Supreme Court clarifies the effect of non-registration of public trusts on lawsuits: Public Trust Shri Geeta Satsang Bhawan vs. Nand Lal & Ors. (25 July 2017)

Introduction

Date of the Judgment: 25 July 2017
Citation: (2017) INSC 673
Judges: R.K. Agrawal, J. and Abhay Manohar Sapre, J.
Can a public trust that is not registered under the relevant state law pursue a legal case? The Supreme Court of India addressed this crucial question in a case involving a public trust in Rajasthan. The court clarified the interpretation of Section 29 of the Rajasthan Public Trusts Act, 1959, which deals with the bar on suits by unregistered trusts. This judgment provides clarity on the procedural aspects of lawsuits filed by public trusts, ensuring that the legal process is followed correctly. The judgment was authored by Justice Abhay Manohar Sapre.

Case Background

The Public Trust Shri Geeta Satsang Bhawan (the appellant) was formed on 31 July 1980. A piece of land was allotted to Shri Ramanand, the chairman of the trust, on 14 May 1982, and he constructed shops on it. Shop No. 7 was rented to Nand Lal (respondent No. 1) on 1 October 1985, and Shop No. 11 was rented to Nand Lal, Jitendar Rai Mathur, and M/s Mayur Auto Repairs on 1 October 1989. The rent for both shops was increased on 1 October 1996. After the rent enhancement, the respondents stopped paying rent. The appellant sent notices on 17 October 1998 and 22 October 1998, to terminate the tenancies of Shop No. 11 and Shop No. 7, respectively, effective midnight of 30 November 1998. The respondents paid rent up to November 1998 and damages for December 1998, but did not vacate the shops. Consequently, the appellant filed suits for eviction and recovery of rent on 20 January 1999.

Timeline

Course of Proceedings

The Trial Court ruled in favor of the appellant on 27 October 2004, ordering the eviction of the respondents and payment of damages. The respondents appealed, and the Appellate Court framed additional issues, including whether the trust was exempt from the Rent Act, whether the tenancy termination was valid, and whether the trust’s registration was necessary. On 30 November 2005, the Appellate Court ruled against the appellant, stating that the suit was not maintainable due to the trust’s lack of registration under the Rajasthan Public Trust Act, 1959. The High Court dismissed the appellant’s second appeals on 19 September 2006. The Supreme Court heard the appeal by special leave.

Legal Framework

The key legal provision in this case is Section 29 of the Rajasthan Public Trusts Act, 1959, which states:

“Section 29. Bar against suits by un-registered trust-(1) No suit to enforce a right on behalf of a public trust which is required to be registered under this Act but has not been so registered shall be heard or decided in any Court.
(2) The provisions of Sub-section(1) shall apply to claim of set off or other proceeding to enforce a right on behalf of such public trust.”

This section bars courts from hearing or deciding suits by unregistered public trusts. The Supreme Court interpreted this provision to mean that while an unregistered trust can file a suit, the court cannot hear or decide it until the trust is registered. The bar applies to the “hearing and deciding” of the suit, not to the filing of the suit itself. Once the trust is registered, the bar is lifted, and the court can proceed with the case.

Arguments

Appellant’s Submissions:

• The appellant argued that the Trial Court had wrongly decided the suit on merits despite the bar under Section 29 of the Rajasthan Public Trusts Act, 1959.
• They contended that the First Appellate Court and the High Court should not have dismissed the suit outright. Instead, they should have stayed the proceedings to allow the trust to get registered.
• The appellant highlighted that the trust had since been registered on 7 February 2013, and therefore, the suit should be heard on merits.

Respondents’ Submissions:

• The respondents did not make any specific submissions, as the focus of the case was on the interpretation of Section 29 of the Rajasthan Public Trusts Act, 1959, and the procedural aspects of the case.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the main issue addressed by the Court was:

1. Whether a suit filed by an unregistered public trust is maintainable under Section 29 of the Rajasthan Public Trusts Act, 1959, and what is the effect of subsequent registration of the trust during the pendency of the appeal.

Treatment of the Issue by the Court

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

Authorities

The Supreme Court did not cite any previous cases or books in this judgment. The primary authority considered was Section 29 of the Rajasthan Public Trusts Act, 1959.

The court considered the following legal provision:

✓ Section 29 of the Rajasthan Public Trusts Act, 1959: The court interpreted this section to mean that a suit filed by an unregistered trust cannot be heard or decided until the trust is registered.

Judgment

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

How each authority was viewed by the Court?

✓ Section 29 of the Rajasthan Public Trusts Act, 1959: The court interpreted this section to mean that a suit filed by an unregistered trust cannot be heard or decided until the trust is registered. The court emphasized that the bar applies to the “hearing and deciding” of the suit, not to the filing of the suit itself. The court held that the bar is lifted once the trust is registered, and the court can then proceed with the case.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the interpretation of Section 29 of the Rajasthan Public Trusts Act, 1959. The Court emphasized the procedural aspect of the law, stating that the bar on suits by unregistered trusts is not absolute. The Court reasoned that the purpose of Section 29 is to ensure that public trusts comply with the registration requirements before seeking legal remedies, but it does not prevent them from pursuing their rights once they have registered. The court also considered the fact that the trust had been registered during the pendency of the appeal, which removed the impediment to the suit being heard on merits.

Logical Reasoning:

The Court considered the following points:

• The Trial Court had no jurisdiction to hear and decide the suit because the Trust was not registered at the time of filing the suit.
• The First Appellate Court and the High Court should have stayed the proceedings to allow the Trust to register instead of dismissing the suit outright.
• The registration of the Trust during the pendency of the appeal removed the bar under Section 29 of the Act, and the suit could now be heard on merits.

The Supreme Court’s decision was unanimous. The Court did not consider any alternative interpretations of Section 29 of the Rajasthan Public Trusts Act, 1959, but focused on the literal interpretation of the provision. The Court held that the bar under Section 29 is not absolute and is lifted once the trust is registered. The Court also emphasized that the purpose of the law is to ensure that public trusts comply with the registration requirements before seeking legal remedies, but it does not prevent them from pursuing their rights once they have registered.

The Court quoted the following from the judgment:

“Section 29 creates a bar “for hearing and deciding a suit” filed by the public Trust for enforcement of any of their rights, if the said Trust is not registered under the Act. The bar, therefore, applies for “hearing and deciding” a suit and not in filing the suit.”

“A fortorari, the moment the Trust is registered under the Act, the Trial Court would assume the jurisdiction to hear and decide the suit on merits. The bar created under Section 29 of the Act for “hearing and deciding” the suit is then lifted and ceases to apply to the proceedings in the suit.”

“In our opinion, the Trial Court was, therefore, wholly unjustified in proceeding to hear and decide the suit on merits by passing a judgment/decree. It failed to see the rigor of Section 29 which had taken away the jurisdiction of the Trial Court in hearing and deciding the suit.”

Key Takeaways

• A suit filed by an unregistered public trust is not automatically dismissed. The court cannot hear or decide the suit until the trust is registered.
• The bar under Section 29 of the Rajasthan Public Trusts Act, 1959, is not absolute and is lifted once the trust is registered.
• Courts should stay proceedings to allow unregistered trusts to register instead of dismissing the suit outright.
• Registration of the trust during the pendency of the appeal allows the suit to be heard on merits.

Directions

The Supreme Court directed the following:

• The matter is remanded to the Trial Court for hearing and deciding the suits on merits.
• Parties are granted liberty to amend their pleadings and file additional documents, including the certificate of registration of the Trust.
• The Trial Court shall decide the suits within six months, uninfluenced by any observations on merits.
• Parties are to appear before the Trial Court on 21 August 2017.
• The Registry is directed to send back the original record to the Trial Court forthwith.

Development of Law

The ratio decidendi of the case is that a suit filed by an unregistered public trust is not automatically dismissed. The court cannot hear or decide the suit until the trust is registered. The bar under Section 29 of the Rajasthan Public Trusts Act, 1959, is not absolute and is lifted once the trust is registered. This clarifies the procedural aspect of lawsuits filed by public trusts.

Conclusion

The Supreme Court’s judgment in Public Trust Shri Geeta Satsang Bhawan vs. Nand Lal & Ors. clarifies the effect of non-registration of public trusts on lawsuits. The Court held that while Section 29 of the Rajasthan Public Trusts Act, 1959, bars the hearing and decision of a suit by an unregistered trust, it does not bar the filing of the suit itself. The bar is lifted once the trust is registered, and the court can then proceed with the case on merits. This judgment ensures that public trusts comply with registration requirements while also allowing them to pursue their legal rights after registration.

Category

✓ Public Trust Law

✓ Rajasthan Public Trusts Act, 1959

✓ Section 29, Rajasthan Public Trusts Act, 1959

✓ Civil Procedure

✓ Litigation by Unregistered Trusts

✓ Trust Registration

✓ Supreme Court Judgments

✓ Landlord and Tenant

FAQ

Q: Can an unregistered public trust file a lawsuit in India?
A: Yes, an unregistered public trust can file a lawsuit, but the court cannot hear or decide the suit until the trust is registered under the relevant state law.

Q: What is the effect of Section 29 of the Rajasthan Public Trusts Act, 1959?
A: Section 29 of the Rajasthan Public Trusts Act, 1959, bars courts from hearing or deciding suits filed by unregistered public trusts. However, it does not bar the filing of the suit.

Q: What happens if a public trust gets registered during the pendency of a lawsuit?
A: If a public trust gets registered during the pendency of a lawsuit, the bar under Section 29 is lifted, and the court can then proceed to hear and decide the suit on its merits.

Q: What should a court do if a suit is filed by an unregistered public trust?
A: Instead of dismissing the suit outright, the court should stay the proceedings and grant the trust a reasonable time to get registered. Once registered, the court can hear the suit.

Q: What is the key takeaway from the Supreme Court’s judgment in this case?
A: The key takeaway is that the bar on suits by unregistered public trusts is not absolute. It is a procedural requirement that ensures compliance with registration laws before legal remedies are pursued. Once the trust is registered, the suit can proceed on its merits.