Dr. Gonchigari Narayana and Others vs Sri Jagadeesh

A.N. Venugopala Gowda

This appeal has been filed by the Petitioners in Misc.Case No. 984/2010 on the file of Prl. City Civil & Sessions Judge at Bangalore, dismissing a petition seeking leave of the Court, to institute a suit u/s 92 of CPC For convenience, the parties would be referred to with reference to their rank in the Court below.

The material facts of the case for consideration are:

On 29.05.2003, the Petitioners 1 &.2 and the Respondent, created a trust in the name of ''Priyadarshini Education Trust''. The said trust was revoked and on 10.08.2005, the Petitioners and Respondents created a new trust in the name of ''Priyadarshini Education Trust'' as per registered deed No. 208/2005-06 of Book-IV in the Office of sub-Registrar, Bangalore North Taluk. The Petitioners alleged mismanagement of the said trust by the Respondent and sought leave u/s 92 of C.P.C to institute a suit against the Respondent i.e.,

(i) to furnish books of accounts of the trust from August 2005;

(ii) to remove him from the trusteeship and from the post of Secretary of the trust and

(iii) to grant perpetual injunction restraining him from interfering with the affairs of the trust and its institutions.

Respondent filed statement of objections, interalia contending that, the petition is not maintainable either in law or on facts; that the Petitioners have not approached the Court with clean hands and that the petition being frivolous, vexatious and filed with an oblique motive to screw money, taking of cognizance of the petition was opposed. He stated that, the objective of the trust is ''neither charitable nor philanthropic'' and it is only for providing education by establishing colleges and hence, the petition is not maintainable and that the Court has no jurisdiction to entertain the plaint with regard to working or non-working of the trust under the trust deed dated 29.05.2003. He further stated that, the trust registered on 10.08.2005 did not start doing any work and did not make any application to any authority and no bank account was opened and hence the question of embezzling money by him does not arise and in the circumstances, submitting of books of account or calling for a meeting never arose.

The Court below, considering the petition seeking leave to institute the proposed suit, noticing that the trust deed dated 10.08.2005, provides for the succession to the trust to the founders, being the life trustees and after their demise, the trusteeship will devolve on the persons of their choice, held that, the trust created is not for the purpose of carrying on the public and charitable activities, so as to attract the provision of Section 92 of CPC By noticing the prayers in the proposed suit, further held that the suit falls outside the purview of Section 92 of C.P.C and by observing that, if the Petitioners are aggrieved by any of the acts of the Respondent, they have to seek relief before a different forum.

Sri H.N. Shashidhara, learned advocate appearing for the Appellant, contended that, the Court below has failed to appreciate the petition, the documents produced alongwith it and on account of misdirection adopted in the matter, the impugned order has been passed. Learned Counsel further contended that, without keeping in view the scope and ambit of Section 92 of Code of Civil Procedure, on account of wrong approach to the matter, the impugned order has been passed.

Sri C.S. Prasanna Kumar, learned advocate appearing for the Respondent, on the other hand, firstly contended that the trust, which is a necessary and proper party, having not been impleaded, the petition and appeal are not maintainable. Secondly, the nature of reliefs in the proposed suit being individual disputes, the Petitioners cannot seek vindication of the same by filing a petition u/s 92 of CPC Thirdly, the parties being related to each other, cannot invoke the provision u/s 92 of C.P.C and in the circumstances, the Trial Court is justified in dismissing the petition seeking leave of the Court to institute the proposed suit u/s 92 of Code of Civil Procedure

Petitioners filed Misc.Cvl. No. 16022/2011, to implead ''Priyadarshini Education Trust'' as Respondent No. 2. The Respondent filed statement of objection, contending that, the petition filed without making the trust as a party to the proceeding is not maintainable and non-impleading of the trust as a party to the proceeding in the Court below, goes to the root of the matter and being an incurable defect, the application is not maintainable,

Undeniably, alongwith the petition and the proposed suit, 33 documents were filed in the Court below, which included a certificate dated 16.01.2007 issued by the Director of Income Tax (Exemptions) Bangalore, to Priyadarshini Education Trust, which had made an application for registration u/s 12AA (a) of Income Tax Act, 1961 in a prescribed form on 31.07.2006. The Trial Court while passing the impugned order has not made any reference to the said certificate. The said certificate shows that the registration u/s 12A(a) of the Income Tax Act, 1961 was granted with effect from 10.08.2005 in the status of "PUBLIC CHARITABLE TRUST".

In view of the rival contentions and the record, the point for consideration is:

Whether the impugned order is arbitrary, capricious, perverse and illegal?

The essential conditions for filing a suit u/s 92 of CPC are:

1) There must exist a trust for public purpose of a charitable or religious nature.

2) The Plaintiff/s must allege that there is a breach of such express or constructive trust created for the public purpose of a charitable or religious nature or where the direction of the Court is necessary for the administration of such trust.

3) The suit must be a representative one and.

4) The reliefs prayed for in the suit must be any one of the reliefs mentioned in Section 92.

In the case of Chairman Madappa Vs. M.N. Mahanthadevaru and Others, , it has been held that, the very object of Section 92 of CPC is to give protection to the public trusts of a charitable or religious nature from being subjected to harassment by suits being filed against them.

In the instant case, indisputedly, a trust was created on 10.08.2005 by the Petitioners and the Respondent. On an application made on behalf of the trust by the Respondent in the capacity as Secretary of the trust, the Director of Income Tax (Exemptions) Bangalore, issued a certificate u/s 12AA (a) of Income Tax Act, 1961 on 16.01.2007. The making of application end obtaining of the certificate was not acknowledged by the Respondent, even during the hearing of this appeal. In fact, an affidavit was filed by the Respondent stating that, pursuant to the execution of the trust deed dated 10.08.2005, no activity of whatsoever nature took place and the said deed remained on paper and that, no permission to run any institution, college or any sanctions were obtained. Since the affidavit was vague with regard to the obtaining of the said certificate dated 16.01.2007, by an order dated 18.07.2011, the Respondent was provided with an opportunity to file a further affidavit. The Respondent filed an affidavit dated 21.07.2011, which also did not make any reference to the exemption granted in favour of the trust w.e.f 10.08.2005. Since the status of the trust, whether it is a public charitable trust or not, is required to be decided and there being a dispute with regard to the trust deed dated 10.08.2005 being operational, summons was ordered to be issued to the Income Tax Officer (Exemptions), Ward - II, Bangalore-1 to produce the file relating to the issue of said certificate u/s 12AA (a) of the Income Tax Act, 1961. Summons having been issued by the Registry, the file was produced. It can be seen from the file that, the Respondent as a Secretary of the Priyadarshini Education Trust(r) made an application on 31.07.2006 for registration of charitable trust u/s 12AA (a) and another application for grant of recommendations u/s 80 G of Income Tax Act, 1961, by stating as follows:

With reference to the above, we have running the business since 2005, our one of the Trustees Dr. Gonchigari Narayana, who out of station since 8 months for business purposes in U.S.A, he was not available for signing the document papers for registration, so we have not able to file the application for Registration u/s 12A & 80G for the year 2005-06. So we filed the Income Tax return and paid tax for the previous year 2005-06 at maximum marginal rate of tax. Please condone the delay for filing the registration u/s 12A(a) & 80G. Please do the needful and oblige.

(underlining is by me)

Please find enclosed herewith the following documents:

Application for registration of charitable trust or institution u/s 12A(a) - two copies each

a. Form 10A

b. Certified copy of TRUST DEED

c. Copy of the accounts of the company since its inception (for the year 2005-2006)

Application for grant of Recognition us/.80G -two copies each

a. Form 10G

b. Motes on activities of the Trust since its inception

c. Copies of accounts of the Trust since its inception (for the year 2005-2006)"

Alongwith the application dated 31.07.2006, the Respondent enclosed an authorisation letter signed by all the Petitioners and the Respondent. In Form No. 10A/application for registration of Charitable or religious trust or institution u/s 12A (a) of the Income Tax Act, 1961, Column No. 3 shows the names of Petitioners and the Respondent and column No. 4 shows i.e., date of creation of the trust or establishment of the instutition, as 10.08.2005. Column No. 5 relating to the name and address of trustee/manager, shows the names of the Petitioners and the Respondent. Even in Form No. 10G, being an application for grant of approval or continuance thereof to institution or fund u/s 80G(5)(vi) of the Income Tax Act, 1961, the very same particulars as shown in Form No. 10A has been shown. The brief resume of all the trustees i.e., the Petitioners and the Respondent was enclosed. With regard to note on activities of the trust, it has been shown that the trust is running the Nursing School and College since 2005 and with regard to bank account details, the name of the bank has been shown as UTI Bank Ltd., Basaveswaranagar Branch, Bangalore with Bank Account No. 065010100257428.

The Income Tax Officer by a communication dared 13.11.2006, called upon the Managing Trustee of the Priyadarshini Education Trust to furnish the information, including certified copy of registered trust deed. The Respondent, acting as the Secretary of Priyadarshini Education Trust(r), has submitted a letter dated 28.11.2006 furnishing the information and the documents, including the certified copy of the trust deed dated 10.08.2005 and the material part of the said letter reads as follows:

With reference to the above, I am furnishing the following information as requested by you.

Note on activities of the Trust along with brochures.

Certified copy of the Trust Deed.

The brochure enclosed with regard to note of activities of the trust, contains the photograph of 1st Petitioner and that of Smt. Jayanthi Narayana, 2nd Petitioner as President.

After the said file from the Income Tax Department was received and perused, Sri C.S. Prasanna Kumar, fairly and rightly conceded that, the Petitioners and the Respondent have created Priyadarshini Education Trust on 10.08,2005 and the Trust was recognised by the Income Tax Department as ''PUBLIC CHARITABLE TRUST

The Court below while passing the impugned order has not noticed even the relevant clauses of said trust deed which indicates that it is public charitable Trust, on account of which the Income Tax Department issued the certificate, produced along with the petition. In the circumstances, the misdirection adopted by the Court below to the matter is apparent. The Court below having adopted a wrong approach to the matter has passed totally erroneous order.

In a suit for securing a direction from the Court for the proper administration of the trust, the trust as well as its trustees are necessary and proper parties. All the trustees of the trust are on record of the petition/suit. The trust as such, was not impleaded. Leave sought has not been granted on account of non-consideration of the record and misdirection adopted by the Court below.

The Court below has totally ignored the record of the case. The Court below has recorded unreasonable and perverse findings. There is both non-application of mind and non-consideration of the record of the case. Hence, the matter requires re-consideration by the Court, below also keeping in view the fact that the Respondent concealed materials, which is evident from the file summoned from the Income Tax Department. Since the Court below failed to consider the matter in the correct perspective, the matter being at the stage of consideration of the petition for grant of leave, the application filed to implead the trust is also required to be considered by the Trial Court.

In the result the appeal is allowed and the impugned order is set-aside.

Since the petition was not decided on merit with reference to the materials on record, the Court below to consider the case keeping in view the observations made supra and in accordance with law.

The parties are directed to appear before the court below on 17.09.2011 and receive further orders.

The Court below to decide the matter expeditiously.

File submitted by the Income Tax Department be returned to the authority concerned who is directed to maintain the file in safe custody till Misc.Case No. 984/2010 is decided by the Court below.