The Karnataka High Court recently held that Ved Vignan Maha Vidya Peeth, of which Sri Sri Ravi Shankar is the founder-trustee, had engaged in fraudulent activities regarding a piece of land it acquired between 2003 and 2005 through a court auction. [R Raghu vs GM Krishna]

Justice R Nataraj observed that in order to purchase the land, the trust propped up its trustee, R Raghu, to be the purchaser to avoid the prohibition under Sections 79A and 80 of the Karnataka Land Reforms Act, which bars the transfer of land to non-agriculturists.

"It is therefore writ large on the face of the record that the Trust, in order to purchase the land propped up the petitioner to be a purchaser, which is obviously to avoid the prohibition contained in Section 80 of the Act, 1961 ... If the property was purchased not by the petitioner but was purchased by the Trust itself, the petitioner did play fraud upon the Court and the Court was unknowingly made a party to an illegality and to a benami transaction,” the Court's order stated.

However, the Court found that it could not set aside the auction sale at present for various reasons, including that Section 80 of the Act was repealed in 2020, with effect from 1974.

Moreover, the judge pointed out that a challenge to the auction sale had already been dismissed earlier by the High Court in another round of litigation, although the Court appeared to have not examined the element of fraud.

"Therefore, even if it is considered that the petitioner (Raghu) had played fraud, which must ordinarily result in setting aside the auction sale and re-auctioning the property but having regard to the fact that valuable right has accrued to the Trust, equity could be worked out by saving the auction sale and the sale certificate and at the same time suitably compensating the respondent no.1," the Court reasoned.

The Court, therefore, refrained from setting aside the auction sale of the land. Rather, it set aside a district court order that had quashed the sale citing the fraud played by Raghu (petitioner, being a trustee of the Ved Vignan Maha Vidya Peeth).

However, the High Court directed the petitioner to pay the original owner of the land ₹25 lakhs per acre of the land in the interest of equity and "in view of the steep increase in the present market value of the auctioned property."

The Court was hearing a revision petition by R Raghu against the district court order that had set aside the auction sale of the land.

Before the High Court, Raghu asserted that the allegations of fraud cited by the district court were not substantiated by concrete evidence. Rather, he maintained that these were speculative and conjecture-based allegations.

He argued that the trust not being a legal entity, operated through its trustees. Further, he claimed his status as an agriculturist entitled him to hold the land on behalf of the trust.

The plea was opposed by the person (respondent) whose land was auctioned by the Karnataka State Financial Corporation (KSFC) for debt recovery. He argued that despite the property being acquired with trust funds, Raghu consistently maintained a false stance that he was the purchaser when he was acting for the trust.

The respondent also contended that Raghu's argument that the trust has to act through its trustees was merely an afterthought.

The Court opined that it was unlikely that the executing court would have concluded the sale in favour of Raghu if he had disclosed during the auction that he was representing a public charitable trust

The Court also took critical note of Raghu's change in stance regarding the status of the land purchaser. Raghu had initially claimed that the ashram was the intended purchaser of the land. However, the Court noted that he later asserted himself to be the buyer. This may have been motivated by his apprehension of facing serious consequences, the High Court concluded.

The Court also pointed out that in another related proceeding, Raghu had acknowledged that the trust was the actual purchaser. Consequently, the judge concluded that there were elements of fraud involved in this case.

"Therefore, the Trust played fraud on the Court by setting up its trustee, who until the sale was declared, claimed that he was the purchaser but later he claimed that the Trust was the purchaser," the Court said.

The judge also noted that Raghu's pleadings before the Court categorically indicated that the trust had purchased the property from its funds but in Raghu's name.

"Therefore, if the property was purchased not by the petitioner but was purchased by the Trust itself, the petitioner did play fraud upon the Court and the Court was unknowingly made a party to an illegality and to a benami transaction," the Court held.

Notably, the Court also took note of the owner's claim that the sale certificate mentioned survey numbers of lands that were not sold to Raghu.

The Court, therefore, ordered a revenue survey of the land to identify the limits of the property sold to Raghu in the auction sale. The Court further ordered the parties to maintain status quo until this survey is completed.

R Raghu was represented by Senior Advocate SS Nagananda and advocate Sumana Naganand.

Respondent GM Krishna was represented by advocate Brijesh M Singh.

KSFC was represented by advocate Bipin Hegde.

[Read Order]