Kishinchand Bulchand Ramnani v The Personal Representatives of the Estate of Roop Vaswani, deceased

• Jurisdiction: Singapore
• Judge: Karthigesu J
• Judgment Date: 26 April 1993
• Neutral Citation: [1993] SGHC 88
• Docket Number: Originating Summons No 347 of 1987
• Date: 26 April 1993
• Year: 1993
• Published date: 19 September 2003
• Plaintiff Counsel: Bala Chandran and Andrew Wong (Mallal & Namazie)
• Citation: [1993] SGHC 88
• Defendant Counsel: MP Kanisan and Percy Mendis (Palakrishnan & Pnrs),Cheong Wai Yin (Shook Lin & Bok) holding watching brief,Christina Cheng Heng Mei (Assomull & Pnrs) holding watching brief
• Court: High Court (Singapore)
• Subject Matter: No trust when purpose of trust not realized,Whether agreement was for the benefit of creditors generally,Composition agreement,Whether expression of intention to using fund to settle loans amounted to intention to create trust,Bankruptcy,Insolvency Law,No agreement reached with the creditors prior to creation of fund,Whether void for non-registration,Trusts,Fund for the payment of creditors,Object of trust non-existent,Whether there was agreement with all unsecured creditors but excluding secured creditors,Trustee in bankruptcy,Bankruptcy Act (Cap 20),Purpose trusts

Cur Adv Vult

Roop Vaswani (`Vaswani`) died in Singapore on 27 February 1978. Before his death, Vaswani was a prominent businessman in Singapore doing business in the import-export trade under the sole-proprietorship business name of KD Vaswani & Co (`the firm`). He had business interests in other countries as well. For example, he was the sole owner of a commercial building in Osaka, Japan, called `Kaydeevas Building.`

In 1977, Vaswani`s business suffered a serious set back as a consequence of which he was unable to meet his business liabilities. His total indebtedness was in the region of $4.2m, broadly divided between what he called `the local creditors` in the sum of $2.6m and `the banks` in the sum of $1.6m.

The Bank of India was the principal banking institution to whom Vaswani was indebted. In fact, the Bank of India was the only bank to have entered a judgment against Vaswani. Accordingly, the proposals Vaswani made for the liquidation of all his liabilities was to the Bank of India.

On 16 September 1977, Vaswani, who had been in discussion with the chairman and other top officials at the Bank of India`s head office in Bombay, addressed a letter to the Singapore branch in which he disclosed his proposals for the liquidation of his liabilities. He proposed the sale of his property in Osaka, the Kaydeevas Building, from which he hoped to realize a net sum of $1.5m. He then proposed setting aside a sum of $800,000 for payment to `the local creditors` with whom he indicated to the Bank of India he was discussing a composition. He stated his proposal in his letter to the Bank of India of 16 September 1977 in the following terms:

To achieve the above objective, my proposals are as under:

(1) After the receipt of the sale proceeds of $1.5m, I wish to pay out the sum of $800,000 to the local creditors because that is the cancerous part for which this major surgery has to be done in the interest of all concerned. That will leave a balance of $700,000 for which my suggestions are as under:

(1) .1 $200,000 to be paid to your bank;

(1) .2 $100,000 to be paid to UCO bank;

(1) .3 $150,000 to be paid to BNP and HSBC banks.

That will leave me a balance of $250,000 from which sum of $50,000 will pay for various sundry expenses and miscellaneous local bills and the remaining amount of $200,000 I would like to utilize for operating my company in Singapore so that the recycling is done. For you are fully aware that our company has been inactive for over one year and just incurring expenses which we cannot undertake any longer.

Vaswani`s letter to the Bank of India dated 16 September 1977 was followed by a letter dated 21 September 1977 which read as follows:

Further to our letter of the 16th instant in this respect and followed by our phone conversation of today, it has been agreed as under:

(1) After the receipt of the sale proceeds of Japan Kaydeevas Building, amount of $300,000 will be paid to your bank.

(2) The amount of $800,000 will be paid to the local creditors as agreed.

(3) The balance outstanding will be paid in quarterly instalments of $45,000.

(4) The balance amount of the sale proceeds will be paid by us to other banks, etc, as mentioned in our letter of the 16th instant.

Please rest assured that we want to clear your outstanding earliest possible and if and when the deal of our Canary Islands property goes through, your outstanding will be reduced much faster.

The Bank of India responded to Vaswani on the same date as follows:

Japan Kaydeevas Property

We refer to the various discussions we had in this connection and are pleased to confirm that:

(i) We do not have any objection to your arranging to sell the abovementioned property, but that the full sale proceeds must be surrendered to us immediately upon completion.

(ii) Upon receipt by us in Singapore of the full sale proceeds, we shall release a sum not exceeding $800,000 for settlement of all your local trade creditors subject to the conditions set out in your letter of 21 September 1977, whereby the bank shall have prior right to retain $300,000.

Provided that no legal action/execution of decree is brought forth by any of your creditors in the meantime.

On 27 September 1977 the Bank of India wrote to Vaswani in further confirmation as follows:

We refer to the various discussions we had with you and to your letter dated 21 September 1977.

We are pleased to inform you that, without prejudice to our rights under the judgment orders obtained by us on 6 July 1977 in Suit Nos 861 and 862 of 1977, we accept your proposal to make a part payment of $300,000 under the judgment orders as soon as the sale proceeds of Japan Kaydeevas building is received, and to pay the balance amount by instalments of $45,000 per quarter until the outstandings are liquidated with interest.

Please note that we reserve the right to proceed to execute the judgment orders forthwith, at any time, without notice to you, should you fail to keep up the schedule of repayments as undertaken by you.

Between 26 October 1977 and 1 November 1977, the Bank of India received three sums of money totalling US$350,000 for the account of one Shivnathrai Bajaj followed by a letter from the said Shivnathrai Bajaj dated 5 November 1977 which read as follows:

Sums amounting to US$350,000 have been remitted to you from Hong Kong in my name and I trust you have received the same by now.

I shall be glad if you will please hold the net proceeds of these funds at the disposal of Mr KB Ramnani of Dalamal & Sons (Malaya) Pte Ltd. You may, at your discretion, act upon any instructions given by Mr Ramnani for the disposal of these funds, without reference to me.

These instructions are irrevocable on my part.

On 11 November 1977 Vaswani wrote to the Bank of India in these terms (hereafter called `first 11 November letter`).

You have received sum of US$350,000 which I intend utilizing for settlement of my local creditors.

I hereby authorize you, irrevocably to accept at your discretion, any instructions written or oral that may be issued by Mr KB Ramnani for the disposal of these funds, without reference to me.

It will be noted that this is not the arrangement Vaswani made with the Bank of India as contained in the two letters exchanged between Vaswani and the Bank of India on 21 September 1977. Vaswani`s first 11 November letter is explained by Vaswani`s second letter to the Bank of India dated 11 November 1977 which reads as follows: (hereafter called `second 11 November letter`)

This refers to my letter dated 21 September 1977 agreeing to pay you a sum of $300,000.

As it appears that payment of this sum to you will be somewhat delayed, I have accordingly arranged to pledge with your Osaka office a sum of [times ]36,000,000 to cover this amount as security. I assure you, however, that I shall pay to you the sum of $300,000 as soon as possible, but in any case not later than three months from now, after receipt of which you may release the lien on the aforesaid [times ]36,000,000.

I request you in the meantime, to please release the required sum out of US$350,000 that you have received, for payment to my local creditors, notwithstanding the fact that I have not been able to pay the agreed sum to you on first priority, as agreed.

It appears that the Bank of India accepted the terms of Vaswani`s second 11 November letter for, on 17 November 1977, the Bank of India wrote to Kishu B Ramnani (`Ramnani`) as follows:

We refer to the telephone conversation we had on 12 November 1977 in the matter of funds received for the settlement of the creditors of KD Vaswani & Co and kept at your disposal.

Please let us have your instructions in due course.

This was in fact confirmed by Mr Srinivasan, the Bank of India`s credit manager, who gave evidence at the hearing before me. He confirmed that the Bank of India would have released the full sum of US$350,000 to Ramnani had Ramnani called for it in November 1977. However, no such request was made by Ramnani. The Bank of India itself made no claim on the US$350,000 in view of the arrangements it had made with Vaswani as stated above. As stated earlier Vaswani died on 27 February 1978. The result was that the US$350,000 (in fact US$349,677.63, ie after deduction of bank charges) remained with the Bank of India in a non-interest bearing account for the next few years until inquiries were made concerning the US$350,000 firstly by JB Rupa & Co in March 1984, secondly by the administratrix of the estate of Vaswani in November 1985 and thirdly by Ramnani in June 1986. The upshot of these inquiries was that the Bank of India made an application for interpleader relief in March 1987 citing Ramnani and the administratrix of the estate of Vaswani as the rival claimants.

By an order of court dated 7 January 1991, an issue was directed to be tried with Ramnani as the plaintiff and the personal representative of the estate of Vaswani (`the estate of Vaswani`) as the defendant.

Ramnani claimed that Vaswani, through the good offices of himself and JB Rupa, had reached...