1

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.1745 OF 2010

CYRUS RUSTOM PATEL ...APPELLANT

VERSUS  

THE CHARITY COMMISSIONER  MAHARASHTRA, STATE & ORS. ...RESPONDENTS   

J U D G M E N T

ARUN MISHRA, J.

1. This appeal has been preferred questioning the dismissal of

the Writ Petition by the High Court, vide impugned Judgment and

Order dated 04-02-2008, thereby declining to interfere in the order

passed by the Joint Charity Commissioner on 03-07-2004 granting

sanction to development cum sale transaction.  

2. The  B.C.  Batliwala  Agiary  Trust  is  registered  under  the

Bombay Public Trusts Act, 1950 (hereinafter referred to as 'the Act').

The Trust, in its meeting dated 20-01-2003, decided to enter into an

agreement  with  M/s.  Astral  Enterprises.   It  was  noted  in  the

2

minutes of  the meeting that the tenants in the premises had, in

principle,  agreed  to  the  development  of  the  Trust  property  at

Tardeo, on the condition that the interest of the tenants would be

looked after and that the tenants would be provided flats in new

buildings on ownership basis, and that the development would be

completed in a time bound manner by the said developer.

3. The minutes of the Trustees meeting dated 20-01-2003 states

that Shri Suresh Mehta, partner of  M/s. Astral  Enterprises, had

been invited to the meeting.  It was decided that in case there was

any difficulty in carrying out the development agreement, it would

be converted into an outright sale.  The Trustee would have an exit

option.  It was decided that development would be on a time-bound

basis.  The registration charges of the deed would be borne by the

developer, as well as the cost of construction. Trustees would have

an exit option if trustees felt that it was not in the interest of the

Trust to carry on with the joint venture development; the Trustees

alone shall have the option to convert the joint venture arrangement

into  a  sale,  in  that  event  M/s.  Astral  Enterprises  would  require

paying a fixed pre-determined price to the Trust. The application

3

was filed under the provisions of Section 36 of the Act, for granting

sanction to enter into joint venture cum sale agreement between the

trust as well as the M/s. Astral Enterprises.

4. The aforesaid development agreement was with respect to “Fire

Temple”, bearing Cadastral Survey No.727 of Malabar Hill Division,

Mumbai  admeasuring  about  3012  sq.  meters,  situated  at  160

Tardeo, Mumbai.  On the said property stand a “Parsi Fire Temple”

and certain other structures that are occupied by 21 occupants in

the capacity of tenants.  There was no further availability of F.S.I.

5. It was mentioned in the application filed under Section 36 of

the Act that construction of the temple was done prior to 1940, it

was  old  and  in  a  dilapidated  condition,  and  required  extensive

repairs.  The Trust was getting a meager income from the building.

It was in need of funds to meet the objectives of the trust; as such

trustees  decided  to  develop  the  property  after  prolonged

discussions.   As  trust  had  no  such  funds  as  were  required  for

carrying out the construction work, it was considered necessary to

take help of  the developer.  M/s. Astral  Enterprises was ready to

provide  the  necessary  services  to  the  trust,  with  a  proposal  to

4

jointly develop the property. It transpires that agreement for joint

venture  development-cum-sale  had  been  entered  into  and

ultimately sale had been effected, for a sum of Rs.2, 95,00,000/-.

6. The Charity Commissioner had accorded the sanction under

Section  36  of  the  Act.   Though  it  was  noted  by  the  Charity

Commissioner  that  no  public  notice  had  been  published  in  the

newspaper  for  inviting  the  offers,  yet  for  non-publication  of  the

same in newspapers, the applicant, gave an explanation by way of

an  affidavit,  that  public  notice  was  not  mandatory  in  all  cases,

before a grant of sanction.

7. Charity  Commissioner  has  further  observed  that  it  was

concerned only with according or refusing sanction to a particular

sale which the trustees propose to make and that it  was for the

trustees to decide to whom they should sell the property, subject to

the sanction of the Charity Commissioner.  There was no necessity

to invite others by way of public advertisement. It was not open to

the Charity Commissioner to invite offers from third parties.  As per

the  development  agreement,  the  temple  would  be  renovated and

33% of the built-up area would be given out of balance F.S.I.  In

5

addition,  a  sum  of  Rs.2,95,00,000/-  as  sale  consideration  was

given; and the alienation was for the compelling necessity, and in

the interest of the public trust.  At the same time, while considering

whether the offer was proper, fair and adequate, as compared to the

market value, the Joint Charity Commissioner has observed that it

was not the case of an outright sale; and further that it was not

necessary  to  take  into  consideration  the  market  value  of  the

property as the developer had agreed to make the extension of Fire

Temple,  and  to  re-house  the  tenant,  and  to  give  33  %  of  the

constructed  portion  out  of  the  balance  F.S.I.   As  such,  the

transaction has been found by the Joint Charity Commissioner to

be in the interest of the trust and sanctioned sell and lease for 999

years of the property. It was ordered that joint venture agreement

for  development-cum-sale  with  the  Astral  Enterprises  may  be

entered into, as per MOU dated 3-04-2003, following order has been

passed:

“1. xxx xxx

2. The Trustees are permitted to enter into the joint venture agreement  coupled  with  the  sale  option  in  terms  of  the

6

memorandum  of  Understanding  dt.3.4.03  Ex.5  executed between the trustees and the Astral enterprises.

3. The Trustees are permitted to enter into joint venture with astral enterprises in terms of Memorandum of Understanding dt.3.4.03  (Ex.5) executed between the trustees and the Astral Enterprises & consequently permitted the trustees to execute a lease of the balance land i.e. the said property minus the land underneath  Agiary  building,  which  Agiary  building  land admeasures  620  sq.  mtrs  or  thereabouts  for  a  term of  999 years  at  a  token  annual  rent  of  Rs.1/-  in  favour  of  Astral Enterprises or its nominee.

4. In the event of trustees exercise the option as provided in cl.  18 of the said MOU Ex.5 they are permitted to sell  the development rights in respect of the balance land i.e. the said entire property minus the land underneath the Agiary building admeasuring  620  sq.mtrs  for  a  total  consideration  of  Rs.2, 95,00,000 (Rupees two crores ninety-five lacs only) to Astral Enterprises  and  consequently  the  trustees  are  permitted  to lease the balance land of a term of 999 years at a token annual rent of Rs.1/- in favour of Astral Enterprises or its nominee. In  the  event,  the  B.E.S.T.  Authorities  so  require  as  a precondition to providing the necessary electrical power, the trustees  are  permitted  to  transfer  such  area  as  may  be necessary  but  not  exceeding  100  sq.  m.  out  of  the  said property in favour of B.E.S.T. undertaking to accommodate a subsection.   The  trustees  are  permitted  to  hand  over  such setback area as may be ultimately determined to be handed over to the Bombay Municipal Corporation on such terms and for  such  consideration  as  may  be  stipulated  by  the Corporation or by any statutory Authority and execute such documents as may necessary or incidental for completing the process of such handling over of the setback area.  

5. Necessary and relevant documents are executed within a period of six months from the date of passing of this order for giving  effect  to  the  Memorandum  of  Understanding dt.2.4.2003 (Ex.5).All the expenses are required to be made

7

for  the  development  of  the  trust  and  for  executing  the document, shall be made by the Astral Enterprises.

6. The above permission is granted subject to the provisions and prohibition contained in any other act and laws for the time being in force, relating to trust property in question.

7. The consideration amount, income received by the trust in view of the transaction permitted shall be utilized in carrying out the objects of the trust and for protecting the interest of the trust and its property.

8. The  trustees  shall  invest  the  amount,  which  will  be received  in  this  transaction  in  the  fixed  deposits  in  any Nationalized  Bank  or  Public  Securities  of  their  choice.   It shall form the part of the corpus of the trust property.

9.  The trustees are directed to file  necessary change report under Sec.22 of the Bombay Public Trust Act, 1950 before the Competent Authority after the transaction completed."  

         (Emphasis supplied)

8. The appellant Cyrus Rustom Patel filed writ application in the

High  Court  of  Bombay.   The  High  Court  dismissed  the  same,

mainly,  on  the  ground  of  delay,  as  petitioner  was  aware  of  the

transaction w.e.f. the year 2003.  The High Court has observed that

offer made by the Nilkanth Realtors in respect of sale transaction of

an  amount  of  Rs.55  crores  was  not  proper.   It  was  to  acquire

property rights on a freehold basis and not in the form where the

setback  line  runs  through  the  Sanctum  Sanctorum.   The  High

8

Court opined that offer may have been tempting, but could not be

said to be genuine as per provisions contained in Section 36 of the

Act.  

9. It has not been disputed that so far the Municipal Corporation

of  Mumbai  has  not  granted  the  permission  for  the  aforesaid

development, as such no development has taken place.

10. The  learned  counsel  appearing  on  behalf  of  the  appellant

urged  that  in  the  instant  case,  the  Charity  Commissioner  while

granting sanction has not safeguarded the interest of the Trust. The

property is a prime property in Mumbai.   It  is  worth multi-folds

more than at what it had been sold away.  The relevant aspect to

grant sanction under Section 56 of the Act had been considered by

a Full Bench of the High Court at Bombay in Sailesh Developers v.

The Joint Charity Commissioner Maharashtra; 2007 (4) ALL MR100=

2007 (3) Bom. CR7, in which it has been held that it was open to

the Charity Commissioner to take care of the interest of the Trust in

such transactions, and if necessary, to invite the other best offers to

safeguard the interest of the Trust.

9

11. Learned counsel  for  the  appellant  has  also  relied  upon the

decisions of this Court in Chenchu Rami Reddy and Another v. Govt.

of A.P. and Others (1986) 3 SCC 391; R. Venugopala Naidu and Ors.

v. Venkatarayulu Naidu Charities and Ors. (1989) Supp. 2 SCC 356,

Bhaskar Laxman Jadhav v. Karamveer Kakasaheb Wagh Education

Society, (2013) 11 SCC 531.

12. He has submitted that sale of the property could only be done

in the prescribed method and manner in which it was to be done,

as apparent from the minutes of the meeting dated 20th January

2003, that in the said meeting only M/s. Astral Enterprises had

been invited.  The Trustees invited no other offer.  Thus, trustees

have totally failed to act in an objective manner.  No transparency

was observed while selling the valuable trust property for a paltry

sum, and that such transaction could not be said to be beneficial

for the Trust.  The trustees had failed to live upto the expectations

of  the  beneficiaries  and  creator  of  the  trust  and  to  protect  the

property of Trust.

13. On  the  other  hand,  learned  counsel  appearing  for  the

respondents contended that no case for interference was made out

10

as the market value was not required to be taken into consideration

in this case.  Tenants were to be settled, and the Temple was also to

be  protected,  and  no  other  builder  was  coming  forth  so  as  to

develop  the  property  by  keeping  intact  the  “Fire  Temple”.   The

property  was  in  a  dilapidated condition;  hence  the  decision had

been  taken  in  the  best  of  the  interests  of  the  trust  to  sell  the

property.

14. It was also submitted on behalf of the respondents that the

competent  authority  the  Joint  Charity  Commissioner  had  duly

accorded sanction under the provisions contained in Section 36 of

the  Act,  and  at  the  relevant  time,  it  was  not  open  to  Charity

Commissioner to make much interference in such a matter. It was

not open even to this Court to interfere in such a matter, in view of

the  decision  of  this  Court  in  Vedica  Procon  Private  Limited  v.

Balleshwar Greens Private Limited and Others; (2015) 10 SCC 94.

15. It  was also  urged on behalf  of  the  respondents  that  at  the

relevant time when the  matter  had been decided by the  Charity

Commissioner, the Full Bench decision of the Bombay High Court

was not available.  As per the then prevailing decision, which had

11

been  noted  by  the  Charity  Commissioner,  permission  had  been

accorded in accordance with law.  Now the Full Bench Decision of

the Bombay High Court has widened the scope of Section 36; said

decision  cannot  be  said  to  have  retrospective  effect.  It  was  also

submitted on behalf of the trust that at present the trust would not

be in a position to repay the amount of Rs.2.95 crores which had

been obtained from the developer.

16. After hearing learned counsel for the parties, first, we propose

to take note of the certain principles laid down by this Court with

respect to the duties enjoined upon the trustee in the matter of sale

of trust properties.

17. This Court in Chenchu Ram Reddy (supra) considered the sale

of immovable property belonging to public religious and charitable

endowments  by  private  negotiations.  The  Government  had

sanctioned the sale  of  land by private  negotiations for  a sum of

Rs.20, 00,000/- without recording reasons whereas, the appellants

made the offer to purchase the land for Rs.80,00,000/-.  This Court

observed that in all circumstances, the concept of an auction of the

property  was  primarily  for  the  benefit  of  the  Trust,  and  that

12

disposal  of  public  property  should  normally  be  done  by  public

auction, with full application of mind by the competent authority.

This  Court  made  the  observations  on  consideration  of  the

provisions contained in Article 14 of the Constitution of India.  This

Court held that in view of the provisions contained in Section 74 (1)

of  the  Andhra  Pradesh  Charitable  &  Hindu  Religious  and

Endowments Act 1966, Government must be satisfied that it was in

the interest of the institution or endowment to permit the sale of the

concerned  lands  otherwise  than  by  a  public  auction,  and  then

reasons to reach that satisfaction must be recorded in the order.

It  was also observed by this  Court  in  Chenchu Ram Reddy

(supra) that  public officials and public-minded citizens entrusted

with the care of ‘public property’ have to show exemplary vigilance;

the property of religious and charitable institutions or endowments

must be jealously protected.  The sale of such a property by private

negotiations which will  not be visible to the public eye, and may

even give rise to public suspicion, should not be, therefore, made,

unless there are reasons to justify the same.  This Court observed:

“10. We cannot conclude without observing that property of such  institutions  or  endowments  must  be  jealously

13

protected. It must be protected, for, a large segment of the community has a beneficial interest in it (that is the raison d’etre  of  the  Act  itself).  The  authorities  exercising  the powers  under  the  Act  must  not  only  be  most  alert  and vigilant  in  such  matters  but  also  show awareness  of  the ways of the present day world as also the ugly realities of the world of today. They cannot afford to take things at their face value or make a less than the closest-and-best-attention approach  to  guard  against  all  pitfalls.  The  approving authority must be aware that in such matters the trustees, or persons authorized to sell by private negotiations, can, in a given case, enter into a secret or invisible under-hand deal or  understanding  with  the  purchasers  at  the  cost  of  the concerned institution. Those who are willing to purchase by private negotiations can also bid at a public auction. Why would they feel shy or be deterred from bidding at a public auction?  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.  With  these words of caution, we close the matter.  

18. Again,  in  R.  Venugopala Naidu (supra), this  Court  observed

that fraudulent sale of the property of public charities by way of

private negotiations should not be permitted.  This Court further

held  that  reserved  price  should  be  fixed  after  ascertaining  the

market value and offer of higher price by filing an affidavit.  In the

aforesaid case, the Subordinate Court and the High Court, instead

of going into the merits of the case, non-suited the plaintiffs on the

14

ground of locus standi.  This Court had considered the fact that the

value of the property which the trust got was not the market value,

and quashed and set aside the sale order of the subordinate court

and the consequent sale.  Relying on Chenchu Ram Reddy (supra),

this Court observed:  

“13.  The subordinate court and the High Court did not go into the merits of the case as the appellants were non-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  ad  S.N.M. Ubayadully have filed affidavit offering Rs.9.00 lacs and Rs. 10.00 lacs  respectively  for  these  properties.  In  support  of their bonafide, they have deposited 10% of the offer in this Court.  This Court in Chenchu Ram Reddy and another v. Government of Andhra Pradesh and Others have held that the  property  of  religious  and  charitable  endowments  or institutions  must  be  jealously  protected  because  a  large segment of the community has a beneficial interest therein. Sale  by  private  negotiations,  which  is  not  visible  to  the public  eye  and  may,  even  give  rise  to  public  suspicion, should not, therefore, be permitted unless there are special reasons to justify the same. It has further been held that care must be taken to fix the reserve price after ascertaining the market value for safeguarding the interest of the endowment.

19. In Bhaskar Laxman Jadhav (supra), this Court considered the

alienation  of  the  immovable  properties  of  public  Trust  under

Section 36 of the Bombay Public Trusts Act, 1950; sanction was

15

sought from the Charity Commissioner to alienate the property of

the  public  trust,  there  was continuation of  negotiations  between

trustees  of  public  trust  and  prospective  purchasers.  There  were

successive applications submitted, seeking permission to alienate

after each negotiation.  This Court held that it would tantamount to

an abuse of the process of law and that such an act of the party

meant that they were trying to take advantage of the absence of any

clear-cut provisions under the act relating to the sale.  To prevent

the abuse, this Court considered the factual scenario that Trustees

and the petitioners had been indulging in a flip-flop, and in a sense

taking  advantage  of  the  absence  of  any  clear-cut  statutory

measures designed to prevent abuse of the process of law in the

Act.   It  was  held  by  this  Court  that  Charity  Commissioner  had

rightly rejected the first application for two reasons, firstly since the

trustees were not voluntarily selling the trust land and secondly, in

the  given  circumstances,  the  sale  transaction  was  not  for  the

benefit, and in the interest of, the Trust. This Court also considered

the background facts, as also the compromise affected between the

trustees  and  the  petitioners  in  the  High  Court  on  28-08-2008,

which  appeared  to  this  Court  to  be  suspicious.   On  an  overall

16

consideration  of  the  facts  and  circumstances  of  the  case,  it

observed  that  it  was  not  possible  to  rule  out  the  possibility  of

collusion between trustees and the petitioners.

20. This  Court  in  Bhaskar  Laxman  Jadhav (supra)  further

observed that the lack of  bonafide of trustees and the petitioners

could not have been overlooked by the High Court.  Therefore, the

safest course was to sell off the trust land through auction. It was

also observed that it was quite clear that due to the passage of time,

the value of the trust land had increased considerably, and that it

would be in the best interest of the Trust if the maximum price is

made available for the trust land from the open market.  This Court

also observed that under Section 36 of the Act enjoins duties on the

Charity Commissioner to consider the sale of immovable property of

the  trust  with  regard  being  had  to  the  “interest,  benefit  or

protection”  of  the  trust.   This  Court  considered  the  decision  in

Chenchu Rami Reddy case  (supra) and held that the only course

available to the High Court was to mold the relief and to direct the

Charity  Commissioner  to  have  a  relook  at  all  the  bids  received

17

pursuant  to  the  public  notice  dated  19-02-2007.   In  Bhaskar

Laxman Jadhav (supra), this Court observed:

“30.  It  was  also  submitted  that  since  Shri  Vyankatesh Mandir  Trust  is  a charitable trust,  it  was expected of  the High  Court  (as  also  this  Court)  to  subserve  the  larger interest of the charitable trust. In achieving this, necessary and  appropriate  orders  can  be  passed  for  the  ultimate benefit  of the trust.  In support of this submission learned counsel for respondent No.1 relied on Chenchu Rami Reddy v. Government of Andhra Pradesh (1986) 3 SCC 391,  R. Venugopala Naidu v. Venkatarayulu Naidu Charities (1989) Supp  2  SCC  356,  and  Mehrwan  Homi  Irani  v.  Charity Commissioner (2001) 5 SCC 305.

xxxxxxxxxxxxxxx

49. It appears to us that another factor that weighed with the High Court in this regard was the submission of the learned Assistant  Government  Pleader  that  the  Charity Commissioner had received an offer higher than that given by respondent No.1. Therefore, it is quite clear that due to the passage of time, mainly because of the flip-flop of the trustees and the petitioners, the value of the Trust land had increased considerably. In these circumstances, it would be in  the  best  interest  of  the  trust  if  the  maximum price  is available for the Trust  land from the open market.  While this may or may not have been a consideration before the High Court, it is certainly one of the considerations before us  for  not  interfering  with the  order  passed by the  High Court,  even  though  it  may  have,  in  a  loose  sense, over-stepped its jurisdiction.

50. Section 36 of the Act clearly provides that the trustees may be allowed by the Charity Commissioner to dispose of immovable property of the trust with regard being had to the "interest, benefit or protection" of the trust. It cannot be

18

doubted that the interest of the trust would be in getting the maximum for its immovable property.

xxxxxxxxxxxxxxxxxxxxxxxx

53.  In  Mehrwan  Homi  Irani (2001)  5  SCC  305,  it  was categorically  held  that  the  Charity  Commissioner  while granting sanction under Section 36 of the Act, must explore the  possibility  of  getting  the  best  price  for  the  trust properties. In keeping with this, the Charity Commissioner was directed to issue a fresh advertisement for leasing out the  trust  property  and  "formulate  and  impose  just  and proper conditions so that it may serve the best interests of the  Trust."  The observations  of  this  Court  and directions given are as follows:-

“9.... In the best interests of the Trust and its objects, we feel it appropriate that Respondents 2 to 4 should explore  the  further  possibility  of  having  agreements with better terms. The objects of the Trust should be accomplished in the best of its interests. Leasing out of a major portion of the land for other purposes may not be  in  the  best  interests  of  the  Trust.  The  Charity Commissioner while granting permission under Section 36  of  the  Bombay  Public  Trusts  Act  could  have explored  these  possibilities.  Therefore,  we  are constrained  to  remit  the  matter  to  the  Charity Commissioner  to take a fresh decision in the matter. There  could  be  fresh  advertisements  inviting  fresh proposals and the proposal of the 5th respondent could also  be  considered.  The  Charity  Commissioner  may himself  formulate  and  impose  just  and  proper conditions so that it may serve the best interests of the Trust.  We direct  that  the Charity Commissioner shall take a decision at the earliest.”

54.  Following the consistent  view taken by this  Court  as well as the language of Section 36 of the Act, we have no hesitation in concluding that the only course available to the

19

High Court was to mould the relief and direct the Charity Commissioner  to  have  a  re-look  at  all  bids  received pursuant to the public notice dated 19-2-2007.”

21. Before coming to the facts and circumstances of the case, we

propose to take note of the decision relied upon by the respondent-

developer in Vedica Procon Private Limited (supra). In that case, this

Court considered irregularity in the conduct of sale of the property.

It  was observed that  duty of  the  Court  was to satisfy  itself  that

having regard to the market value of the property, the price offered

was reasonable and when rights had been acquired as per the law,

it  could  not  be  disturbed.   No  subsequent  higher  offer  can  be

considered as a valid reason.  Once the Court reaches a conclusion

that adequate price was offered, a subsequent increase in the value,

or  any subsequent  higher  offer,  is  of  no avail.  In case  after  the

auction the value of the properties had increased, it would not be a

ground to recall the auction, and to interfere in the auction sale.

The offer of a higher price than that of the successful bidder was

made  after  the  sale  had  been  confirmed,  and  there  were  no

allegations of fraud, irregularity, and inadequacy of price when the

sale was confirmed.  This Court has observed:

20

"47.A survey of the above-mentioned judgments relied upon by the first respondent does not indicate that this Court has ever laid down a principle that  whenever a higher offer  is received in respect of the sale of the property of a company in liquidation,  the  Court  would  be  justified  in  reopening  the concluded proceedings.  The earliest judgment relied upon by the first respondent in Navalkha & Sons laid down the legal position very clearly that a subsequent higher offer is no valid ground for refusing confirmation of a sale or offer  already made.  Unfortunately, in Divya Mfg. Co. this Court departed from the principle laid down in Navalkha & Sons.  We have already explained what exactly is the departure and how such a departure was not justified.

22. The provisions contained in Section 36 of the Act are extracted

hereunder:

36. Alienation of immovable property of public 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 to a public trust, shall be valid without the previous sanction of the  Charity  Commissioner.  Sanction  may  be  accorded subject to such conditions 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.

21

(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 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.

It  is  apparent  from the  provisions  of  Section  36  that  sale,

exchange  or  gift  of  any  immovable  property  or  lease,  extending

beyond 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  not  be  valid  without

previous sanction of the Charity Commissioner.

22

23. The power to grant sanction has to be exercised by the Charity

Commissioner, taking into consideration three classic requirements

i.e.  “the  interest,  benefit,  and  protection”  of  the  Trust.  The

expression  that  sanction  may  be  accorded  subject  to  such

conditions  as Charity  Commissioner  may think fit  under  section

31(1)(b) and Section 36 (1)(c). The Charity Commissioner has to be

objectively  satisfied  that  property  should  be  disposed  of  in  the

interest of public trust; in doing so, he has right to impose such

conditions as he may think fit, taking into account aforesaid triple

classic requirements.  It is also open to the Charity Commissioner,

in  exercise  of  power  of  Section  36(2)  of  the  Act,  to  revoke  the

sanction, given under clauses (a) and (b) of Section 36 of the Act, on

the  ground  that  the  sanction  had  been  obtained  by  fraud  or

misrepresentation  or  those  material  facts  have  been  suppressed

while  obtaining  sanction.   The  intendment  of  the  revocation

provision is also to sub-serve the interest, benefit, and protection of

the Trust and its property.

24. In  the  instant  case,  the  Joint  Charity  Commissioner  was

required to consider the interest and benefit of the Trust.  We are

23

compelled to observe that Joint Charity Commissioner has totally

abdicated its duty, and failed to act as per the mandate of Section

36.   The observations made by Joint Charity Commissioner in its

Order  clearly  reflect  that  Charity  Commissioner  has  failed  to

exercise the duties enjoined upon to protect trust under Section 36

of  the  Act.   It  has  not  considered  the  interest,  benefit,  and

protection of the trust at all. The order is wholly perverse.  Joint

Commissioner  abdicated  its  responsibilities,  in  as  much  as  it

observed that it was the outlook of the Trust as to whom it wanted

to sell the property, and as certain development was to be made; as

such market value of the property was not a relevant consideration.

There is the sale made in the form of Joint Venture development

cum sell agreement and lease was for 999 years.  Right from the

beginning, it was to be a joint venture agreement coupled with a

sale option,  as apparent from the minutes of  the meeting of  the

trust.   The trustees had been acting in collusion with developer

even before resolution had been passed.  Negotiations were going on

with M/s. Astral Enterprises- developer.

24

25. It was not disputed at Bar, by the trust or the developer, that

it was a case of the sale, and right from beginning an option for sale

was made. No effort has been made by the Trust, in case the sale

was necessary, to ascertain the real market value of the property,

nor has it been ascertained by the Joint Charity Commissioner. The

property is located in a prime location of the city of  Mumbai,  at

Malabar Hill  Division near Central  Mumbai Railway Station,  and

that  the  market  value  was,  obviously,  sky  high  as  compared  to

paltry sum offered.  

26. This is a prestigious locality, where one would cherish to own

a property, and in the true sense, it would be like a treasure house.

We unhesitatingly take judicial notice of the fact, that such a huge

area could not have been sold for a paltry sum of Rs.2,95,00,000/-.

Trustees, as well as Joint Commissioner, have failed to act in the

interest, benefit and to protect the Trust, and the same could not

have been sold by such private negotiations.  In our opinion, the

value  was  many  a  time  more  at  the  time  of  entering  into  the

agreement.  The paltry sum that was reserved by the Trust could

not be said to be in the interest and benefit of the trust.  Merely

25

obtaining  a  valuation  report,  from  a  person  of  choice,  without

making any serious effort to ascertain the market value by way of

any method known to law, and fixing its reserve price, was an eye-

wash; such a dubious transaction was not at all acceptable, and it

shocks conscience as to how such a valuable property could have

been sold at such a throw-away price.  Thus, we find, on the basis

of the principles laid down in aforesaid decisions, and even on the

basis of the decision relied upon by the learned counsel appearing

on behalf of the developer, in Vedica Procon Private Limited (supra),

that the respondents have no case at all. In the later decision, this

court unequivocally held that sale should be at market price. In this

case, no such effort had been made; it has not been considered as

to why trust should sell such a valuable property at all, and as to

what was the compelling necessity. Ordinarily, the trust property is

to be protected, such property is held in trust; in case its condition

was not good, there could be several other ways to improve it; it

could  not  have  been  achieved  by  virtually  throwing  away  the

property.

26

27. A full Bench of High Court of Bombay considered the whole

gamut of  the  powers  of  the  Charity  Commissioner  to  act  in  the

interest, for the benefit, and to protect the trust property under the

provisions of Section 36 have been considered in Sailesh Developers

(supra);  it observed:

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  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 genuinely 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 the market value was 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  authorization,  the Charity  Commissioner  has  to  be  satisfied  that  the  trust property  is  required  to  be  alienated.  Once  the  Charity

27

Commissioner  is  satisfied  that  the  alienation  of  the  trust property is necessary and in the interest of the trust or for the benefit of the trust or for the protection of the trust 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 the 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  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 interest of the trust.  The Section gives a

28

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  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 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 vested 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 to be satisfied that the property is required to be transferred or sold  in  the  interest  of  the  Trust,  the  learned  Charity Commissioner  cannot  remain  a  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 as to 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 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  the legislature  never intended that  trustees could sell or transfer the trust property vesting in them as if it

29

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.  

30. Hence,  we  answer  the  questions  referred  to  our decision as under:

(i)  The power  vesting  in  the  Charity  Commissioner  under Section  36  of  the  Bombay  Public  Trusts  Act  1950  is  not confined merely to grant or refusal 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, and protection of the trust.   Hence  we declare  that  the decision of  the Division Bench of this Court  in the case of  Jigna Construction Co. Mumbai v. State of Maharashtra and Ors. 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.

(iii) We direct the Office to place the Writ Petitions before the  appropriate  Benches  for  deciding  the  same  in accordance with law.

28. As discussed, this Court has directed a number of times that

sale  of  trust  property,  which  is  like  public  property,  if  at  all

30

necessary, is not permissible by way of private negotiations; could

be  done  only  in  exceptional  circumstances,  for  reasons  to  be

recorded.  There was no exceptional circumstance, no urgency to

throw away the valuable property of the trust, which was derogatory

to  its  interest  and  would  have  defeated  the  very  object  of  the

creation of the trust for the preservation and protection of religion

and Parsi culture.

29. The  joint  venture  development  was  not  an  intended

transaction; sale option was mentioned dubiously in the agreement;

same indicated that transaction was not bonafide. It was a cloak or

a device adopted by the Trust so as to sell the property, and the

transaction could not be said to be in the interest and benefit of the

trust  at  all.   Unfortunately,  Joint  Charity  Commissioner  totally

failed in observance of statutory duties and did not look into the

various  aspects,  neither  conducted  an  enquiry  envisaged  under

Section 36 of the Act.  Thus, we find that the transaction could not

have  been sanctioned,  considering the spirit  of  the  provisions of

Section 36 of the Act. Though the aforesaid Full Bench decision of

High Court has come later on, however, intendment of the statutory

31

provision,  even  for  a  moment,  could  not  be  to  sanction  such  a

derogatory transaction. The decisions of this court were available,

even in the absence of exposition of the ambit of Section 36 of the

Act  by  the  high court;  they  had been conveniently  ignored.  The

sanction at a glance had been granted in flagrant violation of basic

principles of the law; it cannot withstand judicial scrutiny.

30. Apart from that, it is also apparent that prayer was made in

the application to dispense with public notice in a newspaper on the

pretext that it was joint venture agreement and development was to

be made by trustees, whereas it was, in fact, not the actual factual

situation.  There was a clause for sale, and lease of 999 years would

also tantamount to  a sale,  and admittedly  sale  option had been

exercised. In the application, that was filed under Section 36 before

Charity Commissioner, supported by the affidavit of Mr.Hoshang N.

Wania, one of the trustees of B.C. Batliwala Trust, it was mentioned

in para 6 thus:

“EXEMPTION FROM INSERTING PUBLIC NOTICE IN NEWSPAPER”

(a) xxx that the arrangement contemplated in the said MOU is that of joint venture and the development is being done by the  Trustees  themselves  with  the  active  support  and

32

financial  resources  of  Astral  and  hence  the  question  of inserting public notice in newspaper does not arise.  In any event, the Trustees pray that this procedural formality may please be waived in this case.  

(b) Further, no useful purpose will be achieved by inserting Public  Notice,  as  the  said  property  is  totally  encumbered and not easily marketable in its present form.

(c)  Also,  some  of  the  disgruntled  occupants  may  find  it convenient to stop the proposal and may embroil the trust in wasteful litigation.

31. It  is  apparent  from  aforesaid  averment  that  there  was  a

necessity  of  publishing  a  public  notice  in  a  newspaper,  which

requirement was sought to be waived on the ground that it was a

joint venture and that development was being done by the trustees

themselves,  due  to  that,  a  public  notice  was  not  necessary.

However, as a matter of fact, in Joint venture itself, the sale was

contemplated and in fact it had taken place.  The issuance of public

notice could not have been waived. Inviting an offer by public notice

would  have  disclosed  actual  worth  of  property;  the  aforesaid

averments had been made designedly to evade the public notice,

and it was not in the interest or for the benefit of the Trust to act in

such a clandestine manner.  It is clear that the application under

Section 36 of the Act was not filed with clean hands, and it illegally

33

aimed  to  get  rid  of  public  notice  and  unfortunately  trustees

succeeded  in  it.   There  was  misrepresentation  made  as  to  the

actual  transaction  that  was  intended  and  had  ultimately  taken

place,  in  as  much  as  it  was  stated  in  the  application  that  no

purpose would have been served by issuance of the public notice,

as  it  was  joint  development  venture,  however,  the  property  was

totally unencumbered and easily marketable in its present form.

The Joint Charity Commissioner also omitted to take into account

actual nature of transaction how such property has to be sold and

conveniently overlooked the provisions of the Act and decisions of

this court.

32. As a matter of fact, the trust could not have entered into such

negotiations with M/s. Astral Builders without public notice, which

was admittedly not given in the instant case and, thus, the joint

venture-cum-sale and lease for 999 years amounted to a sale.  In

such a manner and method, the application could not have been

entertained  at  all,  much  less  allowed,  by  the  Joint  Charity

Commissioner.

34

33. The High Court has also failed to consider the various aspects,

and has rejected the petition mainly on the basis of the delay, that

was not very material in the facts, as no development had taken

place.  When  such  a  prime  and  valuable  public  property  was

involved, the aforesaid delay could not be said to be fatal in the

facts and circumstances of the case. The High Court has also not

looked into the market value of the property and has dismissed the

writ application on untenable and flimsy grounds.

34. We refrain from making any further remarks in the matter.

Suffice it to say that such a frivolous prayer could not have been

entertained,  and the  order  of  the  Joint  Charity  Commissioner  is

absolutely illegal.  Learned counsel for the trust stated that it would

be difficult to repay the money.  When trust has obtained money,

obviously  it  has  to  repay.   Let  trust  repay  the  amount  of

Rs.2,95,00,000/-  to  the  developer.  Considering  the  value  of  the

property and the arguments made on behalf of the trustees, we are

of the view that the trustees were not up to the task of protecting

the interest of  the trust,  and clearly colluded with the developer

while entering into such an agreement for development-cum-sale.

35

35. The order passed by the Charity Commissioner as well as by

the High Court is hereby set aside.  The appeal is allowed with the

costs of  Rs.1,00,000/- to be deposited by the developer with the

Supreme Court Advocates Bar Association Welfare Fund within six

weeks from today.

................................................J. (ARUN MISHRA)

……………………………………..….J. (MOHAN M. SHANTANAGOUDAR)

NEW DELHI; SEPTEMBER 21, 2017.