http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 17

CASE NO.:

Appeal (crl.) 182 of 2006

PETITIONER:

Shiva Nath Prasad

RESPONDENT:

State of West Bengal & Ors.

DATE OF JUDGMENT: 03/02/2006

BENCH:

B.P. SINGH & S.H. KAPADIA

JUDGMENT:

J U D G M E N T

[Arising out of S.L.P.(Crl.)No.3987 of 2005]

W I T H

Criminal Appeal No. 183 of 2006

[Arising out of S.L.P.(Crl.) No.4655 of 2005]

Dr. V. Gauri Shanker \005.Appellant

Versus

State of West Bengal & Ors. \005Respondents

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 issued

by the Chief Judicial Magistrate(CJM), Alipore in

respect of alleged offences under sections 120-

B/406/417/420 of the Indian Penal Code (IPC).

The undisputed facts are as follows:

Madhav Prasad Birla (MPB) and Smt.

Priyamvada Devi Birla (PDB) 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

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 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.1, R.S. Lodha and

after him his son, the value of which is around

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 17

Rs.2400 crores. Smt. Birla died on 3rd July 2004.

R.S. Lodha was a trustee of MP Birla Foundation

(one of the three public charitable institutions). He

was also a trustee of HMI and EIEI prior to the

dissolution of the five trusts w.e.f. 15.4.1999.

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.

Respondent no.2 herein (complainant), a

former employee working in 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 IPC, inter alia, on the ground that he

was a witness to the intention and the wishes of the

couple 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

complainant, when the mutual wills were executed

in 1981 and 1982, he was consulted and he had

taken part in the discussion with MPB. According

to the complaint, the couple had decided to dispose

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 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 the instrument of nominations of the

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. According to respondent no.2,

the said five trusts were irrevocable and the three

public charitable institutions nominated by the

couple as beneficiaries were HMI, EIEI and MP Birla

Foundation. Respondent no.2 was also, in turn,

associated as honorary secretary of HMI, EIEI and

MP Birla Foundation. Respondent no.2 herein has

alleged in the complaint that he was stunned 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 MPB,

belonged to him under the above will dated 18th

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 17

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 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

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 criminally 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 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, there 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 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. 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 Shiva Nath Prasad was a close

confidante of late Smt. Birla, having completed 50

years of service with MPB group of companies. He

dealt with all the tax 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 17

charitable institutions. He was also a member of

the managing committee of HMI and EIEI.

Respondent no.2 has further alleged that Dr. Gauri

Shanker was a trustee of all the above 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, Sushil Kumar

Daga, was a long standing employee of the MP Birla

Group. He was a member of the managing

committee of HMI and EIEI. 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 created in

pursuance of the criminal conspiracy to

misappropriate the property of the public charitable

institutions. In his complaint, respondent no.2

herein, has relied 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

biography of MPB 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 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 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 of MPB 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 institutions whose

property stands criminally misappropriated by the

first accused pursuant to a criminal conspiracy by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 17

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 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 on 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 10th September 1990, Smt.

Birla, in fact, executed the nominations 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 R.K. Choudhury

that the said nominations were irrevocable and that

the said Shiva Nath Prasad was fully 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 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 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 one of

them by false representations and fraud to attest a

document signed by the deceased Smt. Birla. This

document is the impugned will by which all the

properties of the couple under the five trusts stood

diverted from charity. They were converted to

become the personal property of R.S. Lodha. The

three persons were P.L. Agarwal, Dr. Madan S.

Vaidya and Mahabir Prasad Sharma. Accordingly,

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. Lodha had cheated and defrauded Smt. Birla

into believing that she was making a document to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 17

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 15th April 2003 termed as codicil is 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 created 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 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, 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

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. 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

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 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 institutions 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 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 17

also deceived and finally the accused have even

deliberately suppressed 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 becoming 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 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 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 IPC. 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

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, IPC.

Respondent no.2 has also alleged in his complaint

that R.S. Lodha was liable for offence punishable

under section 420, IPC inasmuch as he was the

instrumentality of procuring the will dated

18.4.1999 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

charitable institutions had connived both by

positive acts of commission and omission to aid and

abet accused no.1 R.S. Lodha in the offence of

criminal breach of trust for which they are liable to

be punished under section 109 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 IPC.

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 sections 120-B/406/417/420 IPC was made

out against the accused. Accordingly, cognizance

was taken. Accordingly, accused were summoned

on 29.11.2004.

Aggrieved by the said order dated 05.10.2004

of CJM Alipore, accused no.2-Shiva Nath Prasad

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 17

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, IPC. By the impugned

judgment, the High Court has refused to intervene

and set aside/quash the criminal proceedings.

Hence, the accused have come in appeal to this

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 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 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

2001 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 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 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 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 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 17

nothing to do with M.P. Birla group after December

2001; that, immediately after the filing of the

complaint, R.P. Pansari was rewarded with a job at

a basic salary of Rs.1,75,000/- per month by the

grandson of B.K. Birla and accordingly it was

submitted that the complaint constituted an abuse

of the process of law.

Learned counsel submitted that the foundation

of the complaint is based on averments 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 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 10th September 1990 by

Smt. Birla shows that nothing prevented her from

making further nominations superseding the earlier

nominations dated 10.9.1990. Learned counsel

submitted that even the nominations dated

10.9.1990 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 undertaken busy travel

schedules as recently as February 2003.

Learned counsel submitted that even if all the

allegations in the complaint 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 entrustment of property of one 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 complicated issues of civil law

relating to mutual wills and mutual trusts 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

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 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 17

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 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 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 because such powers are required to be

exercised ex debito justitiae or for the ends of

justice. Learned 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. 1 SCC 335]; Madhu Limaye v. The State

of Maharashtra [1977 (4) SCC 551] and

Madhavrao Jiwajirao Scindia & Ors. v.

Sambhajirao Chandrojirao Angre & Ors. [1988

(1) 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 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 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; 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 17

five trust deeds and lastly the revocation of the four

trusts did not amount to the extinguishment of

vested or beneficial 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 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 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 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 connection, it was

urged that the sole beneficiaries of the trusts were

M.P. 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 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. 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 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 17

5, 10, 11(iii), 11(iv) and 11(xxi) 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 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 full

beneficial interest in the corpus during her lifetime;

that, there 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 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 Investment 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 which Smt. Birla wrote to Income Tax

Department intimating dissolution 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 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 trusts 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, 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, IPC.

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

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 17

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 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. 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. Birla group of companies to

Smt. Birla. After the demise of M.P. Birla, Dr. Gauri

Shanker remained close to Smt. Birla. He advised

her on personal and corporate matters. Towards

the end of 1990 Smt. Birla had told Dr. Gauri

Shanker that she had decided on R.S. Lodha as her

successor and she was desirous of making a will for

this purpose. According 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 was 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. 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 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.

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, IPC; 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 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 application of mind to the facts of

the case. That, in the present case, there is no

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 17

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 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 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 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 malafides; that, the

complaint is 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 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

complaint constitutes a gross abuse of the process

of law attended with malafide and, therefore, the

High 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. 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 (T1),

the property of the survivor testator (T2), the

subject matter of the agreement, is held on an

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 17

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 fraud by going back on her

agreement with T1. Since the assets received by T2,

on the death of T1, were bequeathed to T2 on the

basis of the agreement not to revoke the will of T1 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 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 an agreement between the

two testators concerning disposal of their 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

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 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

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 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 17

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 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 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, 1982 and

even in 1988 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 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.

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 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 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 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 observations be treated as

expression of our opinion on the rightfulness of the

claim made in the complaint.

In conclusion, we may quote Law of Crimes by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 17

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 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."

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

malafides and should, therefore, be dismissed. We

need not go into the said judgments as the basic

principle settled in the 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 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 malafides of the

complainant.

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 are accordingly

dismissed.