Supreme Court Sets Aside HC Direction For EOW Probe Against Trustees Of Khasgi Trust; Directs Inquiry Under MP Public Trusts Act Into All Property Alienations

Shruti Kakkar

21 July 2022 8:06 PM IST

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Supreme Court Sets Aside HC Direction For EOW Probe Against Trustees Of Khasgi Trust; Directs Inquiry Under MP Public Trusts Act Into All Property Alienations

The Supreme Court on Thursday set aside the direction issued by Madhya Pradesh High Court for an investigation by the Economic Offences Wing (EOW) against the trustees of the Khasgi (Devi Ahilyabai Holkar Charities) Trust of Indore over alleged misappropriation of government properties.However, the Court held that the Madhya Pradesh Public Trusts Act 1951 will apply to the Khasgi trust...

However, the Court held that the Madhya Pradesh Public Trusts Act 1951 will apply to the Khasgi trust and directed 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.

The trust is created in relation to certain properties of the erstwhile princely state of Indore. The trust deed was executed in 1962 between Maharani Usha Devi of Indore, the daughter and successor of Yashwantrao Holkar( the Maharaja of Indore at the time of joining India) and the nominee of the President of India. In 2020, the Madhya Pradesh High Court ordered EOW probe into alleged illegal sale of the Khasgi properties, observing that government properties vested with the state were alienated.

The Court further directed 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, the Court ordered.

It further said that the Registrar shall determine whether by virtue of the alienations made by the Trustees, any loss was caused to the Public Trust and in case of any such loss, also decide and quantify the amount liable to be paid by the concerned Trustees to the Khasgi Trust.

With regards to the alienation made in favour of Shri Gajanan Maharaj Sansthan, the bench directed the Registrar to 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," court added.

HC direction for EOW probe unwarranted : SC

Allowing the appeals filed by the trustees in part, the Supreme Court observed :

"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".

A bench comprising Justices AM Khanwilkar, Abhay S Oka and CT Ravikumar held that the 246 immovable properties also called as "Trust Properties" that were listed in Part 'B' of its Schedule of the Trust Deed belongs to the Trust.

Remarking that the High Court was not right to the extent of holding that the properties described in "Part B" of schedule to Trust Deed belonged to the Government, the bench said that the properties were vesting in the Khasgi Trust.

"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," the Court said while setting aside the High Court's judgment.

The bench also upheld the legality of the Supplementary Trust Deed dated March 8, 1972 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. It however said that Trustees of the Khasgi Trust would be entitled to alienate the Trust Property only after complying with Section 14 of the Public Trusts Act.

The directions were issued in pleas assailing Madhya Pradesh High Court's order in which the High Court had set aside a single-Bench order which restrained the revenue authorities from entering the name of State of Madhya Pradesh in all properties of the Khasgi (Devi Ahilya Bai Holkar Charities) Trust, Indore, to ensure that the properties of the Trust are not sold to other persons.

The High Court had noted that the Khasgi (Devi Ahilya Bai Holkar Charities) Trust, Indore does not have title of the Trust properties and therefore, it does not have the power to alienate the Trust's properties. It further observed that the erstwhile Ruler had signed a covenant whereby the title of all properties was transferred to Madhya Bharat, now State of Madhya Pradesh.

On October 16, 2020 the bench of Justice A.M. Khanwilkar and Justice B.R. Gavai had directed the concerned parties to maintain status quo with regard to the possession and title of properties, and not to transfer or create any third party interest. The Court also stayed the criminal proceedings ordered by the High Court of Madhya Pradesh.

The Court further went on to direct the State authorities to abstain from taking any precipitative steps to take over the management of properties, if the same had not been done so far.

For the Khasgi Trust, Senior Advocates Mukul Rohatgi and AM Singhvi urged that charities which were already dedicated to the public, could not lapse to the State Government. It was also the contention that as the Khasgi Trust was a State-controlled Trust, provisions of the Public Trusts Act, were not applicable to it. Senior counsel had also 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 and that there was complete absence of mens rea. He also submitted that before making the first alienation in respect of a garden, the Trustees approached the State Government for sanction and that three nominees of the Governments were parties to the decision taken by the Board of Trustees to alienate the properties. It was also urged that 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.

Senior Advocate PS Patwalia for the purchaser of Holkar Bada contended that Sale Deeds, under which Holkar Bada was sold, were not challenged in any proceedings before any competent Court.

Referring to the resolution passed by the Board of Trustees on 5th June 2008, approving the sale transaction, Senior Counsel said there was no material to show that the sale transaction was made at a price which was less than the prevailing market value.

For the intervenor, Advocate Prashant Bhushan submitted 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, were illegal and void.

For the State of Madhya Pradesh, ASG Balbir Singh submitted that properties vested in the State Government and thereafter, the State Government was not divested of the said properties.

Case Title: The Khasgi (Devi Ahilyabai Holkar Charities) Trust, Indore & Anr. v Vipin Dhanaitkar & Ors.| SLP (CIVIL) No. 12133 of 2020]

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Supreme Court Sets Aside HC Direction For EOW Probe Against Trustees Of Khasgi Trust; Directs Inquiry Under MP Public Trusts Act Into All Property Alienations

Shruti Kakkar

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