Holding

The Supreme Court held that there was no reason to interfere with the High Court’s order issuing a contempt notice, and dismissed the Special Leave Petitions.

Summary

The respondent, a permanent trustee of the Lilavati Kirtilal Mehta Medical Trust, sought the removal of the petitioner and four other trustees alleging misfeasance and misuse of trust funds. The Joint Charity Commissioner ordered that the trustees could not make any policy decisions or financial transactions without his prior approval. The trustees paid approximately Rs. 3 crore to lawyers to defend themselves in litigations, which the respondent claimed violated the order and amounted to contempt. The Bombay High Court issued a notice to the trustees to show cause for contempt, interpreting the payments as financial transactions requiring prior sanction. The petitioners appealed to the Supreme Court, arguing that such payments were not "financial transactions" within the order’s meaning. The Supreme Court held that the High Court’s notice was proper, that the payments could constitute contempt, and dismissed the Special Leave Petitions without interfering in the High Court proceedings.

Issues considered

Whether payments to advocates and solicitors by trustees constitute "financial transactions" under the order of the Joint Charity Commissioner.
Whether the High Court was justified in issuing a contempt notice to the trustees for making such payments without prior approval.
Whether the Supreme Court should interfere with the High Court's contempt proceedings.

Legislation cited

Bombay Public Trusts Act, 1950s. 41D
Contempt of Courts Act, 1971s. 19

Subjects

Contempt of CourtTrust lawFinancial transactionsTrustee removalJoint Charity CommissionerSpecial Leave PetitionMisappropriation of trust funds

Judgment

[2010] 9 S.C.R. 216

A REKHABEN H. SHETH
v.
CHARU K. MEHTA & SONS.
(SLP (C) No. 35164 of 2009)

JULY 29, 2010
B
[ALTAMAS KABIR AND A.K. PATNAIK, JJ.)

Contempt of Court - Application by Trustee of a Trust
against petitioner and respondent nos. 2-5 for their removal
C from trusteeship of the Trust - Order of High Court restraining
petitioner and respondent nos. 2-5 from taking any policy
decision and entering into financial transaction without prior
approval of Joint Charity Commissioner - Issuance of cheque
to professionals by petitioner and respondent nos. 2-5 without
D prior sanction of Joint Charity Commissioner - Contempt
Petition - Show cause notice to petitioner and respondent
nos. 2-5 by High Court - On appeal, held: Funds of the Trust
were utilized to a considerable extent not for the purpose of
Trust but for defending Trustees against allegations brought
E against them by Trustee - Thus, order of High Court does not
call for interference - Bombay Public Trust Act, 1950 - s. 41
D.

The respondent no.1 permanent trustee of a Medical
Trust filed an application against the petitioner and the
F respondent nos. 2-5 for their removal from Trusteeship
of the Trust on the ground of malfeasance, misfeasance,
misappropriation of trust funds and breach of trust. The
Joint Charity Commissioner restrained the petitioner and
the respondent nos. 2-5 from taking any policy decision
G and entering into financial transactions with regard to the
Trust without the prior approval of the Joint
Administrators. The High Court modified the said order
to the extent that the prior approval was to be taken from

H 216
REKHABEN H. SHETH v. CHARU K. MEHTA & 217
SONS.
the Joint Charity Commissioner and not the A
Administrators. It is alleged that the petitioner and the
respondent nos. 2 - 5 had withdrawn huge amounts from
the Trust funds and had issued cheques in favour of
solicitors and advocates appearing for them in the
litigations pending before the various courts, including B
the proceedings before the Joint Charity Commissioner.
The respondent no. 1 filed Contempt Petition. The Single
Judge of High Court held that the payments made to
advocates would constitute financial transactions with
regard to the Trust and, therefore, prior approval of the c
Joint Charity Commissioner was required to be obtained
before such payments were made to the advocates. It
issued notice to show cause on the Contempt Petition to
the petitioner and the respondent nos. 2-5. Hence, the
Special Leave Petitions. D
Dismissing the Special Leave Petitions, the Court

HELD: 1.1 There is no reason to interfere with the
order of the Single Judge of High Court issuing notice
on the contempt petition filed by the respondent no.1. It E
was observed that the respondent no.1 had raised
serious objections in the main application about the
payment of advocate's fees from Trust funds for fighting
personal litigations of the Trustees. The judge took
sufficient care to indicate that except for cognizance of F
the allegations made against the petitioner and the
respondent nos.2 to 5, cognizance against the other
Trustees had not been taken as the material against them
were insufficient to frame charges. However, liberty was
also given that when sufficient material in support of the G
allegations was placed on record, it could take
cognizance of such complaint. A chart has been filed on
behalf of the petitioner, respondent nos.2 to 5 and the
other Trustees to show the amounts which had been
H
218 SUPREME COURT REPORTS [2010] 9 S.C.R.

A paid to the counsel amounting to approximately Rs.3%
crores. Although, an attempt was made by to justify such
expenditure, the submissions cannot be accepted since
as observed by the Single Judge of the High Court, most
of the said funds were spent by the petitioner, the
s respondent nos.2 to 5 and the other Trustees for
defending themselves in respect of the various cases
which had been brought against them by the respondent
no.1. [Para 15] [224-G-H; 225-A-E]

1.2 It cannot be said that payments made to lawyers
C advocates and solicitors does not amount to Contempt
in the special facts of the instant case. The fact that the
funds of the Trust were being utilized to a considerable
extent, not for the purposes of the Trust but for defending
the Trustees against the allegations brought against them
D by the respondent no.1 cannot be ignored. These are
prima facie observations which should not influence the
outcome of the matter pending before the High Court
which has to decide the matter on its own merits. In these
circumstances, the order of the High Court is not
E interfered with. [Paras 16 and 17] [225-E-H]
Union of India v. Mario Cabral e Sa (1982) 3 SCC 262;
Tamilnadu Mercantile Bank Shareholders Association v. SC
Sekar (2009) 2 SCC 784; State of J&K v. Trehan Industries
F (P) Ltd. (2005) 11 SCC 459 - referred to.

Case Law Reference:
(1982) ~ sec 262 Referred to. Para 12
(2009) 2 sec 784 Referred to. Para 12
G
(2005) 11 sec 459 Referred to. Para14
CIVIL APPELLATE JURISDICTION : SLP (Civil) No.
35164 of 2009.
H
REKHABEN H. SHETH v. CHARU K. MEHTA & 219
SONS.
From the Judgment & Order dated 11.09.2009 of the High A
Court of Judicature at Bombay in Contempt Petition No. 123
of 2009 in Writ Petition no. 5732 of 2008.

WITH

SLP (C) 6685 of 2010. B

Ashok Desai, Arvind Varma, Jayant Bhushan, Ranjit
Kumar, Prateek Sakreria, Gaurav Agrawal, Gopal Jain, Raj
Patel, Kanika Agnihotri, Ajay Bhargava, Vanita Bhargava,
Abhijeet Swaroop (for Khaitan & Co,) Sameer Parekh, Lalit c
Chauhan, Ranjeeta Rohatagi, Somanadri Goud (for Parekh &
Co.), Guru Krishana Kumar, Ajay Kumar, Sanjay Jain, Lalit
Chauhan, Sanjay Kharde, Asha G. Nair Sanjay Jalan for the
appearing parties.
D
The Judgment of the Court was delivered by

ALTAMAS KABIR, J. 1. These Special Leave Petitions
arise out of an order dated 11th September, 2009 passed by
a learned Single Judge of the Bombay High Court in Contempt
Petition No.123/09 arising out of an order passed on 9th E
September, 2008, in Writ Petition No.5732/08.

2. The Respondent No.1, Charu K. Mehta, is a permanent
Trustee of the Lilavati Kirtilal Mehta Medical Trust. She had filed
an application under Section 41 D of the Bombay Public Trusts F
Act, 1950, against the Petitioner herein and the Respondent
Nos.2 - Vijay K. Mehta, Respondent No.3 - Dr. Amritlal C. Shah,
Respondent No.4 - Niket V. Mehta, and Respondent No.5 -
Sushila V. Mehta in SLP(C)No.35164/09, for their removal from
Trusteeship of the aforesaid Trust on the ground of
malfeasance, misfeasance, misappropriation of Trust funds, G
breach of Trust, etc. An interim application was also filed for
the removal/ suspension/dismissal of the colluding Trustees.
Charges were framed against the Petitioner and the aforesaid
Respondents by the Joint Charity Commissioner, Mumbai, on
H
220 SUPREME COURT REPORTS [2010) 9 S.C.R.

A 3rd June, 2008, and the Trustees were restrained from taking
any policy decision and from entering into any financial
transaction with regard to the Trust.

3. The aforesaid Respondents Nos.2 and 3 in
B SLP(C)No.35164/09 challenged the said order of the Joint
Charity Commissioner in Writ Petition Nos.3849 and 3850 of
2008. By common orders passed in those writ petitions on 11th
July, 2008 and 15th July, 2008, the orders impugned in the writ
petitions were set aside and the Joint Charity Commissioner
was directed to pass fresh orders in accordance with law.
C Thereafter, the Joint Charity Commissioner passed an ad-
interim order on 9th September, 2008, restraining the Pet:~:oner
and the Respondent Nos.2, 3, 4 and 5 herein from taking any
policy decision and entering into financial transactions, without
the prior approval of the Joint Administrators appointed by this
D Court. Aggrieved by the said ad-interim order, the Respondent
Nos.2 and 3 herein filed Writ Petition No.5732/08, wherein the
High Court modified the aforesaid order passed by the Joint
Charity Commissioner on 9th September, 2008. The operative
part of the order of the Joint Charity Commissioner was
E modified to the extent that the prior approval was to be taken
not from the Administrators but from the Joint Charity
Commissioner.

4. The Bombay High Court, therefore, confirmed the order
F of the Joint Charity Commissioner that the Respondents Nos.1
to 9 in the Application filed before him should not take any
policy decision and should not enter into any financial
transaction with regard to the Trust without the prior approval
of the Joint Charity Commissioner till further orders.

G 5. In the Contempt Petition filed by the Respondent No.1
herein, it has been alleged that the Petitioner herein and the
Respondents Nos.2, 3, 4 and 5 had withdrawn huge amounts
from the Trust funds and had issued cheques in favour of
solicitors and advocates appearing for them in the litigations
H
REKHABEN H. SHETH v. CHARU K. MEHTA & 221
SONS. [ALTAMAS KABIR, J.]

pending before the various courts, including the proceedings A
before the Joint Charity Commissioner under Section 41 D of
the Bombay Public Trusts Act, 1950. Rejecting the defence of
the Petitioner and the Respondents Nos.2, 3, 4 and 5 herein
that payment of fees to advocates and solicitors did not amount
to financial transactions being undertaken by the Trust and that B
the services of the advocates and solicitors had to be engaged
to defend the interest of the Trust, the learned Single Judge
observed that the question as to whether payments to
advocates were financial transactions within the meaning of the
order passed by the Joint Charity Commissioner, as modified c
by the High Court, was still at large.

6. The learned Single Judge arrived at a prima facie view
that the payments made to advocates would constitute financial
transactions with regard to the Trust and, therefore, prior
approval of the Joint Charity Commissioner was required to be D
obtained before such payments were made to the advocates.
While making such observations, the learned Judge also
noticed that the Trust was not a party in many of the
proceedings which were initiated by one group of Trustees
against the others. The learned Single Judge, accordingly, E
issued notice to the Petitioner and the Respondent Nos.2, 3,
4 and 5 herein to show cause as to why action should not be
taken against them under the Contempt of Courts Act for having
willfully disobeyed the directions contained in the order dated
9th September, 2008 in Writ Petition No.5732/08 by issuing F
cheques to professionals without the prior sanction of the Joint
Charity Commissioner.

7. It is the said order of the learned Single Judge of the
Bombay High Court and the notice issued to show cause on G
the Contempt Petition filed by the Respondent No.1 herein, that
is the subject matter of the present Special Leave Petitions.

8. Appearing for the Petitioner, Rekhaben H. Sheth, in
S.L.P. (c) No.35164 of 2009, Mr. Ashok Desai, learned Senior
H
222 SUPREME COURT REPORTS [2010] 9 S.C.R.

A Advocate, urged that the expression "financial transactions"
indicated in the order passed by the Joint Charity
Commissioner on 9th September, 2008, subsequently modified
by the High Court, did not include the payment of fees to
professionals, such as Solicitors, Advocates and Chartered
B Accountants for the services rendered by them in the interest
of the Trust. It was submitted that such transactions were meant
to cover the essential expenses incurred for the day-to-day
running of the hospital and were entered into in lieu of goods
provided to the hospital. Mr. Desai submitted that it is only for
c the purposes of acquiring certain tangible objects that the
hospital could enter into financial transactions and not for other
purposes where there was no return involved. In fact, accord:~g
to Mr. Desai, applying the said expression for effecting
payment to professionals would lead to an absurd situation
D where every time professional such as an Advocate or Solicitor
has to be engaged, the prior permission of the Joint Charity
Commissioner would have to be taken. It was urged that the
entire process would be lengthy and self-defeating and would
be difficult to put into operation each time matters came up
before different Courts for consideration.
E
9. Mr. Desai contended that the expenses incurred
towards payment of professional fees to Solicitors, Advocates
and Chartered Accountants were not on account of defending
the Trustees in personam but to defend the interests of the Trust
F and the hospital against the repeated litigations initiated by the
Respondent No.1, Charu K. Mehta, against the other Trustees.
Referring to the various definitions of the aforesaid expression,
Mr. Desai contended that the same could not apply to the facts
of this case.
G
10. Mr. Desai also contended that even if it be held that
the Petitioner and the Respondent Nos.2 to 5 and the other
Trustees had acted against the interests of the Trust in utilizing
its funds for payment to lawyers and other professionals, the
H same could at best be a case before another forum, but there
REKf1A.BEN H. SHETH v:.:CHARU K.. MEHTA & 223
SONS. [ALTAMAS KABIR, J.]
was no element-of contempt of Court involved since the monies A
paid were.not on.account of,any tangible goods received, but
f9r preservation ;;i_nd protection of the Trust. Mr. Desai submitted
that 1 .t~e, co.,nt~rnP! p~titi.on which has been filed by the
Respondent.t)Jo.1,:upon,VY,hich c:ognizance has been taken _by
th·e.le§lrned Single ~udge,,was wholly erroneous and was liable B
to be s_e( aside .. Mr.~Desai submitted. that the contempt
proceedings ,had bee11. initiated by the R6spondent No.1,
agaiQstall the .other. Trustees with t.he sole intentio11 of harassing
the other Trustees cind disturbing the smooth managemeQt of
the.Trust. . , , ·, 9 ~ · . ,. c
. ·,. 1 ( ·an the :qi.Je~tion of maintainability ,of the contempt
proceeding's; it was u(ged by ·Mr. Desai that although Section
19 of the Contempt of Courts Act, 1971, made provisions for
aP.p.eals .against orders vyh_ic;h adversely affected those in
contempt: &!nc~ appeal was a creature of statu!e the provisions D
of,qection ;19 ?f the above Ac;t would still contin.ue to be
operative,_,' r - ; . : . ••
p I ·;··· . ~. 'II ·. • j ! I I 1: . . " • i:'.J •

. ·. 1?. In.support of the submissions made by him, Mr. Desai
~rsfly_ r~f.~·rr~d ~to'?the "decisl8n of this Court in Union of India v. E
Mari6 Ca'bral.
: ' :1' (' e. Sa
\.···~ ' ··1,·1· .... 3 v sc·c
. . ,.. [(1982)'
, ii~_) - '
262] •.and Tamilnadu
• ·,,·, ~ ·~

Mercantile. Bank Shareholders Association v. ·sc Sekar
[{2009) 2 SCC.784]: wherein'it had been.reiterated that once
a 'period which
i '- , j , ...
tlad been presc:ribed ·f · <
under the Act had expired,
1 , 1
I l I _,,-. , 1 f•

contempt p'roceedings which had been initiated earlier could F
not be proceedeCl with further. ~ . ._,, - ..
1 ~ .,... - •I _ l Ul..~t. r I• f I ..

.; ,;. ;13:' Mr:: Desai's submissibifa were reiterated by learned
counsel'appear(ng for 1 the· respondents in the other Special
Leave Petitions. Mr. Rarijit Kumar; learned Senior Advocates,
contended that on a mistaken interpretation of the expression G
"financial transactions", theHigh Court had taken cognizance
of' "the' 6ontempt"petitiori'
''\••fr•·
filed 'and'
f'C-·i'<.)'· :"~
had.. ,1 directed notices to issue
I : 11 ,

thereupon. Referring to'ltie
' • •' 'Ll
'order
11 '
·of the Joint Charity
·I 1 , <l_ I '. ' ' • - _' I j~ . • .

Commissioner dated 3rd, June, 2008, Mr. Ranjit Kumar
~,, · , ~·:.i , ..... 11 J . 1:...:lJ~· . . . . ,.,r· ·._.o: ·~ . .... • . .·
1
~- d H
224 SUPREME COURT REPORTS [2010) 9 S.C.R.

A submitted that the said order was capable of being de-
compartmentalized in that the same neither indicated any
policy decision nor a financial transaction which could have
brought the matter within the ambit of a contempt under the
Contempt of Courts Act vis-a-vis the said order. Mr. Ranjit
B Kumar further urged that the two have to be read together and
would have to be read conjunctively and not disjunctively so as
to give a meaningful and harmonious construction thereto. It
was further contended that till a decision was rendered as to
what would constitute "financial transactions", contempt
c proceedings would not lie, since such decision would
determine whether the alleged contemnors could be said to be
in contempt of the order passed by the Joint Charity
Commissioner on 9th September, 2008.

14. On the question of issuance of notice, Mr. Jayant
D Bhushan referred to and relied upon the decision of this Court
in State of J&K v. Trehan Industries (P) Ltd. [(2005) 11 SCC
459], where the question of civil contempt fell for the
consideration of the Jammu & Kashmir High Court. Mr. Bhushan
pointed out that in the said decision it had been categorically
E pointed out that the petitioners therein could not have a cause
of grievance persuading them to approach the Supreme Court.
Mr. Jayant Bhushan concluded on the note that no special
circumstances existed in regard whereof the Special Leave
Petition could have been filed. He lastly pointed out that the Joint
F Charity Commissioner had by his order dated 10th October,
2008, suspended the Petitioner and the Respondent Nos.2 to
5 and had appointed an Administrator to look after the affairs
of the Trust on the application filed by the Respondent No.1
herein, Charu K. Mehta, under Section 41 D of the Bombay
G Public Trust Act, 1950.

15. Having carefully considered the submissions made on
behalf of respective parties, we see no reason to interfere with
the order of the learned Single Judge issuing notice on the
contempt petition filed by the Respondent No.1 herein. The
H
REKHA.BEN H. SHETH v. CHARU K. MEHTA & 225
SONS. [ALTAMAS KABIR, J.]
learned Judge observed that the Respondent No.1 had raised A
serious objections in the main application about the payment
of Advocate's fees from Trust funds for fighting personal
litigations of the Trustees. The learned Judge took sufficient
care to indicate that except for cognizance of the allegations
made against the Petitioner and the Re$pondent Nos.2 to 5, B
cognizance against the other Trustees had not been taken as
the material against them were insufficient to frame charges.
However, liberty was also given that when sufficient material in
support of the allegations was placed on record, it could take
cognizance of such complaint. A chart has been filed on behalf c
of the Petitioner, Respondent Nos.2 to 5 and the other Trustees
to show the amounts which had been paid to the learned
counsel amounting to approximately Rs.3% crores. Although,
an attempt was made by Mr. Desai to justify such expenditure,
we are unable to agree with his submissions, since as 0
observed by the learned Single Judge of the Bombay High
Court, most of the said funds were spent by the Petitioner, the
Respondent Nos.2 to 5 and the other Trustees for defending
. them$"llves in respect of the various cases which had been
brought against them by the Respondent No.1, Charu K. Mehta.
E
16. We are not convinced with Mr. Desai's submissions
that payments made to lawyers, advocates and solicitors does
not amount to Contempt in the special facts of this case. This
Court cannot ignore the fact that the funds of the Trust were
being utilized to a considerable extent, not for the purposes of F
the Trust but for defending the Trustees against the allegations
brought against them by the Respondent No.1. There are, of
course, prima facie observations which should not influence the
outcome of the matter pending before the High Court which has
to decide the matter on its own merits. G

17. In these circumstances, we are not inclined to interfere
with the order of the High Court and the Special Leave Petitions
are, accordingly, dismissed, but without any order as to costs.

18. We have, however, been informed by Mr. Ranjit Kumar, H
226 SUPREME COURT REPORTS [2010] 9 S.C.R.

A learned senior counsel, who has appeared for Amritlal C. Shah,
in S.L.P. (C) No.6685 of 2010, that after the matter was heard,
the Petitioner No.3, Vijay K. Mehta, passed away on 23rd July,
2010. Since we have dismissed the Special Leave Petitions,
it will now be open to the other Petitioners herein to inform the
B learned Court below of the subsequent event and take further
steps in that regard.

N.J. Special Leave Petitions dismissed.