In a significant judgment, Operation Asha v. Shelly Batra and others [MANU/SC/1020/2025], the Supreme Court considered whether an organization, Operation ASHA, registered under the Societies Registration Act, 1860, met the requirements of Section 92 of the Civil Procedure Code (CPC) to have a suit filed against it under that provision.
The Supreme Court held that the mere registration of a society under the Societies Registration Act, after it had already taken on the characteristics of a public trust, does not alter the nature of its properties, which were already constituted as trust properties. However, the Court clarified that registering as a society does not automatically confer the character of a trust upon the society’s properties.
The Supreme Court outlined the principles concerning Section 92 of the CPC and explained the conditions under which a registered society can be deemed a ‘constructive trust’, making it susceptible to a suit under Section 92 of the CPC, under paragraph 137 of the judgement. The important points in the paragraph are as follows:
- Nature of Section 92 Suits: A suit under Section 92 is a special “representative suit” filed on behalf of the public to protect public trusts. The requirement for a court’s “leave” or permission to file such a suit is a safeguard to prevent frivolous lawsuits against these trusts.
- Three Conditions for a Section 92 Suit: A suit is maintainable only if it meets three conditions: (a) there is a trust for a public charitable or religious purpose; (b) there is a breach of this trust or a need for court direction in its administration; and (c) the reliefs sought are those listed in Section 92(1).
- Identifying a Public Trust: A public trust can be identified by several factors, including how the property was acquired, the intention behind the grant, whether ownership was fully relinquished by the grantor, the rights of public users, and how profits are used. If an entity functions as a public trust before being registered as a society, it retains its character as a trust.
- Societies vs. Trusts: A society registered from its inception is not automatically a trust. Under Section 5 of the Societies Registration Act, 1860, a society’s property vests in its governing body or in separate trustees because the society itself is not a legal entity capable of holding property.
- Constructive Trusts: Even if a society is not an “express trust,” it can be treated as a “constructive trust”. This occurs by operation of law, irrespective of intent, when a person holding property (the governing body) would be unjustly enriched if allowed to keep it. A constructive trust arises when a fiduciary (the governing body) misapplies or diverts property for personal gain. The lawsuit’s allegations of siphoning of funds can prima facie satisfy the conditions for imposing a constructive trust.
- “Interest in the Trust”: The persons filing the suit must have a present and substantial interest, not a remote or sentimental one. The court found that the plaintiffs in this case, due to their deep involvement with the society, met this requirement.
- Reliefs Claimed and Purpose of the Suit: Even if some of the reliefs sought are for personal grievances (like reinstatement), the suit can be maintained if other reliefs fall squarely within Section 92 and the overall purpose is to vindicate public rights. However, day-to-day management disputes or election grievances should be addressed in a separate, regular suit and not under Section 92.
What emerges from the above judgement is that a registered society for public charitable purposes can be treated as a “constructive trust” under Section 92 of the CPC, if funds are diverted from their designated use.
Therefore, suits can be filed against such societies for breach of trust and mismanagement of funds, ensuring greater judicial oversight on such public charitable organizations.
