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2025 Supreme(SC) 1156

SUPREME COURT OF INDIA
J.B. PARDIWALA, R. MAHADEVAN, JJ.
Operation Asha - Appellant
Versus
Shelly Batra & Ors. - Respondents
Civil Appeal No. 10048 of 2025 (Arising out of S.L.P (Civil) No. 29830 of 2024)
Decided on : 05–08-2025

Important Points

A society functioning for public charitable purposes may be construed as a constructive trust under Section 92 of the Code of Civil Procedure, 1908, when its governing body acts in a fiduciary capacity and is alleged to have misappropriated funds, necessitating judicial intervention to protect public rights.

Subject

Civil Law - Trusts and Societies

Act Referred

Headnote

(A) Code of Civil Procedure, 1908 - Section 92 - Societies Registration Act, 1860 - Section 5 - Applicability of Section 92 to entities registered as societies - Essential prerequisites for a representative suit - Scope of constructive trust in respect of non-profit entities. (Para 32, 40)

(B) A suit under Section 92 of the Code is a representative suit of a special nature for the protection of public rights in public charitable trusts. For the section to apply, it must be established that: (i) the institution is a public trust for charitable or religious purposes, (ii) there is a breach of trust or the necessity for court directions, and (iii) the relief sought falls within the enumerations of Section 92(1). A registered society is not automatically a public trust, but its governing body holds properties in a fiduciary capacity. (Para 33, 40, 77, 82)

(C) Constructive trust is an equitable doctrine arising by operation of law, irrespective of the intention of the parties, intended to prevent unjust enrichment or fraud. When those in control of an entity’s funds breach their fiduciary duty by diverting resources for personal gain, equity may impress a constructive trust upon such assets, rendering the actors constructive trustees accountable for public funds. (Para 90, 107, 109)

(D) In deciding whether a suit falls under Section 92, the court must go beyond the specific reliefs prayed and look at the capacity in which the plaintiffs sue and the object of the litigation. The presence of some private grievances within a suit does not necessarily render it non-maintainable if the predominant purpose is the vindication of public rights in a representative capacity. (Para 130, 134)

Facts of the case:
A suit was filed by two persons associated with a non-profit society registered for charitable purposes, alleging gross financial impropriety and mismanagement by certain members of the governing body. The plaintiffs sought leave to institute a representative suit under Section 92 of the Code, claiming that the society functioned as a public trust. The governing body contended that since the entity was a registered society and not a deed-based trust, the provisions of Section 92 were inapplicable.

Findings of Court:
The court held that property vesting in a society’s governing body creates a fiduciary relationship. Where allegations arise that individuals have siphoned public funds contrary to the society's aims, equity can treat the institution or the diverted funds as subject to a constructive trust, making the governing body accountable to the public beneficiaries.

Issues: Whether an entity registered as a non-profit society can be construed as a constructive trust for the purposes of invoking Section 92 of the Code, and whether the suit in question was maintainable as a representative suit for public interest.

Ratio Decidendi: Registration under the societies legislation does not immunize an organization from Section 92 if the substance of its operations constitutes a public charitable trust. By applying the doctrine of constructive trust as an equitable remedy for fiduciary breaches, the law ensures that public funds are safeguarded, allowing judicial intervention through representative suits when the administration fails to meet the expected standards of rectitude.

Result: Appeal dismissed.
Judgement Key Points

Certainly. Based on the provided legal document, here are the key points summarized with references indicated separately:

  1. The case involves a society registered under the Societies Registration Act, 1860, which is alleged to hold property for charitable purposes and may be subject to a suit under Section 92 of the CPC if certain conditions are met (!) (!) .

  2. Section 92 of the CPC provides for a suit concerning breaches of express or constructive trusts created for public purposes of charitable or religious nature, with specific reliefs such as removal of trustees, appointment of new trustees, vesting of property, or settling schemes (!) (!) .

  3. For a suit under Section 92, three fundamental conditions must be satisfied: the trust must be for a charitable or religious purpose, there must be a breach or a necessity for court directions for trust administration, and the relief claimed must fall within those enumerated under Section 92(1) (!) (!) .

  4. The nature of the trust—whether express or constructive—is crucial. An express trust involves clear intention, certainty of subject matter, and beneficiaries, whereas a constructive trust arises by operation of law to prevent unjust enrichment or wrongful conduct (!) (!) .

  5. The creation of a trust can be inferred from circumstances such as the method of property devolution, the intention behind property grants, the conduct of the institution, and public user, even if no formal trust deed exists (!) (!) .

  6. A society registered under the Societies Registration Act, 1860, generally does not automatically constitute a trust or constructive trust merely by virtue of its registration or property vesting provisions. The property is held by the society as a legal entity, with the property vesting in the governing body unless a separate trust is established (!) (!) .

  7. The legal position is that properties of a society are deemed to vest in the governing body, but this does not mean the society is a trust; rather, it is a legal fiction to facilitate management, with fiduciary obligations attached to the governing body (!) (!) .

  8. The distinction between a trust and a society is reinforced by legal provisions and judicial decisions, which emphasize that a trust involves specific intent, formalities, and obligations, whereas a society's property rights are governed by its statutes and bye-laws (!) (!) .

  9. The imposition of a constructive trust is a remedial measure, arising by operation of law in circumstances where it would be unconscionable for the holder of property to retain it, especially in cases of wrongful conduct, fraud, or unjust enrichment (!) (!) .

  10. The burden of proof lies in establishing the existence of a trust, the breach, and the fiduciary or wrongful conduct. Allegations of siphoning or mismanagement need to be substantiated to invoke the doctrine of constructive trust or to justify a suit under Section 92 (!) (!) .

  11. The purpose and object of the suit, including whether it is instituted for vindicating public rights or personal grievances, are critical. A suit primarily aimed at personal or private rights, even if filed by multiple interested persons, may not satisfy the requirement of a public trust suit under Section 92 (!) (!) .

  12. The capacity of the plaintiff to sue, including whether they are interested in the trust and whether they are acting in a representative capacity, affects the maintainability of the suit. The interest must be substantial and not purely sentimental or illusory (!) (!) .

  13. The reliefs claimed must correspond to those specified in Section 92(1). Reliefs outside this scope, especially declarations of trust properties without breach or breach-related reliefs, are generally not permissible under Section 92 (!) (!) .

  14. The procedural safeguards under Section 92, such as obtaining leave of the court and the requirement that the suit be brought by interested persons, are designed to prevent frivolous litigation and protect public trusts from harassment (!) (!) .

  15. The registration of a society under the Societies Registration Act does not automatically change the character of properties held by the society into trust properties unless there is clear evidence of a trust or a trust-like arrangement. The legal position is that properties vest in the society or its governing body, with fiduciary obligations, but not as a trust unless explicitly created (!) (!) .

  16. The court's role at the stage of granting leave under Section 92 is limited to assessing whether there is a prima facie case of breach of trust and whether the suit is for vindicating public rights. A detailed factual inquiry is reserved for the subsequent stage of the suit (!) (!) .

  17. Allegations of misappropriation, misconduct, or breach of fiduciary duties, if proven, can justify the imposition of a constructive trust and the court's intervention for administration or relief, provided they are substantiated during the trial (!) (!) .

  18. The distinction between an express trust, which requires clear intention and formalities, and a constructive trust, which is imposed by law to prevent unjust enrichment, is fundamental to determining the applicability of Section 92 (!) (!) .

  19. The overall purpose of the suit and the capacity of the plaintiffs to represent the public interest are determinative factors in its maintainability under Section 92. Private disputes or suits aimed solely at personal rights are generally outside its scope (!) (!) .

  20. The legal framework and judicial approach emphasize that a society’s registration alone does not convert it into a trust; the existence of a trust depends on the circumstances, conduct, and intention surrounding property management (!) (!) .

These points collectively encapsulate the legal principles, procedural requirements, and distinctions relevant to suits under Section 92 of the CPC concerning societies and trusts, as reflected in the provided document.


Legal Category Hierarchy

  • practice and procedure
    • civil procedure
      • section 92 cpc
        • leave to institute suit (Para 12, 38, 40, 118)
        • representative suits (Para 33, 34, 35, 129)
  • law of trusts
  • statutory law
    • societies registration act 1860
      • vesting of property (Para 71, 72, 77, 81)
      • legal status of societies (Para 72, 74, 77)

Advocates appeared:
For the Petitioner(s): Mr. Dama Seshadri Naidu, Sr. Adv. Mr. Bishwajit Dubey, Adv. Ms. Radhika Bishwajit Dubey, Adv. Mr. Karan Khetani, Adv. Mr. Umesh Dubey, Adv. Ms. Madhulika, Adv. Ms. Vuzmal Nehru, Adv. Mr. Manoj K. Mishra, AOR
For the Respondent(s): Mr. Jai Anant Dehadrai, Adv. Mr. Sidharth Sharma, Adv. Mr. Anubhav Lamba, Adv. Mr. Pulkit Agarwal, AOR

Table of Contents

1. Suit under Section 92, CPC — Alleged breach of trust and financial impropriety in a registered society — Application for leave to institute suit for public charitable purposes. (Para 2 , 7 , 10 )

2. Maintainability of Section 92, CPC suit against a registered society — Distinction between trust and society — Whether siphoning of funds creates a constructive trust. (Para 15 , 16 , 23 , 24 , 26 )

3. Registered societies are not automatically trusts — Governing bodies act as fiduciaries — Constructive trusts arise by operation of law to prevent unjust enrichment from misappropriated funds. (Para 77 , 82 , 90 , 104 , 109 )

4. A registered society may be subject to Section 92, CPC if a constructive trust is established through fiduciary breach and misappropriation of funds for personal gain. (Para 111 , 112 )

5. Appeal dismissed — Leave to institute suit under Section 92, CPC granted — Personal grievances to be agitated in separate proceedings. (Para 137 , 138 )

6. Can a society registered under the Societies Registration Act, 1860, be considered a trust under Section 92, CPC?

Not automatically. A registered society is not a body corporate or a trust by virtue of registration. However, it can be a trust if a public trust pre-existed registration or if a separate trust was created to hold its properties. (Para 59 , 60 , 63 , 64 , 71 , 72 , 77 , 81 )

7. What is a constructive trust in the context of Section 92, CPC?

A constructive trust arises by operation of law, regardless of intention, to prevent unjust enrichment. It is imposed when a fiduciary misapplies property or gains an advantage through their position, which they cannot conscientiously retain. (Para 90 , 91 , 104 , 106 , 107 , 109 )

8. How does Section 5 of the Societies Registration Act, 1860, affect the fiduciary nature of a governing body?

Section 5 creates a fictional vesting of property in the governing body because societies are not juristic persons. This does not eliminate fiduciary obligations; the governing body must use property for the society's charitable objects. (Para 72 , 75 , 77 , 82 , 83 , 84 )

9. When is a suit under Section 92, CPC, considered to be in a representative capacity?

A suit is representative when it is instituted in the interest of the public to vindicate public rights, rather than solely for the vindication of individual or personal rights of the plaintiffs. (Para 33 , 34 , 35 , 36 , 122 , 129 , 130 )

10. Can a suit under Section 92, CPC, be maintained if it includes both public and personal grievances?

Yes, provided the predominant object is the vindication of public rights. Reliefs for personal grievances cannot be granted under Section 92, but their presence does not necessarily invalidate the entire suit. (Para 133 , 134 , 135 , 136 )

JUDGMENT :

J.B. PARDIWALA, J.

For the convenience of exposition, this judgment is divided into the following parts: -

INDEX

A. FACTUAL MATRIX

B. THE IMPUGNED JUDGMENT

C. SUBMISSIONS OF THE PARTIES

i. Submissions on behalf of the Appellant

ii. Submissions on behalf of the respondent no. 1

iii. Submissions on behalf of the respondent nos. 3 and 4

D. ISSUES FOR DETERMINATION

E. ANALYSIS

iii. Submissions on behalf of the respondent nos. 3 and 4

ii. Conditions to be fulfilled for the applicability of Section 92 of the CPC

A. The trust being created for a public purpose of a charitable or religious nature

I. Whether a Society can be construed to be a ‘trust or a ‘constructive trust’?

a. Circumstances under which the creation of a trust has been inferred.

b. Views of different High Courts on the issue

c. Section 5 of the Societies Registration Act, 1860 and the ‘vesting’ of properties in the Executive Committee.

d. The doctrine of constructive trust and its applicability to a society functioning for public purposes of a religious or charitable nature

B. A breach of trust or the directions of the court being necessary for the administration of the trust

C. The institution of the suit must be made by two or more persons “having an interest in the trust”

D. The reliefs falling within the scope of those enumerated under Section 92(1) of the CPC along with the object, purpose and capacity in which the suit is brought

F. CONCLUSION

1. Leave granted.

2. This appeal arises from the judgment and order passed by the High Court of Delhi dated 21.08.2024 in FAO(OS) No. 114 of 2024 (hereinafter, the “impugned decision”), by which the High Court dismissed the appeal filed by the appellant herein against the judgment and order dated 03.05.2024 passed by a learned Single Judge of the High Court in CS(OS) No. 153 of 2020 allowing the application under Section 92 of the Code of Civil Procedure, 1908 (hereinafter, the “CPC”) filed by the respondent nos. 1 and 2 respectively, seeking leave to institute the subject suit.

A. FACTUAL MATRIX

3. Operation ASHA (hereinafter, the “appellant Society/original defendant no. 1”) is 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. The appellant Society is 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 same can be inferred from the Memorandum of Association (hereinafter, the “MoA”) of the appellant Society. The aims and objectives of the appellant Society are as follows:

“4. AIMS AND OBJECTS

MAIN OBJECTIVES OF THE SOCIETY ARE GIVEN BELOW.

4.1.1 To develop, establish, maintain and provide health and all other related services, and to help, aid, assist, arrange, co- ordinate, organize maintain and carry on activities connected with one of health quality of life, nursing facilities, socio-economic aspects, general welfare and problems of the society with special emphasis on provision of services for the underprivileged sections of the society as per Govt. rule.

4.1.2 To develop, establish, make and provide microcredit microfinance and all other related services, and to help, aid, assist, arrange, contribute, co-ordinate, organize maintain and carry on activities connected with concerns of microcredit and micro finance. Socio-economic aspects, general welfare and problems of the society with special emphasis on provision of services for the underprivileged sections of the society as per Govt. rule.

4.1.3 To establish hospitals, medical schools and colleges, nursing schools and colleges, dispensaries, laboratories research institutions and other educational institutions

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