CHARITY COMMISSIONER v. HARIDAS NARANDAS — 1971 DIGILAW 6 (GUJ)

T. U. MEHTA, J. ( 1 ) THIS appeal is preferred by the Charity Commissioner Gujarat State against the order passed by the Assistant Judge Jamnagar in Civil Misc. Application No. 2/62 of his file dismissing his application under sec. 55 (2) of the Bombay Public Trusts Act 1950 ( 2 ) SHORT facts of the case are that the respondents are the trustees of the public trust known as Shri Dwarka Gaushala Dwarka Trust (hereinafter referred to as the Trust ). The main object of the trust is to maintain Gaushala for blind maimed old crippled and such other types of cattle including cows and bullocks as well as to maintain animals which could not be maintained by their owners. ( 3 ) FROM the statement of accounts maintained by the said trust for S. Y. 2012 the concerned Deputy Charity Commissioner found that there was an accumulation of liquid assets and felt that the said accumulated surplus should be utilised by applying the principle of cy pres. Thereafter correspondence between the Deputy Charity Commissioner and the trustees of the trust started in this regard. It is not necessary for the purpose of this appeal to refer to this correspondence in details. It would however be necessary to state that as a result of this correspondence the matter remained unsettled. Ultimately the Charity Commissioner by his order dated 19th September 1959 decided that a notice under sec. 55 of the Bombay Public Trusts Act 1950 should be issued to the trustees of the trust requiring them to seek directions of the court in the matter for the utilisation of the accumulated surplus to the extent of liquid and readily available funds amounting to Rs. 22897/plus securities of face value of Rs. 3 0 The trustees did not care to reply to this notice with the result that on 4th June 1960 the Charity Commissioner addressed a reminder. In reply to that the trustees addressed a letter dated 7th June 1960 giving details of accumulated surplus and stating that the actual cash on hand and in bank was to the extent of Rs. 10 459. 73 only and that if the said amount were to be utilised by applying the doctrine of cy press then nothing would remain on hand to meet the expenses of Gaushala. 10 459. 73 only and that if the said amount were to be utilised by applying the doctrine of cy press then nothing would remain on hand to meet the expenses of Gaushala. Thereafter some negotiations took place between the parties during the course of which the trustees are said to have agreed to utilise the amount of Rs. 9 0 out of the accumulated surplus for the advancement of education. However this alleged settlement did not come into effect and ultimately the trustees by their letter Ex. 40 dated 10th September 1960 stated that the original object of the trust had not failed and that there was no settlement for the utilisation of the amount of Rs. 9 0 for the advancement of education. They however admitted that at the relevant time the accumulated surplus was to the tune of Rs. 20 0 but contended that the same was absolutely necessary for their institution to meet the contingencies in famine years for purchasing fodder for cattle. ( 4 ) IT is in the background of these facts that the Charity Commissioner has ultimately moved the court under sub-sec. (2) of sec. 55 of the Bombay Public Trusts Act 1950 (hereinafter referred to as the Act ). ( 5 ) SEC. 55 of the Act embodies within itself the doctrine of cy pres and empowers the Charity Commissioner to require the trustees of a trust to apply within the prescribed time for directions to the court in four types of cases contemplated by clauses (a) to (d) of sub-sec. (1 ). It is clause (b) which is relevant for our purpose because it states that the Charity Commissioner can call upon the trustees to move the court if he is of the opinion that the income or any surplus balance of any public trust has not been utilised or not likely to be utilised. The case of the Charity Commissioner is that since in this case there was a surplus of Rs. 21 246. 14 at the end of S. Y. 2018 this is a fit case in which the court should give direction for the utilisation of this surplus by applying the doctrine or cy pres. ( 6 ) IT is found that before the lower Court the respondent trustees had made an effort to show that there was no surplus as alleged by the Charity Commissioner. ( 6 ) IT is found that before the lower Court the respondent trustees had made an effort to show that there was no surplus as alleged by the Charity Commissioner. However this contention of the trustees is found to have been rejected by the lower court in the following observations:-THIS is all the correspondence on record. It is clear from the above discussion and the correspondence that the opponents did not deny that there was accumulated surplus. Even as per the letter Ex. 40 on the date of the letter also they had accumulated surplus of Rs. 20 0 The accounts for the years 2013 to 2018 S. Y. both inclusive) show that even at the end of S. Y. 2 (18) they accumulated surplus was Rs. 21 246. 14 Ps. Therefore their efforts to show that there is no accumulated surplus cannot be accepted. It seems to me that in the correspondence which they carried on with the Deputy Charity Commissioner as well as the Charity commissioner. They made efforts to show that no such surplus was available as the same would be required in that particular year. They gave the figures by ignoring the figures of income which they derived from the Gaushala and other sources. From the statement of accounts Exhibit 43 it is evident that the institution is run at a loss and that loss is more in famine or lean years. But even after meeting the said losses it appears clear that at the end of the year the accumulated surplus was of Rs. 21 246. 14 Ps. This surplus also includes Rs. 8 125 of the value of the shops at Okha; Rs. 3 0 of the Government Loans and Rs. 4 0 of the National Savings Certificates. They are capitalised from the accumulated surplus. Hence I come to the conclusion that the said institution has the accumulated surplus of Rs. 21 246. 14 Ps. at the end of S. Y. 2018. I find that these findings of the lower court cannot be challenged and therefore it must be concluded that there was an accumulation to the extent of Rs. 21 246. 14 in the account of the trust at the end of S. Y. 2018. However the question is whether this accumulation amounts to a surplus to which doctrine of cy pres can be applied as contemplated by sec. 21 246. 14 in the account of the trust at the end of S. Y. 2018. However the question is whether this accumulation amounts to a surplus to which doctrine of cy pres can be applied as contemplated by sec. 55 of the Act. ( 7 ) CY pres principle was evolved as auxiliary to the primary rule that the donors intention must be observed. Therefore if a particular charity could be administered according to the directions of the donor the law requires that it should be so administered. Under the Circumstances the Court would have no jurisdiction to allow any departure from the donors directions as regards the utilisation of the trust funds merely on the grounds of expediency. In ordinary course therefore the duty of the Court is to see that the trusts are properly administered and that the directions of the donors are duly carried into effect. However the contingencies mentioned in clauses (a) to (d) of sub-sec (1) of sec. 55 of the Act provide for the exceptions wherein the trust funds can be utilised by applying the doctrine of cy pres. This doctrine means following as nearly as possible the intention of the donor when a particular mode of charity indicated by the donor is not capable of being carried into effect. Clause (b) of sub-sec. (1) of sec. 55 of the Act provides for one contingency in which the cy pres doctrine can be applied. It says that it can be applied where the Charity Commissioner is of the opinion that the income or any surplus balance of the trust has not been utilised or not likely to be utilised. ( 8 ) THE learned Assistant Judge has found as a matter of fact that there was an accumulation to the tune of Rs. 21 246. 14 at the end of S. Y. 2018 but he has further found that this accumulation is not the surplus to which the cy pres doctrine can be applied in view of the facts that the trust has no capital fund and that the income of the trust is not regular. It is found as a matter of fact that during the years from S. Y. 2013 to 2018 the accumulated surplus has decreased by Rs. It is found as a matter of fact that during the years from S. Y. 2013 to 2018 the accumulated surplus has decreased by Rs. 12 198 On behalf of the Charity Commissioner the learned Assistant Government Pleader first contended that when the court comes to a conclusion that a surplus balance is not utilised during a particular year it is not open to the court to consider whether said surplus amount is or is not likely to be utilised in future years as is done by the learned Assistant Judge in this case because the word or which is used in clause (b) of sub-sec. (1) of sec. 55 is used in a disjunctive sense. His second contention was that the expression not likely to be utilised which is found in clause (b) sub-sec. (1) of sec. 55 of the Act is not an absolute proposition which should be taken as good for any length of time in further and that this expression should be interpreted as referring to only a reasonable period of time during which the utilisation of the funds is not likely to happen. ( 9 ) SO far as the first contention is concerned it is based on the interpretation of clause (b) of sec. 55 (1) which is in the following terms:-THE Income or any surplus balance of any public trust has not been utilized or not likely to be utilized. THE contention was that the word or which separates the expression not likely to be utilised from the rest of the clause is used in a disjunctive sense with the result that it is not open to the court to consider both the aspects of the clause namely (1) whether the fund has not been utilised and (2) whether the said fund is not likely to be utilised. If this contention of the learned Assistant Government Pleader is accepted it would follow that the moment the Court finds that in a particular accounting year surplus balance of income or fund is not utilised the court should apply the doctrine of cy pres without going into the question whether the said fund was likely to be utilised or not in future. In my opinion this interpretation of the clause is not acceptable because the word or is used in the clause not in a disjunctive but in a conjunctive sense. In my opinion this interpretation of the clause is not acceptable because the word or is used in the clause not in a disjunctive but in a conjunctive sense. It obviously carries the meaning of the conjunctive expression and. This is the only reasonable interpretation which in my opinion can be put to this clause because in practical life it so often happens that some reserve from the income of a public trust would always be necessary to meet future contingencies of tomorrow which cannot be visualized today. It may happen that the balance found in a particular year cannot be usefully utilised during the course of that year for the objects of the trust for variety of reasons but the said balance would be wiped out on account of some unforeseeable possibilities which the trust affairs would have to encounter in future. It is for this reason that if the accumulation in question is found to be only in the nature of a reserve which is reasonably required to meet some future contingencies the said surplus cannot be considered as a surplus to which the doctrine of cy pres would apply. As a matter of fact it is not the surplus strictly so called because it is liable to be utilised for the objects of the trust in future. Of course whether the accumulation in question amounts to merely a reserve or a surplus to which the doctrine of cy pres would apply depends upon the special circumstances of each case and therefore no generalization can be made on the point. Much depends upon the objects of the trust the activities carried on by the trustees to achieve that object the sources from which the expenditure necessary for carrying out its activities are met the regularity of income and expenditure of the trust and the reasonable possibility of the trust receiving the same quantum of income in future and such other factors. Therefore whenever the question arises whether a particular accumulation becomes a surplus within the meaning of sec. 55 of the Act or not it has got to be answered only with reference to peculiar facts of each case. But it can be safely observed that every accumulation of income of a trust is not by itself a surplus to which the doctrine of cy pres would apply. 55 of the Act or not it has got to be answered only with reference to peculiar facts of each case. But it can be safely observed that every accumulation of income of a trust is not by itself a surplus to which the doctrine of cy pres would apply. ( 10 ) IN cases of fluctuating income and expenditure of a public trust a temporary surplus would often come into existence. Such a temporary surplus would prima facie not be the surplus to which the cy pres principle would apply. Speaking of such temporary surpluses Tudor on Charities (1967 Edition) says as under at page 301:-THE surplus (if it is a surplus of income) must be of a permanent and not of a temporary character. Therefore where the expenditure of income is of a fluctuating character so that the surplus of one year may be required to meet the expenses of another year a scheme for the cy pres application of the income which is temporarily in excess of current needs will not be directed. Thus where a charitys income is applicable for the repair of property so that in one year the necessary expenditure may be small but in a subsequent year may be large no scheme will be directed. The authority which is cited by the author for the above proposition is Att. Gen. v. Love (1857) 23 Beav. 499 507 per Romilly M. R. ( 11 ) THE learned Assistant Judge against whose order this appeal is preferred has taken into consideration the special circumstances of this case and especially the fluctuating nature of income and expenditure of this trust and has come to a conclusion that it could not be said that the accumulated surplus was not likely to be used as contemplated by clause (b) of sec. 55 of the Act. This finding is recorded by him in the following terms:-THERE is no capital fund of the said trust. The main income of the trust is from selling milk. It also receives donations for the Gaushala from charitable minded persons every year but these donations vary every year. The average comes to about Rs. 1200/or there about. But this cannot be regarded as a regular income. It depends upon the efforts of the trustees to collect donations. The other sources of income are the lagas received from merchants and the amount given by pilgrims. The average comes to about Rs. 1200/or there about. But this cannot be regarded as a regular income. It depends upon the efforts of the trustees to collect donations. The other sources of income are the lagas received from merchants and the amount given by pilgrims. But this also does not exceeds Rs. 2000/in all. Hence it cannot be said that this Gaushala is run on the income from the corpus. The annual income both regular and irregular is not certain and it depends on many circumstances. The income received from the Gaushala is not self sufficient. Therefore whatever surplus has accumulated is due to the active efforts of the trustees to secure donations from the charitable minded public. Moreover on perusal of the said statements of accounts published in the report Exhibit 43. It is clear that it is running at a loss. The said accounts are for the period from S. Y. 2013 to S. Y. 2018 (both inclusive ). The accumulated surplus shown in the balance sheet of S. Y. 2013 at pages 8/9 is of Rs. 33342/2/3 pies. The balance sheet for S. Y. 2018 published at pages 38/32 shows the accumulated surplus at Rs. 21256. 14 Ps. That means that the accumulated surplus has decreased by Rs. 12198/during 6 years. That means the average loss per year came to Rs. 2000. 00. The account for the said period further shows that the loss is heavier during famine or lean years. Therefore it cannot be said that the accumulated surplus is not used or is not likely to be used as contemplated by clause (b) of subsec. (1) of sec. 55 of the said Act. The said amount would thus be necessary to meet the loss that would be incurred during famine years of lean years. I find full justification for these observations. The facts which are appreciated by the learned Assistant fudge show that the accumulation in question was only of a temporary nature and that looking to the fluctuating income and expenditure of the trust the said accumulation would be a temporary surplus which is likely to be utilised in future lean years. ( 12 ) AS for the next contention of the learned Government Pleader that the expression not likely to be used as found in clause (b) of sub-sec. (1) of sec. ( 12 ) AS for the next contention of the learned Government Pleader that the expression not likely to be used as found in clause (b) of sub-sec. (1) of sec. 55 of the Act should not be construed as referring to an indefinite period I find that broadly speaking there is nothing objectionable in this submission because it is clear that the expression means non likelihood of the utilisation of the surplus in foreseeable future. But the question whether the surplus under consideration is not likely to be utilised for the objects of the trust in future is required to be considered in light of the peculiar requirements of each trusts coupled with the fluctuating nature of income and expenditure of the trust. Speaking of this case I find that income of the trust cannot be considered as regular nor can the expenditure be considered regular every year. In famine years or lean years the income of the trust is likely to be reduced and the expenditure increased because more cattle would be required to be attended to and since it is found that the area in which the trust carries on its activities is often affected by famine years or lean years it cannot be said that the surplus in question was not likely to be utilised for an indefinite period. Under these circumstances the appellant cannot succeed even on the second contention raised on his behalf. ( 13 ) IN the result therefore I find that this appeal should fail. The same is therefore dismissed with costs. .