The Khasgi (Devi Ahilyabai Holkar Charities) Trust, Indore & Anr. vs Vipin Dhanaitkar & Ors.

36 (1) – Registration of Public Trusts – Alienation of trust property –Previoussanction of Registrar – On facts, matter pertaining to illegal alienation of appellant trust-Khasgi Trust by the trustees – Trust deed of the appellant trust executed in 1962 and is traced to Holkar rulers – Alienations were made by the trustees in relation to at least six properties –Collector held that the properties mentioned in the Trust Deed were the properties of the State Government; that the trustees made illegal alienations without prior permission from Government, thus the alienations held to be invalid–Collector directed that the name of the State Government to be entered in revenue records to prevent further alienations– Said order challenged by the appellant Trust and its trustee – Single Judge of the High Court disposed of the petition by issuing diverse directions for the administration of Khasgi Trust - Another writ petition filed by the appellant-Khasgi Trust disposed of by directing the authorities to correct the revenue record – Appeals before the Division Bench, wherein it was held that the Appellant- Khasgi Trust was governed by the Public Trusts Act; that the Trustees had no authority to alienate the Khasgi properties as the same was vested in the State Government; and that the Single Judge had virtually re-written the Trust Deed and therefore, the judgment could not be sustained – On appeal, held: Khasgi (Devi Ahilyabai Holkar Charities) Trust, Indore, is a Public Trust governed by the provisions of the 1951 Act –Khasgi Trust, is an express Trust for public, religious and charitable purposes –Trustees have a duty to safeguard the interests of the beneficiaries of the Public Trust – Thus, the trustees directed to get the Khasgi Trust registered under the Public Trusts Act by making the necessary application– Properties described in Part ‘B’ of the Schedule to the Trust Deed, are properties of the said Public Trust– Alienationof the said properties can be made only by taking recourse to s.14 – Supplementary Trust Deed is also valid – Issuance of the direction by the High Court to Economic Offences Wing of the State Government to hold an inquiry was not warranted–Registrar having jurisdiction over Khasgi Trust, to call for the record of the Trust relating to all the alienations made by trustees and after holding an inquiry to determine if any loss was caused to the Public Trustby alienation – Subjectto the said directions, the judgment of the Division Bench as well as the Single Judge set aside. Partly allowing the appeals, the Court

HELD: 1.1 The properties described in Part ‘B’ of the schedule to the Trust Deed which were vested in the State Government were transferred to the autonomous Khasgi Trust on its incorporation.In fact, till 2012, the State Government never disputed that the Khasgi properties listed in Part ‘B’ of the Schedule to the Trust Deed were the Trust properties of the Khasgi Trust. Therefore, to that extent, the Division Bench of the High Court is not right when it concluded that the properties incorporated in Part ‘B’ of the Schedule to the Trust Deed continue to be the Government properties even after 16th July 1962. The said properties are vesting in the Khasgi Trust.[Para 33][205-E-F]

1.2 The High Court proceeded on the erroneous footing that as there was no notification issued under sub-section (2) of section 36, clause (a) of sub-section (1) of section 36 will not apply. Sub-Sections (1) and (2) of Section 36 operate in different fields. When sub-Section (1) is applicable to a Public Trust, none of the provisions of the Public Trusts Act is applicable to the Trust. Sub-Section (2) is an independent power of the State Government to issue a notification exempting certain Public Trusts from all or any of the provisions of the Public Trusts Act. [Para 39][208-E-G]

1.3 The Supplementary Trust Deed which enables the Trustees to alienate the Trust Property cannot be illegal. However, alienation of the Trust property can be made only in accordance with Section 14. The Trustees by executing such a document cannot overcome the mandate of Section 14. Therefore, the power to alienate under the Supplementary Trust Deed is subject to the constraints imposed by Section 14 of the Public Trusts Act. To that extent, the Division Bench of the High Court was not right.[Para 41][210-B-C]

1.4 Section 14 is applicable to immovable property of a Public Trust. Section 13 governs the investment of public trust money. The State’s control of charities and religious endowments in some form is not foreign to our jurisprudence. A Public Trust invariably depends on charity done by individuals by donating immovable property or by making cash donations. Though in law, the assets and properties of a Public Trust vest in its Trustees, they hold the Trust property in a fiduciary capacity for the benefit of the beneficiaries of the Trust. They hold the property for giving effect to the objects of the Public Trust. A Trust property cannot be alienatedunless it is for the benefit of the Trust and/or its beneficiaries. The Trustees are not expected to deal with the Trust property, as if it is their private property. It is the legal obligation of the Trustees to administer the Trust and to give effect to the objects of the Trust. Therefore, the statutes dealing with the Public Trusts which are operating in various States, provide for limited control of the activities of a Public Trust. The control is exercised by providing for the submission of the annual accounts by the Trustees and filing of returns with the concerned charity organization or other authority under the law. There are statutory constraints on the power of the Trustees to alienate the property of a Public Charitable Trust. There are provisions in such statutes for penalizing the Trustees for misappropriation of the property of the Trust. Many such Statutes empower the authorities under the Statutes to remove a Trustee of a Public Trust, on account of misbehaviour or acts of misappropriation, etc. The Trustees are the custodians of Trust properties.The Trustees have a duty to safeguard the interests of the beneficiaries of the Public Trust. That is how a provision in Public Trust Law, like Section 14 of the Public Trusts Act, is of importance. This provision seeks to protect the Trust property in the hands of the Trustees from unwarranted alienations. In the present case, the transactions of sale in favour of the appellant in Civil Appeal arising out of Special Leave Petition 19063 of 2021, have been effected admittedly without obtaining prior permission under Section 14. The Division Bench of the High Court has gone into the question whether the alienations were null and void. However, the purchasers were not parties to the proceedings before the High Court. Hence, final adjudication could not have been made on the issue of nullity of the alienations made by the Trustees of the Khasgi Trust in absence of the necessary parties. [Para 45][212-D-H; 213-A-C]

1.5 In the present case, all the alienations made by the Trustees of Khasgi Trust except alienation made in favour of the appellant in Civil Appeal arising out of Special Leave Petition (C) No.19063 of 2021, have been made without complying with the mandatory requirement of obtaining the previous sanction as required by sub- Section (1) of Section 14.[Para 48][217-A-B]

1.6 The impugned judgment of the Division Bench arises out of three proceedings. Two out of three are writ petitions filed by the Trustees. The first one was filed for challenging the impugned order of the Collector and the second one was filed seeking directions regarding entering the names of the Trustees in revenue records in respect of the Trust properties. The third proceeding is the Public Interest Litigation, in which there is a prayer for issuing a writ of mandamus to direct inquiry through CBI. Therefore, there was no occasion for the Division Bench to declare that the sale transactions are void, especially when the purchasers were not before the High Court. Nevertheless, it is necessary for the Registrar to exercise powers under Section 22 and call for necessary records pertaining to the alienations made by the Trustees. Thereafter, the Registrar shall exercise powers under Section 23 and decide whether any loss was caused to the Public Trust as a result of alienations and if any loss was found to have been caused, he shall quantify the amount in accordance with sub-Section (2) of Section 23. He may also consider of invoking sub-section (1) or (2) of Section 26, if found necessary.[Para 49][217-C-F]

1.7 The order of the Collector which was impugned before the High Court was passed without giving an opportunity of being heard to the Trustees of the Khasgi Trust and the purchasers. A show cause notice was issued to the Trustees by the Registrar on the basis of the complaint of the Member of the Parliament. Though the Trustees replied to the notice, even thereply was not considered by the Collector. Only on this ground, the said order ought to be set aside. As a matter of fact, the Collector had no jurisdiction to decide the issues of title as well as mismanagement of the affairs of a Public Trust. For the same reason, even the report of the Commissioner and the report of the Principal Secretary to the Chief Minister are without jurisdiction. The reports have been made in breach of the principles of natural justice without affording an opportunity of being heard to the Trustees. [Para 50][217-G-H; 218-A-B]

1.8. There was no warrant to direct inquiry through the Economic Offences Wing of the State Government as there is no finding that there was mens rea on the part of the Trustees. No finding has been recorded by the High Court based on material that the alienation made by the Trustees has resulted in causing loss to the Trust and that the entire sale consideration being diverted for personal use. The entire consideration received from the purchasers has been credited to the account of the Trust. The allegation of misappropriation can be gone into only by the Authorities underthe Public Trusts Act. Moreover, the direction issued by the High Court proceeds on the erroneous assumption that the Trustees have made misappropriation of the Government properties. There is no offence registered against the Trustees. Hence, Economic Offences Wing cannot be directed to hold an inquiry or investigation in connection with the subject matter of this proceeding. In other words, the direction given by the High Court vide the impugned Judgment in that regard will have to be held to be non est in law. Though the said direction is unwarranted, the Registrar will have to initiate necessary proceedings under the Public Trusts Act and carry them to a logical conclusion.[Para 51][218-C-F]

1.9 The impugned order of the Collector purports to decide the issue of Title of the Trust properties by holding that the properties in Part ‘B’ of the Schedule to the Trust Deed are vested in the State Government. Even assuming that there was no express authority given to the writ petitioner inthe form of a resolution of the Board of Trustees to file the writ petitions, even an individual Trustee was entitled to take proceedings for questioning such orders, which adversely affect the Trust and /or its beneficiaries. On the contrary, it is the duty of every Trustee to take such action of challenging an order holding that the properties held by the Trust are not the Trust properties. Moreover, none of the Trustees has come forward to challenge the authority of Trustee who had filed writ petitions and further proceedings. There was also a direction issued to the Economic Offences Wing to hold an inquiry about the misappropriation of the Trust property by the Trustees. Every Trustee was affected by the said direction. Therefore, in the facts of the case, the objection raised to the maintainability of the petition filed by one of the Trustees cannot be sustained.[Para 49][217-C-F]

1.10 The impugned judgment of the Division Bench cannot be sustained in toto. However, the view taken by the Division Bench that the Khasgi Trust is governed by the Public Trusts Act and no alienation of the Trust properties could be made without complying with Section 14 thereof, is affirmed. Even the order of the Single Judge cannot be sustained as he has virtually directed the rewriting of the Trust Deed. There are submissions canvassed across the Bar about the locus of the applicant in I.A.No.124266 of 2020 filed in Civil Appeals arising out of Special Leave Petition (C) Nos.12241-42 of 2020. It is not necessary for the Court to go into the said question finally. Thus, the said question is left open to be decided in appropriate proceedings. As far as Civil Appeal arising out of Special Leave Petition (C) No.19063 of 2021 is concerned, the alienation was made by the Trustees in favour of the appellant after obtaining the previous sanction of the Registrar by the order dated 16th October 1997. Therefore, the Registrar will have to make an inquiry limited to the question whether compliance of the conditions incorporated under the said order has been made by the Trustees. If there is a non-compliance, the Registrar will have to invoke the provisions of the Public Trusts Act for taking necessary action. [Para 5355][219-D-G] Indore, is a Public Trust governed by the provisions of the Madhya Pradesh Public Trusts Act, 1951. The trustees are directed to get the Khasgi Trust registered under the Public Trusts Act by making the necessary application within the stipulated period. The properties described in Part ‘B’ of the Schedule to the Trust Deed, are properties of the said Public Trust. However, alienation of the said properties can be made only by taking recourse to Section 14 of the Public Trusts Act; The Supplementary Trust Deed dated 08th March 1972 is valid. But, the Trustees of the Khasgi Trust shall be entitled to alienate the Trust Property only after complying with Section 14 of the Public Trusts Act. The direction issued by the High Court to Economic Offences Wing of the State Government to hold an inquiry was not warranted. The Registrar is directed under the Public Trusts Act, having jurisdiction over Khasgi Trust, to call for the record of the Trust relating to all the alienations made by the Trustees. After holding an inquiry as contemplated by Section 23, the Registrar after giving an opportunity of being heard to all concerned shall determine whether by virtue of the alienations made by the Trustees, any loss was caused to the Public Trust. If according to him any such loss was caused to the Public Trust, he shall decide and quantify the amount liable to be paid by the concerned Trustees to the Khasgi Trust. After holding an inquiry, if found necessary, he may invoke the power of making an application to the Court under sub-Section (2) of Section 26. Subject to the said directions, the impugned judgment of the Division Bench as well as the impugned judgment and orders of the Single Judge are set aside.[Para 56][220-A-G; 221-C]

Parsi Zoroastrian Anjuman, Mhow v. Sub Divisional Officer/The Registrar of Public Trusts and Anr. 2022 SCC Online SC 104 ; Akhil Bhartiya Upbhokta

Congress v. State of Madhya Pradesh and Ors. (2011)

5 SCC 29 : [2011] 5 SCR 77 – referred to.