THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST, INDORE & ANR. versus VIPIN DHANAITKAR & ORS. on 21 July 2022

THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES)TRUST, INDORE & ANR.

v.

VIPIN DHANAITKAR & ORS.

(Civil Appeal No. 4839 of 2022)

JULY 21, 2022

[A.M. KHANWILKAR, ABHAY S. OKA ANDC.T. RAVIKUMAR, JJ.]

Trusts and Charities:

Madhya Pradesh Public Trusts Act, 1951:ss. 2 (4), 4 (1), 14,36 (1) – Registration of Public Trusts – Alienation of trust property–Previoussanction of Registrar – On facts, matter pertaining toillegal alienation of appellant trust-Khasgi Trust by the trustees –Trust deed of the appellant trust executed in 1962 and is traced toHolkar rulers – Alienations were made by the trustees in relation toat least six properties –Collector held that the properties mentionedin the Trust Deed were the properties of the State Government; thatthe trustees made illegal alienations without prior permission fromGovernment, thus the alienations held to be invalid–Collectordirected that the name of the State Government to be entered inrevenue records to prevent further alienations– Said orderchallenged by the appellant Trust and its trustee – Single Judge ofthe High Court disposed of the petition by issuing diverse directionsfor the administration of Khasgi Trust - Another writ petition filedby the appellant-Khasgi Trust disposed of by directing the authoritiesto correct the revenue record – Appeals before the Division Bench,wherein it was held that the Appellant- Khasgi Trust was governedby the Public Trusts Act; that the Trustees had no authority to alienatethe Khasgi properties as the same was vested in the StateGovernment; and that the Single Judge had virtually re-written theTrust Deed and therefore, the judgment could not be sustained –On appeal, held: Khasgi (Devi Ahilyabai Holkar Charities) Trust,Indore, is a Public Trust governed by the provisions of the 1951 Act–Khasgi Trust, is an express Trust for public, religious and charitablepurposes –Trustees have a duty to safeguard the interests of thebeneficiaries of the Public Trust – Thus, the trustees directed to getthe Khasgi Trust registered under the Public Trusts Act by making

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Athe necessary application– Properties described in Part ‘B’ of theSchedule to the Trust Deed, are properties of the said Public Trust–Alienationof the said properties can be made only by taking recourseto s.14 – Supplementary Trust Deed is also valid – Issuance of thedirection by the High Court to Economic Offences Wing of the StateGovernment to hold an inquiry was not warranted–Registrar havingBjurisdiction over Khasgi Trust, to call for the record of the Trustrelating to all the alienations made by trustees and after holding aninquiry to determine if any loss was caused to the Public Trustbyalienation – Subjectto the said directions, the judgment of theDivision Bench as well as the Single Judge set aside.CPartly allowing the appeals, the Court HELD: 1.1 The properties described in Part ‘B’ of theschedule to the Trust Deed which were vested in the StateGovernment were transferred to the autonomous Khasgi Truston its incorporation.In fact, till 2012, the State Government neverDdisputed that the Khasgi properties listed in Part ‘B’ of theSchedule to the Trust Deed were the Trust properties of theKhasgi Trust. Therefore, to that extent, the Division Bench ofthe High Court is not right when it concluded that the propertiesincorporated in Part ‘B’ of the Schedule to the Trust DeedEcontinue to be the Government properties even after 16th July1962. The said properties are vesting in the Khasgi Trust.[Para33][205-E-F]

1.2 The High Court proceeded on the erroneous footingthat as there was no notification issued under sub-section (2) ofFsection 36, clause (a) of sub-section (1) of section 36 will notapply. Sub-Sections (1) and (2) of Section 36 operate in differentfields. When sub-Section (1) is applicable to a Public Trust, noneof the provisions of the Public Trusts Act is applicable to theTrust. Sub-Section (2) is an independent power of the StateGovernment to issue a notification exempting certain PublicGTrusts from all or any of the provisions of the Public Trusts Act.[Para 39][208-E-G]

1.3 The Supplementary Trust Deed which enables theTrustees to alienate the Trust Property cannot be illegal. However, H

alienation of the Trust property can be made only in accordancewith Section 14. The Trustees by executing such a documentcannot overcome the mandate of Section 14. Therefore, the powerto alienate under the Supplementary Trust Deed is subject to theconstraints imposed by Section 14 of the Public Trusts Act. Tothat extent, the Division Bench of the High Court was notright.[Para 41][210-B-C]

1.4 Section 14 is applicable to immovable property of aPublic Trust. Section 13 governs the investment of public trustmoney. The State’s control of charities and religious endowmentsin some form is not foreign to our jurisprudence. A Public Trustinvariably depends on charity done by individuals by donatingimmovable property or by making cash donations. Though in law,the assets and properties of a Public Trust vest in its Trustees,they hold the Trust property in a fiduciary capacity for the benefitof the beneficiaries of the Trust. They hold the property for givingeffect to the objects of the Public Trust. A Trust property cannotbe alienatedunless it is for the benefit of the Trust and/or itsbeneficiaries. The Trustees are not expected to deal with theTrust property, as if it is their private property. It is the legalobligation of the Trustees to administer the Trust and to giveeffect to the objects of the Trust. Therefore, the statutes dealingwith the Public Trusts which are operating in various States,provide for limited control of the activities of a Public Trust. Thecontrol is exercised by providing for the submission of the annualaccounts by the Trustees and filing of returns with the concernedcharity organization or other authority under the law. There arestatutory constraints on the power of the Trustees to alienatethe property of a Public Charitable Trust. There are provisionsin such statutes for penalizing the Trustees for misappropriationof the property of the Trust. Many such Statutes empower theauthorities under the Statutes to remove a Trustee of a PublicTrust, on account of misbehaviour or acts of misappropriation,etc. The Trustees are the custodians of Trust properties.TheTrustees have a duty to safeguard the interests of the beneficiariesof the Public Trust. That is how a provision in Public Trust Law,like Section 14 of the Public Trusts Act, is of importance. Thisprovision seeks to protect the Trust property in the hands of the AB

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ATrustees from unwarranted alienations. In the present case, thetransactions of sale in favour of the appellant in Civil Appealarising out of Special Leave Petition 19063 of 2021, have beeneffected admittedly without obtaining prior permission underSection 14. The Division Bench of the High Court has gone intothe question whether the alienations were null and void. However,Bthe purchasers were not parties to the proceedings before theHigh Court. Hence, final adjudication could not have been madeon the issue of nullity of the alienations made by the Trustees ofthe Khasgi Trust in absence of the necessary parties. [Para45][212-D-H; 213-A-C]C

1.5 In the present case, all the alienations made by theTrustees of Khasgi Trust except alienation made in favour of theappellant in Civil Appeal arising out of Special Leave Petition(C) No.19063 of 2021, have been made without complying withthe mandatory requirement of obtaining the previous sanction asDrequired by sub- Section (1) of Section 14.[Para 48][217-A-B]

1.6 The impugned judgment of the Division Bench arisesout of three proceedings. Two out of three are writ petitions filedby the Trustees. The first one was filed for challenging theimpugned order of the Collector and the second one was filedEseeking directions regarding entering the names of the Trusteesin revenue records in respect of the Trust properties. The thirdproceeding is the Public Interest Litigation, in which there is aprayer for issuing a writ of mandamus to direct inquiry throughCBI. Therefore, there was no occasion for the Division Bench todeclare that the sale transactions are void, especially when theFpurchasers were not before the High Court. Nevertheless, it isnecessary for the Registrar to exercise powers under Section 22and call for necessary records pertaining to the alienations madeby the Trustees. Thereafter, the Registrar shall exercise powersunder Section 23 and decide whether any loss was caused to theGPublic Trust as a result of alienations and if any loss was found tohave been caused, he shall quantify the amount in accordancewith sub-Section (2) of Section 23. He may also consider ofinvoking sub-section (1) or (2) of Section 26, if foundnecessary.[Para 49][217-C-F]

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1.7 The order of the Collector which was impugned beforethe High Court was passed without giving an opportunity of beingheard to the Trustees of the Khasgi Trust and the purchasers. Ashow cause notice was issued to the Trustees by the Registraron the basis of the complaint of the Member of the Parliament.Though the Trustees replied to the notice, even thereply wasnot considered by the Collector. Only on this ground, the saidorder ought to be set aside. As a matter of fact, the Collector hadno jurisdiction to decide the issues of title as well asmismanagement of the affairs of a Public Trust. For the samereason, even the report of the Commissioner and the report ofthe Principal Secretary to the Chief Minister are withoutjurisdiction. The reports have been made in breach of theprinciples of natural justice without affording an opportunity ofbeing heard to the Trustees. [Para 50][217-G-H; 218-A-B]

1.8. There was no warrant to direct inquiry through theEconomic Offences Wing of the State Government as there is nofinding that there was mens rea on the part of the Trustees. Nofinding has been recorded by the High Court based on materialthat the alienation made by the Trustees has resulted in causingloss to the Trust and that the entire sale consideration beingdiverted for personal use. The entire consideration received fromthe purchasers has been credited to the account of the Trust.The allegation of misappropriation can be gone into only by theAuthorities underthe Public Trusts Act. Moreover, the directionissued by the High Court proceeds on the erroneous assumptionthat the Trustees have made misappropriation of the Governmentproperties. There is no offence registered against the Trustees.Hence, Economic Offences Wing cannot be directed to hold aninquiry or investigation in connection with the subject matter ofthis proceeding. In other words, the direction given by the HighCourt vide the impugned Judgment in that regard will have to beheld to be non est in law. Though the said direction is unwarranted,the Registrar will have to initiate necessary proceedings underthe Public Trusts Act and carry them to a logical conclusion.[Para51][218-C-F]

1.9 The impugned order of the Collector purports to decidethe issue of Title of the Trust properties by holding that the AB

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Aproperties in Part ‘B’ of the Schedule to the Trust Deed are vestedin the State Government. Even assuming that there was noexpress authority given to the writ petitioner inthe form of aresolution of the Board of Trustees to file the writ petitions, evenan individual Trustee was entitled to take proceedings forquestioning such orders, which adversely affect the Trust and /orBits beneficiaries. On the contrary, it is the duty of every Trusteeto take such action of challenging an order holding that theproperties held by the Trust are not the Trust properties.Moreover, none of the Trustees has come forward to challengethe authority of Trustee who had filed writ petitions and furtherCproceedings. There was also a direction issued to the EconomicOffences Wing to hold an inquiry about the misappropriation ofthe Trust property by the Trustees. Every Trustee was affectedby the said direction. Therefore, in the facts of the case, theobjection raised to the maintainability of the petition filed by oneof the Trustees cannot be sustained.[Para 49][217-C-F]D

1.10 The impugned judgment of the Division Bench cannotbe sustained in toto. However, the view taken by the DivisionBench that the Khasgi Trust is governed by the Public TrustsAct and no alienation of the Trust properties could be madewithout complying with Section 14 thereof, is affirmed. Even theEorder of the Single Judge cannot be sustained as he has virtuallydirected the rewriting of the Trust Deed. There are submissionscanvassed across the Bar about the locus of the applicant inI.A.No.124266 of 2020 filed in Civil Appeals arising out of SpecialLeave Petition (C) Nos.12241-42 of 2020. It is not necessary for Fthe Court to go into the said question finally. Thus, the saidquestion is left open to be decided in appropriate proceedings.As far as Civil Appeal arising out of Special Leave Petition (C)No.19063 of 2021 is concerned, the alienation was made by theTrustees in favour of the appellant after obtaining the previous sanction of the Registrar by the order dated 16th October 1997.GTherefore, the Registrar will have to make an inquiry limited tothe question whether compliance of the conditions incorporatedunder the said order has been made by the Trustees. If there is anon-compliance, the Registrar will have to invoke the provisionsof the Public Trusts Act for taking necessary action. [Para 53-H55][219-D-G]

1.11 The Khasgi (Devi Ahilyabai Holkar Charities) Trust,Indore, is a Public Trust governed by the provisions of theMadhya Pradesh Public Trusts Act, 1951. The trustees aredirected to get the Khasgi Trust registered under the PublicTrusts Act by making the necessary application within thestipulated period. The properties described in Part ‘B’ of theSchedule to the Trust Deed, are properties of the said PublicTrust. However, alienation of the said properties can be madeonly by taking recourse to Section 14 of the Public Trusts Act;The Supplementary Trust Deed dated 08th March 1972 is valid.But, the Trustees of the Khasgi Trust shall be entitled to alienatethe Trust Property only after complying with Section 14 of thePublic Trusts Act. The direction issued by the High Court toEconomic Offences Wing of the State Government to hold aninquiry was not warranted. The Registrar is directed under thePublic Trusts Act, having jurisdiction over Khasgi Trust, to callfor the record of the Trust relating to all the alienations made bythe Trustees. After holding an inquiry as contemplated by Section23, the Registrar after giving an opportunity of being heard to allconcerned shall determine whether by virtue of the alienationsmade by the Trustees, any loss was caused to the Public Trust. Ifaccording to him any such loss was caused to the Public Trust, heshall decide and quantify the amount liable to be paid by theconcerned Trustees to the Khasgi Trust. After holding an inquiry,if found necessary, he may invoke the power of making anapplication to the Court under sub-Section (2) of Section 26.Subject to the said directions, the impugned judgment of theDivision Bench as well as the impugned judgment and orders ofthe Single Judge are set aside.[Para 56][220-A-G; 221-C]

Parsi Zoroastrian Anjuman, Mhow v. Sub DivisionalOfficer/The Registrar of Public Trusts and Anr. 2022SCC Online SC 104 ; Akhil Bhartiya UpbhoktaCongress v. State of Madhya Pradesh and Ors. (2011)5 SCC 29 : [2011] 5 SCR 77 – referred to.

Case Law Reference

[2011] 5 SCR 77

referred to Para 42

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[2022] 17 S.C.R.

ACIVIL APPELLATE JURISDICTION : Civil Appeal No.4839of 2022.

From the Judgment and Order dated 05.10.2020 of the High Courtof Madhya Pradesh, Bench at Indore in Writ Petition No.11234 of 2020.

WithB

Civil Appeal Nos.4840-4841, 4842-4844 and 4845 of 2022.

Balbir Singh, Vikramjit Banerjee, ASGs, Saurabh Mishra, AAG,Dr. A. M. Singhvi, Shyam Divan, Amit Desai, P. S. Patwalia, HuzefaAhmadi, Siddharth Bhatnagar, Sr. Advs., Ms. Nandini Gore, Ms. RubyCSingh Ahuja, Aman Ahluwalia, Ms. Tahira Karanjawala, AbhinavMalhotra, Sidhant Kumar, Ms. Kritika Sachdeva, Ms. Garima Singh,Akshay Aggarwal, Amit Bhandari, M/s Karanjawala & Co., AyushAgarwala, Anuj P. Agrawala, M/s PBA Legal, Ms. Qurratulain, BrajKishor Sah, Mrs. Mrinal Gopal Elker, Kannu Aggarwal, Manish Yadav,Ms. Pratibha Yadav, Prafull Singh Chandel, Harish Pandey, P. V.DYogeswaran, Saurabh Mishra, Chandra Prakash, Arvind Kumar Sharma,Naheed Carrimjee, Sohan Kinkhabwala, Rishi Maheshwari, Ms. AnneMathew, Bharat Sood, Ms. Shruti Jose, P. S. Sudheer, Utsav Trivedi,Abhinay, Ms. Manini Roy, Himanshu Sachdeva, Ms. Shivani Bhushan,Ms. Unnati Vijay, Pooran Chand Roy, Umang Shankar, MayankEKshirsagar, Ms. Anu Gupta, Prashant Bhushan, Ms. Neha Rathi, AliceRaj, Rahul Gupta, Arjun Garg, Ronak Karanpuria, Pulkit Tare, Advs. forthe appearing parties.

The Judgment of the Court was delivered by ABHAY S. OKA, J.F1. Permission to file Special Leave Petition is granted. Leavegranted.

FACTUAL MATRIX

2. These appeals take exception to the common judgment andGorder dated 5[th] October 2020 of a Division Bench of the High Court ofMadhya Pradesh, Bench at Indore. By the said decision, the MadhyaPradesh High Court decided two Writ Appeals filed by the appellants inCivil Appeals arising out Special Leave Petition (C) 12133 of 2020 andSpecial Leave Petition (C) No. 12241-42 of 2020. The Khasgi (DeviAhilyabai Holkar Charities) Trust, Indore (for short, ‘the Khasgi Trust’)H

and its Trustee Shri S. C. Malhotra are the said appellants. The two writappeals decided under the impugned judgment arise out of Writ PetitionNos. 11618 of 2012 and 5372 of 2010 filed by the Khasgi Trust. WritAppeal No. 92 of 2014 arises out of Writ Petition No. 11618 of 2012.The Writ Appeal No. 135 of 2014 arises out of Writ Petition No.5372 of2010. By the impugned judgment, a Public Interest Litigation filed by thefirst respondent–Shri Vipin Dhanaitkar in Civil Appeal arising out ofSpecial Leave Petition (C) No. 12133 of 2020 was also decided.

3. The controversy revolves around the properties claimed by theKhasgi Trust as the Trust Properties. On 30[th] October 1948, an instrumentcalled as “The Covenant” was executed by the erstwhile Rulers ofGwalior, Indore and certain other States in Central India for the formationof the United State of Gwalior, Indore and Malwa (Madhya Bharat).Late Yashwantrao Holkar, the Maharaja of Indore (for short “theMaharaja”) was a party to the said Covenant who agreed to unite andintegrate the territory of Indore into one State with a common executive,legislature and judiciary, by the name of the United State of Gwalior,Indore and Malwa (Madhya Bharat). Article XII provided that the Rulerof each covenanting State shall be entitled to the full ownership, use andenjoyment of all private properties (as distinct from the State Properties)belonging to them on the date of their making over the administration oftheir respective States to Raj Pramukh (the Head of the State of theUnited State of Gwalior, Indore and Malwa). Article XII further providedthat the Ruler of each covenanting State shall furnish to Raj Pramukh,before the first day of August 1948, an inventory of all immovableproperties, securities and cash balance held by him. The Conventionfurther provided that if any dispute arises as to whether any item ofproperty is a private property of the Ruler or a State Property, it shall bereferred to such person as the Government of India may nominate inconsultation with the Raj Pramukh. It is further provided that the decisionof that person shall be final and binding on all parties concerned. It appearsthat Maharaja Yashwantrao Holkar submitted two inventories in termsof Article XII. The first inventory was concerning his alleged privateproperties. The second inventory submitted by the Maharaja was of theproperties known as the Khasgi Properties. In terms of Clause (3) ofArticle XII, the Government of India appointed Shri V.P. Menon, theSecretary of the Ministry of States as the authority to decide the claims.By the letter dated 7[th] May 1949, Shri V.P. Menon informed the Maharajathat the claim made by him in respect of his private properties as listed in ABC

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AAnnexure ‘A’ to the said letter has been finally approved, accepted andsigned in pursuance of Article XII of the Covenant. Annexure ‘A’ containsa detailed description of the private properties of the Maharaja, whichare accepted as per Article XII of the Covenant to be his privateproperties. By another letter dated 6[th] May 1949, Shri V.P. Menoninformed the Maharaja that his claim in respect of the properties describedBas the Khasgi properties has been finally settled on the basis of theenclosure to the said letter. In the enclosure to the letter, it was mentionedthat the Khasgi properties and income received from the Khasgiproperties shall be treated as lapsed for all the time to the Madhya BharatGovernment. In lieu thereof, certain guarantees were given. TheCenclosure provided that the Madhya Bharat Government shall in perpetuityset aside a sum of Rs.2,91,952/- (Rupees Two Lakh Ninety-OneThousand Nine Hundred and Fifty-Two only) for the charities. The amountshall be put under a permanent Trust for the said charities, including thecharities of Maharani Ahilya Bai Holkar. It provided that the Trust shallconsist of the Ruler of erstwhile Indore State, who will be the President.DThere will be two nominees of the Ruler. One nominee shall be of theCentral Government, and two nominees shall be of the Madhya BharatGovernment. However, it was stated that the trustees nominated by theGovernment of India and the Madhya Bharat State shall be appointed inconsultation with the Ruler. It provided that powers and functions of theETrust shall be subject to such legislation as the Central Government orthe Madhya Bharat Government may enact generally to regulate suchTrusts. However, the composition of the Trust and the manner of itsformation shall not be liable to any modification or change by suchlegislation.

F4. It must be noted here that the State Government enacted theMadhya Pradesh Public Trusts Act, 1951 (for short, ‘the Public TrustsAct’). On 26[th] May 1959, the Ministry of Home Affairs of theGovernment of India addressed a letter to the Maharaja, which refers tothe settlement of Khasgi Property. By the said letter, the CentralGovernment nominated one Shri S.V. Kanungo as its nominee. The letterGrecords that Shri Kanungo was already a trustee nominated by theCentral Government on two other family Trusts of the Holkar family.Before that, on 6[th] January 1959, by addressing a letter, the GeneralAdministration Department of the State Government informed the PrivateSecretary to the Maharaja that the State Government was proposing toHnominate the Commissioner, Indore Division and the Superintending Engineer (B & R), Public Works Department, Indore Circle as thetrustees. The State Government requested the Secretary to the Maharajato communicate the concurrence of the Maharaja to the said nominations.By another letter dated 1[st] April 1959, the General AdministrationDepartment of Madhya Pradesh communicated to the Secretary to theMaharaja requesting him that representatives of the Ruler on the Trustbe nominated. The letter records that the State Government has prepareda draft of the Trust Deed which will be finalised without any delay. Theletter dated 14[th] November 1959 of the State Government addressed tothe Secretary of Maharaja which is by way of reminder to the Maharajato nominate his two representatives. The said letter also records that thedraft of the Khasgi Trust Deed will be finalised and sent for approval ofthe Maharaja. The letter dated 14[th] April 1961 addressed by the StateGovernment to the Secretary to Maharaja records that the draft of theDeed of Khasgi Trust is under examination and will be sent soon.

5. Ultimately, in terms of the draft provided by the StateGovernment, the Deed of Trust of the Khasgi Trust (for short, “the TrustDeed”) was executed on 27[th] June 1962 by and between Her HighnessMaharani Usha Devi of Indore, the daughter and successor of MaharajaYashwantrao Holkar, described therein as the Settlor, Shri K.A. Chitale,Senior Advocate and Shri S.C. Malhotra as the nominees of the Settlorand Shri S.V. Kanungo, the nominee of the President of India. The TrustDeed was also signed by the Commissioner, Indore Division andSuperintending Engineer (B & R), Public Works Department, Indorewho were nominated as trustees by the State Government. In the recitals,it is mentioned that the Trust was being created of the annuity ofRs.2,91,952/- in perpetuity for maintenance, upkeep and preservation ofcharities and religious endowments provided in the budget of the HolkarState for the year 1947-48 inclusive of the charities founded by MaharaniDevi Ahilaya Bai Holkar. The said endowments were described in part‘A’ of the Schedule. Further, it is provided that the Trust will be for themanagement and maintenance of the properties described as the TrustProperties, more particularly described in Part ‘B’ of the Schedule tothe Deed of Trust. Part ‘B’ of the Schedule contains a list of a largenumber of properties in various States.

6. There was a notification issued by the State of Madhya Pradeshon 27[th] July 1962. It was mentioned therein that on the formation of theMadhya Bharat State, institutions, factories, religious places, chhatries, AB

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Aetc. fell under the supervision and management of the Commissioner,Pardon Office. It was further stated in the notification that the StateGovernment while granting permission for the formation of the KhasgiTrust and the Alampur Trust (the Holkar Chhatries Trust), has grantedrecognition/approval to the transfer of the areas, and institutions etc.included in the Trust Deeds of the aforesaid Trusts. It is further mentionedBthat accordingly, the areas, institutions, factories, religious places, chhatriesetc. were transferred to the respective Trusts on 16[th] July 1962. A reportof making over and taking over charge of the properties described asthe Alampur and Khasgi trust properties was recorded on 16[th] July 1962.For the sake of completion, it must be mentioned here that on 8[th] MarchC1972, a Supplementary Deed of Trust was executed by and between theTrustees for incorporating a clause that the Trustees have always hadand shall have the power to alienate not only the income but any otheritem of the corpus of Trust Property for the necessity or for the benefitto the objects of the Trusts.

D7. Alienations were made by the Trustees in relation to at least sixproperties. On 18[th] April 2012, a letter was addressed by Smt. SumitraMahajan, a Member of the Parliament to the Chief Minister of theGovernment of Madhya Pradesh. She contended in the said letter thatthe property mentioned in the Trust Deed was vesting in the erstwhileState of Madhya Bharat. It is mentioned that a valuable property shownEin the Trust Deed at Haridwar was sold by the trustees without thepermission of the Registrar under the Public Trusts Act. Therefore, sherequested the Chief Minister to order an inquiry. Along with the noticedated 23[rd] May 2012, a copy of the said complaint was forwarded to thetrustees of the Khasgi Trust by the Registrar of Public Trusts, DistrictFIndore. The Trustees replied on 20[th] June 2012 contending that the PublicTrusts Act was not applicable to the Khasgi Trust and it is for the benefitof the Trust that the alienationshave been made. Thereafter, the Collectorof District Indore passed an order dated 5[th] November 2012 holding thatthe properties mentioned in the Trust Deed were the properties of theState Government. He held that the trustees have made illegal alienationsGwithout prior permission from the Government. Therefore, the alienationswere held to be invalid. Hence, the Collector directed that the name ofthe State Government be entered in revenue records/land records toprevent further alienations.

8. A Writ Petition being Writ Petition No. 11618 of 2012 was filedHby the Khasgi Trust and its Trustee Shri S.C. Malhotra in the Madhya THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,INDORE v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

Pradesh High Court for challenging the aforesaid order dated 5[th]November 2012 passed by the Collector and praying for restraining theCollector from interfering with affairs of the Trust. The learned SingleJudge disposed of the petition by the judgment and order dated 28[th]November 2013 by issuing diverse directions for the administration ofthe Khasgi Trust. The learned Single Judge directed that the Board ofTrustees shall be reconstituted by including Smt. Sumitra Mahajan andtwo the persons as trustees. The State Government was directed tomake a provision for payment of Rs.1 crore every year to the KhasgiTrust. Another writ petition (W.P. No. 5372 of 2010) filed by the KhasgiTrust was disposed of by the order dated 3[rd] December 2013 by thelearned Single Judge directing the authorities to correct the revenuerecord in terms of the aforesaid order dated 28[th] November 2013. Asstated earlier, both the said orders of the learned Single Judge werechallenged by the State Government by filing two writ appeals. ThePublic Interest Litigation which was decided along with the writ appealscontained a prayer for directing inquiry through CBI regarding the affairsof the trust and in particular, regarding the alienations made by theTrustees.

9. Following are the important findings rendered by the DivisionBench in the impugned judgment and order:

(a) the Khasgi properties mentioned in Part ‘B’ of the Scheduleto the Trust Deed continued to be vested in the StateGovernment and therefore, the Trustees had no authorityto alienate the same; (b)the subsequent modification of the Trust Deed made by theTrustees empowering them to alienate the propertiesdescribed in Part “B” of the Trust Deed was illegal andwas not binding on the State Government;

(c) the alienations made by the Trustees were void; (d)the Khasgi Trust was governed by the Public Trusts Act;and (e)the learned Single Judge while deciding the writ petitionsfiled by the Khasgi Trust has virtually re-written the TrustDeed and therefore, his Judgment cannot be sustained.

In paragraphs 158 to 166 of the impugned judgment, the DivisionBench issued following directions:

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A“158. This Court is not reproducing the entire report as theCovenants, Trust Deeds and the notification issued by theGovernment of India have already been reproduced in earlierparagraphs. Thus, it is wrong on the part of the respondent to saythat the mechanical exercise was undertaken by the Collectorbased upon letter of Member of Parliament. With due applicationBof mind, the State Government through Collector, Indore keepingin view the covenant, trust deed and the statutory provisions hastaken action in the matter.

159. In the considered opinion of this Court, this Court does nothave the power to draft the Trust Deed nor is having the power toCenact the statute in respect of trust in question. However, as theproperties which are under the ownership of State of MadhyaPradesh have been sold by the Trust/Trustees, a committeedeserves to be constituted to ensure that the trust properties asper the schedule appended with the original trust deed areDpreserved, maintained and kept intact for the future generationsto come.

160. The Committee so constituted shall inquire in respectof the properties sold by the Trust and shall take all possiblesteps to recover and retrieve any property or fund of theEproperty, which have been sold or have been in unauthorizedoccupation or misappropriated. For doing the aforesaid task,the State of Madhya Pradesh shall incur all the expenditures, incase there is paucity of fund in the accounts of the trust, especiallyin light of the fact that it is the State of Madhya Pradesh, who ishaving title over all properties.

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161. The following Committee is constituted for the aforesaidwork comprising of:—

(a) Chief Secretary, State of Madhya Pradesh (Chairman); (b) Principal Secretary, Finance Department (Member); G

(c) Additional Chief Secretary, Dharmaswa Department(Member); (d) Commissioner, Indore Division, Indore (Member); (e) Collector, Indore (Secretary).

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The State of Madhya Pradesh shall be free to proceed ahead inaccordance with law.

162. In the connected writ petition i.e. W.P. No. 11234/2020, whichis a Public Interest Litigation, a prayer has been made for issuanceof an appropriate writ, order or directing a CBI inquiry. So far asthe prayer with regard to directions for CBI inquiry is concerned,this Court is of the considered opinion that no such directions are required. The allegation of misappropriation of Governmentproperties and its disposal to favour someone and to causeloss to Public Exchequer, if at all, can very well be examinedby Economic Investigation Wing of the State of MadhyaPradesh and accordingly, it is directed that the said Wingwill thoroughly examine the matter and if it finds anycriminality into the actions of any authority, it is expectedthat appropriate action should be taken by the said Wing.Hence, no positive direction to register a First InformationReport is required.

Resultantly, the Economic Offences Wing shall examine the matterand shall be free to proceed ahead in accordance with law.

163. The State of Madhya Pradesh is directed to take all possiblesteps to preserve the cultural heritage including the Ghats, Temples,Dharamshalas, which find place in the Trust property, being thetitleholder of the property in question. The State of Madhya Pradeshshall also take appropriate action in accordance with law againstall those persons, who have allegedly illegally sold the Trust’sproperty from time to time.

164. In W.P. No. 11234/2020, the Union of India is already aparty and Shri Milind Phadke has also been heard in the matterbefore delivering the judgment. He has also stated that theproperties in question, on account of the covenant and the statutorynotifications issued from time to time, are the exclusive propertiesof the State of Madhya Pradesh.

165. This Court on 23-4-2014 has directed the parties to maintainstatus quo and it has been informed by learned counsel for theState of Madhya Pradesh that some construction has taken placeby the private parties.

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A166. Resultantly, the State of Madhya Pradesh is directedto take appropriate action in respect of the constructionwhich has taken place over the Khasgi properties and shallrestore it to its original position and the entire expenditureshall be borne by the State of Madhya Pradesh throughCommissioner, Indore. The Collector, Haridwar shall assistBthe Divisional Commissioner, Indore in the matter and theDivisional Commissioner, Indore shall ensure that KushaGhat as well as other properties are again, which are meantfor public charities are made available to public at large.The aforesaid direction is not only in respect of presentCproperty but in respect of other properties also. The Stateof Madhya Pradesh shall ensure by taking appropriate steps inaccordance with law that no further sale takes place in respect ofsuch properties and they shall maintain the properties for thegenerations to come keeping in view their historic importance.The Collector, Indore shall be free to take action in accordanceDwith law pursuant to the order passed by him dated 5-11-2012and the Registrar shall also be free to take appropriate action inaccordance with law pursuant to the order passed by him dated30-11-2012.”

ESUBMISSIONS ON BEHALF OF THE KHASGI TRUST

10. The submissions have been made initially by Shri MukulRohatgi, Senior Advocate and thereafter, by Dr. A.M. Singhvi, SeniorAdvocate in Civil Appeals arising out of Special Leave Petition (C)FNo.12133 of 2020 and Special Leave Petition (C) No.12241-42 of 2020.The learned senior counsel appearing for the appellants urged that at thetime of the merger of the erstwhile State of Indore with the newly formedState of Madhya Bharat, there were three categories of properties - (A)State Properties covered by Article VI(1)(c) and Article XII of theCovenant; (B) Private Properties of the Ruler of Indore; and (C) CharitiesGand Trust Properties held by the family of the Ruler of Indore. Thecontention raised by the appellants is that the charities which were alreadydedicated to the public, could not lapse to the State Government. Themain submission is that in the impugned order of the Collector dated 5[th]November 2012, there is an error committed by holding that the propertiesHdescribed in Part ‘B’ of the Schedule to the Trust Deed of the Khasgi

Trust, were not the Trust Properties but, were the properties of the State.It was submitted that the properties mentioned in Part ‘B’ of the Schedule,are the properties vested in the Khasgi Trust, as can be seen from variousclauses of the Trust Deed. It was submitted that the SupplementaryDeed of Trust dated 8[th] March 1972 clearly confers a power on theTrustees to alienate the Trust properties mentioned in Part ‘B’ of theSchedule to the Trust Deed. The submission is that as the Khasgi Trustis a State-controlled Trust, in view of clause (a) of the sub-Section (1) ofSection 36 of the Public Trusts Act, the provisions of the Public TrustsAct, are not applicable to it. The learned senior counsel relied upon aspecific order passed in that behalf by the Registrar of Public Trusts. Hesubmitted that there are as many as 246 properties listed in Part ‘B’ ofthe Schedule to the Trust Deed, out of which, only six have beentransferred by the Trustees during the span of over sixty years. Hesubmitted that apart from the fact that Section 14 of the Public TrustsAct is not applicable to the Khasgi Trust, the scope of Section 14 hasbeen laid down by this Court in the case of Parsi Zoroastrian Anjuman,Mhow v. Sub Divisional Officer/The Registrar of Public Trusts andAnr.[1]He submitted that as the Public Trusts Act allows the Trustees toalienate the Trust properties, the Registrar would be required to grantpermission for alienation in view of sub-Section (2) of Section 14 of thePublic Trusts Act.

11. The learned senior counsel would urge that for a period ofover fifty years from the date of execution of the Trust Deed, the StateGovernment never disputed the status of properties mentioned in Part‘B’ of the Schedule to the Trust Deed as the properties of the KhasgiTrust. He submitted that only on the basis of a complaint dated 18[th] April2012, made by a senior Member of Parliament of the ruling party to theoffice of the Chief Minister, the Principal Secretary prepared an InquiryReport dated 2[nd] November 2012. No notice of any such inquiry wasserved upon the Trustees. He pointed out that the said Inquiry Reportdated 2[nd] November 2012 proceeds on the footing that the Trust propertiesare, in fact, the properties of the State Government. The Inquiry Reportsuggests that the possession of the Government properties should betaken over by the State Government. He pointed out that it is on thebasis of this Inquiry Report that the impugned order dated 5[th] November2012 was passed by the Collector unilaterally holding that the StateGovernment was the owner of the properties described as the Trust 12022 SCC Online SC 104

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Aproperties in the Trust Deed. Apart from the fact that the Collector hadno jurisdiction to adjudicate on the disputed question of title, even theelementary principles of natural justice have not been followed. Hepointed out that a show cause notice was issued by the Registrar of thePublic Trusts to the Khasgi Trust on the basis of the complaint made bythe Member of Parliament. Though, the Trustees replied to the saidBshow cause notice issued by the Registrar, the said reply has not beenconsidered by the Collector while passing the impugned order dated 5[th]November 2012.

12. Inviting our attention to the findings recorded in the impugnedjudgment of the Division Bench, the learned senior counsel submittedCthat correspondence on record and the clauses in the Trust Deed havebeen completely overlooked by the Division Bench of the High Court ofMadhya Pradesh. He pointed out that the Supplementary Deed of Trustwas executed on 8[th] March 1972 by all the Trustees including thenominees of the State Government as well as of the Central Government.DThough the said Supplementary Deed was not challenged specifically,the Division Bench has gone into the issue of legality thereof. As regardsthe sale of the property known as Holkar Bada at Haridwar, he pointedout that the Bada which consists of only residential premises, has beensold under four separate Sale Deeds, but the adjacent Kusha Ghat hasnot been sold by the Trustees. The Bada property sold by the TrusteesEwas encroached upon. There is a resolution of the Board of Trusteesauthorising the sale of the said property to which all the Trustees areparties. He pointed out that the constituted Attorney appointed by theTrustees may be related to the purchasers, but the purchasers are not atall related to any of the Trustees. He submitted that the entire sale proceeds Fhave been deposited in the corpus of the Trust. Moreover, the Sale Deedsexecuted by the Trustees in the year 2009, were never challenged bythe beneficiaries or any other person till 2012, when the Member ofParliament raised an objection to the said transactions. If according tothe Authorities, the Trustees had violated the provisions of the Public Trusts Act, assuming the same were applicable, the Registrar could haveGinvoked his powers under Chapter V of the Public Trusts Act. Hesubmitted that the impugned order dated 5[th] November 2012 was passedby the Collector behind the back of the Trustees. Moreover, the Collectorhad no jurisdiction to make an adjudication on the question whether theTrustees have violated any provision of law. He submitted that the orderHof the Collector is without jurisdiction. In any case, in view of the order dated 10[th] August 1971 passed by the Registrar of Public Trust, Indore,the provisions of the Public Trusts Act are not applicable to the KhasgiTrust. He pointed out that each and every alienation has been madepursuant to the resolutions passed by the Trustees which included theGovernment nominees.

13. The learned senior counsel submitted that when the Trusteeshave acted within the four corners of the Trust Deed as well as theSupplementary Trust Deed, criminal intention cannot be attributed tothem. There is a complete absence of mens rea. He submitted thatbefore making the first alienation in respect of a garden, the Trusteesapproached the State Government for sanction. The Chief Secretary ofthe State by communication dated 13[th] June 1969, clearly took a standthat the sanction of the Government for making alienation was notrequired. He submitted that the three nominees of the Governments areparties to the decision taken by the Board of Trustees to alienate theproperties. He urged that the Trustees acted in a bona fide manner andtherefore, in the year 2020, the High Court ought not to have orderedinquiry through the Economic Offences Wing of the State Governmentespecially when the transactions concerning Holkar Bada were of 2009.He submitted that even the learned Single Judge while deciding the writpetition filed by the Trustees, had exceeded the jurisdiction vested in himand directed substantial modifications to be made to the Trust Deed. Hesubmitted that on all counts, the impugned order of the Collector dated5[th] November 2012, deserved to be set aside by allowing the writ petition.

SUBMISSIONS OF THE APPELLANT IN CIVIL APPEALFILED BY THE PURCHASER

SUBMISSIONS OF THE APPELLANT IN CIVIL APPEALFILED BY THE PURCHASER

14. Civil Appeal arising out of Special Leave Petition (C) DiaryNo.22151 of 2020 has been filed by the purchaser of Holkar Bada. ShriP. S. Patwalia, the learned senior counsel firstly submitted that by theimpugned judgment, the High Court has declared that the Sale Deedsexecuted in favour of the appellant, were void, though, the appellant-purchaser was not a party to the writ petition before the learned SingleJudge and to the Appeals before the Division Bench. Moreover, aftereleven years of the execution of the Sale Deeds, the High Court foundfault with the same. He submitted that the appellant are bona fidepurchaser. He submitted that one Mr. Vijay Singh Pal filed a PublicInterest Litigation before the High Court of Uttarakhand, seeking aninquiry through the Central Bureau of Investigation into the sale A

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Atransactions and the said writ petition/PIL was dismissed by the orderdated 24[th] May 2018. The High Court held that the petitioner therein hadnot challenged the Sale Deeds by approaching the Civil Courts. Thelearned senior counsel pointed out that the said order was confirmed bythis Court. He submitted that the appellant has been harassed andblackmailed by the said Mr. Vijay Singh Pal. Therefore, a suit for injunctionBwas filed by the appellant/purchaser against him, which was decreed bythe Civil Court. He submitted that to the Public Interest Litigation decidedby the impugned judgment, the appellant/purchaser was not a party andmoreover, the same was belatedly filed in the year 2020. He submittedthat the Sale Deeds, under which Holkar Bada was sold, were notCchallenged in any proceedings before any competent Court. He submittedthat the appellant has not purchased Kusha Ghat and he is the purchaserof only the property known as Holkar Bada.

15. He also invited our attention to the resolution passed by theBoard of Trustees on 5[th] June 2008, approving the sale transaction. HeDsubmitted that there is no material to show that the sale transaction wasmade at a price which was less than the prevailing market value. Hestated that the old tenants had encroached upon the said property andtheir presence on the property has been noted in the revenue records.

SUBMISSIONS ON THE INTERVENTION APPLICATIONS

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16. Shri Prashant Bhushan, the learned counsel appearing for theapplicant/intervenor in I.A.No.124266 of 2020, filed in Civil Appealsarising out of Special Leave Petition (C) Nos.12241-42 of 2020, hasmade detailed submissions. He submitted that the dispute regarding thetitle claimed by a Maharaja of Indore was resolved in terms of ArticleFXII of the Covenant by Shri V. P. Menon nominated by the CentralGovernment. By a letter dated 6[th] May 1949, he settled the claim ofMaharaja in respect of the Khasgi properties by holding that the sameshall be treated as transferred to the State Government. He submittedthat in the same order, a Trust was proposed to be constituted formaintenance, upkeep and preservation of the charities including the KhasgiGproperties vested in the State Government. He submitted that apart fromthe fact that the Trustees had no authority to sell the property describedin Part ‘B’ of the Schedule to the Trust Deed, the documents on recordshow that the Trust was getting good income and therefore, there wasno necessity of selling the said property known as Holkar Bada. HeHpointed out that on 23[rd] August 2007, a resolution was passed by the

Board of Trustees to authorize Shri S. C. Malhotra, a Trustee to give apower of attorney to the concerned employee/person, only for the purposeof looking after the legal and other matters of the Trust as well as theproperty of the Trust. The resolution did not authorize Shri S. C. Malhotrato execute a power of attorney, authorizing the attorney to sell or disposeof the property. However, Shri S. C. Malhotra fraudulently executed apower of attorney in favour of one Mr. Raghvendra Sharma, authorizinghim to sell the property having an area of 13370 sq.ft. at Kusha Ghat,Haridwar. Shri S. C. Malhotra had no authority to execute such a powerof attorney. Similarly, Mr. Kanwaljit Singh Rathore claiming to be theSecretary of the Khasgi Trust executed a similar power of attorney infavour of said Mr. Raghvendra. On the basis of the said power of attorney,Mr. Raghvendra executed four separate Sale Deeds in favour of hisown brother Mr. Aniruddh Kumar. In one of the four Sale Deeds, evenMr. Raghvendra’s wife is shown as a purchaser along with Mr. Aniruddh.He would, therefore, submit that a fraud has been played by the Trustees.He relied upon various decisions in support of his contention that theSale Deeds executed in favour of said Mr. Aniruddh, are illegal andvoid. He submitted that on the basis of the complaint filed by a Memberof Parliament, a detailed inquiry was conducted by the PrincipalSecretary. He pointed out that only on the basis of the findings recordedin the said inquiry that the impugned order has been passed by theCollector.

17. Shri P.S. Patwalia, the learned senior counsel appearing forthe purchaser has raised a strong objection to the locus of the applicant– Mr. Ved Prakash Pal, represented by Mr. Prashant Bhushan by relyingupon various documents annexed to the counter affidavit. He pointedout that the applicant – Mr. Ved Prakash Pal has been set up by MrVijay Singh Pal, who unsuccessfully filed a Public Interest Litigationbefore the Uttarakhand High Court, which was finally rejected. Hesubmitted that in one of the complaints filed by the intervenor – Mr. VedPrakash Pal before the District Magistrate in April 2019, he has giventhe cell phone number of the said Mr Vijay Singh Pal as his own. Herelied upon several photographs and other documents to show that theapplicant is a close associate of Mr Vijay Singh Pal, who was the petitionerin the Public Interest Litigation. He pointed out that the members of thesyndicate led by Mr Vijay Singh Pal, have criminal antecedents. Hepointed out several documents in this regard. He submitted that the I.A.for intervention filed by Mr Vijay Singh Pal has been dismissed by this AB

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ACourt by imposing costs of Rupees Twenty-Five Lakhs. He would,therefore, submit that the intervention application made by Mr. PrashantBhushan deserves to be dismissed with exemplary costs.

18. The learned senior counsel appearing for the applicant –Richard Holkar in I.A. No.74790 of 2021 filed in Civil Appeals arisingBout of Special Leave Petition (C) Nos.12241-42 of 2020, submitted thatthe property known as ‘Maheshwar Wada’ was accepted as a privateproperty of Maharaja Yashwant Rao Holkar by communication dated7[th] May 1949. His submission is that the lease granted to the applicant inrespect of the said property cannot be interfered with. He submittedthat before executing the transaction with him, the Trustees had appliedCfor a permission under Section 14 of the Public Trusts Act. He submittedthat in any case, the applicant was not impleaded as a party in theproceedings before the High Court and therefore, the High Court couldnot have dealt with the issue of the legality of the transactions in favourof the applicant.D

19. The learned counsel appearing for the intervenors/ applicantsin I.A. No.7103 of 2020 filed in Civil Appeal arising out of Special LeavePetition (C) No. 12133 of 2020 submitted that for managing the propertysubject matter of the Trust Deed, a High-Level National Committeeshould be constituted. He submitted that the annuity of Rs.2,91,952/-Egranted to the Khasgi Trust, is inadequate and the State must substantiallyincrease the same.

SUBMISSIONS ON BEHALF OF THE STATE OFMADHYA PRADESH

20. Shri Balbir Singh, the learned Additional Solicitor General ofFIndia submitted that only one Trustee of the Khasgi Trust Shri S. C.Malhotra had filed the two writ petitions subject matter of these CivilAppeals and therefore, the same were not maintainable. He had noauthority to represent the Khasgi Trust to the exclusion of the otherTrustees. He submitted that the property subject matter of Part ‘B’ ofGthe Schedule to the Trust Deed was treated as lapsed in favour of theerstwhile Madhya Bharat Government. The Trust Deed clearly recitesthat the Trustees were authorized only to maintain and preserve the saidproperties. He pointed out that in the written statement filed by theTrustees in Civil Suit No.15 of 1973 as well as in the writ petition filed bythem before the High Court, it is admitted that the Khasgi property subjectH

matter of the Trust Deed had lapsed in favour of the State Government.He submitted that the correspondence exchanged between the Maharajaand the Government of India constitutes a treaty or agreement withinthe meaning of Article 363 of the Constitution of India. Therefore, alldisputes arising on the basis of the same are required to be adjudicatedby this Court. He submitted that in terms of the adjudication made inaccordance with Article XII of the Covenant, the Khasgi properties vestedin the State Government and thereafter, the State Government was notdivested of the said properties. He submitted that what is mentioned inthe letter dated 13[th] June 1969 issued by the then Chief Secretary, iscontrary to law and therefore, not binding on the State Government. Hesubmitted that the Khasgi Trust is a public trust, which is governed bythe Public Trusts Act. He submitted that as the Khasgi Trust cannot besaid to be under the control of the State Government, exemption underClause (a) of sub-Section (1) of Section 36 of the Public Trusts Act, wasnot applicable. Though the constraints imposed by Section 14 of thePublic Trusts Act were applicable to all the alienations made by theTrust, prior consent of the Registrar under Section 14 was not obtained.

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21. It is pointed out by him that on 28[th] July 2007, the land appendedto Ganpati Mandir admeasuring 1800 sq.ft. was given on annual leasefor thirty years for a meagre rent amount of Rs.720/- per year. As theKhasgi property, which even according to the case of the appellant wasa Trust property was illegally sold, an inquiry by the Economic OffencesWing has been rightly ordered. He would, therefore, submit that nointerference is called for with the impugned judgment.

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BROAD QUESTIONS FOR CONSIDERATION

22. After considering the submissions made across the Bar, broadlythe following main questions arise for our consideration:- F

a.Whether the properties incorporated in Part ‘B’ of theSchedule to the Trust Deed are the properties of the KhasgiTrust?

b.Whether the Khasgi Trust is a Public Trust within theGmeaning of the Madhya Pradesh Public Trusts Act, 1951and whether its provisions are applicable to the Trust?

c.Whether the Supplementary Trust Deed dated 08[th] May1972 is legal and valid?

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Ad.Whether the Trustees of the Khasgi Trust were under anobligation to obtain the previous sanction of the Registrar inaccordance with Section 14 of the Public Trusts Act, 1951for alienating the Trust property?

e.Whether the Division Bench of the High Court was right inBholding that the impugned order dated 5[th] November 2012passed by the Collector was lawful and correct?

f.Whether the High Court was justified in directing theinvestigation into the allegations of misappropriation againstthe Trustees by the Economic Offences Wing of the StateGovernment? and C

g.Whether the writ petitions filed by only one Trustee of theKhasgi Trust before the learned Single Judge weremaintainable?

THE STATUS OF THE PROPERTIES IN PART ‘B’ OFDTHE SCHEDULE TO THE TRUST DEED (Question – a)

23. Perusal of the Trust Deed shows that 246 immovable propertiesare listed in Part ‘B’ of its Schedule. In one of the recitals of the TrustDeed, the properties in Part ‘B’ have been described as “the TrustProperties”. It is necessary to consider the relevant provisions of theECovenant to which the Maharaja is a party. Article XII of the Covenantreads thus:

“(1) The Ruler of each Covenanting State shall be entitled to thefull ownership, use and enjoyment of all private properties (asdistinct from State properties) belonging to him on the date of hisFmaking over the administration of that State to Raj Pramukh.

(2) He shall furnish to the Raj Pramukh before the first day ofAugust 1948 an inventory of all the immovable properties,securities and cash balance held by him as such private property.

(3) If any dispute arises as to whether any item of property is theGprivate property of the Ruler or State property it shall be referredto such person as the Government of India may nominate, inconsultation with the Raj Pramukh and the decision of that personshall be final and binding on all parties concerned.

Provided that no such dispute shall be referable after the first dayHof July 1949.”

24. It appears that the Maharaja made an inventory of all theimmovable properties, securities and cash balance held by him. TheMaharaja made claims in terms of clause (3) of Article XII. Shri V.P.Menon, the Secretary to the Government of India was nominated by theGovernment of India to make an adjudication on the dispute in terms ofclause (3) of Article XII. By the letter dated 6[th] May 1949 addressed byShri V.P. Menon, the Maharaja was informed that the inventory of privateproperties of Maharaja submitted pursuant to Article XII has beenapproved and accepted. It is mentioned in the said letter that Annexure‘A’ contains a list of properties which are approved as private propertiesof the Maharaja. Annexure ‘A’ contains several properties. Admittedly,none of these properties has been included in Part ‘B’ of Schedule to theTrust Deed. Shri V.P. Menon addressed another letter dated 7[th] May1949 to the Maharaja informing him that the claim submitted by him inrespect of the Khasgi properties in the inventory has been also settled asper the enclosure to the said letter. The enclosure to the said letter isvery relevant which reads thus:

“His Highness Maharaja Yashwant Rao Holkar, Maharaja of Indore, Indore Settlement of the claim made by His Highness MaharajaYashwant Rao Holkar of Indore concerning Khasgi The Khasgi properties and the income from Khasgi shallbe treated as ‘lapsed’ for all time to the Madhya BharatGovernment. In lieu thereof the following guarantees aregiven subject to the conditions mentioned below:-

(1) The Madhya Bharat Government shall in perpetuity set asideannually from its revenue a sum of Rs.2,91,952/- (Rupees twolakhs, ninety-one thousand nine hundred and fifty-two only), beingthe amount provided in the Holker State budget of 1947-48 forcharities. This amount shall be funded and put under a permanentTrust for the said charities including the charities of Her HighnessMahar Ahilya Bai Holkar.

The Trust shall consist of the following:

1. Ruler of Indore who will always be the President of the Trust.

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A2. Two nominees of the Ruler.

3. One nominee of the Government of India.

4. Two nominees of the Madhya Bharat Government.

Note: The trustees nominated by the Government of IndiaBand the Madhya Bharat Government shall be so appointedin consultation with the Ruler.

The powers and functions of the Trust shall be subject tosuch legislation as the Central or Madhya BharatGovernment may enact generally for purposes of regulatingCsuch trusts, except that the composition of the Trust andthe manner of its formation as stated above shall not beliable to any modification or change by such legislation.”

25. Thus, the Government of India held that the Khasgi propertiesDand the income from Khasgi should be treated as lapsed for all time tothe Madhya Bharat Government. This shows that the claim made by theMaharaja in respect of the Khasgi properties was not accepted and thata decision was taken that the said properties shall vest in the StateGovernment. In lieu thereof, certain guarantees were given by theGovernment of India, which included that an autonomous Trust wouldEbe created for the said charities (the Khasgi properties and the charitiesof Maharani Ahilyadevi Holkar). The Trust was to be headed by theRuler of Indore as its President. Out of five other Trustees, two were tobe the nominees of the Ruler, two were to be the nominees of the StateGovernment, and one was to be the nominee of the Government ofFIndia. The government nominees were to be appointed after consultationwith the Ruler. The powers and functions of the Trust were made subjectto the State or Central legislation, which may be enacted in future.However, it was clarified that the legislation shall not change the mannerof formation of the autonomous Trust and the composition of the Trust.

G26. Apart from the rejection of the claim by the Maharaja in respectof the Khasgi properties, the Trustees have accepted time and againthat by virtue of the settlement of the dispute in accordance with clause(3) of Article XII of the Covenant, the State Government became theowner of the Khasgi properties. Suit No. 15 of 1975 was filed by amember of the Holkar family to which the Khasgi Trust as well as otherH

two Trusts of Holkar family were party defendants. A written statementwas filed by the Khasgi Trust in the said suit. Paragraph 6 of the saidwritten statement is material, which reads thus:

“6. Reply to para 6:

It is admitted that the property descended to His late Highness onsuccession from his predecessor Ruler of Holkar Dynasty andrecognition by Paramount Power. The property comprised of theKingdom Malharrao extension acquired by Shrimant Holkar andfurther and addition Subhedar acquisition, by successive Rulers,Including His late Highness. The property bestowed onMaharani Gautamabai Holkar at the instance of her husbandSubhedar Malharrao was held and managed separately byor on behalf of the consent of the Ruler and was called the“Khasgi” property, Devi Ahilyabai created public religiousand charitable endowment from her resources and in theyear 1904 the Khasgi property came to be administered bythe Holkar State. In the integration of the administrationunder the Covenant entered into by the Rulers of the Statesof Central India, the administration of the property settledfor public charitable and religious endowments founded byDevi Ahilyabai also passed to the United State of MadhyaBharat, a provision having been made that the endowmentswould be administered subject to any directions orinstructions that may from time to time be given by theGovernment of India. The properties had been settled as afoundation for funds for charity. These properties lapsed to theState and cash grant in lieu thereof was made. The Khasgi (DeviAhilyabai Holkar Charities) Trust was constituted under theappropriate directions of the Government of India to administerthis Trust fund and the charities. The Registrar of Public Trustshas upheld the Trust as a Public Trust administered by an agencyacting under the control of the State. Annexed herewith is a copyof the relevant order and marked ‘B’.”

27. Paragraphs 29.2 and 29.3 are also relevant, which read thus:-“29.2 As stated above, the list of Private Properties settledin 1948 under the Covenant excluded the endowments A

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Awhich were eventually transferred to the Khasgi (DeviAhilyabai Holkar Charities) Trust and Alampur (SubhedarMalharrao Holkar Chhatri) Trust. These endowmentsvested in the United State of Madhya Bharat till 1950, thenin the Part 5 State of Madhya Bharat till 1956 and thereafterin the reorganized State of Madhya Pradesh until the yearB1962 when the two Trusts were created under the obligationto do so. Article VI:(2) (c) of the Covenant recognised thenecessary of the Successor State providing for managementof the religious, charitable and historical endowments andkeeping them separate from the Private Properties.

C29.3 The defendants say that the properties which eventuallyvested in these two Trusts were not Private Properties ofHis late Highness. They did not vest in His late Highness eitherbefore or after 1940 either as personal or joint family properties.Alternatively, they were either State Props or properties whichDvested in the United State of Madhya Bharat under Article 47 ofthe Covenant.”

Again in paragraph 29.4, it is stated thus:

E“29.4 This vesting in three successive Governmentsreferred to above and the handing over of the property bythe Government of Madhya Pradesh to the defendant No.1for the purposes of creation of trusts under the Covenantwere acts of State which cannot be challenged by the Plaintiffin municipal courts.”

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28. Even in the writ petition filed by the Khasgi Trust out of whichthe present Civil Appeals arise, a specific stand was taken in Paragraph5.1 that the Khasgi Properties were charities and religious endowmentsof the family of Rulers of Indore. A stand was taken that the KhasgiGproperties held by Holkar rulers vested in the State Government whichwere restored to the Trust created for that purpose. The relevant part ofparagraph 5.1 reads thus:

“5.1. The petitioner is a religious and charitable Trust dulyconstituted on 27.06.1962 by a registered instrument. A copy ofH

THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,INDORE v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

the Trust Deed is annexed hereto marked ANNEXURE P-2.However, the history of the Trust and its activities can be tracedto the Holkar rulers who had founded and ruled Holkar State atIndore from 1761 A.D. to 1948 A.D. when the said State (i.e.Holkar State) joined the Union of India by first merging itself intoa Part B State by the name of Madhya Bharat. Right from thelime of establishment of their rule, the Holkar rulers, particularlythe legendary Devi Ahilya Bai Holkar being of an extra-ordinaryand unprecedented religious and charitable disposition, generouslyestablished charities and religious endowments spread all overthe country including in their own State. Since the said charitiesand religious endowments were managed and looked afterpersonally by the Rulers and their Queens, the same came to becalled “Khasgi” or ‘personal’ charities and religious endowments.However, since during those days there was little or no distinctionbetween ‘State’ and ‘personal’ charities and religious endowments,the funds for the upkeep and management of the said charitiesand religious endowments were provided by the State and abudgetary provision was accordingly, made therefor. Historically,therefore, the charities and religious endowments came to beregarded as a different and third species of property, asdistinguished from the State properties and/ or personal propertiesof the Rulers of Holkar State.”

29. Paragraph 5.2 is also material, which reads thus:- “5.2 The above nature of the charities and religious endowmentsof the Trust is also clear from the recitals of the Trust Deed,particularly, clauses (3), (5), (12), (15) and (17) therein. (Kindlysee ANNEXURE P-2). It is, therefore, apparent that the Holkarrulers acquired properties in many religious places throughout thecountry and established several temples, dharamshalas, ghats etc.and dedicated the same for public use. However, there wereapparently several properties which could not be put to such use,but which continued to be owned and managed as Khasgi propertiesUltimately, when the Trust was established in 1962, all suchproperties, including the temples, dharamshalas, ghats etc, whichformed part of the Khasgi properties, were vested in and handedover to the petitioner Trust as per the list/ schedule to the TrustDeed. It also appears that the petitioner Trust was created AB

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Awith the active support, participation and approval of theState government as the latter’s Muafi Department, whichhad been looking after the Khasgi properties after themerger of the Holkar State with Madhya Bharat, wasapparently finding it difficult to manage the numerous andfar flung Khasgi properties in the nominal budget grant ofBabout Rs.2.91 lacs. The properties were apparently in dangerof being wasted or being encroached upon and what was worsestill, was the fact that the charities and religious endowments werein danger of losing their historical identity and importance, bothwhich were closely associated with the erstwhile Holkar Rulers.CTherefore, in the above historical background, the StateGovernment in its wisdom decided to restore the Khasgiproperties to the erstwhile Holkar Rulers by getting themto create the petitioner Trust which was the vehicle usedfor entrusting the Khasgi properties to them. However, thepetitioner Trust could come into existence only after the demiseDof late Maharaja Yeshwant Rao Holkar though the process hadbegun much earlier during his lifetime.”

30. On 23[rd] June 1969, an application was made by the TrusteesEof Khasgi properties to the Registrar seeking a declaration regardingexemption under clause (a) of sub-Section (1) of Section 36 of the PublicTrusts Act. In paragraph 6 of the said application, the Trustees statedthat the charities and religious endowments were initially under themanagement of the erstwhile Holkar State. They further stated thatafter the merger of Holkar State with the State of Madhya Bharat, theFmanagement and possession of the charities and religious endowmentsremained with the State Government and its successors till 16[th] July1962, when the same was handed over to the Trustees. The standconsistently taken by the Trustees of the Khasgi Trust clearly showsthat it is an accepted position that the properties described in Part ‘B’ ofGthe Schedule to the Trust Deed vested in the State Government after theadjudication was made in accordance with Clause (3) of the Article XII.It must be noted here that the Maharaja or none of his family memberschallenged the said adjudication made on the issue of ownership of theKhasgi properties and none of them disputed or challenged the act ofthe State Government of taking over the Khasgi properties/charities. InH

fact, the Maharaja acted upon it by nominating two trustees. The KhasgiTrust has been created on the basis of the said adjudication. Hence, theTrustees are bound by the adjudication.

31. Thus, as a result of adjudication made in accordance withclause (3) of Article XII of the Covenant, the Khasgi properties whichare listed in Part ‘B’ of the Schedule to the Trust Deed vested in theState Government.

Facts

32. On 6[th] January 1959, the Under Secretary to the Governmentof Madhya Pradesh wrote to the Private Secretary of Maharaja that theState Government proposes to nominate the Commissioner, IndoreDivision and the Superintending Engineer (B&R), P.W.D., Indore Circleas their nominees to the Trust to be constituted as per the enclosure tothe letter dated 06[th] May 1949 addressed by Shri V.P. Menon. Therefore,a request was made to convey to the State Government whether theMaharaja had accepted their nominations. The letter records that afterreceiving the reply from the Maharaja, the draft of the Trust Deed wouldbe finalised. By the letter dated 1[st] April 1959, the Deputy Secretary tothe State Government requested the Private Secretary of the Maharajaof Indore to make nominations of two persons for being appointed asTrustees. A request was made to make nominations immediately so thatthe State Government could finalise the draft of the Trust Deed. Theletter dated 14[th] November 1959 addressed by the Under Secretary tothe State Government to the Secretary to Maharaja reiterates that afterthe Maharaja confirms the nominations, the Trust Deed will be finalised.By the letter dated 14[th] April 1961, the Under Secretary to theGovernment of Madhya Pradesh informed the Personal Assistant to theMaharaja that the draft deed of the Khasgi Trust was still underconsideration and would be sent as soon as it was finalised. Thesecontemporaneous documents establish that the State Governmentprepared the draft of the Trust Deed in terms of which the Trust Deeddated 27[th] June 1962 was executed. As the Khasgi Trust was createdon the basis of the decision in terms of clause (3) of Article XII of theCovenant, the draft of the Trust Deed was made by the StateGovernment. One of the recitals refers to the properties in Part ‘B’ ofthe Schedule as the Trust properties. Various clauses of the Trust Deedrefer to the fact that the Khasgi properties, which vested in the StateGovernment, became the Trust property of the Khasgi Trust. The recitalsand clauses in the Trust Deed are very relevant as the Trust Deed was AB

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Adrafted by the State Government. Clauses 3 and 5 are material whichread thus:

“3. The Settlor hereby transfers the Trust properties to thetrustees who shall hold the same upon trust and shall beresponsible for the maintenance, upkeep and preservationBof the said Charities and Religious Endowments.

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5. The Trustees shall hold and possess the Trust properties andshall have the power to manage the said properties and collect allsums of money by way of rent, profit, interest and any other incomeCaccruing to the Trust.”

Even Clause 7 of the Trust Deed again refers to maintenance,upkeep and preservation of the Trust properties, which reads thus:- D“(7). The Trustees shall prepare the Budget estimates of the Trustevery year and shall apply the income for the fulfilment of theobjects of the Trust as referred to in paragraph 2 of the preambleof this Deed and for the maintenance, upkeep andpreservation of the Trust Properties in good condition andshall make necessary repairs thereto and the balance, if any, shallEbe held and accumulated for being applied in the fulfilment of theaforesaid objects of the Trust and for purposes set out in clause(14) hereunder.”

F33. Under the report dated 16[th] July 1962, Muafi Officer of theState Government handed over the possession of properties of the KhasgiTrust as well as of the Alampur Trust to the Secretary of the Trusts. Interms of the handing over of the properties as aforesaid, a notificationwas issued by the State Government on 27[th] July 1962. English translationof the said notification reads thus.:- G

“STATE OF MADHYA PRADESH DATED 27.07.1962

COMMUNIQUE FOR COMMISSIONERS AND DISTRICT

CHAIRMANS

OFFICE OF COMMISSIONER, INDORE DIVISION.H

INDORE

(PARDON SECTION)

Owing to the formation of Madhya Bharat, Areas, Institutions,Factories, “Chhatris”, Religious Places etc. of AgreementExecutor former State Indore fell under the supervision andmanagement of Commissioner, Pardon Office. Now, in relationto these properties, Government while granting permissionfor formation two Trusts, one Khasgi Trust (The MaharaniAhilyabai Charities Trust) and second Alampur Trust (TheHolkar Chhatris Trust), has granted recognition to transferof the areas, institutions etc. included in the trust deed tothe aforesaid trusts. Accordingly, all the Areas, Institutions,Factories, “Chhatris”, Religious Places etc., in connectionwith the trust were transferred to them on 16.07.1962.

Hence, for the information of all government offices and generalpublic, this communiqué has been published.

(2273) M. P. Shrivastava, Commissioner”

Thus, the properties described in Part ‘B’ of the schedule to theTrust Deed which were vested in the State Government were transferredto the autonomous Khasgi Trust on its incorporation. In fact, till 2012,the State Government never disputed that the Khasgi properties listed inPart ‘B’ of the Schedule to the Trust Deed were the Trust properties ofthe Khasgi Trust. Therefore, to that extent, the Division Bench of theHigh Court is not right when it concluded that the properties incorporatedin Part ‘B’ of the Schedule to the Trust Deed continue to be theGovernment properties even after 16[th] July 1962. The said propertiesare vesting in the Khasgi Trust.

APPLICABILITY OF THE PROVISIONS OF THEPUBLIC TRUSTS ACT (Question – b)

34. The second issue to be decided is whether the provisions ofthe Public Trusts Act apply to the Khasgi Trust. We have already quotedthe enclosure to the letter dated 6[th] May 1949, issued by Shri V. P.Menon. The enclosure incorporates the decision of the Government ofIndia on the claim made by the Maharaja about the Khasgi properties. Itspecifically records that the powers and functions of the Khasgi Trust A

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Ashall be subject to such legislation as the Central Government or MadhyaBharat Government may enact generally for the purposes of regulatingsuch Trusts. It is in this context that we will have to examine the provisionsof the Public Trusts Act, which was enacted in the year 1951. Sub-section (4) of Section 2 defines a Public Trust, which reads thus.:- B“2. Definitions. – In this Act, unless there is anything repugnant inthe subject or context,–

(1).…………;

(2) ………….;

C(3)………….;

(4) “public trust” means an express or constructive trust for apublic, religious or charitable purposes and includes a temple, amath, a mosque, a church, a wakf or any other religious orcharitable endowment and a society formed for a religious orDcharitable purpose;

(5) ………….;

……………..”

35. Coming back to the Trust Deed, the object of the Trust is tomaintain up-keep and preserve the Trust properties and the charities asEwell as religious endowments. Part ‘A’ of Schedule to the Trust Deedcontains details about the endowments to various places of religion, suchas, temples, anna chattras, peersthans, donations to dharmshalas andchhatris. Some of the properties in Part ‘B’ of the Schedule are templesand religious places. The trust was created with the object of preservationFand maintenance of the Trust properties which are charities andendowments. Thus, it can be said that the Khasgi Trust, is an expressTrust for public, religious and charitable purposes. Under Section 4(1) ofthe Public Trusts Act, every such Trust requires compulsory registration.

36. The Trustees in support of their appeals relied upon the orderGdated 10[th] August 1971, passed by the Registrar of Public Trusts, holdingthat the Khasgi Trust was entitled to exemption under Clause (a) ofSub-Section (1) of Section 36 of the Public Trusts Act. Paragraph 3 ofthe said order reads thus.:- “3 Out of five members of the Management Committee of KhasgiH(Devi Ahilyabai Holkar Charities) Trust are nominated by the State THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,INDORE v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

Government and Central Government. In such circumstances,control of the State Government on this Trust is evidently clear.Even the savings of the Trust could be spent only with the priorpermission of the State Government in accordance with the Section14 of the Trust Deed. It is clear from it that State Government isin full control of the present Trust and it is eligible for the exemptionfrom registration. I believe that the Objection raised by theSecretary of the Trust is valid and appropriate. Thus, proceedingsof the registration are concluded.”

37. It is, therefore, necessary to consider the ambit of Section 36.For the sake of convenience, we are reproducing Section 36, whichreads thus:- “36. Exemption.–

(1) Nothing contained in this Act shall apply to–

(a) a public trust administered by any agency actingunder the control of the State or by any local authority, (b) a public trust administered under any enactment for thetime being in force, and

(c) a public trust to which the Muslim Wakfs Act, 1954 (29of 1954) applies.

(2) The State Government may exempt by notification,specifying the reasons for such exemption in the saidnotification, any public trust or class of public trusts fromall or any of the provisions of this Act subject to suchconditions, if any, as the State Government may deem fit toimpose.”

38. The order of the Registrar proceeds on the footing that evenif Clause (a) of Sub-Section (1) of Section 36 is applicable, Section 14 ofthe Public Trusts Act will apply. Obviously, if Clause (a) is attracted,nothing contained in the Public Trusts Act shall apply to such a Trust,which will include Section 14 as well. The powers of the Registrar underthe Public Trusts Act are found in Chapter V. None of the provisions ofthe Public Trusts Act confer any power on the Registrar to decide thequestion whether an exemption under Clause (a) of Sub-Section (1) of A

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ASection 36 is applicable to a particular public Trust. Therefore, we haveindependently examined whether Clause (a) of sub-Section (1) of Section36 will have application. It is not the case that the Khasgi Trust is beingadministered by any local authority as such. The question is whether it isbeing administered by any agency acting under the control of the StateGovernment. There are six Trustees of the Khasgi Trust, out of which,Bone is the Ruler, who is the ex-officio President. Two Trustees are thenominees of the Ruler. The remaining three are the nominees of theState Government and Central Government. Neither in the order of theGovernment of India dated 6[th] May 1949 nor in the Trust Deed, there isanything to indicate that the Khasgi Trust is administered by any agencyCacting under the control of the State Government. Even the power tonominate two Trustees vested in the State Government and similar powervested in the Central Government to nominate one Trustee has to beexercised in consultation with the Ruler. The three Trustees nominatedby the Government do not have a majority in decision making. The StateGovernment has no effective control over the functioning of the KhasgiDTrust. In one sense, it is an autonomous public Trust. Therefore, on theface of it, Clause (a) of Sub-Section (1) of Section 36 has no application.The Khasgi Trust cannot claim to be covered under the excepted categoryin clause (a) of sub-section (1) of Section 36.

39. We may note here that the High Court has proceeded on theEerroneous footing that as there was no notification issued under sub-Section (2) of Section 36, Clause (a) of Sub-Section (1) of Section 36will not apply. Sub-Sections (1) and (2) of Section 36 operate in differentfields. When sub-Section (1) is applicable to a Public Trust, none of theprovisions of the Public Trusts Act is applicable to the Trust. Sub-SectionF(2) is an independent power of the State Government to issue a notificationexempting certain Public Trusts from all or any of the provisions of thePublic Trusts Act. Thus, we have no manner of doubt that the KhasgiTrust will be governed by the Public Trusts Act and that the same isrequired to be registered accordingly.

GVALIDITY OF THE SUPPLEMENTARY TRUST DEED(Question – c) AND OBLIGATION TO OBTAIN APERMISSION UNDER SECTION 14(Question – d)

40. We may note here that owing to the order of the Registrardated 10[th] August 1971, even the Trustees of the Khasgi Trust had reasonHto believe that though by virtue of Clause (a) of Sub-Section (1) of Section 36, the Trust was exempted from registration under the Public TrustsAct, Section 14 thereof was applicable. Section 14 reads thus :

“14. Previous sanction of Registrar, in cases of sale, etc., ofproperty belonging to a public trust.-(1) Subject to the directionsin the instrument of trust or any direction given under this or anyother 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 ofagricultural land or for a period exceeding three years in the caseof non-agricultural land or building; belonging to a public trust, shall be valid without the previoussanction of the Registrar.

(2) The Registrar shall not refuse his sanction in respect of anytransaction specified in sub-section (1) unless such transition will,in his opinion, be prejudicial to the interests of the public trust.

An application was made by the Secretary of the Khasgi Trust on21[st] August 1997 to the Registrar to grant permission under sub-Section(1) of Section 14 to sell the Trust property mentioned therein which wassold to the appellant in Civil Appeal arising out of Special Leave Petition(C) No. 19063 of 2021. By the order dated 16[th] October 1997, permissionto alienate was accorded by the Registrar to the Trustees, subject toseveral conditions. One of the important conditions was that the propertyshould be sold at the maximum price by inviting tenders and that the saleprice should not be less than the market rate prevailing in the area wherethe property is situated. In any event, as the Public Trusts Act is applicableto the Khasgi Trust, the Trustees cannot alienate the Trust propertieswithout complying with Section 14.

41. The Trustees relied upon the Supplementary Trust Deed dated08[th] March 1972 for contending that they are empowered to alienatetrust property without taking recourse to Section 14 of the Public TrustsAct. This document was not challenged in the proceedings before theHigh Court. But, the issue of legality thereof has been gone into by theHigh Court. As noted earlier, the Khasgi Trust has been created on thebasis of the adjudication made under clause (3) of Article XII of theCovenant. The Khasgi properties vested in the State Government by A

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Avirtue of the said adjudication. However, the Khasgi properties weretransferred to the Khasgi Trust on its establishment. Therefore, we havealready held that the Khasgi properties vested in the Khasgi Trust whichis a public Trust under the Public Trusts Act. The Public Trusts Act itselfpermits the Trustees of a Public Trust to alienate the Trust Propertysubject to constraints imposed by Section 14. Therefore, theBSupplementary Trust Deed which enables the Trustees to alienate theTrust Property cannot be illegal. However, alienation of the Trust propertycan be made only in accordance with Section 14. The Trustees byexecuting such a document cannot overcome the mandate of Section14. Therefore, the power to alienate under the Supplementary TrustCDeed is subject to the constraints imposed by Section 14 of the PublicTrusts Act. To that extent, the Division Bench of the High Court was notright.

42. Before we discuss Section 14 of the Public Trusts Act, even ifwe assume that the exemption under Clause (a) of Sub-Section (1) ofDSection 36 was applicable to the Khasgi Trust, it must be noted that theTrustees held the property in a fiduciary capacity for the benefit of thebeneficiaries, which in the present case are the members of the publicas the Trust properties include a large number of temples, ghats, etc.The property of the Khasgi Trust could not have been sold withoutfollowing a fair and transparent process. The view consistently taken byEthis Court, as regards the alienation of public property, right from thecase of Akhil Bhartiya Upbhokta Congress v. State of MadhyaPradesh and Ors.[2], will substantially apply to the alienation of theproperty of a public Trust and therefore, the Trustees are bound to disposeof the Trust property only for the benefit of the Trust or its beneficiaries, Fand not as a private venture. This can be achieved only by following afair and transparent process. The process must be such that the Trustproperty fetches the best possible price. Only if alienations are made insuch a manner, the same will be in the interests of the beneficiaries.

43. As we have held that the provisions of the Public Trusts ActGshall apply to the Khasgi Trust, now we are referring to the provisions ofSection 14. Section 14 imposes an embargo on the sale, mortgage or giftof any immovable property of the Public Trust as well as lease for aperiod exceeding seven years in the case of agricultural lands, or for aperiod exceeding three years in case of a non-agricultural land or building.

H2 2011 (5) SCC 29

Such transactions shall not be valid without the previous sanction of theRegistrar. Sub-Section (2) limits the power of the Registrar to refuse thesanction in respect of transactions covered by sub-Section (1). TheRegistrar can refuse sanction only when he is satisfied that thetransactions will be prejudicial to the interests of the Public Trust.

44. In the case of Parsi Zoroastrian Anjuman, Mhow[1], a Co-ordinate Bench of this Court had an occasion to deal with the scope ofSection 14. The Co-ordinate Bench compared Section 14 with a similarprovision of Section 36 under the Maharashtra Public Trusts Act, 1950,putting an embargo on the powers of the Trustees of a Public Trust ofalienating the trust property. Paragraph 22 of the said judgment readsthus:

“22. As can be seen by Section 14(1), previous sanction of theRegistrar of public trusts is a precondition, for the (a) “sale,mortgage, exchange of gift of any immovable property” or (b)“lease for a period exceeding seven years in the case ofagricultural land or for a period exceeding three years in thecase of non-agricultural land or building.” If Section 14(1)had stopped there, the embargo on alienation of the typesenumerated in the provision (sale, gift, exchange, mortgage etc.,or long-term lease(s) of agricultural or non-agricultural properties)i.e., obtaining previous sanction, could well have meant that theRegistrar’s role was conceivably intrusive. However, theprovisions of Section 14(1) and the power conferred on theRegistrar under it, are controlled by Section 14(2) whichstates that the Registrar “shall not refuse his sanction”unless in his opinion the alienation, or transfer is prejudicialto the interests of the public trust. The clear reference inSection 14(2) is to the power exercisable under Section14(1).The controlling expression in Section 14(1)significantly, is that previous sanction in respect of the twosituations (i.e., alluded in clauses (a) and (b)) is “subject tothe directions in the instrument of trust or any direction givenunder this or any other law by any Court.” This controllingor, rather opening words, clearly indicate that the grant orrefusal of sanction by the Registrar have to be based oneither “the directions in the instrument of trust”, or “anydirection given under this (i.e., M.P. Public Trusts Act) or any A

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Aother law by any court”. The discretion thus, is relatable todirections in the trust document, or any provision of theAct, or any other law as ordered (or directed) by any court.Therefore, the Registrar, is not empowered to read into ither own notions of what is beneficial and what is prejudicialto the trust. The refusal has to be specific to theBrequirement of law, wherever such law clearly stipulatesso, or any specific provision of the trust document.”

This Court proceeded to permit the Trustees to alienate the TrustCProperty, subject to fresh valuation of the property and subject to sellingthe property to the highest bidder through a public tender.

45. Section 14 is applicable to immovable property of a PublicTrust. Section 13 governs the investment of public trust money. TheState’s control of charities and religious endowments in some form isDnot foreign to our jurisprudence. A Public Trust invariably depends oncharity done by individuals by donating immovable property or by makingcash donations. Though in law, the assets and properties of a PublicTrust vest in its Trustees, they hold the Trust property in a fiduciarycapacity for the benefit of the beneficiaries of the Trust. They hold theproperty for giving effect to the objects of the Public Trust. A TrustEproperty cannot be alienated unless it is for the benefit of the Trust and/or its beneficiaries. The Trustees are not expected to deal with the Trustproperty, as if it is their private property. It is the legal obligation of theTrustees to administer the Trust and to give effect to the objects of theTrust. Therefore, the statutes dealing with the Public Trusts which areFoperating in various States, provide for limited control of the activities ofa Public Trust. The control is exercised by providing for the submissionof the annual accounts by the Trustees and filing of returns with theconcerned charity organization or other authority under the law. Thereare statutory constraints on the power of the Trustees to alienate theproperty of a Public Charitable Trust. There are provisions in such statutesGfor penalizing the Trustees for misappropriation of the property of theTrust. Many such Statutes empower the authorities under the Statutesto remove a Trustee of a Public Trust, on account of misbehaviour oracts of misappropriation, etc. The Trustees are the custodians of Trustproperties. The Trustees have a duty to safeguard the interests of thebeneficiaries of the Public Trust. That is how, a provision in Public TrustH

Law, like Section 14 of the Public Trusts Act, is of importance. Thisprovision seeks to protect the Trust property in the hands of the Trusteesfrom unwarranted alienations. In the present case, the transactions ofsale in favour of the appellant in Civil Appeal arising out of Special LeavePetition 19063 of 2021, have been effected admittedly without obtainingprior permission under Section 14. The Division Bench of the High Courthas gone into the question whether the alienations were null and void.However, the purchasers were not parties to the proceedings before theHigh Court. Hence, final adjudication could not have been made on theissue of nullity of the alienations made by the Trustees of the KhasgiTrust in absence of the necessary parties. However, there is no mannerof doubt that the alienations could not have been made without priorsanction of the Registrar.

POWERS OF THE REGISTRAR UNDER THE PUBLICTRUSTS ACT.

46. Under Chapter V of the Public Trusts Act, there are powersvested in the Registrar of controlling a Public Trust. Sections 17, 22 and23 are material, which read thus:- “17. Auditor’s duty to prepare balance sheet and to reportirregularities, etc. - (1) It shall be the duty of every auditorauditing the accounts of a public trust under Section 16 to preparea balance sheet and income and expenditure account and toforward a copy of the same to the Registrar within whosejurisdiction a public trust has been registered.

(2) The auditor shall, in his report specify all cases of irregularities,illegal or improper expenditure or failure or omission to recovermonies or other property belonging to the public trust or waste ofmoney or other property thereof and state whether suchexpenditure, failure, omission, loss or waste was caused inconsequence of a breach of trust, or misapplication or any othermisconduct on the part of the trustees, or any other person.

22. Power of the Registrar.–The Registrar shall havepowers,–

(a) to enter on and inspect or cause to be entered on and inspectedany property belonging to a public trust; (b) to call for or inspect any extract from any proceedingsof the trustees of any public trust or any book or account in AB

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the possession of or under the control of the trustees;

(c) to call for any return, statement, account or report whichhe may think fit from the trustees or any person connectedwith a public trust:

Provided that in entering upon any property belonging to thepublic trust the officer making the entry shall give reasonablenotice to the trustee and shall have due regard to the religiouspractices or usages of the trust.

23. Procedure after receipt of the report by the Registrar. – (1) Ifthe report of the auditor made under section 17 shows, in theopinion of the Registrar, material defects in the administration ofthe public trust, the Registrar may require the working trustee tosubmit an explanation thereon within such period as he thinks fit.

(2) If on the consideration of the report of the auditor, the accountsand explanation, if any, furnished by the working trustee, theRegistrar is, after holding an inquiry in the prescribedmanner and giving opportunity to the person concerned,satisfied that the trustees or any other person has beenguilty of gross negligence, a breach of trust, misapplicationor misconduct which has resulted in the loss to the publictrust he shall determine –

(a) the amount of loss caused to the public trust; (b) whether such loss was due to any breach of trust,misapplication, or misconduct on the part of any person;

(c) whether any of the trustees, or any other person isresponsible for such loss; (d) the amount which any of the trustees or any other personis liable to pay to the public trust for such loss.

(3) The amount surcharged on any trustee or other personin accordance with clause (d) of sub-section (2) shall, subjectto any order of the Court under section 24, be paid by thetrustee or person surcharged within such time as theRegistrar may fix.”

The Registrar by exercising powers under Section 22 of the PublicTrusts Act, can call for the record and report from the Trustees. If thereport of the Auditor, submitted in accordance with Section 17, showsmaterial defects in the administration of the Public Trust, the Registrarcan always call upon the Trustees to submit an explanation. Under Sub-Section (2) of Section 23, the Registrar has power, after holding an inquiryin a prescribed manner, to decide whether Trustees have been guilty ofany conduct which has resulted in any loss to the Public Trust. He isempowered to quantify the amount of loss caused to the Public Trustand also to decide the amount which any of the Trustees or any otherperson, is liable to pay to the Public Trust for compensating for such aloss. Section 24 provides for an appeal to the Court against an ordermade under Section 23. Section 31 of the Public Trusts Act providesthat the amount determined in accordance with Sections 23 and 24, isrecoverable as arrears of land revenue. In a given case, the Registrarcan direct recovery from Trustees of an amount equivalent to the losscaused to the Trust due to illegal alienation of Trust property by theTrustees.

47. When a Trust property is transferred without prior sanction ofthe Registrar under Section 14 and/or without following a fair andtransparent process, it can be always said that the Trust property is notbeing properly managed or administered. In such a case, apart fromexercising the power under Section 23, the Registrar can make anapplication under sub-Section (1) of Section 26 inviting the attention ofthe Court to the mismanagement of the Trust. Sections 26 and 27 arematerial in this behalf, which read thus: - “26. Application to for directions.-(1) If the Registrar on theapplication of any person interested in the public trust or otherwiseis satisfied that, –

(a) the original object of the public trust has failed:

(b) the trust property is not being properly managed oradministered; or

(c) the direction of the court is necessary for theadministration of the public trust; he may, after giving the working trustee an opportunity tobe heard direct such trustee to apply to court for directionswithin the time specified by the Registrar.

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A(2) If the trustee so directed fails to make an application asrequired, or if there is no trustee of the public trust or if forany other reason, the Registrar considers it expedient todo so, he shall himself make an application to the court.

27. Courts power to hear application- (1) On receipt of suchBapplication the court shall make or cause to be made such inquiryinto the case as it deems fit and pass such orders thereon as itmay consider appropriate.

(2) While exercising the power under sub-section (1) thecourt shall, among other powers, have power to make anCorder for:- (a) removing any trustee; (b) appointing a new trustee;

(c) declaring what portion of the trust property or of theDinterest therein shall be allocated to any particular objectof the trust; (d) providing a scheme of management of the trust property;(e) directing how the funds of a public trust whose originalobject has failed, shall be spent, having due regard to theoriginal intention of the author of the trust or the object forEwhich the trust was created; (f) issuing any directions as the nature of the case mayrequire.

(3) Any order passed by the court under sub-section (2) shall beFdeemed to be a decree of such court and an appeal shall lietherefrom to the High Court.

(4) No suit relating to a public trust under section 92 of the Codeof Civil Procedure, 1908 (V of 1908), shall be entertained by anycourt on any matter in respect of which an application can beGmade under section 26.”

Under sub-Section (2) of Section 26, the Registrar can himselfmake an application to the Court seeking the exercise of powers underSection 27. On such an application being made and after holding anHinquiry, the Court has the power to remove the Trustees of the Trust or to issue directions as provided in Section 27.

48. In the present case, all the alienations made by the Trusteesof Khasgi Trust except alienation made in favour of the appellant in CivilAppeal arising out of Special Leave Petition (C) No.19063 of 2021,have been made without complying with the mandatory requirement ofobtaining the previous sanction as required by sub-Section (1) of Section14.

49. We may note here that there are no proceedings filed forspecifically challenging the validity of stated alienations made by theTrustees. The impugned judgment of the Division Bench arises out ofthree proceedings. Two out of three are writ petitions filed by the Trustees.The first one was filed for challenging the impugned order of the Collectorand the second one was filed seeking directions regarding entering thenames of the Trustees in revenue records in respect of the Trustproperties. The third proceeding is the Public Interest Litigation, in whichthere is a prayer for issuing a writ of mandamus to direct inquiry throughCBI. Therefore, there was no occasion for the Division Bench to declarethat the sale transactions are void especially when the purchasers werenot before the High Court. Nevertheless, it is necessary for the Registrarto exercise powers under Section 22 and call for necessary recordspertaining to the alienations made by the Trustees. Thereafter, theRegistrar shall exercise powers under Section 23 and decide whetherany loss was caused to the Public Trust as a result of alienations and ifany loss was found to have been caused, he shall quantify the amount inaccordance with sub-Section (2) of Section 23. He may also consider ofinvoking sub-section (1) or (2) of Section 26 as observed above, if foundnecessary.

LEGALITY OF THE ORDER OF THE COLLECTOR(Question – e)

50. We may note here that the order of the Collector which wasimpugned before the High Court was passed without giving an opportunityof being heard to the Trustees of the Khasgi Trust and the purchasers. Ashow cause notice was issued to the Trustees by the Registrar on thebasis of the complaint of the Member of the Parliament. Though theTrustees replied to the notice, even the reply was not considered by theCollector. Only on this ground, the said order ought to be set aside. As amatter of fact, the Collector had no jurisdiction to decide the issues oftitle as well as mismanagement of the affairs of a Public Trust. For the A

B

C

D

E

F

GH

Asame reason, even the report of the Commissioner dated 24[th] May 2012and the report of the Principal Secretary to the Chief Minister dated 2[nd]November 2012 are without jurisdiction. The reports have been made inbreach of the principles of natural justice without affording an opportunityof being heard to the Trustees.

BVALIDITY OF THE DIRECTION TO HOLD INQUIRYTHROUGH ECONOMIC OFFENCES WING (Question –

f)

51. There was no warrant to direct inquiry through the EconomicOffences Wing of the State Government as there is no finding that thereCwas mens rea on the part of the Trustees. No finding has been recordedby the High Court based on material that the alienation made by theTrustees has resulted in causing loss to the Trust and that the entire saleconsideration being diverted for personal use. It is noticed from the recordplaced before us that the entire consideration received from thepurchasers has been credited to the account of the Trust. The allegationDof misappropriation can be gone into only by the Authorities under thePublic Trusts Act. Moreover, the direction issued by the High Courtproceeds on the erroneous assumption that the Trustees have mademisappropriation of the Government properties. There is no offenceregistered against the Trustees. Hence, Economic Offences Wing cannotEbe directed to hold an inquiry or investigation in connection with thesubject matter of this proceeding. In other words, the direction given bythe High Court vide the impugned Judgment in that regard will have tobe held to be non est in law. Though the said direction is unwarranted,as observed earlier, the Registrar will have to initiate necessaryproceedings under the Public Trusts Act and carry them to a logicalFconclusion.

MAINTAINABILITY OF WRIT PETITIONS (Question –

g)

52. A contention was raised that only one Trustee had filed writGpetitions before the Learned Single Judge for challenging the impugnedorder of the Collector and seeking other reliefs. The contention is thathe was not authorized by the other Trustees to file the proceedings ofwrit petitions. The impugned order of the Collector purports to decidethe issue of Title of the Trust properties by holding that the properties inPart ‘B’ of the Schedule to the Trust Deed are vested in the StateHGovernment. Even assuming that there was no express authority given to the writ petitioner in the form of a resolution of the Board of Trusteesto file the writ petitions, even an individual Trustee was entitled to takeproceedings for questioning such orders, which adversely affect the Trustand /or its beneficiaries. On the contrary, it is the duty of every Trusteeto take such action of challenging an order holding that the propertiesheld by the Trust are not the Trust properties. Moreover, none of theTrustees has come forward to challenge the authority of Trustee ShriS.C. Malhotra who had filed writ petitions and further proceedings. Therewas also a direction issued to the Economic Offences Wing to hold aninquiry about the misappropriation of the Trust property by the Trustees.Every Trustee was affected by the said direction. Therefore, in the factsof the case, the objection raised to the maintainability of the petition filedby one of the Trustees cannot be sustained.

CONCLUDING PART

53. In view of the discussions made above, the impugned judgmentof the Division Bench cannot be sustained in toto. However, the viewtaken by the Division Bench that the Khasgi Trust is governed by thePublic Trusts Act and no alienation of the Trust properties could be madewithout complying with Section 14 thereof, will have to be affirmed.Even the order of the learned Single Judge cannot be sustained as hehas virtually directed the rewriting of the Trust Deed.

54. There are submissions canvassed across the Bar about thelocus of the applicant in I.A.No.124266 of 2020 filed in Civil Appealsarising out of Special Leave Petition (C) Nos.12241-42 of 2020. It is notnecessary for us to go into the said question finally. We leave the saidquestion open to be decided in appropriate proceedings.

55. As far as Civil Appeal arising out of Special Leave Petition(C) No.19063 of 2021 is concerned, the alienation was made by theTrustees in favour of the appellant after obtaining the previous sanctionof the Registrar by the order dated 16[th] October 1997. Therefore, theRegistrar will have to make an inquiry limited to the question whethercompliance of the conditions incorporated under the said order has beenmade by the Trustees. If there is a non-compliance, the Registrar willhave to invoke the provisions of the Public Trusts Act for taking necessaryaction.

56. Therefore, the appeals must succeed in part and we pass thefollowing order:- AB

C

D

E

F

G

H

Aa.We hold that the Khasgi (Devi Ahilyabai Holkar Charities)Trust, Indore, is a Public Trust governed by the provisionsof the Madhya Pradesh Public Trusts Act, 1951; b.We, therefore, direct the Trustees to get the Khasgi Trustregistered under the Public Trusts Act by making theBnecessary application within a period of one month fromtoday;

c.We hold that the properties described in Part ‘B’ of theSchedule to the Trust Deed, are properties of the said PublicTrust. However, alienation of the said properties can bemade only by taking recourse to Section 14 of the PublicTrusts Act; C

d.We hold that the Supplementary Trust Deed dated 08[th]March 1972 is valid. But, the Trustees of the Khasgi Trustshall be entitled to alienate the Trust Property only aftercomplying with Section 14 of the Public Trusts Act; D

e.We hold that the direction issued by the High Court toEconomic Offences Wing of the State Government to holdan inquiry was not warranted; f.We direct the Registrar under the Public Trusts Act, havingjurisdiction over Khasgi Trust, to call for the record of theETrust relating to all the alienations made by the Trustees.After holding an inquiry as contemplated by Section 23, theRegistrar after giving an opportunity of being heard to allconcerned shall determine whether by virtue of thealienations made by the Trustees, any loss was caused toFthe Public Trust. If according to him any such loss wascaused to the Public Trust, he shall decide and quantify theamount liable to be paid by the concerned Trustees to theKhasgi Trust.

g.After holding an inquiry as aforesaid, if found necessary,Ghe may invoke the power of making an application to theCourt under sub-Section (2) of Section 26.The Registrarmay take such other action and initiate such otherproceedings which are warranted by law; h.However, as regards the alienation made in favour of ShriHGajanan Maharaj Sansthan – the appellant in Civil Appeal THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,INDORE v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

arising out of Special Leave Petition No.19063 of 2021,Aafter calling for the record, the Registrar will hold an inquirylimited to the issue whether the alienation was made onlyafter complying with the conditions incorporated in the orderdated 16[th] October 1997. If he finds after holding an inquirythat compliance was not made with any of the conditions,Bhe shall initiate appropriate proceedings in accordance withthe Public Trusts Act;

i.Subject to the above directions, the impugned judgment ofthe Division Bench as well as the impugned judgment andorders dated 28[th] November 2013 of the Learned SingleCJudge of the Madhya Pradesh High Court, are set aside.

j.Civil Appeals are partly allowed in the above terms.

Nidhi Jain and Amarendra Kumar(Assisted by : Iram Jan, LCRA)

Appeals partly allowed.

D

E

F

G

H