Holding

The complaint establishes a prima facie case of criminal breach of trust and conspiracy; the issues of trust validity are evidentiary matters, and the complaint cannot be dismissed on alleged malafides, so the appeals are dismissed.

Summary

The case arose from a criminal complaint alleging that the deceased Priyamvada Devi Birla (PDB) and her husband Madhav Prasad Birla (MPB) had created five mutual trusts intended for charitable institutions, which were later allegedly revoked and the assets misappropriated through a forged will in favour of R.S. Lodha. The complainant, a former employee, alleged conspiracy, criminal breach of trust, cheating and forgery by Lodha and three trustees, including Shiva Nath Prasad. The appellants sought quashing of the proceedings under Section 482 of the CrPC, arguing that the dispute was civil, the trusts were revocable, and the complaint was malicious and vexatious. The Supreme Court held that the complaint disclosed a prima facie case of criminal breach of trust and conspiracy, that issues of trust validity are matters of evidence, and that oral evidence is admissible to prove fraud in secret‑trust contexts. Consequently, the Court refused to entertain the petition to quash and dismissed the appeals.

Issues considered

The complaint discloses an offence under Sections 120B, 406, 420, 467, 417 and 204 IPC or is it frivolous, vexatious or an abuse of process.
Whether the High Court could quash the criminal proceedings under Section 482 CrPC.
Whether matters relating to mutual wills, secret trusts and revocability are exclusively civil and not cognizable under criminal law.
Whether oral evidence can be admitted to prove fraud in the context of secret trusts.
Whether alleged malafides of the complainant justify dismissal of the complaint at the initial stage.

Legislation cited

Code of Criminal Procedure, 1973s. 482
Indian Evidence Act, 1872s. 91, s. 92
Indian Penal Code, 1860s. 120B, s. 204, s. 406, s. 417, s. 420, s. 467

Subjects

criminal breach of trustsecret trustmutual willssection 482 CrPCquashing of criminal proceedingsoral evidencefraudabuse of processcharitable trusts

Judgment

' ,
A SHIV A NA TH PRASAD
v.
STATE OF WEST BENGAL AND ORS.

FEBRUARY 3, 2006

B [B.P. SINGH AND S.H. KAPADIA, JJ.]

.>

P-enal Code, I 860-Sections I 208, 406, 420, 467, 4 I 7 and 204 /PC-
Criminal Procedure Code, 1973-Section 482-Evidence Act, 1872-Sections
.91 and 92-Criminal complaint filed before trial court against accused for
c conspiracy, criminal breach of trust and misappropriation of assets vested in
trusts for purpose of public charitable institutions on the basis of a will
purported to be executed by testator-Trial Court took cognizance of the
offences and issued summons to the accused-High Court declined to intervene
under section 482 Cr.P.C.-Accused contending before the Court that the
D complaint is malafide, vexatious and oppressive and is an abuse ofthe process
of law and that the issue raised is purely of a civil nature which cannot be
tried in a criminal court-Correctness of-Held, the complaint is based on
1
mutual and oral agreements imposing secret trust obligations as evidenced by
the trust deeds- "Secret trust" is a doctrine evolved to prevent fraud-Oral
evidence is admissible to prove fraud-Hence, the complaint cannot be
E dismissed at the initial stage on the ground of alleged malafides of the
complainant.

MPB and his wife PDB formed five trusts covering their assets estimated
-
at around Rs. 2400 crores. After MPB died, PDB settled the assets of the five
trusts for the benefit of three public charitable institutions. Thereafter, PDB
F
purported to have executed a will bequeathing all her properties to one RSL >-·
after dissolving all the five trusts. After the death of PDB, RSL claimed the
properties under the will.

Complainant-respondent filed a complaint praying for issuance of
G process against RSL and three others (including the two appellants) before
trial court for criminal conspiracy, criminal breach of trust, cheating, forgery
and other offences under section 1208 read with sections 406, 420, 467, 417 ..
and 204 IPC. The complainant has alleged in his complaint that MPB and
PDB desired to leave their estate, after their demise to charity and for that

H 98
I
SHIV A NA TH PRASAD v. ST ATE OF WEST BENGAL 99
,._
·}.>- purpose, they treated five mutual and reciprocal irrevocable trusts for vesting A
the assets in three public charitable institutions; that he was a privy to the
discussions/consultations and thinking at the time of creation of the trusts and
public charitable institutions for the purpose envisaged; that after their
demise, the assets of the trusts stood finally settled in the public charitable
institutions as remainder beneficiaries; that when RSL made a claim to the
entire estate under a purported will executed by PDB, on making enquiries,
B
it revealed that RSL had criminally conspired with the other accused in

)
,,,
~ misappropriating the assets by creating false evidence to show that the five
trusts stood revoked and dissolved during the lifetime of PDB and a will was
executed bequeathing all the assets in his favour; that the object of the alleged
will was to destroy the interest of the three public charitable institutions; that c
one of the trustees of all the trusts was not even aware of the alleged
revocation/dissolution of the trusts by PDB and hence there was no revocation
I..
of the five trusts as alleged by the accused; that the accused committed
criminal breach of trust by doing such acts; that RSL committed fraud and
criminal breach of trust by getting a will signed by PDB without disclosing
the nature of the document; and that RSL brought into existence a letter D
~ termed as codicil allegedly signed by PDB four years after the execution of
,-. the will in conspiracy with the other accused to fortify the will.

The trial court, on the basis of the complaint, found a prima facie case
for offences under sections 120B, 406, 417 and 420 IPC against the accused
and summoned the accused including the appellants. The appellants moved
E
High Court under section 482 Cr.P.C. for quashing of the criminal
proceedings. The High Court refused to intervene and set aside or quash the
proceedings.

In appeal to the Court, the appellants contended that the criminal F
-·~ complaint was filed by the complainant at the instance of au Interested group;
that it is harrasive, ma/afide and is .used as a tool of oppression to terrorise
the appellants into succumbing to the pressure; that the complaint is an abuse
of the process of law since the complainant was rewarded with a highly paid
job by the interested group soon after his making the complaint; that the
G
... · complaint and the documents annexed thereto does not disclose the ingredients
of the offence of criminal breach of trust and cheating; that the issues raised
... in the complaint are complicated issues of civil nature relating to mutual wills
\ ~
and mutual trusts which cannot be decided by criminal court; that the reliance
placed by the COIJlplainant on oral agreements cannot be permitted since the
-::
H
100 SUPREME COURT REPORTS [2006] 2 S.C.R.
,.,.

A oral evidence were contrary to the terms of the written documents and hence
are barred under sections 91 and 92 of the Evidence Act, 1872; that the High
Court should have exercised inherent powers under section 482 Cr.P.C. for
the ends of justice since the complaint was frivolous, vexatious, oppressive
and malicious; and that the allegations of conspiracy were vague, general and
completely lacking in factual particulars and hence there was no reason for
B the magistrate to issue process against them.

The appellants further contended that the five trusts are expressly made ..,,.
revocable; that there was no creation of a beneficial interest in the public
'-
charitable institutions; that PDB was the only beneficiary under the trust deeds
c till she died; that on reading the five trust deeds; there was no valid creation
of the trust because the settlor, the trustee and the beneficiary in all the five
trusts was one and the same person; that the trusts were private trusts and
not public trusts as alleged by the complainant; that there was no vesting of
assets in public charitable institutions as PDB had the right to sell/alienate
the trust property without any restrictions; that PDB, being the sole
D beneficiary of all the trusts, revoked the trusts and hence the appellants cannot
be accused of committing breach of trust as alleged by the complainant; and
'
that the act of PDB in revoking the trusts and/or treating the property as her
1
own and disposing of the same by a will cannot constitute criminal breach of
trust
E Dismissing the appeals, the Court

HELD: 1.1. The question as to whether PDB had the authority to revoke
the trusts is different from the allegation that the acts of setting up personal
title to the trust property constituted criminal breach of trust and that the
act was performed with the intent of converting trust property into private
F
property pursuant to a conspiracy by the accused. In the complaint, the ~

complainant has averred that he was present and consulted when the couple
opted for mutual wills and even when mutual and reciprocal trusts were
executed. The complaint is based on the alleged oral agreement and
understanding between the husband and wife regarding disposal of properties
G on their demise. These facts in issue are matters of evidence. The question as
to whether there existed a valid trust or that PDB was entitled to dissolve the ...
trust even during her lifetime are defences which can be taken at the ...
appropriate time. [118-B-D] '

1.2. The complaint is based on an important aspect of mutual trust The
H allegation is that the beneficial interest is dishonestly misappropriated by the
SHIVA NATH PRASAD v. STATE OF.WEST BENGAL 101

·y> accused. The complaint is about dishonestly setting up personal title to A
the trust property. The complaint is based on mutual and oral agreements
imposing secret trust obligations as evidenced by the trust deeds. "Secret
trust" is a doctrine evolved to prevent fraud; that, fraud is not an
ingredient for the application of the said doctrine. However, the substance
of the complaint is that the secret trust has become the reason for fraud
because the legatee under the secret trust is made to believe by the accused
B
that she was the beneficial owner, free from any trust. In a matter of this
y type, oral evidence was admissible to prove what is called "fraud".
(118-E-F-G]

1.3. The question of malafides has to be decided on the facts of each
case. At the outset, it is reiterated that credentiality of the complainant at
c
this stage is not relevant. In the facts and circumstances of this case, at
this stage, this Court is not included to accept the argument that the
complaint should be dismissed at the initial stage on the ground of alleged
malafides of the complainant. The observations in the judgment should not
be read as the opini<iil of the Court on the merits of the matter. D
(119-D-F)
~

"-,. R.P. Kapur v. State of Punjab, AIR (1960) SC 866; State of Haryana
and Ors. v. Bhajan Lal and Ors., (1992) Suppl. 1 SCC 335; Madhu Limaye
v. State of Maharashtra, (1977) 4 SCC 551; Madhavrao Jiwajirao Scindia
and Ors. v. Sambhajirao Chandrojirao Angre and Ors., [1988] 1 SCC 692 E
and Pepsi Foods Ltd and Anr. v. Special Judicial Magistrate and 0Ts., (1998]
5 sec 749, referred to.

Re. Dale (Deceased) (1993) 4 All. Er 129; Re. Cleaver (Deceased)
(1981) 2 All. EER 1018 and Ottaway v. Norman, (1971) 3 All. ER 1325,
referred to. F
.-1,.
Law of Crimes by Ratanlal and Dhirajlal; Law of Trusts and Equitable
Obligations by Robert Pearce and John Stevens, referred to.

CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 182
of 2006. G
From the Judgment and Order dated 1.7.2005 of the High Calcutta
...
High Court in C.R.R. No. 2995 of 2004.
' WITH
Criminal Appeal No. 183 of 2006. H
102 SUPREME COURT REPORn [2006] 2 S.C.R.
A R.F. Nariman, Harish N. Salve, Mukul Rohtagi, Ameet Desai, Joy ,.
Bagchi, Mahesh Agarwal, Ms. Meenakshi Grover, Ms. Aprajita, Ankur Chawla,
Manu Krishnan E.C. Agrawala and K.V. Mohan with them for the Appellant(s).
Ram Jethmalani, Mahesh Jethmalani, Y.Z. Dastur, R.K. Anand (N.P.),
R.N. Karanjawala, Pranav Badheka, Akhil Sibal, Amit Sibal, Ms. Ruby Singh
B Ahuja, Sandeep Kapur, Ms. Saloni Gupta, Ashish Jha, Gaurav Vats, P.R.
Mala, Mrs. Manik Karanjawala, Tara Chand Sharma, Ms. Neelam Sharma,
Rajeev Sharma, Ajay Sharma, Rupesh Kumar, N.G. Khaitan, R.K. Anand,
Siddharth Luthra, Madhav Khurana, Ankul Chawla, Ms. Gouri Rasgotra,
Sanjeev Kumarand and Vikram Baja (for Mis. Khaitan & Co.) for the
Respondents.
c
The Judgment of the Court was delivered by
KAPADIA, J. Leave granted. ~-

These appeals are filed by accused nos.2 and 3 against the impugned
judgment of the High Court of Calcutta refusing quashing of the process
D issued by the Chief Judicial Magistrate (CJM), Alipore in respect of alleged
offences under sections 120-8/406/4171420 of the Indian Penal Code (IPC).
•
The undisputed facts are as follows:
1
Madhav Prasad Birla (MPB) and Smt. Priyamvada Devi Birla (PDB)
E were one of the richest and the wealthiest couples who had no issues during
their lifetime. MPB was one of the famous industrialists from the Birla family.
The couple executed mutual wills in 1981. In 1982, the couple executed
mutual wills revoking the earlier mutual wills. In 1988, during their lifetime,
Smt. Birla formed four trusts and MPB formed the fifth trust. These trusts,
5 in number, covered corporate assets. On 30th July 1990 MPB died. On
F 10.9.1990, Smt. Birla gave directions in respect of MP Birla Trust under
clause 6(b) and made nominations of beneficiaries in respect of her four
trusts under clause 7(a) of the trust deeds in favour of three named public
charitable institutions, viz., Hindustan Medical Institution (HMI), East India
Education Institution (EIEI) and MP Birla Foundation. In terms of the said
G nominations made after the demise of MPB, the assets of the five trusts
estimated at Rs.2400 crores stood settled for the benefit of HMI, EIEI and
MP Birla Foundation. However, on 15th April 1999 PDB purported to revoke
all the five trusts (stood dissolved). On 18th April 1999, Smt. Birla executed
/'
•.
her will by which she bequeathed all her properties (including the estate of
MPB) to accused no. I, R.S. Lodha and after him his son, the value of which
H is around Rs.2400 crores. Smt. Birla died on 3rd July 2004. R.S. Lodha was
j
SHIVA NATH PRASAD v. STATE OF WEST BENGAL [KAPADIA. J.] 103

.,.->. a trustee of MP Birla Foundation (one of the three public charitable A
institutions). He was also a trustee of HMI and EIEI prior to the dissolution
of the five trusts w.e.f. 15k 1999. Appellant herein, Shiva Nath Prasad, accused
no.2 was also a trustee in the five trusts. Accused no.3, Dr. V.Gauri Shanker
was a trustee in HMI, EIEI and MP Birla Foundation. He was also a trustee
in three out of five mutual trusts referred to above.
B
Respondent no.2 herein (complainant), a former employee working i,1
MP Birla Group, claiming to be a close associate of late MPB and his wife,
-,~
petitioned a complaint in the court of Chief Judicial Magistrate, Alipore in
case no.C/4693 of 2004 alleging offences under the aforestated sections, viz.,
120-B read with 406, 420, 467, 417 and 204 of the !PC, inter alia, on the
ground that he was a witness to the intention and the wishes of the couple
c
during their lifetime to leave their estate to charity which decision was made
known to everyone close to the couple including the other members of the
Birla family. According to the complainant, the couple had accordingly
executed mutual wills on two occasions, first in the year 1981 and subsequently
in 1982. According to the complai:iant, when the mutual wills were executed D
in 1981 and 1982, he was consulted and he had taken part in the discussion
j with MPB. According to the complaint, the couple had decided to dis~ose of
.... their assets to charity after their demise. Respondent no.2 herein has further
alleged in the complaint that in 1988 the couple created five mutual and
reciprocal trusts under which the estate went to charity as the remainder
beneficiary. Respondent no.2 further alleged that he was involved in the E
discussion relating to formulation of the terms and conditions to be mentioned
in the five trust deeds. He was consulted in the matter of drafting of the said
deeds. He was also a witness to the mutual and reciprocal agreements between
MPB and PDB in regard to the five trusts. He was also a formal witness to
the deeds. He was also a witness to tlie instrument of nominations of the F
beneficiaries of the five trusts. He was also a witness to the deed of appointment
.... of trustees of the five trusts. According to respondent no.2, the said five
trusts were created by the couple as mutual and reciprocal trusts by which the
couple had mutually agreed to leave their estate, after their death, to charity
and pursuant to that decision they had nominated the charitable institutions
in which the assets held by the five trusts worth Rs.2400 crores would vest. G
According to respondent no.2, the said five trusts were irrevocable and the
.... three public charitable institutions nominated by the couple as berieficiaries
>-~ were HM!, EIEI and MP Birla Foundation. Respondent no.2 was also, in
tum, associated as honorary secretary of HMI, EIEI and MP Birla Foundation.
Respondent no.2 herein has alleged in the complaint that he was stunned H
104 SUPREME COURT REPORTS [2006] 2 S.C.R.

A when he came to know, on the demise of PDB, that the first accused R.S.
Lodha had claimed that the estate of PDB, which included the estate of MPS,
belonged to him under the above will dated 18th April 1999 made by the
deceased PDB. In his complaint, respondent no.2, has stated that when he
came to know that R.S. Lodha had made a claim to the entire estate of the
B Birlas, he made enquiries which revealed to him that R.S. Lodha had criminally
conspired with the other accused in criminally misappropriating assets worth
Rs.2400 crores vested by the above five mutual trusts in the above three
charitable institutions and that the accused had converted the charitable ""
endowment for personal gain. Respondent no.2, in his complaint, has further
stated that the accused had attempted to create false evidence to show that the
C five trusts stood revoked and dissolved on 15th April 1999 which is three
days before the alleged will dated 18th April 1999 executed by PDB and
thereby the assets which had vested in the charitable institutions had been
\
cri."llinally misappropriated by fraud and conspiracy in which the other accused
had participated actively. Respondent no.2 herein has further stated in his
complaint that the accused have conspired to create false evidence in support
D of their claim that the five trusts stood dissolved during the lifetime of PDB
herself. In his complaint, respondent no.2 has further stated that R.K.
Choudhury, one of the trustees in the three out of five trusts was not even
aware of the alleged revocation/dissolution of the five trusts by Smt. Birla
during her lifetime, as alleged by the accused. According to the complaint,
E the;e was no revocation of the five trusts, as claimed by the accused.
Respondent no.2 is a chartered accountant. In his complaint, he has pointed
out the reasons for the couple deciding to vest the shares of group holding
companies of MPB in the above three public charitable institutions, namely,
HMI, EIEI and MP Birla Foundation. Respondent no.2 has stated that it was
tax planning advised by respondent no.2 and by R.K. Choudhury. The purpose
F of choosing the three institutions was to make them a vehicle to promote the
charitable activities of MPB group. Respondent no.2, in his complaint, has
categorically alleged that R.S. Lodha is a qualified chartered accountant, who
had won the confidence of the couple and who solely planned his way and
eliminated all those who had worked with the couple so as to make Smt.
G Birla hopelessly dependent on him. According to the complaint, R.S. Lodha
was the exclusive advisor and consultant of Smt. Birla personally. He was a
director, auditor and the trustee of different companies. According to the
..
complaint, in the last couple of years prior to 1999, R.S. Lodha had come to
occupy the central place in the scheme of things of MPB group of companies
and charitable endowments. Respondent no.2 has further alleged that similarly
H Shiva Nath Prasad was a close confidante of late Smt. Birla, having completed
t
SHIVA NATH PRASAD v. STA TE OF WEST BENGAL [KAPADIA. J.] j 05

. 50 years of service with MPB group of companies. He dealt with all the tax A
'!..J matters of Smt. Birla. He filed her tax returns. He entered into correspondence
on her behalf with Income Tax Department. He was given a power of attorney
to sign, on her behalf, the tax returns. He was a trustee of all the above five
mutual trusts. He was a trustee in the three public charitable institutions. He
was also a member of the managing committee of HM! and EIEI. Respondent
no.2 has further alleged that Dr. Gauri Shanker was a trustee of all the above B
) three public charitable institutions. He was also a trustee of three of the five
' mutual trusts, viz., M.P. Birla Trust, Priyamvada Birla Trust and Priyamvada
~ Birla Kosh. Similarly, respondent no.2 has stated in his complaint that the
fourth accused, Sushi! Kumar Daga, was a long standing employee of the MP
Birla Group. He was a member of the managing committee of HMI and EIEI. c
He was also a trustee of MP Birla Foundation. In his complaint, respondent
no.2 herein, has alleged that Shiva Nath Prasad and S.K. Daga are the witnesses
to the letter dated 15.4.2003 addressed by late Smt. Birla to R.S. Lodha
which has been tendered as codicil in the probate proceedings pending before
the High Court. Respondent no.2, in his complaint, has alleged that Shiva
Nath Prasad and S.K. Daga are the witnesses to the said letter which was D
created in pursuance of the criminal conspiracy to misappropriate the property
~. of the .public charitable institutions. In his complaint, respondent no.2 herein,
... has re'!ied upon one more circumstance in support of his contention that the
couple had always desired to leave their estate, after their demise, to charity.
In this connection, respondent no.2-complainant has placed reliance on the E
biography ofMPB written by Dr. Gauri Shanker in which a graphic description
of the visit by the couple to Tirupathi has been mentioned. In the said book,
Dr. Gauri Shanker has mentioned how he had taken the draft trust deed of
MP Birla Foundation to His Holiness the Sankaracharya and got it approved
by him. In the said book, it is allegedly stated that in the last years of his life,
MP Birla had desired that his entire estate should go to charity. In the said F
book, it is further recited that MP Birla Foundation was the foremost institution
..... formed on 23rd January 1986, its trustees were the three daughters of K.K.
Birla, brother-in-law of MP Birla, two professionals from the industrialist
group etc. and later Smt. Birla also joined its board as the chairperson and
as the trustee. According to the biography, the couple expressed their desire G
to give their wealth and properties to God and accordingly Dr. Gauri Shanker
was requested to translate that idea into reality by drawing a deed of trust.
The final draft was prepared. It was taken to Kanchipuram. It was placed
~
•\ before His Holiness Sankaracharya and accordingly the deed was sanctified.
This book was published in 1993. This circumstance is relied upon .in the
complaint to show that Dr. Gauri Shanker was aware of the decision ofMPB H
~
\
106 SIJPREME COURT REPORTS 12006] 2 S.C.R.

A and PDB to dedicate their entire wealth to charity and yet he took part in the
conspiracy to divert the endowment worth Rs.2400 crores from charity to the ' ~
personal kitty of R.S. Lodha and after him, his son. According to the complaint,
R.S. Lodha, alongwith Shiva Nath Prasad and Dr. Gauri Shanker were the
trustees of the said three public charitable insti:utions whose property stands
criminally misappropriated by the first accused pursuant to a criminal
B conspiracy by the other accused who committed criminal breach of trust.
This was possible by virtue of the power and influence of R.S. Lodha and by
reason of the long familiarity of the other accused with the couple. According
to the complaint, MPB died on 30th July 1990. Upto the time of his death, >
he had done nothing to show the slightest inclination to change his charitable ,-
c intentions or to put an end to the mutuality expressed wills of 1982 and the
trust deeds of 1988 and on the contrary in January and February 1989, the
couple had agreed m the final nominations in favour of three public charitable
institutions in the presence of the complainant, Shiva Nath Prasad and R.K.
Choudhury. Respondent no.2 has categorically stated that after the demise of
MPB on I0th September 1990, Smt. Birla, in fact, executed the nominations
-
D in accordance with the pious wish of her husband and that the said nominations
were mutually agreed nominations of the five trusts duly executed by her.
The legal effect of the said nominations were explained by R.K. Choudhury
in the presence of the complainant and in the presence of Shiva Nath Prasad ..,
to Smt. Birla. Respondent no.2 has further stated that Smt. Birla was told by
E R.K. Choudhury that the said nominations were irrevocable and that the said
Shiva Nath Prasad was ftilly aware, along with Smt. Birla, that the five trusts
along with the nominations were mutual and reciprocal and were irrevocable
even by Smt. Birla (survivor) except in terms of clause 19 which provision
was common in all the deeds. Respondent no.2 has alleged that in terms of
the nominations agreed between MPB and PDB, during the lifetime of MPB
F and made after the demise of MPB, as explained above, the assets of the five
trusts estimated at Rs.2400 crores stood finally settled in the three public
charitable institutions as remainder beneficiaries. Respondent no.2, in his
...
complaint, has stated that in the second week of April 1999, R.S. Lodha
started misleading Smt. Birla. She was made to sign documents which had
G the effect of misappropriating the assets dedicated to and vested in the three
public charitable institutions through the medium of the five trusts. Pursuant
to the said conspiracy, on 18th April 1999 which was a Sunday, R.S. Lodha
separately called three persons to Birla Park, residence of Smt. Birla and
persuaded each on~ of them by false representations and fraud to attest a ,,•. -
document signed by the deceased Smt. Birla. This document is the impugned
H will by which all the properties of the couple under the five trusts stood
-
I SHIVA NATH PRASAD v. STATE Of WEST BENGAL [KAPADIA. J.]107

diverted from charity. They were converted to become the p~rsonal j:lroperty A
"- ' _, of R.S. Lodha. The three persons were P.L. Agarwal, Dr. Madan S. Vaidya
and Mahabir Prasad Sharma. f:ccordingly, respondent no.2 has complained
that the above acts constituted massive fraud on Smt. Birla and on the five
trusts; that, the said fraud constituted a criminal breach of trust on the three
public charitable institutions which are deprived of endowments worth Rs.2400
crores and accordingly in the complaint respondent no.2 has alleged that R.S. B
Lodha had cheated and defrauded Smt. Birla into believing that she was
f_.
making a document to leave the property to charity as she and her husband
had desired and declared from time to time since 1981-82. Respondent no.2
has lastly stated in his complaint that four years after the execution of the will
dated 18th April 1999, a letter dated I5th April 2003 termed as codicil is c
brought into existence by R.S. Lodha in conspiracy with Shiva Nath Prasad
and S.K. Daga to fortify the will. It contains a direction in respect of four
residential properties which are now directed to R.S. Lodha and after him, his
son. Respondent no.2 has alleged that this letter dated 15.4.2003 is creat~d
as a supporting evidence to the will of 1999. Respondent no.2, in his complaint,
has stated that Shiva Nath Prasad prepared the balance sheets of the five D
trusts as on 15.4.1999 in June 2000 only to show that the five trusts stood
• dissolved through deeds prior to the making of the alleged will dated 18.4.1999.
... Respondent no.2 has pointed out that R.K. Choudhury was a trustee. He had
never resigned from the trusts. He had never ceased to be a trustee. He is not
even aware of the dissolution of the trusts on 15.4.1999. In the circumstances, E
in his complaint, respondent no.2 has alleged that there was no revocation,
oral or in writing, on 15.4.1999 or at any time later on. Respondent no.2 has
further pointed out in his complaint that the accused have communicated
--;
about the dissolution of the trusts to the Income Tax Department only on
27th June 2000 when a letter was addressed by Smt. Birla to the Joint
Commissioner of Income Tax, Calcutta, stating that the five trusts have been F
_, ..... dissolved on 15.4.1999 and that the assets have been transferred to her as the
sole beneficiary. The balance sheets of the five trusts as on 15.4.1999 prepared
by second accused in June 2000 only to show that the trusts stood dissolved
w.e.f. 15.4.1999. Respondent no.2 has alleged that the accused have conspired
to create records by entering into correspondence with Income Tax Department. G
Respondent no.2 has accordingly relied upon the aforestated circumstance in
~
support of his allegation of conspiracy to create ante-dated documents to
•;
,, .... show retro-active revocation of the five trusts. Relying upon the aforestated
~ "1 circumstances, the complainant has alleged in his complaint that the accused
had entered into a criminal conspiracy, the ultimate object of which was to
•, misappropriate dishonestly the charitable estate and converting the said estate H
108 SUPREME COURT REPORTS [2006] 2 S.C.R.
\
A to their own use. Respondent no.2 has further alleged that the object of the
alleged will of 1999 was to destroy the interest of the three public charitable '
in3titutions in which the estate had irrevocably vested; that, the purported
dissolution of the trusts was a step in the execution of criminal conspiracy;
that, the modus operandi of the accused was to attain this illegal object
B fraudulently by showing that the five trusts were dissolved during the lifetime
of Smt. Birla who was fraudulently induced and cheated as she had no legal
knowledge nor access to independent legal advice; that, Smt. Birla was a lay
housewife who had no knowledge of legal intricacies; that, she was deceived
into executing a fraudulent will on 18.4.1999. That the three attesting witnesses
were also deceived and finally the accused have even deliberately 3uppressed
C the facts relating to the five trusts from the application for probate made to
the High Court in respect of the alleged will dated 18.4.1999. Respondent
no.2 has stated in his complaint that a trustee be~oming a party to the
dissolution of an irrevocable trust is dishonest and guilty of criminal breach
of trust; that, there was nothing to show that Smt. Birla was advised to
convert the properties dedicated to public charities to personal properties and
C on the contrary by filing and signing balance sheets of five trusts the accused
have sought to create evidence of the dissolution of the trusts and thereby
they have aided and abetted misappropriation of the properties belonging to
public charitable institutions. The accused have used their dominant position
in the five trusts and in the three public charitable institutions to illegally
E revoke the five trusts and thereby dishonestly misappropriated the properties
of the three public charitable institutions which constituted offence punishable
under section 120-B read with section 406 of !PC. In execution of the
conspiracy, the accused, in fact, misappropriated the properties of the 'public
charitable institutions by illegally showing that the five trusts stood revoked
and by transferring the properties held by five trusts or the three public
F charitable institutions to Smt. Birla as her personal properties as is evidenced
from the balance sheets filed on behalf of the five trusts by the second
accused. Hence, respondent no.2 has alleged that the accused were also guilty
...
of substantive offence of criminal breach of trust under section 406, !PC.
Respondent no.2 has also alleged in his complaint that R.S. Lodha was liable
G for offence punishable under section 420, !PC inasmuch as he was the
instrumentality of procuring the will dated I !S.4.1999 by inducing Smt. Birla
by false representation to sign the said will, divesting the properties from
charity and converting it to the assets of the first accused. Lastly, respondent ...
/,
no.2 has alleged that accused nos.2, 3 and 4, all of whom were trustees and/
or members of managing committee in one or more of the three public
H charitable institutions had connived both by positive acts of commission and
, SHIVA NATH PRASAD v. STATE OF WEST BENGAL [KAPADIA. J.]109

> omission to aid and abet accused no. I R.S. Lodha in the offence of criminal A
breach of trust for which they are liable to be punished under section I 09
read with section 406, IPC. Accordingly, respondent no.2 vide his aforestated
complaint prayed for issuance of process under section 120-B read with
sections 406, 420, 467, 417 and 204, IPC and also substantive offences under
sections 120-B, 406, 420, 417 and 204 of !PC.
B
To complete the chronology of events, suffice it to state that vide order
dated 05.10.2004, CJM Alipore held that a prima facie case for offence under
~ .
I

sections 120-8/406/417 /420 IPC was made out against the accused.
Accordingly, cognizance was taken. Accordingly, accused were summoned
on 29.11.2004.
c
Aggrieved by the said order dated 05. l 0.2004 of CJM Alipore, accused
no.2-Shiva Nath Prasad moved the High Court under section 482 of Code of
Criminal Procedure (Cr.PC) for quashing the proceedings vide complaint
case no.C4693/04 pending before CJM Alipore under sections 406/417/420/
120-B, !PC. By the impugned judgment, the High Court has refused to
D
intervene and set aside/quash the criminal proceedings. Hence, the accused
~
have come in appeal to th is court.

Shri Harish N. Salve, learned senior counsel appearing on behalf of
"' Shiva Nath Prasad submitted that in 1983 G.D. Birla died. At that time, there
was tension within the Birla family over division of assets. M.P. Birla and E
Smt. Birla were unhappy and hurt with the way they were treated during
partition. Despite the couple being issueless, the couple did not take assistance
from any member of the Birla family in the running of their business and in
the running of M.P. Birla group of companies. R.S. Lodha was closely
associated with the couple. Over the years, Smt. Birla came to repose a lot
of faith, confidence and affection on R.S. Lodha. She openly declared that F
R.S. Lodha would be her successor. In this connection, learned counsel placed
reliance on the minutes of the board meeting of Birla Corporation Ltd. held
in September 200 I in which meeting nominees of financial institutions and
banks were present. In their presence, Smt. Birla declared that R.S. Lodha
was to be her successor. Learned counsel further submitted that R.S. Lodha
G
was also made chairperson of four holding companies in M.P. Birla group in
1999 within one week from 18.4.1999. He was also made the co-chairman
.., of the main manufacturing companies controlled by the group headed by
Smt. Birla and all the key senior executives of the group were aware of her
wishes, Learned counsel submitted that on the death of Smt. Birla, the other
Birlas have come together to grab control of the M.P. Birla group for free H
110 SCPREME COURT REPORTS 120061 2 S.C.R.

A under the facade of charity. It was pointed out that in August 2004 Birlas
filed an application in the High Court for probate of two alleged wills allegedly ' (

made by the couple on 13th July 1982 claiming the same to be mutual wills.
It is the case of the appellant herein that the said 1982 wills were revoked
during the lifetime of M.P. Birla and Smt. Birla. Further, it is urged that no
B explanation has been given for not applying for probate of the said wills of
M.P. Birla who died on 30th July 1990 for 14 long years. Learned counsel
submitted that the Birlas have themselves signed documents showing Smt.
Birla as the sole intestate heir of M.P. Birla which documents are totally
contrary to the present case of mutual wills mentioned in the complaint. •'
Learned counsel next contended that the criminal case filed by respondent
C no.2 herein, R.P. Pansari, is one such attempt on the part of the Birlas; that,
the case has been instituted only to harass R.S. Lodha and other individuals
who were close to Smt. Birla; that, the complainant has been set up by the
Birlas to harass R.S. Lodha; that, the complainant is a disgruntled ex-employee
of M.P. Birla group; that, the complainant had nothing to do with three
charitable institutions after April 2000; that, he had nothing to do with M.P.
D Birla group after December 200 I; that, immediately after the filing of the
complaint, R.P. Pansari was rewarded with a job at a basic salary of
Rs. I, 75,000/- per month by the grandson of B.K. Birla and accordingly it
was submitted that the com:ilaint constituted an abuse of the process of law.

E Learned counsel submitted that the foundation of the complaint is based
on averrnents which are false in view of the documents annexed to the
complaint. In this connection, learned counsel submitted that the five trust
deeds clearly show on bare reading that the trusts were set up with a private
object to provide benefit to individual beneficiaries with absolute power of
alienation of the entire trust property and income without any compulsion for
F charity. It was urged that on a bare reading of the trust deeds it is clear that
they were expressly made revocable and, therefore, it is not open to the
complainant to claim that the said five private trusts were irrevocable when
on the face of the documents, they are revocable. Learned counsel further
submitted that the very fact that nominations were made on I0th September
1990 by Smt. Birla shows that nothing prevented her from making further
G nominations superseding the earlier nominations dated I0.9.1990. Learned
counsel submitted that even the nominations dated I0.9.1990 were not entirely
charitable. In fact, in value terms it was more in favour of private individual
members of Birla family. Learned counsel submitted that the deceased Smt. /.
Birla was in sound health and she actively looked after her business and had
H undertaken busy travel schedules as recently as February 2003.
, SHIVA NATH PRASAD v. STATE OF WEST BENGAL [KAPADIA,J.] 111
, ....
Learned counsel submitted that even if all the allegations in the complaint A
supported by documents annexed thereto were believed to be true, the same
did not disclose the ingredients of the offence of criminal breach of trust as
there was no el)trustment of property ofone in the hands of another. Similarly,
the ingredients of the offence of cheating are also not disclosed in the
complaint. Learned counsel urged that the issues raised in the complaint are B
complicated issues of civil law relating to mutual wills and mutual trust1s
which cannot be decided by a criminal court and which issues should be
relegated to regular civil proceedings before a court of competent jurisdiction.
Learned counsel urged that the five trusts were expressly made revocable. In
this connection, reliance was placed on clause 19 of the Trust Deed. Learned
counsel urged that the complainant has relied upon, in the complaint, oral C
agreements for which oral evidence cannot be permitted to be adduced as
such oral evidence was contrary to the terms of the written documents and
was, therefore, barred under sections 91 and 92 of the Indian Evidence Act,
1872. Similarly, the allegations of the trust property having vested in three
public charitable institutions, upon nomination, being made in their favour by D
Smt. Birla, have no substance because the properties mentioned in the
nominations were only to be transferred to the nominees on the death of the
.... settlor/sole beneficiary, namely, Smt. Birla and, therefore, there was no basis
for alleging that the assets had vested in the three charitable institutions upon
nominations being made by Smt. Birla. In this connection, it was further
pointed out that the nominations made by Smt. Birla were in supersession of E
her nominations made earlier. In the circumstances, there was no merit in the
allegations made in the complaint that the assets covered by the trusts stood
vested in the three public charitable institutions on issuance of nominations/
directions in 1990. According to the learned counsel, the complaint made by
respondent no.2 herein smacks of malafides particularly when he has been F
appointed at a salary of Rs.1.75 lacs per month in one of the rival Birla
companies soon after his making the above complaint. As regards the scope
of section 482, Cr.PC, learned counsel submitted that since the complaint
was frivolous, vexatious, oppressive and malicious, the High Court should
have exercised its powers under section 482, Cr.PC b~cause such powers are
required to be exercised ex debito justitiae or for the ends of justice. Learned G
counsel relied upon various cases in which criminal proceedings have been
quashed at the initial stage to prevent abuse of process of court and for the
ends of justice. In this connection, reliance was placed on several decisions
of this court, more important being R.P. Kapur v. State of Punjab, AIR
(1960) SC 866; State of Haryana & Ors. v. Bhajan Lal & Ors., [1992] Suppl. H
1 SCC 335; Madhu Limaye v. The State of Maharashtra, [1977] 4 SCC 551
112 SUPREME COURT REPORTS (2006) 2 S.C.R.
-
A and Madhavrao Jiwajirao Scindia & Ors. v. Sambhajirao Chandrojirao Angre
& Ors., [ 1988] I SCC 692. Learned counsel submitted that the power of the
' .
court to grant discharge under section 245(2), Cr.PC in a warrant case instituted
otherwise than on a complaint did not impinge on the inherent power of the
High Court under section 482 of Cr.PC to quash proceedings in appropriate
cases. In this connection, reliance was placed on the judgment of this Court
B in the case of Pepsi Foods Ltd. & Anr. v. Special Judicial Magistrate & Ors.,
[1998] 5 SCC 749. Learned counsel submitted that exercise of inherent power
to quash the proceedings is called for in cases where the complaint did not >
disclose any offence or that the complaint was frivolous, vexatious or
oppressive. Learned counsel submitted that in the present case the complainant
c has tried to distort the facts in order to give an impression of an offence. That
the said attempt was grossly frivolous, vexatious and oppressive and, therefore,
the High Court should have quashed the process issued by the CJM, Alipore.
On the question of breach of trust, learned counsel submitted that there was
no entrustment of property which is the main ingredient of the offence under
section 405; there was no valid creation of trust under the five trust deeds;
D there was no creation of a beneficial interest in the three public charitable
institutions; that Smt. Birla was the only beneficiary under the trust deeds till ....
she died; that, there was no vested interest created in any beneficiary other
~
than Smt. Birla under any of the five trust deeds and lastly the revocation of .
the four trusts did not amount to the extinguishment of vested or beneficial
E interest of any other person under the trust deed so as to constitute an act of
conversion. Learned counsel submitted that on reading the five trust deeds in
the light of the aforestated proposition of law it would become clear that, in
the present case, there was no trust because the settlor, the trustee and the
beneficiary in all the five trusts was one and the same person, viz., M.P. Birla
F in M.P. Birla Trust and Priyamvada Devi Birla in the other four trusts. As
sole beneficiary, both M.P. Birla in M.P. Birla Trust and Priyamvada Devi
Birla in other four trusts, had absolute power of disposition of the trust
property and also over the trust income including the power of bequest by
nomination. The beneficial interest of M.P. Birla in the trust property was the
same as the legal ownership which vested in him as a trustee and if the
G beneficiary and the trustee were the same person and if the beneficiary has
the same right as the trustee, then there can be no beneficial interest under
section 3 of the Indian Trusts Act, 1882 and, therefore, it was urged that, in
the present case, there was no valid creation of a trust, as alleged. Learned ,?,
counsel submitted that in any event the said five trusts were private in nature
H and a mere contingency in charity would not make such trusts public and
thereby bring them out of the provisions of Indian Trusts Act. In this
r SHIVA NATH PRASAD v. STA TE OF WEST BENGAL [KAPADIA, J.] 113

connection, it was urged that the sole beneficiaries of the trusts were M.P. A
Birla and Smt. Birla and that reference to charity in clause 8 was a mere
contingent interest and, therefore, such provision cannot transform the nature
and character of the private trust into a public or charitable trust. Learned
counsel urged that the primary purpose of the settlor was to benefit the
members of his family and, therefore, the trusts in the present case were
private trusts and not public trusts, as alleged by the complainant. Learned B
counsel urged that, in the present case, there was no complete dedication to
charity under these five private trusts even according to the intention of the
settlor or in terms of the trust deed. Further, learned counsel submitted that
since there was an express clause of revocation, one cannot say, as sought to
be contended, that a public trust came into existence for charitable purposes. C
Learned counsel urged that there was no vesting' on any point of time in three
'' public charitable institutions as on 10.9.1990 or in any charity under clause
8 ·of the trust deed, as submitted by the complainant; that, the proviso to
clause 6 (b) in Smt. Birla's four trust deeds excluded the right of her husband
to sell the 'trust property and consequently Smt. Birla had a right to sell/
· alienate the trust property without any restrictions; that, this provision further D
indicates that ·the trust property was or could be completely extinguished by
Smt. Birla by operation of all or any of her powers as the trustee/settlor.
Learned counsel urged that by. clause 5 of the trust deed Smt. Birla was
vested with the power of alienation of the corpus of the trust and the income
therefrom. In this connection, reliance was placed on clauses 5, 10, I !(iii), E
l i(iv) ;nd ll(~xi) of the trust deeds. In the circumstances, learned counsel
submitted that the 'powers of Smt. Birla under the trust deeds were similar to
the powers of a testator under a will; that, just as a testator could deal with
his property covered in the will during his lifetime and just as under the will
the legatee/beneficiary had no vested 'interest in the bequest under .the will
which is merely contingent upon the acts of the testator during his lifetime F
so also Smt. Birla under the five trust deeds was a testator of a will and she
had full authority to deal with the property covered by the will/trust during
her lifetime, the beneficiary having no vested interest in the bequest. Learned
counsel further urged that even as far as property of M.P. Birla Trust was
concerned, the deceased had fuUbeneficial interest in the corpus during her G
lifetime; that, tbre was nothing in the deed of trust that made her directions
given under clause 6(b) irrevocable; that, Smt. Birla could have nominated
a member of the family even after the nominations/directions of September
1990 without committing breach of trust; that, even if Smt. Birla had named
a charitable trust during her lifetime, she could have changed the direction
and given it to any other trust whether charitable or non-charitable. In any H
114 SUPREME COURT REPORTS [2006] 2 S.C.R.

A event, the directions were to operate only upon her death. In this connection,
reliance was placed on the letter dated 12th September 1990 addressed by
Smt. Birla to East India lnvestnient Company Pvt. Ltd. requesting that the
shares in the trust property may be transmitted to her name as she was the
sole survivor of her late husband. Learned counsel submitted that even the
letter whicll Smt. Birla wrote to Income Tax Department intimating dissolution
B of the private trusts on 15.4.1999 with the enclosed balance sheets showed
that. the assets and the income of the trusts was all along included in the
personal Income Tax returns of Smt. Birla. In conclusion, learned counsel
urged that M.P. Birla and Smt. Birla had granted absolute right in the trust
property unto themselves, and the second bequest, if any, under clause 8 was
C in favour of charity which had failed and, therefore, there was no entrustment
of property as contemplated by section 405, IPC. The sole beneficiary of all
the five trusts was Smt. Birla who had revoked the trust~ in the year 1999
and, therefore, the appellant cannot be accused of committing breach of trust,
as alleged in the complaint. Any disposal by Smt. Birla in her own favour or
to those claiming under her can never fall within the meaning of section 405,
D IPC. The act of the deceased in revoking the trusts and/or treating the property
as her own and disposing of the same by will cannot constitute breach of
trust under section 405, !PC.

Shri R.F. Nariman, learned senior counsel appearing on behalf of Dr.
Gauri Shanker-accused no.3 submitted that Dr. Gauri Shanker is 83 years
E old. He is the senior advocate of this court. He joined Indian Revenue Service
in 1948 and held, during his tenure, senior positions. He was appointed an
advisor to L.K. Jha Commission. He was personally known to late M.P. Birla
and through M.P. Birla, he came to know Smt. Birla. He was close to the
couple. He used to advise them on personal and corporate matters. He came
F to know R.S. Lodha through M.P. Birla. He had seen the couple placing
reliance on R.S. Lodha. He had seen the couple giving responsibility to R.S.
Lodha from time to time. He was consulted by the couple in matters of
religion, philosophy, charity, business and taxation. According to Dr. Gauri
Shanker, Smt. Birla was a wise lady, well read and proficient in several
languages. According Dr. Gauri Shanker, on the demise of G.D. Birla, M.P.
G Birla had conveyed his dissatisfaction over the division of management of
Birla companies. In the last few years of his life, M.P. Birla had gradually
handed over the charge of M.P. B.irla group of companies to Smt. Birla. After
the demise ofM.P. Birla, Dr. Gauri Shanker remained close to Smt. Birla. He
advised her on personal and corporate matters. Towards the end of 1990 Smt.
H Birla had told Dr. Gauri Shanker that she had decided on R.S. Lodha as her ...
r
SHIVA NATH PRASAD v. STATE OF WEST BENGAL [KAPADIA. J.] 115

successor and she was desirous of making a will for this purpose. According A
to Dr. Gauri Shanker, Smt. Birla had told him that she would revoke five
private trust deeds before making her will. It was further submitted that even
according to Dr. Gauri Shanker although he w~s a trustee of three trusts out
of five private trusts created in 1988 none of the properties settled in the
trusts had been transferred/recorded in the names of the trustees and that all
the five private trusts were revocable. Further, Smt. Birla had asked Dr.
B
Gauri Shanker to prepare a will by.which she would bequeath the right, title
and interest of all that she owned to R.S. Lodha whom she used to treat like
her son and in consonance of the detailed instructions of Smt. Birla, Dr.
Gauri Shanker had drawn up a will dated 18.4.1999 which was duly registered
and which is annexed to the criminal complaint. Learned counsel submitted c
that in fact Dr. Gauri Shanker was told by Smt. Birla that she had dissolved
the five private trusts before executing the will. After four years Smt. Birla
had expressed her desire to give further directions regarding her properties
and consequently a letter, based on her instructions, was drafted by Dr. Gauri
Shanker which was signed by Smt. Birla on 15.4.2003 in the presence of
Shiva Nath and S.K. Daga. D
> Learned counsel submitted that from the plain reading of the complaint
',. and the documents appended thereto, it was clear that there is no allegation
at all regarding the offences of cheating under section 417/420, !PC; no
allegation is found in the pre-summoning evidence of respondent no.2 or
M.P. Sharma and, therefore, no process could have been issued under section
E
417/420, IPC and, therefore, it was submitted that the impugned order of
CJM dated 5.10.2004 suffered from the vice of non-application of mind.
Learned counsel submitted that summoning of the accused in a criminal case
was a serious matter. In the present case, according to learned counsel, the
impugned order of the magistrate summoning the accused does not indicate F
application of mind to the facts of the case. That, in the present case, there
is no allegation against Dr. Gauri Shanker regarding creation of letter/codicil
dated 15.4.2003; that, the allegations are directed only against R.S. Lodha,
Shiva Nath Prasad and S.K. Daga. No allegations whatsoever have been
made against Dr. Gauri Shanker even in relation to the revocation of five
private trusts and, therefore, the complaint does not make out a case of any G
overt act being committed by Dr. Gauri Shanker in relation to the revocation
'.,
of the five private trusts and hence, there is no reason for issuing summons
to Dr. Gauri Shanker. Learned counsel urged that the case against Dr. Gauri
Shanker on the point of conspiracy was at the highest that he was a trustee
of three public charitable institutions and that he was also a trustee of the H
116 SUPREME COURT REPORTS [2006) 2 S.C.R.

. A three out of five private trusts; that, he remained a silent spectator to the '
alleged acts of other accused in criminally misappropriating the properties of
three public charitable institutions pursuant to a criminal conspiracy to commit
criminal breach of trust with the common intention to destroy charitable
trusts. That, in any event, the allegations of conspiracy against Dr. Gauri
B Shanker were vague, general and completely lacking in factual particulars
and, therefore, according to the learned counsel there was no reason for the
magistrate to issue process against Dr. Gauri Shanker.

Learned counsel lastly submitted that the complaint needs to be quashed
for the simple reason that it suffers from ma/afides; that, the complaint is
C harrasive, attended with malafides and is a tool of oppression adopted by the
Birlas to terrorise Shiva Nath Prasad, S.K. Daga and Dr. Gauri Shanker into
succumbing to the pressure and thereby making difficult for R.S. Lodha to
have the last will of Smt. Birla probated. Learned counsel urged that the
entire complaint is brought about by Birlas who are working behind the
scene. That the choice of four accused is made on selective basis; that the
D four accused were close to Smt. Birla; that, although the position of Dr. Gauri
Shanker was identical with the other trustees, viz., R.K. Choudhury and
Kashinath Tapuriah, the latter have been left out of the complaint which
unequivocally demonstrates that the criminal complaipt constitutes a gross
abuse of the process of law attended with malafide and, therefore, the High
E Court ought to have quashed the criminal complaint under section 482 of the
Cr. PC.

To understand the basis of the complaint we need to understand the
concept of mutual wills, mutual and reciprocal trusts and secret trusts. A will
on its own terms is inherently revocable during the lifetime of the testator.
F However, "mutual wills" and "secret trusts" are doctrines evolved in equity
to overcome the problems of revocability of wills and to prevent frauds.
Mutual wills and secret trusts belong to the same category of cases. The
doctrine of mutual wills is to the effect that where two individuals agree as
to the disposal of their assets and execute mutual wills in pursuance of the
agreement, on the death of the first testator (Tl), the property of the survivor
G testator (T2), the subject matter of the agreement, is held on an implied trust
for the beneficiary named in the wills. T2 may alter his/her will because a
will is inherently revocable, but if he/she does so, his/her representative will
take the assets subject to the trust. The rationale for imposing a "constructive
trust" in such circumstances is that equity will not allow T2 to commit a
H fraud by going back on her agreement with Tl. Since the assets received by
;
f
I

SHIVA NATH PRASAD v. STATE OF WEST BENGAL [KAPADIA. J.) 1I7
•. /
r T2, on the death of Tl, were bequeathed to T2 on the basis of the agreement A
not to revoke the will of Tl it would be a fraud for T2 to take the benefit,
while failing to observe the agreement and equity intervenes to prevent this
fraud. In such cases, the Instrument itself is the evidence of the agreement
and he, that dies first, does by his act carry the agreement on his part into
execution. If T2 then refuses, he/she is guilty of fraud, can never unbind
himself/herself and becomes a trustee, of course. For no man shall deceive B
another to his prejudice. Such a contract to make corresponding wills in
~- many cases get established by the Instrument itself as the evidence of the
agreement [See: Law of Trusts and Equitable Obligations by Robert Pearce
and John Stevens pages 320 and 321 ]; [See also : Re Dale (Deceased) reported
in [1993] 4 All.ER page 129]. In the case of mutual wills generally we have c
an agreement between the two testators concerning disposal oftheir respective
properties. Their mutuality and reciprocity depends on several factors. Mutual
wills and trusts are evidenced by the Deeds themselves (the recitals, terms
and conditions mentioned therein) as also by the surrounding circumstances,
namely, the simultaneity and the similarity of the terms of the wills/trusts, the
pattern of successive wills, the reciprocity of one to the other, the age of the D
. settlors, the value of the estates, dying of the settlors without any issues,
,.. making of the last will without reference to the revocation of previous wills.
Lastly, in law we have the concept of accessory liability for having assisted
in a breach of trust. In such a case the accused is not charged for having
received trust income or assets for his own benefit but for having acted as an E
accessory to a breach of trust.

We have referred to the doctrine of mutual and reciprocal wills and
trusts only to understand the basis of the complaint. At this stage we are
required to read the complaint as it is. Suffice it to state at this stage of the
matter that the couple had executed mutual wills in 1981 and 1982; followed F
..J. by reciprocal trusts in 1988 which are in almost identical words. The scheme
of the mutual deeds read together is almost identical. It is not disputed that
a mere declaration can create a trust obligation, particularly when the settlor
is the sole trustee under the trust. Before us what is argued by the appellants
is that there is no valid creation of trust; that, there was no "vesting" of the
assets in the three public charitable institutions; that, the act of Smt. Birla in G

, j-._l

~- ~
)
revoking the trusts and/or treating them as her own property was within her
competence; that, the trusts were revocable; that, at the highest it is case of
failure of the second. charity and that predominantly the dispute is a civil
dispute. At this stage, we may point out that what is complained of in the
complaint filed by respondent no.2 herein is regarding the acts of management H
118 SUPREME COURT REPORTS (2006] 2 S.C.R.

A including dissolution of the trusts and making of the will by which trust
properties have been allegedly converted dishonestly into personal properties
of R.S. Lodha constituting an offence of criminal misappropriation under
sections 405 and 406 and cheating under section 420, IPC. Here we may add
that question as to whether Smt. Birla had the authority to revoke is different
B from the allegation that the acts of setting up personal title to the trust property
constituted criminal breach of trust and that, the act was performed with the
intent of converting trust property into private property pursuant to a conspiracy
by the accused. In the complaint, respondent no.2 herein has averred that he
was present and consulted when the couple opted for mutual wills in 1981,
I'>82 and even in 1988 when mutual and reciprocal trusts were executed. The
C complaint is based on the alleged oral agreement and understanding between
the husband and wife regarding disposal of properties on their demise. Suffice
it to say that these facts in issue are matters of evidence. The question as to
whether there existed a valid trust or that Smt. Birla was entitled to dissolve
the trust even during her lifetime are defences which can be taken at the
appropriate time.
D
As stated above, in this case we have mutual wills and mutual and •
reciprocal trusts in 1981, 1982 and 1988; clauses 7(b) and 8 of the trust deed
reflect charitable intention coupled with nominations of 1990. What we would
like to stress is that the complaint is based on an important aspect of mutual
E trust. The allegation is that the beneficial interest (enforceable not against the
assets but against the trustees) is dishonestly misappropriated by the accused.
The complaint is about dishonestly setting up personal title to the trust property.
The complaint is based on mutual and oral agreements imposing secret trust
obligations as evidenced by the trust deeds. In this connection we may reiterate
that "secret trust" is a doctrine evolved to prevent fraud; that, fraud is not an
F ingredient for the application of the said doctrine. However, the substance of
the complaint here is that the secret trust has become the reason for fraud
because the legatee under the secret trust is made to believe by the accused
that she was the beneficial owner, free from any trust [See: Re Cleaver
(Deceased), reported in [1981] 2 All.ER 1018]. Lastly, we may point out that
G in a matter of this type, oral evidence was admissible to prove what is called
"fraud" [See: Ottaway v. Norman, reported in [1971] 3 All.ER 1325].

We have entered into the above discussion, not to express any opinion, ;·-
but to answer the main plank of the argument advanced on behalf of the
appellant that this case basically involves a civil dispute. None of our
H observations be treated as expression of our opinion on the rightfulness of the
SHIVA NATH PRASAD v. STATE OF WEST BENGAL [KAPADIA, J.] 119

claim made in the complaint. A
In conclusion, we may quote Law of Crimes by Ratanlal and Dhirajlal
page 2069 :

"In a case under section 406 the question of trust must be fully
inquired into. For this purpose it is essential that the whole prosecution B
evidence should be recorded. It is impossible to guess at an interim
stage, what will be the result of the inquiry. Consequently, when only
a few of the prosecution witnesses have been examined, it is too
premature to decline to examine any more witnesses for the prosecution
and discharge the accused on the ground that the case is of a civil
nature." C
Before us, number of judgments have been cited in support of the case
that respondent no.2 (complainant) is the disgruntled employee of the MP
Birla Group of Companies and that he has been put up by the Birlas, hence,
the complaint is based on malajides and should, therefore, be dismissed. We
need not go into the said judgments as the basic principle settled in the D
citations is that the question of malafides has to be decided on the facts of
each case. At the outset, we reiterate that credentiality of the complainant at
this stage is not relevant. As stated above, in this case, what is alleged by the
complaint, inter alia, is that he was a privy to the discussions and consultations
and thinking which went into making of the mutual wills and the mutual E
trusts; that, he was a formal witness to some of these deeds and that he was
aware that the couple had mutually agreed to the disposal of the property to
charity after their demise. In the facts and circumstances of this case, at this
stage, we are not inclined to accept the argument that the complaint should
be dismissed at the initial stage on the ground of alleged malajides of the
complainant. F
We reiterate that our observations in the judgment should not be read
as our opinion on the merits of the matter. Similarly, the applicability of the
relevant section to the facts of the present case does not arise at this stage.

For the above reasons, we find no merit in these appeals and the same· G
are accordingly dismissed.

B.S. Appeals dismissed.