“A Society Engaged in Charitable Work Holds the Character of a Constructive Trust”: Supreme Court Says Registration Under Societies Act Doesn’t Diminish Public Trust Nature
Kiran Raj
The Supreme Court Division Bench of Justice J.B. Pardiwala and Justice R. Mahadevan dismissed a civil appeal challenging the maintainability of a suit instituted under Section 92 of the Civil Procedure Code (CPC), 1908, against a charitable society. The Court held that the society qualified as a constructive trust engaged in public charitable purposes, and therefore the leave granted under Section 92 CPC by the Delhi High Court was valid. The Court directed that the underlying suit must proceed at the earliest and disposed of pending applications.
The dispute arose from internal conflicts within Operation ASHA, a not-for-profit society registered under the Societies Registration Act, 1860. The society, founded in 2005, operates nationwide to provide tuberculosis and other health-related services to underprivileged populations. Its objectives include establishing medical institutions, microfinance programs, and alternate systems of medicine, among others.
Dr. Shelly Batra, a medical professional and co-founder of the society, was removed from her position as President and from the Board in June 2020. The Board, under respondent no. 3, Mr. Sandeep Ahuja, alleged misrepresentation, fabrication of documents, and misappropriation of assets by Dr. Batra. On 28.06.2020, Dr. Batra and her mother, Usha Gupta (a Board member), instituted a civil suit under Section 92 CPC before the Delhi High Court, seeking reliefs including declarations invalidating Board decisions, restoration of Dr. Batra’s position, and removal of other Board members.
The plaintiffs alleged that respondent nos. 3 and 4 siphoned off donations through shell entities for personal gain, avoided statutory employee payments, and manipulated salary structures. They also alleged use of force, employee coercion, fraudulent COVID-19 relief claims, and discriminatory behavior within the society. Reliefs sought included:
- Declaration of the illegality of decisions taken by the Board post 01.06.2020;
- Reinstatement of Dr. Batra as President and Board member;
- Removal of certain Board members;
- Rendition of accounts and recovery of misappropriated funds;
- Amendment of the society’s by-laws to prevent family control;
- Costs and further just reliefs.
An interim Chairperson, Justice (Retd.) R.V. Easwar, was appointed to oversee the society's financial affairs. Reports submitted indicated irregularities in fund management and suggested governance reforms. A final forensic audit corroborated these concerns.
On 03.05.2024, a Single Judge of the High Court granted leave to institute the suit under Section 92 CPC, finding the statutory criteria fulfilled. This order was affirmed by the Division Bench of the High Court on 21.08.2024. Operation ASHA then appealed to the Supreme Court, arguing that:
- The society was a registered society, not a trust;
- No formal trust was created;
- The suit lacked representative character;
- Reliefs were private, not public;
- Procedural defects invalidated the suit, including the absence of respondent no. 2’s signature.
The respondents argued that the society held public donations for charitable purposes, functioned as a constructive trust, and that the plaintiffs had sufficient interest. They contended that the substance of the plaint met all the requirements of Section 92 CPC.
The Court began by stating: “Section 92 of the CPC has been created for a specific purpose and to address a specific kind of grievance which has the impact of affecting public rights.”
It reviewed the object and nature of suits under Section 92 CPC: “A suit under this provision can be termed as a ‘representative suit of a special nature’ since the object behind the enactment of this provision is the protection of public rights in the public trust.”
Citing precedent, the Court observed: “The parties filing a suit by invoking this section are considered to be representatives of the public.”
It discussed the requirement for trust under Section 92: “A suit under Section 92 of the CPC being one of special nature, presupposes the existence of a public trust of a religious or charitable character. The existence of a public trust is essential, whether express or constructive.”
The Court rejected the appellant’s argument that a formal trust was necessary: “The formal ‘entrustment’ of property or funds by a third-party to the society is not a necessary ingredient to hold that the society is a ‘constructive trust’. If that formality were a sine-qua-non, the very distinction between a ‘trust’ and a ‘constructive trust’ would stand obliterated.”
Referring to Article 13 of the Articles of Association, the Court recorded: “Any grant-in-aid, donation or gift made by a third-party to the society is, by its very nature, meant and intended to be used for the benefit of those in need of medical care in furtherance of the objects and purpose of the society. This, in itself, is sufficient to infer that all such grants-in-aid, donations, gifts etc. made to the society are property ‘entrusted’ to it, by reason of which the society acquires the character of a ‘constructive trust’.”
On the public purpose: “The appellant Society is evidently engaged in a public purpose of charitable nature since they principally provide health care services to the underprivileged sections of the society, specifically with respect to the treatment, education and prevention of tuberculosis.”
On maintainability: “It is the dominant purpose of the suit, as discernible only from the allegations in the plaint, that is required to be assessed by the court at the stage of considering whether leave should be granted under section 92 CPC to institute a suit.”
The Court discussed the principle laid down in Ashok Kumar Gupta and other cases: “Three conditions are, therefore, required to be satisfied in order to invoke Section 92 of the Code and to maintain an action under the said section, namely, that: (i) the Trust in question is created for public purposes of a charitable or religious nature; (ii) there is a breach of trust or a direction of court is necessary in the administration of such a Trust; and (iii) the relief claimed is one or other of the reliefs as enumerated in the said section.”
On procedural objections, the Court recorded: “The procedural infirmities alleged, such as the lack of signature of respondent no. 2 on the plaint, do not go to the root of the maintainability under Section 92 CPC, particularly where representative interest and the threshold for leave are otherwise met.”
On the nature of reliefs: “The reliefs in the present plaint, insofar as they agitate private rights, cannot be granted under a suit of this nature.”
Yet, the Court held: “This, however, cannot overshadow the representative reliefs brought under Section 92, which meet the statutory threshold.”
On the nature of constructive trust: “The appellant society holds all donations and income solely for public welfare. Any misapplication of such funds constitutes a breach of trust and invites judicial scrutiny.”
The Court delivered its final judgment stating: “For all the foregoing reasons, this appeal fails and is hereby dismissed.”
It directed the High Court to proceed with the underlying civil suit: “The underlying suit bearing CS (OS) No. 153 of 2020 filed before the Single Judge of the High Court must be commenced at the earliest and the High Court must pay careful attention to whether the circumstances necessitating the imposition of a ‘constructive trust’ is made out. If yes, it must delineate the properties which would be subjected to the constructive trust and assess whether the reliefs prayed for under prayers (c), (d) and (e) respectively of the present plaint may be granted.”
Finally, the Court concluded: “Pending application(s), if any, shall stand disposed of.”
Advocates Representing the Parties
For the Petitioners: Mr. Dama Seshadri Naidu, Sr. Adv., Mr. Bishwajit Dubey, Adv., Ms. Radhika Bishwajit Dubey, Adv., Mr. Karan Khetani, Adv., Mr. Umesh Dubey, Adv., Ms. Madhulika, Adv., Ms. Vuzmal Nehru, Adv., Mr. Manoj K. Mishra, AOR
For the Respondents: Mr. Jai Anant Dehadrai, Adv., Mr. Sidharth Sharma, Adv., Mr. Anubhav Lamba, Adv., Mr. Pulkit Agarwal, AOR
Case Title: Operation ASHA v. Shelly Batra & Ors.
Case Number: Civil Appeal No. 10048 of 2025
Bench: Justice J.B. Pardiwala and Justice R. Mahadevan
