Supreme Court Clarifies Limits on Registrar’s Power in Public Trust Property Sales: Parsi Zoroastrian Anjuman vs. Registrar of Public Trusts (2022)

Introduction

Date of the Judgment: 28 January 2022

Citation: (2022) INSC 87

Judges: Uday Umesh Lalit, J., S. Ravindra Bhat, J., Bela M. Trivedi, J.

Can a Registrar of Public Trusts reject a public trust’s decision to sell its property if the decision was made democratically and transparently by its members? The Supreme Court of India recently addressed this question, clarifying the extent of the Registrar’s powers under the Madhya Pradesh Public Trusts Act, 1951. This case revolves around a trust seeking to sell some of its properties to better manage its finances and fulfill its charitable objectives. The Court examined the limits of the Registrar’s authority to interfere with the trust’s decisions. The judgment was authored by Justice S. Ravindra Bhat, with Justices Uday Umesh Lalit and Bela M. Trivedi concurring.

Case Background

The Parsi Zoroastrian Anjuman, Mhow (the trust), a public trust registered in 1973 under the Madhya Pradesh Public Trusts Act, 1951, sought to sell five of its immovable properties. The trust’s membership consists exclusively of members of the Parsi community in Mhow. A revisited scheme for the trust, approved by the District Judge, Mhow on 15 May 2011, allowed the Managing Committee to liquidate assets with the consent of a majority of the General Body Members and the specific concurrence of the FPZAI (apex body of the Parsi community). On 14 December 2014, the Managing Committee unanimously agreed to sell five properties, a decision supported by a majority of the trust members in a general meeting on 19 January 2015. The trust prepared a “Vision Document” outlining the financial implications of the sale and the proposed use of the funds.

Timeline

Course of Proceedings

The trust applied to the Registrar of Public Trusts under Section 14 of the Madhya Pradesh Public Trusts Act, 1951, for permission to sell the properties. After the application languished, the trust filed a writ petition in the Madhya Pradesh High Court, which directed the Registrar to decide within 45 days. The Registrar rejected the application on 10 November 2017, citing concerns that the trust was selling properties to meet expenses and that expert advice was needed to manage finances. The trust’s appeal to the High Court was also dismissed. The single judge of the High Court upheld the Registrar’s decision, stating that the trust should have tried to repair the buildings instead of selling them. The Division Bench of the High Court also dismissed the trust’s appeal.

Legal Framework

The case primarily concerns Section 14 of the Madhya Pradesh Public Trusts Act, 1951, which governs the sale of property belonging to a public trust.

Section 14 of the Madhya Pradesh Public Trusts Act, 1951 states:

“14. Previous sanction of Registrar, in cases of sale, etc., of property belonging to a public trust. (1) Subject to the directions in the instrument of trust or any direction given under this or any other law by any Court, –
(a) no sale, mortgage, exchange of gift of any immovable property; and
(b) no lease for a period exceeding seven years in the case of agricultural land or for a period exceeding three years in the case of non -agricultural land or building;
belonging to a public trust, shall be valid without the previous sanction of the Registrar.
(2) The Registrar shall not refuse his sanction in respect of any transaction specified in sub -section (1) unless such transaction will, in his opinion, be prejudicial to the interests of the public trust.”

Rule 9 of the M.P. Trust Rules, 1962, outlines the procedure for applications under Section 14:

“9. Applications under Section 14 for sanction of alienations. –
(1) Every application for sanction of an alienation shall contain information inter alia on the following points, –
(i) whether the instrument of trust contains any directions as to alienation of immovable property;
(ii) what is the necessity for the proposed alienation;
(iii) how the proposed alienation is in the interest of the public trust; and
(iv) in the case of a proposed lease, the terms of the past leases, if any.
Such application shall be accompanied by a valuation report of an expert.
(2) The Registrar, before according or refusing sanction, may make such inquiry as he may deem necessary’
(3) In according sanction, the Registrar may impose such conditions, as he may deem fit, if he is of the opinion that the grant of sanction to the proposed alienation without imposing such conditions will be prejudicial to the interests of the public trust.”

The Court emphasized that the Registrar’s power is subject to the directions in the trust instrument or any court order and that the Registrar cannot refuse sanction unless the transaction is prejudicial to the trust’s interests.

Arguments

Arguments on behalf of the Trust:

• The Registrar’s power under Section 14 of the Madhya Pradesh Public Trusts Act, 1951 is limited, unlike the broad powers given to the Charity Commissioner under Section 36 of the Bombay Public Trusts Act.
• Section 14(1) conditions the grant or withholding of approval to “the directions in the interest of Trust” or any direction given under “this or any other law by any Court.”
• The Registrar cannot withhold sanction unless there are specific restrictions in the Trust Deed, statute, or court directions.
• Section 14(2) requires an assessment of whether the transfer is prejudicial to the trust’s interest, based on the materials presented.
• The trust had a well-thought-out plan to sell five of its fifteen properties, invest the proceeds, and use the increased income for charitable purposes.
• The trust’s proposal was transparent, with properties to be valued and sold to the highest bidder through sealed tenders.
• The second respondent’s objection was baseless, as previous sales of trust properties had occurred during her father’s tenure as President of the trust.

Arguments on behalf of the Respondent:

• The Registrar’s decision was based on an independent and objective consideration of the materials.
• Rule 9 of the M.P. Trust Rules, 1962, requires consideration of whether the trust deed allows alienation, the necessity for alienation, and whether it is in the trust’s interest.
• Rule 9(2) empowers the Registrar to make necessary inquiries, and Rule 9(3) allows the Registrar to impose conditions to protect the trust’s interests.
• The Registrar was not satisfied with the proposal’s details regarding the sale, valuation, and investment of proceeds.
• The Registrar believed that the trust could augment income and maintain properties without selling them.
• The best interests of a public trust are paramount, especially when long-term alienation of property is involved.

Innovativeness of the argument: The trust innovatively argued that the Registrar’s power was limited and that the decision to sell properties was made democratically and transparently by its members, which should be respected.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section but the core issue was:

1. Whether the Registrar of Public Trusts has the power to reject an application for sale of trust property under Section 14 of the Madhya Pradesh Public Trusts Act, 1951, when the decision to sell was made by the trust’s members democratically and transparently, and the proposed sale is not prejudicial to the trust’s interests as per the trust deed or any law.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Chenchu Rami Reddy & Anr. v. Govt. of Andhra Pradesh & Ors. (1986) 3 SCC 391: The Court distinguished this case, noting that it involved a private sale, whereas the trust in the present case proposed a public tender.
• Mehrwan Homi Irani & Anr. v. Charity Commissioner Bombay and Ors. (2001) 5 SCC 305: The Court distinguished this case, highlighting that it dealt with the broader powers of the Charity Commissioner under the Bombay Public Trusts Act, which are not comparable to the Registrar’s powers under the M.P. Act.
• Bhaskar Laxman Jadhav & Ors. v. Karamveer Kakasaheb Wagh (2013) 11 SCC 531: The Court distinguished this case, noting that it involved a delay in the sale of trust property and did not directly relate to the Registrar’s powers.
• Cyrus Rustom Patel v. Charity Commissioner (2018) 14 SCC 761: The Court distinguished this case, emphasizing that it concerned the wide supervisory powers of the Charity Commissioner under the Bombay Public Trusts Act, which are not available to the Registrar under the M.P. Act.
• Section 14 of the Madhya Pradesh Public Trusts Act, 1951: The Court interpreted this section to mean that the Registrar’s power is limited and subject to the directions in the trust instrument or any court order.
• Rule 9 of the M.P. Trust Rules, 1962:The Court interpreted this rule to mean that the Registrar can impose conditions only if the instrument of public trust, or any law relating to public trusts, results in a court direction to such effect.

What weighed in the mind of the Court?

The Court was primarily influenced by the following factors:

• The democratic and transparent decision-making process of the trust.
• The limited scope of the Registrar’s power under Section 14 of the Madhya Pradesh Public Trusts Act, 1951.
• The fact that the trust’s decision was based on a realistic assessment of its financial situation and charitable obligations.
• The absence of any specific restrictions in the trust deed or any law that would prevent the sale.
• The need to respect the autonomy of self-governed organizations.

Fact:Law Ratio

The court gave a higher weightage to the factual aspects of the case, such as the trust’s democratic decision-making process and financial assessment, while also considering the legal framework and the limitations on the Registrar’s powers.

Logical Reasoning:

The Court considered alternative interpretations but rejected them. The court rejected the interpretation that the Registrar had broad powers to impose conditions, as this would be contrary to the limited powers under Section 14. The court also rejected the argument that the Registrar could reject the application based on her subjective notion of what is beneficial to the trust, as this would undermine the trust’s autonomy.

The Court held that the Registrar’s rejection was unjustified because the trust’s decision was made democratically, transparently, and based on a realistic assessment of its financial situation. The Court emphasized that the Registrar’s power is limited and subject to the directions in the trust instrument or any court order.

The Court’s decision was based on the following reasons:

• The Registrar’s power under Section 14 is limited and subject to the directions in the trust instrument or any court order.
• The trust’s decision to sell the properties was made through a democratic and transparent process.
• The trust’s decision was based on a realistic assessment of its financial situation and charitable obligations.
• The Registrar cannot impose conditions or reject the application based on her subjective notions of what is beneficial to the trust.
• The principle of autonomy and democratic decision-making of self-governed organizations should be respected.

The Court did not have any dissenting opinions.

The Court’s reasoning was based on a careful interpretation of Section 14 of the Madhya Pradesh Public Trusts Act, 1951, and the relevant rules. The Court emphasized that the Registrar’s power is limited and that the trust’s decision should be respected as long as it is made democratically and transparently. The Court also considered the principle of autonomy and democratic decision-making of self-governed organizations.

The decision has potential implications for future cases involving the sale of public trust properties. It clarifies the limits of the Registrar’s power and emphasizes the importance of respecting the autonomy of self-governed organizations. This judgment will likely influence how Registrars and other authorities approach similar applications in the future.

The Court did not introduce any new doctrines or legal principles but clarified the existing legal framework and emphasized the importance of respecting the autonomy of self-governed organizations.

The Court analyzed arguments for and against the Registrar’s decision and rejected the legal points made by the Registrar, emphasizing that the Registrar’s power is limited and that the trust’s decision should be respected as long as it is made democratically and transparently.

The Court quoted the following from the judgment:

• “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. Therefore, the Registrar, is not empowered to read into it her own notions of what is beneficial and what is prejudicial to the trust.”
• “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.”
• “Disregarding all this disclosed transparency, the Registrar, on the basis of her subjective notion of what constituted best interests of the trust, could not have rejected the application, as she did.”

Key Takeaways

• The Registrar’s power to reject a public trust’s application for the sale of its property is limited under Section 14 of the Madhya Pradesh Public Trusts Act, 1951.
• The Registrar cannot impose conditions or reject the application based on their subjective notions of what is beneficial to the trust.
• Decisions made democratically and transparently by the members of a public trust should be respected.
• Public trusts have a degree of autonomy, and state control should not undermine their right to self-governance.
• The Registrar should focus on ensuring that the trust’s decisions are well-informed and grounded on relevant considerations.

This judgment is likely to have a significant impact on how public trusts operate and how their decisions are reviewed by authorities. It reinforces the importance of democratic decision-making within trusts and limits the scope of state intervention in their affairs.

Directions

The Supreme Court directed that the trust may proceed to implement its decision to sell the properties, but subject to a fresh valuation of each property. This valuation must be disclosed to the Registrar, who will facilitate the sale to the highest bidder through a public tender.

Development of Law

The ratio decidendi of the case is that the Registrar’s power to grant or withhold sanction for the sale of public trust property under Section 14 of the Madhya Pradesh Public Trusts Act, 1951, is limited and subject to the directions in the trust instrument or any court order. The Registrar cannot impose conditions or reject the application based on their subjective notions of what is beneficial to the trust. This judgment clarifies the scope of the Registrar’s powers and emphasizes the importance of respecting the autonomy of self-governed organizations. There is a change in the previous position of law as the court has clarified the limited scope of the Registrar’s power and has emphasized on the autonomy of trusts.

Conclusion

In conclusion, the Supreme Court’s judgment in the case of Parsi Zoroastrian Anjuman vs. The Sub Divisional Officer/The Registrar of Public Trusts clarifies the limited scope of the Registrar’s power under Section 14 of the Madhya Pradesh Public Trusts Act, 1951. The Court emphasized that the Registrar cannot reject a trust’s decision to sell its property if the decision was made democratically and transparently by its members, and the proposed sale is not prejudicial to the trust’s interests as per the trust deed or any law. The Court also underscored the importance of respecting the autonomy of self-governed organizations.

Category

Parent Category: Public Trust Law

Child Categories:

• Section 14, Madhya Pradesh Public Trusts Act, 1951
• Sale of Trust Property
• Registrar of Public Trusts
• Autonomy of Trusts
• Democratic Decision Making in Trusts

FAQ

Q: What was the main issue in the Parsi Zoroastrian Anjuman case?

A: The main issue was whether the Registrar of Public Trusts could reject a public trust’s decision to sell its property when the decision was made democratically and transparently by its members.

Q: What did the Supreme Court decide about the Registrar’s power?

A: The Supreme Court clarified that the Registrar’s power is limited and subject to the directions in the trust instrument or any court order. The Registrar cannot impose conditions or reject the application based on their subjective notions of what is beneficial to the trust.

Q: What does this judgment mean for public trusts?

A: This judgment means that public trusts have a degree of autonomy and that their decisions, when made democratically and transparently, should be respected. The state’s control should not undermine their right to self-governance.

Q: What did the Supreme Court say about the decision-making process of the trust?

A: The Supreme Court emphasized that the decision to sell the properties was made through a democratic and transparent process, where all members participated and decided to dispose of the property, and that this should be respected.

Q: What are the practical implications of this judgment?

A: The practical implications include that Registrars and other authorities should focus on ensuring that the trust’s decisions are well-informed and grounded on relevant considerations, rather than imposing their own subjective views. It also means that public trusts have more autonomy in managing their affairs.