Supreme Court Upholds Hereditary Trustee Claim: V. Prakash Entitled to Founder Trustee Role (2022)

Introduction

Date of the Judgment: 09 May 2022
Citation: (2022) INSC 458
Judges: Vineet Saran, J., and Dinesh Maheshwari, J.

Can a person holding a Green Card of the United States of America, yet residing in India, be deemed a resident of the Madras Presidency for the purpose of holding a founder trustee position in a public trust? The Supreme Court of India recently addressed this complex question, overturning a High Court decision that had disqualified an individual based on his Green Card status and perceived lack of continuous physical presence in India. This case revolves around the interpretation of “residence” as stipulated in the Scheme of Administration of a public trust and its application to modern circumstances.

The Supreme Court bench, comprising Justices Vineet Saran and Dinesh Maheshwari, delivered the judgment, with Justice Dinesh Maheshwari authoring the opinion. The core issue was whether the appellant, despite holding a U.S. Green Card, met the residency requirements to be appointed as a founder trustee of the respondent-Trust. The Court’s decision hinged on a nuanced understanding of “residence” and the spirit of the trust’s Scheme of Administration.

Case Background

The case involves a dispute over the founder trusteeship of M/s. P.S. Govindaswamy Naidu & Sons’ Charities, a public trust established in 1926. The trust’s Scheme of Administration (SOA), framed in 1936, stipulated that a trustee must be a Hindu, not less than 21 years of age, and a resident of the Madras Presidency. The appellant, V. Prakash, claimed the right to be appointed as a founder trustee, being the surviving male descendant of one of the original founder trustees, Shri P.S.G. Narayanaswami Naidu. The dispute arose when the respondent-Trust rejected the appellant’s claim, citing his Green Card status and the requirement of residing within the Madras Presidency.

The appellant’s father, Shri G. N. Venkatapathy, held the position of founder trustee until his demise in 1994, after which his brother, Shri V. Rajan, took over. Following Shri V. Rajan’s resignation in 2012, a series of litigations ensued, culminating in the present dispute. The appellant contended that he was indeed a resident of the area in question, as evidenced by his Indian Passport, Aadhaar Card, property documents, and bank accounts. The respondent-Trust, however, argued that his Green Card status and frequent travel to the U.S.A. disqualified him from holding the trustee position.

Timeline:

Course of Proceedings

The dispute over the founder trusteeship has seen multiple rounds of litigation. Initially, after Shri V. Rajan’s resignation, the Trial Court ruled that he had lost his right to vote, and the remaining trustees should choose between Shri Naren Rajan and the appellant. However, the High Court reversed this decision, stating that Shri V. Rajan retained his right to vote, and directed the appointment of Shri Naren Rajan. After Shri Naren Rajan’s death, the appellant filed a suit seeking recognition as a founder trustee, which was initially rejected by the Board of Trustees.

The Trial Court, in O.S. No. 160 of 2018, ruled in favor of the appellant, declaring him entitled to be recognized as the founder trustee. The Trial Court reasoned that the appellant’s Green Card was a mere privilege and did not negate his Indian citizenship or residency. However, the High Court reversed this decision in A.S. No. 978 of 2020, holding that the appellant did not meet the residency requirements as per the SOA, due to his Green Card status and limited physical presence in India. The High Court emphasized that the term “resides” should be interpreted strictly, requiring continuous physical presence within the Madras Presidency.

Legal Framework

The core legal framework in this case is the Scheme of Administration (SOA) of the respondent-Trust, particularly Chapter IV, which outlines the qualifications and disqualifications for trusteeship. Clause (B) of Chapter IV specifies the qualifications for trusteeship, stating that a person must be a Hindu, not less than 21 years of age, and must reside in the Madras Presidency. The relevant provision reads as follows:

“QUALIFICATION AND DISQUALIFICATION FOR TRUSTEESHIP
(A) QUALIFICATIONS FOR THE TRUSTEESHIP
No person shall be elected or hold office as trustee unless,
(i) he is a Hindu
(ii) he resides in the Madras Presidency and
(iii) he is not less than 21 years age”

Clause (D)(1) of the SOA outlines the process for filling vacancies in the office of founder trustee, stating that an adult male descendant in the male line of the original founder trustee, if competent, shall be eligible for appointment. The relevant provisions read as follows:

“(D) FILLING UP OF VACANCIES:
(1) FOUNDER TRUSTEES
(a) Whenever any vacancy arises in the office of a Founder Trustee,
an adult male descendant in the male line of the original founder
Trustee if existing and competent according to the rules herein
contained, shall be eligible for appointment to that office.
(b) If there be only one in such line and he is willing to act he shall
be appointed as Trustee by the Board of Trustees. If such person,
however, could not be appointed thereto by reason of his not having
the necessary qualifications for Trustee or by reason of his being
disqualified for Trusteeship then the remaining Founder. Trustees
shall proceed to fill up the vacancy in the same manner as if such
person did not exist; but the person so appointed to the office shall
hold office only till the disability ceases and on such disability
ceasing the person entitled to succeed as herein before mentioned
shall be appointed to the place of trustee.”

The dispute primarily revolves around the interpretation of the term “resides in the Madras Presidency” within the context of the SOA and whether the appellant’s Green Card status and travel history disqualify him from holding the founder trustee position. The Supreme Court’s judgment interprets this clause in a contemporary context, emphasizing the spirit of the trust and the intent of the founders.

Arguments

Appellant’s Submissions:

• The appellant argued that the High Court erred in reversing the Trial Court’s judgment, which had correctly interpreted the term ‘residence’ in the context of the Scheme of Administration (SOA).
• The appellant contended that the Trial Court had rightly considered his previous conduct, the previous judicial proceedings, and the fact that the Green Card was a mere privilege and not a bar to his appointment as a founder trustee.
• The appellant emphasized the importance of the principles of res judicata and estoppel, arguing that the High Court had cursorily rejected these principles.
• The appellant asserted that he had independently proven his residence in the area and his animus to reside there, supported by his Aadhaar Card, Indian Passport, bank certificates, and certificates from Chartered Accountants.
• The appellant relied on the judgment in Yogesh Bhardwaj v. State of U.P. & Ors. : (1990) 3 SCC 355, arguing that any period of physical presence, however short, may constitute residence, provided it is not transitory or casual.
• The appellant argued that his retirement in 2009, his shift to India in 2010, and his non-application for U.S. citizenship demonstrated his intent to reside in India.

Respondent’s Submissions:

• The respondents argued that the High Court had rightly set aside the Trial Court’s judgment.
• The respondents contended that the bar of res judicata did not apply as the appellant’s qualification had never been a matter directly in issue and was never decided on merits in previous litigations.
• The respondents argued that the principle of estoppel could not operate against the respondent-Trust because the appellant’s previous appointment was conditional upon proof of permanent shifting to Coimbatore.
• The respondents submitted that the issue of the Green Card in relation to residence in India was a pure question of law, and therefore, the principle of estoppel could not be invoked.
• The respondents argued that the appellant was not qualified to be a founder trustee under Chapter IV Clause (B) of the SOA, as a Green Card holder cannot stay outside the U.S.A. beyond one year without a re-entry permit.
• The respondents emphasized that the appellant had admitted in his cross-examination that he did not intend to give up his Green Card, and that he was a pensioner, had a driving license, and was an income tax assessee in the U.S.A., thereby failing to establish his animus to reside in India.

Sub-Submissions Categorized by Main Submissions:

Issues Framed by the Supreme Court

The Supreme Court considered the following key issues:

1. Whether the High Court was correct in reversing the judgment of the Trial Court which had upheld the claim of the appellant to the office of founder trustee.
2. Whether the appellant, holding a Green Card of the U.S.A. and residing in India, could be considered a resident of the Madras Presidency for the purpose of holding the founder trustee position.
3. Whether the principles of res judicata and estoppel apply in the present case.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court referred to the following authorities:

Legal Provisions Considered:

• Scheme of Administration (SOA) of M/s. P.S. Govindaswamy Naidu & Sons’ Charities: Specifically, Chapter IV Clause (B) regarding qualifications for trusteeship and Clause (D)(1) regarding filling vacancies of founder trustees.
• Section 6 of the Income Tax Act, 1961: Regarding the definition of ‘resident’ for income tax purposes.
• Section 11 of the Code of Civil Procedure, 1908: Regarding res judicata and constructive res judicata.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Supreme Court followed the ratio in Mst Jagir Kaur & Anr. v. Jaswant Singh [(1964) 2 SCR 73]* regarding the definition of residence, emphasizing that “reside” means more than a casual stay.
• The Supreme Court distinguished the facts of the case from the ratio in Yogesh Bhardwaj v. State of U.P. & Ors. [(1990) 3 SCC 355]* , emphasizing that the appellant’s stay in India was not a casual visit.
• The Supreme Court referred to Inder Singh Ahluwalia v. Prem Chand Jain & Ors. [1993 SCC OnLine Del 12]* to support its interpretation of residence.
• The Supreme Court referred to Makhija Construction & Engg. (P) Ltd. v. Indore Development Authority & Ors. [(2005) 6 SCC 304]* regarding the application of res judicata between co-defendants, but did not make a conclusive finding on its applicability.
• The Supreme Court referred to Directorate of Enforcement v. Deepak Mahajan [(1994) 3 SCC 440]* to emphasize that words are not passive agents and should be interpreted contextually.

What weighed in the mind of the Court?

The Supreme Court’s reasoning was primarily driven by the following:

• The spirit of the Scheme of Administration, which intended for the founder trusteeship to be hereditary within the male line of the original founder trustees.
• The appellant’s substantive connection to India, evidenced by his Aadhaar Card, Indian Passport, property ownership, and bank accounts.
• The fact that the appellant’s Green Card was a mere privilege and did not negate his Indian citizenship or intent to reside in India.
• The contemporary interpretation of “residence,” recognizing the advancements in communication and transport, which allow for effective participation in the affairs of the trust even without continuous physical presence.
• The fact that the appellant had been a trustee previously and had been participating in the affairs of the trust.

Sentiment Analysis of Reasons Given by the Supreme Court:

Fact:Law Ratio:

The Court’s decision was significantly influenced by the factual aspects of the case, particularly the appellant’s ties to India and his demonstrated intent to reside there. While legal interpretations were considered, they were applied in a manner that aligned with the factual context.

Logical Reasoning:

Key Takeaways

• Interpretation of “Residence”: The Supreme Court has clarified that the term “resides” should be interpreted contextually, considering present-day advancements in communication and transport. It does not necessarily require continuous physical presence.
• Green Card Status: Holding a Green Card of the U.S.A. is not a disqualification for Indian residency, especially if the individual has strong ties to India and demonstrates an intent to reside there.
• Spirit of Trust Administration: The Court emphasized the importance of adhering to the spirit of the Scheme of Administration, particularly the hereditary nature of the founder trusteeship.
• Balancing Act: The judgment balances the need to adhere to the letter of the law with a practical and contemporary understanding of the circumstances.
• Res Judicata and Estoppel: While these principles were discussed, the Court’s decision was based on the evidence presented, rendering a detailed analysis of these principles unnecessary.

Directions

The Supreme Court directed that the appointment of respondent No. 10 as trustee be annulled. The Court also directed that the appellant shall be entitled to hold the office of founder trustee representing the P.S.G. Narayanaswami Naidu branch. The Court rejected the claim of the intervener.

Development of Law

Ratio Decidendi: The ratio decidendi of this case is that the term “resides” in a trust deed or similar document should be interpreted contextually, considering the purpose of the provision and the present-day realities of communication and transport. A person’s Green Card status does not automatically disqualify them from holding a trustee position if they have strong ties to India and demonstrate an intent to reside there. The Court emphasized that the spirit of the trust and the hereditary nature of the founder trusteeship should be respected.

Change in Previous Positions of Law: The Supreme Court’s judgment clarifies that the term “resides” should not be interpreted narrowly to require continuous physical presence. This represents a shift from a strict, literal interpretation to a more contextual and purposive approach. The Court has also emphasized the importance of considering the spirit of the trust and the intent of the founders, which can sometimes outweigh a literal interpretation of the terms.

Conclusion

In conclusion, the Supreme Court allowed the appeal, setting aside the High Court’s judgment and restoring the Trial Court’s decree. The Court held that the appellant, V. Prakash, was indeed qualified to be appointed as a founder trustee of M/s. P.S. Govindaswamy Naidu & Sons’ Charities, despite holding a Green Card of the U.S.A. The Court emphasized the importance of a contextual interpretation of “residence” and the spirit of the trust’s Scheme of Administration. The judgment underscores that a Green Card is a mere privilege and does not negate an individual’s Indian residency if they have strong ties to India and demonstrate an intent to reside there. The decision also upholds the hereditary nature of the founder trusteeship as intended by the original founders.

Category

Category & Tags

Categories:

• Civil Law
• Trust Law
• Supreme Court Judgments
• Hereditary Rights

Tags:

• Supreme Court
• Hereditary Trustee
• Trust Law
• Residency
• Green Card
• Scheme of Administration
• V. Prakash
• M/s. P.S. Govindaswamy Naidu & Sons’ Charities
• Indian Citizenship
• Legal Interpretation