HUKUMCHAND GULABCHAND JAIN versus FULCHAND LAKHMICHAND JAIN AND OTHERS

Citation: [1965] 3 S.C.R. 91 · Decided: 16-02-1965 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Appeal(s) allowed

Judgment (excerpt)

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HUKUMCHAND GULABCHAND JAIN 
v. 
FULCHAND LAKHMICHAND JAIN AND OTHERS 
February 16, 1965 
!) J. 
(K. SUBBA RAO, RAGHUBAR DAYAL AND R. S. BACHAWAT, JJ.] 
Public Trusts-Trustee-Liability to pay interest on trust funds-
Rule of damdupat-Applicability. · 
The respondents who were interested in a public temple filed a 
suit against the appellant who was looking after the affairs of the 
temple. They prayed for his removal from possession of the trust pro-
perties, for the rendering by him of true and faithful accounts and 
for the framing of a scheme. The trial court held that the appellant 
was liable to render accounts. Having ascertained the amount of prin-
cipal, it determined the interest payable at an amount equal to that 
of the principal on the basis of the rule of damdupat. The respon-
dents appealed to the High Court and urged that the rule of damdu-
pat should not have been applied and that compound interest should 
have been charged against the appellant. The High Court held that 
the appellant had used the trust moneys in his business and therefore 
agreed with the contention of the respondents and remanded the case 
to the trial court for ascertaining the amount due to the temple. 
In the appeal to the Supreme Court, it was contended that (i} 
there were no grounds for making the appellant liable to pay dom-
pound interest, and (ii) even if there was liability to pay any inter-
est, it was only for paying simple foterest and that the rule of damdu-
pat should be applied. 
HELD: (i) It had not been proved that the trust funds had been 
used in the appellant's business and therefore the appellant was not 
liable to pay compound interest on the balance of the trust funds 
with him. f96 Gl 
(ii) In the absence of statutes during the period of suit dealing 
with public charitable trusts making a trustee liable to pay interest, 
· interest could ·be charged only on equitable grounds. One such cir-
cumstance is, when the Court considers that the trustee ought to 
have received interest, as when he retains trust money in his hands 
u·ninvested. Since the accounts, in the instant case, show that the 
oppellant had retained the principal amount uninvested for over 
twenty years he would be liable to pay simple interest at the rate of 
4 per cent per annum. Even though the interest calculated at that 
rate exceeded the principal, that entire interest would have to be 
paid, because, the rule of damdupat would not apply. The principle 
of damdupat was evolved both as an inducement to the debtors to 
pay the entire principal and interest at one and the same time in 
order to save interest in excess of the principal, and as a warning to 
the creditor to take effective steps for realising the debt from the 
borrower within a reasonable time, so that, there may not be accumu-
lation of interest in excess of the principal amount. But that rule 
applies only to cases where a loan is advanced. Though a trustee Who 
had custody of trust funds, has a pecuniary liabili~y to make ~oo? 
those funds if he has used them and may, on the baSls of such a hab1-
lity be said to be a debtor of the trust, yet he, as an individual, is 
not' a borrower of the funds from the trust and cannot be said to 
have taken a loan from himself as a trustee in charge of the trust 
funds. [96 H; 97 E-H; 99 D; E; 101 E-F, HJ 
92 
SUPREME COURT REPORTS 
(1965] 3 S.C.R. 
Sharp v. Jackson, (1899) A. C. 419 and Lake, in re Dye>r Ex Parte, 
A 
(1901)1 K.B. 710, referred to. 
OVIL APPELLATE JURISDICTIOl'I: Civil Appeal No. 216 of 
1962. 
Appeal from the judgment and decree dated September 15, 
1959 of the Bombay High Court in First Appeal No. 600 of 1955 
B 
from Original Decree. 
A. V. Viswanatha Sa~tri, Rameshwar Nath, S. N. Andley and 
P. L. Vohra, for the appellant. 
· 
S. N. Pershad, M. II. Chhatrapati, J. B. Dadachanji, 0. C. 
Mathur and Ravinder Narain, for respondents Nos. 1 and 2. 
K. L. Hathi and R. H. Dhebar, for respondent No. 3. 
The Judgment of the Court was delivered by 
Raghubar Dayal, J. There is a temple known as Shri Chandra-
prabhu Khandelwal Jain Tempie· at Dhulia. Gulabchand Hiralal, 
father of appellant Hukumchand Gulabchand Jain, a leading mem-
ber of the Khandelwal Jain Community a( Dhulia, looked after D 
the temple for over 40 years till his death sometime in 1950. The 
appellant looked after it after his father's death. Two members 
of the community interested in the temple, held to be a public 
temple, inst

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