Hon. S.C. -A Charitable Trust's Informed decision to Sell of Property cannot be questioned : Adv. ROHiT ERANDE. ©
“So long as the decisions are well informed and grounded, any organization which is self-governed, the interests of the trust are those defined by its members and it cannot be subjected to overarching state control.”
A path breaking Judgment of Hon’ble Apex court while upholding the informed decision of a Charitable Trust to sell off its properties for the benefit of the Trust.
Adv. Rohit Erande. B.Com, LLM, Pune.©
Introduction :
In a recent and one could call as a path breaking judgment1, 3 judges bench2 of Hon’ble Supreme Court of India was pleased to hold that, under the provisions of the Madhya Pradesh Public Trusts Act, 1951 & Rules 1962, the Registrar is not empowered to prescribe its own notions as to what is beneficial and what is prejudicial to the Public trust, and as a result the Registrar cannot put unreasonable and unilateral restrictions on the sale of the Trust property, which was otherwise in dilapidated condition and fetching no income but causing recurring expenses. It was further held that A Larger Bench of Justice observed that any organization which is self-governed, cannot be subjected to overarching state
1 Parsi Zoroastrian Anjuman, Mhow Vs. The Sub Divisional Officer/The Registrar of Public Trusts &Anr. [Civil Appeal No.00490/2022 arising out of SLP (C) No. 1150 of 2019],decided on 28/01/2022.
2 Hon. Justice Uday Umesh Lalit, Hon. Justice Ravindra Bhatt and Hon. Justice Bela M. Trivedi
control, and as long as its decisions are well informed, and grounded on relevant considerations, the interests of the trust are those defined by its members.
Facts in Brief :
1. The Appellant, Parsi Zoroastrian Anjuman (Appellant) was registered as a public trust under the provisions of the Madhya Pradesh Public Trusts Act, 1951 (said Act), whose membership was made up exclusively of members of the Parsi community at Mhow, M.P.. On 15.05.2011, Trust Scheme was revisited and it was decided to liquidate the assets and immovable properties of the Anjuman which have taken vacant and utilize the proceeds of the objects of the Trust and for the benefits of Parasi and Irani Zoroastrian Community.
2. Subsequently in a meeting dated 14.12.2014, the members of the trust's Managing Committee unanimously agreed that five of its immovable properties should be sold and this decision was consented to Parsi Zoroastrian Anjuman community, As a follow-up, the proposal was placed before a general meeting of all members of the trust on 19.01.2015 in which a majority of members supported the Managing Committee's decision to sell the five items of property and in addition thereto, the Trust had also circulated a write-up called as “Vision document” mentioning interalia therein the
existing income, expenditure, and the likely projection incase the property if sold and how the sale proceeds will be utilized.
3. Accordingly, the trust applied U/s 14 of said Act, with the Registrar of Public Trusts for previous sanction for the sale of the five said properties. One of the member viz. Ms. Pervin Rumi Jehangir took various objections over the decision of the Trust, to which the Trust filed its written submissions mentioning that the properties would be sold after due and proper valuation and would be under the supervision of the Court and already the yearly expenses of maintaining these properties have reached upto Rs.26 lakhs and the Rental income from the tenants is meager to reach out the expenses.
4. However, after hearing of the Parties, the Registrar was pleased to reject said application and held that no evidence to show that steps have been take to repair the properties and there would be adverse effect from permission to sell the property on interest of the Trust. Thus aggrieved by the said order, the Trust knocked the doors of Hon. M.P. High Court, Indore Bench, but Hon. Single Judge also upheld the Registrar’s order, observing that record disclosed that the property sought to be sold were all old and that they had been donated by the members of the Parsi community and it was also observed that properties should be protected to ensure that the rich cultural heritage of the Parsis which is still alive in the township of Mhow, is not destroyed by selling it to builders and to other persons at throwaway price.
5. Hence the matter reached to the Apex Court of the India. The Ld. Sr. Advocate Mr. A.K. Chitale appeared for the Trust and the Respondents were represented by ld. Sr. Advocate Mr. Huzefa Ahemadi.
6. Contentions in brief before the Hon. Apex Court :
Of the Trust :
a. Firstly, the decision to sell off the properties was taken unanimously. Unlike Section 14, the Bombay Trusts Act, by Section 36 grants independent powers to the Charity Commissioner to impose conditions which were thought appropriate "regard being had to the interest, benefit or protection of the Trust". Unlike Section 36 of the Bombay Public Trusts Act, which conferred intrusive and pervasive supervisory powers upon the Registrar in regard to applications seeking approval for transfer or alienation of immovable property of public trusts, Section 14 of the Act, in the present instance, conferred extremely limited powers.
b. In the absence of any restrictive condition or external limiting factors located in a statute, the Registrar could not have validly withheld the sanction. Secondly, of the 15 immovable properties owned by the trust, only 5 were proposed to be sold. Further the sale would have resulted in income of Rs. 83 lakhs against the present income of Rs.20 lakhs.
c. It was also pointed out that 2nd Respondent’s father also took decisions previously to sell off some of the Trust properties when he was the President of the Trust..
Of the Respondents.
a. The Registrar's determination that the trust's application for transfer of five immovable properties was prejudicial to its interest was based upon an independent and objective consideration of the materials placed before her.
b. It was further highlighted that by virtue of Rule 9(2), the Registrar is empowered to make necessary enquiry and by Rule 9(3), the Registrar may impose conditions "as he may deem fit",
Held :
a. After considering the submissions and after going through the records, the Hon’ble Bench set aside both the impugned orders of the Registrar and that of the High Court.
b. Their Lordships compared the provisions of Bombay Public Trust Act (Sec.36) and provisions of the Madhya Pradesh Public Trusts Act, 1951 (Sec.14 and Rule 9).
c. It was held that the language of the Sec.14 clearly indicate that the grant or refusal of sanction by the Registrar have to be based on either "the directions in the instrument of trust", or "any direction given under M.P. Public Trusts Act or any other law by any court". The discretion thus, is relatable to directions in the trust document, or any provision of the Act, or any other law as ordered (or directed) by any court. It was held that “ Therefore, the Registrar, is not empowered to read into it her own notions of what is beneficial and what is prejudicial to the trust. The refusal has to be specific to the requirement of law, wherever such law clearly stipulates so, or any specific provision of the trust document”.
d. It was also observed that since power to impose conditions is absent in the main provision of the parent enactment, i.e., Section 14 (1) or (2), the provisions of Sub rule 9(3) goes beyond the power and cannot be looked into in isolation.
e. While distinguishing the case laws cited by the Respondents as same were in the context of Section 36 of the Bombay Public Trust Act, which confers decidedly wider powers on the Commissioner than Sec.14 of the M.P. Act.
For instance, in the case of Chenchu Rami Reddy &Anr. V/s. Govt. of Andhra Pradesh, it was held that in that case the Section 74 (1)
(c) of the Andhra Pradesh Charitable and Hindu Religious Endowments Act, 1966 obliged that public trust property had to be put to auction by the Commissioner (of trusts). In that case, the property of the trust was sought to be sold by private negotiation, despite an offer of three times more consideration, by another party.
f. In the case of Bhaskar Laxman Jadhav &Ors. v. Karamveer Kakasaheb Wagh, the decision to sell of the property was taken in 1994, but the matter was prolonged for some reason or the other and in the year 2006 said decision was tried to be executed. The hon. Bombay high required the Charity Commissioner to re- examine the matter afresh, and also take into consideration altered circumstances, i.e., the passage of time had led to a considerable increase in the value of the property.
It was held that the Bombay law confers a wider supervisory role; however, such a wide power is not available to the Registrar, under the M.P Public Trusts Act.
g. Control of Government over Public Charities : Must be reasonable and sound.
i. Further, their Lordships dealt with very important point of Public control of charities (whether social or religious), which has been recognized in our country for over a century.
ii. Such regulation does not mean that the state is allowed to appropriate monies which rightly belong to the endowment.
iii. The aim of public control is to ensure that the trust is administered efficiently and smoothly.
iv. The state interest is that far, and no more; it cannot mean that the state can dictate what decisions can or cannot be taken.
v. It is for this reason, that provisions like Section 36 clearly enunciate a principle that the Commissioner can impose such conditions as may be appropriate. However, the statute in the present case (the M.P. Public Trusts Act) does not contain such a power to impose conditions
vi. Other than these considerations, the principle of autonomy and democratic decision-making cannot be undermined. “The interests of the trust are those defined by its members”
h. Lastly it was observed that, “Any organization which is self- governed, cannot be subjected to overarching state control. As long as its decisions are well informed, and grounded on relevant considerations, the interests of the trust are those defined by its members” and further it was held that
“Any measure of public control enacted through express stipulations in law, should not be expanded to such an extent that the right to freedom of association, under Article 19 (1) (c), is reduced to an empty husk, bereft of meaningful exercise of choice”.
i. Thus, it was observed that the Trust has taken proper and informed decision to sell the properties which was a consequence of a two layered process, where all members participated and decided to dispose of the property.
j. The decision was based on a realistic assessment of the trust's existing and future liabilities, the obligations towards charity, aid to senior citizens, education, medical aid, and religious ceremonies, imposed by the trust instrument.
k. Lastly, the Hon. Apex Court permitted the Trust to sell the properties but subject to fresh valuation of each of the properties, which is proposed to be sold. This valuation should be disclosed to the Registrar, who can facilitate the implementation of the decision to sell to the highest bidder, through public tender.
Conclusion :
This is certainly an important judgment that supported the “informed” and “conscious” decision to dispose of the Trust properties, for the benefit of the Trust. Their Lordships have clearly held that too much of control over Public Charities might put fetters on the growth of the Trusts. It is would be incorrect to presume that every decision to sell off the properties carries a suspicion at the backdrop. The Trustees of the Trust are require to maintain the property and at the same time they have been permitted under various State Trust laws to alienate the Trust properties “for the benefit of the Trust”. Every State has enacted its own Statutes relating to the Charitable Trusts. As we have seen in the present case, the Registrar’s powers are limited as compared with wide powers bestowed upon a Charity commissioner under Sec.36 of Maharashtra (previously Bombay) Public Trust Act and I am afraid, but in future this may be the ground to test the veracity of Sec. 36 of the said Act which gives wide powers to the Charity Commissioner, whereas their Lordships say, subject to soundness of the decisions, the interests of the trust are those defined by its members .
However, if a Trust is a private Trust, it shall be govern by the Indian Trust Act, 1882. In any case, facts of each case play very important role and same shall be governed by the respective Statutes.
With kind regards
(Adv. Rohit Erande) Pune.
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