Administrator Misuse of Estate Funds for Litigation Over Excluded Assets Violates Fiduciary Duty Under Succession Act | Bombay HC

The Bombay High Court has held that an administrator appointed only over specific assets of a deceased person cannot lawfully divert proceeds from those assets to fund litigation concerning properties explicitly excluded from the grant. This ruling reinforces fiduciary boundaries in estate administration and sets a clear precedent against self-serving appropriation of estate funds.

Background & Facts

The Dispute

The dispute arises from the estate of Late Raghunandan Lal Aggarwal, valued at Rs. 43.69 crores, comprising immovable property (Flat No. 308, Shalaka Co-operative Housing Society, Mumbai), movable assets (bank balances and equity shares), and a loan of Rs. 3.5 crores deposited with the High Court. The Petitioner, Serika Lal, and the Respondent, Devika Sunil Jamdar, are two of four legal heirs. A contentious relationship developed over ownership of Flat No. 308, which the Petitioner claims was gifted to her during the deceased’s lifetime.

Key Facts

• The deceased died intestate on an unspecified date prior to 2017.
• The Respondent filed Testamentary Petition No. 2244 of 2017 seeking Letters of Administration.
• The Petitioner filed Caveat No. 13 of 2018 opposing the grant.
• The Testamentary Petition was converted into Testamentary Suit No. 8 of 2018.
• Schedule 1 of the Testamentary Petition listed:
  • Flat No. 308, Shalaka Co-operative Housing Society, Mumbai (immovable)
  • Bank balances in Standard Chartered Bank and SBI
  • Equity shares in Demat account with Indbank Merchant Banking Services Limited
  • Loan of Rs. 3.5 crores deposited by Mr. Rajesh Jhunjhunwala with the High Court
• On 06.04.2021, the parties entered into Consent Terms, which were made an order of the Court on 08.04.2021.
• Clause 2 of the Consent Terms explicitly excluded Flat No. 308 and the Rs. 3.5 crore deposit from the Respondent’s administration.
• Clause D required the Respondent to distribute all administered assets among the four heirs equally within 10 weeks of obtaining Letters of Administration.
• Letters of Administration were granted to the Respondent on 13.07.2021, with distribution deadline extended to 31.10.2021.
• The Respondent filed Suit No. 1427 of 2019 against the Petitioner seeking declaration of her 1/4th share in Flat No. 308 and its administration by the Court.
• The Petitioner withdrew her caveat in reliance on the Consent Terms.
• The Respondent liquidated equity shares in the Demat account and bank balances, realizing net proceeds of Rs. 39.94 crores.
• On 29.10.2021, the Respondent emailed beneficiaries stating a corpus of Rs. 10 crores was set aside for tax liabilities arising from sale of Swiss shares.
• On 04.01.2022, she released Rs. 1 crore each to the beneficiaries from the corpus.
• The Respondent claimed total expenses of Rs. 5.17 crores, including Rs. 98.95 lakhs for legal costs in Suit No. 1427 of 2019.
• The Petitioner filed Interim Application No. 25222 of 2021 seeking removal of the Respondent, which was later withdrawn to avoid contempt.
• The present Miscellaneous Petition (L) No. 19345 of 2025 was filed on 28.03.2023 seeking removal of the Respondent as administrator.
• On 17.12.2025, the Court directed the Respondent to submit a full statement of accounts.
• Advocate Rahul Sarda was appointed as Court Commissioner on 09.03.2026.
• The Commissioner submitted reports dated 30.04.2026 and 04.05.2026.

Procedural History

• 2017: Testamentary Petition No. 2244 filed by Respondent.
• 2018: Petitioner filed Caveat No. 13; petition converted to Testamentary Suit No. 8 of 2018.
• 06.04.2021: Consent Terms executed.
• 08.04.2021: Consent Terms made Court order.
• 13.07.2021: Letters of Administration granted to Respondent; distribution deadline extended to 31.10.2021.
• 2019: Respondent filed Suit No. 1427 of 2019 against Petitioner over Flat No. 308.
• 29.10.2021: Respondent emails beneficiaries about Rs. 10 crore corpus for tax liabilities.
• 04.01.2022: Rs. 1 crore released to each beneficiary from corpus.
• 2021: Interim Application No. 25222 of 2021 filed and withdrawn.
• 28.03.2023: Miscellaneous Petition (L) No. 19345 of 2025 filed.
• 17.12.2025: Court directs submission of accounts.
• 09.03.2026: Court Commissioner appointed.
• 30.04.2026 & 04.05.2026: Court Commissioner submits reports.
• 08.06.2026: Judgment pronounced.

The Parties' Positions

Petitioner (Serika Lal): Argued that the Respondent was appointed administrator only over bank balances and equity shares, not Flat No. 308 or the Rs. 3.5 crore deposit. Contended that using proceeds from liquidated shares to fund litigation over excluded assets constitutes misappropriation and breach of fiduciary duty.

Respondent (Devika Sunil Jamdar): Claimed she was appointed administrator of the entire estate except the two excluded items. Argued that litigation expenses under Section 321 of the Succession Act are legitimate, and that the Petitioner’s conduct in Suit No. 1427 of 2019 necessitated prolonged and costly proceedings.

Relief Sought

The Petitioner sought:

• Removal of the Respondent as administrator.
• Appointment of a fit person (Court Receiver) as new administrator.
• Recovery of misused funds for distribution to beneficiaries.
• Directions to account for all expenditures.

The Legal Issue

Can an administrator, appointed only over specific assets of an estate, lawfully use proceeds from those assets to fund litigation concerning properties explicitly excluded from the grant of Letters of Administration under the Consent Terms?

Arguments Presented

For the Petitioner

The Petitioner relied on the express terms of the Consent Terms dated 06.04.2021, which clearly excluded Flat No. 308 and the Rs. 3.5 crore deposit from the Respondent’s administrative authority. She argued that Section 321 of the Indian Succession Act permits expenses only for administration of assets under the administrator’s control. Using sale proceeds of shares to fund litigation over excluded property constitutes misapplication under Section 307. The Court Commissioner’s report confirmed that Rs. 5.17 crores of expenses were incurred, including Rs. 98.95 lakhs for Suit No. 1427 of 2019 - a suit over property the Respondent had no authority to administer. The Respondent’s email of 29.10.2021 explicitly stated the Rs. 10 crore corpus was reserved for tax liabilities, not litigation costs, making subsequent diversion a deliberate act of mismanagement.

For the Respondent

The Respondent contended that the Consent Terms did not restrict her from administering the estate broadly, and that Suit No. 1427 of 2019 was necessary to protect the estate’s integrity. She relied on Section 321, arguing that judicial proceedings necessary for administration - even if contested - qualify as legitimate expenses. She cited prior orders in Suit No. 1427 of 2019, including interim restraints on the Petitioner, to justify the necessity of litigation. She also argued that the Petitioner’s withdrawal of the earlier application barred the present one under res judicata, and that the expenses were supported by vouchers and approved by the Court Commissioner.

The Court's Analysis

The Court undertook a meticulous textual and contextual analysis of the Consent Terms, concluding that the Respondent’s authority was strictly circumscribed. Clause A(1) of the Consent Terms explicitly appointed the Respondent as administrator of the estate "except the properties set out in clause 2 below." Clause 2 specifically excluded Flat No. 308 and the Rs. 3.5 crore deposit. Clause C reinforced this by stating the Petitioner had no objection to the Respondent being appointed as administrator of "all other undisputed estate and credits... save and except as provided hereinabove." The phrase "undisputed estate" was held to be a deliberate legal carve-out, excluding the subject flat from the grant.

"The use of the word 'undisputed estate' would take the disputed flat out of the estate in respect of which the Respondent was appointed as administrator."

The Court rejected the Respondent’s reliance on Section 321, noting that the provision applies only to expenses incurred in administering assets over which the administrator holds authority. Since the Respondent had no authority over Flat No. 308, litigation concerning its ownership could not be deemed an expense of administration. The Court emphasized:

"The Respondent was not appointed as administrator of flat no. 308 and the loan of Rs. 3.5 crores... the expenses incurred towards the judicial proceedings of Suit No. 1427 of 2019 cannot be to the detriment of other beneficiaries or claimed to be legitimate expenses under Section 321."

The Court further found that the Respondent’s use of the Rs. 10 crore corpus - explicitly reserved for tax liabilities - to fund litigation constituted misappropriation. The email of 29.10.2021 and 04.01.2022 made no mention of litigation expenses, and the affidavit of 14.10.2025 claimed tax liabilities were reserved for the sub-judice properties, not litigation. The Court Commissioner’s report confirmed that Rs. 5.17 crores in expenses were claimed, nearly wiping out the Rs. 6 crore corpus remaining after distributions. The administrator’s fee of Rs. 67.23 lakhs and reimbursement of Rs. 97.09 lakhs further indicated excessive compensation.

The Court distinguished The Union of India v. Official Assignee of Bombay and Abha Dastane-Rao v. Prabhakar Deolankar, noting that while the former dealt with priority of costs over tax dues, and the latter required gross misconduct for removal, the present case involved clear, documented misapplication of estate funds beyond the scope of authority - a threshold breach under Section 301.

The Verdict

The Petitioner succeeded. The Court removed the Respondent as administrator and appointed the Court Receiver, High Court, Bombay, as the new administrator. The Court directed:

• The Respondent to hand over all records relating to liquidated assets to the Court Receiver within three weeks.
• The Court Receiver to distribute the balance reserve of Rs. 2,28,81,655.92 among the four beneficiaries after deducting its own costs.
• The entire distribution to be completed within two months, with a final report submitted to the Court.
• The Petitioner to retain liberty to pursue proceedings to recover the deficit caused by the Respondent’s misappropriation.
• The order was stayed for four weeks, subject to the Respondent filing an undertaking within one week that she will not deal with the balance reserve pending appellate review.

What This Means For Similar Cases

Administrator Authority Is Strictly Limited by Consent Terms

• Practitioners must scrutinize Consent Terms in testamentary suits for explicit exclusions - these define the scope of administrative authority.
• Any expenditure beyond the granted assets, even if "necessary," is ultra vires and constitutes misconduct.
• Oral claims of broad authority will not override written, court-approved terms.

Litigation Costs Cannot Be Funded from Restricted Assets

• Expenses incurred in litigation over excluded property cannot be charged to the estate’s administered assets.
• Administrators must maintain separate accounting for litigation costs related to disputed assets - these must be borne personally or through separate funding.
• Using estate proceeds to fund litigation against beneficiaries breaches fiduciary duty under Section 307.

Court Commissioners Are Critical for Accountability

• Courts will appoint Court Commissioners to audit accounts when allegations of mismanagement arise.
• Vague or unsupported expense claims (e.g., conveyance, stationery) without vouchers will be disallowed.
• Email communications and contemporaneous records carry greater weight than post-hoc affidavits.

Res Judicata Does Not Shield Misconduct

• Withdrawal of a prior application for removal does not bar a subsequent petition if new evidence of misconduct emerges.
• The Court emphasized that fiduciary breaches are ongoing wrongs - not subject to res judicata.

Fees Must Be Reasonable and Statutorily Compliant

• Administrator fees must comply with the Administrator General’s Act, 1913.
• Fees exceeding statutory limits or disproportionate to asset size (e.g., Rs. 67 lakhs on Rs. 40 crore estate) invite scrutiny.
• Reimbursement claims must be itemized and substantiated.