Ratilal Panachand Gandhi vs The State Of Bombay And Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Civil Appeal Nos. 1 and 7 of 1954

Decision Date: 18 March 1954

Coram: B.K. Mukherjea, Ghulam Hasan, Mehar Chand Mahajan, Vivian Bose

In this matter the petitioner, Ratilal Panachand Gandhi, brought proceedings against the State of Bombay and several other respondents. The judgment was delivered on the eighteenth of March, 1954 by a Bench of the Supreme Court of India consisting of Justice B. K. Mukherjea, Justice Ghulam Hasan, Justice Mehar Chand Mahajan and Justice Vivian Bose. The case is reported in the official law reports as 1954 AIR 388 and also appears in the Supreme Court Reporter at page 1035 of the 1954 volume. Subsequent citations of the decision can be found in later reports, including R 1958 SC 731, D 1959 SC 942, R 1961 SC 459, D 1963 SC 1638, R 1965 SC 1107, R 1965 SC 1611, RF 1971 SC 344, R 1971 SC 1182, R 1975 SC 706, R 1975 SC 846, F 1977 SC 908, F 1978 SC 1181, R 1980 SC 1008, RF 1981 SC 1863, MV 1983 SC 1, R 1984 SC 51, R 1987 SC 748. The substantive provisions examined were sections 44, 47(3), 47(4), 47(6), 55(c) and 56(1) of the Bombay Public Trust Act, 1950 (Act XXIX of 1950), together with Article 25 and Article 26 of the Constitution of India and Section 68 of the Act. The petition challenged whether the statutory provisions were ultra vires the Constitution and whether Section 68 was ultra vires the State Legislature.

The Court held that the provision of section 44 of the Bombay Public Trust Act, 1950, which authorised the Charity Commissioner to be appointed as a trustee of any public trust by the court without any reservation concerning religious institutions such as temples and maths, was unconstitutional and therefore void. Likewise, the subsections (3) to (6) of section 47 pertaining to the appointment of the Charity Commissioner as trustee of a religious trust were declared void to the same extent. The judgment emphasized that a religious denomination possesses a constitutional right to manage its own affairs, including the use of trust property or its income for religious purposes as intended by the founder or established by usage. The Court observed that allowing the Charity Commissioner or the court to divert trust property for purposes deemed expedient, even if the founder’s original objectives could still be achieved, constituted an impermissible intrusion on the freedom of religious institutions in managing their religious affairs. Consequently, clause (3) of section 55, which embodied the offending provision, and the corresponding power of the court found in the latter part of section 56(1) were held to be void. In contrast, the Court found that Section 58 of the Act was not ultra vires the State Legislature because the contribution imposed under that section constituted a fee, not a tax, and thus fell within the jurisdiction of entry 47 of the State List of the Constitution.

The Court referred to several authorities, including List III in Schedule VII of the Constitution, the decision of the Commissioner of Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar reported in the Supreme Court Reporter at page 1005, the United States case Davis v. Beason reported at 133 U.S. 333, the Australian case Adelaide Company v. The Commonwealth reported at 67 C.L.R. 116 and 124, and the Indian case Tamshed Ji v. Soonabai reported in the Bombay Law Reports at page 122. The judgment concerned civil appeals numbered 1 of 1954 and 7 of 1954, which were filed under article 132(1) of the Constitution of India. Both appeals challenged the judgment and order dated 12 September 1952 of the High Court of Judicature at Bombay in civil application 880 of 1952 and miscellaneous application 212 of 1952 respectively. The appellants in appeal 1 were represented by counsel, and the appellant in appeal 7 was also represented by counsel. The respondents in both appeals were represented by counsel. The opinion was delivered by Justice Mukherjea. These two connected appeals arose from a common judgment of a division bench of the Bombay High Court dated 12 September 1952, in which the learned judges dismissed two petitions filed under article 226 of the Constitution. The petitions, presented by the appellants in the two appeals, questioned the constitutional validity of the Bombay Public Trusts Act, 1950 (Act XXIX of 1950), which the Bombay Legislature had enacted to regulate and improve the administration of public and religious trusts within the State of Bombay. By a notification dated 30 January 1951, the Act was brought into force on 1 March 1951 and applied to temples, maths and all other trusts—express or constructive—pursuing public, religious, charitable purposes or any combination thereof.

The State of Bombay was named as the first respondent in both appeals, while the second respondent was the Charity Commissioner, appointed by the State under section 3 of the impugned Act to implement its provisions throughout Bombay. In appeal 1, the Assistant Charity Commissioner for the Baroda region was also joined as a third respondent. The appellant in appeal 1 was a Swetamber Murtipujak Jain residing in Vejalpar, a village in the district of Pune. He served as the vahivatdar, or manager, of a Jain public temple, or derasar, located in the same village, and the endowed property associated with the temple was valued at five lakh rupees. The petition that gave rise to this appeal was filed by the appellant on 29 May 1952 in the appellate side of the Bombay High Court, challenging the enforcement of the Bombay Public Trusts Act and its provisions relating to the registration of public and religious trusts managed by him and the levying of contributions on such trusts.

In the first petition the appellant sought a writ of mandamus or a directive that would require the three respondents mentioned earlier to refrain from enforcing any provisions of the Bombay Public Trusts Act, 1950, including those relating to the registration of public and religious trusts managed by the appellant and the collection of contributions levied in respect of such trusts. The petitioner argued that several sections of the Act infringed upon the fundamental rights protected to him by articles 25 and 26 of the Constitution. In addition, the petitioner contended that the contribution imposed on the trust amounted to a tax, which the State Legislature was not competent to levy. A parallel application invoking article 226 of the Constitution and requesting essentially the same relief was filed by the appellant in the other appeal, identified as Appeal No. 7 of 1954, before the High Court on its Original Side on 4 August 1952. The respondents in that case claimed to be the current trustees of the Parsi Punchayet Funds and Properties in Bombay, which were registered under the Parsi Public Trusts Registration Act, 1936. Those assets formed a single consolidated fund administered by the trustees for the benefit of the whole Parsi community, with the income applied to specified religious and charitable purposes of a public nature, as indicated by the various donors. The petitioners challenged the validity of the Bombay Public Trusts Act, 1950, principally on the ground that it interfered with their freedom of conscience and with their right to freely profess, practise and propagate religion, as well as their right to manage their own religious affairs, thereby contravening articles 25 and 26 of the Constitution. They also alleged that the contribution required under section 58 of the Act functioned as a tax on public, religious and charitable trusts, a matter beyond the legislative competence of the State.

Because the two petitions raised essentially the same questions, the learned Chief Justice of Bombay ordered the later petition to be transferred from the Original Side to the Appellate Side of the High Court, and both were heard together by a Division Bench consisting of the Chief Justice and Justice Shah J. The two petitions were disposed of by a single judgment delivered on 12 September 1952, wherein the learned Judges rejected every contention raised by the respective applicants and dismissed the petitions. The petitioners in both matters now approached this Court on appeal, relying on certificates granted by the High Court under article 132(1) of the Constitution. To understand the arguments presented before this Court, it is convenient to refer briefly to the scheme and salient features of the impugned Act.

In order to understand the matters raised before the Court, it is necessary to set out briefly the scheme and the main features of the legislation that has been challenged. The Act declares in its preamble that its purpose is to regulate and improve the administration of public, religious and charitable trusts that exist within the State of Bombay. The scope of the Act embraces every public trust that has been created not only for religious objectives but also for purely charitable purposes, and it applies to persons of all classes and denominations throughout the State. The authority for supervising and administering public trusts under the Act is vested in the Charity Commissioner, who is appointed by the State Government in accordance with the procedure prescribed in Chapter II. The State Government is also empowered to appoint any number of Deputy and Assistant Charity Commissioners as it deems appropriate, and these officers may be assigned responsibility for specific geographical regions, particular trusts, or categories of trusts whenever such allocation is considered necessary. Chapter III begins with Section 9, which provides a definition of “charitable purposes,” while Sections 10 and 11 respectively provide that a public trust shall not be declared void on the grounds of uncertainty and shall not fail as to its religious or charitable purpose even if any non-charitable or non-religious purpose included in it cannot be given effect. Chapter IV deals with the registration of public trusts; under Section 18 every trustee of a public trust that falls within the ambit of the Act is required to make an application for registration of that trust. If a trustee omits to comply with this requirement, Section 31 disqualifies that trustee from instituting any suit to enforce a right on behalf of the trust in a court of law. Chapter V addresses the matters of accounts and audit. Section 32 imposes on every trustee of a trust that has been registered under the Act the duty to keep regular accounts. Section 33 then mandates that those accounts be audited annually in the manner prescribed by the regulations. Section 34 makes it the auditor’s responsibility to prepare balance-sheets and to report any irregularities discovered in the accounts. Section 35 prescribes the manner in which trust money must be invested, and Section 36 prohibits the alienation of immovable trust property except through leases of specified duration and only after obtaining prior sanction from the Charity Commissioner. Section 37 authorises the Charity Commissioner and his subordinate officers to enter upon and inspect any property belonging to a public trust, with a proviso that reasonable notice must be given to the trustee and that the officers must show due respect for the religious practices and usages of the trust. Chapter VII sets out further powers and functions of the Charity Commissioner, and Section 44, for example, empowers the Commissioner to act in additional capacities as provided by the Act.

In this provision, the law states that the Charity Commissioner may be appointed to act as a trustee of a public trust either by a court that has appropriate jurisdiction or by the individual who created the trust. Section 47 sets out the authority of a court to appoint a new trustee or trustees, and it specifies that under clause (3) of that section, after conducting an inquiry, the court may designate the Charity Commissioner or any other suitable person to fill a vacancy on the trust board. Section 48 then provides that where the Charity Commissioner is appointed as a trustee, administrative charges may be levied against the trust. Section 50 functions as a replacement for section 92 of the Civil Procedure Code and contains provisions that are virtually identical in character to those dealing with suits concerning public trusts; among the remedies available in such a suit is a declaration indicating the share of the trust’s property or interest that should be allotted to a particular object of the trust. Section 55 claims to set out the rule of cy pres for the administration of religious and charitable trusts, but it extends that doctrine beyond the limits established by the principles of the English Chancery Courts or by the judicial pronouncements recognized in this country. Section 56 deals with the powers of the courts to apply the cy pres doctrine. Section 57 creates a fund called “The Public Trusts Administration Fund,” which is to be vested in the Charity Commissioner, and clause (2) of that section specifies the amounts that are to be credited to the fund. Section 58 obligates every public trust to make a contribution to this fund at a time and in a manner prescribed by the government; the prescribed contribution rate has been fixed at two percent per annum of the gross annual income of each public trust. Failure to make the contribution exposes the trustee to the penalties laid down in section 66 of the Act. Section 60 provides that the Public Trusts Administration Fund, subject to the Act and to any general or special orders issued by the State Government, may be used to pay charges for expenses incidental to the regulation of public trusts and, more generally, to implement the provisions of the Act. Sections 62 to 66, which form Chapter IX of the Act, govern the appointment and qualifications of assessors, whose role is to assist and advise the Charity Commissioner or his subordinate officers in conducting inquiries that may be required under the Act. Chapter X prescribes the penalties that may be imposed on trustees who violate any of the Act’s provisions. Chapter XI deals with procedural matters relating to the jurisdiction of courts and the right of appeal, while the twelfth and final chapter addresses various miscellaneous matters.

In this case the Court observed that the final chapter of the legislation deals with various miscellaneous matters, and that the provisions contained in that chapter are the only sections of the Act that are relevant to the issues before the Court. The Court noted that the arguments presented by the counsel supporting the appeals fall into two distinct categories. First, the counsel contended that several provisions of the Act should be held invalid because they allegedly conflict with the freedom of religion and with the right of each religious denomination or sect – the appellants in the individual matters – to manage its own religious affairs, a right that is guaranteed by Articles 25 and 26 of the Constitution. The sections whose validity was challenged on this ground were identified as Section 18, Sections 31 to 37, Section 44, Section 47, Section 48, Section 50, clauses (e) and (g), Section 55, Section 58 and Section 66. The second category of the appellants’ contentions concerned the requirement to pay a contribution as prescribed in Sections 57 and 58 of the Act. The counsel argued that, in substance, this requirement amounted to a tax and that the State Legislature was therefore incompetent to enact such a provision.

Turning to the first category of challenges, the Court remarked that a substantial amount of argument had been advanced before it regarding the scope and measure of the fundamental rights enshrined in Articles 25 and 26 of the Constitution. The Court stated that it was necessary to address this question at the very beginning of its analysis, because without a clear understanding of the breadth and limits of these constitutional rights, the Court could not determine whether any provision of the Act infringed upon them. The Court recalled that the same question had earlier arisen before it in Civil Appeal No 38 of 1953, namely The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Tirtha Swamiar, and that the judgment in that case had discussed the matter at length. For the present purpose, the Court said it would simply restate the principal principles that had been laid down in that earlier judgment. Article 25, the Court explained, guarantees to every person – not only to citizens of India – the freedom of conscience and the right to freely profess, practice and propagate religion, subject always to the requirements of public order, health and morality. The Court further noted that Article 25 contains a second clause which introduces specific exceptions. Sub-clause (a) of that clause preserves the State’s power to make laws that regulate or restrict any economic, financial, political or other secular activity that may be associated with religious practice. Sub-clause (b) preserves the State’s power to make laws that provide for social reform or social welfare even where such laws might interfere with religious practices. Consequently, the Court concluded that, subject to these constitutional limitations, every individual enjoys a fundamental right not merely to hold a religious belief approved by his conscience but also to manifest that belief through outward acts and to propagate his religious views for the benefit of others.

The Court explained that Article 25 of the Constitution guarantees every person, not only citizens, the freedom of conscience and the right to profess, practise and propagate religion. This guarantee includes the right to display one’s religious belief and ideas through outward acts that are endorsed by the religion, and also the right to spread those religious views for the benefit of others. The Court noted that it is irrelevant whether such propagation is undertaken by an individual in a personal capacity or on behalf of a church or any other religious institution. The freedom to exercise religion outwardly is, however, subject to regulation by the State when such regulation is necessary to preserve public order, health or morality. The Court clarified that sub-clause (a) of clause (2) of Article 25 does not empower the State to interfere with protected religious practices themselves, unless those practices threaten public health or morality. Instead, the sub-clause authorises the State to regulate activities that are essentially economic, commercial or political in nature, even when those activities are associated with religious practice. Thus, the State’s power under this provision is confined to matters that have a secular character rather than to the core religious rites that are protected by the Constitution.

Turning to Article 26, the Court described the scope of the rights it confers on any religious denomination or a section thereof. Under this article, a denomination is entitled to establish and maintain institutions for religious and charitable purposes and to manage all affairs relating to religion in a manner of its own choosing. The denomination also enjoys the right to acquire and own both movable and immovable property and to administer that property in accordance with law. The Court highlighted the distinction between clauses (b) and (d) of Article 26. Clause (b) guarantees the denomination the fundamental right to manage its religious affairs, a right that no legislation may withdraw. Clause (d), by contrast, provides that the administration of property must be carried out in accordance with law, meaning that the State may enact valid laws to regulate the administration of trust property. Nevertheless, the Court emphasized that even under clause (d) the denomination itself retains the right to administer its property subject to any law that the State may validly impose; a law that entirely removes the denomination’s right of administration and vests it in a secular authority would violate the guarantee of Article 26(d). The Court then identified the central issue as determining where the boundary lies between matters that are truly religious and those that are not. It observed that the Constitution-makers did not define the term “religion,” and that formulating an exhaustive definition applicable to all persons is not feasible. The Court referred to the observation made in the Madras case that the definition of religion offered by Fields in the American case of Davis v Beason is neither adequate nor precise.

The Court observed that the definition of “religion” offered in the American decision Davis v. Beason (1) was neither adequate nor precise. The learned judge in that case explained that the term refers to an individual’s view of his relationship to his Creator and to the duties of reverence for the Creator’s being and character and to obedience to the Creator’s will. The judge further noted that the term is often confused with the cultus or form of worship of a particular sect, but it is distinct from that form. The Court pointed out that “religion” does not have to be theistic; for example, Buddhism and Jainism, which are well-known faiths in India, do not accept the existence of a God or an Intelligent First Cause. While a religion certainly rests on a system of beliefs and doctrines that its adherents consider conducive to their spiritual welfare, it would be inaccurate to reduce matters of religion merely to matters of religious faith and belief, as was suggested by a learned judge of the Bombay High Court. Religion is not simply an opinion, doctrine, or belief; it also manifests itself in outward actions. To illustrate this point, the Court quoted the observations of Latham C. J. of the High Court of Australia in Adelaide Company v. The Commonwealth (2), where the scope of protection afforded to religious freedom by section 116 of the Australian Constitution was examined. The Court therefore emphasized that the definition of religion must encompass both internal convictions and external expressions.

In the Australian case, Latham C. J. observed that some commentators propose that, although the civil government should not interfere with religious opinions, it may regulate any acts performed in accordance with religious belief without violating the principle of religious freedom. The judge found this distinction difficult to sustain when interpreting section 116, which expressly refers to the “exercise of religion.” Accordingly, the provision was intended to protect from the operation of any Commonwealth law the acts that are performed in the exercise of religion. The judge explained that the section therefore goes far beyond safeguarding liberty of opinion; it also protects acts undertaken pursuant to religious belief as part of religion itself. The Court agreed that these observations apply fully to the provision on religious freedom enshrined in the Indian Constitution. Religious practices or performances of acts carried out in accordance with religious belief are as much a component of religion as faith or belief in particular doctrines. Consequently, if the tenets of the Jain or Parsi religion prescribe that certain rites and ceremonies be performed at specific times and in particular manners, such rites cannot be characterized as secular activities of a commercial or economic character merely because they involve expenditure of money or the employment of priests. The Court concluded that these religious observances form essential parts of the religion and are not subject to arbitrary restriction by the State.

The Court explained that when religious observances involve the use of marketable commodities, no external authority may declare such practices non-essential to religion. Accordingly, the secular State does not have the power to restrict or prohibit these practices merely by claiming authority over the administration of a trust estate. Nevertheless, the Court acknowledged that the amount of expenditure required for these religious activities is a matter of managing the property of religious institutions. If such expenditures threaten to diminish the endowed assets or jeopardise the stability of the institution, the law does permit appropriate control by State agencies. In support of this view, the Court referred to the observations of Justice Davar in Jamshedji v. Soonabai, a case concerning whether a bequest made by a Parsi testator for the perpetual celebration of Zoroastrian ceremonies such as Muktad-baj and Vyezashni could be treated as a valid charitable gift. The Court found those remarks highly relevant to the present matter. Justice Davar had stated: “If this is the belief of the community… and it is proved undeniably to be the belief of the Zoroastrian community, a secular judge is bound to accept that belief. It is not for him to sit in judgment on that belief; he has no right to interfere with the conscience of a donor who makes a gift in favour of what he believes to be the advancement of his religion and the welfare of his community or mankind.” The Court held that these comments illustrate the protection afforded by article 26(b) of the Constitution. The Court further noted that the line between religious matters and the secular administration of religious property can sometimes be thin. In instances of doubt, the Court agreed with the earlier observation of Chief Justice Latham that a common-sense approach, guided by practical necessity, should be adopted. Guided by these principles, the Court proceeded to examine the various provisions of the Bombay Public Trusts Act, which had been challenged by the appellants. The Court first considered the sections dealing with the registration of trusts. Section 18 imposes a duty on the trustee of every public, religious, or charitable trust to obtain registration of the trust. Section 66 makes it an offence for a trustee to fail to comply with this requirement and prescribes a penalty for such non-compliance. Section 31 further compels compliance by providing that no suit may be instituted on behalf of a public trust to enforce its rights in any court unless the trust has been registered. A compulsory payment is also prescribed, as noted in the citation (1) 33 Bom. I22, and the Court referenced the earlier case Adelaide Company v. The Commonwealth (2) for additional context.

The Court observed that the rules made by the Government prescribed a fee of twenty-five rupees for the registration of a trust under section eighteen. It explained that the purpose of the registration provisions was to secure proper supervision of trust property and to enable effective control over the assets. These matters fell within the administration of trust property contemplated by article twenty-six sub-paragraph d of the Constitution and could not, by any stretch of imagination, be described as an attempt to interfere with the right of religious institutions to manage their own religious affairs. The fees collected under section eighteen were credited to the Public Trust Administration Fund created by section fifty-seven, and the Court noted that the fund was to be used to meet the expenses incurred in regulating public trusts and to implement the provisions of the Act. The penalties provided in the Act were described as merely consequential provisions that did not involve any violation of a fundamental right. Counsel for the appellants argued that Jain doctrine held that temple property and its income existed solely for religious purposes, and that directing the use of money for purposes not regarded as sacred in Jain scriptures would amount to interference with freedom of religion. The Court found this contention unsound, observing that such expenditures were incidental to the proper management and administration of the trust estate, for example the payment of municipal rates and taxes, and therefore could not be said to divert trust property away from the purposes prescribed by any religion. The Court then turned to the objections raised to sections thirty-two to thirty-seven. Section thirty-two required a trustee of a public trust to keep accounts in the form prescribed by the Charity Commissioner; section thirty-three provided for the auditing of those accounts; and section thirty-four made it the duty of the auditor to prepare balance-sheets and to report any irregularities discovered. The Court held that these provisions were not matters of religion and that the objections to their validity were entirely baseless. Section thirty-five dealt with the investment of trust money and, as the Court noted, it is a well-settled principle that trustees should not retain cash that is not required for immediate expenses, and legislation typically enumerates the securities in which trust money may be invested. Section thirty-six allowed alienation of immovable trust property only with the prior sanction of the Charity Commissioner, a measure the Court considered perfectly salutary. Finally, the Court addressed the objection to section thirty-seven, which was raised on the ground that an unrestricted right of entry into any religious premises might offend the sentiments of the followers. The Court pointed out that the statute expressly required officers making an entry to give reasonable notice of their intended entry to the trustees and to have due regard to the religious practices and usages of the trust.

The Court observed that although the provision allowing entry into a religious trust might appear to offend followers, the statute expressly required the officers who intended to make such entry to give reasonable notice to the trustees and to conduct the entry with due regard for the religious practices and customs of the trust. This safeguard was noted as part of the legislative scheme.

The Court then turned to the objections raised against sections 44 and 47 of the Act. Section 44 provided that the Charity Commissioner could be appointed as a trustee of a public trust either by a court of competent jurisdiction or by the author of the trust. The Court held that when the author of a trust voluntarily appointed the Charity Commissioner as a trustee, no objection could be sustained. However, the Court found that the power vested in a court to make such an appointment raised serious constitutional concerns. To illustrate the problem, the Court considered a religious institution such as a Math, which is headed by a Mathadhipati who serves as the spiritual superior and is regarded as a trustee under the Act. If a court were empowered to appoint the Charity Commissioner as the superior of a Math, the result would be disastrous and would amount to a flagrant violation of the constitutional guarantee protecting the management of religious affairs of such institutions. The Court emphasized that this issue was not a secular matter concerning the administration of trust property but directly related to the core religious function of the Math, which is to maintain a continuous line of teachers for propagating and strengthening the doctrines of a particular sect. Since a Math could not exist without its Mathadhipati, substituting the Charity Commissioner for that spiritual head would effectively destroy the institution.

The Court also noted that clause (4) of section 44 aggravated the problem by stipulating that the Charity Commissioner would be the sole trustee and that it would not be lawful to appoint him as a trustee alongside any other person. In the Court’s opinion, the provision in section 44 that allowed a court to appoint the Charity Commissioner as a trustee of any public trust without any reservation for religious institutions such as temples and Maths was unconstitutional and therefore had to be declared void. The same objections, the Court held, extended to clauses (3) to (6) of section 47. While the Court acknowledged that it was proper for a court to be empowered to appoint a trustee to fill a vacancy created by any of the reasons listed in section 47(1), and that it was a salutary principle for the court to consider the matters specified in clause (4) of section 47 when making such an appointment, the Court could not accept clause (3) to the extent that it authorised the court to appoint the Charity Commissioner as the trustee. Moreover, clause (5) declared that the Charity Commissioner would be the sole trustee, a condition the Court found could not be regarded as

The Court observed that allowing the Charity Commissioner to act as the Shebait of a temple or as the superior of a Math would constitute interference with the religious affairs of those institutions. Accordingly, the Court declared that clauses (3) to (6) of section 47, insofar as they provide for the appointment of the Charity Commissioner as trustee of a religious trust such as a temple or a Math, are invalid. The Court further stated that if those provisions of section 47 are removed, there is no longer any objection to the operation of section 48 in its present form. In that circumstance, section 48 would apply only to situations where the Charity Commissioner has been appointed trustee by the settlor himself, and the administrative charges authorized by section 48 could then be imposed upon the trust. Turning to section 50, the Court noted that objections had been raised to clauses (e) and (g) of that section. The Court found no basis for rejecting those clauses, observing that section 50 essentially replicates section 92 of the Civil Procedure Code and governs suits relating to public trusts. Clause (e) of section 50 duplicates clause (e) of CPC section 92, and clause (g) similarly reproduces the substance of clause (g) of CPC section 92. Consequently, the Court concluded that the provisions of clauses (e) and (g) of section 50 do not encroach upon, nor do they violate, any fundamental right guaranteed by the Constitution. A more serious challenge was presented by counsel for the appellants against sections 55 and 56 of the impugned Act, and the Court found those challenges to be largely well-founded. Sections 55 and 56 purport to prescribe the manner in which the doctrine of cy pres should be applied to the administration of public trusts of religious or charitable character. The Court recalled that the doctrine of cy pres, originally developed by the English courts of equity, has long been adopted by Indian courts. However, the Court observed that the provisions of sections 55 and 56 extend the doctrine beyond its established limits and introduce principles that conflict with well-settled rules governing charitable trusts. When the specific purpose for which a charitable trust was created fails, the court traditionally would not permit the trust to fail. Similarly, if circumstances prevent the trust from being carried out wholly or partially, or if a surplus remains after the settlor’s purposes have been exhausted, the court would still seek to preserve the trust where a general charitable intention is evident. Instead, the court would apply the doctrine of cy pres, meaning it would endeavour to carry out the trust in a way as close as possible to the settlor’s original intention. In such cases, the Court affirmed that it cannot be disputed that the doctrine of cy pres must be applied to give effect to the charitable purpose.

The Court explained that it possessed the power to devise a scheme and to issue appropriate directions concerning the purposes for which the money of a trust could be applied. Nevertheless, the Court emphasized that in situations where the intention of the donor could be honored, the Court lacked any authority to sanction a departure from the specific intentions expressed by the settlor on the mere ground of expediency. Accordingly, the Court could not exercise the power to apply the trust property or its income to purposes other than those originally stipulated simply because the Court or another authority considered such alternative purposes to be more convenient or beneficial than the directions given by the settlor (1). The Court observed that the provisions of section 55(c) read together with section 56 of the Act permitted a diversion of property belonging to a public trust, or of its income, to objects different from those intended by the donors, provided that the Charity Commissioner formed the opinion that carrying out the original intentions of the author of the trust, either wholly or partially, was not expedient, practicable, desirable or necessary, and that the Court affirmed that opinion and ordered that the property or income should be applied to any other charitable or religious object. The Court stated that the reasonableness of such a provision was not the issue to be decided; it was sufficient to assume that the legislature, which had the competence to enact statutes concerning charitable and religious trusts, was free to make provisions that might not align with the existing law. The real question, the Court held, was whether that legislative provision infringed any fundamental right guaranteed by the Constitution, and the Court found without hesitation that it did so in the context of religious trusts. The Court noted that a religious sect or denomination possessed an undeniable constitutional right to manage its own affairs in matters of religion, a right that included the authority to spend the trust property or its income for the religious purposes and objects identified by the founder of the trust or established by long-standing usage within a particular institution. Consequently, to divert the trust property or funds to purposes that the Charity Commissioner or the Court deemed expedient or proper, even though the original objects of the founder could still be fulfilled, constituted, in the Court’s view, an unwarranted intrusion upon the freedom of religious institutions to manage their religious affairs. The Court further acknowledged the counsel’s reliance on the established Jain maxim that “Divadraya” or religious property could not be diverted to purposes other than those regarded as sacred in Jain scriptures, and, aside from the specific tenets of the Jain religion, the Court considered such diversion to be a violation of both the freedom of religion and the constitutional right of a religious denomination to manage its own affairs.

In this case, the Court observed that the right of a religious community to manage its own affairs in matters of religion includes the prohibition against allowing any secular authority to divert trust money for purposes other than those for which the trust was created. The Court held that the State may intervene only when a trust fails or becomes incapable of being carried out, either wholly or partially. Accordingly, the Court declared clause (3) of section 55, which contains the impugned provision, and the related provision concerning the powers of the court that appears in the latter part of section 56(1), to be void. The Court noted that the only other provision of the Act challenged by the petitioners is section 58. Section 58 authorises the levying of a contribution on each public trust at rates to be fixed by rules, the rates being proportionate to the gross annual income of the trust. Together with the sums specified in clause (2) of section 57, this contribution constitutes the Public Trusts Administration Fund. The Fund is intended to be applied for the payment of charges incidental to the regulation of public trusts and for the implementation of the provisions of the Act. Because the contribution is levied solely for the purpose of proper administration of trust property and for defraying expenses incurred in connection with that administration, the Court found no ground for holding that the provision infringes any fundamental right of the petitioners. The substantive objection raised by the petitioners concerned the character of the contribution under section 58. The petitioners argued that the contribution is, in substance, a tax and that the Bombay State Legislature lacked the constitutional competence to enact such a provision. The Court recognized that this issue required careful examination. It was uncontested that if the contribution were a tax, legislation imposing it would be outside the competence of the State Legislature. Entries 46 to 62 of List II in Schedule VII of the Constitution enumerate the various taxes and duties that the State Legislature may legislate upon, and none of those entries covers a tax of the kind imposed by section 58. The contribution does not fall within any specific entry in List III or List I either. Consequently, if the imposition were deemed a tax, it could only be placed under entry 97 of List I, which covers taxes not mentioned in Lists II and III, or under article 248(1) of the Constitution, both of which vest exclusive legislative competence in Parliament. Conversely, the Court observed that if the imposition is characterised as a fee, it may be placed within entry 47 of the Concurrent List. The Act itself is legislation that falls under entries 10 and 28 of the Concurrent List.

In the matter before this Court the legislation was framed under entries ten and twenty-eight of the Concurrent List. The entire dispute turned on the question of whether the contribution imposed by section fifty of the statute should be characterised as a fee or as a tax, and what specific indicia and characteristics legally distinguish a fee from a tax. The same question had earlier been examined by this Court in Civil Appeal number thirty-eight of nineteen fifty-three, which concerned the provision of section seventy-six of the Madras Religious and Charitable Endowments Act. The principle adopted in that earlier decision for determining the appropriate criterion to differentiate a fee from a tax is substantially in line with the view expressed by the Bombay High Court in the present proceedings. Because the Madras decision contains an extensive discussion of the issue, it is unnecessary to repeat that discussion in full. Instead, this judgment will outline the key principles articulated by this Court in the Madras case. The Court may begin by observing that there is no inherent or generic distinction between a tax and a fee; both are merely different modes in which a State exercises its power to levy charges. Nevertheless, for legislative purposes the Constitution has intentionally drawn a distinction between the two. While the three lists in the Seventh Schedule contain numerous entries dealing with various forms of taxation, each list also terminates with a specific entry permitting the imposition of fees in respect of every matter enumerated therein. This constitutional differentiation is further reflected in the provisions governing Money Bills, namely articles one-hundred ten and one-hundred ninety-nine. Both articles expressly state that a Bill cannot be classified as a Money Bill merely because it provides for the imposition of fines or for the demand or payment of licence fees or fees for services rendered; in contrast, any Bill concerning the imposition, abolition or regulation of a tax will invariably be treated as a Money Bill. Although a fee bears many resemblances to a tax, the difficulty lies in identifying the proper test to separate one from the other. A tax is unquestionably a compulsory exaction of money by a public authority for public purposes, with the obligation to pay being enforceable by law. Equally important, a tax is levied to meet the general expenses of the State without reference to any particular advantage conferred on those who pay it. Consequently, while a tax may be assessed on specific classes of persons or particular types of property, its purpose is not to grant any special benefit to the individual payers.

The Court explained that taxes are collected together with all other revenues and placed into the State’s general treasury, where they are used for the common expenditures of the public. Consequently a tax represents a shared burden, and the only benefit that a taxpayer receives is participation in the general advantages provided by the State. Fees, by contrast, are payments made primarily in the public interest but are required for a particular service or a specific piece of work that benefits the persons from whom the payment is demanded. Therefore a fee always contains an element of quid-pro-quo that is absent in a tax. The Court observed that it may not be possible to demonstrate in every instance that the fees collected by the Government correspond exactly to the expenses incurred in providing a particular service or performing a particular task for certain individuals. Nevertheless, for a levy to be characterised as a fee, there must be a correlation between the amount imposed and the expenses that the State incurs in rendering the relevant service. Such a correlation can be shown when, on the face of the legislative provision, the collections are not merged into the general revenue but are set apart and appropriated specifically for providing those services. Accordingly, two essential elements must be satisfied for a payment to be regarded as a fee. First, the payment must be imposed in consideration of certain services that the individuals have either willingly or unwillingly accepted. Second, the amount collected must be earmarked to meet the expenses of providing those services and must not be deposited into the State’s general revenue for expenditure on general public purposes. The Court also referred to the Madras case and cautioned against placing excessive emphasis on the presence or absence of a coercive element. It corrected the view that, unlike a compulsory tax, a fee is always voluntary, arguing that the decision to accept a service for which a fee is payable is a matter of choice for the individual. To illustrate, the Court cited the example of a licence fee for a motor car, noting that it is sometimes described as a fee because it is optional: a person may choose either to own a motor car or not, and if he opts not to own a car, he owes no fee. However, the same reasoning can be applied to house tax or land tax, which are levied only on those who own houses or lands; a person who does not own any house or land can likewise avoid paying those taxes. Finally, the Court observed that even if the payment of a motor-licence fee is voluntary

In this case, the Court observed that even when a payment is technically voluntary, it may still be characterised as a tax if the fees collected for motor licences have no connection with the actual expenses incurred by the Government in maintaining the office or bureau that issues those licences, and if the sums collected are not appropriated for that specific purpose but are instead deposited into the general revenue. Applying this test, the Court agreed that the High Court had correctly held that the contributions imposed under section 58 of the Bombay Public Trusts Act were in truth fees and not taxes. First, the contributions that are gathered pursuant to section 58 are required to be credited to the Public Trusts Administration Fund that has been established under section 57. That fund is a special fund and it is to be applied exclusively for the payment of charges and expenses that are incidental to the regulation of public trusts and for carrying into effect the provisions of the Act. The fund is vested in the Charity Commissioner, and the custody, investment and disbursement of the money belonging to the fund are to be effected not in the same manner as the disbursement of general revenues, but according to the procedure prescribed by the rules made under the Act. Consequently, the collections are not merged with the general revenue; rather they are earmarked and set apart for this particular purpose. It is true that section 6A of the Act provides that the officers and servants appointed under the Act draw their salaries and allowances from the Consolidated Fund of the State, but the Court agreed with the observation of Mr Justice Shah of the Bombay High Court that this provision is intended solely to facilitate the administration and not to mix that fund with the general revenue collected for governmental purposes. This intention is reinforced by the provision of section 6B, which states that out of the Public Trusts Administration Fund all the costs that the State Government may determine on account of pay, pension, leave and other allowances of the officers appointed under the Act shall be paid. Thus, it is the Public Trusts Administration Fund that meets all the expenses of the administration of trust property within the scheme of the Act, and it is to meet those administrative expenses that these collections are levied. As the learned judges of the High Court explained, under the modern concept of a State it is not necessary that services be rendered only at the request of particular individuals; it is sufficient that payments are demanded for services which the State considers beneficial to the public interest and which the people must accept whether they are willing or not. Accordingly, the Court concluded that section 58 is not ultra vires of the State Legislature because it is a fee that falls within entry 47 of List III in Schedule VII of the Constitution.

In this case the Court observed that the reference to List III in Schedule VII of the Constitution was relevant to the matter before it. It concluded that, in its view, the appeals were allowed only in part. Accordingly the Court ordered that a writ of mandamus would be issued in each of the two appeals. The mandamus would restrain both the State Government and the Charity Commissioner from enforcing certain provisions of the Act against the appellants. The specific provisions that would be restrained were Section 44 of the Act, but only to the extent that it related to the appointment of the Charity Commissioner as a trustee of a religious public trust by a court; the provisions contained in clauses (3) to (6) of Section 47; and clause (c) of Section 55 together with the portion of clause (1) of Section 56 that corresponded to that clause. The restriction therefore applied only to those enumerated sections and did not affect any other powers or duties of the State Government or the Charity Commissioner under the Act. No direction was given to alter the administration of any trust, nor to modify any other statutory requirement. The Court further held that all other reliefs sought by the appellants were dismissed. Finally the Court directed that each party should bear hi own costs in both appeals.