The Supreme Court says Trusts cannot file consumer disputes, but...why?!

A trust cannot file a consumer dispute under the provisions of the Consumer Protection Act, 1986 because it cannot be a complainant within the meaning of the legislation. As stated by the Supreme Court of India in Pratibha Pratisthan v. Manager, Canara Bank [Note 1], Section 2(c)(i) read with Section 2(d) of the Consumer Protection Act, 1986 indicates that a complainant must be a consumer and that a consumer must be a person. A trust is not a person. Hence, a trust cannot be a consumer or a valid complainant.

Under common law, a trust does not have a legal personality (in the way corporations do). Trusts can be characterised as fiduciary relationships with respect to property, wherein a trustee has holds legal title for the benefit of another/others under a manifested intention to create such a relationship [Note 2]. In technical terms, trusts do not establish a legal fiction of a person that has the capacity to sue in its own name.

To put matters into perspective – the Consumer Protection Act, 1986 excludes purchasers/users who are using the goods and services for resale or for a commercial purpose [Note 3]. The Consumer Protection Act, 1986 clearly mentions in its title that it is intended to protect the interests of ‘consumers’ in a limited sense. Businesses that have received defective goods/deficient services or are subject to unfair/restrictive trade practices cannot seek remedy as against those specific claims under the Consumer Protection Act, 1986. Such businesses must seek relief under other legislations – such as the Competition Act, 2002 or the Indian Contract Act, 1872.

But, why did the Supreme Court in Pratibha Pratisthan not consider that a common law trust is not the same thing as an entity carrying on a business? The parties in a trust are in fiduciary relationship, so it is not always correct to say that a trustee has obligations that are similar to commercial obligations.

Further, why should trustees not be included in a consumer protection law? Should the beneficiary be expected to take proceedings before consumer redressal fora if their trustees made bona fide purchases of goods and services that later turn out to be sub-standard? What if the beneficiaries are minors? Does this judgment have any bearing on the application Section 13 of the Indian Trusts Act, 1882, which requires trustees to take all steps reasonably necessary to protect title to trust property? The Supreme Court does not explore these implications.

In fact, there is no justification for excluding public trusts from the ambit of consumer protection law when societies registered under the Societies Registration Act, 1860 are protected [Note 3]. Nor is there any clear rationale given by the court as to why it believes that the legislature intended to exclude public trusts - such as the Pratibha Prathisthan (registered under the Bombay Trusts Act, 1950) - from the ambit of the consumer protection law.

The Supreme Court in the Pratibha Prathisthan case makes no reference to the Bombay Trusts Act, 1950 in order to understand whether a public trust is the kind of entity that lawmakers intended not to give relief under the Consumer Protection Act, 1986. The definition of a 'public trust' under Section 2(13) of the Bombay Trusts Act, 1950 includes three kinds of entities and relationships that are, in fact, entitled to consumer protection:

1. Any kind of trusts (express or constructive) [Note 4]. Section 2(20) of the Bombay Trusts Act, 1950 endowments states that any words/expressions used but not defined in the Bombay Trusts Act, 1950 but defined in the Indian Trusts Act, 1882 shall have the meaning assigned to them in the Indian Trusts Act, 1882.

2. Religious or charitable endowments, such as dharmadas. Again, there is no good reason why endowments should not be allowed to benefit under consumer protection law. A religious or charitable endowment does not conduct its affairs for a commercial purpose.

3. Societies registered under the Societies Registration Act, 1860 – which, as mentioned above, is included within the scope of the Consumer Protection Act, 1986.

One can contend that some trust-like structures do involve an element of commercial purpose. Lawyers from other common law jurisdictions may consider the pension fund trust as one such example. But to suggest that all trusts must be understood as businesses is inappropriate. And to exclude all trusts from consumer protection law is simply unjustified. Regardless of the circumstances in which the Pratibha Pratisthan case was decided, the outcome of the Supreme Court's decision will be applicable to all trusts unless clarified in subsequent litigation.

For now, the Supreme Court’s decision in the Pratibha Pratisthan case is considered good law, at least as far as consumer courts concerned [Note 5]. It may be difficult to tell the impact of this ruling on the law governing remedies for breach of trust and protection of trust property. As such, trustees of private trusts, public trusts as well as religious and charitable endowments will have to exercise extreme caution in applying trust funds in purchases.

Note 1: 2017 (2) RCR (Civil) 242.

Note 2: Austin W.Scott and William F. Fratcher, The Law of Trusts, 4th edn (1989) para 2.3, as cited in Charles Mitchell, Hayton & Mitchell: Commentary and Cases on the Law of Trusts and Equitable Remedies, 13th edn. (2010) page 5.

Note 3: Section 2(m)(iv), Consumer Protection Act, 1986.

Note 4: In my opinion, including constructive trusts in this definition is an odd choice. In common law, constructive trusts are conventionally used as a response to unjust enrichment. Is the implication that charitable public trusts can be borne entirely out of unjust enrichment? This certainly warrants a careful study of the interpretation of the Bombay Public Trusts Act, 1950.

Note 5: See, for instance, South Indian Education Society v. UCO Bank and Ors. IV (2018) CPJ 527 (NC), before the National Consumer Disputes Redressal Commission, New Delhi.