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Issues: (i) Whether the two trusts created on 21 March 1953 were valid or void ab initio in view of the rule against perpetuities and the applicability of Mohammedan law and validating statutes. (ii) Whether the trustees had perfected title by adverse possession or limitation so as to defeat recovery by the settlor or his heirs and exclude the trust corpus from the principal value of the estate.
Issue (i): Whether the two trusts created on 21 March 1953 were valid or void ab initio in view of the rule against perpetuities and the applicability of Mohammedan law and validating statutes.
Analysis: The settlements created successive family benefits for descendants and postponed the ultimate charitable gift until extinction of the family line, bringing them within the mischief of the restrictions on remote and perpetual transfers under the Transfer of Property Act. The exception for Mohammedan wakf was held inapplicable on the facts, and the Mussalman Wakf Validating Act, 1913, was found not to assist the trusts in the Hyderabad context. The trusts were also not saved by the Nizam Trust Deeds (Validating) Act, 1950. The court therefore treated the dispositions as invalid.
Conclusion: The trusts were void ab initio and the finding was against the assessee.
Issue (ii): Whether the trustees had perfected title by adverse possession or limitation so as to defeat recovery by the settlor or his heirs and exclude the trust corpus from the principal value of the estate.
Analysis: For movable property, limitation under Article 113 of the Limitation Act turns on when the right to sue accrues. Mere lapse of time or long possession was held insufficient unless there was an accrued right, followed by clear assertion and denial, or a clear and unequivocal threat to the right asserted. As there was no demand by the settlor or his heirs and no refusal by the trustees, the right to sue had not accrued and limitation did not extinguish the title. Once the trusts were treated as void, the property remained liable to revert and the corpus was exigible to estate duty under the charging provision.
Conclusion: Adverse possession and limitation were not established, and inclusion of the corpus in the estate was upheld against the assessee.
Final Conclusion: The references were answered in favour of the Revenue, the trusts were held invalid, and the corpus of each trust was held includible in the principal value of the estate for estate duty purposes.
Ratio Decidendi: A family trust or wakf that postpones the ultimate charitable gift beyond the permissible limits is void, and long possession by trustees does not defeat the settlor's title unless the right to sue has accrued through a clear assertion and denial of that right; until then, the corpus remains liable to be treated as part of the settlor's estate.
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