Bombay High Court
Rizvi Education Society And Ors vs The Brihan Mumbai Municipal ... on 9 May, 2025
2025:BHC-AS:21629
First Appeal No. 1156 of 2015 (f).doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
FIRST APPEAL NO. 1156 OF 2015
1. Rizvi Education Society ]
A society registered under the Society ]
Registration Act, 1960 and also under the ]
provisions of Bombay Public Trust Act, 1950, ]
having its existing office at Rizvi House, 1 st ]
Floor, Hill Road, Bandra [West], Mumbai - ]
400 050. ]
2. Akhtar Hasan Rizvi ]
3. Meena A. Rizvi ]
4. Aziz Akhtar Rizvi ]
5. Saqib Akhtar Rizvi ]
6. Reshma Akhtar ]
7. Sibte Hasan Rizvi Builders ]
8. Javed Hasan ]
Respondent Nos. 2 to 8 are the office ]
bearers of Rizvi Education Society, having ]
their office at Rizvi House, 1st floor, Hill Road, ]
Bandra [West], Mumbai - 400 050. ]
9. Kailash Seva Sadan Trust ]
Registered under the Bombay Public Trust ]
Act, 1950 having their address at 3, Saraswati ]
Niketan, Gurudeo CHS Ltd., Kashinath Dhuru ]
Road, Near Kirti College, Dadar, Mumbai - ]
400 028. ]
10. Sidheshwar D. B. ]
11. Ravindra Bhaskar Nadkarni ]
12. Dilip Gonddas Sampat ]
13. Kapoor Rajendra Krishna ]
14. Pyarelal Tiwari ]
15. Arvind Malkan ]
Appellant Nos. 10 to 15 are trustees of ]
Kailash Seva Sadan Trust, having their ]
address at 3, Saraswati Niketan, Gurudeo ]
CHS Ltd., Kashinath Dhuru Road, Near Kirti ]
College, Dadar, Mumbai - 400 028. ] ...Appellants.
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First Appeal No. 1156 of 2015 (f).doc
Versus
1. The Brihan Mumbai Municipal Corporation ]
a statutory body constituted under the ]
provisions of the then Bombay Municipal ]
Corporation Act, 1888, and having its office ]
at Mahapalika Marg, Mumbai - 400 001. ]
2. The Assistant Charity Commissioner ]
nd
Having his office at 2 floor, ]
Dharmadayukta Bhavan, 83, Dr. Annie Besant ]
Road, Worli, Mumbai - 400 018. ]
3. The Charity Commissioner ]
nd
Having his office at 2 floor, Dharmadayukta ]
Bhavan, 83, Dr. Annie Besant Road, Worli, ]
Mumbai - 400 018. ] ...Respondents.
------------
Mr. Mayur Khandeparkar, Mr. Anand Pai, Mr. Mahesh R. Mishra, Mr. Arun for
Appellants.
Mr. Narendra Walavalkar, Senior Advocate a/w Mr. Rahul Soman, Ms. Vidya
Vyavhare, Ms. Pallavi Khale i/b Ms. Komal Punjabi for Respondent-BMC.
------------
Coram : Sharmila U. Deshmukh, J.
Reserved on : 28th March, 2025
Pronounced on : 9th May, 2025.
Judgment :
1. The First Appeal impugns the judgment dated 8th May, 2015
passed by the City Civil Court in Charity Application No. 09 of 2013
quashing the order of amalgamation of Appellant No. 1 i.e. Rizvi
Education Trust and Kailas Seva Sadan Trust dated 31 st October, 2011
passed by the Assistant Charity Commissioner under Section 50A(2) of
the Maharashtra Public Trusts Act, 1950 [for short, "the Trusts Act"].
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FACTUAL MATRIX:
2. Kailas Seva Sadan Trust had entered into Agreement to Sell
dated 30th June, 1984 with the Respondent No. 1-Corporation in
respect of their immovable property pursuant to sanction accorded
under Section 36 of Trusts Act. Certain disputes arose between Kailas
Seva Sadan Trust and the Respondent No.1-Corporation regarding the
transaction of sale of property.
3. On 12th May, 2005, an Application No. 44 of 2005 was filed by the
Trustees of 'Rizvi Education Society' and 'Kailas Seva Sadan Trust'
before the Assistant Charity Commissioner under Section 50A(2) of the
Trusts Act seeking amalgamation of the two trusts and to approve and
sanction the draft common scheme of amalgamation and to de-register
Kailas Seva Sadan Trust. By order dated 2nd December, 2005, the
Assistant Charity Commissioner ordered the amalgamation and settled
the common scheme.
4. The Respondent No. 1-Corporation instituted Suit No 82 of 2006
seeking specific performance of Agreement to Sell in which Rizvi
Education Society as well as Kailas Seva Sadan Trust were impleaded as
Parties. After the order of amalgamation dated 2 nd December, 2005,
Rizvi Education Society filed Suit No. 1878 of 2006 seeking a
declaration that the Agreement dated 30th June, 1984 has been validly
terminated and for recovery of possession of the suit land from
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Respondent No. 1-Corporation.
5. The Respondent No. 1 challenged the order of 2 nd December,
2005 permitting amalgamation of two Trusts by way of Charity
Application No. 9 of 2008 in the City Civil Court under Section 72 of the
Trusts Act. By order dated 21st December, 2009, the City Civil Court
allowed the Charity Application No. 9 of 2008 and remanded the
matter to the Assistant Charity Commissioner with direction to issue
notice to Respondent No 1 and decide the matter afresh after hearing
the parties on merits.
6. Upon remand, the Respondent No. 1 filed their objections in
Charity Application No 44 of 2005 to which response was filed by the
Appellant No. 1. After hearing the parties, vide order dated 31 st April,
2011, the Assistant Charity Commissioner allowed the Application of
Trustees and passed an order of amalgamation of two trusts. The order
dated 31st April, 2011 was challenged by the Respondent No 1 before
the City Civil Court by way of Charity Application No. 9 of 2013, which
was allowed by the impugned judgment giving rise to the present
Appeal.
FINDINGS OF CITY CIVIL COURT:
7. The City Civil Court held that Respondent No. 1 was 'person
having interest' and was entitled to maintain challenge to the order of
amalgamation. It further held that under the provisions of Section
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50A(2), the publication of notice in the Official Gazette is mandatory
and failure to follow the mandatory procedure prescribed by law
vitiated the order of amalgamation. It was further held that order of
Assistant Charity Commissioner does not reflect as to how the object
or proper management would be served by amalgamation. It further
noted that Kailas Seva Sadan Trust is entirely taken over by Rizvi
Education Society and not a single Trustee is taken from the Board of
Trustees of Kailas Seva Sadan Trust and it cannot be said to be a
common scheme. It held that it is matter of champertous litigation
prohibited by Section 23 of Contract Act. The City Civil Court further
held that the objects of Rizvi Education Society and Kailas Seva Sadan
Trust are not aligned and the amalgamation cannot be said to be in
interest of the management and administration of the Trusts and
allowed the Application directing Kailas Seva Sadan Trust to continue
to exist as before.
SUBMISSIONS:
8. Mr. Khandeparkar, learned counsel appearing for Appellants
submits that the Respondent No. 1 being an adversary in the
proceedings filed against the Appellant Nos. 1 and 9 cannot have any
say in internal affairs of the Trust. He submits that the issue is not
about locus of Respondent No 1 but merits of the objections, which are
not germane for the inquiry under Section 50A.
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9. He submits that the order of amalgamation does not render the
suit filed by Respondent No 1 infructuous in view of Section 19(b) of
the Specific Relief Act, 1963. He submits that the Respondent No 1 is
estopped from pleading the effect of amalgamation in view of its
pleading in the plaint that Respondent No 1's rights are not affected by
amalgamation. He would further submit that the impleading of the
Appellant as well as Kailas Seva Sadan Trust in Suit No. 82 of 2006
indicates that Corporation did not consider the order of amalgamation
as a fetter on its claim for specific performance of Agreement. He
would submit that by reason of setting aside the order of
amalgamation, the Appellant's Suit No. 1878 of 2006 has been
effectually rejected.
10. He submits that the plea of non publication of notice in Official
Gazette is not available to Respondent No 1 as it was heard while
deciding the Application for amalgamation. He submits that in any
event, the failure will not entail dismissal of the Application of
amalgamation and at the most, the matter ought to have been
remanded for complying with the said procedure.
11. He would further submit that the impugned judgment renders a
factually incorrect finding that the objects of the Rizvi Education
Society and Kailas Seva Sadan Trust are not aligned by pointing out the
objects of the Rizvi Education Society which includes the object of
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providing medical relief. He would further submit that the Application
for amalgamation offers sufficient justification for amalgamation. He
would assail the finding of champertous litigation by pointing out that
the City Civil Court after rendering a finding that Kailas Seva Sadan
Trust is not in a position to adopt appropriate steps for recovery of
property, has thereafter, held that the scheme of amalgamation is
prohibited under Section 23 of the Indian Contract Act, 1872, which is
unsustainable. He would further submit that financing litigation is
permissible under Order XXV, Rule 3 (Maharashtra Amendment) of
Code of Civil Procedure, 1908. He would further point out the interim
orders passed by the High Court in Suit No. 1878 of 2006 in which, the
present Appellant's contentions were held to be well-founded. In
support, he relies upon the following decisions :
Omprakash Gulabchand Partani vs. Charity
Commissioner1
Ramkrushna-Appa s/o Vishweshwar-Appa vs.
Krushna s/o Udaybhanji Ingale2
Saiyad Mohammad Bakar El-Edroos vs. Abdulhabib
Hasan Arab3
12. Per contra, Mr. Walavalkar, Learned Senior Advocate appearing
for the Respondent Nos 1 and 2 Corporation would submit that under
Section 50A of the unamended Act, the power to order amalgamation
1 2007 SCC OnLine Bom 429.
2 2005(3) Mh.L.J. 729.
3 (1998) 4 SCC 343.
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vested in the Charity Commissioner and not the Assistant Charity
Commissioner. He submits that the Application for amalgamation is
filed with an oblique motive demonstrated from the fact that in the
amalgamated trust, there is not a single Trustee of Kailas Seva Sadan
Trust. He submits that the underlying object of filing of the Application
of Amalgamation is to get out of the rigors of Section 36 of Trusts Act,
as Rizvi Education Society could not have entered into agreement for
sale of the property in view of the agreement executed by Kailas Seva
Sadan Trust with Respondent No 1.
13. He would submit that the application for amalgamation under
Section 50A(2) is not competent. He submits that Section 50 and
Section 50A are two modes provided for amalgamation of trusts and
filing of proceeding is contemplated under Section 50 of Trusts Act. He
submits that the order under Section 50A(2) can be passed only upon
subjective opinion of the Charity Commissioner and that too after
following the prescribed procedure. He draws attention of this Court
to sub-section (1) of Section 50A which is prefaced with a non-
obstante clause and is missing in Section 50A(2). He submits that sub-
sections (1) and (2) of Section 50A are independent provisions and the
requirements of Section 50A(1) cannot be read into Section 50A(2). He
would further submit that both sub-sections deal with different
situations and therefore the judgments relied upon by Mr.
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Khandeparkar, interpreting the scheme and scope of Section 50A(1) are
inapplicable.
14. Pointing out sub-section (2) of Section 50A, he submits that the
Charity Commissioner can alone act after forming an opinion that such
amalgamation is in the interest of the Trusts and manner in which the
Charity Commissioner has to act on forming such opinion is after its
publication in the Official Gazette which is jurisdictional fact and as the
Gazette notification is not published, he will not have jurisdiction to
proceed further.
15. He would further draw the attention of this Court to Rule 26 and
Rule 27 of the Trusts Rules and would submit that the fact that there is
no format of Application and no register maintained in the office
Charity Commissioner for such Application would demonstrate that
filing of Application is not contemplated under Section 50A(2). He
submits that there is no enabling provision in the Act permitting
invocation of powers by way of an Application except Section 50 of
Trusts Act.
16. He would further submit that it is the finding in the impugned
judgment that the Appellant has purchased litigation and that the
amalgamation is against the public policy and is fraud on statute. He
submits that the Appellants could not have acquired the title in the
property by purchase in view of pendency of the suit and hence,
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method of amalgamation is resorted. He submits that submission on
provisions of Order XXV, Rule 3 was not raised before any authority
and in any event, the present case, is not a case of financing, but is a
case of extinguishing Kailas Seva Sadan Trust and obtaining its
property without purchasing the same. He submits that as the order of
amalgamation was in force, when the Corporation filed a suit for
specific performance, both Rizvi Education Society and Kailas Seva
Sadan Trust were impleaded as Defendants, which cannot operate as
estoppel against the Corporation. In support, he relies upon the
following decisions:-
Kulsum R. Nadiadwala vs. State of Maharashtra4
Taker Alimohohamad Poonawala vs. Quizar Shaikh
Nomanbhoy5
Hussein Ghadially alias M.H.G.A. Shaikh vs. State of
Gujarat6
17. In rejoinder, Mr. Khandeparkar would submit that by notification
of 2nd October, 1986, the State Government in exercise of powers
under Section 8(2) of the Trusts Act has delegated all the powers of
Charity Commissioner to Assistant Charity Commissioner.
18. He would further submit that the remedy under Section 50A(2) is
a remedy available in addition to Section 50A(2) and applies in
4 2012 (3) SC 575.
5 1995 (1) Mh.L.J. 906.
6 (2014) 8 SCC 425.
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situations beyond clause (i) to (iv) of Section 50. He submits that the
plea of maintainability was not raised earlier. According to him, suit
filed under Section 50(k) seeks framing of common scheme whereas an
Application under Section 50(A)(2) of the Trusts Act applies where a
prospective draft scheme of amalgamation is put up before the
Assistant Charity Commissioner for his subjective satisfaction and it is
for this reason that no form or particular format under Rule 26 of the
Maharashtra Public Trust Rules has been provided. He would further
submit that Section 50A does not in any way limit the jurisdiction of the
Assistant Charity Commissioner to receive Application from Trustees
for the purpose of framing common scheme. He would further submit
that the plea that a Public Charitable Trust should apply under Section
50 and not under Section 50A(2) cannot be raised by third party who is
an adversary and two trusts who are dominus litis are entitled to
choose the course required to be adopted.
POINTS FOR DETERMINATION :
(i) Whether the objections raised by Respondent Nos. 1 and 2-
Corporation to the amalgamation of the two Trusts are germane to
the inquiry to be conducted under Section 50A of the Trusts Act?
(ii) Whether the plea of non publication of notice in Official Gazette is
available to Respondent No 1 and 2, who were granted an opportunity
of being heard?
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(iii) Whether the jurisdictional condition of formation of opinion by the
Assistant Charity Commissioner stands satisfied upon such opinion
being framed on basis of draft scheme of amalgamation placed for
consideration by an application?
(iv) Whether the publication of formation of opinion by the Assistant
Charity Commissioner was a jurisdictional condition sans which the
Assistant Charity Commissioner could not have proceeded further?
(v) Whether in view of absence of non-obstante clause in Section
50A(2), the remedy of Appellant was to institute proceedings under
Section 50 of Trusts Act?
(vi) Whether the amalgamation of the two trusts was in interest of the
proper management and administration of the trusts?
REASONS AND ANALYSIS:
OBJECTIONS RAISED BY RESPONDENT-CORPORATION:
19. A joint application for amalgamation was filed by the Trustees of
Rizvi Education Trust and Kailas Seva Sadan Trust on 12 th July, 2005
before the Assistant Charity Commissioner under Section 50A(2) of
Trusts Act. The unamended provisions of Section 50A read as under:
"50A. Power of Charity Commissioner to frame,
amalgamate or modify schemes :
(1) Notwithstanding anything contained in section 50, where
the Charity Commissioner has reason to believe that, in the
interest of the proper management or administration of a
public trust, a scheme should be settled for it, or where two or
more persons having interest in a public trust make an
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application to him in writing in the prescribed manner that, in
the interest of the proper management or administration of a
public trust, a scheme should be settled for it, the Charity
Commissioner may, if, after giving the trustees of such trust
the opportunity to be heard, he is satisfied that it is necessary
or expedient so to do, frame a scheme for the management or
administration of such public trust.
(2) Where the Charity Commissioner is of opinion that in the
interest of the proper management or administration, two or
more public trusts may be amalgamated by framing a common
scheme for the same, he may, after-
(a) publishing a notice in the Official Gazette and also in at
least two newspapers (one in English, and the other in the
language of the region) with a wide circulation in the region in
which the trust is registered, and
(b) giving the trustees of such trusts and all other interested
persons due opportunity to be heard,
frame a common scheme for the same.
(3) The Charity Commissioner may, at any time, after hearing
the trustees, modify the scheme framed by him under sub-
section (1) or sub-section (2).
(4) The scheme framed under sub-section (1) or sub-section (2)
or modified under sub-section (3) shall, subject to the decision
of the competent court under section 72, have effect as a
scheme settled or altered, as the case may be, under a decree
of a Court under section 50."
20. By order of 21st December, 2009, the matter was remanded to
the Assistant Charity Commissioner to issue notice to Respondent No 1
and 2 Corporation and decide the issue of amalgamation afresh.
Accordingly, objections were filed by the Corporation. Before perusing
the objections to the amalgamation raised by the Corporation, it needs
to be borne in mind that the statutory provisions provide for granting a
hearing only to specified class of persons i.e. the trustees of the Trusts
and all other interested persons which is to ensure that the objections
to amalgamation are referable to the interest of the trusts and sets out
the grounds as to why the amalgamation of the trusts is not in the
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interest of proper management and administration of the trusts.
21. The issue as to whether the Respondent No. 1-Corporation was a
person interested is not longer under consideration as the matter was
remanded to hear the Respondent Corporation, which order has
attained finality. Coming now to the objections raised by the
Respondent Corporation, the objections sets out the relevant facts
about the Agreement for Sale executed by the Respondent No 1 and
the filing of the suit for specific performance. The objections of
Respondent No. 1 -Corporation MCGM can be broadly summarized as
under:
(a) As Kailas Seva Sadan Trust could not get possession of the subject
property from MCGM, the application for amalgamation has been filed.
(b) The amalgamation is with an oblique motive and has been filed as
counterblast to the suit for specific performance.
(c) The objects of the two trusts are not aligned as Rizvi Education
Society has been functioning in the field of education whereas Kailas
Seva Sadan Trust is constituted with the object of providing medical
relief.
(d) The motive of amalgamation is to exploit the commercial potential
by converting the hospital into commercial building.
(e) The amalgamation will jeopardize the interest of Respondent No. 1 -
Corporation and and members of public. It will also affect the pending
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litigation between the Respondent No 1 and Defendants to the suit.
(f) There is no notification in the Official Gazette informing the
proposed amalgamation.
22. The pre-dominant purpose of the hearing was to ascertain
whether the amalgamation is in interest of the Trusts or not and
therefore it was not open for the Respondent Corporation, in a hearing
under Section 50A(2) of Trusts Act, to raise objections which are
adverse to the interest of the Trusts. The summary of objections
indicates that the same is premised on the ground that the
amalgamation will impact the specific performance suit of Respondent
No. 1 and the intent is to protect the interest of Respondent No. 1-
Corporation under the Agreement for sale, which can effectively be
adjudicated in the civil suit pending between the parties. The issue of
amalgamation of the Trusts and the pending civil litigation are distinct
and separate issues and have no bearing on each other. Most pertinent
is the specific objection raised by Respondent No1 that the
amalgamation will totally jeopardize the interest of the objectors and
will affect the pending litigation between the Objectors and the Trusts,
which makes the intent obvious. The objection that the amalgamation
is with an oblique motive to circumvent Section 36 of Trusts Act is a
self serving argument. Even otherwise, the Appellant can claim right
to the property only upon final decision of the suit and if the outcome
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was favourable to Kailas Seva Sadan Trust, there was no impediment of
Section 36 of Trusts Act. The crucial factor is the pending litigation and
the efforts of the Respondent Corporation is to ensure that no aid and
assistance be received by Kailas Seva Sadan Trust. Considering the
mandate of Section 50A(2), the objections designed to protect the
interests of Respondent Corporation cannot be said to be germane to
an inquiry under Section 50A(2). The objections are in nature of a
challenge by a party aggrieved by the order and not by a party with the
purpose of showing that the beneficial interest of the Trusts is better
served by its independent existence. The hearing before the Assistant
Charity Commissioner was not an adversarial litigation where
challenges can be raised on grounds alien to the interest of the Trusts
and designed to resolve inter se disputes. The resistance by the
Respondent No 1 Corporation is aimed to secure the suit property and
cannot form basis to object to the amalgamation of the Trusts.
NON-PUBLICATION OF NOTICE IN OFFICIAL GAZETTE:
23. Under the unamended Sub-section (2) of Section 50A, it was
upon the formation of opinion by Charity Commissioner that
amalgamation could be ordered by framing a common scheme. Though
some arguments were advanced on exercise of the power under
Section 50A(2) by the Assistant Charity Commissioner, in view of the
Notification dated 2nd October, 1986 delegating the powers of
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Charity Commissioner to the Assistant Charity Commissioner, the same
is no longer in question.
24. The statutory scheme is that before the amalgamation of two
trusts by framing of common scheme takes place, it is necessary (a)
that an opinion is formed by the Charity Commissioner that it was in
the interest of proper management or administration of the Trusts (b)
which opinion is required to be published in in Official Gazette and if
necessary in any newspaper and (c) opportunity of hearing to trustees
of such trust and all other interested person is given. As far as
newspaper publication is concerned, the same is required only if
deemed necessary by the Assistant Charity Commissioner. However,
the publication in Official Gazette is a requirement which has not been
met in the present case. The Respondent No. 1-Corporation has raised
a specific objection to the non publication of notice in the Charity
Application No 9 of 2008, which resulted in remand of the matter.
Despite specific plea being raised, the City Civil Court did not direct
publication in Official Gazette and directed notice to Respondent No.
1-Corporation and to hear them and the Respondent No. 1-Corporation
was heard by the Assistant Charity Commissioner, the City Civil Court
and by this Court.
25. Though it cannot be disputed that the publication of notice in
Official Gazette was necessary, the intent behind the publication is to
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make all parties interested aware of the proposed amalgamation. It
was the duty of the Assistant Charity Commissioner to cause the
publication of notice in the official Gazette. In absence of publication
in the official gazette, the usual course would be to remand the matter
and to direct publication. However, in facts of this case, where the
remand was confined to hearing Respondent No 1 upon issuance of
notice, who has been substantially heard, I am not inclined to remand
the matter once again for purpose of publication of notice in official
gazette, which would not serve any purpose. The publication of notice
is not a mere formality but is backed with the purpose of hearing
parties interested in the Trusts and in the present case it is not shown
that by reason of non publication of notice in the Official Gazette,
other persons interested in the Trusts lost the opportunity of being
heard. In any event, the plea of non publication of notice cannot be
considered at the instance of Respondent No. 1-Corporation who has
been heard in the matter.
26. The publication of notice in official Gazette is sought to be
elevated to the status of a jurisdictional condition for exercise of
power under Section 50A(2). I am not inclined to accept the said
submission as in my view, it is the formation of prima facie opinion that
the proposed amalgamation is in interest of proper management or
administration of trusts which is the jurisdictional fact for the Assistant
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Charity Commissioner to proceed further. The publication of notice is
for giving notice to all concerned and hearing them before framing a
common scheme, which is procedural aspect.
MAINTAINABILITY OF APPLICATION:
27. Coming to the issue of competency of an application seeking
amalgamation, there are two limbs to submission of Mr. Walavalkar -
firstly that as Section 50A(2) is not pre-faced with non-obstante clause,
the remedy of Section 50 is the only remedy where amalgamation is
sought by way of application and secondly plain reading of Section
50A(2) does not admit of filing of application for amalgamation. The
statutory scheme of Trusts Act provides for two modes for
amalgamation of trusts i.e. Section 50 and Section 50A(2). It will be
apposite to reproduce Section 50(1) which reads thus:
"50. Suit by or against or relating to public trusts or
trustees or others.--
In any case,--
(i) where it is alleged that there is a breach of a public trust,
negligence, misapplication or misconduct on the part of a
trustee or trustees,
(ii) where a direction or decree is required to recover the
possession of or to follow a property belonging or alleged to
be belonging to a public trust or the proceeds thereof or for
an account of such property or proceeds from a trustee, ex-
trustee, alienee, trespasser or any other person including a
person holding adversely to the public trust but not a tenant
or licensee;
(iii) where the direction of the Court is deemed necessary for
the administration of any public trust, or
(iv) for any declaration or injunction in favour of or against a
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public trust or trustee or beneficiary thereof,
the Charity Commissioner after making such enquiry as he
thinks necessary, or two or more persons having an interest in
case the suit is under sub-clauses (i) to (iii), or one or more
such persons in case the suit is under sub-clause (iv) having
obtained the consent in writing of the Charity Commissioner
as provided in section 51 may institute a suit whether
contentions or not in the Court within the local limits of whose
jurisdiction the whole or part of the subject-matter of the
trust is situate, to obtain a decree for any of the following
reliefs
(a) an order for the recovery of the possession of such
property or proceeds thereof;
(b) the removal of any trustee or manager;
(c) the appointment of a new trustee or manager;
(d) vesting any property in a trustee;
(e) a direction for taking accounts and making certain
enquiries;
(f) an order directing the trustees or others to pay to the trust
the loss caused to the same by their breach of trust,
negligence, misapplication, misconduct or wilful default;
(g) a declaration as to what proportion of the trust property or
of the interest therein shall be allocated to any particular
object of the trust;
(h) a direction to apply the trust property or its income cypres
on the lines of section 56 if this relief is claimed along with any
other relief mentioned in this section;
(i) a direction authorising the whole or any part of the trust
property to be let, sold, mortgaged or exchanged or in any
manner alienated on such terms and conditions as the court
may deem necessary;
(j) the settlement of a scheme, or variations or alterations in a
scheme already settled;
(k) an order for amalgamation of two or more trusts by
framing a common scheme for the same;
(l) an order for winding up of any trust and applying the funds
for other charitable purposes;
(m) an order for handing over of one trust to the trustees of
some other trust and deregistering such trust;
(n) an order exonerating the trustees from technical breaches,
etc;
(o) an order varying, altering, amending or superseding any
instrument of trust;
(p) declaring or denying any right in favour of or against a
public trust or trustee or trustees or beneficiary thereof and
issuing injunctions in appropriate cases ; or
(q) granting any other relief as the nature of the case may
require which would be a condition precedent to or
consequential to any of the aforesaid reliefs or is necessary in
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the interest of the trust:
Provided that, no suit claiming any of the reliefs specified in
this section shall be instituted in respect of any public trust,
except in conformity with the provisions thereof:
Provided further that, the Charity Commissioner may instead
of instituting a suit make an application to the Court for a
variation or alteration in a scheme already settled:
Provided also that, the provisions of this section and other
consequential provisions shall apply to all public trusts,
whether registered or not or exempted from the provisions of
this Act under subsection (4) of section 1."
28. Section 50(1) provides for filing of suits in eventualities
mentioned in Clauses (i) to (iv) of Section 50(1) by the Charity
Commissioner or with the consent of Charity Commissioner by two or
more persons having interest for obtaining reliefs set out in clauses (a)
to (q), which includes the relief of an order for amalgamation of two or
more trusts.
29. In Saiyad Mohammad Bakar El-Edroos vs. Abdulhabib Hasan
Arab7, the provisions of Trusts Act was considered by the Hon'ble Apex
Court in context of considering whether the proceedings under
Section 50A of the Trusts Act abates for non-substitution of one of the
deceased Applicant. The Hon'ble Apex Court noted Section 50A of
Trusts Act and held in paragraph 7 as under:
"7. Section 50-A infuses the Charity Commissioner with power
in addition to Section 50 to frame, amalgamate or modify any
scheme in the interest of proper management of a public
trust. This is exercised either suo motu when he has reason to
believe it is necessary to do so or when two or more persons
having interest in a public trust makes an application to him in
7 (1998) 4 SCC 343.
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writing in prescribed manner. This merely enables the Charity
Commissioner to initiate proceedings for settling a scheme for
the proper management or administration of a public trust. In
the background of the setting of various provisions, the object
of the Act, the Charity Commissioner being clothed with
sufficient power to deal with all exigencies where a public
trust or its trustees stray away from its legitimate path and
where the materials are before him or placed before him by
the said two persons, then to hold abatement of proceedings
on application of any procedural laws not only would amount
to curtailment of his power but make him spineless and
helpless to do anything in the matter of a public trust eroding
the very object of the Act. This is too restrictive interpretation
to be accepted."
30. The Hon'ble Apex Court recognized that the power vested in the
Charity Commissioner under Section 50A is in addition to the power
under Section 50 to frame, amalgamate or modify any scheme in
proper management of public trust. Before the provisions of Section
50A can be invoked, the conditions contained in clauses (i) to (iv) are
required to be satisfied whereas under Section 50A, there are no such
restrictions placed. The power exercised by the Charity Commissioner
under Section 50A is of framing of scheme for the trusts, whether
under Section 50A(1) for an individual trust or framing of common
scheme under Section 50A(2) for two trusts by amalgamation. The
primary and essential requirement under both the sub sections is
formation of opinion backed by necessary facts and material that the
framing of scheme is in interest of proper management or
administration of public trust. The manner in which the statement of
facts and material is brought to the notice of the Assistant Charity
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Commissioner for formation of opinion will not render the formation
of opinion non est. Section 50A is the repository of power of the
Assistant Charity Commissioner to frame, amalgamate and modify the
scheme for the public trusts. The statutory provisions does not impose
any fetters on power of Assistant Charity Commissioner to form an
opinion based on examination of material placed for consideration by
way of application. Reading of such restriction in Section 50A(2) would
defeat the avowed object of the Act which is to regulate and make
better provision for the administration of public, religious and
charitable trusts. Can it be said that though it was in interest of better
management and administration of the Trusts, the common scheme by
amalgamation of two trusts cannot be ordered since it was not suo
motu opinion but based on application filed by the Trustees
themselves. Even if such application is filed, the discretion is vested
with Assistant Charity Commissioner whether to frame a common
scheme or not, which can always be tested in Appeal. In my view, such a
pedantic view cannot be accepted.
31. I am supported in my view by the decision relied upon Mr.
Walavlakar of Taker Alimohohamad Poonawala vs. Quizar Shaikh
Nomanbhoy (supra), where this Court considered the statutory scheme
of Section 50A of the Trusts Act and laid down the guidelines inherent
and implicit in the Section 50A(1) and 50A(2). The Court read the
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words' reason to believe" occurring in Section 50A(1) in Section 50A(2)
by necessary application and held that the Charity Commissioner is
required to record his reasons in order sanctioning initiation of suo
motu proceedings made either of the two sub-sections. The Co-
ordinate Bench clarified in paragraph 15 as under:
"15. It is hereby clarified that this order shall not preclude the
Charity Commissioner from starting de novo inquiry under
Section 50A(1) or section 50A(2) of the Act provided the
Charity Commissioner has reason to believe that a common
scheme or a single scheme should be settled in the interest of
proper management or administration of the two trusts or
either of them. If the Charity Commissioner decides to
exercise any such powers hereafter, the Charity Commissioner
must follow the procedure as indicated in the foregoing part
of this judgment and must give real and effective reasonable
opportunity to the trustees of the two trusts. If two or more
persons having interest in the said trust make an application
to the Charity Commissioner for settlement of a common
scheme for the two trusts or for settlement of a scheme in
respect of one of the trusts, such persons shall also be under
an obligation to disclose factual data, formulated grounds and
the material sought to be relied upon the application made to
the Charity Commissioner on the basis of which the Charity
Commissioner can objectively come to a conclusion as to
whether a prima facie case was made out for issue of show
cause notice or for invoking of statutory powers under Section
50A(2) or Section 50-A(1) of the Act....."
(emphasis supplied).
32. The Co-ordinate Bench read Section 50A as repository of power
of Charity Commissioner and underscored the importance of formation
of opinion based on factual data, which can be placed by way of
application. Mr. Walavalkar would draw attention of this Court to the
Rule 26 and 27 providing for particulars to submit that the Rules do
not provide for format of an Application under Section 50A(2). The
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decision noted above is a complete answer to the submission on
maintainability of application under Section 50A(2).
WHETHER AMALGAMATION IS IN INTEREST OF TRUST:
33. Dealing now with the core issue as to whether in the interest of
proper management or administration, the two trusts should be
amalgamated. The application pleads that Kailas Seva Sadan Trust is
desirous of reviving the activities of the Trust and take back possession
of the property from BMC and that the amalgamated trust will take
requisite legal steps to recover possession of land from BMC and to
revive the hospital activities of Kailas Seva Sadan Trust.
34. The Assistant Charity Commissioner by its order dated 31st
October, 2011 has rightly considered that BMC intends to object only in
order to frustrate the claim made by Rizvi Education Society on the
basis of amalgamation order. The Assistant Charity Commissioner held
in paragraph 15 and 16 as under:
"15) It appears to me that objector intends to object the
present proceedings only in order to frustrate the claim made
by Rizvi Education Society on the basis of amalgamation made
of two trusts. It is clear from record that Kailash Seva Sadan
Trust due to weak financial position, can not protect their
rights to the property inspite of default made by the B.M.C. I
see nothing wrong to protect the trust property by
approaching the Hon'ble High Court, with the claims made on
behalf of the trusts. I do agree in submissions made by
advocate, M. A. Kadam, that objector has come to oppose the
proceedings so that Kailash Seva Sadan Trust due to weaker
financial position can not independently fight for their claim,
rights and interest in the trust properties, which is being
fought with the help of Rizvi Education Society, such intention
of B.M.C is improper. I therefore hold that apprehension made
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by B.M.C. that their claim made in property will be jeopardize
in the hands of Rizvi Education Society, can not sustain and
same is incorrect. I therefore answer point no.2 in negative.
16) I am of the opinion that application for amalgamation of
two trusts is altogether different subject than the pending
dispute in respect of the trust properties. The above dispute is
pending in the Hon'ble High Court, Bombay and shall get
decided. However, since there is no objection from anybody in
getting two trusts amalgamated and in view of the other
circumstances as to avoid separate books of accounts and to
keep records of meetings, separate minutes, records of the
activities for running both the trusts. It is necessary to reduce
administrative expenses. It is also necessary to allow
application to carry out activities more effectively and in
better manner, as per present requirement, for public at large,
therefore, the amalgamation of this trust is necessary and
hence answered the point No. 3 in affirmative."
35. The findings of the Assistant Charity Commissioner are based on
observations that the objects of both trusts are common, that Kailas
Seva Sadan Trust could not run the hospital due to financial crisis, that
though the hospital was sold to BMC for Rs 65 lakhs, only Rs 12 lakhs
was paid, that there is no objection from anybody to the amalgamation
and to reduce administrative expenses and to carry out activities more
effectively and in better manner, the amalgamation is necessary.
36. The record indicates that Kailas Seva Sadan Trust was recorded
in PTR as defunct. It is also not disputed that the property which is
subject matter of the pending litigation was the sole property of Kailas
Seva Sadan Trust. The order of City Civil Court directs the continued
existence of Kailas Seva Sadan Trust which cannot exist unless the
property comes in the hands of the Trust and its activities are revived.
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The amalgamation was essential for revival of the now defunct Kailas
Seva Sadan Trust and for its proper management and administration.
By virtue of rejection of scheme of amalgamation, Kailas Seva Sadan
Trust has been deprived of the benefit of resources of Rizvi Education
Trust to revive its hospital activities and recover possession of its sole
property. It is not the order of rejection which would be in best interest
of the Trust but the order of amalgamation.
37. The City Civil Court held that Kailas Seva Sadan Trust has been
entirely taken over by Rizvi Education Society and is in fact extinction
of Kailas Seva Sadan Trust as not a single Trustee is taken on the Board
of Trustee from Kailas Seva Sadan Trust. The said finding overlooks the
fact that upon amalgamation, the two separate Trusts cease to exist as
legal entities and new legal entity in form of new amalgamated Trust
emerges. It is not the extinction of any one Trust but the merging of
two different Trusts into a new Trust. The common scheme provides
for the first Trustees of the amalgamated Trust and the absence of
appointment of the Trustee of Kailas Seva Sadan Trust cannot be a
ground for rejection of order of amalgamation.
38. As far as the finding that it is matter of champertous litigation
which is prohibited under Section 23 of Contract Act, considering that
public policy is involved in determining the validity of champertous
contract, recourse is usually taken to Section 23 of Indian Contract Act,
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1872 which reads thus:
"23. What considerations and objects are lawful, and what
not.--The consideration or object of an agreement is lawful,
unless--
it is forbidden by law; or
is of such a nature that if permitted, it would defeat the
provisions of any law; or
is fraudulent; or
involves or implies injury to the person or property of another;
or
the Court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an
agreement is said to be unlawful. Every agreement of which
the object or consideration is unlawful is void.
In case of Bar Council of India vs. A.K. Balaji8, the Hon'ble Apex Court
held in paragraph 38 as under:
"38. In India, funding of litigation by advocates is not explicitly
prohibited, but a conjoint reading of Rule 18 (fomenting
litigation), Rule 20 (contingency fees), Rule 21 (share or
interest in an actionable claim) and Rule 22 (participating in
bids in execution, etc.) would strongly suggest that advocates
in India cannot fund litigation on behalf of their clients. There
appears to be no restriction on third parties (non-lawyers)
funding the litigation and getting repaid after the outcome of
the litigation. In USA, lawyers are permitted to fund the entire
litigation and take their fee as a percentage of the proceeds if
they win the case. Third-Party Litigation Funding/Legal
Financing agreements are not prohibited. In UK, Section 58-B
of the Courts and Legal Services Act, 1990 permits litigation
funding agreements between legal service providers and
litigants or clients, and also permits Third-Party Litigation
Funding or Legal Financing agreements, whereby the third
party can get a share of the damages or "winnings"."
39. It therefore cannot be countenanced that third party funding of
litigation is per se illegal and violates Section 23 of Contract Act, apart
8 (2018) 5 SCC 379.
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from the fact that such contemplation is alien to an inquiry under
Section 50A (2) of Trusts Act.
40. The Application for amalgamation gives the justification for the
amalgamation that the objects of the trusts are common and upon
amalgamation, the income the Trusts can be utilised for furtherance of
objects of the Trusts more effectively. Annexure III to the application
shows that Kailas Seva Sadan Trust is defunct for the present.
41. The City Civil Court failed to note that one of the objects of Rizvi
Education Society was to provide medical relief and the objects of both
the trusts were aligned. The direction to continue existence of Kailas
Seva Sadan Trust which was defunct and without any financial
resources to recover possession of its sole asset resulted in extinction
of the said Trust. The City Civil Court has failed to apply the requisite
parameters for consideration of the order of amalgamation i.e.
whether the same is in interest of proper administration or
management of the Trusts. The apprehension of Corporation that the
intent of Rizvi Education Society is to convert the hospital into
commercial building is not backed by any material and cannot be
considered, particularly when the intent of Corporation in objecting
the amalgamation was to frustrate the claim for recovery possession of
the subject property by the amalgamated Trust. The direction to
continue the existence of Kailas Seva Sadan Trust which is now defunct
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and fighting for revival of its activities and for recovery of its sole
property with depleting financial resources cannot be said to be in the
interest of the Trust.
42. In light of the above, the First Appeal is allowed. The impugned
judgment dated 8th May, 2015 passed in Charity Application No 09 of
2013 is quashed and set aside. Resultantly, order of 30 th October, 2011
of amalgamation stands revived.
[Sharmila U. Deshmukh, J.]
43. At this stage, request is made for the stay of the impugned
judgment and order for period of 12 weeks. The said request is
opposed by learned counsel for Respondent. The impugned judgment
is stayed for a period of 12 weeks.
[Sharmila U. Deshmukh, J.]
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