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Andhra Pradesh High Court
Judges : C.KONDAIAH, P.RAMAKRISHNAM RAJU
Fatima Fauzia - Appellant
Versus
Syed UI-Mulk - Respondent
Decided On : 02-28-79
The Court held that the contract of sale between the trustees and the tenderers was not a concluded contract, within the meaning of S. 2 (h) of the Contract Act, enforceable against the beneficiaries. The trustees did not act reasonably and in good faith, though they acted honestly without any mala fides or corrupt motives, they did not perform their statutory duties, functions and powers diligently and as reasonable prudent men would have dealt with their own property.
Fact of the Case:
The Nizam Jewellery Trust was created to sell the jewellery of the late Nizam of Hyderabad. The trustees were given absolute discretion to sell the jewellery either by public auction or by private contract. The trustees decided to sell 37 items of jewellery by private contract. They invited tenders from prospective buyers and received 17 tenders. The four trustees who were present at the meeting accepted the highest tenders of 8 respondents on 9-3-1978 and 10-3-1978. The Chairman of the Trust, who was not present at the meeting, approved the action of the other trustees on 23-3-1978. The second appellant, one of the beneficiaries of the trust, filed a suit challenging the validity of the sale. She contended that the sale was collusive and clandestine and that the trustees had not acted in the best interests of the beneficiaries. The trial court granted an injunction restraining the trustees from taking any further steps towards the finalisation or tenders for the sale of the jewellery. On appeal, the High Court set aside the injunction and upheld the validity of the sale. The second appellant then appealed to the Supreme Court. The Supreme Court directed the High Court to submit a fresh finding on the issue of whether or not there had been a concluded contract of sale between the trustees and the tenderers.
Finding of the Court:
The Court found that there was no concluded contract of sale between the trustees and the tenderers. The Court held that the trustees did not act reasonably and in good faith, though they acted honestly without any mala fides or corrupt motives, they did not perform their statutory duties, functions and powers diligently and as reasonable prudent men would have dealt with their own property.
Issues: Whether there has been a concluded contract of sale between H. E. H the Nizam Jewellery Trust on the one hand and the respondents 7 to 17, the various tenderers on the other hand.
Ratio Decidendi: The Court held that the contract of sale between the trustees and the tenderers was not a concluded contract, within the meaning of S. 2 (h) of the Contract Act, enforceable against the beneficiaries. The trustees did not act reasonably and in good faith, though they acted honestly without any mala fides or corrupt motives, they did not perform their statutory duties, functions and powers diligently and as reasonable prudent men would have dealt with their own property.
Final Decision: The Court held that the contract of sale between the trustees and the tenderers was not a concluded contract, within the meaning of S. 2 (h) of the Contract Act, enforceable against the beneficiaries. The trustees did not act reasonably and in good faith, though they acted honestly without any mala fides or corrupt motives, they did not perform their statutory duties, functions and powers diligently and as reasonable prudent men would have dealt with their own property.
( 1 ) PURSUANT to the order of the Supreme Court dated 14 -9-1978 in Civil Appeals Nos. 1105, 1245 and 1269 of 1978 on its file, C. M. A. No. 147 of 1978 is restored to the file of this Court and had come up before us for deciding afresh the principal issue i. e. whether or not there has been a valid and concluded contract of sale between H. E. H. the Nizam Jewellery Trust on the one hand and the respondents 7 to 17, the various tenderers, on the other hand.
( 2 ) WE may briefly state the material facts, which lie in a narrow compass and gave rise to the submission of our finding to the Supreme Court. The late H. E. H. the Nizam of Hyderabad, Nawab Mir Sir Osman Ali Khan Bahadur had executed a trust deed on 29/03/1951 true copy of which is Ext. A-1, creating the trust called H- E. H, the Nizams Jewellery Trust (hereinafter referred to as the Trust) in respect of 107 items of valuable and rare Jewellery belonging to him, for the benefit of his (1) two sons (i) Prince Azam Jah and (ii) Prince Muzzam Jah: (2) two grandsons (i) Prince Moukkarram Jah and (ii) Prince Muffakam Jah; (3) two grand daughters (i) Fatima Fouzia and (ii) Amina Narzia (4) daughter Shahazadi Begum and (i) his step brother Sahebzada Nawab Basalath Jah Bahadur and other sons and daughters. Clause 13 of the trust deed requires the trustees to sell the jewellery within a period of three years after !he death of Prince Azam Jah, who had in fact died in October. 1970. The jewellery is kept in the safe Vault of Mercantile Bank of India at Bombay as per the wish of the settlor, R. N. Malhotra (R. W. 2) the nominee of the Government of India, M. A. Abbas (R. W. 1), Prince Muffakam Jah Mr. Zaher Ahmed and Mr. Ataur Rahman are the trustees since 1977. The trustees submitted a memorial under Ex. B-l to the Prime Minister of India to acquire the rare and valuable pieces of jewellery as part of the collection of a public museum since they are articles of great historical and cultural value for a proper and reasonable price. The efforts of the trustees, which commenced in July, 1972 as noticed from the correspondence (Exs. B-l to B-38), did not fructify. In December, 1975 the jewellery was inspected by Vittaldas (R. W. 6) and also by a Committee of Valuers appointed by Government of India They submitted their valuation reports Exs. B-123 and B-70 respectively. The Government of India had informed the trustees through Ex. B-45 dated 13-3-78 that they are not interested in acquiring any of the jewellery having antique value. In January, 1978 Prince Muzzam Jah, the principal beneficiary had expressed through Ex. B-41, his concern about the delay in selling the jewels and wanted the trustees to expedite the sale. To the same effect is Ex. B-2 from some other beneficiaries. The Trustees consulted Gazdar (R. W 3) regarding the mode of sale and decided that the best method of sale would be to invite some reputed dealers in this country and from abroad for the intended sale. Then, R. W. 3 and the Secretary of the Trust addressed letters Exs. B-72 to B-100 to some reputed jewellers specified in Ex. B-46 informing them about the intended sale of the jewellery. Out of 107 items of jewellery mentioned in the first schedule of the trust, 37 items with which we are concerned were sought to be sold by the trustees after arranging them into different lots Exs. B-47 and B-48 are the printed brochures and Ex. B-50 is the printed list of the jewellery. The terms and conditions of sale were settled as per Ex. B-19 dated 3-3-1978. The intending purchasers were permitted to inspect the jewellery at the Bank on payment of security deposit of Rs. 30,000. 00 and an inspection fee of Rs. 1,500. 00 by each party. About 26 or 27 foreigners and 42 Indians who were permitted by R. W. 3, had inspected the jewellery on 6-3-78, 7-3-78 and 8-3-78 in the presence of some of the trustees and R. W. 3, as seen from Ex. B-134. In the course of inspection, the tenderers were informed to send their t
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