THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST, INDORE & ANR. versus VIPIN DHANAITKAR & ORS.
[2022] 17 S.C.R. 173 | 2022 INSC 739
Supreme Court of India
Decision date: 21-07-2022
Judges: A.M. KHANWILKAR
Outcome: Case Partly allowed (Granted)

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THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES)
TRUST, INDORE & ANR.
v.
VIPIN DHANAITKAR & ORS.
(Civil Appeal No. 4839 of 2022)
JULY 21, 2022
[A.M. KHANWILKAR, ABHAY S. OKA AND
C.T. RAVIKUMAR, JJ.]
Trusts and Charities:
Madhya Pradesh Public Trusts Act, 1951:ss. 2 (4), 4 (1), 14,
36 (1) – Registration of Public Trusts – Alienation of trust property
–Previoussanction of Registrar – On facts, matter pertaining to
illegal alienation of appellant trust-Khasgi Trust by the trustees –
Trust deed of the appellant trust executed in 1962 and is traced to
Holkar rulers – Alienations were made by the trustees in relation to
at least six properties –Collector held that the properties mentioned
in the Trust Deed were the properties of the State Government; that
the trustees made illegal alienations without prior permission from
Government, thus the alienations held to be invalid–Collector
directed that the name of the State Government to be entered in
revenue records to prevent further alienations– Said order
challenged by the appellant Trust and its trustee – Single Judge of
the High Court disposed of the petition by issuing diverse directions
for the administration of Khasgi Trust - Another writ petition filed
by the appellant-Khasgi Trust disposed of by directing the authorities
to correct the revenue record – Appeals before the Division Bench,
wherein it was held that the Appellant- Khasgi Trust was governed
by the Public Trusts Act; that the Trustees had no authority to alienate
the Khasgi properties as the same was vested in the State
Government; and that the Single Judge had virtually re-written the
Trust Deed and therefore, the judgment could not be sustained –
On appeal, held: Khasgi (Devi Ahilyabai Holkar Charities) Trust,
Indore, is a Public Trust governed by the provisions of the 1951 Act
–Khasgi Trust, is an express Trust for public, religious and charitable
purposes –Trustees have a duty to safeguard the interests of the
beneficiaries of the Public Trust – Thus, the trustees directed to get
the Khasgi Trust registered under the Public Trusts Act by making

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the necessary application– Properties described in Part ‘B’ of the
Schedule to the Trust Deed, are properties of the said Public Trust–
Alienationof the said properties can be made only by taking recourse
to s.14 – Supplementary Trust Deed is also valid – Issuance of the
direction by the High Court to Economic Offences Wing of the State
Government to hold an inquiry was not warranted–Registrar having
jurisdiction over Khasgi Trust, to call for the record of the Trust
relating to all the alienations made by trustees and after holding an
inquiry to determine if any loss was caused to the Public Trustby
alienation – Subjectto the said directions, the judgment of the
Division Bench as well as the Single Judge set aside.
Partly allowing the appeals, the Court
HELD: 1.1 The properties described in Part ‘B’ of the
schedule to the Trust Deed which were vested in the State
Government were transferred to the autonomous Khasgi Trust
on its incorporation.In fact, till 2012, the State Government never
disputed that the Khasgi properties listed in Part ‘B’ of the
Schedule to the Trust Deed were the Trust properties of the
Khasgi Trust. Therefore, to that extent, the Division Bench of
the High Court is not right when it concluded that the properties
incorporated in Part ‘B’ of the Schedule to the Trust Deed
continue to be the Government properties even after 16th July
1962. The said properties are vesting in the Khasgi Trust.[Para
33][205-E-F]
1.2 The High Court proceeded on the erroneous footing
that as there was no notification issued under sub-section (2) of
section 36, clause (a) of sub-section (1) of section 36 will not
apply. Sub-Sections (1) and (2) of Section 36 operate in different
fields. When sub-Section (1) is applicable to a Public Trust, none
of the provisions of the Public Trusts Act is applicable to the
Trust. Sub-Section (2) is an independent power of the State
Government to issue a notification exempting certain Public
Trusts from all or any of the provisions of the Public Trusts Act.
[Para 39][208-E-G]
1.3 The Supplementary Trust Deed which enables the
Trustees to alienate the Trust Property cannot be illegal. However,

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alienation of the Trust property can be made only in accordance
with Section 14. The Trustees by executing such a document
cannot overcome the mandate of Section 14. Therefore, the power
to alienate under the Supplementary Trust Deed is subject to the
constraints imposed by Section 14 of the Public Trusts Act. To
that extent, the Division Bench of the High Court was not
right.[Para 41][210-B-C]
1.4 Section 14 is applicable to immovable property of a
Public Trust. Section 13 governs the investment of public trust
money. The State’s control of charities and religious endowments
in some form is not foreign to our jurisprudence. A Public Trust
invariably depends on charity done by individuals by donating
immovable property or by making cash donations. Though in law,
the assets and properties of a Public Trust vest in its Trustees,
they hold the Trust property in a fiduciary capacity for the benefit
of the beneficiaries of the Trust. They hold the property for giving
effect to the objects of the Public Trust. A Trust property cannot
be alienatedunless it is for the benefit of the Trust and/or its
beneficiaries. The Trustees are not expected to deal with the
Trust property, as if it is their private property. It is the legal
obligation of the Trustees to administer the Trust and to give
effect to the objects of the Trust. Therefore, the statutes dealing
with the Public Trusts which are operating in various States,
provide for limited control of the activities of a Public Trust. The
control is exercised by providing for the submission of the annual
accounts by the Trustees and filing of returns with the concerned
charity organization or other authority under the law. There are
statutory constraints on the power of the Trustees to alienate
the property of a Public Charitable Trust. There are provisions
in such statutes for penalizing the Trustees for misappropriation
of the property of the Trust. Many such Statutes empower the
authorities under the Statutes to remove a Trustee of a Public
Trust, on account of misbehaviour or acts of misappropriation,
etc. The Trustees are the custodians of Trust properties.The
Trustees have a duty to safeguard the interests of the beneficiaries
of the Public Trust. That is how a provision in Public Trust Law,
like Section 14 of the Public Trusts Act, is of importance. This
provision seeks to protect the Trust property in the hands of the
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR

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Trustees from unwarranted alienations. In the present case, the
transactions of sale in favour of the appellant in Civil Appeal
arising out of Special Leave Petition 19063 of 2021, have been
effected admittedly without obtaining prior permission under
Section 14. The Division Bench of the High Court has gone into
the question whether the alienations were null and void. However,
the purchasers were not parties to the proceedings before the
High Court. Hence, final adjudication could not have been made
on the issue of nullity of the alienations made by the Trustees of
the Khasgi Trust in absence of the necessary parties. [Para
45][212-D-H; 213-A-C]
1.5 In the present case, all the alienations made by the
Trustees of Khasgi Trust except alienation made in favour of the
appellant in Civil Appeal arising out of Special Leave Petition
(C) No.19063 of 2021, have been made without complying with
the mandatory requirement of obtaining the previous sanction as
required by sub- Section (1) of Section 14.[Para 48][217-A-B]
1.6 The impugned judgment of the Division Bench arises
out of three proceedings. Two out of three are writ petitions filed
by the Trustees. The first one was filed for challenging the
impugned order of the Collector and the second one was filed
seeking directions regarding entering the names of the Trustees
in revenue records in respect of the Trust properties. The third
proceeding is the Public Interest Litigation, in which there is a
prayer for issuing a writ of mandamus to direct inquiry through
CBI. Therefore, there was no occasion for the Division Bench to
declare that the sale transactions are void, especially when the
purchasers were not before the High Court. Nevertheless, it is
necessary for the Registrar to exercise powers under Section 22
and call for necessary records pertaining to the alienations made
by the Trustees. Thereafter, the Registrar shall exercise powers
under Section 23 and decide whether any loss was caused to the
Public Trust as a result of alienations and if any loss was found to
have been caused, he shall quantify the amount in accordance
with sub-Section (2) of Section 23. He may also consider of
invoking sub-section (1) or (2) of Section 26, if found
necessary.[Para 49][217-C-F]

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1.7 The order of the Collector which was impugned before
the High Court was passed without giving an opportunity of being
heard to the Trustees of the Khasgi Trust and the purchasers. A
show cause notice was issued to the Trustees by the Registrar
on the basis of the complaint of the Member of the Parliament.
Though the Trustees replied to the notice, even thereply was
not considered by the Collector. Only on this ground, the said
order ought to be set aside. As a matter of fact, the Collector had
no jurisdiction to decide the issues of title as well as
mismanagement of the affairs of a Public Trust. For the same
reason, even the report of the Commissioner and the report of
the Principal Secretary to the Chief Minister are without
jurisdiction. The reports have been made in breach of the
principles of natural justice without affording an opportunity of
being heard to the Trustees. [Para 50][217-G-H; 218-A-B]
1.8. There was no warrant to direct inquiry through the
Economic Offences Wing of the State Government as there is no
finding that there was mens rea on the part of the Trustees. No
finding has been recorded by the High Court based on material
that the alienation made by the Trustees has resulted in causing
loss to the Trust and that the entire sale consideration being
diverted for personal use. The entire consideration received from
the purchasers has been credited to the account of the Trust.
The allegation of misappropriation can be gone into only by the
Authorities underthe Public Trusts Act. Moreover, the direction
issued by the High Court proceeds on the erroneous assumption
that the Trustees have made misappropriation of the Government
properties. There is no offence registered against the Trustees.
Hence, Economic Offences Wing cannot be directed to hold an
inquiry or investigation in connection with the subject matter of
this proceeding. In other words, the direction given by the High
Court vide the impugned Judgment in that regard will have to be
held to be non est in law. Though the said direction is unwarranted,
the Registrar will have to initiate necessary proceedings under
the Public Trusts Act and carry them to a logical conclusion.[Para
51][218-C-F]
1.9 The impugned order of the Collector purports to decide
the issue of Title of the Trust properties by holding that the
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR

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properties in Part ‘B’ of the Schedule to the Trust Deed are vested
in the State Government. Even assuming that there was no
express authority given to the writ petitioner inthe form of a
resolution of the Board of Trustees to file the writ petitions, even
an individual Trustee was entitled to take proceedings for
questioning such orders, which adversely affect the Trust and /or
its beneficiaries. On the contrary, it is the duty of every Trustee
to take such action of challenging an order holding that the
properties held by the Trust are not the Trust properties.
Moreover, none of the Trustees has come forward to challenge
the authority of Trustee who had filed writ petitions and further
proceedings. There was also a direction issued to the Economic
Offences Wing to hold an inquiry about the misappropriation of
the Trust property by the Trustees. Every Trustee was affected
by the said direction. Therefore, in the facts of the case, the
objection raised to the maintainability of the petition filed by one
of the Trustees cannot be sustained.[Para 49][217-C-F]
1.10 The impugned judgment of the Division Bench cannot
be sustained in toto. However, the view taken by the Division
Bench that the Khasgi Trust is governed by the Public Trusts
Act and no alienation of the Trust properties could be made
without complying with Section 14 thereof, is affirmed. Even the
order of the Single Judge cannot be sustained as he has virtually
directed the rewriting of the Trust Deed. There are submissions
canvassed across the Bar about the locus of the applicant in
I.A.No.124266 of 2020 filed in Civil Appeals arising out of Special
Leave Petition (C) Nos.12241-42 of 2020. It is not necessary for
the Court to go into the said question finally. Thus, the said
question is left open to be decided in appropriate proceedings.
As far as Civil Appeal arising out of Special Leave Petition (C)
No.19063 of 2021 is concerned, the alienation was made by the
Trustees in favour of the appellant after obtaining the previous
sanction of the Registrar by the order dated 16th October 1997.
Therefore, the Registrar will have to make an inquiry limited to
the question whether compliance of the conditions incorporated
under the said order has been made by the Trustees. If there is a
non-compliance, the Registrar will have to invoke the provisions
of the Public Trusts Act for taking necessary action. [Para 53-
55][219-D-G]

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1.11 The Khasgi (Devi Ahilyabai Holkar Charities) Trust,
Indore, is a Public Trust governed by the provisions of the
Madhya Pradesh Public Trusts Act, 1951. The trustees are
directed to get the Khasgi Trust registered under the Public
Trusts Act by making the necessary application within the
stipulated period. The properties described in Part ‘B’ of the
Schedule to the Trust Deed, are properties of the said Public
Trust. However, alienation of the said properties can be made
only by taking recourse to Section 14 of the Public Trusts Act;
The Supplementary Trust Deed dated 08th March 1972 is valid.
But, the Trustees of the Khasgi Trust shall be entitled to alienate
the Trust Property only after complying with Section 14 of the
Public Trusts Act. The direction issued by the High Court to
Economic Offences Wing of the State Government to hold an
inquiry was not warranted. The Registrar is directed under the
Public Trusts Act, having jurisdiction over Khasgi Trust, to call
for the record of the Trust relating to all the alienations made by
the Trustees. After holding an inquiry as contemplated by Section
23, the Registrar after giving an opportunity of being heard to all
concerned shall determine whether by virtue of the alienations
made by the Trustees, any loss was caused to the Public Trust. If
according to him any such loss was caused to the Public Trust, he
shall decide and quantify the amount liable to be paid by the
concerned Trustees to the Khasgi Trust. After holding an inquiry,
if found necessary, he may invoke the power of making an
application to the Court under sub-Section (2) of Section 26.
Subject to the said directions, the impugned judgment of the
Division Bench as well as the impugned judgment and orders of
the Single Judge are set aside.[Para 56][220-A-G; 221-C]
Parsi Zoroastrian Anjuman, Mhow v. Sub Divisional
Officer/The Registrar of Public Trusts and Anr. 2022
SCC Online SC 104 ; Akhil Bhartiya Upbhokta
Congress v. State of Madhya Pradesh and Ors. (2011)
5 SCC 29 : [2011] 5 SCR 77 – referred to.
Case Law Reference
[2011] 5 SCR 77
 referred to
 Para 42
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR

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CIVIL APPELLATE JURISDICTION : Civil Appeal No.4839
of 2022.
From the Judgment and Order dated 05.10.2020 of the High Court
of Madhya Pradesh, Bench at Indore in Writ Petition No.11234 of 2020.
With
Civil Appeal Nos.4840-4841, 4842-4844 and 4845 of 2022.
Balbir Singh, Vikramjit Banerjee, ASGs, Saurabh Mishra, AAG,
Dr. A. M. Singhvi, Shyam Divan, Amit Desai, P. S. Patwalia, Huzefa
Ahmadi, Siddharth Bhatnagar, Sr. Advs., Ms. Nandini Gore, Ms. Ruby
Singh Ahuja, Aman Ahluwalia, Ms. Tahira Karanjawala, Abhinav
Malhotra, Sidhant Kumar, Ms. Kritika Sachdeva, Ms. Garima Singh,
Akshay Aggarwal, Amit Bhandari, M/s Karanjawala & Co., Ayush
Agarwala, Anuj P. Agrawala, M/s PBA Legal, Ms. Qurratulain, Braj
Kishor Sah, Mrs. Mrinal Gopal Elker, Kannu Aggarwal, Manish Yadav,
Ms. Pratibha Yadav, Prafull Singh Chandel, Harish Pandey, P. V.
Yogeswaran, Saurabh Mishra, Chandra Prakash, Arvind Kumar Sharma,
Naheed Carrimjee, Sohan Kinkhabwala, Rishi Maheshwari, Ms. Anne
Mathew, Bharat Sood, Ms. Shruti Jose, P. S. Sudheer, Utsav Trivedi,
Abhinay, Ms. Manini Roy, Himanshu Sachdeva, Ms. Shivani Bhushan,
Ms. Unnati Vijay, Pooran Chand Roy, Umang Shankar, Mayank
Kshirsagar, Ms. Anu Gupta, Prashant Bhushan, Ms. Neha Rathi, Alice
Raj, Rahul Gupta, Arjun Garg, Ronak Karanpuria, Pulkit Tare, Advs. for
the appearing parties.
The Judgment of the Court was delivered by
ABHAY S. OKA, J.
1. Permission to file Special Leave Petition is granted. Leave
granted.
FACTUAL MATRIX
2. These appeals take exception to the common judgment and
order dated 5th October 2020 of a Division Bench of the High Court of
Madhya Pradesh, Bench at Indore. By the said decision, the Madhya
Pradesh High Court decided two Writ Appeals filed by the appellants in
Civil Appeals arising out Special Leave Petition (C) 12133 of 2020 and
Special Leave Petition (C) No. 12241-42 of 2020. The Khasgi (Devi
Ahilyabai Holkar Charities) Trust, Indore (for short, ‘the Khasgi Trust’)

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and its Trustee Shri S. C. Malhotra are the said appellants. The two writ
appeals decided under the impugned judgment arise out of Writ Petition
Nos. 11618 of 2012 and 5372 of 2010 filed by the Khasgi Trust. Writ
Appeal No. 92 of 2014 arises out of Writ Petition No. 11618 of 2012.
The Writ Appeal No. 135 of 2014 arises out of Writ Petition No.5372 of
2010. By the impugned judgment, a Public Interest Litigation filed by the
first respondent–Shri Vipin Dhanaitkar in Civil Appeal arising out of
Special Leave Petition (C) No. 12133 of 2020 was also decided.
3. The controversy revolves around the properties claimed by the
Khasgi Trust as the Trust Properties. On 30th October 1948, an instrument
called as “The Covenant” was executed by the erstwhile Rulers of
Gwalior, Indore and certain other States in Central India for the formation
of the United State of Gwalior, Indore and Malwa (Madhya Bharat).
Late Yashwantrao Holkar, the Maharaja of Indore (for short “the
Maharaja”) was a party to the said Covenant who agreed to unite and
integrate the territory of Indore into one State with a common executive,
legislature and judiciary, by the name of the United State of Gwalior,
Indore and Malwa (Madhya Bharat). Article XII provided that the Ruler
of each covenanting State shall be entitled to the full ownership, use and
enjoyment of all private properties (as distinct from the State Properties)
belonging to them on the date of their making over the administration of
their respective States to Raj Pramukh (the Head of the State of the
United State of Gwalior, Indore and Malwa). Article XII further provided
that the Ruler of each covenanting State shall furnish to Raj Pramukh,
before the first day of August 1948, an inventory of all immovable
properties, securities and cash balance held by him. The Convention
further provided that if any dispute arises as to whether any item of
property is a private property of the Ruler or a State Property, it shall be
referred to such person as the Government of India may nominate in
consultation with the Raj Pramukh. It is further provided that the decision
of that person shall be final and binding on all parties concerned. It appears
that Maharaja Yashwantrao Holkar submitted two inventories in terms
of Article XII. The first inventory was concerning his alleged private
properties. The second inventory submitted by the Maharaja was of the
properties known as the Khasgi Properties. In terms of Clause (3) of
Article XII, the Government of India appointed Shri V.P. Menon, the
Secretary of the Ministry of States as the authority to decide the claims.
By the letter dated 7th May 1949, Shri V.P. Menon informed the Maharaja
that the claim made by him in respect of his private properties as listed in
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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Annexure ‘A’ to the said letter has been finally approved, accepted and
signed in pursuance of Article XII of the Covenant. Annexure ‘A’ contains
a detailed description of the private properties of the Maharaja, which
are accepted as per Article XII of the Covenant to be his private
properties. By another letter dated 6th May 1949, Shri V.P. Menon
informed the Maharaja that his claim in respect of the properties described
as the Khasgi properties has been finally settled on the basis of the
enclosure to the said letter. In the enclosure to the letter, it was mentioned
that the Khasgi properties and income received from the Khasgi
properties shall be treated as lapsed for all the time to the Madhya Bharat
Government. In lieu thereof, certain guarantees were given. The
enclosure provided that the Madhya Bharat Government shall in perpetuity
set aside a sum of Rs.2,91,952/- (Rupees Two Lakh Ninety-One
Thousand Nine Hundred and Fifty-Two only) for the charities. The amount
shall be put under a permanent Trust for the said charities, including the
charities of Maharani Ahilya Bai Holkar. It provided that the Trust shall
consist of the Ruler of erstwhile Indore State, who will be the President.
There will be two nominees of the Ruler. One nominee shall be of the
Central Government, and two nominees shall be of the Madhya Bharat
Government. However, it was stated that the trustees nominated by the
Government of India and the Madhya Bharat State shall be appointed in
consultation with the Ruler. It provided that powers and functions of the
Trust shall be subject to such legislation as the Central Government or
the Madhya Bharat Government may enact generally to regulate such
Trusts. However, the composition of the Trust and the manner of its
formation shall not be liable to any modification or change by such
legislation.
4. It must be noted here that the State Government enacted the
Madhya Pradesh Public Trusts Act, 1951 (for short, ‘the Public Trusts
Act’). On 26th May 1959, the Ministry of Home Affairs of the
Government of India addressed a letter to the Maharaja, which refers to
the settlement of Khasgi Property. By the said letter, the Central
Government nominated one Shri S.V. Kanungo as its nominee. The letter
records that Shri Kanungo was already a trustee nominated by the
Central Government on two other family Trusts of the Holkar family.
Before that, on 6th January 1959, by addressing a letter, the General
Administration Department of the State Government informed the Private
Secretary to the Maharaja that the State Government was proposing to
nominate the Commissioner, Indore Division and the Superintending

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Engineer (B & R), Public Works Department, Indore Circle as the
trustees. The State Government requested the Secretary to the Maharaja
to communicate the concurrence of the Maharaja to the said nominations.
By another letter dated 1st April 1959, the General Administration
Department of Madhya Pradesh communicated to the Secretary to the
Maharaja requesting him that representatives of the Ruler on the Trust
be nominated. The letter records that the State Government has prepared
a draft of the Trust Deed which will be finalised without any delay. The
letter dated 14th November 1959 of the State Government addressed to
the Secretary of Maharaja which is by way of reminder to the Maharaja
to nominate his two representatives. The said letter also records that the
draft of the Khasgi Trust Deed will be finalised and sent for approval of
the Maharaja. The letter dated 14th April 1961 addressed by the State
Government to the Secretary to Maharaja records that the draft of the
Deed of Khasgi Trust is under examination and will be sent soon.
5. Ultimately, in terms of the draft provided by the State
Government, the Deed of Trust of the Khasgi Trust (for short, “the Trust
Deed”) was executed on 27th June 1962 by and between Her Highness
Maharani Usha Devi of Indore, the daughter and successor of Maharaja
Yashwantrao Holkar, described therein as the Settlor, Shri K.A. Chitale,
Senior Advocate and Shri S.C. Malhotra as the nominees of the Settlor
and Shri S.V. Kanungo, the nominee of the President of India. The Trust
Deed was also signed by the Commissioner, Indore Division and
Superintending Engineer (B & R), Public Works Department, Indore
who were nominated as trustees by the State Government. In the recitals,
it is mentioned that the Trust was being created of the annuity of
Rs.2,91,952/- in perpetuity for maintenance, upkeep and preservation of
charities and religious endowments provided in the budget of the Holkar
State for the year 1947-48 inclusive of the charities founded by Maharani
Devi Ahilaya Bai Holkar. The said endowments were described in part
‘A’ of the Schedule. Further, it is provided that the Trust will be for the
management and maintenance of the properties described as the Trust
Properties, more particularly described in Part ‘B’ of the Schedule to
the Deed of Trust. Part ‘B’ of the Schedule contains a list of a large
number of properties in various States.
6. There was a notification issued by the State of Madhya Pradesh
on 27th July 1962. It was mentioned therein that on the formation of the
Madhya Bharat State, institutions, factories, religious places, chhatries,
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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etc. fell under the supervision and management of the Commissioner,
Pardon Office. It was further stated in the notification that the State
Government while granting permission for the formation of the Khasgi
Trust and the Alampur Trust (the Holkar Chhatries Trust), has granted
recognition/approval to the transfer of the areas, and institutions etc.
included in the Trust Deeds of the aforesaid Trusts. It is further mentioned
that accordingly, the areas, institutions, factories, religious places, chhatries
etc. were transferred to the respective Trusts on 16th July 1962. A report
of making over and taking over charge of the properties described as
the Alampur and Khasgi trust properties was recorded on 16th July 1962.
For the sake of completion, it must be mentioned here that on 8th March
1972, a Supplementary Deed of Trust was executed by and between the
Trustees for incorporating a clause that the Trustees have always had
and shall have the power to alienate not only the income but any other
item of the corpus of Trust Property for the necessity or for the benefit
to the objects of the Trusts.
7. Alienations were made by the Trustees in relation to at least six
properties. On 18th April 2012, a letter was addressed by Smt. Sumitra
Mahajan, a Member of the Parliament to the Chief Minister of the
Government of Madhya Pradesh. She contended in the said letter that
the property mentioned in the Trust Deed was vesting in the erstwhile
State of Madhya Bharat. It is mentioned that a valuable property shown
in the Trust Deed at Haridwar was sold by the trustees without the
permission of the Registrar under the Public Trusts Act. Therefore, she
requested the Chief Minister to order an inquiry. Along with the notice
dated 23rd May 2012, a copy of the said complaint was forwarded to the
trustees of the Khasgi Trust by the Registrar of Public Trusts, District
Indore. The Trustees replied on 20th June 2012 contending that the Public
Trusts Act was not applicable to the Khasgi Trust and it is for the benefit
of the Trust that the alienations have been made. Thereafter, the Collector
of District Indore passed an order dated 5th November 2012 holding that
the properties mentioned in the Trust Deed were the properties of the
State Government. He held that the trustees have made illegal alienations
without prior permission from the Government. Therefore, the alienations
were held to be invalid. Hence, the Collector directed that the name of
the State Government be entered in revenue records/land records to
prevent further alienations.
8. A Writ Petition being Writ Petition No. 11618 of 2012 was filed
by the Khasgi Trust and its Trustee Shri S.C. Malhotra in the Madhya

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Pradesh High Court for challenging the aforesaid order dated 5th
November 2012 passed by the Collector and praying for restraining the
Collector from interfering with affairs of the Trust. The learned Single
Judge disposed of the petition by the judgment and order dated 28th
November 2013 by issuing diverse directions for the administration of
the Khasgi Trust. The learned Single Judge directed that the Board of
Trustees shall be reconstituted by including Smt. Sumitra Mahajan and
two the persons as trustees. The State Government was directed to
make a provision for payment of Rs.1 crore every year to the Khasgi
Trust. Another writ petition (W.P. No. 5372 of 2010) filed by the Khasgi
Trust was disposed of by the order dated 3rd December 2013 by the
learned Single Judge directing the authorities to correct the revenue
record in terms of the aforesaid order dated 28th November 2013. As
stated earlier, both the said orders of the learned Single Judge were
challenged by the State Government by filing two writ appeals. The
Public Interest Litigation which was decided along with the writ appeals
contained a prayer for directing inquiry through CBI regarding the affairs
of the trust and in particular, regarding the alienations made by the
Trustees.
9. Following are the important findings rendered by the Division
Bench in the impugned judgment and order:
(a)
the Khasgi properties mentioned in Part ‘B’ of the Schedule
to the Trust Deed continued to be vested in the State
Government and therefore, the Trustees had no authority
to alienate the same;
(b)
the subsequent modification of the Trust Deed made by the
Trustees empowering them to alienate the properties
described in Part “B” of the Trust Deed was illegal and
was not binding on the State Government;
(c)
the alienations made by the Trustees were void;
(d)
the Khasgi Trust was governed by the Public Trusts Act;
and
(e)
the learned Single Judge while deciding the writ petitions
filed by the Khasgi Trust has virtually re-written the Trust
Deed and therefore, his Judgment cannot be sustained.
In paragraphs 158 to 166 of the impugned judgment, the Division
Bench issued following directions:
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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“158. This Court is not reproducing the entire report as the
Covenants, Trust Deeds and the notification issued by the
Government of India have already been reproduced in earlier
paragraphs. Thus, it is wrong on the part of the respondent to say
that the mechanical exercise was undertaken by the Collector
based upon letter of Member of Parliament. With due application
of mind, the State Government through Collector, Indore keeping
in view the covenant, trust deed and the statutory provisions has
taken action in the matter.
159. In the considered opinion of this Court, this Court does not
have the power to draft the Trust Deed nor is having the power to
enact the statute in respect of trust in question. However, as the
properties which are under the ownership of State of Madhya
Pradesh have been sold by the Trust/Trustees, a committee
deserves to be constituted to ensure that the trust properties as
per the schedule appended with the original trust deed are
preserved, maintained and kept intact for the future generations
to come.
160. The Committee so constituted shall inquire in respect
of the properties sold by the Trust and shall take all possible
steps to recover and retrieve any property or fund of the
property, which have been sold or have been in unauthorized
occupation or misappropriated. For doing the aforesaid task,
the State of Madhya Pradesh shall incur all the expenditures, in
case there is paucity of fund in the accounts of the trust, especially
in light of the fact that it is the State of Madhya Pradesh, who is
having title over all properties.
161. The following Committee is constituted for the aforesaid
work comprising of:—
(a) Chief Secretary, State of Madhya Pradesh (Chairman);
(b) Principal Secretary, Finance Department (Member);
(c) Additional Chief Secretary, Dharmaswa Department
(Member);
(d) Commissioner, Indore Division, Indore (Member);
(e) Collector, Indore (Secretary).

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The State of Madhya Pradesh shall be free to proceed ahead in
accordance with law.
162. In the connected writ petition i.e. W.P. No. 11234/2020, which
is a Public Interest Litigation, a prayer has been made for issuance
of an appropriate writ, order or directing a CBI inquiry. So far as
the prayer with regard to directions for CBI inquiry is concerned,
this Court is of the considered opinion that no such directions are
required. The allegation of misappropriation of Government
properties and its disposal to favour someone and to cause
loss to Public Exchequer, if at all, can very well be examined
by Economic Investigation Wing of the State of Madhya
Pradesh and accordingly, it is directed that the said Wing
will thoroughly examine the matter and if it finds any
criminality into the actions of any authority, it is expected
that appropriate action should be taken by the said Wing.
Hence, no positive direction to register a First Information
Report is required.
Resultantly, the Economic Offences Wing shall examine the matter
and shall be free to proceed ahead in accordance with law.
163. The State of Madhya Pradesh is directed to take all possible
steps to preserve the cultural heritage including the Ghats, Temples,
Dharamshalas, which find place in the Trust property, being the
titleholder of the property in question. The State of Madhya Pradesh
shall also take appropriate action in accordance with law against
all those persons, who have allegedly illegally sold the Trust’s
property from time to time.
164. In W.P. No. 11234/2020, the Union of India is already a
party and Shri Milind Phadke has also been heard in the matter
before delivering the judgment. He has also stated that the
properties in question, on account of the covenant and the statutory
notifications issued from time to time, are the exclusive properties
of the State of Madhya Pradesh.
165. This Court on 23-4-2014 has directed the parties to maintain
status quo and it has been informed by learned counsel for the
State of Madhya Pradesh that some construction has taken place
by the private parties.
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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166. Resultantly, the State of Madhya Pradesh is directed
to take appropriate action in respect of the construction
which has taken place over the Khasgi properties and shall
restore it to its original position and the entire expenditure
shall be borne by the State of Madhya Pradesh through
Commissioner, Indore. The Collector, Haridwar shall assist
the Divisional Commissioner, Indore in the matter and the
Divisional Commissioner, Indore shall ensure that Kusha
Ghat as well as other properties are again, which are meant
for public charities are made available to public at large.
The aforesaid direction is not only in respect of present
property but in respect of other properties also. The State
of Madhya Pradesh shall ensure by taking appropriate steps in
accordance with law that no further sale takes place in respect of
such properties and they shall maintain the properties for the
generations to come keeping in view their historic importance.
The Collector, Indore shall be free to take action in accordance
with law pursuant to the order passed by him dated 5-11-2012
and the Registrar shall also be free to take appropriate action in
accordance with law pursuant to the order passed by him dated
30-11-2012.”
(emphasis added)
SUBMISSIONS ON BEHALF OF THE KHASGI TRUST
10. The submissions have been made initially by Shri Mukul
Rohatgi, Senior Advocate and thereafter, by Dr. A.M. Singhvi, Senior
Advocate in Civil Appeals arising out of Special Leave Petition (C)
No.12133 of 2020 and Special Leave Petition (C) No.12241-42 of 2020.
The learned senior counsel appearing for the appellants urged that at the
time of the merger of the erstwhile State of Indore with the newly formed
State of Madhya Bharat, there were three categories of properties - (A)
State Properties covered by Article VI(1)(c) and Article XII of the
Covenant; (B) Private Properties of the Ruler of Indore; and (C) Charities
and Trust Properties held by the family of the Ruler of Indore. The
contention raised by the appellants is that the charities which were already
dedicated to the public, could not lapse to the State Government. The
main submission is that in the impugned order of the Collector dated 5th
November 2012, there is an error committed by holding that the properties
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Trust, were not the Trust Properties but, were the properties of the State.
It was submitted that the properties mentioned in Part ‘B’ of the Schedule,
are the properties vested in the Khasgi Trust, as can be seen from various
clauses of the Trust Deed. It was submitted that the Supplementary
Deed of Trust dated 8th March 1972 clearly confers a power on the
Trustees to alienate the Trust properties mentioned in Part ‘B’ of the
Schedule to the Trust Deed. The submission is that as the Khasgi Trust
is a State-controlled Trust, in view of clause (a) of the sub-Section (1) of
Section 36 of the Public Trusts Act, the provisions of the Public Trusts
Act, are not applicable to it. The learned senior counsel relied upon a
specific order passed in that behalf by the Registrar of Public Trusts. He
submitted that there are as many as 246 properties listed in Part ‘B’ of
the Schedule to the Trust Deed, out of which, only six have been
transferred by the Trustees during the span of over sixty years. He
submitted that apart from the fact that Section 14 of the Public Trusts
Act is not applicable to the Khasgi Trust, the scope of Section 14 has
been laid down by this Court in the case of Parsi Zoroastrian Anjuman,
Mhow v. Sub Divisional Officer/The Registrar of Public Trusts and
Anr.1 He submitted that as the Public Trusts Act allows the Trustees to
alienate the Trust properties, the Registrar would be required to grant
permission for alienation in view of sub-Section (2) of Section 14 of the
Public Trusts Act.
11. The learned senior counsel would urge that for a period of
over fifty years from the date of execution of the Trust Deed, the State
Government never disputed the status of properties mentioned in Part
‘B’ of the Schedule to the Trust Deed as the properties of the Khasgi
Trust. He submitted that only on the basis of a complaint dated 18th April
2012, made by a senior Member of Parliament of the ruling party to the
office of the Chief Minister, the Principal Secretary prepared an Inquiry
Report dated 2nd November 2012. No notice of any such inquiry was
served upon the Trustees. He pointed out that the said Inquiry Report
dated 2nd November 2012 proceeds on the footing that the Trust properties
are, in fact, the properties of the State Government. The Inquiry Report
suggests that the possession of the Government properties should be
taken over by the State Government. He pointed out that it is on the
basis of this Inquiry Report that the impugned order dated 5th November
2012 was passed by the Collector unilaterally holding that the State
Government was the owner of the properties described as the Trust
12022 SCC Online SC 104
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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properties in the Trust Deed. Apart from the fact that the Collector had
no jurisdiction to adjudicate on the disputed question of title, even the
elementary principles of natural justice have not been followed. He
pointed out that a show cause notice was issued by the Registrar of the
Public Trusts to the Khasgi Trust on the basis of the complaint made by
the Member of Parliament. Though, the Trustees replied to the said
show cause notice issued by the Registrar, the said reply has not been
considered by the Collector while passing the impugned order dated 5th
November 2012.
12. Inviting our attention to the findings recorded in the impugned
judgment of the Division Bench, the learned senior counsel submitted
that correspondence on record and the clauses in the Trust Deed have
been completely overlooked by the Division Bench of the High Court of
Madhya Pradesh. He pointed out that the Supplementary Deed of Trust
was executed on 8th March 1972 by all the Trustees including the
nominees of the State Government as well as of the Central Government.
Though the said Supplementary Deed was not challenged specifically,
the Division Bench has gone into the issue of legality thereof. As regards
the sale of the property known as Holkar Bada at Haridwar, he pointed
out that the Bada which consists of only residential premises, has been
sold under four separate Sale Deeds, but the adjacent Kusha Ghat has
not been sold by the Trustees. The Bada property sold by the Trustees
was encroached upon. There is a resolution of the Board of Trustees
authorising the sale of the said property to which all the Trustees are
parties. He pointed out that the constituted Attorney appointed by the
Trustees may be related to the purchasers, but the purchasers are not at
all related to any of the Trustees. He submitted that the entire sale proceeds
have been deposited in the corpus of the Trust. Moreover, the Sale Deeds
executed by the Trustees in the year 2009, were never challenged by
the beneficiaries or any other person till 2012, when the Member of
Parliament raised an objection to the said transactions. If according to
the Authorities, the Trustees had violated the provisions of the Public
Trusts Act, assuming the same were applicable, the Registrar could have
invoked his powers under Chapter V of the Public Trusts Act. He
submitted that the impugned order dated 5th November 2012 was passed
by the Collector behind the back of the Trustees. Moreover, the Collector
had no jurisdiction to make an adjudication on the question whether the
Trustees have violated any provision of law. He submitted that the order
of the Collector is without jurisdiction. In any case, in view of the order

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dated 10th August 1971 passed by the Registrar of Public Trust, Indore,
the provisions of the Public Trusts Act are not applicable to the Khasgi
Trust. He pointed out that each and every alienation has been made
pursuant to the resolutions passed by the Trustees which included the
Government nominees.
13. The learned senior counsel submitted that when the Trustees
have acted within the four corners of the Trust Deed as well as the
Supplementary Trust Deed, criminal intention cannot be attributed to
them. There is a complete absence of mens rea. He submitted that
before making the first alienation in respect of a garden, the Trustees
approached the State Government for sanction. The Chief Secretary of
the State by communication dated 13th June 1969, clearly took a stand
that the sanction of the Government for making alienation was not
required. He submitted that the three nominees of the Governments are
parties to the decision taken by the Board of Trustees to alienate the
properties. He urged that the Trustees acted in a bona fide manner and
therefore, in the year 2020, the High Court ought not to have ordered
inquiry through the Economic Offences Wing of the State Government
especially when the transactions concerning Holkar Bada were of 2009.
He submitted that even the learned Single Judge while deciding the writ
petition filed by the Trustees, had exceeded the jurisdiction vested in him
and directed substantial modifications to be made to the Trust Deed. He
submitted that on all counts, the impugned order of the Collector dated
5th November 2012, deserved to be set aside by allowing the writ petition.
SUBMISSIONS OF THE APPELLANT IN CIVIL APPEAL
FILED BY THE PURCHASER
14. Civil Appeal arising out of Special Leave Petition (C) Diary
No.22151 of 2020 has been filed by the purchaser of Holkar Bada. Shri
P. S. Patwalia, the learned senior counsel firstly submitted that by the
impugned judgment, the High Court has declared that the Sale Deeds
executed in favour of the appellant, were void, though, the appellant-
purchaser was not a party to the writ petition before the learned Single
Judge and to the Appeals before the Division Bench. Moreover, after
eleven years of the execution of the Sale Deeds, the High Court found
fault with the same. He submitted that the appellant are bona fide
purchaser. He submitted that one Mr. Vijay Singh Pal filed a Public
Interest Litigation before the High Court of Uttarakhand, seeking an
inquiry through the Central Bureau of Investigation into the sale
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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transactions and the said writ petition/PIL was dismissed by the order
dated 24th May 2018. The High Court held that the petitioner therein had
not challenged the Sale Deeds by approaching the Civil Courts. The
learned senior counsel pointed out that the said order was confirmed by
this Court. He submitted that the appellant has been harassed and
blackmailed by the said Mr. Vijay Singh Pal. Therefore, a suit for injunction
was filed by the appellant/purchaser against him, which was decreed by
the Civil Court. He submitted that to the Public Interest Litigation decided
by the impugned judgment, the appellant/purchaser was not a party and
moreover, the same was belatedly filed in the year 2020. He submitted
that the Sale Deeds, under which Holkar Bada was sold, were not
challenged in any proceedings before any competent Court. He submitted
that the appellant has not purchased Kusha Ghat and he is the purchaser
of only the property known as Holkar Bada.
15. He also invited our attention to the resolution passed by the
Board of Trustees on 5th June 2008, approving the sale transaction. He
submitted that there is no material to show that the sale transaction was
made at a price which was less than the prevailing market value. He
stated that the old tenants had encroached upon the said property and
their presence on the property has been noted in the revenue records.
SUBMISSIONS ON THE INTERVENTION APPLICATIONS
16. Shri Prashant Bhushan, the learned counsel appearing for the
applicant/intervenor in I.A.No.124266 of 2020, filed in Civil Appeals
arising out of Special Leave Petition (C) Nos.12241-42 of 2020, has
made detailed submissions. He submitted that the dispute regarding the
title claimed by a Maharaja of Indore was resolved in terms of Article
XII of the Covenant by Shri V. P. Menon nominated by the Central
Government. By a letter dated 6th May 1949, he settled the claim of
Maharaja in respect of the Khasgi properties by holding that the same
shall be treated as transferred to the State Government. He submitted
that in the same order, a Trust was proposed to be constituted for
maintenance, upkeep and preservation of the charities including the Khasgi
properties vested in the State Government. He submitted that apart from
the fact that the Trustees had no authority to sell the property described
in Part ‘B’ of the Schedule to the Trust Deed, the documents on record
show that the Trust was getting good income and therefore, there was
no necessity of selling the said property known as Holkar Bada. He
pointed out that on 23rd August 2007, a resolution was passed by the

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Board of Trustees to authorize Shri S. C. Malhotra, a Trustee to give a
power of attorney to the concerned employee/person, only for the purpose
of looking after the legal and other matters of the Trust as well as the
property of the Trust. The resolution did not authorize Shri S. C. Malhotra
to execute a power of attorney, authorizing the attorney to sell or dispose
of the property. However, Shri S. C. Malhotra fraudulently executed a
power of attorney in favour of one Mr. Raghvendra Sharma, authorizing
him to sell the property having an area of 13370 sq.ft. at Kusha Ghat,
Haridwar. Shri S. C. Malhotra had no authority to execute such a power
of attorney. Similarly, Mr. Kanwaljit Singh Rathore claiming to be the
Secretary of the Khasgi Trust executed a similar power of attorney in
favour of said Mr. Raghvendra. On the basis of the said power of attorney,
Mr. Raghvendra executed four separate Sale Deeds in favour of his
own brother Mr. Aniruddh Kumar. In one of the four Sale Deeds, even
Mr. Raghvendra’s wife is shown as a purchaser along with Mr. Aniruddh.
He would, therefore, submit that a fraud has been played by the Trustees.
He relied upon various decisions in support of his contention that the
Sale Deeds executed in favour of said Mr. Aniruddh, are illegal and
void. He submitted that on the basis of the complaint filed by a Member
of Parliament, a detailed inquiry was conducted by the Principal
Secretary. He pointed out that only on the basis of the findings recorded
in the said inquiry that the impugned order has been passed by the
Collector.
17. Shri P.S. Patwalia, the learned senior counsel appearing for
the purchaser has raised a strong objection to the locus of the applicant
– Mr. Ved Prakash Pal, represented by Mr. Prashant Bhushan by relying
upon various documents annexed to the counter affidavit. He pointed
out that the applicant – Mr. Ved Prakash Pal has been set up by Mr
Vijay Singh Pal, who unsuccessfully filed a Public Interest Litigation
before the Uttarakhand High Court, which was finally rejected. He
submitted that in one of the complaints filed by the intervenor – Mr. Ved
Prakash Pal before the District Magistrate in April 2019, he has given
the cell phone number of the said Mr Vijay Singh Pal as his own. He
relied upon several photographs and other documents to show that the
applicant is a close associate of Mr Vijay Singh Pal, who was the petitioner
in the Public Interest Litigation. He pointed out that the members of the
syndicate led by Mr Vijay Singh Pal, have criminal antecedents. He
pointed out several documents in this regard. He submitted that the I.A.
for intervention filed by Mr Vijay Singh Pal has been dismissed by this
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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Court by imposing costs of Rupees Twenty-Five Lakhs. He would,
therefore, submit that the intervention application made by Mr. Prashant
Bhushan deserves to be dismissed with exemplary costs.
18. The learned senior counsel appearing for the applicant –
Richard Holkar in I.A. No.74790 of 2021 filed in Civil Appeals arising
out of Special Leave Petition (C) Nos.12241-42 of 2020, submitted that
the property known as ‘Maheshwar Wada’ was accepted as a private
property of Maharaja Yashwant Rao Holkar by communication dated
7th May 1949. His submission is that the lease granted to the applicant in
respect of the said property cannot be interfered with. He submitted
that before executing the transaction with him, the Trustees had applied
for a permission under Section 14 of the Public Trusts Act. He submitted
that in any case, the applicant was not impleaded as a party in the
proceedings before the High Court and therefore, the High Court could
not have dealt with the issue of the legality of the transactions in favour
of the applicant.
19. The learned counsel appearing for the intervenors/ applicants
in I.A. No.7103 of 2020 filed in Civil Appeal arising out of Special Leave
Petition (C) No. 12133 of 2020 submitted that for managing the property
subject matter of the Trust Deed, a High-Level National Committee
should be constituted. He submitted that the annuity of Rs.2,91,952/-
granted to the Khasgi Trust, is inadequate and the State must substantially
increase the same.
SUBMISSIONS ON BEHALF OF THE STATE OF
MADHYA PRADESH
20. Shri Balbir Singh, the learned Additional Solicitor General of
India submitted that only one Trustee of the Khasgi Trust Shri S. C.
Malhotra had filed the two writ petitions subject matter of these Civil
Appeals and therefore, the same were not maintainable. He had no
authority to represent the Khasgi Trust to the exclusion of the other
Trustees. He submitted that the property subject matter of Part ‘B’ of
the Schedule to the Trust Deed was treated as lapsed in favour of the
erstwhile Madhya Bharat Government. The Trust Deed clearly recites
that the Trustees were authorized only to maintain and preserve the said
properties. He pointed out that in the written statement filed by the
Trustees in Civil Suit No.15 of 1973 as well as in the writ petition filed by
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matter of the Trust Deed had lapsed in favour of the State Government.
He submitted that the correspondence exchanged between the Maharaja
and the Government of India constitutes a treaty or agreement within
the meaning of Article 363 of the Constitution of India. Therefore, all
disputes arising on the basis of the same are required to be adjudicated
by this Court. He submitted that in terms of the adjudication made in
accordance with Article XII of the Covenant, the Khasgi properties vested
in the State Government and thereafter, the State Government was not
divested of the said properties. He submitted that what is mentioned in
the letter dated 13th June 1969 issued by the then Chief Secretary, is
contrary to law and therefore, not binding on the State Government. He
submitted that the Khasgi Trust is a public trust, which is governed by
the Public Trusts Act. He submitted that as the Khasgi Trust cannot be
said to be under the control of the State Government, exemption under
Clause (a) of sub-Section (1) of Section 36 of the Public Trusts Act, was
not applicable. Though the constraints imposed by Section 14 of the
Public Trusts Act were applicable to all the alienations made by the
Trust, prior consent of the Registrar under Section 14 was not obtained.
21. It is pointed out by him that on 28th July 2007, the land appended
to Ganpati Mandir admeasuring 1800 sq.ft. was given on annual lease
for thirty years for a meagre rent amount of Rs.720/- per year. As the
Khasgi property, which even according to the case of the appellant was
a Trust property was illegally sold, an inquiry by the Economic Offences
Wing has been rightly ordered. He would, therefore, submit that no
interference is called for with the impugned judgment.
BROAD QUESTIONS FOR CONSIDERATION
22. After considering the submissions made across the Bar, broadly
the following main questions arise for our consideration:-
a.
Whether the properties incorporated in Part ‘B’ of the
Schedule to the Trust Deed are the properties of the Khasgi
Trust?
b.
Whether the Khasgi Trust is a Public Trust within the
meaning of the Madhya Pradesh Public Trusts Act, 1951
and whether its provisions are applicable to the Trust?
c.
Whether the Supplementary Trust Deed dated 08th May
1972 is legal and valid?
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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d.
Whether the Trustees of the Khasgi Trust were under an
obligation to obtain the previous sanction of the Registrar in
accordance with Section 14 of the Public Trusts Act, 1951
for alienating the Trust property?
e.
Whether the Division Bench of the High Court was right in
holding that the impugned order dated 5th November 2012
passed by the Collector was lawful and correct?
f.
Whether the High Court was justified in directing the
investigation into the allegations of misappropriation against
the Trustees by the Economic Offences Wing of the State
Government? and
g.
Whether the writ petitions filed by only one Trustee of the
Khasgi Trust before the learned Single Judge were
maintainable?
THE STATUS OF THE PROPERTIES IN PART ‘B’ OF
THE SCHEDULE TO THE TRUST DEED (Question – a)
23. Perusal of the Trust Deed shows that 246 immovable properties
are listed in Part ‘B’ of its Schedule. In one of the recitals of the Trust
Deed, the properties in Part ‘B’ have been described as “the Trust
Properties”. It is necessary to consider the relevant provisions of the
Covenant to which the Maharaja is a party. Article XII of the Covenant
reads thus:
“(1) The Ruler of each Covenanting State shall be entitled to the
full ownership, use and enjoyment of all private properties (as
distinct from State properties) belonging to him on the date of his
making over the administration of that State to Raj Pramukh.
(2) He shall furnish to the Raj Pramukh before the first day of
August 1948 an inventory of all the immovable properties,
securities and cash balance held by him as such private property.
(3) If any dispute arises as to whether any item of property is the
private property of the Ruler or State property it shall be referred
to such person as the Government of India may nominate, in
consultation with the Raj Pramukh and the decision of that person
shall be final and binding on all parties concerned.
Provided that no such dispute shall be referable after the first day
of July 1949.”

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24. It appears that the Maharaja made an inventory of all the
immovable properties, securities and cash balance held by him. The
Maharaja made claims in terms of clause (3) of Article XII. Shri V.P.
Menon, the Secretary to the Government of India was nominated by the
Government of India to make an adjudication on the dispute in terms of
clause (3) of Article XII. By the letter dated 6th May 1949 addressed by
Shri V.P. Menon, the Maharaja was informed that the inventory of private
properties of Maharaja submitted pursuant to Article XII has been
approved and accepted. It is mentioned in the said letter that Annexure
‘A’ contains a list of properties which are approved as private properties
of the Maharaja. Annexure ‘A’ contains several properties. Admittedly,
none of these properties has been included in Part ‘B’ of Schedule to the
Trust Deed. Shri V.P. Menon addressed another letter dated 7th May
1949 to the Maharaja informing him that the claim submitted by him in
respect of the Khasgi properties in the inventory has been also settled as
per the enclosure to the said letter. The enclosure to the said letter is
very relevant which reads thus:
“His Highness Maharaja Yashwant Rao Holkar,
Maharaja of Indore,
Indore
Settlement of the claim made by His Highness Maharaja
Yashwant Rao Holkar of Indore concerning Khasgi
The Khasgi properties and the income from Khasgi shall
be treated as ‘lapsed’ for all time to the Madhya Bharat
Government. In lieu thereof the following guarantees are
given subject to the conditions mentioned below:-
(1) The Madhya Bharat Government shall in perpetuity set aside
annually from its revenue a sum of Rs.2,91,952/- (Rupees two
lakhs, ninety-one thousand nine hundred and fifty-two only), being
the amount provided in the Holker State budget of 1947-48 for
charities. This amount shall be funded and put under a permanent
Trust for the said charities including the charities of Her Highness
Mahar Ahilya Bai Holkar.
The Trust shall consist of the following:
1. Ruler of Indore who will always be the President of the Trust.
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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2. Two nominees of the Ruler.
3. One nominee of the Government of India.
4. Two nominees of the Madhya Bharat Government.
Note: The trustees nominated by the Government of India
and the Madhya Bharat Government shall be so appointed
in consultation with the Ruler.
The powers and functions of the Trust shall be subject to
such legislation as the Central or Madhya Bharat
Government may enact generally for purposes of regulating
such trusts, except that the composition of the Trust and
the manner of its formation as stated above shall not be
liable to any modification or change by such legislation.”
(emphasis added)
25. Thus, the Government of India held that the Khasgi properties
and the income from Khasgi should be treated as lapsed for all time to
the Madhya Bharat Government. This shows that the claim made by the
Maharaja in respect of the Khasgi properties was not accepted and that
a decision was taken that the said properties shall vest in the State
Government. In lieu thereof, certain guarantees were given by the
Government of India, which included that an autonomous Trust would
be created for the said charities (the Khasgi properties and the charities
of Maharani Ahilyadevi Holkar). The Trust was to be headed by the
Ruler of Indore as its President. Out of five other Trustees, two were to
be the nominees of the Ruler, two were to be the nominees of the State
Government, and one was to be the nominee of the Government of
India. The government nominees were to be appointed after consultation
with the Ruler. The powers and functions of the Trust were made subject
to the State or Central legislation, which may be enacted in future.
However, it was clarified that the legislation shall not change the manner
of formation of the autonomous Trust and the composition of the Trust.
26. Apart from the rejection of the claim by the Maharaja in respect
of the Khasgi properties, the Trustees have accepted time and again
that by virtue of the settlement of the dispute in accordance with clause
(3) of Article XII of the Covenant, the State Government became the
owner of the Khasgi properties. Suit No. 15 of 1975 was filed by a
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two Trusts of Holkar family were party defendants. A written statement
was filed by the Khasgi Trust in the said suit. Paragraph 6 of the said
written statement is material, which reads thus:
“6. Reply to para 6:
It is admitted that the property descended to His late Highness on
succession from his predecessor Ruler of Holkar Dynasty and
recognition by Paramount Power. The property comprised of the
Kingdom Malharrao extension acquired by Shrimant Holkar and
further and addition Subhedar acquisition, by successive Rulers,
Including His late Highness. The property bestowed on
Maharani Gautamabai Holkar at the instance of her husband
Subhedar Malharrao was held and managed separately by
or on behalf of the consent of the Ruler and was called the
“Khasgi” property, Devi Ahilyabai created public religious
and charitable endowment from her resources and in the
year 1904 the Khasgi property came to be administered by
the Holkar State. In the integration of the administration
under the Covenant entered into by the Rulers of the States
of Central India, the administration of the property settled
for public charitable and religious endowments founded by
Devi Ahilyabai also passed to the United State of Madhya
Bharat, a provision having been made that the endowments
would be administered subject to any directions or
instructions that may from time to time be given by the
Government of India. The properties had been settled as a
foundation for funds for charity. These properties lapsed to the
State and cash grant in lieu thereof was made. The Khasgi (Devi
Ahilyabai Holkar Charities) Trust was constituted under the
appropriate directions of the Government of India to administer
this Trust fund and the charities. The Registrar of Public Trusts
has upheld the Trust as a Public Trust administered by an agency
acting under the control of the State. Annexed herewith is a copy
of the relevant order and marked ‘B’.”
 (emphasis added)
27. Paragraphs 29.2 and 29.3 are also relevant, which read thus:-
“29.2 As stated above, the list of Private Properties settled
in 1948 under the Covenant excluded the endowments
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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which were eventually transferred to the Khasgi (Devi
Ahilyabai Holkar Charities) Trust and Alampur (Subhedar
Malharrao Holkar Chhatri) Trust. These endowments
vested in the United State of Madhya Bharat till 1950, then
in the Part 5 State of Madhya Bharat till 1956 and thereafter
in the reorganized State of Madhya Pradesh until the year
1962 when the two Trusts were created under the obligation
to do so. Article VI:(2) (c) of the Covenant recognised the
necessary of the Successor State providing for management
of the religious, charitable and historical endowments and
keeping them separate from the Private Properties.
29.3 The defendants say that the properties which eventually
vested in these two Trusts were not Private Properties of
His late Highness. They did not vest in His late Highness either
before or after 1940 either as personal or joint family properties.
Alternatively, they were either State Props or properties which
vested in the United State of Madhya Bharat under Article 47 of
the Covenant.”
 (emphasis added)
Again in paragraph 29.4, it is stated thus:
“29.4 This vesting in three successive Governments
referred to above and the handing over of the property by
the Government of Madhya Pradesh to the defendant No.1
for the purposes of creation of trusts under the Covenant
were acts of State which cannot be challenged by the Plaintiff
in municipal courts.”
 (emphasis added)
28. Even in the writ petition filed by the Khasgi Trust out of which
the present Civil Appeals arise, a specific stand was taken in Paragraph
5.1 that the Khasgi Properties were charities and religious endowments
of the family of Rulers of Indore. A stand was taken that the Khasgi
properties held by Holkar rulers vested in the State Government which
were restored to the Trust created for that purpose. The relevant part of
paragraph 5.1 reads thus:
“5.1. The petitioner is a religious and charitable Trust duly
constituted on 27.06.1962 by a registered instrument. A copy of

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the Trust Deed is annexed hereto marked ANNEXURE P-2.
However, the history of the Trust and its activities can be traced
to the Holkar rulers who had founded and ruled Holkar State at
Indore from 1761 A.D. to 1948 A.D. when the said State (i.e.
Holkar State) joined the Union of India by first merging itself into
a Part B State by the name of Madhya Bharat. Right from the
lime of establishment of their rule, the Holkar rulers, particularly
the legendary Devi Ahilya Bai Holkar being of an extra-ordinary
and unprecedented religious and charitable disposition, generously
established charities and religious endowments spread all over
the country including in their own State. Since the said charities
and religious endowments were managed and looked after
personally by the Rulers and their Queens, the same came to be
called “Khasgi” or ‘personal’ charities and religious endowments.
However, since during those days there was little or no distinction
between ‘State’ and ‘personal’ charities and religious endowments,
the funds for the upkeep and management of the said charities
and religious endowments were provided by the State and a
budgetary provision was accordingly, made therefor. Historically,
therefore, the charities and religious endowments came to be
regarded as a different and third species of property, as
distinguished from the State properties and/ or personal properties
of the Rulers of Holkar State.”
29. Paragraph 5.2 is also material, which reads thus:-
“5.2 The above nature of the charities and religious endowments
of the Trust is also clear from the recitals of the Trust Deed,
particularly, clauses (3), (5), (12), (15) and (17) therein. (Kindly
see ANNEXURE P-2). It is, therefore, apparent that the Holkar
rulers acquired properties in many religious places throughout the
country and established several temples, dharamshalas, ghats etc.
and dedicated the same for public use. However, there were
apparently several properties which could not be put to such use,
but which continued to be owned and managed as Khasgi properties
Ultimately, when the Trust was established in 1962, all such
properties, including the temples, dharamshalas, ghats etc, which
formed part of the Khasgi properties, were vested in and handed
over to the petitioner Trust as per the list/ schedule to the Trust
Deed. It also appears that the petitioner Trust was created
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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with the active support, participation and approval of the
State government as the latter’s Muafi Department, which
had been looking after the Khasgi properties after the
merger of the Holkar State with Madhya Bharat, was
apparently finding it difficult to manage the numerous and
far flung Khasgi properties in the nominal budget grant of
about Rs.2.91 lacs. The properties were apparently in danger
of being wasted or being encroached upon and what was worse
still, was the fact that the charities and religious endowments were
in danger of losing their historical identity and importance, both
which were closely associated with the erstwhile Holkar Rulers.
Therefore, in the above historical background, the State
Government in its wisdom decided to restore the Khasgi
properties to the erstwhile Holkar Rulers by getting them
to create the petitioner Trust which was the vehicle used
for entrusting the Khasgi properties to them. However, the
petitioner Trust could come into existence only after the demise
of late Maharaja Yeshwant Rao Holkar though the process had
begun much earlier during his lifetime.”
 (emphasis added)
30. On 23rd June 1969, an application was made by the Trustees
of Khasgi properties to the Registrar seeking a declaration regarding
exemption under clause (a) of sub-Section (1) of Section 36 of the Public
Trusts Act. In paragraph 6 of the said application, the Trustees stated
that the charities and religious endowments were initially under the
management of the erstwhile Holkar State. They further stated that
after the merger of Holkar State with the State of Madhya Bharat, the
management and possession of the charities and religious endowments
remained with the State Government and its successors till 16th July
1962, when the same was handed over to the Trustees. The stand
consistently taken by the Trustees of the Khasgi Trust clearly shows
that it is an accepted position that the properties described in Part ‘B’ of
the Schedule to the Trust Deed vested in the State Government after the
adjudication was made in accordance with Clause (3) of the Article XII.
It must be noted here that the Maharaja or none of his family members
challenged the said adjudication made on the issue of ownership of the
Khasgi properties and none of them disputed or challenged the act of
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fact, the Maharaja acted upon it by nominating two trustees. The Khasgi
Trust has been created on the basis of the said adjudication. Hence, the
Trustees are bound by the adjudication.
31. Thus, as a result of adjudication made in accordance with
clause (3) of Article XII of the Covenant, the Khasgi properties which
are listed in Part ‘B’ of the Schedule to the Trust Deed vested in the
State Government.
32. On 6th January 1959, the Under Secretary to the Government
of Madhya Pradesh wrote to the Private Secretary of Maharaja that the
State Government proposes to nominate the Commissioner, Indore
Division and the Superintending Engineer (B&R), P.W.D., Indore Circle
as their nominees to the Trust to be constituted as per the enclosure to
the letter dated 06th May 1949 addressed by Shri V.P. Menon. Therefore,
a request was made to convey to the State Government whether the
Maharaja had accepted their nominations. The letter records that after
receiving the reply from the Maharaja, the draft of the Trust Deed would
be finalised. By the letter dated 1st April 1959, the Deputy Secretary to
the State Government requested the Private Secretary of the Maharaja
of Indore to make nominations of two persons for being appointed as
Trustees. A request was made to make nominations immediately so that
the State Government could finalise the draft of the Trust Deed. The
letter dated 14th November 1959 addressed by the Under Secretary to
the State Government to the Secretary to Maharaja reiterates that after
the Maharaja confirms the nominations, the Trust Deed will be finalised.
By the letter dated 14th April 1961, the Under Secretary to the
Government of Madhya Pradesh informed the Personal Assistant to the
Maharaja that the draft deed of the Khasgi Trust was still under
consideration and would be sent as soon as it was finalised. These
contemporaneous documents establish that the State Government
prepared the draft of the Trust Deed in terms of which the Trust Deed
dated 27th June 1962 was executed. As the Khasgi Trust was created
on the basis of the decision in terms of clause (3) of Article XII of the
Covenant, the draft of the Trust Deed was made by the State
Government. One of the recitals refers to the properties in Part ‘B’ of
the Schedule as the Trust properties. Various clauses of the Trust Deed
refer to the fact that the Khasgi properties, which vested in the State
Government, became the Trust property of the Khasgi Trust. The recitals
and clauses in the Trust Deed are very relevant as the Trust Deed was
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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drafted by the State Government. Clauses 3 and 5 are material which
read thus:
“3. The Settlor hereby transfers the Trust properties to the
trustees who shall hold the same upon trust and shall be
responsible for the maintenance, upkeep and preservation
of the said Charities and Religious Endowments.
xxx
xxx
xxx
5. The Trustees shall hold and possess the Trust properties and
shall have the power to manage the said properties and collect all
sums of money by way of rent, profit, interest and any other income
accruing to the Trust.”
 (emphasis added)
Even Clause 7 of the Trust Deed again refers to maintenance,
upkeep and preservation of the Trust properties, which reads thus:-
“(7). The Trustees shall prepare the Budget estimates of the Trust
every year and shall apply the income for the fulfilment of the
objects of the Trust as referred to in paragraph 2 of the preamble
of this Deed and for the maintenance, upkeep and
preservation of the Trust Properties in good condition and
shall make necessary repairs thereto and the balance, if any, shall
be held and accumulated for being applied in the fulfilment of the
aforesaid objects of the Trust and for purposes set out in clause
(14) hereunder.”
 (emphasis added)
33. Under the report dated 16th July 1962, Muafi Officer of the
State Government handed over the possession of properties of the Khasgi
Trust as well as of the Alampur Trust to the Secretary of the Trusts. In
terms of the handing over of the properties as aforesaid, a notification
was issued by the State Government on 27th July 1962. English translation
of the said notification reads thus.:-
“STATE OF MADHYA PRADESH DATED 27.07.1962
COMMUNIQUE FOR COMMISSIONERS AND DISTRICT
CHAIRMANS
OFFICE OF COMMISSIONER, INDORE DIVISION.

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INDORE
(PARDON SECTION)
Owing to the formation of Madhya Bharat, Areas, Institutions,
Factories, “Chhatris”, Religious Places etc. of Agreement
Executor former State Indore fell under the supervision and
management of Commissioner, Pardon Office. Now, in relation
to these properties, Government while granting permission
for formation two Trusts, one Khasgi Trust (The Maharani
Ahilyabai Charities Trust) and second Alampur Trust (The
Holkar Chhatris Trust), has granted recognition to transfer
of the areas, institutions etc. included in the trust deed to
the aforesaid trusts. Accordingly, all the Areas, Institutions,
Factories, “Chhatris”, Religious Places etc., in connection
with the trust were transferred to them on 16.07.1962.
Hence, for the information of all government offices and general
public, this communiqué has been published.
(2273)
 M. P. Shrivastava, Commissioner”
(emphasis added)
Thus, the properties described in Part ‘B’ of the schedule to the
Trust Deed which were vested in the State Government were transferred
to the autonomous Khasgi Trust on its incorporation. In fact, till 2012,
the State Government never disputed that the Khasgi properties listed in
Part ‘B’ of the Schedule to the Trust Deed were the Trust properties of
the Khasgi Trust. Therefore, to that extent, the Division Bench of the
High Court is not right when it concluded that the properties incorporated
in Part ‘B’ of the Schedule to the Trust Deed continue to be the
Government properties even after 16th July 1962. The said properties
are vesting in the Khasgi Trust.
APPLICABILITY OF THE PROVISIONS OF THE
PUBLIC TRUSTS ACT (Question – b)
34. The second issue to be decided is whether the provisions of
the Public Trusts Act apply to the Khasgi Trust. We have already quoted
the enclosure to the letter dated 6th May 1949, issued by Shri V. P.
Menon. The enclosure incorporates the decision of the Government of
India on the claim made by the Maharaja about the Khasgi properties. It
specifically records that the powers and functions of the Khasgi Trust
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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shall be subject to such legislation as the Central Government or Madhya
Bharat Government may enact generally for the purposes of regulating
such Trusts. It is in this context that we will have to examine the provisions
of the Public Trusts Act, which was enacted in the year 1951. Sub-
section (4) of Section 2 defines a Public Trust, which reads thus.:-
“2. Definitions. – In this Act, unless there is anything repugnant in
the subject or context,–
(1).…………;
(2)………….;
(3)………….;
(4) “public trust” means an express or constructive trust for a
public, religious or charitable purposes and includes a temple, a
math, a mosque, a church, a wakf or any other religious or
charitable endowment and a society formed for a religious or
charitable purpose;
(5)………….;
……………..”
35. Coming back to the Trust Deed, the object of the Trust is to
maintain up-keep and preserve the Trust properties and the charities as
well as religious endowments. Part ‘A’ of Schedule to the Trust Deed
contains details about the endowments to various places of religion, such
as, temples, anna chattras, peersthans, donations to dharmshalas and
chhatris. Some of the properties in Part ‘B’ of the Schedule are temples
and religious places. The trust was created with the object of preservation
and maintenance of the Trust properties which are charities and
endowments. Thus, it can be said that the Khasgi Trust, is an express
Trust for public, religious and charitable purposes. Under Section 4(1) of
the Public Trusts Act, every such Trust requires compulsory registration.
36. The Trustees in support of their appeals relied upon the order
dated 10th August 1971, passed by the Registrar of Public Trusts, holding
that the Khasgi Trust was entitled to exemption under Clause (a) of
Sub-Section (1) of Section 36 of the Public Trusts Act. Paragraph 3 of
the said order reads thus.:-
“3 Out of five members of the Management Committee of Khasgi
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Government and Central Government. In such circumstances,
control of the State Government on this Trust is evidently clear.
Even the savings of the Trust could be spent only with the prior
permission of the State Government in accordance with the Section
14 of the Trust Deed. It is clear from it that State Government is
in full control of the present Trust and it is eligible for the exemption
from registration. I believe that the Objection raised by the
Secretary of the Trust is valid and appropriate. Thus, proceedings
of the registration are concluded.”
37. It is, therefore, necessary to consider the ambit of Section 36.
For the sake of convenience, we are reproducing Section 36, which
reads thus:-
“36. Exemption.–
(1)
Nothing contained in this Act shall apply to–
(a) a public trust administered by any agency acting
under the control of the State or by any local authority,
(b) a public trust administered under any enactment for the
time being in force, and
(c) a public trust to which the Muslim Wakfs Act, 1954 (29
of 1954) applies.
(2)
The State Government may exempt by notification,
specifying the reasons for such exemption in the said
notification, any public trust or class of public trusts from
all or any of the provisions of this Act subject to such
conditions, if any, as the State Government may deem fit to
impose.”
(emphasis added)
38. The order of the Registrar proceeds on the footing that even
if Clause (a) of Sub-Section (1) of Section 36 is applicable, Section 14 of
the Public Trusts Act will apply. Obviously, if Clause (a) is attracted,
nothing contained in the Public Trusts Act shall apply to such a Trust,
which will include Section 14 as well. The powers of the Registrar under
the Public Trusts Act are found in Chapter V. None of the provisions of
the Public Trusts Act confer any power on the Registrar to decide the
question whether an exemption under Clause (a) of Sub-Section (1) of
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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Section 36 is applicable to a particular public Trust. Therefore, we have
independently examined whether Clause (a) of sub-Section (1) of Section
36 will have application. It is not the case that the Khasgi Trust is being
administered by any local authority as such. The question is whether it is
being administered by any agency acting under the control of the State
Government. There are six Trustees of the Khasgi Trust, out of which,
one is the Ruler, who is the ex-officio President. Two Trustees are the
nominees of the Ruler. The remaining three are the nominees of the
State Government and Central Government. Neither in the order of the
Government of India dated 6th May 1949 nor in the Trust Deed, there is
anything to indicate that the Khasgi Trust is administered by any agency
acting under the control of the State Government. Even the power to
nominate two Trustees vested in the State Government and similar power
vested in the Central Government to nominate one Trustee has to be
exercised in consultation with the Ruler. The three Trustees nominated
by the Government do not have a majority in decision making. The State
Government has no effective control over the functioning of the Khasgi
Trust. In one sense, it is an autonomous public Trust. Therefore, on the
face of it, Clause (a) of Sub-Section (1) of Section 36 has no application.
The Khasgi Trust cannot claim to be covered under the excepted category
in clause (a) of sub-section (1) of Section 36.
39. We may note here that the High Court has proceeded on the
erroneous footing that as there was no notification issued under sub-
Section (2) of Section 36, Clause (a) of Sub-Section (1) of Section 36
will not apply. Sub-Sections (1) and (2) of Section 36 operate in different
fields. When sub-Section (1) is applicable to a Public Trust, none of the
provisions of the Public Trusts Act is applicable to the Trust. Sub-Section
(2) is an independent power of the State Government to issue a notification
exempting certain Public Trusts from all or any of the provisions of the
Public Trusts Act. Thus, we have no manner of doubt that the Khasgi
Trust will be governed by the Public Trusts Act and that the same is
required to be registered accordingly.
VALIDITY OF THE SUPPLEMENTARY TRUST DEED
(Question – c) AND OBLIGATION TO OBTAIN A
PERMISSION UNDER SECTION 14 (Question – d)
40. We may note here that owing to the order of the Registrar
dated 10th August 1971, even the Trustees of the Khasgi Trust had reason
to believe that though by virtue of Clause (a) of Sub-Section (1) of Section

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36, the Trust was exempted from registration under the Public Trusts
Act, Section 14 thereof was applicable. Section 14 reads thus :
“14. Previous sanction of Registrar, in cases of sale, etc., of
property belonging to a public trust.-(1) Subject to the directions
in the instrument of trust or any direction given under this or any
other law by any court –
(a) no sale, mortgage, exchange of gift of any immovable property;
and
(b) no lease for a period exceeding seven years in the case of
agricultural land or for a period exceeding three years in the case
of non-agricultural land or building;
belonging to a public trust, shall be valid without the previous
sanction of the Registrar.
(2) The Registrar shall not refuse his sanction in respect of any
transaction specified in sub-section (1) unless such transition will,
in his opinion, be prejudicial to the interests of the public trust.
An application was made by the Secretary of the Khasgi Trust on
21st August 1997 to the Registrar to grant permission under sub-Section
(1) of Section 14 to sell the Trust property mentioned therein which was
sold to the appellant in Civil Appeal arising out of Special Leave Petition
(C) No. 19063 of 2021. By the order dated 16th October 1997, permission
to alienate was accorded by the Registrar to the Trustees, subject to
several conditions. One of the important conditions was that the property
should be sold at the maximum price by inviting tenders and that the sale
price should not be less than the market rate prevailing in the area where
the property is situated. In any event, as the Public Trusts Act is applicable
to the Khasgi Trust, the Trustees cannot alienate the Trust properties
without complying with Section 14.
41. The Trustees relied upon the Supplementary Trust Deed dated
08th March 1972 for contending that they are empowered to alienate
trust property without taking recourse to Section 14 of the Public Trusts
Act. This document was not challenged in the proceedings before the
High Court. But, the issue of legality thereof has been gone into by the
High Court. As noted earlier, the Khasgi Trust has been created on the
basis of the adjudication made under clause (3) of Article XII of the
Covenant. The Khasgi properties vested in the State Government by
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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virtue of the said adjudication. However, the Khasgi properties were
transferred to the Khasgi Trust on its establishment. Therefore, we have
already held that the Khasgi properties vested in the Khasgi Trust which
is a public Trust under the Public Trusts Act. The Public Trusts Act itself
permits the Trustees of a Public Trust to alienate the Trust Property
subject to constraints imposed by Section 14. Therefore, the
Supplementary Trust Deed which enables the Trustees to alienate the
Trust Property cannot be illegal. However, alienation of the Trust property
can be made only in accordance with Section 14. The Trustees by
executing such a document cannot overcome the mandate of Section
14. Therefore, the power to alienate under the Supplementary Trust
Deed is subject to the constraints imposed by Section 14 of the Public
Trusts Act. To that extent, the Division Bench of the High Court was not
right.
42. Before we discuss Section 14 of the Public Trusts Act, even if
we assume that the exemption under Clause (a) of Sub-Section (1) of
Section 36 was applicable to the Khasgi Trust, it must be noted that the
Trustees held the property in a fiduciary capacity for the benefit of the
beneficiaries, which in the present case are the members of the public
as the Trust properties include a large number of temples, ghats, etc.
The property of the Khasgi Trust could not have been sold without
following a fair and transparent process. The view consistently taken by
this Court, as regards the alienation of public property, right from the
case of Akhil Bhartiya Upbhokta Congress v. State of Madhya
Pradesh and Ors.2, will substantially apply to the alienation of the
property of a public Trust and therefore, the Trustees are bound to dispose
of the Trust property only for the benefit of the Trust or its beneficiaries,
and not as a private venture. This can be achieved only by following a
fair and transparent process. The process must be such that the Trust
property fetches the best possible price. Only if alienations are made in
such a manner, the same will be in the interests of the beneficiaries.
43. As we have held that the provisions of the Public Trusts Act
shall apply to the Khasgi Trust, now we are referring to the provisions of
Section 14. Section 14 imposes an embargo on the sale, mortgage or gift
of any immovable property of the Public Trust as well as lease for a
period exceeding seven years in the case of agricultural lands, or for a
period exceeding three years in case of a non-agricultural land or building.
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Such transactions shall not be valid without the previous sanction of the
Registrar. Sub-Section (2) limits the power of the Registrar to refuse the
sanction in respect of transactions covered by sub-Section (1). The
Registrar can refuse sanction only when he is satisfied that the
transactions will be prejudicial to the interests of the Public Trust.
44. In the case of Parsi Zoroastrian Anjuman, Mhow1, a Co-
ordinate Bench of this Court had an occasion to deal with the scope of
Section 14. The Co-ordinate Bench compared Section 14 with a similar
provision of Section 36 under the Maharashtra Public Trusts Act, 1950,
putting an embargo on the powers of the Trustees of a Public Trust of
alienating the trust property. Paragraph 22 of the said judgment reads
thus:
“22. As can be seen by Section 14(1), previous sanction of the
Registrar of public trusts is a precondition, for the (a) “sale,
mortgage, exchange of gift of any immovable property” or (b)
“lease for a period exceeding seven years in the case of
agricultural land or for a period exceeding three years in the
case of non-agricultural land or building.” If Section 14(1)
had stopped there, the embargo on alienation of the types
enumerated in the provision (sale, gift, exchange, mortgage etc.,
or long-term lease(s) of agricultural or non-agricultural properties)
i.e., obtaining previous sanction, could well have meant that the
Registrar’s role was conceivably intrusive. However, the
provisions of Section 14(1) and the power conferred on the
Registrar under it, are controlled by Section 14(2) which
states 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
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
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other law by any court”. The discretion thus, is relatable to
directions in the trust document, or any provision of the
Act, or any other law as ordered (or directed) by any court.
Therefore, the Registrar, is not empowered to read into it
her own notions of what is beneficial and what is prejudicial
to the trust. The refusal has to be specific to the
requirement of law, wherever such law clearly stipulates
so, or any specific provision of the trust document.”
 (emphasis added)
This Court proceeded to permit the Trustees to alienate the Trust
Property, subject to fresh valuation of the property and subject to selling
the property to the highest bidder through a public tender.
45. Section 14 is applicable to immovable property of a Public
Trust. Section 13 governs the investment of public trust money. The
State’s control of charities and religious endowments in some form is
not foreign to our jurisprudence. A Public Trust invariably depends on
charity done by individuals by donating immovable property or by making
cash donations. Though in law, the assets and properties of a Public
Trust vest in its Trustees, they hold the Trust property in a fiduciary
capacity for the benefit of the beneficiaries of the Trust. They hold the
property for giving effect to the objects of the Public Trust. A Trust
property cannot be alienated unless it is for the benefit of the Trust and/
or its beneficiaries. The Trustees are not expected to deal with the Trust
property, as if it is their private property. It is the legal obligation of the
Trustees to administer the Trust and to give effect to the objects of the
Trust. Therefore, the statutes dealing with the Public Trusts which are
operating in various States, provide for limited control of the activities of
a Public Trust. The control is exercised by providing for the submission
of the annual accounts by the Trustees and filing of returns with the
concerned charity organization or other authority under the law. There
are statutory constraints on the power of the Trustees to alienate the
property of a Public Charitable Trust. There are provisions in such statutes
for penalizing the Trustees for misappropriation of the property of the
Trust. Many such Statutes empower the authorities under the Statutes
to remove a Trustee of a Public Trust, on account of misbehaviour or
acts of misappropriation, etc. The Trustees are the custodians of Trust
properties. The Trustees have a duty to safeguard the interests of the
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Law, like Section 14 of the Public Trusts Act, is of importance. This
provision seeks to protect the Trust property in the hands of the Trustees
from unwarranted alienations. In the present case, the transactions of
sale in favour of the appellant in Civil Appeal arising out of Special Leave
Petition 19063 of 2021, have been effected admittedly without obtaining
prior permission under Section 14. The Division Bench of the High Court
has gone into the question whether the alienations were null and void.
However, the purchasers were not parties to the proceedings before the
High Court. Hence, final adjudication could not have been made on the
issue of nullity of the alienations made by the Trustees of the Khasgi
Trust in absence of the necessary parties. However, there is no manner
of doubt that the alienations could not have been made without prior
sanction of the Registrar.
POWERS OF THE REGISTRAR UNDER THE PUBLIC
TRUSTS ACT.
46. Under Chapter V of the Public Trusts Act, there are powers
vested in the Registrar of controlling a Public Trust. Sections 17, 22 and
23 are material, which read thus:-
“17. Auditor’s duty to prepare balance sheet and to report
irregularities, etc. - (1) It shall be the duty of every auditor
auditing the accounts of a public trust under Section 16 to prepare
a balance sheet and income and expenditure account and to
forward a copy of the same to the Registrar within whose
jurisdiction a public trust has been registered.
(2) The auditor shall, in his report specify all cases of irregularities,
illegal or improper expenditure or failure or omission to recover
monies or other property belonging to the public trust or waste of
money or other property thereof and state whether such
expenditure, failure, omission, loss or waste was caused in
consequence of a breach of trust, or misapplication or any other
misconduct on the part of the trustees, or any other person.
22. Power of the Registrar.–The Registrar shall have
powers,–
(a) to enter on and inspect or cause to be entered on and inspected
any property belonging to a public trust;
(b) to call for or inspect any extract from any proceedings
of the trustees of any public trust or any book or account in
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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the possession of or under the control of the trustees;
(c) to call for any return, statement, account or report which
he may think fit from the trustees or any person connected
with a public trust:
Provided that in entering upon any property belonging to the
public trust the officer making the entry shall give reasonable
notice to the trustee and shall have due regard to the religious
practices or usages of the trust.
23. Procedure after receipt of the report by the Registrar. – (1) If
the report of the auditor made under section 17 shows, in the
opinion of the Registrar, material defects in the administration of
the public trust, the Registrar may require the working trustee to
submit an explanation thereon within such period as he thinks fit.
(2) If on the consideration of the report of the auditor, the accounts
and explanation, if any, furnished by the working trustee, the
Registrar is, after holding an inquiry in the prescribed
manner and giving opportunity to the person concerned,
satisfied that the trustees or any other person has been
guilty of gross negligence, a breach of trust, misapplication
or misconduct which has resulted in the loss to the public
trust he shall determine –
(a) the amount of loss caused to the public trust;
(b) whether such loss was due to any breach of trust,
misapplication, or misconduct on the part of any person;
(c) whether any of the trustees, or any other person is
responsible for such loss;
(d) the amount which any of the trustees or any other person
is liable to pay to the public trust for such loss.
(3) The amount surcharged on any trustee or other person
in accordance with clause (d) of sub-section (2) shall, subject
to any order of the Court under section 24, be paid by the
trustee or person surcharged within such time as the
Registrar may fix.”
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The Registrar by exercising powers under Section 22 of the Public
Trusts Act, can call for the record and report from the Trustees. If the
report of the Auditor, submitted in accordance with Section 17, shows
material defects in the administration of the Public Trust, the Registrar
can always call upon the Trustees to submit an explanation. Under Sub-
Section (2) of Section 23, the Registrar has power, after holding an inquiry
in a prescribed manner, to decide whether Trustees have been guilty of
any conduct which has resulted in any loss to the Public Trust. He is
empowered to quantify the amount of loss caused to the Public Trust
and also to decide the amount which any of the Trustees or any other
person, is liable to pay to the Public Trust for compensating for such a
loss. Section 24 provides for an appeal to the Court against an order
made under Section 23. Section 31 of the Public Trusts Act provides
that the amount determined in accordance with Sections 23 and 24, is
recoverable as arrears of land revenue. In a given case, the Registrar
can direct recovery from Trustees of an amount equivalent to the loss
caused to the Trust due to illegal alienation of Trust property by the
Trustees.
47. When a Trust property is transferred without prior sanction of
the Registrar under Section 14 and/or without following a fair and
transparent process, it can be always said that the Trust property is not
being properly managed or administered. In such a case, apart from
exercising the power under Section 23, the Registrar can make an
application under sub-Section (1) of Section 26 inviting the attention of
the Court to the mismanagement of the Trust. Sections 26 and 27 are
material in this behalf, which read thus: -
“26. Application to for directions.-(1) If the Registrar on the
application of any person interested in the public trust or otherwise
is satisfied that, –
(a) the original object of the public trust has failed:
(b)the trust property is not being properly managed or
administered; or
(c)the direction of the court is necessary for the
administration of the public trust;
he may, after giving the working trustee an opportunity to
be heard direct such trustee to apply to court for directions
within the time specified by the Registrar.
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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(2) If the trustee so directed fails to make an application as
required, or if there is no trustee of the public trust or if for
any other reason, the Registrar considers it expedient to
do so, he shall himself make an application to the court.
27. Courts power to hear application- (1) On receipt of such
application the court shall make or cause to be made such inquiry
into the case as it deems fit and pass such orders thereon as it
may consider appropriate.
(2) While exercising the power under sub-section (1) the
court shall, among other powers, have power to make an
order for:-
(a) removing any trustee;
(b) appointing a new trustee;
(c) declaring what portion of the trust property or of the
interest therein shall be allocated to any particular object
of the trust;
(d) providing a scheme of management of the trust property;
(e) directing how the funds of a public trust whose original
object has failed, shall be spent, having due regard to the
original intention of the author of the trust or the object for
which the trust was created;
(f) issuing any directions as the nature of the case may
require.
(3) Any order passed by the court under sub-section (2) shall be
deemed to be a decree of such court and an appeal shall lie
therefrom to the High Court.
(4) No suit relating to a public trust under section 92 of the Code
of Civil Procedure, 1908 (V of 1908), shall be entertained by any
court on any matter in respect of which an application can be
made under section 26.”
(emphasis added)
Under sub-Section (2) of Section 26, the Registrar can himself
make an application to the Court seeking the exercise of powers under
Section 27. On such an application being made and after holding an
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to issue directions as provided in Section 27.
48. In the present case, all the alienations made by the Trustees
of Khasgi Trust except alienation made in favour of the appellant in Civil
Appeal arising out of Special Leave Petition (C) No.19063 of 2021,
have been made without complying with the mandatory requirement of
obtaining the previous sanction as required by sub-Section (1) of Section
14.
49. We may note here that there are no proceedings filed for
specifically challenging the validity of stated alienations made by the
Trustees. The impugned judgment of the Division Bench arises out of
three proceedings. Two out of three are writ petitions filed by the Trustees.
The first one was filed for challenging the impugned order of the Collector
and the second one was filed seeking directions regarding entering the
names of the Trustees in revenue records in respect of the Trust
properties. The third proceeding is the Public Interest Litigation, in which
there is a prayer for issuing a writ of mandamus to direct inquiry through
CBI. Therefore, there was no occasion for the Division Bench to declare
that the sale transactions are void especially when the purchasers were
not before the High Court. Nevertheless, it is necessary for the Registrar
to exercise powers under Section 22 and call for necessary records
pertaining to the alienations made by the Trustees. Thereafter, the
Registrar shall exercise powers under Section 23 and decide whether
any loss was caused to the Public Trust as a result of alienations and if
any loss was found to have been caused, he shall quantify the amount in
accordance with sub-Section (2) of Section 23. He may also consider of
invoking sub-section (1) or (2) of Section 26 as observed above, if found
necessary.
LEGALITY OF THE ORDER OF THE COLLECTOR
(Question – e)
50. We may note here that the order of the Collector which was
impugned before the High Court was passed without giving an opportunity
of being heard to the Trustees of the Khasgi Trust and the purchasers. A
show cause notice was issued to the Trustees by the Registrar on the
basis of the complaint of the Member of the Parliament. Though the
Trustees replied to the notice, even the reply was not considered by the
Collector. Only on this ground, the said order ought to be set aside. As a
matter of fact, the Collector had no jurisdiction to decide the issues of
title as well as mismanagement of the affairs of a Public Trust. For the
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same reason, even the report of the Commissioner dated 24th May 2012
and the report of the Principal Secretary to the Chief Minister dated 2nd
November 2012 are without jurisdiction. The reports have been made in
breach of the principles of natural justice without affording an opportunity
of being heard to the Trustees.
VALIDITY OF THE DIRECTION TO HOLD INQUIRY
THROUGH ECONOMIC OFFENCES WING (Question –
f)
51. There was no warrant to direct inquiry through the Economic
Offences Wing of the State Government as there is no finding that there
was mens rea on the part of the Trustees. No finding has been recorded
by the High Court based on material that the alienation made by the
Trustees has resulted in causing loss to the Trust and that the entire sale
consideration being diverted for personal use. It is noticed from the record
placed before us that the entire consideration received from the
purchasers has been credited to the account of the Trust. The allegation
of misappropriation can be gone into only by the Authorities under the
Public Trusts Act. Moreover, the direction issued by the High Court
proceeds on the erroneous assumption that the Trustees have made
misappropriation of the Government properties. There is no offence
registered against the Trustees. Hence, Economic Offences Wing cannot
be directed to hold an inquiry or investigation in connection with the
subject matter of this proceeding. In other words, the direction given by
the High Court vide the impugned Judgment in that regard will have to
be held to be non est in law. Though the said direction is unwarranted,
as observed earlier, the Registrar will have to initiate necessary
proceedings under the Public Trusts Act and carry them to a logical
conclusion.
MAINTAINABILITY OF WRIT PETITIONS (Question –
g)
52. A contention was raised that only one Trustee had filed writ
petitions before the Learned Single Judge for challenging the impugned
order of the Collector and seeking other reliefs. The contention is that
he was not authorized by the other Trustees to file the proceedings of
writ petitions. The impugned order of the Collector purports to decide
the issue of Title of the Trust properties by holding that the properties in
Part ‘B’ of the Schedule to the Trust Deed are vested in the State
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to the writ petitioner in the form of a resolution of the Board of Trustees
to file the writ petitions, even an individual Trustee was entitled to take
proceedings for questioning such orders, which adversely affect the Trust
and /or its beneficiaries. On the contrary, it is the duty of every Trustee
to take such action of challenging an order holding that the properties
held by the Trust are not the Trust properties. Moreover, none of the
Trustees has come forward to challenge the authority of Trustee Shri
S.C. Malhotra who had filed writ petitions and further proceedings. There
was also a direction issued to the Economic Offences Wing to hold an
inquiry about the misappropriation of the Trust property by the Trustees.
Every Trustee was affected by the said direction. Therefore, in the facts
of the case, the objection raised to the maintainability of the petition filed
by one of the Trustees cannot be sustained.
CONCLUDING PART
53. In view of the discussions made above, the impugned judgment
of the Division Bench cannot be sustained in toto. However, the view
taken by the Division Bench that the Khasgi Trust is governed by the
Public Trusts Act and no alienation of the Trust properties could be made
without complying with Section 14 thereof, will have to be affirmed.
Even the order of the learned Single Judge cannot be sustained as he
has virtually directed the rewriting of the Trust Deed.
54. There are submissions canvassed across the Bar about the
locus of the applicant in I.A.No.124266 of 2020 filed in Civil Appeals
arising out of Special Leave Petition (C) Nos.12241-42 of 2020. It is not
necessary for us to go into the said question finally. We leave the said
question open to be decided in appropriate proceedings.
55. As far as Civil Appeal arising out of Special Leave Petition
(C) No.19063 of 2021 is concerned, the alienation was made by the
Trustees in favour of the appellant after obtaining the previous sanction
of the Registrar by the order dated 16th October 1997. Therefore, the
Registrar will have to make an inquiry limited to the question whether
compliance of the conditions incorporated under the said order has been
made by the Trustees. If there is a non-compliance, the Registrar will
have to invoke the provisions of the Public Trusts Act for taking necessary
action.
56. Therefore, the appeals must succeed in part and we pass the
following order:-
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]

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a.
We hold that the Khasgi (Devi Ahilyabai Holkar Charities)
Trust, Indore, is a Public Trust governed by the provisions
of the Madhya Pradesh Public Trusts Act, 1951;
b.
We, therefore, direct the Trustees to get the Khasgi Trust
registered under the Public Trusts Act by making the
necessary application within a period of one month from
today;
c.
We hold that the properties described in Part ‘B’ of the
Schedule to the Trust Deed, are properties of the said Public
Trust. However, alienation of the said properties can be
made only by taking recourse to Section 14 of the Public
Trusts Act;
d.
We hold that the Supplementary Trust Deed dated 08th
March 1972 is valid. But, the Trustees of the Khasgi Trust
shall be entitled to alienate the Trust Property only after
complying with Section 14 of the Public Trusts Act;
e.
We hold that the direction issued by the High Court to
Economic Offences Wing of the State Government to hold
an inquiry was not warranted;
f.
We direct the Registrar under the Public Trusts Act, having
jurisdiction over Khasgi Trust, to call for the record of the
Trust relating to all the alienations made by the Trustees.
After holding an inquiry as contemplated by Section 23, the
Registrar after giving an opportunity of being heard to all
concerned shall determine whether by virtue of the
alienations made by the Trustees, any loss was caused to
the Public Trust. If according to him any such loss was
caused to the Public Trust, he shall decide and quantify the
amount liable to be paid by the concerned Trustees to the
Khasgi Trust.
g.
After holding an inquiry as aforesaid, if found necessary,
he may invoke the power of making an application to the
Court under sub-Section (2) of Section 26.The Registrar
may take such other action and initiate such other
proceedings which are warranted by law;
h.
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arising out of Special Leave Petition No.19063 of 2021,
after calling for the record, the Registrar will hold an inquiry
limited to the issue whether the alienation was made only
after complying with the conditions incorporated in the order
dated 16th October 1997. If he finds after holding an inquiry
that compliance was not made with any of the conditions,
he shall initiate appropriate proceedings in accordance with
the Public Trusts Act;
i.
Subject to the above directions, the impugned judgment of
the Division Bench as well as the impugned judgment and
orders dated 28th November 2013 of the Learned Single
Judge of the Madhya Pradesh High Court, are set aside.
j.
Civil Appeals are partly allowed in the above terms.
Nidhi Jain and Amarendra Kumar
Appeals partly allowed.
(Assisted by : Iram Jan, LCRA)
THE KHASGI (DEVI AHILYABAI HOLKAR CHARITIES) TRUST,
INDORE  v. VIPIN DHANAITKAR [ABHAY S. OKA, J.]