Court-Monitored Probe in Estate Siphoning Dispute Upheld

The Supreme Court has upheld the Bombay High Court’s direction for a court-monitored criminal investigation into alleged siphoning of assets from the estate of late Purvez Burjor Dalal. The appeals arose from a common judgment of the Bombay High Court dated 16 July 2024, which had affirmed the Single Judge’s order of 21 December 2018.

The dispute concerned competing Wills over an estate valued at more than Rs. 100 crores. One Will dated 22 November 2010 was propounded by Shernaz Faroukh Lawyer and her mother. A later Will dated 8 September 2011 was propounded by Manek Dara Sukhadwalla and purported to leave the estate to charitable purposes.

During the testamentary proceedings, an Administrator pendente lite was appointed under Section 247 of the Indian Succession Act, 1925. The Administrator later reported that a bank account in the name of the estate had been opened and that substantial sums had been transferred from it shortly after the testator’s death, before the Administrator’s appointment. One transfer of Rs. 17,08,147 was made to Amoha Traders Private Limited, and another of Rs. 15,00,000 was made to Bai Avabai Hormusji Tata Trust for Charitable objects.

The Administrator’s reports alleged diversion of estate funds and sought recovery. The respondents also alleged a wider conspiracy involving fabricated documents and the use of multiple entities as conduits. The High Court recorded that the conduct of the concerned parties was obstructive and deceitful, and held that ordinary civil remedies were insufficient to protect the estate.

Invoking the High Court’s plenary jurisdiction as a court of record under Article 215 of the Constitution, the Single Judge directed the Administrator to prepare a criminal complaint, which was to be scrutinised and then forwarded to the Commissioner of Police, Mumbai. The police were directed to investigate and report progress to the High Court on a fortnightly basis.

Before the Supreme Court, the appellants argued that a testamentary court could not order a roving criminal investigation and that the Indian Succession Act was a self-contained code. The Supreme Court rejected that challenge. It held that the High Court was justified in refusing to remain a mute spectator where the record disclosed a concerted effort to frustrate the Administrator’s mandate and dissipate the estate.

The Court found no infirmity in either the Division Bench judgment or the underlying Single Judge order. It also observed that the investigation was meant to assist the testamentary court in tracing siphoned assets, and that a police investigation to uncover the truth did not, by itself, infringe the liberty of a trust or corporate entity.

The appeals were dismissed, and the Court directed that if a report is drawn by the Prothonotary and submitted for investigation, the competent authority should proceed expeditiously and submit progress reports as directed by the High Court.

Practical takeaway: In a probate dispute marked by alleged diversion of estate assets, the Supreme Court has accepted court-monitored criminal investigation as a valid tool where civil remedies are being defeated.