Summary
The Khasgi properties of the Holkar rulers lapsed to the State in 1949 under the Covenant and were transferred in 1962 to the Khasgi Trust, whose trustees later sold some of them. On a complaint, the Collector declared the properties to belong to the State and the sales invalid. The High Court upheld him and ordered an inquiry by the Economic Offences Wing. The Supreme Court partly allowed the appeals. The Part B properties vest in the Trust, a public trust under the Madhya Pradesh Public Trusts Act, 1951 that is not exempt under Section 36(1)(a), because the government nominees lack control. It must register, and alienations need the Registrar's prior sanction under Section 14. The Collector's order lacked jurisdiction and natural justice, and the inquiry was unwarranted. The Registrar must inquire into losses under Section 23.
Issues
- Whether the properties in Part B of the Schedule to the Trust Deed of 1962 vest in the Khasgi Trust or in the State Government.
- Whether the Khasgi Trust is a public trust governed by the Madhya Pradesh Public Trusts Act, 1951, or exempt under Section 36(1)(a).
- Whether the Supplementary Trust Deed of 08.03.1972 is valid, and whether the trustees needed the Registrar's prior sanction under Section 14 to alienate trust property.
- Whether the Collector's order of 05.11.2012 and the High Court's direction for an inquiry by the Economic Offences Wing were sustainable.
- Whether writ petitions filed by one trustee alone were maintainable.
Provisions considered
- Sections 2(4), 4 and 36, Madhya Pradesh Public Trusts Act, 1951The Khasgi Trust is an express trust for public religious and charitable purposes. It is not administered by an agency under State control, since three government nominees, appointed in consultation with the Ruler, do not form a majority. Section 36(1)(a) therefore does not apply and registration is compulsory. Section 36(2) operates in a separate field. (¶¶ 34, 35, 37, 38, 39)
- Section 14, Madhya Pradesh Public Trusts Act, 1951A sale, gift, mortgage, exchange or long lease of trust immovable property is invalid without the Registrar's prior sanction. The Registrar may refuse only if the transaction is prejudicial to the trust (Parsi Zoroastrian Anjuman). (¶¶ 40, 43, 44, 45, 48)
- Sections 17, 22, 23, 26 and 27, Madhya Pradesh Public Trusts Act, 1951The Registrar may call for records, inquire into and quantify loss caused by breach of trust, surcharge the trustees, and apply to court for removal of trustees or a scheme. He was directed to exercise these powers over the alienations. (¶¶ 46, 47, 49, 56)
- Article XII, Covenant forming the United State of Gwalior, Indore and Malwa (1948)On adjudication under clause (3), the Khasgi properties lapsed to the Madhya Bharat Government, which bound the trustees. They were later transferred to the Trust on 16.07.1962 by a State-drafted trust deed and notification. (¶¶ 23, 24, 25, 30, 31, 33)
Held
- Under the 1949 adjudication under Article XII(3) of the Covenant, the Khasgi properties lapsed to the State, and the trustees had consistently accepted this. Those properties were then transferred to the autonomous Khasgi Trust by the trust deed of 1962 (drafted by the State), the handover of 16.07.1962 and the notification of 27.07.1962. The Part B properties therefore vest in the Trust, and the High Court erred in treating them as government property. (¶¶ 25, 30, 31, 32, 33)
- The Trust is a public trust within Section 2(4). Exemption under Section 36(1)(a) requires administration by an agency under State control, but the government nominees are a minority and are appointed in consultation with the Ruler. The Trust is autonomous and must be registered. The Registrar had no power to decide the question of exemption, and Section 36(2) is a separate power. (¶¶ 35, 38, 39)
- The Supplementary Trust Deed giving the trustees power to alienate is valid, since the Act itself allows alienation. That power is, however, subject to Section 14, and the trustees cannot avoid that section by deed. (¶ 41)
- Even if the Trust were exempt, the trustees hold the property in a fiduciary capacity for the public. Like public property, trust property may be sold only for the trust's benefit, by a fair and transparent process that fetches the best price (Akhil Bhartiya Upbhokta Congress). (¶¶ 42, 45)
- Apart from one sanctioned sale, the alienations were made without Section 14 sanction. However, the purchasers were not parties, so the High Court could not declare the sales void. The Registrar must examine them under Sections 22, 23 and 26. (¶¶ 45, 48, 49)
- The Collector's order was passed without hearing the trustees or purchasers, and the Collector had no jurisdiction to decide title or mismanagement of a public trust. The inquiry reports on which it relied were likewise without jurisdiction. (¶ 50)
- The direction for an inquiry by the Economic Offences Wing was unwarranted. No offence was registered, there was no finding of mens rea or diversion of sale proceeds, which were credited to the Trust, and misappropriation is a matter for the authorities under the Public Trusts Act. (¶ 51)
- A single trustee may, and indeed has a duty to, challenge an order declaring that trust properties are not trust properties. The writ petitions were therefore maintainable. The Single Judge's order, which effectively rewrote the trust deed, could not stand. (¶¶ 52, 53)
Result
Appeals partly allowed. The trust is a public trust and must apply for registration within one month. The Part B properties belong to it, but may be alienated only under Section 14, and the 1972 deed is valid subject to that section. The direction to the Economic Offences Wing was set aside. The Registrar must inquire into the alienations under Sections 22 and 23, quantify any loss, and may proceed under Section 26. For the sale to Gajanan Maharaj Sansthan, the inquiry is limited to compliance with the sanction of 16.10.1997.