Holding

Under Muslim law, wakf‑al‑aulad trusts are valid and not subject to Sections 13 and 14 of the Transfer of Property Act; therefore the trust property does not form part of the settlor’s estate for estate‑duty purposes.

Summary

The Nizam of Hyderabad, Sir Mir Osman Ali Khan, executed two deeds of trust in 1953 creating wakf‑al‑aulad for his granddaughter Oalia Kulsum and his daughter‑in‑law Anwar Begum, with benefits flowing to their descendants and ultimately to a holy shrine. After his death in 1967, the estate duty authorities treated the trust property as part of his estate and levied duty. The Tribunal held the property excluded, but the Andhra Pradesh High Court reversed, declaring the trusts void for violating Sections 13 and 14 of the Transfer of Property Act (rule against perpetuity). On appeal, the Supreme Court examined whether Muslim law permits such perpetual trusts and whether the rule against perpetuity applies. Relying on Muslim law principles and the Muslim Wakf Validation Acts, the Court held that wakf‑al‑aulad is a valid creation not governed by Sections 13 and 14, so the settlor had divested himself of the property. Consequently, the trust assets are not part of his estate for estate‑duty purposes. The High Court judgment was set aside and the appeal was allowed.

Issues considered

Whether the trusts created in 1953 (wakf‑al‑aulad) are void ab initio for contravening Sections 13 and 14 of the Transfer of Property Act, 1882 (rule against perpetuity).
Whether the value of the trust corpus is liable to be included in the principal value of the deceased’s estate for the purpose of estate duty.

Legislation cited

Transfer of Property Act, 1882s. 13, s. 14, s. 2

Subjects

WakfMuslim lawTransfer of Property ActRule against perpetuityEstate dutyTrust validityPerpetual trustReligious endowment

Judgment

TRUSTEES OF SAHEBZADl OALIA KULSUM TRUST A
v.
CONTROLLER OF ESTATE DUTY, A.P.

AUGUST 3, 1998

[SUJATA V. MANOHAR AND M. SRINIVASAN, JJ.] B

Muslim Law:

Transfer of Property Act, 1882 : Sections 2, 13, and 14.

Wakfs-Dedication of property-In perpetuity-Validity of-Muslim
c
sett/or created trusts in respect of certain jewellery and other properties for
the benefit of his children and their descendants for life and thereafter for
the maintenance of a holy shrine-Held, According to the principles of
Muslim law such a Wakf is valid and not affected by Ss. 13 and 14-
•. Mussalman Waif Validating Act, 1913-Mussalman Waif Validation Act, D
/!ho.
Wakfs-Wakf-alal-aulad-Wakf property-Estate duty-Liability a/-
Dedication, of property-In perpetuity- For the benefit of Sett/or's children
and their descendants for life and thereafter for the maintenance of a holy
shrine-Held, such Wakf property not part of sett/or's estate-Hence, not E
liable for estate duty.

The deceased executed a deed of trust under which he settled certain
jewellery and other properties on trust for the benefit of his grand daughter
for life and thereafter for her children and their children for life etc. and F
ultimately for the maintenance of a holy shrine. The deceased also executed
a similar deed of trust in favour of his daughter-in-law.

On the death of the settlor the Additional Assistant Collector of Estate
Duty included the corpus of the said two trust deeds in the principal value of
the estate of the settlor for the purposes of estate duty. The Appellate Controller G
of Estate Duty allowed the appeal filed by the appellant-Trust The Tribunal
dismissed the appeal filed by the respondent-Revenue. However, the High
Court allowed the respondent's appeal. Hence this appeal.

On behalf of the respondent it was contended that the trusts created
under the said deeds of trust werevoid ab initio since they violated Sections H
947
948 SUPREME COURT REPORTS [1998] 3 S.C.R.

A 13 and 14 of the Transfer of Property Act, 1882, particularly the Rule against
Perpetuity incorporated therein.

Allowing the Appeal this, Court

HELD: 1. In the light of the principles of Mohammedan Law the two
B trusts are valid Wakfs and are not affeded by Sections 13 and 14 of the
Transfer of Property Act, 1882. As a result the settlor had divested himself
of these properties during his lifetime for the benefit of his grand daughter
and his daughter-in-law and thereafter for their descendants and then for holy
shrine. On the date of his death the settlor did not have any interest in the
C properties nor had he reserved any interest to himself under these trusts.
Hence, for the purposes of Estate Duty, the deceased cannot be considered as
having any interest in the trust property, which passed on his death. The
properties, which constituted the subject matter of the two trusts, therefore
cannot be included in the estate of the deceased for purposes of estate duty.
[955-F-H)
D
Sala v. Hussain, AIR (1955) Hyd 229, approved.

Abu/ Fat'! Mohammad Ishak v. Rasamaya Dhur Chowdhary, (1894) 22
IA 76, overruled.

E Rasamaya Dhur Chowdhary v. Abu/ Fata Mohammad Ishak, (1891) ILR
18 Cal 399, referred to.

Syed Ameer Ali: Mahommedan Law (Fourth Edn.) Vol. I p. 284, A.A.
Fyzee Outlines of Muhammadan Law (Fourth Edn.) p. 303, referred to.

F Baillie's Dig 2nd Edn. p. 593, cited.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2961-
62 of 1984 Etc.
I
From the Judgment and Order dated 9 .12.84 of the Andhra Pradesh
G High Court in C. R. No. 87-88 of 1978.

K. N. Shukla, (P. Murli Krishanan, Mrs. A. K. Verma) for JBD & Co.,
(Rajeev Sharma) for B. K. Prasad and (A. D. N. Rao) for A. Subba Rao, B.
Parthasarthy for the appearing parties.

H The Judgment of the Court was delivered by
• V. MANOHAR, J.] 949
TRUSTEES OF S.O.K. TRUST v. C.E.D. [SUJATA

MRS. SUJATA V. MANOHAR. J. On 21st of March, 1953, the Nizam A
of Hyderabad, Sir Mir Osman Ali Khan, executed a deed of trust under which
he settled certain jewellery and other properties on trust for the benefit of
Sahebzadi Oalia Kulsum, his grand daughter for life and thereafter for her
children and their children for life etc. and ultimately for the maintenance
of a holy shrine. On the same date, he also executed a deed of trust in favour
of his daughter-in-law, Sahebzadi Anwar Begum, the wife of second Prince B
Muazzam Jah. The terms of the two trust deeds are similar. For the sake of
convenience, we are referring only to the trust deed executed in favour of
Sahebzadi Oalia Kulsum.

Under the deed of trust, the settlor who was a Muslim, created a trust C
in respect of certain jewellery and ornaments and other properties for the
benefit of his grand daughter Oalia Kulsum who was given a right to wear
the jewellery after her marriage or on completing the age of 30 years whichever
was earlier. She was allowed to wear the jewellery and ornaments during her
life time and after her death the trustees were directed to sell the ornaments
and invest the sale proceeds, thus turning them into an income yielding D
investment. A further direction was given to the trustees to pay the income
to the children of Oalia Kulsum or remoter issue of Prince Muazzam Jah
'1 Bahadur from generation to generation in the ratio of two shares for male and
one share female heirs. In the absence of the contingencies mentioned above,
the income was directed to be paid to remoter issues of Prince Muazzam Jah
Bahadur from generation to generation in the ratio of two shares for male and E
one share for female. On the death of the last survivor of the persons entitled
to the net income of the fund, the income was directed to be utilised for the
benefit of the holy shrine at Khum in Iran. Thus the trust was in the nature
of wakf-alal-Aulad. In fact the recital in the trust deed is to the same effect:

"AND WHEREAS out of natural love and affection which the settlor F
bears towards his relatives hereinafter mentioned and for divers other
good causes and considerations him thereunto moving he the settlor
.; is desirous of making a settlement and wakf-ul-aulad in the name of
the most merciful God in respect of the said articles specified in the
First Schedule hereunder written............ for the purpose of the G
maintenance and support of the members of his family and his
descendants and ultimately for the religious and charitable purposes
hereinafter mentioned in the manner hereinafter appearing .... "

Pursuant to the deed of trust the jewellery and ornaments and certain
other properties were transferred by the settlor as a wakf. H
950
•
SUPREME COURT REPORTS [1998] 3 S.C.R.

A The settlor Sir Mir Osman Ali Khan expired on 24th of February, 1967.
By an order passed by the Additional Assistant Collector of Estate Duty
dated 25th of January, 1973, the properties which were the subject matter of
these two trusts were deemed to pass on the death of the deceased and were
treated as property passing on the death of the deceased for the purposes
B of estate duty. The appeal of the present appellant, however, was allowed by
the Appellate Controller of Estate Duty by his order dated 2nd of June, 1975.
In the further appeal to the Tribunal, the Tribunal by its order dated 7th of
July, 1976 dismissed the appeal of the department and confirmed the order of ~
the Appellate Controller by holding that the value of the property forming the
corpus of the trust cannot be included in the principal value of the estate of
C the deceased.

From this finding of the Tribunal, the following two questions were ·
referred to the High Court of Andhra Pradesh at Hyderabad:

"A: Whether on the facts and in the circumstances of the case the
D trust created by the deceased on 21.3.1953 known as Sahebzadi Oalia
Kulsum Trust is ab initio void?

B: Whether on the facts and in the circumstances of the case and on -(
the interpretation of the trust deed the value of the corpus of the
Shabzadi Oalia Kulsum Trust is liable to be included in the Principal
E value of the estate of late Sir Osman Ali Khan Bahadur?"

Similar questions were referred in conneciion with the second trust. The
High Court by its impugned judgment and order dated 9th of December,
1983 decided the questions in favour of the revenue and against the assessee.
The present apptals arise from the impugned judgment of the fligh Court
F dated 9th of December, 1983.

It is contended by the respondent i.e. the department that the trusts
created under the said deeds of trust are void ab initio since they violate
Sections 13 and 14 of the Transfer of Property Act, particularly the Rule
G against Perpetuity incorporated there. The appellant, however, relies upon
Section 2 of the Transfer of Property Act under which it is provided, inter
alia, that nothing in the second chapter of this Act shall be deemed to affect
any rule ofMahomedan law. Sections 13 and 14 relied upon by the department,
form a part of the second chapter of the Transfer of Property Act. The
appellant submits that under Mahomedan Law it is permissible to create a
H Wakf-alal-aulad under which a trust in perpetuity can be created for the
TRUSTEES OF S.O.K. TRUST v. C.E.D. (SUJATA V. MANOHAR, J.] 951

maintenance and support wholly or partially, of the family of the settlor, his A
children or descendants from generation to generation and thereafter for the
benefit of poor or for any other purpose recongnised by Mohammedan Law
as a religious, pious or charitable purpose of a permanent character. The
provisions of Chapter 2 of the Transfer of Property Act which inter alia
embody the Rule against Perpetuity applicable to transfers inter vivas, do B
not apply to such trusts.

Syed Ameer Ali in his book on Mahommedan Law, Fourth Edition,
Volume I, page 284 stated as follows:

"When a man,' says the Fatawai Alamgiri quoting the Zakhira, has C
made a wakf of land or something else with a condition, that the
whole or part of it shall be for himself while he lives and after him
for the poor, the wakf is valid according to Abu Yusuf, and the jurists
of Balkh have adopted his opinion and ruled accordingly, and the
Fatwa is in conformity with that opinion as an inducement to the
making of wakfs." D
Dealing with wakf in favour of descendants, Ameer Ali says (p.284):

"So also if he should, 'This my land is a sadakah-mowkoofa, he
(meaning the mutwalli) will pass the produce to me while I live, then
after me to my child and my child's child and their nasl for ever, E
while there are any and when they cease, to the indigent,' This is
lawful."

(N.B. nasl = descendants)

There is general consensus on this proposition amongst the various authorities
ooh~. F
The Privy Council, however, had an occasion to consider a wakf-alal-
aulad created by a Muslim in the case of Abu/ Fata Mohammad Ishak v.
Rasamaya Dhur Chowdhary, (1894) 22 Indian Appeals 76 in which two
Muslim brothers made a wakf whereby they were the first mutwallis of the G
wakf. The entire benefit of the wakf was to go to the children in the first
instance and their descendants from generation to generation until the total
extinction of the family. Thereafter the income was to be applied for the
benefit cif widows, orphans, beggars, and the poor. The Privy Council held
that since the bequest to charity was illusory and too remote, the wakfs were
not valid as they offended the rule against perpetuity. H
952 SUPREME COURT REPORTS [1998] 3 S.C.R.

A Criticising the decision of the Calcutta High Court in the case of
Rasamaya Dhur Chowdhary v. Abu/ Fata Mohammad Ishak, (1891) I.L.R.
18 Cal. 399 which was subsequently upheld by the Privy Council in Abu/
Fata Mohammad Ishak v. Rasamaya Dhur Chowdhary, (supra), Ameer Ali
explains the position in Mahomma.dan Law by saying that the provision for
B one's children and descendants is regarded as a pious duty by which nearness
(kurbat) to God is attained. The mention of the poor is required by Mohammad
(not by Abu Yusuf with whom is the Fatwa) not to give validity to the wakf,
but to ensure perpetuity; and as human beings are liable to become extinct
and as a wakf must be a permanent dedication, Mohammad required that the
poor should be expressly named or implied by the use of the word "sadakah".
C Abu Yusuf, on the other hand, held that whether the poor were named or not,
or whether the word "sadakah" was used or not, the word "wakf' implied
perpetuity, and, therefore, unless some other object was named, on failure
of the wakifs posterity, the income would be applied for the poor. There is
no question about the validity of the wakf; the mention of the poor does not
D make the wakf per se more or less valid; it only ensures perpetuity insisted
upon in the law (pages 296-297).

Asaf A.A. Fyzee in his book "Outlines of Muhammadan Law", Fourth
Edition at page 303 states that according to the ancient texts, wakfs for the
support of a man's descendants and family were considered to be proper and
E lawful. He says, " The Prophet is reported to have said that 'When a Muslim
bestows on his family and kindred, hoping for reward in the next world, it
becomes alms, although he was not given to the poor, but to his family and
children.' What in the estimation of the English lawyers would be a pernicious
perpetuity, calculated to aggrandize the family of the founder, is, according
to the shariat, the best of charities." The position in Islamic Law is summed
F up by Fyzee at page 303 by quoting the words of Ameer Ali:

"From the promulgation of Islam up to the present day there has been
an absolute consensus of opinion regarding the validity of wakfs on
one's children, kindred and neighbours. Practical lawyers, experienced
judges, high officers of every sect and school under Mussulman
G sovereigns are all in unison on this point. There are minor differences,
viz. Whether a wakf can be created for one's self, whether the unfailing
object should be designated, whether the property should be
partitioned or not, whether consignment is necessary or not; but so
far as the validity of a wakf constituting one's family or children the
H recipients of the benefaction, in whole or in part, is concerned, there
TRUSTEES OF S.0.K. TRUST v. C.E.D. [SUJATA V. MANOHAR, J.] 953

is absolutely no difference. A wakf is a permanent benefaction for the A
good of God's creatures: the wakif may bestow the usufruct, but not
the property, upon whomsoever he chooses and in whatever manner
he likes, only it must endure for ever. If he bestows the usufruct in
the first instance upon those whose maintenance is obligatory on him,
or if he gives it to his descendants so long as they exist to prevent B
their falling into indigence, it is a pioos act, - more pious, according
to the Prophet than giving to the general body of the poor. He laid
down that one's family and descendants are fitting objects of charity,
and that to bestow on them and to provide for their future subsistence
is more pious and obtains greater 'reward' than to bestow on the
indigent stranger. And this is insisted upon so strongly that when a C
wakf is made for the indigent or poor generally, the proceeds of the
endowment is applied to relieve the wants of the endower's children
and descendants and kindred in the first place (see Baillie's Dig., 2nd
ed., p.593). When a wakf is created constituting the family or
descendants of the wakf [sic, for wakif] the recipients of the charity D
so long as they exist, the poor are expressly or impliedly brought in
not for the purpose of making the wakf charitable (for the support of
the family and descendants is a part and parcel of the charitable
purpose for which the dedication is made), but simply to impart
permanency to the endowment. When the wakif' s descendants fail, it
must come to the poor. So it is an enduring benefaction - an act of E
ibadat or worship, to use the language of the Jawahir-ul-Kalam-an
act by which kurbat or 'nearness' is gained to the Deity, according
to the Bahr-ur-Raik."

Despite this clear Islamic pronouncement regarding the validity ofwakfs-
alal-aulad, the Privy Council pronounced in the case of Abu/ Fata Mohammad F
Ishak (supra) that such a wakf would be invalid, even if there is an express
ultimate dedication to the poor, because the bequest to "charity" is too
remote. The decision can, at best, be held as interpreting Mohammedan Law
as interpreted in British India of the time, as the case arose in Britis~ A.ndia.
Not surprisingly, it led to large scale protests. ' G

, On account of large scale protests in British India against the decisi?n,
the Mus~alman Wakf Validating Act of 1913 was enacted to validate such
~~ wakfs. This''Act cannot be looked upon as laying down any new principle of
Mohammedan Law. As Fyzee has put it, (page 304) the Act purported to
restore the law of the Shariat in India and to overrule the law as laid down H
954 SUPREME COURT REPORTS [I 998] 3 S.C.R.

A by the Privy Council. This Act was given retrospective effect by the
Mussalman Wakf Validation Act of 1930. Both the Acts applied to British ..._~
India. After the Constitution came into force, the operation of the Validation
Act of 1913 was, therefore, by amendment, excluded from Part-B States i.e.
territories which were originally native States or outside British 1ndia. After
B the Constitution (Seventh Amendment) Act, 1956 abolishing Part-B States
(inter alia), all the territories which were included in Part-B States prior to 1956
were excluded from the Validation Act, 1913. It is, therefore, contended by the
department that the Validation Act did not apply to the State of Hyderabad
which was a Part-B State upto 1956. And hence the wakfs in the present case
are hit by the Privy Council decision in Abu! Fata Mohammad Ishak (Supra).
c
However, the Privy Council decision in Abu! Fata Mohammad Ishak
(supra) can be taken to have interpreted Mohammedan Law as applicable in
British India. The Validation Act, 1913 merely restored the law of the Shariat
which had been disturbed by the Privy Council judgment. Hyderabad, which
was outside British India, must be considered as continuing to be governed
D by the principles of Mohammadan Law as understood by the accepted
authorities on the subject. Non-applicability of the Mussahnan WakfValidation
Act, 1913 to the State of Hyderabad will not affect wakfs-alal-aulad created
in the State of Hyderabad which are valid under the accepted principles of
Mohammadan Law.
E
In fact, the Hyderabad High Court in 1955, referred to and applied the
general principles of Mohammadan Law to declare a wakf invalid. In the case
of Sa/ah v. Husain and Ors., AIR (1955) Hyderabad 229, one Salah Bin Ahmed
purported to create a wakf-alal-aulad with himself as mutawalli. After his death
his sons were to be mutwallis and thereafter his grandsons. There was no
F dedication to the poor. Dealing with the position under the Mohammedan
Law, the High Court of Hyderabad referred to the difference of opinion
between the disciples of Abu Hanif viz. Imam Mohammad and Abu Yusuf.
While Imam Mohammed was of the view that without dedication to the poor,
the wakf was invalid, Abu Yusuf was said to be of the view that such a
G dedication was implicit in the wakf. The Court held that there was no clear
authority that the view of Abu Yusuf differed from that oflmam Mohammad
on this point. On the principles ofMohammadan Law the wakf, in the absence
of dedication to the poor, was invalid.

Although the High Court referred, inter alia, to the Privy Council decision
H in ABUL FATA MOHAMMAD ISHAK, (supra), and the Mussalmar. Wakf
TRUSTEES OF S.O.K. TRUST v. C.E.D. [SUJATA V. MANOHAR, J.] 955

,.- • Validation Acts 1913 and 1930 which applied only to British India, it appears A
to have accepted the submission that the Court was obliged to apply the
original principles of Mohammedan Law in as much as H.E.H. the Nizam in
the Charter granted to the High Court directed that in cases where the parties
were Muslims the case would be governed by Sharai-Shariff. The High Court
held the wakf to be invalid under Mohammedan Law. B
Of course, in the case before it, both under the law as declared by the
Privy Council as also the dictum oflmam Mohammad (said to be no different
from that of Abu Yusuf on this issue) the wakf was invalid. But the High
Court, in the light of its Charter also took the assistance of Mohammedan Law
as laid down by Islamic authorities in deciding the issue.
c
In the light of the principles of Mohammadan Law as set out earlier, the
two trusts created in 1953 in the present case are valid wakfs. The wakif-
settlor made a dedication in perpetuity of the subject matter of these trusts
for purposes which are considered pious under Islamic Law. The properties, D
therefore, ceased to be the properties of the settlor on the creation of the
, r wakfs in 1953. When the settlor died in 1967, they could not form a part of
his estate - the settlor having divested himself of these properties fourteen
years prior to his death.
E
The appellant has also pointed out that during the life time of the
settlor, the income-tax authorities had accepted the validity of the wakfs and
had not treated the income of the wakfs as the income of the settlor.

In the present case, therefore, the beneficial interest created in favour
of Oalia Kulsum and Anwar Begum is a valid creation of trust which is not F
affected by Sections 13 and 14 of the Transfer of Property Act. As a result
the settlor had divested himself of these properties during his lifetime for
the benefit of his grand daughter Oalia Kulsum and his daughter-in-law Anwar
Begum and thereafter for their descendants and then for the holy shrine at
Khum. On the date of his death the Settlor did not have any interest in the G
properties nor had he reserved any interest to himself under these trusts.
Hence, for the purposes of Estate Duty, the deceased cannot be considered
as having any interest in the trust property which passed on his death. The
properties which constituted the subject matter of the two trusts, therefore,
cannot be included in the estate of the deceased Sir Mir Osman Ali Khan, H
956 SUPREME COURT REPORTS (1998] 3 S.C.R.

A the Nizam of Hyderabad for the purposes of estate duty.
In the premises, the judgment and order of the High Court are set aside
and the two questions are answered in the negative and in favour of the
appellant. The appeals are accordingly allowed with costs.

B v.s.s. Appeals allowed.