State Cannot Dictate What Decisions Can Or Cannot Be Taken By A Public Trust: Supreme Court

"The aim of public control is to ensure that the trust is administered efficiently and smoothly. The state interest is that far, and no more; it cannot mean that the state can dictate what decisions can or cannot be taken."

A Bench comprising Justices U.U. Lalit, S. Ravindra Bhat and Bela M. Trivedi allowed an appeal assailing the order of the Division Bench of the Madhya Pradesh High Court, which upheld the decision of the Registrar of Public Trusts to reject the application filed by a public trust seeking prior approval to sell its properties.  

Factual Background

The Managing Committee of the appellant (Parsi Zoroastriam Anjuman, Mhow), a public trust registered under the Madhya Pradesh Public Trust Act ("1951 Act") agreed to sell off five of its immovable properties. The proposal was accepted in a general meeting and a Vision Documents pertaining to the income, expenditure and future projections of the utilisation of the money received from selling the properties was circulated. The appellant applied for prior-sanction before the Registrar of Public Trusts ("Registrar") as per the terms of Section 14 of the 1951 Act. Considering the inordinate delay in taking up the application, the appellant approached the Madhya Pradesh High Court, which directed the Registrar to decide within 45 days. Respondent No. 2 (Ms. Jehangir) was notified as she had previously objected to the proposal. Eventually, the Registrar rejected the application stating that the sale would adversely affect the interest of the Trust. The Single Bench as well as the Division Bench of the Madhya Pradesh High Court upheld the decision of the Registrar.

Contentions raised by the appellant

Senior Advocate, Mr. A.K. Chitale appearing on behalf of the Trust argued that unlike Section 36 of the Bombay Public Trust Act, Section 14 of the 1951 Act conferred limited power to the Registrar to accept or reject the application seeking prior approval. It was asserted that the grant of approval was only subjected to 'the directions in the instrument of trust' or 'the directions given under the 1951 Act or other law'. Mr. Chitale submitted that the decision to sell was in the interest of the trust as it would have generated an income of Rs. 83 crore, which would have been spent on charity, education, aid of senior citizens, maintenance of trust buildings, increased salary of employees and would have boosted the religious obligations of the trust.

Contentions raised by the respondent

Senior Advocate, Mr. Huzefa Ahmadi appearing on behalf of Ms. Jehangir urged the Apex Court to not interfere with the concurrent findings of the Courts below in exercise of power under Article 136. He argued that as per Rule 9 of the M.P. Trust Rules, 1962, the Registrar is to consider if the trust deed contains a stipulation to alienate property; the necessity for alienation; and whether it would be in the interest of the trust. Moreover, he contended that Rule 9(3) permitted the Registrar to impose conditions as they deem fit, giving them ample discretion to act in the best interest of the trust, which is paramount as elucidated in Chenchu Rami Reddy & Anr. v. Govt. of Andhra Pradesh & Ors.(1986) 3 SCC 391; Bhaskar Laxman Jadhav & Ors. v. Karamveer Kakasaheb Wagh (2013) 11 SCC 531; and Mehrwan Homi Irani & Anr. v. Charity Commissioner Bombay and Ors. (2001) 5 SCC 305.

Analysis by the Supreme Court

The Court observed that though Section 14(1) imposes a precondition to seek the Registrar's approval before selling property of the Trust, Section 14(2) stated that they shall not refuse sanction unless the alienation is prejudicial to the interest of the public trust. The Court further noted that grant of sanction was only subjected to 'the directions in the instrument of trust' or 'the directions given under the 1951 Act or other law' and no additional conditions could have been imposed by invoking Rule 9(3). It was clarified that the contours of the Rules cannot go beyond the scope of the parent provision. The Court was of the view that the State cannot dictate what decisions can or cannot be taken by a public trust. The limited scope of oversight is to see to it that the valuable assets of the public trusts do not go to waste. Acknowledging the limited scope of Section 14, the Court opined -

"…the principle of autonomy and democratic decision-making cannot be undermined. 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. 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."

Considering the decision to sell the five immovable properties were taken in a democratic and transparent manner; and in the best interest of the Trust, the decision of the Registrar and that of the Courts below were set aside by the Apex Court.

Case Name: Parsi Zoroastrian Anjuman, Mhow v. The Sub-Divisional Officer/The Registrar of Public Trusts And Anr.

Citation: 2022 LiveLaw (SC) 96

Case No. and Date: Civil Appeal No. 490 of 2022 | 28 Jan 2022

Corum: Justices U.U. Lalit, S. Ravindra Bhat and Bela M. Trivedi

Counsel for the Appellant: Senior Advocate, Mr. A.K. Chitale; Advocate-on-Record Mr. Niraj Sharma

Counsel for the Respondent: Senior Advocate, Mr. Huzefa Ahmadi; Advocate-on-Record Mr. Sahil Tagotra.

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