Shri K P Ghanshyam Vs Shri K L Swamy

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 5^TH DAY OF FEBRUARY, 2025

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BEFORE

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THE HON'BLE MR. JUSTICE K. NATARAJAN MISCELLANEOUS FIRST APPEAL NO. 6815 OF 2024

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BETWEEN:

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SHRI K.P.GHANSHYAM S/O LATE SHRI. K.L.A.PADMANABHASA, AGED ABOUT 53 YEARS, RESIDING AT NO.9/1, SESHADRI ROAD, GANDHINAGAR, BANGALORE, KARNATAKA - 560 009.

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...APPELLANT

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(BY SRI. ARJUN RAO, ADVOCATE)

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AND:

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SHRI. K.L.SWAMY SON OF LATE KHODAY LAKSHMANSA, AGED ABOUT 77 YEARS, RESIDING AT NO.9, SESHADRI ROAD, GANDHINAGAR, BANGALORE, KARNATAKA - 560 009.

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SHRI. K. H. GURUNATH, SON OF LATE K.L. SRIHARI, AGED ABOUT 60 YEARS, RESIDING AT PRESTIGE HERMITAGE, BANGALORE, KARNATAKA - 560 008.

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SHRI. K. R. NITYANANDA, SON OF LATE K. L. RAMACHANDRA, AGED ABOUT 65 YEARS, RESIDING AT NO.1,

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KINGS HOUSE, MILLERS ROAD, BANGALORE, KARNATAKA - 560 052.

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SHRI. K. R. DAYANANDA, SON OF LATE K.L.RAMACHANDRA, AGED ABOUT 58 YEARS, RESIDING AT NO.1, KINGS HOUSE, MILLERS ROAD, BANGALORE, KARNATAKA - 560 052.

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SHRI. K. H. SRINIVAS, SON OF LATE K.L. SRIHARI, AGED ABOUT 57 YEARS, RESIDING AT NO.9, SESHADRI ROAD, GANDHINAGAR, BANGALORE - 560 009.

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6 . SHRI. K. H. RADHESHYAM, SON OF LATE K.L. SRIHARI, AGED ABOUT 54 YEARS, RESIDING AT NO.9, SESHADRI ROAD, GANDHINAGAR, BANGALORE, KARNATAKA - 560 009.

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SHRI. K. S. GIRIDHAR, SON OF SHRI. K.L. SWAMY, AGED ABOUT 51 YEARS, RESIDING AT NO.9, SESHADRI ROAD, GANDHINAGAR, BANGALORE, KARNATAKA - 560 009.

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8 . SHRI. K. S. BRIJMOHAN, SON OF SHRI. K.L. SWAMY, AGED ABOUT 48 YEARS, RESIDING AT NO.9, SESHADRI ROAD,

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GANDHINAGAR, BANGALORE, KARNATAKA - 560 009.

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MRS. RAJALAKSHMI SRIHARI KHODAY, WIFE OF LATE K.L. SRIHARI, AGED ABOUT 77 YEARS, RESIDING AT NO.9, SESHADRI ROAD, GANDHINAGAR, BANGALORE, KARNATAKA - 560 009.

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LK TRUST AN ERSTWHILE TRUST REGISTERED UNDER THE INDIAN TRUST ACT 1882 , HAVING STOOD DETERMINED ON 07.06.2023, PREVIOUSLY HAVING ITS ADDRESS AT NO.9, SESHADRI ROAD, GANDHINAGAR, BANGALORE - 560 009. REPRESENTED BY ITS TRUSTEE.

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…RESPONDENTS

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(BY SRI. SUDARSHAN L., ADVOCATE FOR R-1; SMT. SWATHI SUKUMAR, ADVOCATE FOR R3 & 4; SRI. UDAY HOLLA, SENIOR COUNSEL FOR SRI. GURUMURTHY M., ADVOCATE FOR R2, 5, 6, 9 & PROP. R10; SRI. DHYAN CHINNAPPA, SENIOR COUNSEL FOR SRI. A.S.VISHWAJITH, ADVOCATE FOR R7 & 8)

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THIS MFA IS FILED U/O 43 RULE 1(r) R/W SECTION 151 OF CPC, AGAINST THE ORDER DATED 09.05.2024 PASSED ON I.A.NO.1 IN OS.NO.3150/2024 ON THE FILE OF THE II ADDITIONAL CITY CIVIL JUDGE BENGALURU CCH-17, DISMISSING THE IA.NO.1 FILED UNDER ORDER 39 RULE 1 AND 2 R/W SECTION 151 OF CPC.

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THIS MISCELLANEOUS FIRST APPEAL HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 31.01.2025 THIS DAY, THE COURT PRONOUNCED THE FOLLOWING:

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CORAM: HON'BLE MR JUSTICE K.NATARAJAN

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RESERVED FOR ORDERS ON : 31.01.2025 PRONOUNCED ON : 05.02.2025

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CAV JUDGMENT

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This appeal is filed by the appellant/plaintiff under Order 43 Rule 1 (r) read with Section 151 of Code of Civil Procedure,1908 (CPC) for setting aside the order passed by the City Civil and Sessions Judge, Bengaluru in O.S.No.3150/2024 dated 09.05.2024 for having rejected the application in I.A.No.1 filed under Order 39 Rule 1 and 2 of CPC and to grant injunction against the respondent/defendants.

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Heard the arguments of Sri.Arjun Rao, learned counsel for the appellant and Sri.Sudarshan L, learned counsel for the respondent No.1, Smt.Swathi Sukumar, learned counsel for respondent Nos.3 and 4, Sri.Uday Holla, learned senior counsel for Gurumurthy for respondent Nos.2, 5, 6, 9 and 10 and also heard Sri.Dhyan Chinnappa, learned senior counsel for respondent Nos.7 and 8.

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The appellant was the plaintiff and the respondents were

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the defendants before the trial court. The ranks of the parties are retained for the sake of convenience.

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The case of the plaintiff before the trial court is that the plaintiff filed the suit for declaration to declare the term 'LK Trust' as expired and consequently determine as per the terms of 'Clause 18' of the Trust Deed dated 07.06.1987, with effect from 08.06.2023 and to declare that the trustees are obligated to fulfil the terms of ' Clause 19' of the Trust Deed, to appoint the receiver to carry on all functions of erstwhile trustees, grant decree of enquiry into financial affairs of the trust, grant decree that pursuant to such enquiry, the trustees who have committed breach of trust, the defendant Nos.1 and 2, and another claiming under them have received the legal benefits and grant mandatory injunction and direct the defendants to furnish all original books, papers and documents and information pertaining to the trust and pass award and pass any other relief deemed fit and proper.

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During the pendency of the suit, the appellant also filed I.A.No.1 under Order 39 Rule 1 and 2 of CPC, for directing the defendants not to create any 3^rd party interest, alienate the schedule property of the Trust. It is averred by the appellant/plaintiff in its affidavit along with IA contending that the plaintiff is the beneficiary of 'LK trust' which is family trust formed by later Mahaveersa for the benefit of some of his family members who are the beneficiaries and named therein as trustees as on

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07.06.1987. The said trust deed was constituted and settled by its founder, namely MS Mahaveersa and trustees namely K.L.Swamy, K.L.A. Padmanabhasa, K.L.Srihari and K.L. Ramachandra. After death of one of the trustees, K.L. Srihari, his son K.H.Gurunath is made as trustee in the trust. In the initial stage, the trust was constituted for a period of 18 years and subsequently it was extended by resolution dated 11.5.2005 from 07.06.2005 till 07.06.2014 and thereafter supplementary trust deed has been executed on 29.07.2011 by revising the individual shares of the surviving beneficiaries of the trust to 6.66% share for the beneficiaries except KL.Ramachandra who was allotted 6.76% shares. Again the trust was extended for period of 9 years from 08.06.2014 to 07.06.2023 as per the resolution dated 02.06.2014.

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The plaintiff claimed that the trust has been determined as on 07.06.2023 and claimed that the trust deed has not been continued. The plaintiff made out the case that the trustees have misappropriated the funds of the trust and the father of the plaintiff Sri.K.L.A Padmanabhasa has filed Criminal proceedings against the defendant for breach of trust etc., Subsequently the plaintiff came to know that the civil suit has been filed for determination of the trust deed and properties are not being partitioned as per the terms of trust deed. The trust has been determined as on 7.6.2023. Therefore, this suit has been filed to determine the trust and the

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defendants are trying to alienate the properties. Hence, prayed for restraining them from alienating the properties and not to create any 3^rd party interest, till disposal of the suit.

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The respondent No.1 filed the statement of objection contending that the suit itself is collusion suit and that the plaintiff colluded with his father. The defendant No.10 who has filed criminal case and failed to succeed in criminal case and contended that the trust deed has been continued and as such relief is not maintainable . It is the contention of the defendants that the plaintiff had forged the order to get the relief and it is proxy litigation and forum shopping. It is also contended that the plaintiff himself signed the loan documents, there was an agreement between the parties that the trust itself continues till clearance of the loan of the trust. The loan of the trust is not cleared, as such trust deed has been continued for 9 more years and it is also contended that the trustees have resolved to extend the period of trust for 9 years, by passing the resolution. Subsequent to the resolution, the plaintiff himself signed the declaration along with other beneficiaries. Such being the case, the suit itself is not maintainable and the relief cannot be granted. Hence, prayed for dismissing the Interlocutory Application.

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After hearing the arguments by the trial court, the trial court dismissed the application filed by the plaintiff. Hence, the plaintiff is before this court.

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Learned counsel appearing for the appellant contended that the order of the trial court is not correct. The appellant is one of the beneficiary under the trust, which is a family trust, it was extended time to time and there is no extension of trust from 08.06.2023 onwards. There is a notice given to his father by one of the trustee on 08.05.2023 and on the very next day, they fixed the date for board meeting. The father of the plaintiff did not attend the meeting and he has raised an objection, which was not considered. Though the trust was started in 1987 previously for 18 years, thereafter as per ' clause 18' it has to be unanimously determined, otherwise, they can extend it as per 'Clause 12' of the trust deed. There was internal dispute between the trustees and the beneficiaries, criminal cases were registered against each other. Therefore, there is no question of continuing the trust. The trustees are misusing the funds of the trust by showing the drawings in the name of the dead person, who was the mother of the plaintiff who died in 2014. They have shown withdrawal in the year 2016 and 2017, of more than lakhs of rupees, which is nothing but misappropriation by the trustees and they are alienating the properties of the trust. However, until the suit is disposed of, the

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trustees shall be restrained from alienating the property of the trust. They have to show their accounts, which they refused to show. The Chartered Accountant shall be appointed which is not yet done. Therefore, in the interest of the trust, the properties especially immovable properties shall be protected by way of injunction. The trial court, without proper consideration of the documents rejected the application, which is not correct. As per the provisions of the Trust Act 1882, the beneficiaries are entitled to seek the accounts and know the day to day affairs of the trust and the properties of the trust shall be protected under the Act. Therefore, it is required to determine the trust, hence until disposal of the suit, the property shall be protected. Hence prayed for allowing the appeal by setting aside the order of the trial court.

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Learned counsel also contended that the trial court also dismissed the application on the ground that the trust was not made as party, therefore it is necessary for the appellant to make the trust as party in this appeal. Hence, prayed for allowing the application.

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Sri.Dhyan Chinnappa, learned senior counsel appearing for the respondent Nos.7 and 8, seriously objected the appeal contending that he has interpreted the ' Clause 12' and 'Clause 18' of the trust deed and contended that as per ' Clause 12' of the trust deed, the Board of trustees can extend the trial unanimously or by

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voting or by circulation. In case of equal number of persons or if there is a tie, the Managing Director can cast the vote. Such being the case, the trustees have power to extend the trust. It is also contended that the trust was having lot of landed properties, it had raised the loan from the bankers and had constructed huge apartments, and leased out to the lessees. Therefore, until clearing the loans and clearing the lease agreements, the trust cannot be determined or closed. If at all any violation under clause 18 , the father of the plaintiff could have filed suit for declaration for further continuation of the trust, but he has not challenged. Whereas, the plaintiff is only the beneficiary and he has challenged. Though he has given notice to his father/defendant No.10, who was alive and subsequently died, therefore, the trial court dismissed the suit on the ground, there is a collusion between plaintiff and his father defendant No.10 and only for the determination, the unanimous decision should be taken but not for extension of the trust. Therefore, the trial court considering the same, rightly rejected the application.

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Learned senior counsel also contended that though it is not mentioned in the extension of the trust, in the resolution, that the loans were created, but subsequent to the extension of the trust, the very said plaintiff and his father, all signed the declaration

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form and given to the bankers including all the beneficiaries of the family. Therefore, the plaintiff cannot blow hot and cold at a time and he has suppressed the material facts by signing the declaration form, subsequently to the extension of the trust. Therefore, the appeal cannot be maintainable, he has suppressed the facts. Therefore, prayed for dismissal of the appeal.

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Sri.Uday Holla, learned senior counsel appearing for the other respondents, also contended that there is lot of landed property at that time and there was no income. The loans were raised and put up the apartments and leased out. Therefore, until clearing the loans to the banks and vacating the lessees the trust cannot be concluded or determined. Apart from that, the trial court considering the aspect rightly dismissed the application. The trust required to conduct day to day business by alienating or leasing out the property, receiving rents for the purpose of improvement of the trust and benefit of the trust. Therefore, the question of restraining the defendants from creating any 3^rd party interest cannot be granted. Hence, prayed for dismissing the appeal.

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Sri.Dhyan Chinnappa, learned senior counsel, for respondent Nos.7 and 8, also contended that the trust was under the loss, the loss of the trust was shared by all the beneficiaries, accordingly the loan amount outstanding in the name of the mother

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of the plaintiff was shown in the bracket in the balance sheet. Subsequently, the trust was getting some income which was shared equally as per the trust deed and the amount has been reduced. There is no actual withdrawal of any amount, shown in the balance sheet, it was in the bracket, shown as outstanding loan payable by this dead person and contended that even the plaintiff cannot ask the trust to determine or cancel the trust deed, as beneficiary and even the trustees cannot evict or expel the beneficiary from the trustee. Such being the case, until disposal of the suit, the plaintiff is not entitled for any relief. Hence, prayed for dismissal of the suit.

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Sri.Sudarshan L., learned counsel appearing for respondent No.1, , also supported the contention of the learned senior counsel appearing for the respondents and prayed for dismissing the appeal.

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Learned counsel for the appellant also contended that the father of one Gurunath had died whose name is K.L.Srihari shown as estate of K.L.Srihari but for the death of Smt.Gulab P Khoday, they have not shown as estate of Smt.Gulab P Khoday. Therefore, they have misused the accounts of the dead persons, etc., Hence prayed for allowing the appeal by granting the injunction.

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Having heard the arguments, and perused the records,

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the point that arises for my consideration are;

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(i) Whether the plaintiff/appellant made out prima facie case in his favour?

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(ii) Whether balance of convenience lies in his favour?

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(iii) Whether if injunction is not granted, he will be put into irreparable loss and?

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(iv) Whether the order of the trial court is perverse and capricious and is liable to be set aside?

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On considering the entire records, it is not in dispute that the LK Trust is a family trust, created in the year 1987, where the plaintiff and so many family members are the beneficiaries under the trust, which is a family trust. There were 4 founder trustees in the beginning, including the father of the plaintiff K.L.A. Padmanathasa. Subsequently, the trust was extended time to time by passing resolution in the board meetings. The plaintiff's father disputed the board meeting held on 09.05.2023 as his father was not given proper notice and they extended for 9 years. I have perused the documents, where a notice has been issued to his father on 08.05.2023 where he has replied that he will not attend and as per the meeting, they stated that the properties are leased out. Therefore, until recovery of the trust properties, the trust is required to be continued. However, as per the sub-clause 1 of

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clause 18 it is stated that initially trust was formed for 18 years, thereafter, it was extended from time to time and as per the subclause 3 of clause 18 , for the determination of the trust, it should be unanimous. Admittedly, there was no unanimous meeting held for the determination, therefore as per clause 12 of the trust deed, the trust was extended for 9 years from 07.06.2023. Ofcourse they have stated that the property was leased out, until clearing the loan, the trust shall not be determined. However, it is shown in the documents by the respondents that the very plaintiff also filed the documents, that the trust properties were put up for construction by borrowing loan from various banks and leased out to various lessees and the very plaintiff and his father though objected the extension of the period by his father, but all of them have signed the declaration form and submitted to the bank. The signature of the plaintiff, his father, apart from all the beneficiaries was unanimously signed and sent to the bankers and the documents were not produced by the plaintiff, along with the plaint in the suit, even though he has given consent. On the other hand, he has been agitated that on the extension of the period, which was illegal and it is a clear violation of clause 18 which is not correct. On the other hand clause 12 and 18 reads as under;

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"12. The Trustees shall conduct meetings for the purpose of administration of the Trust as and

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when they find it necessary and take decisions in the meeting including resolution by circulation. The Managing Trustee is entitled to casting vote in case of tie.

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18. The Trust shall stand determined;

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(a) at the end of 18 years from this date; or such other extended date to be decided upon by the Board of Trustees;

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(b) on the demise of the last surviving beneficiary; or

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(c) when the Trustees unanimously so decide to determine the trust, whichever event is earlier but not earlier than seven years from this date."

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On careful perusal of clause 12 which clearly reveals, for

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the purpose of extension, the trustees shall decide, even by circulation or by voting and if there is any tie, the MD can vote. Such being the case, the quorum of 3 trustees among 4 trustees who decided to extend the period of trust, for 9 years. Therefore, there is no illegality or violation of the clause 18 or 12 of the trust deed as contended by the learned counsel for the appellant and very appellant signed the declaration form and given to the bankers along with the other trustees, as well as beneficiaries. Such being the case, the plaintiff failed to show that there is a prima facie case

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in his favour, and that shows the trust was illegally extended, instead of termination, determining the trust as on meeting of 09.05.2023. Therefore the trial Court rightly held against the plaintiff and in favour of the defendants. This court also holds that the plaintiff failed to prove the case in his favour, to show that the trust was extended illegally. Apart from that, he also suppressed the fact by signing the declaration form, along with other trustees, beneficiaries and was sent to the bankers. Thereafter, the extension of the trust was not questioned by the father of the plaintiff who is a trustee, whereas the plaintiff is only beneficiary under the trust. Therefore, if the trust is extended, there is no loss caused to him whereas so many beneficiaries are other than 3 trustees. Such being the case, if trust is continued no harm will cause to the plaintiff's case. Therefore, there is no balance of convenience lies in his favour.

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That apart, the trust raised various loans in various banks amounting to crores of rupees and constructed apartments. Now they leased out the apartments and is getting income. Earlier there was fully loss to the trust, now they are getting income, even plaintiff account shows crores of credit in his account. There is no loss in his account and if the trust is not extended, the trust is going to suffer and there is debt payable by the trustees to the bankers and if the trust is determined, at this stage, definitely there will be

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huge loss to the trust as well as trustees, apart from the loss caused to more number of beneficiaries. Therefore, if the injunction is not guaranteed, plaintiff will not incur any loss wherein, if injunction is granted, the trustees and the beneficiaries will be put into loss and the there will be multiplication of litigation. The bankers will recall the loans, they will take action, attach the property of the trust and sell out through public auction that will cause irreparable loss to the trust. Therefore, considering the aspect that no irreparable loss would be caused to the plaintiff, if the injunction is not granted.

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Ofcourse the properties of the trust is required to be protected, as per the Trust Act. However, the trust is acting on behalf of all the beneficiaries, it is a family trust. There were criminal cases filed against petitioner by respondent. Though they have filed case against the other trustees 'B final report' was filed by the police whereas it is alleged that the appellant has misappropriated Rs.17 crores in the business, the investigation is going on. His bail application came to be rejected by the court and he is facing the investigation. Such being the case, at this stage, if the injunction is granted, it will lead to multiplicity of litigation and irreparable loss caused to all the beneficiaries of the trust.

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The trial court after considering various aspects rightly dismissed the application. Learned senior counsel for the

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respondent relied upon the judgment reported in (1994) 1 SCC in case of S.P. Chengalvaraya Naidu (dead) by LRs Vs Jagannath (dead) by Lrs & ors wherein the Hon'ble Apex Court has held that even the court can reject the plaint, dismiss the suit on the preliminary stage itself, when the fraud is committed by suppressing material fact. It is well settled by Hon'ble Supreme Court in catena of decisions, when the plaintiff approaches the court, he should come with clean hands and should not misrepresent. Therefore, in view of the judgment of Hon'ble Supreme Court, I am of the view that the trial court rightly considered the application and dismissed and there is no capricious or no perversity in the Order, in order to reverse the same by this court. Therefore, by looking to the facts and circumstances, I am of the view, the appeal filed by the appellant is devoid of merits and is liable to be dismissed.

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Accordingly it is hereby dismissed .

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Sd/(K.NATARAJAN) JUDGE

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AKV

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CT:SK

Shri K P Ghanshyam v. Shri K L Swamy

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Shri K P Ghanshyam v. Shri K L Swamy

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