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Akhil Deshastha Rigvedi Brahman Madhyawarti Mandal Vs. Joint Charity Commissioner, Maharashtra State, Bombay, and anr. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtMumbai High Court
Decided On
Case NumberAppeal No. 348 of 1967 from original decree
Judge
Reported in[1973]43CompCas361(Bom)
ActsIndian Companies Act, 1913 - Sections 36; Public Trusts Act; Companies Act, 1956 - Sections 25
AppellantAkhil Deshastha Rigvedi Brahman Madhyawarti Mandal
RespondentJoint Charity Commissioner, Maharashtra State, Bombay, and anr.
Appellant AdvocateR.W. Adik, Adv.
Respondent AdvocateV.H. Gumaste, Adv.
Excerpt:
company - public trust - section 36 of indian companies act, 1913, section 18 of bombay public trusts act, 1950 and section 25 of companies act, 1956 - whether applicant was public trust and liable to be registered under section 18 - object clause of memorandum of association of applicant provided that applicant shall act as trustee in respect of its property for attainment of object - educational and other purposes specified in memorandum constitute public religious and charitable purposes - applicant was trustee in respect of property held for carrying public religious and charitable purposes - held, such public trust liable to be registered under act - memorandum of association provided for holding property in trust for specified objects and beneficiaries will be members of particular..........confidence is accepted is called the 'beneficiary' and the subject-matter of the trust is called 'trust property'. in my opinion if a corporation is capable of accepting the ownership of property with an obligation annexed to the ownership for the benefit of another which may be a class of persons, there can be no objection to a corporation acting as a trustee. the only question is whether in this case the mandal has accepted such trust. 6. section 2(13) of the public trusts act defines a 'public trust' as under : ''public trust' means an express or constructive trust for either a public religious or charitable purpose or both and includes ..... a society formed either for a religious or charitable purpose or for both and registered under the societies registration act, 1860.' 7. the.....
Judgment:

Nain, J.

1. This is an appeal by the original applicants No. 1 against the order dated 3rd March, 1966, of a judge of the Bombay City Civil Court. The applicants No. 1 are Akhil Deshastha Rigvedi Brahman Madhyawarti Mandal (hereinafter, for the sake of brevity, referred to as 'the mandal'). The mandal is a company limited by guarantee incorporated under the Indian Companies Act, 1913, and now under the Companies Act, 1956, under a license from the Central Government under section 26 of the Indian Companies Act, 1913, corresponding to section 25 of the Companies Act, 1956, dispensing with the word 'Limited' in the name of the mandal. The respondent No. 1 is the Joint Charity Commissioner, State of Maharashtra. The respondent No. 2 was formerly the chairman of the mandal. The order under appeal held that the mandal was a public trust and as such was liable to be registered under section 18 of the Bombay Public Trusts Act, 1950 (hereinafter referred to as 'the Public Trusts Act'), as a public trust notwithstanding the fact that it was a corporation.

2. A few facts leading to this litigation may be briefly stated. The mandal applied for and obtained a license under section 26 of the Indian Companies Act, 1913, to register itself under the said Act without the word 'Limited' added to its name on the representation that it was a non-profit making concern and charitable institution. The mandal was incorporated on 3rd April, 1939, as a company limited by guarantee without the word 'Limited' added to its name. It appears between 1939 and 1961, the mandal acquired some property for the objects set out in its memorandum of association. On 12th October, 1961, the mandal made an application to the Charity Commissioner for its registration as a public trust under the Public Trusts Act. It is alleged on behalf of the mandal that this application was made under protest and to find out whether it was liable to be registered under the Public Trusts Act so that it may not be charged with the contravention of the provisions of the Public Trusts Act. On 26th April, 1962, as a result of an inquiry, the Assistant Charity Commissioner, Bombay, held that the mandal did not require registration under the Public Trusts Act. It appears that the Joint Charity Commissioner, Bombay, was not satisfied with this order. He, therefore, commenced review proceedings suo motu and by an order dated 27th April, 1965, set aside the order dated 26th April, 1962, of the Assistant Charity Commissioner, held that the mandal constituted a public trust and remanded the proceedings to the Assistant Charity Commissioner for inquiry and findings on the remaining statutory issues provided for in section 19 of the Public Trusts Act.

3. Against the decision of the Joint Charity Commissioner the mandal appealed to the Bombay City Civil Court. By its order dated 3rd March, 1966, the Bombay City Civil Court dismissed the appeal and upheld the decision of the Joint Charity Commissioner. It is against the said decision that the present appeal has been filed.

4. As I have stated above the mandal is a company limited by guarantee registered under a license under section 26 of the Indian Companies Act, 1913, corresponding to section 25 of the Companies Act, 1956. It is a corporation and, therefore, a juristic person and a distinct legal entity. This is a well-established proposition from the time of the decision of the Judicial Committee of the House of Lords in Salomon v. salomon and Company Ltd. which has been followed in India by the Supreme Court in Mrs. Bacha F. Guzdar v. Commissioner of Income-tax State Trading Corporation of India Ltd. v. Commercial Tax Officer 1811. and Tata Engineering and Locomotive Co. Ltd. v. State of Bihar. As a juristic person the mandal can carry on all human activities subject to such limitation as arise from its not being a natural person and the limitations imposed upon it activities by its own charter contained in the objects clause in the memorandum of association. A juristic person cannot marry and procreate, but it is certainly capable of owning property. It is also capable of owning property in its capacity as a trustee. Corporations carrying on the activity of becoming trustees and executors are not unknown. There can, therefore, be no objection to a corporation acting as a trustee provided its objects clause in the memorandum of association so permits.

5. On behalf of the mandal my attention was drawn to the definition of 'trust' in section 3 of the Indian Trusts Act, 1882. This Act does not apply to public trusts, but the definition of 'trust' contained in it is nonetheless a proper definition of the word 'trust'. Section 3 provided that a 'trust' is an obligation annexed to the ownership of property and arising out of a confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of another ..... The person who reposes or declares the confidence is called the 'author of the trust'. The person who accepts the confidence is called the 'trustee', and the person for whose benefit the confidence is accepted is called the 'beneficiary' and the subject-matter of the trust is called 'trust property'. In my opinion if a corporation is capable of accepting the ownership of property with an obligation annexed to the ownership for the benefit of another which may be a class of persons, there can be no objection to a corporation acting as a trustee. The only question is whether in this case the mandal has accepted such trust.

6. Section 2(13) of the Public Trusts Act defines a 'public trust' as under :

''Public trust' means an express or constructive trust for either a public religious or charitable purpose or both and includes ..... a society formed either for a religious or charitable purpose or for both and registered under the Societies Registration Act, 1860.'

7. The difference between a private trust and a public trust arises from the difference between the objects. While in the private trust the intention is to benefit an individual or a group of persons and there is no public religious or charitable purpose, in the public trust there is a public religious or charitable purpose. It is expressly provided in the definition of 'public trust' that a society formed for a religious or charitable purpose or for both and registered under the Societies Registration Act, 1860, is included in the definition of 'public trust'. There is no reference to a company incorporated under the Companies Act, but that should not make any difference. If a company is authorised by its objects clauses in its memorandum of association to hold property in trust for public religious or charitable purposes, there is no reason why its ownership of property for such purposes should not form a public trust.

8. We must, therefore, refer to the constitution of the mandal and find out whether the objects clauses and the other provisions in its memorandum of association authorise it to hold property for public religious or charitable purposes. We must also see if there are other circumstances, if any, pointing to the existence of a public trust. Under section 26 of the Indian Companies Act, 1913, and under section 25 of the Companies Act, 1956, a license can only be granted by the Central Government if the company is formed for promoting commerce or science, religion, charity or any other useful purpose and intends to apply its profits, if any, or other income in promoting its objects and to prohibit the payment of any dividend to its members. In the case of the mandal the license granted to it by the Central Government provides that the memorandum of association shall prohibit payment of any dividend to its members.

9. Now, we come to the objects clause in the memorandum of association of the mandal. Several sub-clauses provide for establishment of a home for the use of Akhil Deshastha Rigvedi Brahman Community, providing a lecture hall, educational and religious classes, industrial workshops and hospitals, etc. The objects also include rendition of medical aid to the member of the said community, scholarships for the education of the members of the said community and provision for gymnasiums, gymkhanas and other recreation. Sub-clauses (11), (12) and (13) of clause 3 provide as under :

'(11) To accept and undertake any trust and to act as sole trustee or executor in respect of any estate if such acceptance and undertaking is conducive to the attainment of the above objects or any of them.

(12) To accept donations for the purposes aforesaid in cash or in kind.

(13) To hold the property and funds of the mandal in trust and to apply the same and/or the income thereof in promoting the above objects or any one or more of them.'

10. It will thus appear that the object clauses contained in the memorandum of association of the mandal expressly provide that the mandal shall act as a trustee in respect of its property for the attainment of the objects of the mandal, and that it shall hold such property in trust and apply the same for the said purposes. The educational and other purposes seat out in the memorandum would in my opinion constitute public religious and charitable purposes. The mandal is, therefore, in my opinion, a trustee in respect of the property it holds for carrying out the said public religious and charitable purposes and there is in existence a public trust which is liable to be registered under the Public Trusts Act.

11. On behalf of the mandal it was contended that at the time of incorporation of the mandal in 1939, there was no property and, therefore, there could be on public trust. It is true that there is no evidence that in 1939 there was any property of the mandal and it may be that at that time the objects clauses in the memorandum of association only contained an intention that when the property came into existence, it would be held by the mandal in trust for the members of the said community for charitable purposes. But the moment the property came into existence the mandal became a trustee in respect of the said property, the beneficiary was the community for whose benefit the property was held and the objects are those set out in the memorandum of association.

12. The second contention taken was based on two judgments, one of Jahagirdar J., in the case of Bhaskar Sadashiv Joshi v. Registrar, Bombay Public Trusts Registration Act, 1935 and the other an unreported judgment dated 12th July, 1956, in Appeal No. 657 of 1954 of a Division Bench of this court consisting of Chagla C.J. and Dixit J. In Bhaskar Joshi's case it was held that a society registered under the Societies Registration Act, 1860, even if it is religious or charitable, is exempt from the operation of the Bombay Public Trusts Registration Act, 1935. This may be a correct interpretation of the 1935 Act but it cannot apply to the Bombay Public Trusts Act of 1950 because such a society is now expressly included in the definition of a public trust. Apart from this we are in this case concerned with a company and not with a society. In the case before the Division Bench (Civil Appeal No. 657 of 1954) there was a panchayat holding property for the benefit not of the members of a particular community but for the benefit of such members of that community who were members of the panchayat. It was in view of that limitation that the Division Bench held that the panchayat was not a public trust and was not liable to be registered under the public Trusts Act. In this case, however, the memorandum of association of the mandal expressly provides for holding property in trust for the objects specified in the memorandum, and the beneficiaries are the members of a particular community irrespective of whether they are or are not the members of the mandal. The Division Bench decision has no application to the facts of this case.

13. Another contention taken on behalf of the mandal was that if the mandal was compelled to register itself under the Public Trusts Act, it will come under dual control and such dual control will create conflict, the dual control being of the Companies Act and of the Public Trusts Act. In my opinion, there is no substance in this contention. The mandal is a trustee. With regard to its own constitution, it may be governed by the provisions of the Companies Act. But with regard to property held by it as trustee for public religious and charitable purposes, it will be liable to comply with the provisions of the Public Trusts Act. A company incorporated under the Companies Act has to comply with the other laws of the land applicable to its activities. This does not result in any conflict.

14. The last contention taken was that if the mandal was compelled to register itself under the Public Trusts Act, and it is removed as a trustee for any breach of trust or other malversation, the trust would come to an end. I find no substance in this contention. It may be that the mandal may be found guilty of breach of trust or malversation of the property of the trust and may be removed as a trustee. There is no reason why the removal as a trustee of the mandal should bring an end to the trust. The Charity Commissioner or the court can always frame schemes for the administration of the trust and the trust can continue with substituted trustees. It would not matter if in that event the mandal has to be wound up. Many companies find themselves in this position, if their business comes to an end and their substratum is gone. This cannot be a reason for exempting the mandal from registering itself under the Public Trusts Act.

15. If the contention that a company even if it owns property as a trustee in trust for a class of beneficiaries for public religious and charitable purposes is not required to be registered under the Public Trusts Act were accepted, it would result in large-scale evasion of the provision of the Public Trusts Act. All that the trustee have to do is to register a company under the Companies Act, vest the trust property in the company and become its directors in order to escape the provisions of the Public Trusts Act. Such a construction is not to be favoured.

16. In the result, the appeal fails and is dismissed. The order of the City Civil Court dated 3rd March, 1966, is confirmed. In the circumstances of the case, there will be no order as to costs.


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