09 May 2025 Civil Appeals >> Civil & Consumer Law  

In a significant decision, the High Court of Judicature at Bombay on May 9, 2025, allowed First Appeal No. 1156 of 2015, thereby quashing the City Civil Court's judgment that had previously set aside the amalgamation of Rizvi Education Trust and Kailas Seva Sadan Trust. This ruling effectively revives the amalgamation order dated October 31, 2011, issued by the Assistant Charity Commissioner.

The case, Rizvi Education Society, Mumbai & Others v/s The Brihan Mumbai Municipal Corporation, Mumbai & Others, was heard and decided by The Honourable Mrs. Justice Sharmila U. Deshmukh.

Background of the Dispute:

The core of the dispute revolves around the amalgamation of two public trusts: Rizvi Education Trust (Appellant No. 1) and Kailas Seva Sadan Trust. The amalgamation was initially sought on May 12, 2005, through an application filed by the trustees of both entities before the Assistant Charity Commissioner under Section 50A(2) of the Maharashtra Public Trusts Act, 1950 ("the Trusts Act"). The Assistant Charity Commissioner approved the amalgamation on December 2, 2005.

However, the Brihan Mumbai Municipal Corporation (Respondent No. 1) challenged this amalgamation. The Corporation had an existing Agreement to Sell dated June 30, 1984, with Kailas Seva Sadan Trust regarding an immovable property, and disputes had arisen concerning this transaction. The Corporation subsequently filed a suit for specific performance (Suit No. 82 of 2006) and also challenged the amalgamation order.

The City Civil Court, in an order dated December 21, 2009, remanded the matter back to the Assistant Charity Commissioner, directing a fresh hearing after issuing notice to the Corporation. Following this, on April 31, 2011, the Assistant Charity Commissioner again allowed the amalgamation. This order was then challenged by the Corporation in Charity Application No. 9 of 2013, which the City Civil Court allowed, leading to the present appeal.

City Civil Court's Findings and the Appeal:

The City Civil Court had quashed the amalgamation primarily on the grounds that the Corporation was a "person having interest" and thus entitled to challenge the order. It also found that the mandatory procedure of publishing notice in the Official Gazette under Section 50A(2) of the Trusts Act was not followed, vitiating the amalgamation order. Furthermore, the City Civil Court noted that the amalgamation did not reflect how the trusts' objects or proper management would be served, and that Kailas Seva Sadan Trust was entirely taken over by Rizvi Education Society without any of its trustees being included in the new board, which it considered a "champertous litigation" prohibited by Section 23 of the Contract Act. The court concluded that the objects of the two trusts were not aligned and the amalgamation was not in the interest of their management and administration.

High Court's Analysis and Decision:

The High Court considered several key points for determination, including whether the Corporation's objections were germane to the inquiry under Section 50A, the impact of non-publication of notice in the Official Gazette, and whether the amalgamation was truly in the trusts' interest.

Mr. Mayur Khandeparkar, representing the appellants, argued that the Corporation, as an adversary, had no say in the trusts' internal affairs and that the non-publication of notice, while an issue, should not lead to dismissal, but perhaps a remand. He also contended that the City Civil Court incorrectly found the objects of the trusts to be unaligned, pointing out Rizvi Education Society's object of providing medical relief.

Mr. Narendra Walavalkar, appearing for the Corporation, countered that the Assistant Charity Commissioner lacked the power to order amalgamation under the unamended Section 50A(2) and that the application for amalgamation was filed with an "oblique motive". He emphasized the mandatory nature of the Gazette publication as a "jurisdictional fact".

The High Court, in its reasoning, affirmed that the primary purpose of the hearing under Section 50A(2) is to determine if the amalgamation serves the interest of the trusts, not to resolve adversarial disputes between parties like the Corporation and the trusts. It held that the Corporation's objections were aimed at protecting its own interests in the pending civil suit, which are distinct from the interests of the trusts themselves.

Regarding the non-publication of notice in the Official Gazette, the High Court acknowledged this lapse but stated that since the Corporation was substantially heard at multiple stages, remanding the matter again for publication would be futile. The court clarified that the formation of a prima facie opinion by the Charity Commissioner that the amalgamation is in the trusts' interest is the jurisdictional condition, not the publication itself.

Crucially, the High Court also addressed the City Civil Court's finding of "champertous litigation." Citing legal precedents, it concluded that third-party funding of litigation is not per se illegal and does not violate Section 23 of the Contract Act, and that such a consideration is "alien to an inquiry under Section 50A(2) of Trusts Act".

The High Court emphasized that the amalgamation was "essential for revival of the now defunct Kailas Seva Sadan Trust and for its proper management". It also corrected the City Civil Court's finding that the amalgamation led to the "extinction" of Kailas Seva Sadan Trust, stating that it is a merging of two trusts into a new legal entity.

In conclusion, the High Court found that the City Civil Court failed to recognize that one of Rizvi Education Society's objects included providing medical relief, aligning with Kailas Seva Sadan Trust's objectives. The direction for Kailas Seva Sadan Trust, which was defunct and financially depleted, to continue existing independently was deemed not in the trust's best interest.

Therefore, the First Appeal was allowed, the City Civil Court's judgment was quashed, and the amalgamation order of October 30, 2011, stands revived. The High Court has stayed its judgment for a period of 12 weeks upon request.

Section 50A, MAHARASHTRA PUBLIC TRUSTS ACT - 1950  

MAHARASHTRA PUBLIC TRUSTS ACT, 1950