Suit U/S 92 CPC Is Representative Suit Of Special Nature Since Action Is Instituted On Behalf Of Public Beneficiaries
The Supreme Court observed that a Suit under Section 92 of the Civil Procedure Code, 1908 (CPC) is a representative suit of a special nature since the action is instituted on behalf of the public beneficiaries and in public interest.
The Court observed thus in a Civil Appeal arising out of the Judgment of the Delhi High Court, which dismissed an Appeal against the Single Judge’s Judgment allowing an Application under Section 92 CPC.
The two-Judge Bench of Justice J.B. Pardiwala and Justice R. Mahadevan explained, “A suit under Section 92 of the CPC is a representative suit of a special nature since the action is instituted on behalf of the public beneficiaries and in public interest. Obtaining a ‘grant of leave’ from the court before the suit can be proceeded with, acts as a procedural and legislative safeguard in order to prevent public trusts from being subjected to undue harassment through frivolous suits being filed against them and also to obviate a situation that would cause a further wastage of resources which can otherwise be put towards public charitable or religious aims. However, at the stage of grant of leave, the court neither adjudicates upon the merits of the dispute nor confers any substantive rights upon the parties.”
The Bench added that a trust can be said to have been created for a ‘public purpose’ when the beneficiaries are the general public who are incapable of exact ascertainment and even if the beneficiaries are not necessarily the public at large, they must at least be a classified section of it and not a pre-ascertained group of specific individuals.
SENIOR ADVOCATE DAMA SESHADRI Naidu appeared for the Appellant while Advocate Jai Anant Dehadrai appeared for the Respondents.
Factual Background
Operation ASHA i.e., the Appellant society was a not-for-profit society founded in the year 2005 and registered under the Societies Registration Act, 1860 with its registered office in New Delhi. It was engaged in providing health services through a plethora of activities primarily to the underprivileged sections of the society across India with special emphasis on the treatment, education and prevention of tuberculosis and other diseases. The Memorandum of Association (MoA) of the Appellant also stipulated that all the incomes and earnings of the society whether movable or immovable, shall solely be utilised to further the aims and objectives of the society. Also, it was stated that the members of the Appellant society would not be entitled to any profits by virtue of their membership. The Respondent woman was a medical health professional and co-founder of the Appellant society. Vide communication in 2020, one man who was also the co-founder and CEO of the Appellant, terminated the services/employment of the Respondent.
It was alleged that the termination was on account of various “omissions including misrepresentation” of the Respondent’s daughter’s previous employment, fabrication of documents, misappropriation of the assets and funds of the NGO as well as gross misbehaviour with the staff and the employees. Subsequently, the Board of the society passed a resolution terminating the Respondent from the post. Soon thereafter, the Board also removed the Respondent from her capacity as a member of the Board. The Respondent’s mother was one of the current members of the Board and hence, both instituted a suit under Section 92 CPC before the High Court, declaration, permanent & prohibitory injunction and, rendition of accounts. They alleged misconduct and breach of several of the society’s by-laws. The Judge held that all the elements and ingredients under Section 92 CPC stood fulfilled and hence, granted leave. The Division Bench upheld the same and being aggrieved, the Appellant was before the Apex Court.
Court’s Observations
The Supreme Court after hearing the contentions of the counsel, noted, “Several decisions of this Court have outlined certain conditions or essential pre-requisites that need to be fulfilled for a suit to be maintainable under this provision. This Court in Ashok Kumar Gupta (supra) delineated them as follows – (a) the trust in question must be created for public purposes of a charitable or religious nature; (b) there must exist a breach of trust or a direction of the court must be necessary for the administration of the trust; and (c) the relief claimed must be one or other of the reliefs as enumerated under Section 92(1) of the CPC. In order to successfully establish that a suit is not maintainable under Section 92, it would be sufficient to prove that any one of the conditions enumerated above has not been met, however, in order to assert its maintainability, all the aforesaid conditions need to be satisfied.”
The Court added that when no formal recognition has been given to the institution, the creation of a public trust can be inferred from the relevant circumstances surrounding the coming into existence of and functioning of the institution/entity in question.
“Although it is not possible to provide an exhaustive list of the same, yet they may include – (a) the method of devolution of the property to the institution or its acquisition and the circumstances along with the intention behind the grant of property i.e. whether it was for the benefit of the organization/public beneficiaries or for the personal benefit of any particular individual/family; (b) whether the grant is accompanied with any fetter/obligation or qualified with a condition, either express or implied, regarding its use by the grantee; (c) whether the ‘dedication’ was complete i.e., whether there was an absolute cessation or complete relinquishment of ownership of the property on the part of the grantor and a subsequent vesting of the property in another individual (trustee) for the said object; (d) whether the public user or an unascertained class of individuals could exercise any ‘right’ over the organization and its properties; (e) the manner of use of the profits accrued, more particularly, whether it is applied/re-applied towards the benefit of the organization and its objectives, etc.”it enunciated.
The Court said that if the aforementioned circumstances exist and the entity has been, much later in time, registered as a society under the Societies Registration Act, 1860, it would still be treated as a ‘public trust’.
“However, if the institution has been registered, from its inception, as a society under the Societies Registration Act, 1860, it is true that whenever a society acquires property, it cannot be said that it declares itself a trustee in respect of said property. In other words, the effect of registration under the Societies Registration Act, 1860 would not be to automatically invest the properties of the society with the character of trust property. This has been consistently laid down by the decisions of several High Courts”it further remarked.
The Court elucidated that the property belonging to the society can either be vested in ‘trustees’ or in the governing body of the society and this vesting has been envisaged because a society registered under the Act is not a juristic person or a body corporate capable of holding property by itself.
“The phrase, “if not vested in trustees” must be read to mean that a trust can be created, either expressly or impliedly, before or after the registration of a society, for the purpose of holding its properties. A public trust would be created prior to the registration of a society if the broad circumstances enumerated under point (v) are met. In such a case, all the properties of the society which had been imbued with the character of ‘trust property’ would be subject to Section 92”it also noted.
The Court explained that if it is argued that a trust has instead separately been created for holding the property of the society after its registration as a society, the same must be clearly and sufficiently proven.
“Here, the separate trust which has been created and the properties which has been vested in said trust would be subject to scrutiny under Section 92. In both these scenarios, an ‘express trust’ would be created and in a suit under Section 92 CPC, the first criteria i.e., the existence of an express or constructive trust, would be met”it added.
The Court said that while the society cannot be considered as an ‘express trust’, what must also be noted, at this crucial juncture, is that, for an entity to be brought within the rigours of Section 92, the Plaintiff has the option of also contending that a ‘constructive trust’ exists in the circumstances and a breach of such a constructive trust has occurred or that the directions of the Court are necessary for the administration of such a constructive trust.
“… the fiduciary must receive property or money which he cannot conscientiously retain. It is only thereafter that a constructive trust would be raised in favour of the beneficiaries on whose account the money was originally received. To put it simply, the factum that the fiduciary ‘withheld’ the property from its rightful beneficiaries must be established”it emphasised.
Moreover, the Court noted that the phrase “persons having an interest in the trust” must neither be construed too narrowly nor too widely and it must not be narrow for the reason that the word used is ‘interest’ instead of ‘direct interest’.
“However, it must also be remembered that while no direct interest is required, the interest must denote a present and substantial interest and not a sentimental, remote, fictitious or purely illusory interest”it added.
Conclusion
Coming to the facts of the case, the Court was of the view that the reliefs claimed by the Plaintiffs, must fall within those reliefs outlined under Section 92(1).
“Furthermore, the special nature of the suit under Section 92 requires it to be filed fundamentally on behalf of the public for the vindication of public rights. Therefore, courts must go beyond the reliefs and also give due regard to the object and purpose for which the suit is brought. The true nature of the suit must be determined on a comprehensive understanding of the facts of the matter and a hard-and-fast rule cannot be made for the same. The fact that certain private rights are being agitated must not be reason enough to ignore the other allegations made in the suit and dismiss it outrightly, provided the suit is instituted in a representative capacity. The reliefs in the present plaint, insofar as they agitate private rights, cannot be granted under a suit of this nature”it remarked.
The Court also clarified that the issues involving the day-to-day management of the institution and grievances by members qua other members as regards the election of members or certain board decisions pertaining to the reshuffling of the elected/board members, must not be made in a suit of this nature, especially when such grievances can be redressed through other mechanisms or under a regular suit not falling within Section 92.
“Such issues must not be deviously magnified or amplified as if there is a breach of trust warranting intervention under this provision. Therefore, the reliefs insofar as the removal of the respondent no. 1 from the post of President and board member respectively are concerned along with the grievances which the respondent nos. 1 and 2 respectively may have with the other board members, would have to be agitated in a separate suit not being falling under Section 92 of the CPC”it concluded.
Accordingly, the Apex Court dismissed the Appeal and directed the Registry to circulate one copy each of the Judgment to all the High Courts.
Cause Title- Operation ASHA v. Shelly Batra & Ors. (Neutral Citation: 2025 INSC 932)
Appearance:
Appellant: Senior Advocate Dama Seshadri Naidu, Aor Manoj K. Mishra, Advocates Bishwajit Dubey, Radhika Bishwajit Dubey, Karan Khetani, Umesh Dubey, Madhulika, Vuzimal Nehru.
Respondents: Aor Pulkit Agarwal, Advocates Jai Anant Dehadrai, Sidharth Sharma, and Anubhav Lamba.