Holding

The alleged sale was void because the trustees, being more than one, failed to act unanimously as required by s.48 of the Indian Trusts Act, and their discretionary power was exercised imprudently, warranting court intervention under s.49.

Summary

The Nizam's Jewellery Trust, created by the late Nizam of Hyderabad, authorized its trustees to sell jewellery at their discretion after a three‑year period. In 1978 the Board of Trustees resolved to sell 37 items, but only four of the five trustees opened the tenders and purportedly accepted bids without the Chairman’s consent and without a proper meeting. Beneficiary Princess Fatima sought removal of the trustees and an injunction, which was later lifted. The High Court set aside the alleged sale for Rs 14.43 crore, finding no concluded contract and later rejected the higher offer of Rs 20.25 crore, ordering a re‑auction. The Supreme Court affirmed that, under s.48 of the Indian Trusts Act, all trustees must act jointly in alienating trust property; the sale was therefore void, the contract frustrated by the interim injunction, and the trustees’ exercise of discretion was not reasonable or in good faith, justifying court intervention under s.49.

Issues considered

Whether a contract of sale of trust property was concluded between the trustees and the successful bidders.
Whether the interim injunction frustrated the alleged contracts, rendering performance impossible.
Whether the trustees’ exercise of the discretionary power of sale under clause 13 of the trust deed was unreasonable and thus subject to control under s.49 of the Indian Trusts Act.

Legislation cited

Antiquities and Art Treasures Act, 1972
Code of Civil Procedure, 1908s. Order 39, Rule 1
Indian Contract Act, 1872s. 2, s. 56
Indian Trusts Act, 1882s. 47, s. 48, s. 49

Subjects

trust lawsection 48 Indian Trusts Actsection 49 Indian Trusts Actdiscretionary power of salecontract frustrationimprovident saletrustees' duty of carevaluation of trust assetsinterim injunction

Judgment

459

SHANTI VIJAY & CO. ETC.
v.
( PRINCESS FATIMA FOUZIA & ORS. ETC.
August 31, 1979
'[S. MURTAZA FAZAL ALI, P. S. KAILASAM AND A. P. SEN, JJ.] B
Indian Trusts Act 1882 (2 of 1882)--Ss. 47, 48 & 49-Trust-Deed of
rtnut stipulating sale of trust property by trustees in their absolute discretion~
Absence of specific provision authorising execution to be carried out not by
, 1(1[{, but by one or more or majority of trustees-Applicability of s: 48.

Where trustees cannot delegate duties they 1n11st personally perfonn-Exer-
.cise of individual judRment and discretion-Necessity of. c
Discretionary power not exercised reasonably and in good faith-lnter-
.jerence by court under s. 49-Validity of-Duty of trustees to act t-vith prudence
'). ,.as a body of reasonable men.
j
The late H.E.H. Nlliwab :fyiir Sir Osn1an Ali, the Nizan1 of Hyderabad by
;an. indenture dated March 29, 1951 created the trust called H.E.H. the Nizam's
D
Jewellery Trust in respect of 107 items of extremely valuable, rare and price-
leii jewellery for the benefit of his two sons, two grand sons, tv.'o grand
daughters, daughter and step son. The nominee of the Government of India
'R. N. Malhotra, Addl. Secretary to the Government of India, Ministry of
Finance, Department of Economic Affairs ¥:as made the Chairman of the
·Board of Trustees. In· addition to the Chairinan, there were four trustees and
a Secretary for the Trust. Clause 13 of the trust deed provided that after a E
"Period of three years from the date of the death of the settlor and bis eldest son
the trustees may sell the trust property in their absolute discretion either, in
1

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
reaionableness or otherwise of the price or consideration or other tenns in res-
·pect of the sale.
Prince Azam Shah the eldest son of the Nizam died in October, 1970 and F
.the trustees on July l, 1972 submitted a memorial to the Prime 1Iinister
to acquire the je\vellery as they were of great historical and culturnl value and
. -~
1ceep the same intact as part of the national heritage. The Government
-0f India appointed an Expert Committee to advise whether any part of the
jev.rellery should be acquired as antiques under the Antiquity and Art Treasures
Act 1972 and in pursuance to its report acquired eighteen selected pieces of
G
• "jewellery at ~ mutually negotiated price. of Rs. 1.17 crores .
It appears that the beneficiaries of the trust v.'ere in very straitened cir-
··curnstances 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 Go- H
vernment of India were not likely to acquire any of the 37 pieces of jewellery
\With regard to whiCh the negotiations were being made. The Board of Trustees
460 SUPREME COURT REPORTS [1980] I S.C.R.

A 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 Chair~
man R. N. Malhotra being absent due to official pre-occupation at New
Delhi.
B t
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 pro-
ceedings 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
c Procedure was filed for restraining the trustees from taking any further steps
towards the finalisation of the sale1 of the jewellery. The City Civil Court grant·
ed an ad~interim injunction restraining the trustees from taking any steps to 4

wards 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
D 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 respon 4

dent was allowed to inspect all the items of jewellery. The first respondent filed ·
E 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
F 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 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
G jewellery to them for Rs. 14.43 crores. The High Court impleaded the ether •
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
B 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.
SHANTI VIJAY & co. v. PRINCESS FATIMA (Sen, 1.) 46 I

(2) Whether there was frustration of the contract in that the ad-interim
0
A
injunction of the. City Civil Court on March 14, 1978 made further performance
of the alleged contrticts in1possible; 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 B
offered by the eighth respondent.

HELD : I. 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 ten-
derers for Rs. 14.43 crores on the ground that there was· no concluded con-
tract between the parties. [480 DJ
c
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 con-
tracts. 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 D
of the jewellery so long tis the injunction lasted. [481CJ

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
bona fide exercise of power, conducive of beneficial management. There is no
reason to come to a different conclusion. When one deals with another's pro-
perty, it n1atters little to him what price the property fetches. But in the case E
of a trust there arises the duty of the trustees to act with prudence and as
a body of reasonable men. [485E, DJ

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 J!
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 ·an must act together. This is, subject to any express direction given by
the settlor. [473EJ

Lala Mohan Das v. Janki Prasad, LR (1944) 72 IA 3~; L. Jankirama Iyer
G
• & Ors. v. Neelakanta Iyer & 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 exercising the power of sale, as in the exercise of the
other pov.'ers, a trustee cannot, therefore, properly delegate the perforr:Ilance
of the acts which he ought personally perform. Although a trustee may H
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-
11-531 SCI/79
462 SUPREME COURT REPORTS (1980] 1 S;C.R.

A to his co.trustees. The reason for this is that the settler bas entrusted the
trust prope1iy and its management to all the· trustees, and the beneficiaries
are entitled to the benefit of their collective wisdoni and experience. [474C-
D]

Uruletbill's Law of Tmsts and Trustees, 12th Ed., pp. 434, 442-443, Scot on
Trust•. Vol. 2, p. 1033,
B 5. All acts wliich 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,
t
1882. Where there are more trustees than one, all must join in the execution
of the tn1st, except where the instrument of trust otherwise provides. . If
the validity of an alienation affected by the trustees falls to be considered
only in tbe 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
c 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 n1ajority of the trustees. Jn the absence of such a specific -pro-
vision, 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
D 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. [4 74H-475B]
7. Section 48 is a corollary of s. 47. If the trustees cannot delegate their
duticsi it fol_lows that they must all personally perform those duties, and not
.
appoint one of themselves to manage the business of the trust; for the settler
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., The view taken by the
Ji
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 '1\
'
'
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
)I. - ~
trustees meant, i.e., the rema.ining 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 ternlS. The words "be examined and decided" in the first
part of the resolution n1ay mean anything, and are not necessarily susceptible
H of the only construction as contended for, namely that of 'acceptance'. The
expression "to negotiate for OOile" in relation to the authority of an estate
agent, has a definite legal connotation. He gets an authority to find a purchaser,
SHANTI V!JAY & co. v. PRINCESS FATIMA (Sen, J.) 463

but he cannot bind the principal by entering into a conract r'f sale. There is A
a substantial difference between 'to sell' and 'to find a purchaser'. [476D-E]

Chadbum v. Moore, (1892) 67 LJ Ch. 674; Rosenbaum v. Belsen,
( LR (1900) 2 Ch. 267. Abdul Ahmed v. Animendra Kissen Mitter, [1950]
SCR 30 referred to.
B
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 je\vellery, 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 wao; 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 i& implicit,
when the language is clear and it does not bear out any such construction. A
view which would be prejudical to the entire body of beneficiaries is not to be
taken. There is no reason why the \Vords 'be examined and decided' in the
first part, should not have their plain meaning that the tenders \vere to be opened
)
j
and examined by the remaining four trustees to see if they were valid tenders.
The first part did not, give uny 'authorisation' to the remaining trmtees to
D
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 on1y under the second part
reject the tenders submitted. Delegation must be express. The trend of cross·
examinatio~ of Malhotra, also shows that his c.oncurrence was necessary.
[476F, 477BJ

11. The Secretary drew up the note, dated March 14, 1978 Ex. B 124 in
undue haste despite the Court's order granting the injunction. [478D] E

12. The minutes of the meetings held on ~.farch 5, 1978 and of I\.farch
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. lt is thus clear that no· meeting of the Board of
Trustees was. held at all on March 9, 1978. The absence of any minutes (I'
of the aUeged meeting held on March 9, 1978 must, as it should, clearly excite
suspicion about the genuineness of the sale. Ex. B 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 tabulox chart
running into 34 large sheets with minute details.. On each "of the sheets there
is a letter 'A' encircled against the highest tender, an~d at the foot appear the
alleged initials of three tn1stees bearing the date March 9, 1978. None of the G
remaining trustees except M. A. Abbasi have entered the witness-box and none
• of the t.rustees has proved the initials at the foot of the document, Ex, B 123,
Nothing is known ,as to when the initials were put and by whom. Though the
-0ther three trustees are a11eged to have put their initials at the foot of the state-
ment 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]
H
I 3.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
464 SUPREME COURT REPORTS [1980] 1 S.C.R.

A minutes of the meeting, if any held on that day showing that there was accep-
tance of t.he 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-FJ

In the instant case, els. 11 and 12 of the conditions of sale embodied
the ternis of the contract. By cl. 11, time is made the essence of contract.
B Clause 11 cannot be read in isolation, but both els. 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 els. 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
c 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 prln.~
ciple embodied in s. 49 is that when such discretionary power is not exercised
D 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-GJ

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
E
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 fi;1.cts and circumstances of the cnse, 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
F parties within the meaning of s. 2(h) of the Contract Act, tl)e High Court
accepted the offer of the eighth respondent for -Rs. 20.25 crores for the pur-
chase 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 worih more than Rs. 20.25 crores,
and therefore reauction ordered. [485G, 486E, GJ

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1105, 1245
and 1269 of 1978.

From the Judgment and Order dated 12-6-78 of the Andhra Pra-
desh High Court in appeal against Order No. 147 /78.

B AND t
SPECIAL LEAVE PETITION (CIVIL) NOS. 3648-3649/178
In the matter of H.E.H. The Nizam's J ewel!ery Trust.
SHANTI VIJAY & co. v. PRINCESS FATIMA (Sen, 1.) 465

·} A
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 /•78.
0. P. Verma, B. V. Singh, Anil B. Diwan, B. Parthasarathi and
J. V. Suryanarayan R,~o for Respondent in CA 1105/78.
B
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, 1. B. Dadachanji, K. J.
John and A. G. Menses. for Respondent No. 8 in CA 1105/78,
1245/78 and 1269178.
c
F. S. Nariman, P. R. Mridul, B. Jaivalu, Dhimimt Thakkar, P. H.
Parekh, C. B. Singh, Miss Vl~neta Caprihan and B. L. Verma for the
Appellant in CA. 1245/78.
B. A. Zaibala, Dhimant Tf(akkar, P. H. Parekh and Miss Kamlesh
Bansal for. the Petitioner in SLP 3648/78. D
B. A. Zaibala, Dhimant Thakkar, P.H. Parekh and Mukul MudgaJ
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 Pra- E
desh High Court dated June 12, 1978, the short question is whether
that Court was justified in setting aside the alJeged 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 do~ed in favour of the appellants and II
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 pehdency of the appeal before
it.
The facts of the case, so far as they are material, are not now in
dispute, and are as follows : G
The late H.E.H. N awab Mir Sir Osman Ali Khan Bahadur, the
Nizam of Hyderabad, by an indentnre 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 jeweilery of exquisite
design and beauty studded with emeralds, diamonds, sapphires, rubies H
etc·. of the highest quality and purity belonging to him, specified in the
First Schedule, and Government secu,ities of the aggregate face value
•

466 SUPREME COURT· REPORTS [1980] 1 S.C.R,

A of Rs. 10 la.khs, specified in the Second Schedule, for the benefit of
his two sons, Prince Azam Jab and Prince Muazzam Jab; two grand-
sons, Prince Mukarram Jab and Prince Muffakham Jab; two grand-
daughters, Princes Fatima Fouzia and Princess Amina Mirzia;
daughter Shahzadi Begum, and his step-brother Sahebzada Nawab j
Basalat Jab Bahadur.
.B
Clause 13 of the trust deed, Ex. 'A', confers upon the trust~es the
power of sale of the Jewellery, the material portion of which is in
these terms :
"13. Subject to the Trusts afov~said in respect of the
c articles referred to i'n clause 3(c), (d), (e) and (f) hereof,
during the lifetime of his eldest son Prince Azam Jab (if
and so long as the Dynasty of the Settlor continues and
Prince Azam Jab succeeds him as \)le Nizam of Hyderabad)
it shall be at the option of the trustees either to keep the said
jewels and· other articles mentioned fa the first Schedule here-
D under written unsold or to sell the same or any part thereof
at such time or times a'nd in such manner as they may in
their discretion think fit, but subject as aforesaid, after
death of the ~ttlor 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 writ~~n within a
E period of three years after the date of the death of the sur-
vivor of the s-~ttlor and the said Prince Azam J ah and any
such sale as 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 discMion think fit
and either in India or in any foreign country without the
F·
trustees being liable or accountable to any person whomso-
ever for the propriety of or justification for any such sale or
)
for the reasonableness or otherwise of the price or considera-
tion or other terms in respect of the sale of any of the said
articles."
G The said jewellery is kept in the safe deposit vault of the Mercan-
tile Bank Ltd. at Bombay.
R. N. Malhotra, Addi. Secretary to the Government of India,
Minis.try of Finance, Department of Economic Affairs, is the Cha;r- .
man of the present Board of Trustees of HE.H. The Nizam's Jewel-
& lery Trust, as a nominee of the Government of India. The other four
trustees are : Prince Muffakham Jah, Zaheer Ahmed, Ataur Rehman
and M. A. Abbasi. M. A. Ashtuff is the Secretary of the Trrn;t.
SHANTI VIJAY & co. v. PRINCESS FATIMA (Sen, J.) 467

It appears that Prince Azam Jab died in October 1970 and there- A
after, on July 1, 1972 the trustees submitted a memorial to the then
Prime Minisl\:r of India to acquire the jewellery as they were of great
historical and cultural value and keep it intact as a national hedtage,
and not allow it to pass into the hands of people who were interested
only i"n their moµey value. It appears that the trusrees acted upon
legal opinion that there was no objection to the sales being arranged B
through negotiation on the basis of valuation by two independant
valuers.
The Gowrnment of India constituted an Expeits Committee whose
fu"nction was purely of an advisory natnre, with a view to guide the
Government whether any part of the jewellery should be acquired as c
antiques under the Antiquity and Art Treasures Act, 1972. It was
required to select and eyaluate such items of antique jewellery as had
l to be acquired in the national interest. The Experts Committee ins-
pected 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 D
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. Even-
tually, the Government of India acquired 18 selected pieces of antique
jewellery for their cultural and historical importance at a mutually E
negotiated price of Rs. 1.17 crores.

It has been represented thau the beneficiaries are in very straitened
circumstances due to the abolition of privy pnrse, 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 p
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 jewelfory. ·
On January 9, 1978 it is alleged that there was a meeting of the
Board of Trustees. Malhotra, who is the Chairma·n, conveyed to the
trustees that the Government of India were not likely to acquire any G
of the 37 pieces of jewelkry with regard to which negotiations were
I being made. The Board of Trustees accordingly passed a resolution
• to sell the jewellery immediately. Tl>~ next meeting of the Board was
held on January 25, 1978 but Malhotra could not attend it.
Pursuant to the resolution of the Board of January 9; 1978, the ll
Secretary of the trust applied to the Director of Archaeolo~ical Survey
of India, for the grant of clearance for sale of the said jewellery; and
468 SUPREME COURT REPORTS (1980] 1 S.C.R.

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,
B
through a firm of solicitors. Conditions 11 and 12, which formed an
t
integral part of the coll.tract of sale, arc 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
c jewellery shall on acceptance of the tender become imme-
diately the property of the buyer and shall be available for
delivery to the buyer immediately thereafter on payment
of the bala:O.ce 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
D his risk.
12. !enderers 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 o:O. the day of inspection
E bdore taking delivery. It is hereby agreed that if the ten-
derer 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 to-
gether 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 comple-
tion of the resale."
On January 31, 1978, Gazdar sent intimations (Bxs. B.130-133)
to some foreign and Jndia:O. nationals abroad regarding the in!ended
G
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 p·~r list Ex. B-46. The letters of the
R Secretary, as far as material, read :
"The unique collection of the fabulous oriental jewel-
lery of the once richest man of the world, HEH the Nizam
SHANTI VIJAY & co. v. PRINCESS FATIMA (Sen, J.) 46 9

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 jewel-
lery could be had from March 6 to 9'. It would thus appear that the B
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 biddern from March 6 to March 9. During the course
of inspection, however, the trustees decided to restrict the period of C
inspection till March 8 and they informed the intending bidders ac-
cordingly, and asked them to give their bids before a particular hour
) on March 9. On the 8th of March, Malhotra was present through-
) out, at the Mercantile Bank Ltd., and there was also a meeting of the
Board of Trustees.
D
The resolution of the Board of Trustees of March 8, 1978 (Ex.·
R 106) was in these terms :
"!. 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 w1ders 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 F
: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. G
' Resolved that the delivery cf 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 H
opened by the remaining four trustees. He had to he away from
Bombay on the morning of 9th and 10th March due to official
470 SUPREME COURT REPORTS [l 980] l s.c.R.
A preoccupation at New Delhi. He was busy at Delhi heading a group
which was ir.gotiating 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
B matters of national importanoo.

On March 9, 1978, the remaining four trustees are alleged to have
opened the tenders and accepted aU the highest tenders except in res-
pect 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, tlN
c Secretary addressed letters of acceptance Exs. B.54-65, to the appel-
lants 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
D ,& Co. the date fixed was March 17, 1978.

On March 10, 1978, the first respondent, Princess Fatima Fouzia,
one of th~ 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
E Trusts Act for removal of the present trustees for alleged dereliction
of duty, negligence and mismanagement o'n their ·part, with particular
reference to the manner in which the 37 items of j·~wellery 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 taki'ng any further steps towards the
F finalization of the sale of jewellery. The application was taken up by
too Court on March 14, 1978, and the learned Judge on the same
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 coun~~r <rnd prayed
for vacating the injunction and ultimately the Court after hearing the
G parties vacated the injunction on March 27, 1978.

On March 28, 1978, the first respondent, Princess Fatima Fouzia
filed an appeal before the Aildhra Pradesh High Court and on April
13, 1978 the High Court directed that the status quo ante be main-
tained. It appears that in the meanwhile, the eighth respondent,
H 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 im-
pleaded as a party respondent in the appeal. On April 18, 1978, the
SHANTI VIJAY & co. v. PRINCESS FATIMA (Sen, J.) 471

appellan~ M/s. Shanti Vijay & Co., one of the successful bidders, also A
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 {ides of the eighth respondent, Peter Jansin
Fernandez, directed that he should deposit the amou'rrt of Rs. 20.25
crores within one week from that date. On such deposit being made,
B
the ·~ighth respondent along with his foreign counterpart were to be
given arr opportunity to inspect the 37 items of jewe~ery which were
previously offered for sale by the Board of Trustees. On May 8,
1978, the State Bank of India Owrseas Branch, Bombay fur'nished
an unconditional guarantee to the tune of Rs. 20.25 crores on behaH
of the eighth respondent and his counterpart. The eighth respondent c
having furnished the bank guara'nt·~e, 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 jewelby, the eighth respondent, Peter Jansin Fer-
nandez, confirmed his offer and deposited the amount of Rs. 20.25
crores in Court, and was,. therefore, permitted to intervene. D
At this stag,, 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 'da'nger of entire
E
body of the beneficiaries being depriwd 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 June 12, 1978 set aside the
alleged sale of the 37 items of jewellery by the Board of Trustees .in F
favour of the appellant and other successful tenderers for a sum of
Rs. 14.43 crores on the grou'nd that there was no concluded contract
between the partieB and instead accepted the offor of the eighth res-
pondent, Peter Jansin Fernandez, for the sale of the aforesaid jewellery
to him for Rs. 20.25 crores.
G
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 tendcrors and without afford-
ing an opportu'nity to the appellants M/s. Shanti Vijay & Co. to sub-
stantiate their claim that there was a concluded contract for the sale 8
of the jewellery to them for Rs. 14.43 crores. Inasmuch as the appel-
lants M/s. Shanti Vijay & Co. were alone a party respondent to the
472 SUPREME COURT REPORTS [1980] 1 S.C.R.

A appeal and the remaining successful tenderers were not so imp~aded,
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
.B oral or documentary evidence, as they desired .
In compliance of the order of this Court, the High Court impleadcd
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
.c the alleged sales effected by the Board of Trustees of the 37 items of
jewellery ~or 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
.D the evidence and have reached a result unfavourable to the appellants.
It w.ould serve little purpose to go through the evidence which has
already bee'n 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 b~en successfully criticized. It is sufficient to say
that we entirely agree with the judgment and reasoning of Kondaiah
E J., who delivered the judgment of the High Court on remand. We
shall only touch upo'n the salient features to show that. no other con-
clusion is possible. There was, in fact, no evidence that any binding
contraet came into existence.
In these appeals, three questions arise for consideration. The first
F is, whether there was a concluded contract effected between the appel-
lants a'nd 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 i111erim injunction of March 14, 1978 made
G 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 -0f the Trusts Act
to interdict the sale and issue necessary ·directions in that behalf,
ought not to b, set aside as an improvident sale because of the fact
H that an amount o{ 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
SHANTI VIJAY & co. v. PRINCESS FATIMA (Sen,!.) 473

merely indicates an error of judgment on their part and the sale by A
them was on a mistakeh impression of the actual value of the jewel-
lery.
\I
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 flO, 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
jewelkry uhder cl. 13 of the deed; and (2) whether, if there was a
valid acceptance of the bids as alleged, by the remaining trustees, on c
March 9, 1978, the Chairman of the Board of Trustees could not
have accorded his approval on 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 rostrained from taking any fur-
ther steps to finalize the sale of the jewellery.

The law governrng 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 th.;, trust. The concurrence of all is in
general necessary in a transaction effecting the trust property, and a
majority cannot bind the trust estate. Ih 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
L•owin's Law of Trusts, 15th ed., p. 190, to the effect :
F
"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 capa-
city. It is not uncommon to hear one of several trustees
spoken of as the acting trustee but the Court knows no such G
distinction : all who accept the office are in the eye of the
law acting trustees. H ahy 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
(1) L.R. [1944] 72 I. A. 39,
474 SUPREME COURT REPORTS [1980] 1 S.C.R.

A regarded as the act of both.- But such sanction or approval
must be strictly proved."
which, in their opinion, contai'ns 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 ap-
B proval by this Court in L. Jankiranza Iyer & Ors. v. Neelakanta Iyer
& Ors.(').
It follows as a necessary corollary, that where there are sevrra1
trustees they mnst act uhanimonsly 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
c 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
D the settlor has entrusted the trust property a'nd its manage.ment to a11
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 a~ts
which the trustees intend to take for executing the trust, must be taken
E
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 tha'n one, all must
join in the execution of the trust, except where the instru-
ment of trust otherwise provides."
F
It is axiomatic that where there are more trustees than one, a1l
must join in the execution of the trust, except 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
G fact that out of the three trustees only two hav•o executed the sale
deed would by itself make the transaction invalid and would not con-
vey a valid title to the transferee.
In the present ca9", as the High Court rightly observes, there is
no such clause in the trust deed authorising the execution of the trusts
fl 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 Jaw
(I) [1962) Supp. I S. C· R. 106.
SHANTI VIJAY & co. v. PRINCESS FATIMA (Sen, J.) 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. H 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.
B
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,
c
or ( d) the beneficiary, being competent to contract, conGents
to the delegation."
Section 48 is a corollary of s. 47 for, if the trustees cannot dele-
·gate their duties, it follows that thoy must all personally perform those
duties, and not appoint one of themselves to manage the business of D
1he trust; for the scttlor has trusted all his trustees, and it behoves each
;and every one of them to exercise his individual judgment and discre-
tion 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 E
,Trustees dated March 8, 1978 has been discussed with groat minute-
ness, 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 re-
maining four trustees to accept the bids, or any one of them.
Learned counsel for the appellants strenuously urges that the reso- F
lution 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
1o the first, and when so read, the words "be examined and decided" G
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
{bat R. N. Malh6tra, the Chairman could not be present at the meet- H
ing 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 SUPREME COURT REPORTS [1980] l s.c.&.

A required for pressing official business. Upon these premises, it is con-
tended that the resolution of March 8, 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
B 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 iu all its aspects.
c But that intention of trustees is not at all manifested in the resolu-
tion 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
D
as contended for, namely that of 'acceptance'. The expression "to nego-
tiate 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( 2 ). These two deci-
E sions 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 remaming 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
G
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
are not prepared to take a view which wonld be prejudicial to the entire
body of beneficieries. There is no reason why the words "be examined
and decided" in the first part, should not have their plain meaning that
H (I) [1892] 67 LJ Ch. 674.
12) L.R. [1900J 2 Ch. 267.
(3) [!950] S.C.R. 30.
SHANTI VIJAY & co. v. PRINCESS FATIMA (Sen, J.) 4 77

tbe tenders were to be opened and examined by tbe remaining four
trristees 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 tbey did not find a satisfactory offer or offers for any
of tbe items offered for sale they could only under the second pa1t
reject the tenders submitted. It is needless to stress that delegation must
B
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 14, 1978 reveals
that the tenders were received on March 9, 1978 in sealed covers
accompanied by ten ver cent of the value of jewellery tendered for, in
c
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. 16, of group XIV, negotiations were entered into with the I>
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 E
22, 1973. 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 F
trustees on March 9, 1978. fo his examination-in-chief, he states t11at
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
12-531SCil79
478 SUPREME <;OURT REPORTS [1980) 1 S.C.R.

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
B the trustees have accepted the tenders." ,
1
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 injunc-
tion was granted, and accordingly rang up the Secretary of the Trust,
and states :
"I remember it was about 15th of March, 1978 and I
c 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 hlm on
0 telephone."
n; 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 accep-
tance of the tenders till March 23, 1978 when the note of the Secre-
tary, Ex. B-124 reached hlm. 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 confihnation of the
minutes of the earlier meeting. 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, Ex. B-125. But there
are no mir.utes 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 remaining four
trustees on March 9, 1978 appears to be complete myth. The Secre-
tary'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 fad in particular may be alluded to. The absence of any
11 minutes of the alleged meeting held on March 9, 1978 must, as it
should, clearly excite our suspecision about the genuineness of the sale.
Our attention was drawn to the tabular statement prepared by the
SHANTI VIJAY & co. v. PRINCESS FATIMA (Sen, J.) 479

Secretary containing acceptance of bids by the four trustees, Ex. B-123. A
..... > 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 B
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
initiale~ 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 c
the highest tender was not inscribed by him but by the Secretary and
he 01ily 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
-0ne .sitting, at the same time. D
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.nl., i.e. within half an hour. It was humanly impossible to pre-
pare this document within such a short time. Furthermore, if the four E
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. F

It is amply clear that there was no meeting of the Board of Trustees
on March 9, 1978. The allegation that there was such a meeting, is
<:omplecely belied by the affidavit of M. A. Abbasi, the material portion
of which may be extracted :
G
"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. H
The highest tenders received were accepted and letters of
acceptance were issued on the same day to the persons whose
480 SUPREME COURT REPORTS [1980] 1 S.C.R.

tenders had been accepted. In no case has any lower tender
been accepted." \
I
This tends to suggest that the alleged meeting was held not on March
9, 1.978 but on March 10, 1978. He clearly states that the tenders
were opened on March 10, 1978, they were accepted on that day and
• ;
B 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 .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 '

R. N. Malhotra, tl:je Chairman of the Board of Trustees and also the
c 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 3 7 items of •
Jewellery belonging to H.E.H. the Nizam's Jewellery Trust effected by
D 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.
The' second question is perhaps a more difficult one for the
appellants to surmount, though the difficulty was sought to be
E 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
F section, insofar as material, runs as follows :
"56. An agreement to do an act impossible in itself is
void.
A contract to do an act which after the contract is made,
becomes impossible, or, by reason of some event which the
G promisor could not prevent, unlawful, becomes ¥oid when
the act becomes impossible or unlawful." ·
In the present case, els. 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 els.
H 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
•
I
SHANTI VIJAY & co. v. PRINCESS FATIMA (Sen, J.) 481
;
per cent of the tender amount, i.e., the balance of the price "the con- A
tract would be deemed to have been cancelled". It is, however, argued
t 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 els. 11 and 12 together, there can be no doubt ·
8
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, in terms of the resolution of
March 8, 1978, the contract was frnstrated by the grant of an c
ad interim injunction by the Court of the Chief Judge, City Civil Court,
Hyderabad on March 14, 1978. The grant of such injunction pre-
vented 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. D

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, con-

- firmed 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 E
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 F
by the Court. The injunction, in terms, restrained the trustees "from
taking any steps to finalise the sale of the j~wellery". 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. G
It is nobody's case, that a new contract was ever entered into. We are
.J
clearly of the opinion that there was a frustration of the alleged con-
tracts, 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 th~ trustees H
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 SUPREME COURT REPORTS (1980] 1 S.C.R.

A was not liable to be interfered with under s. 49 of the Trusts Act,
which is in these terms :
"49. Where a discretionary powet conferred on a trustee
is not exercised reasonably and in good faith, such power
may be controlled by a principal Civil Court of original
B 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
C 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 bene-
ficiaries 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:(') :
D "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, in-
cluding a court of law, might consider unreasonable."
E 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, musr be exercised
reasonably and in good faith.

F The power conferred on the Board .of Trustees is no doubt dis-
cretionary, 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 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
G 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
B continued or called in. So, too, where absolute discretion has
been given to trustees to do a particular act (e.g., to sell the
(I) (1952] 1 All E.R. 896 H.L at p. 901.
SHANTI VIJAY & co. v. PRINCESS FATIMA (Sen, !.) 483

trust property), the court cannot compel them to exercise A
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 crores B
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. C
It is somewhat disconcerting that throughout this litigation, the
trustees should have, as they appear to have done, aligned them-
selves 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 Mafc'h 9, D
1978, bnt 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
wiui elearly 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 inte.rest of the
E
beneficiaries, but for proving facts from which it could be inferred
that, accepting that the price of Rs. 14.43 crores offered by the appel-
lants 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 F
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 jewel- G
lary 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 B
Gwalior, Darbhanga, Jodhpur and Bikaner. Vithaldas, RW 6, is one
of approved valuers appointed by the Government of India, and had
484 SUPREME COURT REPORTS [1980] J S.C.R.

A valued the jewellery belonging to the Paiga of Khrusheed J ah and ·
also some jewels belonging to the late Salarjung. At the ins.lance of
the Government of India, he had valued the jewellery belonging to
the 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
B
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
c fetch, despite the fact that the eighth respondent, Peter Jansin Fernan-
dez, made an offer of Rs. 20.25 crores for the same, during the course
of the proceedings. For this they largely relie'd 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.

D 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
E were offered for sale. He further. admits that he did not consult any-
one except Dinshaw Jabangir 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 jewel-
F
lers 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
J ahangir Gazdar that it was not desirable to give publicity in the
daily newspapers as undesirable elements. might· step in for inspecting
G the jewels and he could not assure them the bona fides of every such
person, who wanted tq inspect the jewellery. He, therefore, approach-
ed some of the je_wellers through letters.

Then we come to Dinshaw Jahangir Gazdar, RW 3. It is true Jr
that this witness has wide experience in jewellery business and tries
H 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.
SHANTI VIJAY & co. v. PRINCESS FATIMA (Sen, !.) 485

/ "there is no principle as such in valuing an item of jewellery. One A
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 B I
: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
bis cross-examination.. he st?ted that according to him an offer of
Rs. 20.25 crores for these 37 items of jewellery was a fancy price'. c
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 estab-
lish that the trustees acted honestly and there was no lack of good
faith on their part. D
.,
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,
F
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
<lue care and attention. Upon its finding that there was no. concluded
contract between the parties within the meaning of s. 2(h) of the
Conkact 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 record-
ed 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 :
H
"The parties will submit the methodology by which a
maximum price may be fetched for the benefit of the bene-
486 SUPREME COURT REPORTS [1980] l S.C.R.

A ficiaries. Any offer which is below Rs. 20 crores will a11to-
matically 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
B 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 Ovuseas
Branch Bombay to that extent. This was· duly c=plied with by the
eighth respondent, Peter Jansin Fernandez; and the i=vocable bank
guarantee for Rs. 20.25 crores furnished by him is due to expire on:
C September 20, 1979.
The appeals came up for hearing before the Court on August 1~,
1979. 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,
D 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 J ansin Fernandez, without
inviting fresh tenders would be subject to the same infirmity. From
E
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
F H.E.H. the Nizam's 'Jewellery Trust, effected by the Board of Trustees
in fuvour 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 on the terms
1
G 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.
B

N.V.K.