Holding

A suit under Section 92 CPC is a representative suit and the scheme-decree binds all persons interested in the trust, giving the appellants locus standi to invoke its provisions.

Summary

The appellants challenged the sale of two properties of a public trust, alleging that the sales were made at a fraction of market value and without public notice. The sales were approved by the subordinate court under a scheme-decree issued in a suit filed under Section 92 of the Civil Procedure Code, which sought removal of a trustee and recovery of trust assets. The appellants, who were not named parties in the original suit, filed an interim application to set aside the sale orders, but the lower courts dismissed it on the ground of lack of locus standi. The Supreme Court held that a suit under Section 92 is a representative suit and the scheme-decree binds all persons interested in the trust, thereby granting the appellants standing to invoke clauses 13 and 14. Consequently, the Court set aside the orders permitting the sales and directed that the properties be sold by public auction with appropriate compensation to the purchasers. The appeal was allowed and the orders of the subordinate and High Courts were vacated.

Issues considered

Whether "parties" referred to in clause 14 of the scheme-decree of a Section 92 suit are limited to the named plaintiffs and their successors or include all persons interested in the public trust.
Whether the appellants, not being parties to the original suit, have locus standi to seek setting aside of the sale orders under clauses 13 and 14 of the scheme-decree.

Legislation cited

Code of Civil Procedure, 1908s. 11, s. 92, s. Order 1 Rule 8

Subjects

Section 92 CPCrepresentative suitpublic trustlocus standischeme decreesale of trust propertypublic auctionres judicatacharitable trust

Judgment

A
R. VENUGOPALA NAIDU AND ORS.
v.
..,-- -
VENKATARAYULU NAIDU CHARITIES AND ORS.

OCTOBER 26, 1989

B (S. NATARAJAN AND KULDIP SINGH, JJ.)

Civil Procedure Code, 1908: Section 92-Representative suit-
Nature of-Whether all persons interested in a trust are parties to the
suit.
'-
Respondent No. 1 is a public trust. The trust owns several proper-
c ties. On the ground that the trust properties were improperly and
fraudulently alienated, a suit was filed under Section 92 CPC for
removing the trustee and appointing a new trustee and to recover trust
properties alienated by the said trustee. The sub-judge permitted the
trustees to continue and framed a scheme-decree for the future manage-
D men! and administration of trust. The scheme also granted liberty to
the parties to apply to the sub-court for further directions as regards
the administration of the trust.
b
The trustees filed an interim application before the sub-court and •
obtained permission to sell two properties. The appellants filed an
E interim application for setting aside the order granting permission to
the trust for selling the two properties, alleging that the negotiated price
was only about 20% of the market price. The sub-judge dismissed the
application on the ground that the applicants had no locus-standi to file
the application under clauses 13 and 14 of the Scheme-decree as they
were not parties to the Original suit.
F
On revision the High Court also came to the conclusion that the
application was not maintainable.
..-
This appeal, by special leave, is against the said judgment of the
High Court.
0
On behalf of the appellants, it was contended that since the suit
under section 92 CPC being a representative suit, the scheme-decree
binds not only the parties thereto, but all those who are interested in the
trust.

H The contention of the Respondents was that only the two persons
... -
760
R.V. NAIDU v. V.N. CHARITIES 761

who filed the original suit can be considered as "parties" in terms of A
clause 14 of the scheme-decree and since the appellants were not
plaintiffs in the suit, they have no locus-standi to file an application
under clauses 13 and 14 of the scheme decree.

Allowing the appeals, this Court,
B
HELD: 1.1 A suit under Section 92 of the Code is a suit of a special
nature for the protection of Public rights ii:t the Public Trusts and
charities. The suit is fundamentally on behalf of the entire body of
persons who are interested in the trust. It is for the vindication of public
• rights. The beneficiaries of the trust, which may consist of public at
large, may choose two or more persons amongst themselves for the
purpose of filing a suit under Section 92 of the Code and the suit-title in C
that event would show only their names as plaintiffs. The named
plaintiffs being the representatives of the public at large which is
interested in the trust all such interested persons would be considered in
the eyes of law to be .Parties to the suit. A suit under Section 92 of the
Code is thus a representative suit and as such binds not only the parties D
named in the suit~title but all those who are interested in the trust ..It is
for that reason that explanation VI to Section 11 of Code constructively
bar by res-judicata the entire body of interested persons from reagitat-
ing the matters directly and substantially in issue in an earlier suit
under Section 92 of the Code. (766B-C]
E
1.2 A suit whether under Section 92 of the Civil Procedure Code
or under Order 1 Rule 8 of Civil Procedure Code is by the representa-
tives of large number of persons who have a common Interest. The very
nature of a representative suit makes all those who have common
interest in the suit as parties. In the Instant case all persons who
are interested in the respondent trust are parties to the original suit F
and as such can exercise their rights under clauses 13 and 14 of
scheme-decree. (766H; 767 A]

Raje Anandrao v. Shamrao and Ors., (1961] 3 SCR 930; Ahmed
Adam Sail and Ors. v. Inayatullah Mekhri and Ors., (1964] 2 SCR 647
relied on. G

2.1 The property of religious and charitable endowments or
institutions must be jealously protected because large segment of the
community has beneficial interest therein. Sale by private negotiations
·c which is not visible to the public eye and may even give rise to public
suspicion should not, therefore, be permitted unless there are special H
762 SUPREME COURT REPORTS [1989] Supp. 1 S.C.R.

reasons to justify the same. Care must be taken to fix ihe reserve price
A
after ascertaining the market value for safeguarding the interest of the
endowment. [767F-G I ·
2.2 The orders of subordinate court dated October 27, 1984 and
January 23, 1985 permitting the sale of the two properties and conse-
B quent sale in favour of the respondents, are set aside. Tbe propeties in
question may be sold by public auction by giving wide publicity regard-
ing the date, time and place of public auction. The offer of Rs.IO lal:s
made in this Court will be treated as minimum bid of the person who
has given the offer and deposited ten percent of the amount in this
Court. It will also be open to the respondents/purchasers to participate
in the auction and compete with others for purchasing the properties.
c The respondents-vendees from the trust shall be entitled to refund of
the price paid by thein with 10% interest from tbe date of payment of
the amount till the date of auction of the property. They will also be
entitled to compensation for any superstructure put up by them in the
properties including compensation for any additions or improvements
D made by them to the building and the property. l767H; 768A-CJ

Chenchu Ram Reddy and Anr. v. Govt. of Andhra Pradesh and
Ors., [1986] 3 SCC 391, relied on.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3577
E of 1988.

From the Judgment and Order dated 19.9.1986 of the Madras High
Court in C.R.P. No. 3210 of 1985.

S. Padmanabhan, Mr. T.A. Subramaniyam, R.N. Keshwani and
F S. Balakrishnan for the Appellants.

G. Ramaswamy, Additional Solicitor General, K. Swami,
S. Srinivasan, Rajyappa, S. Murlidhar, Diwan Balak Ram and
M.K.D. Namboodari for the Respondents.

G The Judgment of the Court was delivered by

KULDIP SINGH, J. Venkatarayulu Naidu Charities is a public
trust V.P. Venkatakrishna Naidu and V.P. Rajagopala Naidu, filed an
original suit No. 28 of 1909 (hereinafter called original suit) in the
court of Subordinate Judge, Mayavaram under Section 92 of the Code •
H of Civil Procedure praying inter alia that the defendant trustee be
R.V. NAIDU v. V.N. CHARITIES IKULDIP SINGH, J.] 763

removed from the said office and a new trustee be appointed with
A
directions to recover trust properties improperly and fraudulantly
alientated by the defendant. The subordinate court permitted the
trustee to continue and framed a scheme-decree dated September 9,
1910 for the future management and administration of the trust.
Clauses 13 and 14 of the scheme are as under:
B
"13-The trustee shall not effect any alterations or addi-
tions to the existing buildings except with Lie permission of
the Tanjore Sub Court."

"14-Liberty is given to the parties to apply to the Tanjore
Sub Court for further directions if any from time to time as
regards the administration of the trusts." C

The question for consideration -in this Appeal is whether
"parties" mentioned in Clause 14 of the scheme-decree reproduced
above mean only the named plaintiffs and defendant in the suit-title
and their successors-in-interest or the suit being representative it D
includes all those who are interested in the trust.

Further necessary facts are as under:

The trust owns several items of properties. We are concerned
with the following two properties alone of the trust. E

1. Property situate at Muthukumara Moopannaar Road in T.S.
No. 2936 to an extent of 11484 sq. ft.

2. Property situate at ward No. 6 Gandhiji Road, in T.S. No.
2937 to an extent of 4429 sq. ft. F

The trustees f:led interim application No. 453 of 1984 in the
Original Suit before the subordinate court for permission to sell the
first property which was granted by the order dated October 27, 1984
and the property was sold for Rs.11,000. Similarly the second property
was sold for Rs.69,328 with the permission of the court dated January G
23, 1985.

R . .Venugopala Naidu and three others who are the present
appellants filed interim application No. 175 of 1985 in the original suit
before the subordinate judge, Thanjavur for setting aside the orders
dated October 27, 1984 and January 23, 1985 granting permission to H
•

764 SUPREME COURT REPORTS [1989] Supp. 1 S.C.R.

the trust to sell the above mentioned two properties. It was alleged
A that the negotiated sale was at a price which was almost 20% of the
market price. There was no publication in any newspapers or even in
the court notice board inviting the general public.

The learned subordinate judge dismissed the application on the
B ground that the applicants have no locus-sandi to file the application
under clauses 13 and 14 of the scheme-decree as they were not parties to
the original suit. A further revision before the Madras High Court was
dismissed. The High Court also came to the conclusion that the appli-
cation was not mintainable. It was also held by the High Court that two
of the four applicants who are muslims cannot have any interest in the
administration of the trust. Against the High Court judgment the pre-
c sent appeal by way of special leave has been filed.

Mr. S. Padmanabhan, learned counsel for the appellants has
vehemently argued that though the appellants were not shown as
parties in suit-title but the suit under Section 92 of Civil Procedure
D Code being a representative suit the scheme-decree binds not only the
parties thereto but all those who are interested .in the trust. According
to him "parties" in clause 14 of the scheme decree would include
appellants-and all those who are interested in the trust. _He has relied on
Raje Anandrao v. Shamrao and Others, [1961] 3 SCR 930 wherein this
Court held as under:
E
" ..... It is true that the pujaris were not parties to the
suit under s. 92 but the decision in that suit binds the
pujaris as worshippers so far as the administration of the
temple is concerned, even though they were not parties to
it, for a suit under s. 92 is a representative suit and binds
F not only the parties thereto but all those who are
interested in the trust."

The learned counsel further relied on Ahmed Adam Sail and
Others v. lnayathullah Mekhri and Others, [1964] 2 SCR 647 wherein
this Court observed as under:
G
"A suit under s. 92, it is urged, is a represenatative suit,
and so, whether or not the present respondents actually
appeared in that suit, they would be bound by the decree,
which had framed a scheme for the proper administration
of the Trust. In support of this argument, reliance is placed
H on the decision of this Court in Raja Anandrao v. Shamrao,
R.V. NAIDU v. V.N. CHARITIES [KULDIP SINGH, J.J 765

where it is observed that though the Pujaris were not
parties to the suit under s. 92, the decision in that suit binds A
the pujaris as worshipers so far as the administration of
the temple .is concerned, because a suit under s. 92 is a
representative suit and binds not only the parties thereto,
but all those who are interested in the Trust ....... "
B
" ..... In assessing the validity of this argument, it is neces-
sary to consider the basis of the decisions that a decree
,• passed in a suit under s. 92 binds all parties. The basis of
this view is that a suit under s. 92 is a representative suit
and is brought with the necessary sanction required by it on
behalf of all the beneficiaries interested in the Trust. The
said section authorises two or more persons having an c
interest in the Trust to file a suit for claiming one or more
of the reliefs specified in clauses (a) to (h) of sub-section
(1) after consent in writing there prescribed has been
obtained. Thus, when a suit is brought under s. 92, it is
brought by two or more persons interested in the Trust who D
have taken upon themselves the responsibility of represent-
ing all the beneficiaries of the Trust. In such a suit, though
all the beneficiaries may not be expressly impleaded, the
action is instituted on their behalf and relief is claimed in a
representative character. This position immediately at-
tracts the provisions of explanation VI to s. 11 of the Code. E
Explanation VI provides 'that where persons litigate bona
fide in respect of a public right or of a private right clajmed
in common for themselves and others, all persons interes-
ted in such right shall, for the purpose~ of this section, be
deemed to claim under the persons so litigating. It is clear
that s. 11 read with its explanation VI lea.ds to the result F
that a decree passed in a suit instituted by persons to which
explanation VI applies will bar further claims by persons
interested in the same right in respect of which the prior
suit had been instituted. Explanation VI thus illustrates
one aspect of constructive res judicata. Where a representa-
tive suit is _brought under s. 92 and a decree is passed in G
such a suit, law assumes that all persons who have the same
interest as the plaintiffs in the representative suit were rep-
resented by the said plaintiffs and, therefore, are construe-
tively barred by res judicata from reagitating the matters
directly and substantially in issue in the said earlier suit.
~ H
A similar result follows if a suit is either brought or
766 SUPREME COURT REPORTS [1989] Supp. 1 S.C.R.

A defended under 0.I., r. 8. In that case persons either suing
or defending an action are doing so in a representative
character, and so the decree passed in such a suit binds all
those whose interests were represented either by the
plaintiffs or by the defendants ....... "

B The legal position which emerges is that a suit under Section 92
of the Code is a suit of a special nature for the protection of Public
rights in the Public Trusts and charities. The suit is fundamently on
behalf of the entire body of persons who are interested in the trust. It
is for the vindication of public rights. The beneficiaries of the trust,
which may consist of public at large, may choose two or more persons
amongst themselves for the purpose of filing a suit under Section 92 of
c the Code and the suit-title in that event would show only their names
as plaintiffs. Can we say that the persons whose names are on the
suit-title are the only parties to the suit? The answer would be in the
negative. The named plaintiffs being the representatives of the public
at large which is interested in the trust all such interested persom would
D be considered in the eyes of law to be parties to the suit. A suit under
Section 92 of the Code is thus a representative suit and as such binds
only the parties named in the suit-title ·but all those who are interested
iri the trust. It is for that reason that explanation VI to Section II of the
Code constructively bar by res judicata the entire body of interested
persons from reagitating the matters directly and substantially in issue
E in an earlier suit under Section 92 of the Code.

Mr. G. Ramaswamy, learned counsel appearing for the respon-
dent trust has argued that only the two persons who filed the original
suit can be considered as "parties" in terms of clause 14 of the scheme-
decree and according to him since the appellants were not the plaintiffs
F they have no /ocus-standi to file any application under clause 13 and 14
of the scheme-decree. According to the learned counsel Section 92 of
the Code brings out a dichotomy in the sense that there are "parties to
the suit" and "persons interested in the trust." According to him
persons interested in the trust cannot be considered parties to the suit
although the judgment/decree in the suit in binding on them. He has
G also argued that a suit under Section 92 of Civil Procedure Code is
different from a suit filed under Order 1 Rule 8 of Civil Procedure
Code. We do not agree with the learned counsel. A suit whether under
Section 92 of Civil Procedure Code or under Order 1 Rule 8 of Civil
Procedure Code is by the representatives of large number-0(l'ersons
who have a common interest. The very nature of a representative suit
H makes all those who have common interest in the suit as parties. We,
R.V. NAIDU v. V.N. CHARITIES [KULDIP SINGH, J.] 767. ..
therefore, conclude that all persons who are interested in Venkata-
rayulu Naidu Charities which is admittedly a public trust are parties to A
the original suit and as such can exercise their rights under clauses 13
and 14 of scheme-decree dated September 9, 1910.

It is not necessary to go into the finding of the High Court that
two of the appellants being muslims can have no interest in the trust as B
the other two appellants claim to be the beneficiaries of the trust and
their claim has not been negatived. Moreover, the trust has been con-
/ stituted to perform not only charities/of a religious nature but also
charities of a secular nature such as providing for drinking water and
food for the general public without reference to caste or religion.

In view of our findings above the subordinate court and the High C
Court were in error in holding that the appellants had no locus-standi
to file the application for setting aside the order permitting the sale of
the properties. We, therefore, allow the appeal and set aside the order
of the subordinate court and that of the High Court.

The subordinate court and the High Court did not go into the
merits of the <;ase as the appellants were non-suited on the ground of
locus-standi. We would have normally remanded the ·case for decision
on merits but in the facts and circumstances of this case we are satisfied
'that the value of the property whith the trust got was not the market
value. Two persons namely S.M. Mohamed Yaaseen ad S.N.M. E
Ubayadully have filed affidavit offering Rs.9.00 lacs and Rs.10.00 lacs
respectively for these properties. In support of their bona fide they
have deposited 10% of the offer in this Court. This Court in Chenchu ·;
Ram Reddy and another v. Government of Andhra Pradesh and ·
Others, [1986] 3 SCC 391 has held that the property of religious and
charitable endowments or institutions must be jealously protected F
because large segment of the community has beneficial interest
therein. Sale by private negotiations which is not visible to the public
eye and may. even give rise to public suspicion should not, therefore,
be permitted unless there are special reasons to justify the same. It has
further been held that care must be taken to fix the reserve price afte~
ascertaining the market value for safeguarding the interest of the G
endowment.

We, therefore, \set aside the orders of subordinate court dated
October 27, 1984 and January 23, 1985 permitting the sale of the two
properties and also set aside the consequent sale in favour of the
respondents. We direct that the properties in _question may be sold by Ji
768 SUPREME COURT REPORTS [1989} Supp. l S.C.R.

A public auction by giving wide publi~ity regarding the date, nme and
place of public auction. The offer of Rs.10 lacs made in this Court will
be treated as minimum bid of the person who has given the offer and
deposited ten percent of the amount in this Court. It will also be open
to the respondents/purchasers to participate ·iu the auction and com-
pete with others for purchasing the properties.
B
The respondents-vendees from the trust shall be entitled to
refund of the price paid by them with 10% interest from the date of
payment of the amount till the date of auction of the property. They
will also be entitled to compensation for any super structure put up by
them in the properties including compensation for any additions or
improvements made by them to the building and the property. The
value of such super structure and the improvements and additions shall
be ascertained by the subordinate court through a qualified engineer
and by such other method as the court may deem fit. The court shall fix
the value and compensation amount after affording opportunity to the
respondents and the trust to make their representation in that respect.
There shall be no order as to costs.

G.N. Appeal allowed.