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While granting previous sanction in cases of sale, etc., of property belonging to a public trust, as per Section 14 of the Madhya Pradesh Public Trusts Act, 1951, the Registrar is not empowered to read into their own notions of what is beneficial and what is prejudicial to the trust, held the Supreme Court on Friday.

The discretion, the court said, was relatable to directions in the trust document, or any provision of the Act, or any other law as ordered (or directed) by any court and the refusal by the Registrar had to be specific to the requirement of law, wherever such law clearly stipulates so, or any specific provision of the trust document.

An appeal was filed by the Parsi Zoroastrian Anjuman, Mhow against an order of the Madhya Pradesh High Court whereby it had upheld the Registrar’s order rejecting the application made by the Trust under Section 14 for previous sanction for the disposal of its trust property.

The court undertook an analysis of Section 14 of the MP Public Trusts Act and Rule 9 of of the M.P Trust Rules, 1962.

A bench of Justices UU Lalit, S Ravindra Bhat and Bela M Trivedi found that the provisions of Section 14 (1) and the power conferred on the Registrar under it, were controlled by Section 14 (2) which stated that the Registrar “shall not refuse his sanction” unless in his opinion the alienation, or transfer is prejudicial to the interests of the public trust.

"The clear reference in Section 14 (2) is to the power exercisable under Section 14 (1). The controlling expression in Section 14 (1) significantly, is that previous sanction in respect of the two situations (i.e., alluded in clauses (a) and (b)) is “subject to the directions in the instrument of trust or any direction given under this or any other law by any Court.” This controlling or, rather opening words, clearly indicate that the grant or refusal of sanction by the Registrar have to be based on either “the directions in the instrument of trust”, or “any direction given under this (i.e., M.P. Public Trusts Act) or any other law by any court”....", noted the bench.

While dealing with the submission that Rule 9, especially Rule 9 (3), states that the Registrar can – in addition to the stipulations which condition grant of previous sanction – also “impose such conditions, as he may deem fit, if he is of the opinion that the grant of sanction to the proposed alienation without imposing such conditions will be prejudicial to the interests of the public trust”, the court said,

"....the power to impose conditions is absent in the main provision of the parent enactment, i.e., Section 14 (1) or (2), clearly, sub-rule (3) goes beyond enacted law. A plain look at Rules 9 (1) and (2) would show that the conditions mentioned in those rules, are in conformity with the framework of Section 14. However, if Rule 9 (3) were to be read independently, it can be construed as conferring additional power to impose conditions. Such a reading would lead to Rule 9 (3) being rendered ultra vires."

Apart from dealing with the provisions, the court further held that the role of the designated state official (commissioner, or registrar, etc.) is to ensure that accounts are properly maintained; monies are expended in accordance with the aims and objects of the endowments; the proper rituals are conducted, etc.

"Such regulation does not mean that the state is allowed to appropriate monies which rightly belong to the endowment. In the case of public charities and trusts, slightly different considerations prevail. The aim of public control is to ensure that the trust is administered efficiently and smoothly. The state interest is that far, and no more; it cannot mean that the state can dictate what decisions can or cannot be taken", added the bench.

The court also opined that any organization which is self-governed, cannot be subjected to overarching state control and as long as its decisions are well informed, and grounded on relevant considerations, the interests of the trust are those defined by its members.

Any measure of public control enacted through express stipulations in law, should not be expanded to such an extent that the right to freedom of association, under Article 19 (1) (c), is reduced to an empty husk, bereft of meaningful exercise of choice, said the court.

In the present case, the court saw that the decision to sell the properties was a consequence of a two layered process, where all members of the trust participated and decided to dispose of the property.

Disregarding all the disclosed transparency, the Registrar, on the basis of her subjective notion of what constituted best interests of the trust, could not have rejected the application, as she did, the court held. It added that the High Court, fell into error, in endorsing that rejection. Thus the bench ordered,

"...the trust may proceed to implement its decision, but subject to fresh valuation of each of the properties, which is proposed to be sold. This valuation should be disclosed to the Registrar, who can facilitate the implementation of the decision to sell to the highest bidder, through public tender."

Cause Title: PARSI ZOROASTRIAN ANJUMAN, MHOW v THE SUB DIVISIONAL OFFICER/THE REGISTRAR OF PUBLIC TRUSTS & ANR