Registered society can be subject to constructive trust and suit under S.92 CPC where fiduciary diversion is prima facie shown

A bench of Justice J.B. Pardiwala and Justice R. Mahadevan on 5 August 2025 heard Civil Appeal No. 10048 of 2025 arising out of SLP (C) No. 29830 of 2024 in which Operation ASHA (a registered not‑for‑profit society) challenged the Delhi High Court’s grant of leave under Section 92 of the Code of Civil Procedure to two former office‑bearers to sue the society and other office‑holders for alleged mismanagement and misappropriation.

The Court dismissed the appeal and upheld the High Court’s orders granting leave to institute the suit under Section 92 CPC, but clarified the limits of that remedy. The majority held that registration as a society under the Societies Registration Act did not preclude a court from finding that property or donations held by the society were subject to an express or constructive trust in appropriate circumstances, and that the governing body, even where property vested in it under Section 5 of the Societies Act, acted in a fiduciary capacity. The Court reiterated the established test for invoking Section 92: “Three conditions are, therefore, required to be satisfied in order to invoke Section 92 of the Code and to maintain an action under the said section, namely, that: (i) the Trust in question is created for public purposes of a charitable or religious nature; (ii) there is a breach of trust or a direction of court is necessary in the administration of such a Trust; and (iii) the relief claimed is one or other of the reliefs as enumerated in the said section.” The Court emphasised that leave is a procedural safeguard to prevent harassment of public charities and that the trial court alone must examine the evidence on whether a constructive trust and breach were proved.

Background The dispute arose after Dr. Shelly Batra — a co‑founder and long‑time President of Operation ASHA — was removed from employment and from the society’s board in June 2020. Dr. Batra and her mother sought leave under Section 92 CPC to sue the society and certain officers, alleging large‑scale diversion of donations, financial mismanagement, failure to provide statutory employee benefits, coercion of staff and other misconduct. They sought, among other remedies, removal of trustees, rendition of accounts and settling of a scheme. The Single Judge of the Delhi High Court granted leave after appointing retired Justice R.V. Easwar as chair to supervise audits and after interim and forensic reports were filed; the Division Bench of the High Court later dismissed an appeal and held that donations and gifts to the society could constitute property “entrusted” and hence a constructive trust. The appellant urged that a registered society is not a trust and that Section 5, Societies Act, which deems society property to vest in the governing body, precluded S.92 relief. The Supreme Court, while affirming the High Court’s finding that Operation ASHA was a charitable organisation and that the plaint alleged matters falling within Section 92(1) (notably accounts, inquiries and settling a scheme), stressed that Section 92 remained confined to representative public‑interest suits and that purely private or election‑style grievances were not the vehicle for S.92 relief. The Court directed that the underlying suit be proceeded with expeditiously and that the High Court “satisfy itself” whether the facts established a constructive trust and any breach; it cautioned that if the plaint allegations proved unfounded the suit could later be dismissed. The Single Judge’s interim directions (appointment of a chair and forensic audits) and those reports were noted as relevant factual material.

Case Details: Case No.: CIVIL APPEAL NO. 10048 OF 2025 (Arising out of S.L.P (Civil) No. 29830 of 2024) Case Title: Operation ASHA … Appellant(s) v. Shelly Batra & Ors. … Respondent(s) Appearances: For the Petitioner(s): Mr. Dama Seshadri Naidu, Senior Counsel For the Respondent(s): Mr. Jai Anant Dehadrai, Counsel for Respondent No.1; (Counsel for Respondent Nos.3 & 4 not specified in the reported bench notes)

Disposition: Appeal dismissed; Delhi High Court orders granting leave under Section 92 CPC were affirmed; underlying suit to proceed with directions that the High Court examine, on evidence, whether a constructive trust and breach were established; private reliefs beyond S.92 scope remain subject to normal judicial scrutiny.