Operation Asha vs Shelly Batra & Ors.

2 filed an application seeking leave to institute the civil suit against the appellant Society along with the respondent nos.3 to 10 – Single Judge granted leave to the respondent nos.1 and 2 for instituting a suit u/s.92 holding that all the elements and ingredients u/s.92 stood fulfilled – Appeal thereagainst dismissed by the Division Bench – Challenge to: Held: Respondent nos.1 and 2 made several allegations of siphoning of funds by the respondent nos.3 and 4, for their own personal use, could be said to have prima facie satisfied the condition required to apply the doctrine of constructive trust to the present facts – If these allegations are found to have no substance or plainly false, the entire suit would fail – That would happen also when the circumstances which required the imposition of a constructive trust do not exist/have not been proven – However, if found true, all the property diverted for the purpose of obtaining a pecuniary advantage would be subject to a constructive trust, the administration of which can be sought in a suit u/s.92 and the respondent nos.3 and 4 respectively would be considered to be ‘constructive trustees’– While scrutinising whether the respondent nos.1 and 2 are persons interested in the trust and whether they are bringing the suit in a representative capacity, it is not just their designation or position which must be looked into or given importance to – While recognising that they have also sought some remedies related to personal grievances and the wrongful dismissal of the respondent no. 1 which could be seen as unduly magnifying an election dispute, there are several other allegations in the plaint which cannot simply be ignored and which give the respondent nos.1 and 2, a dual role/capacity, whilst they’re agitating the matter u/s.92 – Larger background in which the suit is brought alludes to the existence of public interest also at play – Reliefs claimed by the plaintiffs, must fall within those reliefs outlined u/s.92(1) – Reliefs in the present plaint, insofar as they agitate private rights, cannot be granted under a suit of this nature – Suit filed before the Single Judge of the High Court to be commenced – Societies Registration Act, 1860. [Paras 137 (xv), (xvii), 138] Code of Civil Procedure, 1908 – s.92 – Object and purpose – Conditions to be fulfilled for the applicability of s.92: Held: Suit u/s.92 is a representative suit of a special nature since the action is instituted on behalf of the public beneficiaries and in public interest – Obtaining a ‘grant of leave’ from the court before the suit can be proceeded with, acts as a procedural and legislative safeguard in order to prevent public trusts from being subjected to undue harassment through frivolous suits being filed against them – However, at the stage of grant of leave, the court neither adjudicates upon the merits of the dispute nor confers any substantive rights upon the parties – Certain conditions or essential pre-requisites need to be fulfilled for a suit to be maintainable under this provision are-the trust in question must be created for public purposes of a charitable or religious nature; there must exist a breach of trust or a direction of the court must be necessary for the administration of the trust; and the relief claimed must be one or other of the reliefs as enumerated u/s.92(1) – To establish that a suit is not maintainable u/s.92, it is sufficient to prove that any one of the conditions enumerated above has not been met, however, in order to assert its maintainability, all the said conditions need to be satisfied – Furthermore, special nature of the suit u/s.92 requires it to be filed fundamentally on behalf of the public for the vindication of public rights – Thus, courts must go beyond the reliefs and also give due regard to the object and purpose for which the suit is brought – True nature of the suit must be determined on a comprehensive understanding of the facts of the matter and a hard-and-fast rule cannot be made – Fact that certain private rights are being agitated must not be reason enough to ignore the other allegations made in the suit and dismiss it outrightly, provided the suit is instituted in a representative capacity – Issues involving the day-to-day management of the institution and grievances by members qua other members as regards the election of members or certain board decisions, must not be made in a suit of this nature, especially when such grievances can be redressed through other mechanisms or under a regular suit not falling within s.92. [Para 137(i), (ii), (xix), (xx)]

Societies Registration Act, 1860 – s.5 – Property of society how vested – Doctrine of constructive trust and its applicability to a society:

Held: Effect of registration under the 1860 Act would not be to automatically invest the properties of the society with the character of trust property – s.5 provides two options, or mechanisms through which a society can hold the property belonging to itself, one, in trustee(s) or, two, in the governing body of the society – While the society cannot be considered as an ‘express trust’, for an entity to be brought within the rigours of s.92, the plaintiff has the option of also contending that a ‘constructive trust’ exists in the circumstances and a breach of such a constructive trust has occurred or that the directions of the Court are necessary for the administration of such a constructive trust – Constructive trust, arises by operation of law, without regard to or irrespective of the intention of the parties to create a trust – It is imposed predominantly because the person holding the title to the property would profit by a wrong or would be unjustly enriched if they were permitted to keep the property – For this equitable doctrine to be applied, fiduciary must receive property or money which he cannot conscientiously retain – It is only thereafter that a constructive trust would be raised in favour of the beneficiaries on whose account the money was originally received – Factum that the fiduciary ‘withheld’ the property from its rightful beneficiaries must be established – That such a fiduciary sought to misapply the property in contravention to the covenants that bound him, or sought to gain an advantage for himself, must be proved for a constructive trust to come into existence by the operation of law – That he further divested the said siphoned property/funds, would have to be proved in order to assert that the ‘constructive trust’ has additionally been breached – Even in the absence of such a further divestment, the directions of the court may still be necessary for the administration of the constructive trust. [Para 137 (vii), (xi), (xii), (xiii), (xiv)]