  trustees that  the Government of India were  not likely  to acquire  any of  the 37 pieces of jewellery with regard to which negotiations were being made. The Board  of Trustees  accordingly passed  a resolution  to sell the  jewellery immediately.  The next  meeting  of  the Board was  held on  January 25,  1978 but Malhotra could not attend it.

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    Pursuant to  the resolution  of the Board of January 9, 1978, the  Secretary of the trust applied to the Director of Archaeological Survey  of India,  for the grant of clearance for sale of the said jewellery; and 468 in consultation  with Dinshaw Jehangir Gazdar, RW 3, a noted jeweller of  Bombay, with  the concurrence  of M.  A. Abbasi decided upon  the procedure  to be  adopted for the eventual sale of these 37 items of jewellery.      It appears  that the conditions of sale, Ex. B-49, were got drafted  by M. A. Abbasi, one of the trustees, and M. A. Ashruff, Secretary, through a firm of solicitors. Conditions 11 and  12, which formed an integral part of the contract of sale, are as follows:           "11. Tenders will be opened by the Trustees on the      date announced  at the time of inspection and the party      whose  tender   is  accepted   will  be  notified  soon      thereafter. The  jewellery shall  on acceptance  of the      tender become immediately the property of the buyer and      shall  be   available  for   delivery  to   the   buyer      immediately thereafter on payment of the balance of 90%      of the  tendered amount  as specified in para 12 below.      If delivery  is not  taken at  that time  the jewellery      will be  held for  and on behalf of the tenderer at his      risk.           12. Tenderers  whose offers  are accepted  will be      required to  deposit in full the tendered amount (after      deducting the  amount of  10% deposited as per clause 4      above) on  the date or dates to be announced on the day      of inspection  before taking  delivery.  It  is  hereby      agreed that  if the  tenderer fails  to pay the balance      amount within  the stipulated  period, the  sale  shall      stand cancelled  and the  earnest money  paid by him to      the Trust  shall be  forfeited by  the Trustees and the      Trustees  shall   be  at  liberty  to  offer  the  same      jewellery at  the next  sale and any deficiency arising      at such  sale together  with all  expenses arising from      the subsequent  sale shall be borne by the tenderer who      shall also pay interest at the rate of 10% per annum to      the Trust until the completion of the resale."      On January  31, 1978,  Gazdar  sent  intimations  (Exs. B.130-133) to  some  foreign  and  Indian  nationals  abroad regarding the  intended sale  of the jewels. It appears that M. A.  Ashruff,  Secretary,  also  addressed  letters  dated February 8/10,  1978 (Exs.  B.72-87) and also sent telegrams dated February  25,  1978  (Exs.  B.88-100)  to  29  reputed dealers, seven  of whom  were jewellers  from abroad and the remaining 22  in the  country, as  per list  Ex.  B-46.  The letters of the Secretary as far as material, read:           "The unique  collection of  the fabulous  oriental      jewellery of the once richest man of the world, HEH the      Nizam 469      of Hyderabad and Berar, the erstwhile premier prince of      India, is  coming up for sale in Bombay sometime during      the first or second week of March 1978. The exact dates      will be notified later." The telegrams sent by him mentioned that: ’inspection of the jewellery could  be had  from March  6 to  9’. It would thus appear that  the intending buyers were not notified the date of sale.      The 37  items of jewellery put up for sale were divided into 16  groups. Inspection  of these  37 items of jewellery was to  be offered  to the intending bidders from March 6 to March 9.  During the  course  of  inspection,  however,  the

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trustees decided  to restrict  the period of inspection till March 8 and they informed the intending bidders accordingly, and asked  them to  give their bids before a particular hour an March  9. On  the 8th  of  March,  Malhotra  was  present throughout, at  the Mercantile Bank Ltd., and there was also a meeting of the Board of Trustees.      The resolution  of the  Board of  Trustees of  March 8, 1978 (Ex. B. 106) was in these terms:           "1.  To confirm the minutes of the last meeting.           The Minutes  of the  last meeting  of the Trustees      held on 5th March, 1978 were confirmed. E           2.       Consideration  and  decision  on  tenders                received.           Resolved that the tenders received be examined and      decided by  the Trustees  present at  the meeting to be      held for the purpose on 9th March, 1978.           And further  resolved that  in case  such Trustees      did not  find a satisfactory offer or offers in respect      of any  of the  items offered for sale, they may reject      the tendered  offers and negotiate the sale of any item      with any party for a higher price.           3. Delivery of articles sold.           Resolved that  the delivery  of articles  sold  be      arranged on dates convenient to the Trustees preferably      not later than 25th March 1978."      The Chairman  of the  Board of  Trustees, Malhotra  was admittedly not  present in  Bombay on March 9, 1978 when the tenders were  opened by  the remaining four trustees. He had to be  away from Bombay on the morning of 9th and 10th March due to official 470 preoccupation at  New Delhi.  He was busy at Delhi heading a group which  was negotiating  with  a  high-powered  Russian delegation to  settle the  rupee-rouble exchange  ratio  and connected matters.  He could not leave Delhi from March 9 to 23, during  which period  the  talks  commenced  earlier  on January 28,  1978, had  entered a crucial stage. These talks required his  personal presence  at Delhi, because they were matters of national importance.      On March  9, 1978,  the  remaining  four  trustees  are alleged to  have opened  the tenders  and accepted  all  the highest tenders  except in  respect of  item No. 16 of Group XIV, which was negotiated on the next day for a higher price of Rs.  6.92  crores.  On  March  10,  1978,  the  Secretary addressed  letters   of  acceptance  Exs.  B.54-65,  to  the appellants and  other successful  bidders, requiring them to pay the  balance of  90 per  cent of  the tender price on or before March 21 and 22, 1978 as the case may be, and to take delivery of  the items  of jewellery  purchased by  them. In respect of  the appellants  M/s. Shanti Vijay & Co. the date fixed was March 17, 1978.      On March  10,  1978,  the  first  respondent,  Princess Fatima Fouzia, one of the beneficiaries and a grand-daughter of the Nizam, instituted the present proceedings, being O.P. No. 141  of 1978 in the Court of the Chief Judge, City Civil Court, Hyderabad,  under s. 74 of the Trusts Act for removal of the  present trustees  for alleged  dereliction of  duty, negligence and  mismanagement on their part, with particular . reference to the manner in which the 37 items of jewellery belonging to  the trust were brought to sale. She also filed an application  for temporary injunction under ord. 39, r. 1 of the  Civil Procedure  Code for  restraining the  trustees from taking  any further  steps towards  the finalization of the sale  of jewellery.  The application was taken up by the Court on  March 14,  1978, and the learned Judge on the same

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day,  granted  an  ad  interim  injunction  restraining  the trustees from  taking any  steps to finalise the sale of the jewellery. On  March 16,  1978, M.  A. Abbasi,  one  of  the trustees  filed  a  counter  and  prayed  for  vacating  the injunction  and  ultimately  the  Court  after  hearing  the parties vacated the injunction on March 27, 1978.      On March  28,  1978,  the  first  respondent,  Princess Fatima Fouzia filed an appeal before the Andhra Pradesh High Court and on April 13, 1978 the High Court directed that the status quo  ante be  maintained.  It  appears  that  in  the meanwhile, the  eighth respondent,  Peter Jansim  Fernandez, made an  offer to  purchase the 37 items of jewellery in one lot for Rs. 20.25 crores and also applied to be impleaded as a party respondent in the appeal. On April 18. 1978, the 471 appellant M/s.  Shanti Vijay  & Co.,  one of  the successful bidders, also applied to be impleaded as a party respondent. On April 21, 1978, the High Court impleaded the appellant as a party  to the  appeal, and in order to test the bona fides of the  eighth respondent,  Peter Jansin Fernandez, directed that he should deposit the amount of Rs. 20.25 crores within one week  from that  date. On  such deposit  being made, the eighth respondent along with his foreign counterpart were to be B.  given an  opportunity to  inspect  the  37  items  of jewellery which  were previously  offered for  sale  by  the Board of  Trustees. On  May 8, 1978, the State Bank of India overseas Branch, Bombay furnished an unconditional guarantee to the  tune of  Rs. 20.25  crores on  behalf of  the eighth respondent and  his counterpart.  The eighth  respondent  C: having furnished the bank guarantee, the High Court directed that inspection  of the  jewellery be granted to him and his counterpart at  the Mercantile  Bank Ltd.  On May  27, 1978. After an inspection of the 37 items of jewellary, the eighth respondent, Peter  Jansin Fernandez, confirmed his offer and deposited the  amount of Rs. 20.25 crores in Court, and was, therefore, permitted to intervene.      At this  stage, the  first respondent,  Princess Fatima Fouzia, filed  an application  to withdraw  the appeal.  The parties were heard on the application, but before any orders could be  passed, her  sister, Princess  Amine  Mirzia,  the second respondent, applied for permission to be impleaded as appellant No. 2, as there was a danger of entire body of the beneficiaries being  deprived  of  an  amount  of  Rs.  5.78 crores.  On  June  12,  1978,  Princess  Fatima  Fouzia  was permitted to  withdraw and  her sister Princess Amina Mirzia was brought on record as appellant No. 2.      The High  Court by  its order  dated Jun,- 12, 1978 set aside the  alleged sale  of the 37 items of jewellery by the Board of  Trustees in  favour of  the  appellant  and  other successful tenderers  for a  sum of  Rs. 14.43 crores on the ground that  there was  no concluded  contract  between  the parties  and  instead  accepted  the  offer  of  the  eighth respondent, Peter  Jansin Fernandez,  for the  sale  of  the aforesaid jewellery to him for Rs. 20.25 crores.      When the  matter came up for hearing before this Court, a grievance was made that the High Court had no power to set aside the sale of the jewellery by the Board of Trustees for Rs. 14.43  crores without  impleading the  other  successful tenderers  and  without  affording  an  opportunity  to  the appellants M/s.  Shanti Vijay  & Co.  to substantiate  their claim that  there was  a concluded  contract for the sale of the jewellery  to them for Rs. 14.43 crores. Inasmuch as the appellants M/s.  Shanti Vijay  &  Co.  were  alone  a  party respondent to the 472

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appeal and  the remaining  successful tenderers  were not so impleaded, the  matter was  remitted by  this Court  by  its order dated  September 14,  1978, to  the High  Court for  a decision  afresh   on  the  question  whether  there  was  a concluded  contract   or  not,   after  impleading  all  the necessary parties  and affording them an opportunity to lead such oral or documentary evidence, as they desired.      In compliance  of the  order of  this Court,  the  High Court impleaded  the other  tenderers, respondents Nos. 7 to 17 in  the appeal  and they  were given  an  opportunity  to substantiate their  claim and  they, as well as the opposite parties,  filed   their  statements  and  counter-statements touching upon  the question  of  the  factum,  validity  and propriety of  the alleged  sales effected  by the  Board  of Trustees of  the 37  items of jewellery for Rs. 14.43 crores in favour of the appellants and other tenderers.      In the  present case,  the learned  Judges of  the High Court in  their judgment  dated February  28, 1979 have very carefully examined  all the  evidence  and  have  reached  a result unfavourable to the appellants. It would serve little purpose to  go through  the evidence  which has already been dealt with  in detail  by these  learned Judges, seeing that the accuracy  of their  statement of facts and the soundness of their  reasoning has not been successfully criticized. It is sufficient  to  say  that  we  entirely  agree  with  the judgment and  reasoning of  Kondaiah J.,  who delivered  the judgment of  the High  Court on  remand. We shall only touch upon the  salient features  to show that no other conclusion is possible.  There was,  in  fact,  no  evidence  that  any binding contract came into existence.      In   these   appeals,   three   questions   arise   for consideration. The  first is,  whether there was a concluded contract effected  between  the  appellants  and  the  other successful bidders  of  the  one  part,  and  the  Board  of Trustees of  the other,  for the  sale of  the 37  items  of jewellery for  Rs. 14.43 crores by the alleged acceptance of their bids  by the four trustees on March 9, 1978; secondly, whether there  was frustration  of contract  in that  the ad interim  injunction   of  March   14,  1978   made   further performance  of   the  alleged   contracts  impossible,  and thirdly, whether  the exercise of the discretionary power of sale exercised  by the  trustees conferred on them by cl. 13 of the  trust deed,  which is  subject to  the Court’s over- riding power  under s. 49 of the Trusts Act to interdict the sale and  issue necessary  directions in  that behalf, ought not to  be set  aside as  an improvident sale because of the fact that  an amount of Rs. 20.25 crores for the 37 items of jewellery had  been offered  by the eighth respondent, which showed that the trustees had not acted with prudence and due care or attention, or whether it 473 merely indicates  an error of judgment on their part and the sale by  them was  on a  mistaken impression  of the  actual value of the jewellery.      This in  the arguments  before us has resolved into two subsidiary questions, namely (1) whether in the absence of a provision for the B. delegation of powers in the trust deed, it was  competent for four of the Trustees to effect a sale, and if  so, whether in the absence of authorisation by R. N. Malhotra, Chairman  of the  Board of Trustees, the remaining four trustees  could exercise  the  power  of  sale  of  the jewellery under  cl. 13  of the  deed; and  (2) whether,  if there was  a valid acceptance of the bids as alleged, by the remaining trustees,  on March  9, 1978,  the Chairman of the Board of  Trustees could  not have  accorded his approval on

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the Secretary’s  note, Ex.  B-124, dated  March 14, 1978, in view of  the ad  interim injunction  granted by the Court of the Chief  Judge, City  Civil Court,  Hyderabad, dated March 14, 1978,  by which the trustees were r-strained from taking any further steps to finalize the sale of the jewellery.      The law  governing the  execution  of  trusts  is  well settled. In  the case  of a  private trust,  where there are more trustees  than one,  all must  join in the execution of the trust. The concurrence of all is in general necessary in a transaction  effecting the  trust property, and a majority cannot bind  the trust estate. In order to bind the trust E. estate, the  act must be the act of all. They constitute one body in  the eye of law, and all must act together. This is, of course,  subject to  any express  direction given  by the settlor. The  Judicial Committee  in Lala  Man Mohan  Das v. Janki Prasad  quoted a  passage from  Lewin’s Law of Trusts, 15th ed., p. 190, to the effect :           "In the  case of co-trustees the office is a joint      one. Where the administration of the trust is vested in      co-trustees they all form as it were but one collective      trustee, and  there fore must execute the duties of the      office in  their joint  capacity. It is not uncommon to      hear one  of several  trustees spoken  of as the acting      trustee but  the Court  knows no  such distinction: all      who accept  the office are in the eye of the law acting      trustees. If  any one  refuses or be incapable to join,      it is  not competent  for the others to proceed without      him, but  the administration  of the trust must in that      case devolve  upon the  Court. However,  the act of one      trustee done  with the  sanction and  approval of a co-      trustee may be 474      regarded as  the act  of both.  But  such  sanction  or      approval must be strictly proved." which, in their opinion, contains a correct statement of law applicable in  England and that the same doctrine applied to India also.  The’ decision  in Lala Man Mohan Das’s case has been followed  with approval  by this  Court in L. Jankirama Iyer & Ors. v. Neelakanta Iyer & ors.      It follows  as a  necessary corollary, that where there are several  trustees they  must act unanimously in making a sale or  a contract of sale, unless it is provided otherwise by the  terms of  the deed. In exercising the power of sale, as in  the exercise  of  other  powers,  a  trustee  cannot, therefore, properly  delegate the  performance of  the  acts which he  ought personally  perform. Although  a trustee may listen to  the  opinions  and  wishes  of  others,  he  must exercise his  own judgment.  Thus  a  trustee  for  sale  of property, cannot  leave the whole conduct of the sale to his co-trustees.  The   reason  for  this  is  the  settlor  has entrusted the  trust property  and its management to all the trustees, and  the beneficiaries are entitled to the benefit of their  collective wisdom  and experience: Underhill’s Law of Trusts  and Trustees,  12th Ed., pp. 434, 442-43: Scot on Trusts, vol. 2, p. 1033.      In L.  Janakirama Iyer’s  case this Court observed that all acts which the trustees intend to take for executing the trust, must  be taken  by all  of them  acting together,  as provided by s. 48 of the Trusts Act, 1882. Section 48 of the Trusts Act provides as follows:           "48. When  there are  more trustees  than one, all      must join  in the  execution of the trust, except where      the instrument of trust otherwise provides."      It is axiomatic that where there are more trustees than one, all  must join  in the  execution of  the trust, except

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where the instrument of trust otherwise provides. Therefore, as laid  down by this Court in L. Janakirama Iyer’s case, if the validity of an alienation effected by the trustees falls to be  considered only  in the  light of s 48, the fact that out of  the three  trustees only  two have executed the sale deed would  by itself make the transaction invalid and would not convey a valid title to the transferee.      In  the   present  case,  as  the  High  Court  rightly observes,  there  is  no  such  clause  in  the  trust  deed authorising the  execution of  the trusts  to be carried out not by  all but  by one or more or majority of the trustees. In the absence of such a specific provision, the general law 475 envisaged in s. 48 of the Act would govern the rights of the parties. We  are,  accordingly,  of  the  opinion  that  the alleged contracts  of sale entered into by the four trustees were not  binding and  of no  legal effect, and could not be enforced.  It  must  necessarily  follow  that  the  alleged contracts for sale entered into by them could not ripen into concluded contracts  so  as  to  bind  the  entire  body  of beneficiaries.      It was  not disputed that a trustee cannot delegate his functions except as provided in s. 47, which reads:           "47. A  trustee cannot  delegate his office or any      of his  duties either to a co-trustee or to a stranger,      unless (a)  the instrument of trust so provides, or (b)      the delegation is in the regular course of business, or      (c)  the   delegation  is   necessary,   or   (d)   the      beneficiary, being  competent to  contract, consents to      the delegation."      Section 48 is a corollary of s. 47 for, if the trustees cannot delegate  their duties, it follows that they must all personally perform  those duties,  and not  appoint  one  of themselves to  manage the  business of  the trust;  for  the settlor has  trusted all  his trustees,  and it behoves each and every  one of  them to  exercise his individual judgment and discretion on every matter, and not blindly to leave any questions to his co-trustees or co-trustee.      In the  course of  the arguments, the resolution of the Board of  Trustees dated  March 8,  1978 has  been discussed with great  minuteness, but  we have  no doubt that the view taken of  it by  the High Court was right. The language used is perhaps  not of  a trained draftsman, but it clearly does not, in  terms, confer  ’authorisation’ upon  the  remaining four trustees to accept the bids, or any one of them.      It Learned counsel for the appellants strenuously urges that the  resolution of March 8, 1978 is in two parts. It is pointed out  that the second part unequivocally confers upon the  trustees  the  power  of  rejection  of  bids.  It  is, therefore, urged  that the first part must be construed with reference to  the second.  It is said that we must correlate the second  part to  the First,  and when so read, the words "be examined and decided" must, in the context in which they appear,  mean   the  conferment  of  authority  to  reach  a ’decision’, i.e.,  as to acceptance or rejection of bids. It was also  submitted that the words "by the trustees present" clearly meant  the remaining  four trustees.  It was  argued that when  the Board  of Trustees  met on March 8, 1978, the trustees knew  full well  that R.  N. Malhotra, the Chairman could not be present at the meeting of the Board of Trustees to be held on March 9, 1978 as he had to leave Bombay on the morning of the 9th, as his presence in Delhi was 476 required  for   pressing  official   business.  Upon   these premises, it  is contended  that the  resolution of March 8,

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1978 cannot  but be  construed as  giving ’authorisation’ to the remaining  four trustees  to accept the bids on March 9, 1978.      While we are not oblivious of Malhotra’s statement that it was  decided at  the meeting  on March  8, 1978 that ’the trustees were  free to  accept the  highest tenders, if they did not see any reason to reject the same’ and also that ’if the trustees  felt that  a higher  amount could be obtained, they could  negotiate with  the tenderer and obtain a higher price’ May  be, that  is what  the trustees meant, i.e., the remaining four  trustees, were fully authorised to deal with the matter  in  all  its  aspects.  But  that  intention  of trustees is not at all manifested in the resolution of March 8, 1978,  the terms  of which are clear and explicit. In the case of  a trust,  we are  clearly  of  the  view  that  the ’authorisation’  must   be  express,  specific  and  in  the clearest of terms. The word "be examined and decided" in the first part  of the resolution may mean anything, and are not necessarily  susceptible   of  the   only  construction   as contended for,  namely that  of ’acceptance’. The expression "to negotiate  for sale"  in relation to the authority of an estate agent,  has a  definite legal connotation. He gets an authority to  find a  purchaser,  but  he  cannot  bind  the principal by  entering into  a contract of sale: Chadburn v. Moore and Rosenbaum v. Belson. These two decisions have been approved of by this Court in Abdul Ahmed v. Animendra Kissen Mitter laying  down that  there is  a substantial difference between ’to  sell’ and  ’to find  a purchaser’.  There is no reason why  the same  principle should not apply with regard to the  authority, if  any, of  the remaining  trustees,  in terms of the resolution of March 8, 1978. If the second part of the  resolution has to be construed with reference to the first, as is contended for, then their authority was limited to find  purchasers for  the jewellery,  and then  place the matter before  a meeting  of  the  Board  of  Trustees,  for acceptance of their bids.      When the trustees took care in drafting the second part which relates  to rejection of bids, there was no reason for their leaving  any ambiguity  in the  first part.  It is not permissible to spell out something which is not explicit, by merely saying  that it  is implicit,  when the  language  is clear and it does not bear out any such construction. We arc not prepared  to take  a view  which would be prejudicial to the entire body of beneficiaries. There is no reason why the words "be  examined and  decided" in  the first part, should not have their plain meaning that 477 the tenders  were to be opened and examined by the remaining four trustees  to see  if they were valid tenders. The first part did  not, in  our opinion,  give any ’authorisation’ to the remaining trustees to accept any of the tenders. If they did not  find a  satisfactory offer or offers for any of the items offered for sale they could only under the second part reject the  tenders submitted. It is needless to stress that delegation must  be express.  The trend of cross-examination of Malhotra also shows that his concurrence was necessary.      What transpired on March 9, 1978 is completely shrouded in mystery. The Secretary’s note, Ex. B-124 dated March l 4, 1978 reveals that the tenders were received on March 9, 1978 in sealed covers accompanied by ten per cent of the value of jewellery tendered  for, in  room no. 305, Ambassador Hotel, Bombay, between 3 and 4 p.m. It asserts that 27 tenders were received and  they were opened at 4.30 p.m. On the same day, in the  presence of  the trustees and except for item No. 16 of group  XIV, they accepted the same. As regards item No.1,

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of group  XIV,  negotiations  were  entered  into  with  the appellants, M/s.  Shanti Vijay  & Co.,  the highest tenderer and the  price of  Rs. 6,81,00,000  offered by them for item No. 16  was enhanced  to Rs.  6,92,00,000 which the trustees accepted. It  then mentions  that  acceptance  letters  were issued to all the tenderers whose tenders had been accepted. The date  for delivery  of groups VII and XIV had been fixed for March  17, 1978  and for the other items on March 21 and 22, 1978.  The Secretary’s  note, Ex.  B-124 reached  R.  N. Malhotra, the Chairman of the Board of Trustees at New Delhi on March 23, 1978 and bears his initials of that date      It is  accepted before  us that  Malhotra was not aware till March 23, 1978 that the tenders or any of them had been accepted by  the four  trustees On  March 9,  1978.  In  his examination-in-chief, he  states that  one or two days after he had  left for  Delhi, the Secretary rang him up at Delhi. He says:           ’I remember  that the Secretary of trust intimated      to me on phone that the trustees had opened the tenders      and the  highest amount  offered for  all the items was      over 14  crores. I  remember I received that phone call      one or  two Days  after I  reached Delhi  and at a time      when I  was in  my office.  I enquired of the Secretary      whether the amount was the total of the highest bid for      each item  and he  confirmed it.  I made  a  particular      enquiry from  the Secretary  as to  how much amount the      item  consisting   of  22  emeralds  had  fetched.  The      Secretary told me that item fetched over six crores. As      I was 478      broadly aware  of the  values of  the jewels,  per  the valuations earlier made. I said "Teek Hai"." During his cross-examination, he states:           "When the Secretary telephoned to me within one or      two days  after I  left Bombay  he did not inform me as      such that  the trustees  have accepted the tenders." He      then goes on to say that he read in the newspapers that      a suit  had been  instituted against  the  trustees  at      Hyderabad and  that  an  injunction  was  granted,  and      accordingly rang  up the  Secretary of  the Trust,  and      states: "I  remember it  was about  15th of March, 1978      and I rang up the Secretary on that very day to enquire      what it  was about.  Till then  the Secretary  did  not      inform me  about the  institution of the proceedings in      the City  Civil Court.  It will  be more correct to say      that  I  had  not  received  any  intimation  from  the      Secretary before I contacted him on telephone." It, therefore,  appears that the Secretary drew up the note, Ex. B-124, in undue haste despite the Court’s order granting the injunction.      It is  not disputed  that Malhotra  had no knowledge of the acceptance  of the  tenders till March 23, 1978 when the note of the Secretary, Ex. B-124 reached him. It is also not disputed before us that no minutes of the alleged meeting of the remaining  four trustees held on March 9, 1978 exist. We have gone through the Minutes Book of the Board of Trustees. It reveals  that minutes were regularly kept and indeed each and every meeting began with the confirmation of the minutes of the  earlier meeting. The minutes of the meetings held on March S,  1978 and  of March  8, 1978  are there. Thereafter appears the  minutes of  a meeting held on May 15, 1978, Ex. B-125. But  there are no minutes of the alleged meeting held on March  9, 1978.  It is  thus clear that no meeting of the Board of Trustees was held at all on March 9, 1978.      The story  of the  alleged acceptance  of bids  by  the

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remaining four  trustees on  March 9,  1978 appears  to  be. complete myth.  The Secretary’s note, Ex. B-124 was intended to mislead  R. N.  Malhotra, the  Chairman of  the Board  of Trustees, in  a frantic attempt to obtain his concurrence to something which never transpired.      One fact  in particular  may be alluded to. The absence of any  minutes of the alleged meeting held on March 9, 1978 must, as it should, clearly excite our suspecision about the genuineness of  the sale.  nm attention  was  drawn  to  the tabular statement prepared by the 479 Secretary  containing   acceptance  of   bids  by  the  four trustees, Ex.  B-123. The  authenticity of  this document is not beyond  question. It  is a tabular chart running into 34 large sheets  with minute  details. On  each of  the  sheets there is  a letter ’A’ encircled against the highest tender, and at  the  foot  appear  the  alleged  initials  of  three trustees bearing  the  date  March  9,  1978.  None  of  the remaining trustees  except M.  A. Abbasi  have  entered  the witness-box. We do not know whether the initials at the foot of the  document, Ex.  B-123, are of the trustees or not, as none has  proved them.  Nothing is  known  as  to  when  the initials were  put and  by whom.  There is  another alarming feature. According  to  Abbasi,  he  encircled  the  highest tender with  the letter  ’A’ and  then initialed  it on  the statement Ex. B-123. During his cross-examination, he gave a lie to  this and  asserted that  the  letter  ’A’  encircled against the  highest tender  was not inscribed by him but by the Secretary  and he  only initialed  it. Though  the other three trustees are alleged to have put their initials at the foot of  the statement on March 9, 1978, there is nothing on record to  show that  all this  was done  that day,  at  one Sitting, at the same time.      This document  certainly cannot  take the  place of the minutes of the alleged meeting. The Secretary’s note, Ex. B- 124 shows  that the  sealed tenders  were received between 3 and 4  p.m. and  they were opened at 4.30 p.m., i.e.. within half an  hour. It  was humanly  impossible to  prepare  this document within  such a short time. Furthermore, if the four trustees with the assistance of the Secretary, could prepare these large  tabular charts  there was  no reason  why  they could not record the minutes of the meeting, if any, held on that day  showing that  there was  acceptance of the bids by them. The  Minutes Book  is the  primary evidence,  and  the chart cannot form the basis for a finding that there was any acceptance of the tenders on March 9, 1978.      It is  apply clear  that there  was no  meeting of  the Board of  Trustees on  March 9,  1978. The  allegation  that there was  such a  meeting,  is  completely  belied  by  the affidavit of M. A. Abbasi, the material portion of which may be extracted:           "8. Out  of the  107 items  of jewellery  only  37      items were  put up  for sale  in the first instance and      tenders invited.  About sixty foreign and Indian buyers      of repute  inspected the  jewellery between the 6th and      8th March  1978  at  Bombay.  On  9th  March  1978  the      trustees received  the tenders and the same were opened      on the  10th March  1978. The  highest tenders received      were accepted  and letters of acceptance were issued on      the same day to the persons whose 480      tenders had  been accepted.  In no  case has  any lower      tender been accepted." This tends  to suggest that the alleged meeting was held not on March  9, 1978  but on  March 10, 1978. He clearly states

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that the  tenders were  opened on  March 10, 1978, they were accepted on  that day and letters of acceptance were sent to the persons on the same day whose tenders had been accepted. This is  in contradiction  with the  Secretary’s note Ex. B- 124. It  is quite clear to our mind that either M. A. Abbasi is not  speaking the  whole truth  or that  the story of the alleged meeting  of the  Board of  Trustees of March 9, 1978 was feigned  to beguile  R. N. Malhotra, the Chairman of the Board of Trustees and also the beneficiaries. We cannot rely on the  bare assertion  of M.A.  Abbasi, RW  1 that the bids were accepted by the trustees on March 9, 1978.      It must,  accordingly, be  held, for all these reasons, that the  High Court  was justified  in  setting  aside  the alleged sale  of 37  items of  Jewellery belonging to H.E.H. the  Nizam’s  Jewellery  Trust  effected  by  the  Board  of Trustees in favour of the appellants and other tenderers for Rs. 14.43  crores on  the ground that there was no concluded contract between the parties.      The second question is perhaps a more difficult one for the appellants to surmount, though the difficulty was sought to be explained away by saying that they had fulfilled their part of the con tract and they should not be deprived of the fruits of  their  bargain  merely  because  of  the  Court’s injunction. It  is unfortunate  that this aspect of the case was not  submitted to  the High  Court, and  we, there fore, have  not  the  assistance  of  that  Court’s  opinion.  We, however, think,  that the  meaning of  s. 56 of the Contract Act is  clear. The  section, insofar  as material,  runs  as follows:           "56. An  agreement to  do  an  act  impossible  in      itself void.           A contract  to do  an act which after the contract      is made,  becomes impossible,  or, by  reason  of  some      event which  the promisor  could not prevent, unlawful,      becomes  void   when  the  act  becomes  impossible  or      unlawful."      In the  present case,  cls. 11 and 12 of the conditions of sale  embodied the terms of the contract. By cl. 11, time is made the essence of contract. Clause 11 cannot be read in isolation but  both cls.  11 and  12 must  be read  together because they  form an  integral part  of the contract. These clauses in  addition to making time the essence of contract, clearly provide that in the event there was a failure to pay 90 481 per cent  of the  tender amount,  i.e., the  balance of  the price "the contract would be deemed to have been cancelled". It is,  however, argued  that upon acceptance of the tender, the property  in the  goods passed  to  the  buyer.  We  are afraid, we  cannot appreciate  this  line  of  argument.  It totally  ignores   the  effect   of  the  defeasance  clause contained in  cl. 12.  On a  reading of  both cls. 11 and 12 together, there  can be  no doubt  that the  passing of  the property was dependent upon the tender of the balance of the price and the taking delivery of the goods upon payment.      Even assuming  that there  was acceptance of tenders by the four  trustees on March 9, 1978, as alleged, hl terms of the resolution of March g, 1973, the contract was frustrated by the grant of an ad interim injunction by the Court of the Chief Judge,  City Civil Court, Hyderabad on March 14, 1973. The grant  of such  injunction prevented  the performance of the  alleged   contracts.  The  appellants  could  not  have tendered 90 per cent of the tender amount, i.e., the balance of the  price, by  the stipulated  date or taken delivery of the jewellery so long as the injunction lasted.

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    It is,  however, pointed  out that  the appellants M/s. Shanti Vijay  & Co. by their lawyer’s notice dated March 15, 1978, Ex.  B-66, confirmed  that they  had sent  a  telegram making a  demand for  delivery  of  the  two  items  of  the jewellery purchased  by them  against payment  of  Rs.  8.52 crores. It  is true  that the  letter was accompanied with a photostat copy of a certificate of foreign inward remittance of the  amount. But  the fact  remains that  in terms of the said notice,  the appellants  never made  a  tender  of  the balance amount  to the  Board of  Trustees at the Mercantile Bank at  Bombay on  March 17, 1978. They knew full well that the trustees  would not  accept the amount nor could deliver all the  jewellery in  question, in  view of  the injunction granted by  the Court.  The injunction, in terms, restrained the trustees  "from taking any steps to finalise the sale of the jewellery".  The injunction  was not  vacated till March 27,  1978.  Even  after  the  injunction  was  vacated,  the appellants or  other  successful  tenderers  never  made  an attempt to  pay the  balance amount  till April 13, 1978, on which date  the High  Court passed  an order for maintaining the status  quo ante.  It  is  nobody’s  case,  that  a  new contract was  ever entered  into.  We  are  clearly  of  the opinion  that   there  was  a  frustration  of  the  alleged contracts, in  the facts  and circumstances  of the  present case.      It was  faintly argued by learned counsel appearing for some of  the appellants  that by  reason of  the  concluding words without  the trustees  being liable  or accountable to any person  whomsoever’ in  cl. 13  of the  trust deed,  the discretionary power of sale conferred upon the trustees 482 was not  liable to  be interfered  with under  s. 49  of the Trusts Act, which is in these terms:           "49. Where  a discretionary  power conferred  on a      trustee is  not exercised reasonably and in good faith,      such power may be controlled by a principal Civil Court      of original jurisdiction." After a  stage in  the arguments  before us, learned counsel appearing for  the Board of Trustees was at pains to impress upon  us,  that  the  trustees  would  be  "subject  to  the directions of the Court" and would act in the best interests of the  beneficiaries. This  if we may say so, is a complete change of front. On the contrary, the submission in the High Court was  that, not  only the Court will refuse to restrain the exercise  of discretionary  power, but  it will  give no relief to  the beneficiaries where honest exercise of such a power has  by an  error of judgment led to loss for, as Lord Normand said in Dundee General Hospitals Board of Management v. Walker :           "It is  one thing  to say  that the  trustees must      honestly discharge  their trust  and  keep  within  the      bounds of  the powers and duties entrusted to them, and      quite another  to say  they must  not fall  into errors      which other  persons, including  a court  of law, might      consider unreasonable."      The learned  Judges of  the High  Court, however,  have rightly, in  our opinion,  repelled the  contention. It  was certainly open  to the Board of Trustees to effect a sale of the 37  items of jewellery under cl. 13 of the deed. But the power, although  discretionary, must be exercised reasonably and in good faith.      The power  conferred on  the Board  of Trustees  is  no doubt discretionary,  but the  principle embodied  in s.  49 viz., that  when such  discretionary power  is not exercised reasonably and  in good  faith, such power may be controlled

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by a  court. There was no warrant for the suggestion made by the Board  of Trustees  before the High Court that the power is absolute.  The law on the subject is succinctly stated in Underhill’s Law of Trusts and Trustees, 12th Ed., p. 472:           "..it would  seem that,  even where trustees claim      to exercise  their discretion  as to  investments,  the      court will, in a proper case, direct an inquiry whether      it is  for the  interest of  the beneficiaries  that  a      particular investment should be continued or called in.      So, too,  where absolute  discretion has  been given to      trustees to do a particular act (e.g., to sell the 483      trust  property),  the  court  cannot  compel  them  to      exercise the  power; but  if they  do exercise  it, the      court will  see that they do not exercise it improperly      or unreasonably."      The proposition  is  no  doubt  one  which  speaks  for itself. When  it appears  from the facts that the act of the trustees in offering for sale these 37 items of jewellery at an inadequate  price of  Rs. 14.43  crore was not the act of all, that  it was  undoubtedly an  improvident sale  as  the jewellery has  been found  to be  worth Rs. 20.25 crores, if not more; and more so, when the alleged sale was effected by them in  favour of  the appellants and other bidders without trying to ascertain their actual price, it certainly follows that they  acted in  flagrant disregard  of the interests of the entire body of beneficiaries.      It  is  somewhat  disconcerting  that  throughout  this litigation, the trustees should have, as they appear to have done, aligned  themselves  with  the  appellants  and  other successful tenderers.  They not only asserted that there was a ’concluded contract’ for the sale of 37 items of jewellery by the  alleged acceptance of bids by them on March 9, 1978, but also  that the  Court had no power to interdict the sale under s.  49. If  we may say so, the attitude adopted by the Board of  Trustees was  clearly against the interests of the beneficiaries.      In the  present  case,  evidence  is  tendered  by  the trustees, not  for the purpose of showing that they tried to protect the  interest of  the beneficiaries, but for proving facts from  which it  could be inferred that, accepting that the price  of Rs. 14.43 crores offered by the appellants and other tenderers  was wholly  inadequate,  the  discretionary power of sale was not liable to be interfered with.      It remains  then to  determine whether  on the whole of the evidence  as tendered,  the appellants  have established facts from  which a  sale in  their favour could be inferred or, that  the act  of the  trustees  was  not  a  bona  fide exercise of  their power  so as to attract the Court’s over- riding power  to annul  the sale  under s.  49 of the Trusts Act. The testimony, of Dinshaw Jahangir Gazdar RW 3, Kashmir Chand RW  4 and  Vithaldas RW  6 goes to show that they have been in jewellary business since long, and selling jewellery belonging to  several Indian princes. Dinshaw Jahangir RW 3, was  a  consultant  to  the  late  Nizam  for  sale  of  his jewellery, and  had also  arranged  the  sale  of  jewellery belonging to  late Salarjung of Hyderabad. Kashmir Chand, RW 4, partner  of the  appellant firm  M/s. Shanti Vijay & Co., had participated  in the  sale of jewellery belonging to the Maharajahs  of  Gwalior,  Darbhanga,  Jodhpur  and  Bikaner. Vithaldas, RW 6, is one of approved valuers appointed by the Government of India, and had 484 valued the jewellery belonging to the Paiga of Khrusheed Jah and also some jewels belonging to the late Salarjung. At the

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instance of  the Government  of India,  he  had  valued  the jewellery belonging to he Nizam as also the Nawab of Rampur. According to  these  jewellers,  the  only  method  of  sale adopted in  all these  sales was to inform reputed jewellers both in  the country  and abroad. and none of the sales were by advertisement in the press.      As regards  value of  the jewellery,  Dinshaw  Jahangir Gazdar, RW  3, and  M. A.  Abbasi, RW  1, want us to believe that Rs. 14.43 crores was the ’best possible price’ that the 37 items  of jewellery  could ever  fetch, despite  the fact that the  eighth respondent, Peter Jansin Fernandez, made an offer of Rs. 20.25 crores for the same, during the course of the proceedings.  For this  they  largely  relied  upon  the valuation report  of Vithaldas,  RW 6, showing that these 37 items of jewellery were worth Rs. 10,36,30,00. We shall deal with these witnesses later      It is  somewhat strange  that  the  Board  of  Trustees should have, acted in a cavalier fashion in disposing of the jewellery, without  trying to  ascertain their actual value. The alleged sale effected by them was clearly detrimental to the interests  of the  beneficiaries. M.  A. Abbasi,  RW  1. admits during  his cross-examination, that ’the trustees had no definite  idea of the value of the 37 items of jewellery’ when they  were offered  for sale. He further admits that he did not consult anyone except Dinshaw Jahangir Gazdar, RW 3, about the  actual value.  He also admits that he did not get in touch  with any  curators of Museums of foreign countries to find  out whether  they were interested in purchasing any of the  items, nor were any letters sent to any jewellers of Holland, Belgium,  United Kingdom,  Switzerland and  Geneva. Even in  this country,  the trustees  did not appear to have written to  any jeweller from Calcutta, Madras, Hyderabad or Bangalore. M.  A.  Abbasi  states  that  the  trustees  were advised particularly  by Dinshaw Jahangir Gazdar that it was not desirable  to give  publicity in the daily newspapers as undesirable elements might step in for inspecting the jewels and he  could not  assure them  the bona fides of every such person, who  wanted to inspect the jewellery. He, therefore, approached some of the jewellers through letters.      Then we  come to  Dinshaw Jahangir  Gazdar, RW 3. It is true that  this witness  has wide  experience  in  jewellery business and  tries to  assert that  the amount of Rs. 14.43 crores offered  by the successful tenderers was a ’very good price’, but  then had  to admit that he does not possess any qualification in gemmology. According to this witness. 485 ’there is  no principle  as  such  in  valuing  an  item  of jewellery. One  looks  at  it  and  values  the  same.’  He, however, had to admit that he never participated in sales of rare jewels  held abroad,  nor is  he aware  of the practice where jewels  are sold  abroad in auction rooms after proper advertisement. This  witness goes  on to  say: ’It is only a jeweller who  can value  jewels by having a look at them. He will keep  in consideration  the size,  cutting, clarity and lustre, and colour.’      Vithaldas, RW  6, also  asserts that  the price  of Rs. 14.43 crores  fetched was  a ’very good price’ in March 1978 for these jewels. When be was confronted with the offer made by the  eighth respondent  during his  cross-examination, he stated that  according to  him an  offer of Rs. 20.25 crores for these  37 items  of jewellery  was a  fancy  price’.  He explains by  saying that  a fancy price would be higher than the  market   price.  All  this  evidence  was  led  by  the appellants and  the other  tenderers as well as by the Board of Trustees,  in trying to establish that the trustees acted

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honestly and there was no lack of good faith on their part.      It appears  that, as  so often  happens when  one deals with another’s property, it matters little to him what price the property  fetches. But  in the  case of  a trust,  there arises the  duty of the trustees to act with prudence and as a body  of reasonable  men. The  High Court  has come  to  a definite  conclusion   that  the  improvident  sale  of  the jewellery at  such a low price without due public notice was not a  bona  fide  exercise  of  their  power  conducive  of beneficial management.  There is no reason for us to come to a different conclusion.      On the  totality of  the evidence,  in our opinion, the High Court  rightly came to the conclusion that though there were  no   mala  fides,   corrupt  motives,  fraud  or  mis- representation on  the part  of the  trustees and they acted honestly, the trustees in the facts and circumstances of the present case,  did not act reasonably and in good faith i.e. with due care and attention. Upon its finding that there was no concluded contract between the parties within the meaning of s 2 (h) of the Contract Act, it accepted the offer of the eighth respondent,  Peter Jansin  Fernandez, for  Rs.  20.25 crores for the purchase of 37 items of jewellery.      It is  necessary to  mention that  upon receipt  of the findings recorded  by the  High Court,  these  appeals  were placed before  the Court  for orders on April 18, 1979, when it issued a direction to the effect:           "The parties  will submit the methodology by which      a maximum  price may  be fetched for the benefit of the      bene- 486      ficiaries. Any  offer which is below Rs. 20 crores will      automatically be ignored." Since the  Court was rising for the summer vacation from May 5, 1979,  learned counsel  for the  eighth respondent, Peter Jansin Fernandez,  made a  request  for  withdrawal  of  the deposit of  Rs. 20.25  crores made  by him  before the  High Court for,  the purchase  of the  37 items of jewellery, and instead gave  an undertaking  to furnish an irrevocable bank guarantee by the State Bank of India overseas’ Branch Bombay to that  extent. This  was duly  complied with by the eighth respondent, Peter Jansin Fernandez; and the irrevocable bank guarantee for  Rs. 20.25  crores furnished  by him is due to expire on September 20, 1979.      The appeals  came up  for hearing  before the  Court on August 18, 19?9 We request to say that though the appellants and other successful tenderers had nearly four months’ time, no better  offer than the one made by the eighth respondent, Peter  Jansin   Fernandez,  for   Rs.   20.25   crores   was forthcoming. We, therefore, proceeded to hear the appeals on merits. The parties were heard on all aspects.      The question  still remains  as  to  the  course  open. Accepting the  offer of  the eighth respondent, Peter Jansin Fernandez, without  inviting fresh  tenders would be subject to the  same infirmity.  From the  evidence  on  record,  it appears nobody really knows the actual value of the 37 items of the  jewellery. It  may be well worth more than Rs. 20.25 crores.      We must,  therefore, uphold  the judgment  of the  High Court  setting  aside  the  alleged  sale  of  37  items  of jewellery belonging  to. H.E.H. the Nizam’s Jewellery Trust, effected  by   the  Board  of  Trustees  in  favour  of  the appellants and  other successful  tenderers  for  Rs.  14.43 crores, but  set aside  its order  accepting the  bid of the eighth respondent,  Peter Jansin  Fernandez, for purchase of the jewellery  for Rs. 20.25 crores, and direct a re-auction

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on the terms specified separately.      The appeals are disposed of accordingly. The appellants in all  these appeals,  excepting Civil  Appeal No.  1269 of 1978, shall  bear their own costs and pay one set of cost to the respondents  as they  have substantially failed. The two special leave applications are also dismissed. N.V.K. 487