1962 (9) TMI 33 - HC - Companies Law

Name of Charitable or other company Power to dispense with Limited in, Oppression and Mismanagement Right to apply under section 397 and 398

Summary

Issues:
Jurisdiction of civil court vs. company court in matters relating to the administration of public charitable trusts.

Analysis:
The case involved an appeal against an order returning a plaint for presentation to the company court instead of the civil court. The dispute arose regarding the jurisdiction to entertain a suit for settling a scheme for the due administration of a high school managed by a committee registered under the Indian Companies Act. The appellants contended there was a breach of trust and sought court directions for proper administration. The defendants argued that the civil court lacked jurisdiction due to the existence of specific provisions in the Companies Act for settling a scheme.

The key issue revolved around the interpretation of Section 92 of the Civil Procedure Code, which confers jurisdiction on matters related to the administration of public and religious charities. The court clarified that this provision aims to protect public rights and prevent the misuse of trust funds, distinct from vindicating private rights. In contrast, provisions like Section 398 of the Companies Act deal with private rights of company members in cases of mismanagement, not applicable to public charitable trusts.

The respondent committee argued that if a company is solely created for charitable purposes, the jurisdiction under Section 92 would not apply, suggesting resorting to the company court for misconduct issues. Drawing parallels to English law on ecclesiastical and eleemosynary corporations, the court emphasized that in India, Section 92 governs matters of public, charitable, or religious trusts irrespective of the trustee being an individual or a company.

The court rejected the argument that the company court should exclusively handle issues of charitable trusts managed by companies, asserting that Section 92 of the Civil Procedure Code applies universally to all public charitable trusts. It clarified that beneficiaries of a trust can seek court intervention under Section 92 for breaches or necessary directions, regardless of the trustee's nature. Consequently, the lower court's decision to decline jurisdiction was deemed erroneous, and the appeal was allowed, directing the lower court to restore the suit for further proceedings.

In conclusion, the judgment clarified the jurisdictional scope of the civil court under Section 92 of the Civil Procedure Code concerning public charitable trusts, emphasizing its applicability regardless of the trustee's entity, and overruling the notion that company courts exclusively handle such matters.