Even Individual Trustee Entitled To Question Orders Which Adversely Affect Trust And /Or Its Beneficiaries: Supreme Court

The Supreme Court has recently observed that even an individual Trustee is entitled to question orders, which adversely affect the Trust and /or its beneficiaries.

The Bench of Justice A.M. Khanwilkar, Justice Abhay S. Oka and Justice C. T. Ravikumar held thus- "Even assuming that there was no express authority given to the writ petitioner in the 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."

The case revolved around the properties claimed by the Khasgi (Devi Ahilyabai Holkar Charities) Trust (Khasgi Trust) as the Trust Properties. The Khasgi Trust had challenged the Order of the Division Bench of the High Court holding that the Khasgi properties mentioned in in Part 'B' of the Schedule to the Trust Deed continued to be vested in the State Government and therefore, the Trustees had no authority to alienate the same.

Senior Advocates Mukul Rohatgi, and A.M. Singhvi, appearing for Khasgi Trust raised the contention that the charities which were already dedicated to the public, could not lapse to the State Government.

It was submitted that the properties mentioned in Part 'B' of the Schedule, are the properties vested in the Khasgi Trust, as per various clauses of the Trust Deed.

Senior Advocate P. S. Patwalia appearing for the purchaser of Holkar Bada submitted that the Sale Deeds, under which Holkar Bada was sold, were not challenged in any proceedings before any competent Court.

Advocate Prashant Bhushan appearing for the applicant intervenor submitted that apart from the fact that the Trustees had no authority to sell the property described in Part 'B' of the Schedule to the Trust Deed, the documents on record show that the Trust was getting good income and therefore, there was no necessity of selling the said property known as Holkar Bada.

Additional Solicitor General Balbir Singh on behalf of the state of Madhya Pradesh submitted that only one Trustee of the Khasgi Trust -S. C. Malhotra had filed the two writ petitions subject matter of these Civil Appeals and therefore, the same were not maintainable.

He submitted that in terms of the adjudication made in accordance with Article XII of the Covenant, the Khasgi properties vested in the State Government and thereafter, the State Government was not divested of the said properties.

The Supreme Court firstly noted that the properties part of 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.", the Court held.

The Court also had to decide upon whether the provisions of the Public Trusts Act applied to the Khasgi Trust. To which the Court held that Clause (a) of Sub-Section (1) of Section 36 Public Trusts Act- entailing exemption from the application of the said act, has no application. The Court held that the Khasgi Trust cannot claim to be covered under the excepted category in clause (a) of sub-section (1) of Section 36.

The Court also set aside the Order of the High Court directing investigation against the trustees (Khasgi Trust) by the economic offences wing over alleged misappropriation of government properties.

"We hold that the direction issued by the High Court to Economic Offences Wing of the State Government to hold an inquiry was not warranted", the Bench observed.

The Court directed the Registrar under the Public Trusts Act to call for the record of the Trust and hold an inquiry relating to all the alienations made by the Trustees.

The Court further held that the Registrar may take such other action and initiate such other proceedings which are warranted by law.

However, as regards the alienation made in favour of Gajanan Maharaj Sansthan, the Court held that after calling for the record, the Registrar will hold an inquiry limited to the issue whether the alienation was made only after complying with the conditions incorporated and that if he finds after holding an inquiry that compliance was not made with any of the conditions, he shall initiate appropriate proceedings in accordance with the Public Trusts Act.

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