dadoba jagannath tenants association and ors. vs. dadoba jagannath religious trust and ors.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 1641 OF 2005 WRIT WRIT PETITION NO. 1641 OF 2005 PETITION NO. 1641 OF 2005
1) M/s Sailesh Developers,
a registered Partnership Firm,
having its Office at 7 Haman
house, Ambalal Doshi Marg,
Fort, Mumbai 400 023
2) Mr. Ramesh Bhavarlal Nahar
of Mumbai Indian Inhabitant,
having his office at 7 Hamam
House, Ambalal Doshi Marg,
Fort, Mumbai 400 023 ... Petitioners
Versus
1) The Joint Charity Commissioner
Maharashtra, Greater Mumbai
Region, Mumbai having his
Office at Dharmaday Ayukta Bhavan
Dr. Annie Besant Road, Worli,
Mumbai 400 018
2) Dadoba Jagannath Religious Trust
a Public Trust registered under
the Bombay Public Trusts Act,
1950 and having its registered
office at 21/A, Gamdevi Road,
Mumbai 400 007
3) Jaywant Manick Desai
4) Padmakar Kanhoba Sahani
5) Shaila Madhukar Pathare
6) Dinesh Ramnath Date
7) Ganapati Govind Bhatte
Respondent Nos. 3 to 7 all of
Mumbai, Indian Inhabitants,
Trustees of the Respondent
No. 2 having their office at
21/A, Gamdevi Road,
Mumbai 400 007
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8) Vaibhav Builders & Contractors
Pvt. Ltd. A company registered
under the provisions of Indian
Companies Act, 1956 and having
its registered office at
Blue Moon Chambers, Gr. Floor
25, Nagindas Master Road,
Fort, Mumbai 400 023. ... Respondents.
Mr. D.J. Khambatta, Sr. Counsel with Mr. M.S. Doctor and
Mr. D.G. Rangras for Petitioner.
Mr. R.M. Sawant, Govt. Pleader for Respondent No.1.
Mr. Shyam Mehta with Mr. Cyrus Ardeshir i/by Madekar &
Co. for Respondent Nos. 2 & 3.
Dr.Virendra V. Tulzapurkar, Sr.Counsel with Mr. P.K.
Samdani,Sr.Counsel and Mr. Sandeep Parekh i/by M/s
Kishore Thakordas & Co. for Respondent No. 8.
WITH WITH WITH
WRIT PETITION NO. 759 OF 1993 WRIT WRIT PETITION NO. 759 OF 1993 PETITION NO. 759 OF 1993
1) Kalpana Properties Pvt. Ltd.
a Company incorporated under
the Companies Act, 1956 and
having its Registered office at
4, Nanabhoy Mansion, 2nd Floor,
61, Sir P.M. Road, Modi Street
Corper, Fort, Bombay-400 001
2) Mulchand Shah of Bombay
Indian Inhabitant residing at
Windsor Chambers, Flat No.15,
3rd Floor, Cawasji Patel Street,
Fort, Bombay-400 023 ... Petitioners
Versus
1) K.M. Desai,
Charity Commissioner for
Maharashtra having his office at
Dharmaday Ayukta Bhavan,
3rd Floor, 33 Dr. Annie Besant
Road, Bombay-400 018
2) Dr. Sam Minocher Mahalaxmiwala
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3) Mehrwan Nowroji Mehta
4) Nousher Nowroji Mehta
5) Rustom Nowroji Mullan
6) Dr.(Mrs.)Narges Sam Mahalaxmiwala
All of Bombay, Indian Inhabitants
the Trustees of late R.D.
Mahalaxmiwala Charity Building
Trust, a Public Charitable Trust
registered under the Bombay
Public Trust Act, 1950 under P.T.R
No. C-895(Bom) and having its
office at C/o Dr. S.N.
Mahalaxmiwala, Firauz Ara, 160
Maharshi Karve Road,
Bombay-400 021.
7) Mr. P.N. Behramfaram of Bombay
Indian Inhabitant, residing at
Flat No. 6, Building No.20,
R.D. Mahalaxmiwala Charity Trust
Building, Sleater Road,
Bombay-400 007
8) Mrs. M.A. Motivala of Bombay
Indian Inhabitant, residing at
Flat No. 10, Building no. 19,
R.D. Mahalaxmiwala Charity Trust
Building, Sleater Road,
Bombay-400 007
9) Mr. H.D. Omrigar of Bombay
Indian Inhabitant, residing at
Flat No. 5, Building no. 19,
R.D. Mahalaxmiwala Charity Trust
Building, Sleater Road,
Bombay-400 007
10) Mr. A.D. Cooper of Bombay
Indian Inhabitant, residing at
Flat No. 6, Building no. 17,
R.D. Mahalaxmiwala Charity Trust
Building, Sleater Road,
Bombay-400 007 ... Respondents
Mr. Ajit Kapadia with Mr. Aditya Chitale i/by M/s
Purohit & Purohit for Petitioner.
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Mrs. S.M. Dandekar, AGP for Respondent No. 1.
Mr. Phiroze Colabawala, i/by Mulla & Mulla & Craigie
Blunt & Caroe for Respondent Nos. 2 to 6.
Mr. V.A. Thorat, Sr. Counsel with Mr. P.M.
Rustomkhan for Respondent Nos. 8 and 9.
WITH WITH WITH
WRIT PETITION NO. 2499 OF 2005 WRIT WRIT PETITION NO. 2499 OF 2005 PETITION NO. 2499 OF 2005
M/s Sneha Land Developers Pvt.
Ltd. Having their office at City
Mall, Plot No. 4, New Mumbai
(Vashi) Sector 19, Vashi,
Navi Mumbai-400 705 through its
Director Shri Jadhav ... Petitioner.
Versus
1) Dadoba Jagannath Religious
Trust,through its Trustees,
having their office at 21/A,
Gamdevi Road, Mumbai- 400 007
2) Mr. Jayant M. Desai,
Trustee of the Dadoba Jagannath
Religious Trust, having his
office at 21/A,
Gamdevi Road, Mumbai- 400 007
3) Mr. Padmakar K. Sahani,
Trustee of the Dadoba Jagannath
Religious Trust, having his
office at 21/A,
Gamdevi Road, Mumbai- 400 007
4) Mrs. Shaila Madhukar Pathare
Trustee of the Dadoba Jagannath
Religious Trust, having her
office at 21/A,
Gamdevi Road, Mumbai- 400 007
5) Mr. Dinesh Ramnath Dute,
Trustee of the Dadoba Jagannath
Religious Trust, having his
office at 21/A,
Gamdevi Road, Mumbai- 400 007
6) Mr. Ganpati Govind Bhatte
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Trustee of the Dadoba Jagannath
Religious Trust, having his
office at 21/A,
Gamdevi Road, Mumbai- 400 007
7) M/s Vaibhav Builders &
Contractors, 9 Blue Moon Chambers
25, Nagindas Master Road,
Mumbai-400 023
8) The Charity Commissioner,
Mumbai
9) State of Maharashtra
Through the Urban Development
Department,
Mantralaya, Mumbai-400 032. ... Respondents.
WITH WITH WITH
WRIT PETITION NO. 3023 OF 2005 WRIT WRIT PETITION NO. 3023 OF 2005 PETITION NO. 3023 OF 2005
1) Dadoba Jagannath Tenants Association
through its Vice President,
Mr. Subhash Dighe of Mumbai, Indian
Inhabitant, having his residence at
Building No.21C, Block No. 30,
Religious Trust Building,
Gamdevi Road, Gamdevi,
Bombay-400 007
2) Shekhar Mhatre of Mumbai
Indian Inhabitant, Treasurer of the
Dadoba Jagannath Tenants Association
having his residence at Building
No. 21B, Block No.5,
Dadoba Jagannath Religious Trust
Building, Gamdevi Road,
Gamdevi, Bombay-400 007
3) Chandrakant Pathare of Mumbai
Indian Inhabitant, Committee Member
of the Dadoba Jagannath Tenants
Association, having his residence
at Building No. 21/C, Block No.13,
Dadoba Jagannath Religious Trust
Building, Gamdevi Road,
Gamdevi, Bombay-400 007
4) Suryakant Paralkar of Mumbai
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Indian Inhabitant, Committee Member
of the Dadoba Jagannath Tenants
Association, having his residence
at Building No. 21/D, Block No.10,
Dadoba Jagannath Religious Trust
Building, Gamdevi Road,
Gamdevi, Bombay-400 007
5) Sudhir Choudhary of Mumbai
Indian Inhabitant, Committee Member
of the Dadoba Jagannath Tenants
Association, having his residence
at Building No. 21/D, Block No.18,
Dadoba Jagannath Religious Trust
Building, Gamdevi Road,
Gamdevi, Bombay-400 007 ... Petitioners
Versus
1) Dadoba Jagannath Religious Trust
through its Trustees, having their
office at 21/A, Gamdevi Road,
Mumbai-400 007
2) Jayant M. Desai,
Trustee of the Dadoba Jagannath
Religious Trust,having his office
at 21/A, Gamdevi Road,
Mumbai-400 007
3) Padmakar K. Sahani
Trustee of the Dadoba Jagannath
Religious Trust,having his office
at 21/A, Gamdevi Road,
Mumbai-400 007
4) Shaila Madhukar Pathare
Trustee of the Dadoba Jagannath
Religious Trust,having her office
at 21/A, Gamdevi Road,
Mumbai-400 007
5) Dinesh Ramnath Dute
Trustee of the Dadoba Jagannath
Religious Trust,having his office
at 21/A, Gamdevi Road,
Mumbai-400 007
6) Ganpati Govind Bhatte
Trustee of the Dadoba Jagannath
Religious Trust,having his office
at 21/A, Gamdevi Road,
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Mumbai-400 007
7) M/s Vaibhav Builders & Contractors
9, Blue Moon chambers,
25, Nagindas Master Road,
Mumbai-400 023
8) The Charity Commissioner
State of Maharashtra,
Worli, Mumbai-400 030
9) State of Maharashtra
through the Urban Development
Department, Mantralaya,
Mumbai-400 032
10) M/s Sneha Land Developers Pvt.Ltd.
having their office at City Mall,
Plot No. 4, New Mumbai (Vashi)
Sector 19, Vashi,
Navi Mumbai-400 705 through its
Director Shri Jadhav. ...Respondents.
FOR W.P. 2499/2005 & W.P. 3023/2005
Mr. Sunil V. Manohar with Ms. Chandana Salgaocar
Radia for Petitioner.
Mr. R.M. Sawant, Govt. Pleader for Respondent No.1.
Mr. Shyam Mehta with Mr. Cyrus Ardeshir, i/by Madekar
& Co. for Respondent Nos. 2 & 3.
Dr. Virendra V. Tulzapurkar, Sr. Counsel, with Mr.
P.K. Samdani, Sr. Counsel and Mr. Sandeep Parekh i/by
M/s Kishore Thakordas & Co. for Respondent No. 8.
Mr. Owen Menezes for Intervenor.
CORAM : F.I. REBELLO, CORAM CORAM : F.I. REBELLO, : F.I. REBELLO,
SMT. V.K. TAHILRAMANI, AND SMT. SMT. V.K. TAHILRAMANI, AND V.K. TAHILRAMANI, AND
ABHAY S. OKA, JJJ. ABHAY ABHAY S. OKA, JJJ. S. OKA, JJJ.
DATE ON WHICH JUDGMENT DATE DATE ON WHICH JUDGMENT ON WHICH JUDGMENT
IS RESERVED IS IS RESERVED RESERVED : 24TH AUGUST 2006 24TH AUGUST 2006 24TH AUGUST 2006
DATE OF WHICH JUDGMENT DATE DATE OF WHICH JUDGMENT OF WHICH JUDGMENT
IS PRONOUNCED. IS IS PRONOUNCED. PRONOUNCED. : 14th FEBRUARY, 2007. 14th FEBRUARY, 2007. 14th FEBRUARY, 2007.
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J U D G M E N T
1) A Division Bench of this Court (Coram Smt.
Ranjana Desai and Abhay S. Oka, JJ) found that there
was a divergence of opinion between two Division Benches
of this Court as regards powers of Charity Commissioner
under Section 36(1) of The Bombay Public Trusts Act,
1950 (hereinafter referred to as the said Act of 1950).
Therefore, a direction was issued to place the papers of
these petitions before the Honourable the Chief Justice
for passing appropriate direction in accordance with
Rule 28 of the High Court, (O.S.) Rules for making a
reference to larger Bench. The questions formulated by
the Division Bench for a decision by a larger Bench read
thus :
i) Whether the power vesting in the Charity
Commissioner under Section 36 of the Bombay
Public Trusts Act, 1950 is confined to grant or
refusal of sanction to a particular sale
transaction which the trustees propose to make
or it extends to compelling trustees to sell or
transfer the property to another party who
participates in the proceedings under Section
36 and gives his offer?
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ii) Whether the party who comes forward to submit
his offer directly before the Charity
Commissioner in a pending application under
Section 36 of the said Act of 1950 has locus
standi to challenge the order passed in a
proceeding under Section 36?
2) The Division Bench referred to a decision of
another Division Bench (Coram : A.P. Shah and Dr.
D.Y. Chandrachud, JJ) in the case of M/s Jigna
Construction Co., Mumbai Vs. State of Maharashtra and
others decided on 2nd December 2005. The relevant part
of the decision of Division Bench reads thus :
"The proceeding under Section 36 of the Act
are not a lis between the parties to
adjudicate contesting claims. The mandate of
Section 36 is that no transfer of the trust
property shall be valid unless approved by the
Charity Commissioner with previous sanction.
The Charity Commissioner as per the scheme has
to accord the sanction,having regard to the
interest or benefit of the trust. The Charity
Commissioner in these proceedings after
inquiry has to record satisfaction in this
behalf. Section 36 merely authorises the
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Charity Commissioner to ascertain as to
whether the trustees acted in the best
interest of the trust. The petitioners since
neither necessary nor proper party to the
proceedings under Section 36, cannot claim any
entitlement to invoke Articles 226 and 227 of
the Constitution of India to canvas their
grievance against sanction accorded under
Sub-section (1) of Section 36 of the Act."
3) Another Division Bench of this Court (Coram:
H.L.Gokhale and Mrs.R.S.Dalvi,JJ) in Letters Patent
Appeal No.419 of 2004, 454 of 2004 and 448 of 2004
(Mr.A.R.Khan Construwell and Co. Vs. Youth Education
and Welfare Society and others) decided on 23rd
September 2005 held thus :
"It is quite clear that the principle of locus
standi has been expanded and any such parties,
who want to give their offers in the interest of
the trust, cannot be restrained from
participating in the proceedings before the
Charity Commissioner or later on by challenging
his decision. The proposition in Girdhar
Nichani (supra) by a Single Judge cannot be said
to be a good one in the light of the approach
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adopted by the Apex Court in Mehrwan Homi Irani.
Similarly, the proposals of uninvited offers can
not be restricted only to ascertain the market
price as held in Arunodaya earlier. It is clear
from the judgment in Mehrwan Homi Irani that the
Charity Commissioner can explore the possibility
of having agreements with other parties on
better terms."

RELEVANT PROVISIONS OF LAW :
4) The said Act of 1950 was brought into force on
31st May 1950. Prior to the enactment of the said Act
of 1950, Section 92 of the Code of Civil Procedure, 1908
was on the Statute book which deals with alienation of
immovable property of a Trust. Section 92 of the said
Code reads thus :
"92. Public Public Public Charities- Charities- Charities- (1) In the case of any
alleged breach of any express or constructive
trust created for public purposes of a
charitable or religious nature, or where the
direction of the Court is deemed necessary for
the administration of any such trust, the
Advocate-General, or two or more persons
having an interest in the trust and having
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obtained the [leave of the Court,) may
institute a suit, whether contentious or not,
in the principal Civil Court of original
jurisdiction or in any other Court empowered
in that behalf by the State Government within
the local limits of whose jurisdiction the
whole or any part of the subject-matter of the
trust is situate to obtain a decree -
(a) removing any trustee;
(b) appointing a new trustee;
(c) vesting any property in a trustee;
[(cc) directing a trustee who has been removed
or a person who has ceased to be a
trustee, to deliver possession of any
trust property in his possession to the
person entitled to the possession of such
property;]
(d) directing accounts and inquiries;
(e) declaring what proportion of the trust
property or of the interest therein shall
be allocated to any particular object of
the trust;
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(f) authorizing the whole or any part of the
trust property to be let, sold, mortgaged
or exchanged;
(g) settling a scheme, or
(h) granting such further or other relief as
the nature of the case may require.
Section 36 of the said Act of 1950 as it originally
stood reads as under :
"36. 36. 36. Alienation of immovable property of public Alienation Alienation of immovable property of public of immovable property of public
trust. trust. trust.
(1) Subject to the directions in the instrument of
trust -
(a) no sale, mortgage, exchange of any immovable
property, and
(b) no lease for a period exceeding ten years in
the case of agricultural land or for a period
exceeding three years in the case of
non-agricultural land or a building belonging
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to a public trust, shall be valid without the
previous sanction of the Charity Commissioner.
5) The first amendment to Section 36 was made by
Bombay Act No.6 of 1960. By the said amendment, the
words "subject to the directions in the instrument of
trust" were replaced by the words "Notwithstanding
anything contained in the instrument of trust". The
Section underwent further amendment by the Maharashtra
Act No.20 of 1971. Section 36 of the said Act of 1950
as amended by Bombay Act 6 of 1960 and Maharashtra Act
20 of 1971 reads thus :
"36. "36. "36. Alienation of immovable property of public Alienation Alienation of immovable property of public of immovable property of public
trust. trust. trust.
[(1)][Notwithstanding anything contained in the
instrument of trust -]
(a) no sale, exchange or gift of any immovable
property, and
(b) no lease for a period exceeding ten years in
the case of agricultural land or for a period
exceeding three years in the case of
non-agricultural land or a building belonging
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to a public trust, shall be valid without the
previous sanction of the Charity Commissioner.
[Sanction may be accorded subject to such
condition as the Charity Commissioner may
think fit to impose, regard being had to the
interest, benefit or protection of the trust;
(c) if the Charity Commissioner is satisfied that
in the interest of any public trust any
immovable property thereof should be disposed
of, he may, on application, authorise any
trustee to dispose of such property subject to
such conditions as he may think fit to impose,
regard being had to the interest or benefit or
protection of the trust.
(2) The Charity Commissioner may revoke the
sanction given under Clause (a) or clause (b)
of sub-section (1) on the ground that such
sanction was obtained by fraud or
misrepresentation made to him or by concealing
from the Charity Commissioner, facts material
for the purpose of giving sanction; and
direct the trustee to take such steps within a
period of one hundred and eighty days from the
date of revocation (or such further period not
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exceeding in the aggregate one year as the
Charity Commissioner may from time to time
determine) as may be specified in the
direction for the recovery of the property.
(3) No sanction shall be revoked under this
section unless the person in whose favour such
sanction has been made has been given a
reasonable opportunity to show cause why the
sanction should not be revoked.
(4) If, in the opinion of the Charity
Commissioner, the trustee has failed to take
effective steps within the period specified in
sub-section (2), or it is not possible to
recover the property with reasonable effort or
expense, the Charity Commissioner may assess
any advantage received by the trustee and
direct him to pay compensation to the trust
equivalent to the advantage so assessed.]"
6)
SUBMISSIONS MADE BY THE COUNSEL APPEARING FOR

THE PARTIES :
. The learned Counsel appearing for the
Petitioners have made detailed submissions. They have
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placed reliance on various decisions of the Apex Court
and High Court. We are summarising the submissions made
before us. We have dealt with the relevant decisions
relied upon by the learned counsel appearing for the
parties in the later part of this Judgment.
. Mr.D.J.Khambata, learned Senior Counsel
appearing for the Petitioner in Writ Petition No.1641 of
2005 submitted that the law laid down by the Division
Bench of this Court in the case of M/s A.R.Khan
Construwell & Company vs. Youth Education & Welfare
(supra) is the correct view. He has taken us through
various provisions of the said Act of 1950. He has
relied upon various decisions. The submissions of
Mr.Khambata, learned senior counsel can be summarised as
under:
(a) The enquiry to be held by the Charity
Commissioner under Section 36 is a Judicial
enquiry in view of Provisions of Section 73 and
73(A) of the said Act of 1950. Even Rule 7 of
The Bombay Public Trusts Rules, 1951
(hereinafter referred to as "the said Rules of
1951") expressly provides that while deciding
application under Section 36 of the said Act of
1950, the Charity Commissioner shall, as far as
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possible, follow the procedure prescribed for
trial of suits under the Presidency Small Cause
Courts Act, 1882. The enquiry under Section 36
is a quasi judicial enquiry.
(b) He submitted that by virtue of Clause (b) of Sub
Section 1 of section 36 of the said Act of 1950
and Sub Rule 2 of Rule 24 of the Rules of 1951,
express powers have been conferred on the
Charity Commissioner to grant sanction for
alienation by imposing such conditions as are
necessary, regard being had to the interest,
benefit or protection of the trust.
(c) Relying upon certain decisions of the Apex
Court, he submitted that sale of property of a
Public Trust will be governed by the same
constraints which apply to an alienation of
Public property.
(d) He submitted that after the decision of learned
Single Judge of this Court in the case of
Arunodaya Prefab Vs. M.D.Kambli & Ors., [1979
MH.L.J. page 104] (supra), the concept of locus
standi has been considerably broadened by the
Apex Court. He submitted that Section 73-A of
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the said Act of 1950 read with Rule 7 of the
said Rules of 1951 clearly permits third parties
to participate in the proceedings under Section
36 of the said Act of 1950.
(e) A Trust property is not a personal property of
the Trustees and the Charity Commissioner being
the custodian of the Public Trusts can always
ensure that property is alienated by the trustees
to a purchaser who has offered the best deal in
the interest of trust and its beneficiaries.
(f) He submitted that in the case of Mehrwan Homi
Irani & Anr. v. Charity Commissioner, Bombay &
Ors. (A.I.R. 2001 S.C. 2350), the Apex Court
has held that Charity Commissioner can invite
bids from the Members of the public with a view
to ensure that the Trust is benefitted by the
best available bargain.
(g) He submitted that if bids are invited from the
Members of the Public only for a limited
purposes of ascertaining market value of the
property as held by learned Single Judge in
Arunodaya’s case (supra), a genuine prospective
buyer will never come before the Charity
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Commissioner and there is every possibility that
some interested persons may come out with
inflated offers with a view to scuttle the
transaction proposed to be enterted into by the
trustees.
(h) He submitted that the Division Bench dealing
with the case of M/s.A.R.Khan Construwell
Company (supra) has correctly laid down the law
on the point.
(i) There is an internal aid in Section 36 for the
aforesaid interpretation. The said internal aid
is as provided by Clause ( c ) of Section 36(1).
7) Shri Sunil Manohar appearing for Petitioners in
one of the Petitions has also made submissions as
regards power of learned Charity Commissioner to issue
directions to the trustees under Section 36 of the said
Act. His submissions can be summarised as under :
(a) None of the earlier decisions including the
decision in Arunodaya Prefab’s case has
considered the effect of Clause (c) of Sub
Section 1 of Section 36 of the said Act of 1950.
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(b) He submitted that the Clause (c) of Section
36(1) is identical to Section 92(1)(f) of the
Code of Civil Procedure, 1908. Relying upon
certain decisions of the Apex Court, he
submitted that under Clause (c) of Section 36(1)
of the said Act of 1950, the Charity
Commissioner possesses a power to direct sale of
property belonging to a Public Trust. He
submitted that the power under Clause (c) is
very wide. He submitted that considering
Section 36-A of the said Act of 1950, it is
obvious that the Charity Commissioner has a
power to issue direction to the trustees to
transfer a trust property to a particular person
on the terms and conditions fixed by him. He
submitted that the power to issue lawful
directions under Section 36-A is very wide. He
submitted that the term lawful, implies what is
authorised or at any rate what is not forbidden
by law. "Lawful" is wider in connotation than
legal and means something which is not forbidden
by law. Thus unless statutorily forbidden, the
Charity Commissioner can issue all directions
which are "lawful". Placing reliance on various
sections of the said Act of 1950, he submitted
that the Charity Commissioner has vast powers
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including a power to invite fresh bids and
directing that no property should be sold only
to a bidder which the Charity Commissioner finds
to be more suitable.
C) Reading provisions of Section 73 and 73-A of the
said Act of 1950 and Rules 7, 7-A and 24 of the
said Rules of 1951, it is apparent that the
Charity Commissioner has to conduct a detailed
enquiry in the matter while deciding application
under Section 36 of the said Act of 1950.
Therefore, the Charity Commissioner can himself
invite offers and authorise the sale of the
trust property to any person who has submitted a
bid before him.
8) Shri Tulzapurkar, learned senior counsel
appearing for the Respondent No.7 in Writ Petition No.
2499 of 2005 canvassed that the decision of the Division
Bench in the case of M/s Jigna Construction Company
(supra) and the decision of learned single Judge in the
case of Arunodaya Prefab vs. M.D.Kambli (1979 Mh.L.J.
P.104) lay down the correct proposition of law. The
submissions made by Shri Tulzapurkar, learned senior
counsel can be summarised as under :
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(a) He submitted that Clause (a) of Sub Section 1 of
Section 36 of the said Act of 1950 imposes
fetters upon the powers of the trustees to
alienate trust property. He submitted that the
trustees being legal owners of the property
always have a right to alienate the trust
property.
(b) Section 36(1)(a) does not confer any power on the
Charity Commissioner and it only imposes fetters
on the powers of the Trustees. Therefore the
Charity Commissioner cannot compel the trustees
of a public trust to sell or transfer the trust
property to a third party who participates in the
proceeding under Section 36(1)(a) and gives his
offer.
(c) He submitted that primary rule of construction of
a statute is that the intention of the
legislature must be gathered from the words used
by the legislature itself. He submitted that in
the present case when the words used by the
legislature in Section 36 were so clear, for
interpreting the said provision, any external aid
is not required.
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(d) He submitted that power under the Statute is to
grant sanction to the alienation proposed by the
trustees and the power is not of directing sale.
The power of the Charity Commissioner is to
ratify the action of the trustees and to sanction
the sale or alienation proposed by the Trustees.
The use of words sanction, permission or
authorisation cannot confer a power on Charity
Commissioner to order sale of the property in
favour of a particular party.
(e) Hardship or inconvenience cannot alter the
meaning of plain language employed by the
legislature.
f) The functions of the Charity Commissioner under
the said Act of 1950 can be broadly divided into
four categories:
(i) Advisory (Section 56);
(ii) Administrative (Section 35, 36, 50, 50-A and
51 of the Act;
(iii) Supervisory (Sections 31A, 32, 34, 37 and
38 ) and
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(iv) Quasi-Judicial (Sections 18, 39, 40, 41-A to
41-E and 59).
(g) He submitted that the power of Charity
Commissioner under Section 36(1)(a) is confined
to ascertaining whether the transaction proposed
by the trustees is in the interest of the trust.
(h) Placing reliance on a decision of a Division
Bench of this Court in the case of Bomi Jal
Mistry Vs. Joint Charity Commissioner (2002 (5)
MH.L.J. 660), he submitted that power under
Clauses (a) and (b) of Sub Section 1 of Section
36 is to accord sanction to the transaction and
the power under clause (c) is to grant
authorisation to the trustees to dispose of the
property. He submitted that Clause (c) was
introduced by an amendment to avoid delay caused
in obtaining orders from Civil Court by filing
suit under Section 50 of the said Act 1950. He
submitted that the Division Bench has held that
in a case where the instrument of the trust does
not permit the trustees to alienate trust
property, after obtaining authorisation under
clause (c), sanction under clause (b) of
sub-section (1) of Section 36 will have to be
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obtained.
(vii) He submitted that if construction sought to be
given to Section 36 is accepted, it will render
the said Section ultra vires Article 26 of the
Constitution of India.
(viii) The decision of the Apex Court in the case of
Mehrwan Homi Irani and another Vs. Charity
Commissioner, Bombay (2001) 5 SCC P.305) does not
lay down any law and the Division Bench in the
case of A.R. Khan (supra) committed an error by
reading the said decision as laying down a
proposition of law.
(ix) He submitted that the matter of sanction is only
between the trustees of a Public Charitable Trust
and the Charity Commissioner and at the most
between the Charity Commissioner and the
beneficiaries of the trust. He submitted that
one who gives an offer cannot claim any interest
in the trust property and therefore he has no
locus standi. He submitted that only a person
having interest in the trust may be joined in any
proceedings before the Charity Commissioner. He
submitted that only the trustees or the
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beneficiaries or at highest the person in respect
of whose transaction the sanction is sought are
having locus standi.
9) Shri P.K.Samdani, learned senior Counsel also
made extensive submissions. His submissions can be
summarised as under :
(1) The immovable property of a trust vests in the
trustees. He submitted that trustees being the
legal owners of the property hold the property
for the benefit of beneficiaries and not on
behalf of the beneficiaries.
(2) Section 36 of the said Act of 1950 puts fetters
on the freedom of the trustees and therefore,
the provision is required to be construed
strictly.
(3) He submitted that the position of the Charity
Commissioner is therefore that of a supervisor
who screens the proposed alienation and if he
finds that the proposed alienation in the
interest or for the benefit or for the
protection of the trust, he is obliged to grant
sanction to the alienation.
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(4) He submitted that if Charity Commissioner finds
that the proposed alienation is neither in the
interest nor for the benefit of the trust, he is
empowered to refuse sanction to the proposed
alienation. He submitted that while granting
sanction applied for, the Charity Commissioner
may impose conditions guided by the interest,
benefit or protection of the trust such as
providing time frame within which the
transaction has to be completed, making
provision for payment of interest on delayed
payment if the payment is to be made by
instalments. He submitted that power to impose
conditions cannot be extended to issue
directions. He submitted that imposition of
conditions can be only to the sanction applied
for and not to a sanction which is not applied
for.
(5) He submitted that any offerer who comes before
the Charity Commissioner has no legal right or
interest. His offer remains a mere offer until
it is accepted by the trustees. As there is no
legal right in favour of such offerer, obviously
he cannot challenge the sanction.
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10) Shri Shyam Mehta appearing for some of the
parties submitted that what is required to be granted
under Section 36 is a sanction to the alienation which is
proposed by the trustees. He placed reliance on certain
decisions of the Apex Court and Allahabad High Court.
11) Shri V.A. Thorat, learned senior Counsel
appearing for petitioners in some of the petitions
supported Shri. Tulzapurkar to some extent. He
submitted that power to issue direction can be read at
highest in clause (c) of Sub Section 1 of Section 36 of
the said Act. He submitted that so far as clause (a) and
(b) are concerned, such a power cannot be read in the
statute as the power is limited either to grant or reject
sanction to the proposal submitted by the trustees.
12) Shri Owen Menezes, learned Counsel has made
submissions mainly on the issue of locus standi. He
placed reliance on several decisions for showing that the
concept of locus standi has been considerably widened by
the Apex Court.
13) Shri Kapadia appearing for one of the Petitioners
submitted that even after a sanction is granted by the
Charity Commissioner, the trustees are not bound to
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execute the document of transfer. He submitted that even
under clause ‘c’ of Sub Section 1 of Section 36, there is
no power vesting in the Charity Commissioner to give
direction to the trustees to sell the trust property in a
particular manner and to a particular person.
:
CONSIDERATION OF LEGAL POSITION
14) A reference will have to be made to the decision
of learned Single Judge in the case of Arunodaya Prefab
(supra). The learned Single Judge was dealing with a
case where trustees of a public trust had entered into an
agreement for sale in respect of the trust property in
favour of the Respondent no.2 before the learned Single
Judge. On the basis of the said agreement, the trustees
(the Respondent Nos.3 to 9 before the learned Single
Judge) applied for a sanction before the learned Charity
Commissioner under Section 36 of the said Act of 1950.
The learned Charity Commissioner directed the trustees to
advertise the property for sale. However,the trustees
did not advertise the property. One of the Petitioners
before the learned Single Judge had made an offer before
the Charity Commissioner to buy the property at a higher
price than what was offered by the second Respondent and
showed willingness even to enhance the offer. The
Charity Commissioner called a meeting to consider the
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offers of the Petitioners. In the said meeting, the
offer was raised to Rs.85.00 Lacs by the said petitioner.
Another offer was submitted by another Petitioner before
the learned Charity Commissioner. In a meeting called by
the Charity Commissioner, the trustees declined to ask
the second Respondent to enhance his offer. However, the
second Respondent gave a revised offer and the Charity
Commissioner ultimately sanctioned the sale. As stated
earlier, petitions were filed by the Petitioners who had
offered higher price before the learned Charity
Commissioner. In Paragraph 8 of his decision, the
learned Single Judge held thus :
"8. In the present case the trustees made an
application to the Charity Commissioner for
sanction of the proposed sale to the second
respondent. To ascertain whether the price
offered by the second respondent was
reasonable, the Charity Commissioner directed
the trustees to invite offers for the sale of
the said property. The trustees declined to
do so on the ground that they had already
entered into an agreement for sale in favour
of the 2nd respondent and had morally
committed themselves to the 2nd respondent.
There is substance in the contention of the
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trustees to which I shall advert later. The The The
petitioners petitioners petitioners submitted submitted submitted offers offers offers for for for the the the purchase purchase purchase
of of of the the the said said said land land land uninvited uninvited uninvited to to to the the the Charity Charity Charity
Commissioner Commissioner Commissioner and and and the the the trustees. trustees. trustees. Under Under Under Section Section Section
36 36 36 it it it was was was not not not open open open to to to the the the Charity Charity Charity Commissioner Commissioner Commissioner
to toto consider consider consider the the the said said said offers offers offers except except except only only only to to to the the the
extent extent extent that that that they they they might might might disclose disclose disclose to to to him him him what what what
might might might be be be the the the market market market value value value of of of the the the said said said land. land. land.
ItItIt was was was certainly certainly certainly not not not open open open to to to the the the Charity Charity Charity
Commissioner Commissioner Commissioner to to to sell sell sell the the the said said said land land land to to to the the the
Petitioners Petitioners Petitioners or or or to to to require require require the the the trustees trustees trustees to to to sell sell sell
the the the said said said land land land to to to any any any one one one other other other than than than the the the 2nd 2nd 2nd
respondent. respondent. respondent. If If If he he he considered considered considered the the the proposed proposed proposed
sale sale sale to to to the the the 2nd 2nd 2nd respondent respondent respondent adverse adverse adverse to to to the the the
interests of the trust he could only decline interests interests of the trust he could only decline of the trust he could only decline
sanction." (Emphasis Supplied) sanction." sanction."
In Paragraph 9 of his decision, the learned Single Judge
held thus :
"9. Looked Looked Looked at at at in in in that that that light, light, light, it it it is is is clear clear clear that that that
the the the Charity Charity Charity Commissioner Commissioner Commissioner owned owned owned no no no legal legal legal duty duty duty
to toto the the the petitioners, petitioners, petitioners, and, and, and, merely merely merely by by by sending sending sending
offers offers offers to to to him him him for for for purchase, purchase, purchase, of of of the the the said said said
property, property, property, the the the petitioners petitioners petitioners acquired acquired acquired no no no legal legal legal
rights. rights. rights. It would not be correct to hold as
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: 33 :
Mr.Rana has urged me to do, that the Charity
Commissioner was obliged to associate the
petitioners with the enquiry that he was
required to institute or that he was obliged
to consider the offers made by the
Petitioners. In In In my my my view, view, view, the the the petitioners petitioners petitioners have have have
no no no legal legal legal right right right which which which has has has been been been infringed infringed infringed by by by the the the
impugned impugned impugned order order order and and and the the the Charity Charity Charity Commissioner Commissioner Commissioner
owned no legal duty to the petitioners." owned owned no legal duty to the petitioners." no legal duty to the petitioners."
(Emphasis Supplied)
About the locus standi of the petitioners, learned
Single Judge in Paragraph 19 held thus :
"Since "Since "Since the the the Charity Charity Charity Commissioner Commissioner Commissioner was was was concerned concerned concerned
only only only with with with according according according or or or not not not according according according sanction sanction sanction
to toto the the the agreement agreement agreement of of of sale sale sale placed placed placed before before before him him him by by by
the the the trustees trustees trustees there there there was was was no no no question question question of of of his his his
giving giving giving any any any hearing hearing hearing to to to the the the petitioners petitioners petitioners or or or of of of
considering considering considering any any any bids bids bids made made made by by by them. them. them. The The The
Petitioners Petitioners Petitioners and and and the the the 2nd 2nd 2nd respondents respondents respondents cannot cannot cannot be be be
treated treated treated on on on par par par for for for the the the 2nd 2nd 2nd respondent respondent respondent was was was the the the
party party party to to to whom whom whom the the the trustees trustees trustees proposed proposed proposed to to to sell sell sell
the the the said said said land land land and and and in in in respect respect respect of of of which which which proposed proposed proposed
sale sale sale they they they sought sought sought the the the Charity Charity Charity Commissioner’s Commissioner’s Commissioner’s
sanction. sanction. sanction. It is, therefore, not legitimate
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for the petitioners to contend that there has
been any breach of any principle of natural
justice in the Charity Commissioner not
hearing the petitioners or not associating the
petitioners with any inquiry held by him.
Inasmuch as the Charity Commissioner was not
entitled to call for or to consider any offers
with the object of concluding a sale of the
said land on the basis thereof the petitioners
cannot make a grievance of the fact that their
offers were not considered by him nor does the
impugned order become a nullity in law because
it does not state the reasons why the
petitioners bids are not accepted." (Emphasis
Supplied)
In Paragraph 22, the learned Single Judge observed thus
:
"22. Before parting with this case, I would
add this note of caution. If the Charity
Commissioner directs trustees to invite offers
for sale of trust property in respect whereof
the trustees have already entered into an
agreement for sale and applied for sanction
thereof, there are bound to be difficulties of
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: 35 :
the sort which have occurred in this petition.
If the Charity Commissioner is inclined to
direct the trustees to invite offers for the
sale of trust property, he must first
ascertain that the trustees would be willing
to sell the property to one of these offers.
Where an agreement for sale has been arrived
at and is sent up for sanction, the Charity
Commissioner must satisfy himself of the
adequacy of the price offered upon the basis
of instance of sale in the locality or upon an
architects’ report or upon some similar
basis".
15) The Division Bench in the case of M/s Jigna
Construction Co. Mumbai Vs. The State of Maharashtra &
Ors. (supra) approved the law laid down by the learned
Single Judge in the case of Arunodaya Prefab (supra).
The Division Bench referred to another decision of
learned Single Judge of this Court in the case of
Girdhar C. Nichani Vs. REV. E.H. Lewellen and
another (1991 Mh. L.J. 891). In paragraph 8, the
Division Bench proceeded to hold that:
"8. The view taken by Bharucha J. was also
followed by the Division Bench in Suburban
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: 36 :
Education Society vs. Charity Commissioner,
2004(2) Mh.L.J. 792. The Division Bench held
that the scope and authority which is
exercised by the Charity Commissioner under
section 36(1)(a) of the Public Trust Act is
very limited. The The The Charity Charity Charity Commissioner Commissioner Commissioner in in in the the the
first first first instance instance instance is is is required required required to to to consider consider consider whether whether whether
the the the trust trust trust has has has genuine genuine genuine need need need for for for the the the purpose purpose purpose of of of
selling selling selling its its its immovable immovable immovable property property property and and and secondly secondly secondly
whether whether whether the the the said said said property property property is is is being being being sold sold sold in in in the the the
interest interest interest of of of the the the trust trust trust and and and its its its beneficiaries. beneficiaries. beneficiaries.
The The The Charity Charity Charity Commissioner Commissioner Commissioner is is is not not not supposed supposed supposed to to to
substitute substitute substitute his his his own own own ideas ideas ideas and and and views views views vis vis vis a a a vis vis vis
the functioning of the trust." the the functioning of the trust." (Emphasis functioning of the trust."
added).
Even on the issue of locus standi, the Division Bench
expressed agreement with the view taken by the learned
Single Judge in the case of Arunodaya Prefab.
16) In so far as the decision of the Division Bench
in the case of M/s A.R.Khan Construwell & Co. Vs.
Youth Education Welfare Society (supra) is concerned,
the Division Bench relied upon the decision of the Apex
Court in the case of Mehrwan Homi Irani (supra). In
paragraph 49, the Division Bench observed thus :
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: 37 :
"It "It "It is is is quite quite quite clear clear clear that that that the the the principle principle principle of of of locus locus locus
standi standi standi has has has been been been expanded expanded expanded and and and any any any such such such parties, parties, parties,
who who who was was was to to to give give give their their their offers offers offers in in in the the the interest interest interest
of of of the the the Trust Trust Trust cannot cannot cannot be be be restrained restrained restrained from from from
participating participating participating in in in the the the proceedings proceedings proceedings before before before the the the
Charity Charity Charity Commissioner Commissioner Commissioner or or or later later later on on on by by by
challenging challenging challenging his his his decision. decision. decision. The proposition in
Girdhar Nichani (supra) by a Single Judge
cannot be said to be a good one in the light
of the approach adopted by the Apex Court in
Mehrwan Homi Irani. Similarly, Similarly, Similarly, the the the proposals proposals proposals
of of of uninvited uninvited uninvited offerers offerers offerers cannot cannot cannot be be be restricted restricted restricted
only only only to to to ascertain ascertain ascertain the the the market market market price price price as as as held held held in in in
Arunodaya Arunodaya Arunodaya earlier. earlier. earlier. It It It is is is clear clear clear from from from the the the
judgment judgment judgment in in in Mehrwan Mehrwan Mehrwan Homi Homi Homi Irani Irani Irani that that that the the the
Charity Charity Charity Commissioner Commissioner Commissioner can can can explore explore explore the the the
possibility possibility possibility of of of having having having agreements agreements agreements with with with other other other
parties parties parties on on on better better better terms. terms. terms. That was also the
view of a Division Bench of this Court in
Madhukar Vs. S.K. Laul (supra) when the
Division Bench observed that the terms of
agreement of sale are liable to be examined by
the Charity Commissioner at the time when he
grants the sanction. To that limited extent,
the role of the Charity Commissioner while
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scrutinising the Proposal before him cannot be
compared to the role of a writ court examining
the terms of a Government tender. In that
sense, the reliance by the learned Single
Judge on the judgment in Director of Education
(supra) for interpreting the role of the
Charity Commissioner under section 36 of the
BPT Act was not apt. Section Section Section 36 36 36 of of of the the the BPT BPT BPT
Act Act Act gave gave gave wide wide wide powers powers powers to to to the the the Charity Charity Charity
Commissioner Commissioner Commissioner which which which are are are obviously obviously obviously given given given in in in the the the
interest, interest, interest, benefit benefit benefit or or or protection protection protection of of of the the the Trust. Trust. Trust.
The The The section section section itself itself itself provides provides provides that that that while while while
according according according the the the sanction sanction sanction to to to the the the proposed proposed proposed lease lease lease
or or or sale, sale, sale, the the the Charity Charity Charity Commissioner Commissioner Commissioner may may may impose impose impose
such such such conditions conditions conditions as as as he he he may may may think think think fit fit fit to to to impose impose impose
for for for this this this purpose. purpose. purpose. He He He can can can undoubtedly undoubtedly undoubtedly refuse refuse refuse
to toto accord accord accord sanction. sanction. sanction. He He He may may may as as as well well well formulate formulate formulate
and and and impose impose impose just just just and and and proper proper proper conditions conditions conditions which which which
may may may serve serve serve the the the interest interest interest of of of the the the Trust Trust Trust as as as held held held in in in
Mehrwan Homi Irani (supra)." Mehrwan Mehrwan Homi Irani (supra)." (Emphasis Homi Irani (supra)."
Supplied)
17) Before we proceed to the other decisions relied
upon by the learned counsel appearing for the parties,
we will have to refer to the relevant provisions of the
said Act of 1950 and the rules framed thereunder which
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: 39 :
deal with nature of the proceedings under Section 36.
Section 73 and 73-A of the said Act of 1950 read thus :
"73. 73. 73. Officers holding inquiries to have Officers Officers holding inquiries to have holding inquiries to have
powers of civil courts powers powers of civil courts of civil courts
In holding inquiries under this Act, the
Officer holding the same shall have the same
powers as are vested in courts in respect of
the following matters under the Code of Civil
Procedure, 1908 in trying a suit -
(a) proof of facts by affidavits,
(b) summoning and enforcing the attendance of
any person and examining him on oath,
[(c) Ordering discovery and inspection, and
compelling the production of documents.]
(d) issuing of commissions.
[73A. 73A. Power of Inquiry Officer to join persons 73A. Power of Inquiry Officer to join persons Power of Inquiry Officer to join persons
as party to proceedings as as party to proceedings party to proceedings
. In any proceedings under this Act, any
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: 40 :
person having interest in the public trust may
be joined as a party to such proceedings on an
application made by such person or such terms
and conditions as the officer holding the
inquiry may order.]
. Rule 7 of the said Rules of 1951 lays
down the manner in which inquiries
contemplated under certain Sections of the
said Act of 1951 should be held. The Rule
provides that :
7. Manner of inquiries Manner Manner of inquiries of inquiries
. Except as otherwise provided in the
Act and these rules, inquiries under or for
purpose 19, 22, 22A, 28, 29, 36, 39, 41D,
41E(3), 43(2)(a), 47, 50A, 51, 54(3) and 79AA
or any other inquiry which the Charity
Commissioner may direct to be held for the
purpose of the Act, shall be held, as far as
possible, in the Greater Bombay Region in
accordance with the procedure prescribed for
the trial of suits under the Presidency Small
Cause Courts Act, 1882 , and elsewhere under
the Provincial Small Cause Court Act, 1887, In
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any inquiry a party may appear in person or by
his recognised agent or by a pleader duly
appointed to act on his behalf :
. Provided that any such appearance
shall, if the Deputy or Assistant Charity
Commissioner so directs, made by the party in
person.
. Rule 7 will have to be read with Rule
24, which reads as under :
24. Applications under section 36 for 24. 24. Applications under section 36 for Applications under section 36 for
sanction of alienations. sanction sanction of alienations. of alienations.
(1) Every application for sanction of an
alienation shall contain information
inter alia on the following points :
(i) Whether the instrument of trust
contains any directions as to
alienation of immovable property;
(ii) what is the necessity for the
proposed alienation;
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(iii) how the proposed alienation is in
the interest of the public trust;
and
(iv) in the case of a proposed lease,
the terms of the past leases, if
any, such application shall be
accompanied, as far as
practicable, by a valuation report
of an expert.
(2) The Charity Commissioner, before
according or refusing sanction, may make
such inquiry as he may deem necessary.
(3) In according sanction, the Charity
Commissioner may impose such conditions
or give such direction as he may deem
fit.
There cannot be any dispute that an enquiry is
contemplated under Section 36. Enquiry will be governed
by procedure prescribed for trial of suits under the
Presidency Small Cause Courts Act, 1882 or Provincial
Small Cause Court Act, 1887, as the case may be. Under
the provisions of both the said enactments, it is
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provided that the provisions of The Code of Civil
Procedure, 1908 in so far as the same are not
inconsistent will apply to the trials under the said
Acts. Thus on a plain reading of Rule 7, it is obvious
that the enquiry contemplated under Section 36 of the
said Act of 1950 is a Judicial enquiry and the
provisions of The Code of Civil Procedure, 1908 will
apply to such enquiry, as far as possible. Therefore it
cannot be accepted that the Charity Commissioner
discharges only an administrative function while
exercising the power under Section 36. In fact he
discharges a judicial function. What is the scope of
powers of the Charity Commissioner is the question which
is required to be decided.
18) Before dealing with the question, it will be
necessary to refer to the Legislative history. The said
Act of 1950 was brought on the Statute Book with the
object of regulating and making better provision for the
administration of Public Religious and Charitable Trusts
in the State of Bombay. Prior to coming into the force
of the said Act, Section 92 of the Code of Civil
Procedure, 1908 was already on the Statute Book which
dealt with Public charities. Section 92 provides that
where the direction of the Court is deemed necessary for
administration of any Trust, the Advocate General or two
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or more persons having an interest in the trust and
having obtained leave of the Court may institute a suit,
whether contentious or not, in the Principal Civil Court
of original jurisdiction to obtain a decree authorising
the whole or any part of the trust property to be let,
sold, mortgaged or exchanged. Section 52 of the said
Act of 1950 provides that :
"Notwithstanding anything contained in the
said Code, the provisions of Section 92 and 93
of the said Code shall not apply to a Public
Trust."
Thus after coming into force of the said Act of 1950,
Section 92 of The Code had no application to a Public
Trust. Prior to the amendment effected to the said Act
of 1950 by the Maharashtra Act no.20 of 1971, the
provisions of Section 50 were different and in fact
entire Section 50 was substituted by the Act 20 of 1971.
Prior to coming into force of the amending Act of 1971,
it was permissible under Section 50 of the said Act of
1950 for persons having interest in the trust to file a
suit for seeking directions of the Court for alienation
of the trust property. The said provision does not find
place in the Section 50 substituted by the Maharashtra
Act No.20 of 1971.
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19) Section 36 as originally incorporated in the
said Act of 1950 reads thus :
"36. Subject to the directions in the
instrument of the trust :
(a) no sale, mortgage, exchange or gift of
any immovable property, and
(b) no lease for a period exceeding ten
years in the case of agricultural land
or for a period exceeding three years
in the case of non- agricultural land
or a building, belonging to a public
trust, shall be valid without the
previous sanction of the Charity
Commissioner.
. The said provision was read to mean that where
the instrument of trust authorised the trustees to
alienate the trust property, there was no requirement of
obtaining the prior sanction of the Charity
Commissioner. Therefore, to make the provision more
effective, by Bombay Act No. 6 of 1960 the words
"subject to the directions in the instrument of trust"
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: 46 :
were substituted by inserting the words "Notwithstanding
anything contained in the instrument of the trust". The
amendment brought into force by Bombay Act No.6 of 1960
made it very clear that notwithstanding the authority
granted by the instrument of the trust to the trustees
to alienate the trust property, no alienation shall be
valid without the previous sanction of the Charity
Commissioner. As stated earlier, Clause (c) of Sub
Section 1 of Section 36 was brought on the Statute Book
by the Maharashtra Act No. 20 of 1971. Clause (b) of
Sub Section 1 of Section 36 was amended by the said
amending Act by addition of the following portion :
. "Sanction may be accorded subject to such
condition as the Charity Commissioner may think fit to
impose, regard being had to the interest, benefit or
protection of the trust."
. In the statement of objects and reasons of the
Act no. 20 of 1971, it was stated that "power is taken
to the Charity Commissioner to authorise any trustee to
dispose of immovable property subject to conditions
which he may think fit to impose." By the said
amendment, Sub-Sections 2, 3 and 4 of Section 36 were
brought on the statute book.
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. One of the questions to be decided will be
whether the amendment made to clause (b) by adding the
aforesaid words, authorises the Charity Commissioner to
direct the Trustees not to sell or alienate the property
to the party in whose favour the trustees have proposed
alienation and whether the said amendment empowers the
Charity Commissioner to direct the trustees to alienate
the trust property in favour of a third party who
according to the Charity Commissioner has given a better
offer considering the interest, benefit and protection
of the trust. The other question which arises is
whether clauses (a) and (b) and clause (c) of Sub
section 1 of Section 36 operate in different fields. If
clauses (a) and (b) were already in existence, which
permitted the trustees to alienate the trust property
with the prior sanction of the Charity Commissioner,
what was the necessity of incorporating clause (c) which
empowers the Charity Commissioner, on application, to
authorise any trustee to dispose of the trust property
when he is satisfied that in the interest of the trust,
the trust property should be disposed of.
20) A Division Bench of this Court has dealt with
said issue in the case of Bomi Jal Mistry and others vs.
Joint Charity Commissioner, Maharashtra and others
(2002(3) ALL M.R. P.749). The Division Bench dealt
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with the amendments made by the Maharashtra Act No. 20
of 1971 to Section 36 and 50 of the said Act of 1950.
After referring the objects and reasons of Maharashtra
Act No.20 of 1971, in Paragraph No.15, the Division
Bench dealt with the scope of the amendments made by the
Maharashtra Act No.20 of 1971 to section 36 and 50 of
the said Act of 1950. In paragraph 15 the Division
Bench observed thus:
"The "The "The objects objects objects and and and reasons reasons reasons for for for this this this amendment amendment amendment was was was
that that that it it it was was was observed observed observed that that that powers powers powers of of of the the the Charity Charity Charity
Commissioner Commissioner Commissioner under under under the the the then then then existing existing existing provisions provisions provisions of of of
Act Act Act 1950 1950 1950 were were were considerably considerably considerably limited limited limited and and and hence hence hence many many many a a a
time time time it it it was was was found found found by by by the the the Charity Charity Charity Commissioner Commissioner Commissioner
difficult difficult difficult to to to enforce enforce enforce the the the effective effective effective working working working of of of the the the
public public public trusts. trusts. trusts. This This This is is is the the the fulcrum fulcrum fulcrum of of of the the the
amendment amendment amendment of of of 1971. 1971. 1971. It It It needs needs needs to to to be be be mentioned mentioned mentioned that that that
prior prior prior to to to 1971, 1971, 1971, the the the legal legal legal position position position as as as obtained obtained obtained was was was
that that that the the the Charity Charity Charity Commissioner Commissioner Commissioner could could could only only only accord accord accord
sanction sanction sanction to to to the the the alienation alienation alienation of of of the the the immovable immovable immovable
property property property of of of the the the public public public trust trust trust and and and he he he had had had no no no power power power to to to
authorise authorise authorise the the the trustee trustee trustee of of of any any any public public public trust trust trust to to to
alienate alienate alienate any any any immovable immovable immovable propert propert propert of of of the the the public public public trust. trust. trust.
In In In other other other words, words, words, in in in cases cases cases where where where the the the trust trust trust deed deed deed
expressly expressly expressly or or or impliedly impliedly impliedly prohibited prohibited prohibited the the the trustees trustees trustees from from from
alienating alienating alienating the the the immovable immovable immovable property property property of of of the the the public public public
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trust trust trust or or or for for for that that that matter matter matter made made made no no no provision provision provision with with with
regard regard regard to to to such such such power, power, power, it it it was was was incumbent incumbent incumbent upon upon upon the the the
trustees trustees trustees to to to first first first obtain obtain obtain relief relief relief in in in this this this behalf behalf behalf from from from
the the the Civil Civil Civil Court Court Court under under under Section Section Section 50 50 50 of of of the the the Act. Act. Act.
Accordingly, Accordingly, Accordingly, the the the position position position prior prior prior to to to 1971 1971 1971 was was was that, that, that,
authorisation authorisation authorisation for for for alienation alienation alienation of of of the the the immovable immovable immovable
property property property of of of public public public trust trust trust could could could be be be granted granted granted only only only by by by
the the the Civil Civil Civil Court, Court, Court, in in in cases cases cases where where where such such such authorisation authorisation authorisation
was was was necessary. necessary. necessary. However, However, However, after after after amendment amendment amendment of of of 1971, 1971, 1971,
this this this position position position has has has obviously obviously obviously undergone undergone undergone change. change. change. As
observed earlier, the objects and reasons for
amendment of 1971 was to give necessary powers to
the Charity Commissioner to effectively supervise
the administration and management of the public
trust." (Emphasis supplied)
21) In Paragraph no. 16 of the said decision, the
Division Bench proceed to consider the scope of clause
(c). In Paragraph no.16, the Division Bench observed
thus :
"Therefore, Legislature introduced clause (C)
empowering the Charity Commissioner to
authorise the trustees to dispose of any
immovable property of the trust in the
interest or benefit or protection of the
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trust. The plenitude of this power no doubt
apparently appears to be wide. Indubitably,
the power of the Charity Commissioner is
plenipotentiary, but is specific and limited
to the cause of interest or benefit or
protection of the trust. We We We are are are not not not at at at all all all
impressed impressed impressed by by by the the the argument argument argument of of of the the the objectors objectors objectors
that that that clause clause clause (c) (c) (c) has has has been been been inserted inserted inserted to to to cover cover cover
matters matters matters which which which were were were left left left out out out from from from clause clause clause (a) (a) (a)
and and and (b). (b). (b). This This This submission submission submission would would would virtually virtually virtually
require require require us us us to to to construe construe construe expression expression expression "authorise" "authorise" "authorise"
in inin clause clause clause (c) (c) (c) as as as only only only "sanction". "sanction". "sanction". This cannot
be countenanced, for the legislature can be
ascribed the knowledge of distinction between
the two, especially when both these
expressions are used in one section. Besides
it would mean that all transactions in respect
of immovable property of the public trust
would require sanction, which is obviously
negating the purport of clauses (a) and (b).
Moreover, it is seen that section 36 opens
with Non-obstante clause, for it provides
that; "Notwithstanding anything contained in
the instrument of trust". On On On its its its plain plain plain
language language language it it it would would would mean mean mean that that that even even even if if if the the the
instrument instrument instrument of of of trust trust trust prohibits prohibits prohibits the the the trustees trustees trustees
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either either either expressly expressly expressly or or or impliedly, impliedly, impliedly, even even even then then then the the the
Charity Charity Charity Commissioner Commissioner Commissioner would would would be be be empowered, empowered, empowered, may, may, may,
obliged obliged obliged to to to authorise authorise authorise any any any trustee trustee trustee to to to dispose dispose dispose of of of
such such such property property property on on on an an an application application application made made made in in in that that that
behalf, behalf, behalf, regard regard regard being being being had had had to to to the the the interest interest interest or or or
benefit benefit benefit or or or protection protection protection of of of the the the trust. trust. trust. In In In any any any
case case case when when when the the the instrument instrument instrument of of of trust trust trust is is is silent silent silent or or or
aphonic aphonic aphonic about about about the the the authority authority authority of of of the the the trustees trustees trustees in in in
that that that regard regard regard or or or that that that it it it does does does not not not expressly expressly expressly or or or
impliedly impliedly impliedly prohibit prohibit prohibit the the the trustees, trustees, trustees, then then then surely surely surely
in inin such such such a a a case case case the the the Trustees Trustees Trustees can can can approach approach approach the the the
Charity Charity Charity Commissioner Commissioner Commissioner under under under section section section 36(1)(c) 36(1)(c) 36(1)(c)
for for for giving giving giving authority authority authority to to to dispose dispose dispose of of of any any any
immovable immovable immovable property property property of of of the the the public public public trust. trust. trust. The The The
present case, would, in our view, fall at
least in this category of cases enabling the
Charity Commissioner to exercise powers under
section 36 of the Act. We say so because the
subject instrument of trust does not expressly
prohibit the trustees from alienating any
trust property nor does it impliedly do so.
We have come to this conclusion on carefully
reading the instrument of trust as a whole.
Even for this reason we would conclude without
any hesitation that by virtue of section
36(1)(c), the Charity Commissioner had power
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to authorise the respondents-trustees to
dispose of the immovable property of the
public trust- in particular the one referred
to in the application under Section 36 of the
Act and the subject agreement entered with the
respondent No. 6." (Emphasis supplied)
. The Division Bench held that in the same section
two different words namely ’sanction’ and ’authorise’
have been used and therefore both the words will have to
be given different meaning. The Division Bench observed
that even if the instrument of trust prohibits trustees
either expressly or impliedly from selling the trust
property, then under clause (c), the Charity
Commissioner can authorise the trustees to sell the
trust property on terms and conditions incorporated by
the Charity Commissioner. Thus, according to the
Division Bench clauses (a) and (b) of Sub section 1 will
apply to a case where there is an express authorisation
in the instrument of trust in favour of the trustees to
sell the trust property or where there is no prohibition
in the instrument of the trust against the alienation of
the trust property by the trustees. In these categories
of cases, there cannot be a valid alienation of the
trust property without prior sanction of the Charity
Commissioner. Where there is an express or implied
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prohibition in the instrument of trust, the trustees
will have to apply for authorisation under clause (c)
and it will not be necessary for the trustees to file a
suit governed by Section 50. The Division Bench
therefore proceeded to observe that after authorisation
is granted under clause (c), the trustees will be
obliged to apply for sanction under clause (b). In our
view, only this part of the reasoning adopted by the
Division Bench is incorrect.
. Under clause (c). the Charity Commissioner can
authorise the trustees to sell the trust property only
if he satisfied that it is in the interest of the trust
that the immovable property should be disposed of.
While granting authorisation, the Charity Commissioner
is empowered to impose such conditions as he may think
fit after considering the interest, benefit or
protection of the trust. The Division Bench held that
clause (c) was brought on the statute book to prevent
the mischief caused by long delay in disposal of the
suits filed by invoking provision of Section 50 of the
said Act of 1950. While granting sanction under Clause
(b), the Charity Commissioner must be satisfied that it
is in the interests of public trust to dispose of the
property. While granting sanction, he can impose
conditions having regard to the interest, benefit or
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protection of the trust. Thus, the jurisdiction of the
Charity Commissioner under Clauses (b) and (c) is not
different. Jurisdiction under Clause (b) is to be
exercised where under the instrument of the trust the
trustees are authorised to alienate the trust property
or where there is no prohibition in the instrument of
trust against alienation of the trust property. The
jurisdiction under clause (c) has to be exercised where
there is an express or implied prohibition in the
instrument of the Trust. While exercising powers under
both the sections, the factors which are required to be
considered are the same. Therefore, once authorisation
is granted under Clause (c), it is not necessary for the
trustees to again apply for sanction as the
authorisation is bound to be in respect of a specific
property of the trust in favour of a particular buyer
and in no case it can be a general or blanket
authorisation.
. Shri Tulzapurkar relied upon the dictionary
meaning of the word "sanction" in various dictionaries.
He referred to Black’s Law Dictionary where meaning of
the word "sanction" is stated as official approval or
authorisation. In the Advanced Law Lexicon, the meaning
of the word "sanction" is again "official approval" or
"authorisation". Another meaning given to the word
"sanction" in the said Advanced Law Lexicon is "an
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express authorisation", "permission" or "recognision".
The said Law Lexicon also states that "sanction" not
only means prior approval; generally, it also means
ratification. Reliance is also placed on Stroud’s
Judicial Dictionary of Words and Phrases. The said
dictionary gives the meaning of the word "sanction" as
not only a prior approval; generally, it also means
ratification.
. Though the word "sanction" has been used in
clause (a) and (b) and the word ’authorise’ is used in
clause ’c’, both the words have the same meaning.
However, clause (b) and clause (c) operate in different
fields as indicated above.
22) Now we turn to the controversy regarding scope
of powers of the Charity Commissioner. Clause (b) after
amendment of 1971 gives power to the Charity
Commissioner to impose such conditions as the Charity
Commissioner may think fit to impose regard being had to
the interest, benefit or protection of the trust. In
clause (b), power is conferred on the Charity
Commissioner to impose conditions while granting
sanction. While imposing conditions, the Charity
Commissioner will have to keep in mind the interest,
benefit or protection of the trust. Shri. Samdani,
learned senior counsel made a submission that the
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trustees are the legal owners of the trust property and
they are not holding the property on behalf of the
beneficiaries. He submitted that the trust property
vests in the trustees for the benefit of the
beneficiaries. He placed reliance on the decision of
the Apex Court in the case of W.O.Holdsworth and others
v. The State of Uttar Pradesh (A.I.R. 1957 S.C. 887).
The Apex Court in Paragraph no.23 has held thus :
"(23) These definitions emphasize that the
trustee is the owner of the trust property and
the beneficiary only has a right against the
trustee as owner of the trust property. The
trustee is thus the legal owner of the trust
property and the property vests in him as
such. He no doubt holds the trust property
for the benefit of the beneficiaries but he
does not hold it on their behalf. The
expressions "for the benefit of" and "on
behalf of" are not synonymous with each other.
They convey different meanings."
. The Apex Court, in the said case was considering
a question relating to interpretation of Section 11(1)
of the U.P. Agricultural Income Tax Act, 1948. The
Appellants before the Apex Court were the trustees of
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the estate settled on trust under the last will and
testament of one J.J.Holdsworth. Under the said Act of
1949, notice of assessment of Agricultural Income-tax
was issued to the trustees. The trustees applied under
Section 24(2) of the said Act of 1949 before the
Agricultural Income Tax Board. Ultimately a statement
of case was drawn up by the Board and was submitted to
the High Court. The question of law which was referred
to the High Court for decision was "whether on the facts
and in the circumstances of the case the trustees can be
said to be holding land on behalf of beneficiaries and
can the beneficiaries be said to be jointly interested
in the land or in the agricultural income derived
therefrom within the meaning of S.11(1) of the said Act
of 1948". The High Court answered the question by
holding that the trustees could be said to be holding
land on behalf of beneficiaries, but it cannot be said
that beneficiaries were jointly interested in the land
or the agricultural income. In the said context, the
Apex Court has made the observations which are quoted
above. In paragraph no.24, the Apex Court observed
thus :
"If on a true reading of the provisions of the
deed of trust the interest which is created in
the beneficiaries is a separate or individual
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interest of each of the beneficiaries in the
land or in the agricultural income derived
therefrom, merely because they have a common
interest therein, that cannot make that
interest a joint interest in the land or in
the agricultural income derived therefrom.
The words "jointly interested" have got to be
understood in their legal sense and having
been used in a statute are not capable of
being understood in a popular sense as meaning
a common interest or an interest enjoyed by
one person in common with another or others."
The said decision may not be helpful for deciding the
scope of powers of the Charity Commissioner of imposing
conditions in the interest and for the benefit of the
trust.
23) The Apex Court in the case of T.Venugopala Naidu
v. Venkatarayulu Naidu Charities (AIR 1990 Supreme
Court 444) was dealing with an appeal arising out of a
suit filed under Section 92 of the said Code. The
prayer in the suit was for removal of the defendant-
trustee from the office and to recover the trust
property fraudulently alienated by the defendant. In
the said suit, the trial Court permitted the trustee to
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continue and framed a scheme for future management and
administration of the trust. In the said suit, the
trustees subsequently filed an application seeking
permission to sell trust property. The trial Court
granted permission. The plaintiff and three others
applied for setting aside the order granting permission.
The application was dismissed by the trial court holding
that they had no locus. Revision application preferred
before the High Court was dismissed on the ground that
two out of four applicants who were Muslims cannot have
interest in the administration of the trust. The order
of the High court was challenged in the Apex Court. In
paragraph no.13, Apex Court held thus :
"13. The subordinate court and the High Court
did not go into the merits of the case as the
appellants were not-suited on the ground of
locus standi. We would have normally remanded
the case for decision on merits but in the
facts and circumstances of this case we are
satisfied that the value of the property which
the trust got was not the market value. Two
persons namely S.M. Mohamed Yaaseen and
S.N.M. Ubayadully have filed affidavits
offering Rs.9.00 lacs and Rs.10.00 lacs
respectively for these properties. In support
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of their bona fide they have deposited 10% of
the offer in this Court. This This This Court Court Court in in in
Chenchu Chenchu Chenchu Ram Ram Ram Reddy Reddy Reddy v. v. v. Govt. Govt. Govt. of of of Andhra Andhra Andhra Pradesh Pradesh Pradesh
(1986) (1986) (1986) 3 3 3 SCC SCC SCC 391: 391: 391: (AIR (AIR (AIR 1986 1986 1986 SC SC SC 1158) 1158) 1158) has has has held held held
that that that the the the property property property of of of religious religious religious and and and charitable charitable charitable
endowments endowments endowments or or or institutions institutions institutions must must must be be be jealously jealously jealously
protected protected protected because because because large large large segment segment segment of of of the the the
community community community has has has beneficial beneficial beneficial interest interest interest therein. therein. therein.
Sale Sale Sale by by by private private private negotiations negotiations negotiations which which which is is is not not not
visible visible visible to to to the the the public public public eye eye eye and and and may may may even even even give give give
rise rise rise to to to public public public suspicion suspicion suspicion should should should not, not, not,
therefore, therefore, therefore, be be be permitted permitted permitted unless unless unless there there there are are are
special special special reasons reasons reasons to to to justify justify justify the the the same. same. same. It It It has has has
further further further been been been held held held that that that care care care must must must be be be taken taken taken to to to
fix fix fix the the the reserve reserve reserve price price price after after after ascertaining ascertaining ascertaining the the the
market value for safeguarding the interest of market market value for safeguarding the interest of value for safeguarding the interest of
the endowment." the the endowment." (Emphasis supplied). endowment."
24) The submission of the learned senior counsel
Shri. Khambata was that the property held by the public
trust is to be treated on par with a public property and
therefore principles laid down by the Apex Court in the
case of Ram & Shyam Co. vs. State of Haryana [(1985) 3
SCC 267] will apply to alienation of trust property. On
this point, it will be necessary to refer to the
decision of the Apex Court in the case of Committee of
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Management of Pachaivappa’s Trust v. Official Trustee
of Madras and another [(1994) 1 SCC 475]. The subject
matter of the property in appeal before the Apex Court
was immovable property vested in the official trustee as
an executor and trustee. The dispute was regarding
grant of long term lease in respect of the said property
and exercise of supervisory jurisdiction of High Court
under Section 25 of the Official Trustees Act, 1913. A
Partnership firm applied before the High Court praying
that the Official Trustee be directed to execute a lease
agreement in favour of the said firm for a period of 50
years with an option to renew the same for further
period of 15 years. The said application was opposed by
the appellants before the Apex Court. It was contended
that grant of such long term lease was not in the
interest of the trust and in fact it would be
detrimental to the interest of the trust. The official
trustee submitted a report recording no objection for
issuing a direction for the execution of long term
lease. A supplementary report was filed by Official
trustee putting on record the terms of the proposed long
term lease. The learned Single Judge of the High Court
disposed of the said application by treating the same as
one under Official Trustees Act, 1913. The learned
Single Judge held that it was in the best interest of
the trust to lease out the property. The learned Single
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Judge directed the official trustee to lease the portion
of the property on the terms and conditions indicated in
the order.
. The order of the learned single Judge was
challenged in appeal before a Division Bench of the High
Court. Submission before the Division Bench was that
the Appellant was not opposed to grant of lease but the
lease should have been given by a public auction. The
Division Bench refused to interfere with the order of
learned Single Judge by holding that the learned Single
Judge had taken into consideration the rent, nature of
the property, situation and purpose for which the lease
is asked for and had come to the conclusion that the
direction as prayed should be given subject to certain
terms and conditions as provided in his order.
. Subsequently an application was filed before the
learned Single Judge for cancellation of direction
issued earlier. The said application was filed by a
third party one Mohammed Ummer Sheriff. In the said
application, he expressed willingness to pay monthly
rent of Rs.3,000/- and to pay security deposit of
Rs.35,000/- and an advance amount of Rs.15,000/-. The
Official Trustee, therefore, filed an application for
modification of the original order passed by the learned
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Single Judge. By the said application a prayer was made
for modification of the conditions incorporated in the
original order passed by the learned Single Judge. The
Division Bench of the High Court allowed the application
for modification and modified the terms and conditions
in the original order. The order passed by the Division
Bench was challenged before the Apex Court. The Apex
Court dealt with Section 25 of the said Act of 1913
which reads thus :
"25. Power of High Court to make orders in
respect of property vested in Official
Trustee. - The High Court may make such
orders as it thinks fit respecting any trust
property vested in the Official Trustee, or
the income or produce thereof."
. Section 26 of the said Act of 1913 provides that
an order under Section 25 may be made on the application
of any person beneficially interested in any trust
property or by any trustee of the trust. The Apex Court
noted that the Act does not envisage an application
being moved by any other person. The question before
the Apex Court was whether the application made at the
instance of the 2nd Respondent M/s R.V.A. & Company was
maintainable. The Apex Court referred to its earlier
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decision in the case of Chenchu Rami Reddy and another
v. The Government of Andhra Pradesh and others [(1986)
3 SCC 391)]. In the said decision, the Apex Court had
observed that the trustees or persons authorised to sell
by private negotiations, can, in a given case, enter
into a secret or invisible underhand deal or
understanding with the purchasers at the cost of the
concerned institution. The Apex Court in the said case
held that those who are willing to purchase by private
negotiations can also bid at a public auction. The Apex
Court in the said case of Chenchu Rami Reddy v. Govt.
of Andhra Pradesh (supra) held as under :
"Why then permit sale by private negotiations
which will not be visible to the public eye
and may even give rise to public suspicion
unless there are special reasons to justify
doing so? And care must be taken to fix a
reserve price after ascertaining the market
value for the sake of safeguarding the
interest of the endowment."
While dealing with the powers of Official Trustee, the
Apex Court in paragraph no. 21 and 22 of the decision
in "Committee of Management" held as under :
"21. In B. Muniswami Naidu v. Official
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: 65 :
Trustee while referring to the duties of
Official Trustee, it has been held :
"So long as the property is vested in the
Official Trustee, it it it will will will be be be the the the duty duty duty of of of the the the
Official Official Official Trustee Trustee Trustee to to to take take take such such such steps steps steps and and and
conduct conduct conduct himself himself himself in in in such such such a a a manner manner manner as as as to to to make make make
the the the trust trust trust get get get the the the maximum maximum maximum advantage advantage advantage of of of any any any
transaction without prejudice to the security transaction transaction
and safety of the trust property itself."
22. In the said case, it has been further
held that if the Official Trustee himself
wants to lease out the property the normal
procedure to be adopted is by public auction.
The said view is in consonance with the law
laid down by this Court in the context of
alienation of public property."
In paragraph Nos.27 and 28, the Apex Court held as
under:
"27. In Chenchu Rami Reddy v. Govt. of A.P.
While dealing with sale of property of a
religious endowment governed by the Andhra
Pradesh Charitable and Hindu Religious
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Institutions and Endowments Act, 1966, this
Court has held that what is true of public
property is equally true about the property
belonging to the religious institutions and
endowments and has further pointed out: (SCC
pp. 397-98, para 10)
"...the trustees or persons authorised to sell
by private negotiations, can, in a given case,
enter into a secret or invisible underhand
deal or understanding with the purchasers at
the cost of the concerned institution. Those Those Those
who who who are are are willing willing willing to to to purchase purchase purchase by by by private private private
negotiations negotiations negotiations can can can also also also bid bid bid at at at a a a public public public auction. auction. auction.
Why Why Why would would would they they they feel feel feel shy shy shy or or or be be be deterred deterred deterred from from from
bidding bidding bidding at at at a a a public public public auction? auction? auction? Why Why Why then then then permit permit permit
sale sale sale by by by private private private negotiations negotiations negotiations which which which will will will not not not be be be
visible visible visible to to to the the the public public public eye eye eye and and and may may may even even even give give give
rise rise rise to to to public public public suspicion suspicion suspicion unless unless unless there there there are are are
special special special reasons reasons reasons to to to justify justify justify doing doing doing so? so? so? And care
must be taken to fix a reserve price after
ascertaining the market value for the sake of
safeguarding the interest of the endowment."
28. The The The aforesaid aforesaid aforesaid observations observations observations in in in the the the context context context
of of of public public public property property property and and and property property property belonging belonging belonging to to to
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religious religious religious and and and charitable charitable charitable endowments endowments endowments and and and
institutions would equally apply to trust institutions institutions would equally apply to trust would equally apply to trust
property as in the present case." property property as in the present case." as in the present case."
In Paragraph 29, the Apex Court proceeded to hold as
under :
"29. The Division Bench of the High Cout has
held that although the Official Trustee, if he
were to lease out the property, should have
done so by public auction but since lease was
being granted under order passed by the High
Court after being satisfied that the terms are
fair and just, there was no need to go for a
public auction. This raises the question -
how would the court satisfy itself that the
terms are just and reasonable? For such
satisfaction the court must have adequate
material to make a proper assessment. This
cannot be possible on the basis of the terms
offered by the applicant approaching the
Court. Whether the said terms are just and
reasonable, and in the interest of the trust,
can be determined by making a comparative
assessment of competing offers and, therefore,
it is necessary that the persons interested in
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taking the lease must have an opportunity to
make an offer. Public auction is the means
for enabling such persons to make their
offers. In the matter of exercise of it
supervisory jurisdiction under Section 25 of
the Act the High Court has to be guided by the
same consideration which governs the
administration of trust property by the
Official Trustee, namely, "to make the trust
get the maximum advantage of a transaction".
Since public auction after adequate publicity
ensures participation of those who are
interested and anxious to compete, it normally
secures the best price. There appears to be
no reason why this procedure of public auction
should not be adopted when the lease is to be
granted under an order passed by the High
Court in exercise of the jurisdiction under
Section 25 of the Act. It It It is is is no no no doubt doubt doubt true true true
that that that an an an order order order under under under Section Section Section 25 25 25 of of of the the the Act Act Act is is is
passed passed passed in in in a a a judicial judicial judicial proceeding proceeding proceeding conducted conducted conducted in in in
open open open court court court under under under public public public gaze. gaze. gaze. This This This
necessarily necessarily necessarily postulates postulates postulates adequate adequate adequate publicity publicity publicity of of of
the the the matter matter matter under under under consideration consideration consideration to to to enable enable enable
persons persons persons having having having an an an interest interest interest to to to appear appear appear and and and put put put
forward forward forward their their their point point point of of of view view view before before before the the the court. court. court.
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IfIfIf lease lease lease is is is granted granted granted by by by the the the court court court on on on the the the basis basis basis
of of of an an an application application application submitted submitted submitted by by by an an an applicant applicant applicant
without without without notice notice notice to to to others others others who who who may may may also also also be be be
interested interested interested in in in the the the lease lease lease the the the consequence consequence consequence would would would
not not not be be be very very very different different different from from from that that that when when when a a a lease lease lease
isisis granted granted granted in in in the the the secrecy secrecy secrecy of of of an an an office. office. office. In
order to ensure participation by every person
interested in making an offer it is necessary
that there should be vide publicity about the
proposal to give the lease and the lease be
granted either by inviting bids at a public
auction or by inviting sealed offers by a
specified date." (Emphasis supplied).
There is no reason why the law laid down by the Apex
Court by the said decision should not be applied to an
alienation governed by Section 36 of the said Act of
1950.
25) The Division Bench in the case of M/s A.R. Khan
Construwell & Co. (supra) has referred to the decision
of the Apex Court in the case of Mehrwan Homi Irani &
Anr. Vs. Charity Commissioner, Bombay & Ors. (A.I.R.
2001 SC 2350). The subject matter of the case before
the Apex Court was a property of a Public Trust duly
registered under said Act of 1950. The trustees of the
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trust received an offer from the fifth Respondent before
the Apex Court for acquiring the trust property. The
trustee entered into an agreement of the lease with
fifth Respondent whereby two acres of trust property was
to be alienated and given on lease to the fifth
Respondent for a period of 99 years and the fifth
Respondent agreed to construct eight blocks of area of
450 sq. ft each for the benefit of the trust which
would form part of sanatorium of the trust. The
trustees applied for permission under section 36(1) of
the said Act of 1950. The Charity Commissioner on the
said application advised the trustees to give publicity
of the intended transaction of lease. Accordingly
advertisements were published in daily newspapers at the
instance of the Appellants. On the basis of the said
advertisements, two offers including the offer by the
fifth Respondent were received. The trustees accepted
the offer of the fifth Respondent. The Appellants
before the Apex Court intervened in the proceedings and
contended that the trustees had no power to grant long
lease. The Charity Commissioner proceeded to grant
sanction in favour of the trustees for alienation of the
trust property in favour of the fifth Respondent. The
order of the Charity Commissioner was challenged by the
Appellants before the High Court by filing a writ
petition. The contentions of the Appellants was there
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: 71 :
could be a better proposal from other parties. The High
Court, however upheld the decision of the Charity
Commissioner. The Apex Court noted that important point
to be considered was whether agreements entered into
between the trustees and the fifth Respondent were
capable of carrying out the objects of the trust to
provide a Sanatorium for convalescing and sick persons.
The Apex Court noted that there were offers received
from well known charitable institutions by the trustees.
The Apex Court proceeded further to direct as under :
"However, we are told that there were some
other offers also from some well known
charitable institutions. In In In the the the best best best
interests interests interests of of of the the the Trust Trust Trust and and and its its its objects, objects, objects, we we we
feel feel feel it it it appropriate appropriate appropriate that that that respondents respondents respondents Nos. Nos. Nos. 2 2 2
to toto 4 4 4 should should should explore explore explore the the the further further further possibility possibility possibility of of of
having having having agreements agreements agreements with with with better better better terms. terms. terms. The The The
objects objects objects of of of the the the Trust Trust Trust should should should be be be accomplished accomplished accomplished in in in
the the the best best best of of of its its its interests. interests. interests. Leasing out of
major portion of the land for other purposes
may not be in the best interests of the Trust.
The The The Charity Charity Charity Commissioner Commissioner Commissioner while while while granting granting granting
permission permission permission under under under Section Section Section 36 36 36 of of of the the the Bombay Bombay Bombay
Public Public Public Trusts Trusts Trusts Act Act Act could could could have have have explored explored explored these these these
possibilities. possibilities. possibilities. Therefore, Therefore, Therefore, we we we are are are constrained constrained constrained
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to toto remit remit remit the the the matter matter matter to to to the the the Charity Charity Charity
Commissioner Commissioner Commissioner to to to take take take a a a fresh fresh fresh decision decision decision in in in the the the
matter. matter. matter. There There There could could could be be be fresh fresh fresh advertisements advertisements advertisements
inviting inviting inviting fresh fresh fresh proposals proposals proposals and and and the the the proposal proposal proposal of of of
the the the 5th 5th 5th respondent respondent respondent could could could also also also be be be considered. considered. considered.
The The The Charity Charity Charity Commissioner Commissioner Commissioner may may may himself himself himself formulate formulate formulate
and and and impose impose impose just just just and and and proper proper proper conditions conditions conditions so so so that that that
ititit may may may serve serve serve the the the best best best interests interests interests of of of the the the Trust. Trust. Trust.
We direct that the Charity Commissioner shall
take a decision at the earliest. We allow the
appeal as indicated above and remit the matter
to the Charity Commissioner in modification of
the orders of the High Court in Writ Petition
and that of Charity Commissioner." (Emphasis
supplied).
26) The submission of Shri. Tulzapurkar, learned
senior counsel was that the decision of the Apex Court
in the case of Mehrwan (supra) does not lay down any
proposition of law and the said case is decided on its
peculiar facts. This submission is not correct. The
Apex Court does hold that the Charity Commissioner while
exercising the power under Section 36(1) must explore
possibility of having a deal of the Trust property on
better terms as the object of the Trust should be
accomplished in the best of its interest.
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. Shri Tulzapurkar relied upon the decision of the
Supreme Court in the case of Tribhovandas Purshottamdas
Thakkar v. Ratilal Motilal Patel and others (AIR 1968
Supreme Court 372). He relied upon the observations of
the Court to the effect that Section 36 imposes only a
fetter upon the power of the trustee. The relevant
portion of the decision of the Apex Court relied upon by
Shri Tulzapurkar reads thus :
"For the purpose of te present case, we do not
deem it necessary to express any opinion on
the question whether a sale in exercise of
authority derived from the trustees, e.g. a
covenant for sale under an English mortgage
executed by the trustees or a sale in terms of
a consent decree attracts the application of
S.36 of Act. We have no doubt, however, that
the Legislature did not intend to put any
restriction upon the power of the Civil Court
executing a decree for recovery of money due
from the trust, by sale of the property of the
trust. The section imposes a fetter upon the
power of the trustees: it it it is is is not not not intended intended intended
hereby hereby hereby to to to confer confer confer upon upon upon the the the Charity Charity Charity Commissioner Commissioner Commissioner
an an an overriding overriding overriding authority authority authority upon upon upon actions actions actions of of of the the the
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: 74 :
Civil Court in execution of decrees." Civil Civil Court in execution of decrees." Court in execution of decrees."
(Emphasis supplied)
. The question before the Apex Court was whether
expression ‘sale’ in Clause (a) of Section 36 would only
mean transfer of property by the trustees for a price or
will include a sale of the property of a public trust in
execution of a decree of a Civil Court for recovery of
debt due by the trust. The said decision cannot be read
as laying down a ratio that powers of the Charity
Commissioner under Section 36 are limited either to
grant of sanction or to reject sanction. The said
decision is not helpful in deciding the scope of powers
of Charity Commissioner under Section 36.
27) While exercising powers under Section 36 of the
said Act of 1950, the Charity Commissioner has to
safeguard the interests of the trust as well as the
interests of beneficiaries. The learned Single Judge in
the case of Arunodaya Prefab (supra) has held thus :
"It may not be open for the Charity
Commissioner to consider the offers of third
parties except only to the extent that they
might disclose to him what might be the market
value of the land only for the limited
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: 75 :
purposes of ascertaining the market value of
the land."
. The said view was rightly criticised before us
by pointing out that if Charity Commissioner was to
invite offers only for the purpose of ascertaining the
market value of the property, no genuine buyer or
purchaser will come forward and offer a genuine
competitive price. It was submitted that no genuine
buyer would be interested in coming forward with the
offer if his offer is to be considered only for a
limited purpose of finding out as to what was the market
value on the relevant date. If offers are invited only
for this purpose, there is every possibility that the
offers will not be bonafide and genuine.
28) While exercising power either under clause (b)
or clause (c), the Charity Commissioner can impose
conditions having regard to the interest, benefit or
protection of the trust. Before passing an order of
sanction or authorisation, the Charity Commissioner has
to be satisfied that the trust property is required to
be alienated. Once the Charity Commissioner is
satisfied that the alienation of the trust property is
necessary in the interest of the trust or for the
benefit of the trust or for the protection of the trust,
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: 76 :
it is very difficult to accept the submission that the
power of the Charity Commissioner is restricted either
to grant sanction to a particular proposal of the
trustees or to reject it. It is the duty of the Charity
Commissioner to ensure that the transaction of
alienation is beneficial to the trust and its
beneficiaries. He has to ensure that the property is
alienated to a purchaser or buyer whose offer is the
best in all respects. It is not necessary in every case
that the Charity Commissioner has to ensure that
property is sold by the trustees to the person offering
highest price or consideration. What is the best offer
in the interest of the trust will again depend on facts
and circumstances of each case. In a given case, while
alienating the trust property, the trustees may provide
that as a part of consideration for alienation, the
purchaser should construct a building on a part of the
trust property for the use by the trustees for the
objects of the trust. In such a case, it may be
necessary to ascertain the reputation and capacity of
the purchaser apart from the consideration offered.
When the Charity Commissioner is satisfied that trust
property needs to be alienated and when he finds that
the offer received by the trustees may not be the best
offer, he can always direct that bids be invited by a
public notice. When a better offer is received in
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: 77 :
public bidding or auction, it is very difficult to say
that the power of the Charity Commissioner is restricted
and he cannot enjoin the trustees to sell or transfer
the trust property to a third party who has given an
offer which is the best in the interest of the trust.
The Trustees approach the Charity Commissioner only when
they are satisfied that there is a necessity to alienate
the trust property. The trustees hold the property for
the benefit of the beneficiaries and therefore once they
express desire to alienate the property, it is obvious
that Charity Commissioner can always impose condition
while granting sanction that the property shall be sold
or transferred to a person who has come with an offer
which is the best offer in the interests of the trust.
The Section gives a power to the Charity Commissioner to
impose conditions and the said conditions will include a
requirement of selling or transferring or alienating the
trust property to a purchaser who has offered the best
deal having regard to the interest and benefit of the
beneficiaries and the protection of the trust. The
power to impose conditions cannot be a limited power
when the law requires the Charity Commissioner to
exercise the said power having regard to the interest,
benefit and protection of the trust. Once the Charity
Commissioner accepts the necessity of alienating the
trust property, the trustees cannot insist that the
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: 78 :
property should be sold only to a person of their choice
though the offer given by the person may not be the best
offer. The property may be vesting in the trustees but
the vesting is for the benefit of the beneficiaries.
The Charity Commissioner has jurisdiction to ensure that
the property is sold or transferred in such a manner
that the maximum benefits are available to the
beneficiaries of the Trust. Under Clause (b) of Section
36 of the said Act, the Charity Commissioner has
jurisdiction to decide whether it is in the interest of
the trust that the property of the trust be sold or
transferred. Once the learned Charity Commissioner is
satisfied that the property is required to be
transferred or sold in the interest of the Trust, the
learned Charity Commissioner cannot remain silent
spectator when he finds that the transaction proposed by
the Trustees is not in the interest of the Trust or its
beneficiaries. Once the necessity of sale or transfer
is established, the Charity Commissioner can certainly
ensure that best available offer is accepted, so that
the transaction is for the benefit of the trust. If the
trustees were to be the final authority to judge what is
in the interest of the Trust, the legislature would not
have enacted provision requiring prior sanction. While
deciding which is the best offer, the learned Charity
Commissioner is bound to take into consideration various
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factors which cannot be exhaustively listed. However,
the paramount consideration is the interest, benefit and
protection of the trust. It is obvious from the scheme
of Section 36 that legislature never intended that
trustees could sell or transfer the trust property
vesting in them as if it was their personal property.
It is the duty of Charity Commissioner to ensure that
the property should be alienated in such a manner that
maximum benefits are accrued to the trust. The Charity
Commissioner while considering an application under
Section 36(1) of the said Act of 1950, in a given case
can opt for public auction or can invite bids.
. Thus narrow interpretation sought to be given to
the power of Charity Commissioner under clauses (a) and
(b) of Sub Section 1 of Section 36 cannot be accepted.
Thus the view taken in the case of A.R. Khan
Construwell and Co. (supra) is the correct view. The
case of Arunodaya Prefab is not correctly decided.
29) The second question referred to the Full Bench
for decision is regarding locus standi of a person who
appears before the Charity Commissioner and offers his
bid to challenge the order passed by the Charity
Commissioner. The trustees and persons having an
interest in the Trust can always challenge the order.
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We have already held that the proceeding under Section
36 of the said Act before the learned Charity
Commissioner is a judicial proceeding. The Apex Court
has held that a trust property is on par with a public
property so far as its sale or transfer is concerned.
It is, therefore, very difficult to say that such a
person who appears before the Charity Commissioner and
offers his bid has no locus standi to challenge the
final order passed by the Charity Commissioner. Such a
person will certainly have locus standi to file the
petition under Articles 226 and 227 of The Constitution
of India for challenging the final order passed under
Section 36 of the said Act. However, the scope of
challenge will be naturally limited. Such a person will
be in a position of a bidder challenging the auction or
tender process of sale of a public property. The
challenge by such a person to the order will be limited
to the decision making process of the Charity
Commissioner. In the case of A.R. Khan Construwell the
Division Bench has rightly held that after the decision
in the case of Arunodaya Prefab, the concept of locus
standi has been expanded.
30) Hence, we answer the questions referred to our
decision as under:
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(i) The power vesting in the Charity Commissioner
under Section 36 of the Bombay Public Trust Act
1950 is not confined merely to grant or refusal
of sanction to a particular sale transaction in
respect of which sanction is sought under
Section 36 of the said Act. The power of the
Charity Commissioner extends to inviting offers
from the members of the public and directing the
trustees to sell or transfer the trust property
to a person whose bid or quotation is the best
having regard to the interest, benefit or
protection of the trust. Hence we declare that
the decision of the Division Bench of this Court
in the case of M/s.Jigna Construction Co.
Mumbai v/s. State of Maharashtra and others
does not lay down correct law.
(ii) The party who comes forward and submits his
offer directly before the Charity Commissioner
and complies with other requirements as may be
laid down by the Charity Commissioner in a
pending application under Section 36 of the said
Act of 1950 has a locus standi to challenge the
final order passed in a proceeding under Section
36. However, the scope of the challenge will be
limited as indicated in paragraph 29 above.
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(iii) We direct the Office to place the Writ
Petitions before the appropriate Benches for
deciding the same in accordance with law.
(F.I. REBELLO, J.)
(SMT. V.K. TAHILRAMANI,J)
(ABHAY S. OKA, J.)
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