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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.9936 OF 2018 ( @ SPECIAL LEAVE PETITION [C] NO.35049 OF 2013 )

SHRI AMBADEVI SANSTHA & ORS.      …  APPELLANT(S)

VERSUS

JOINT CHARITY COMMISSIONER & ORS. … RESPONDENTS

WITH   C.A. NO.9938 OF 2018 @    S.L.P. [C] NO   .35050    OF 2013

AND

C.A. NO.9937 OF 2018 @    S.L.P. [C] NO   .35051    OF 2013

J U D G M E N T

ARUN MISHRA, J.

1. The appellant­Shri  Ambadevi  Sanstha,  a registered Public  Trust

under the Bombay Public Trusts Act, 1950 (hereinafter referred as the

“Act of 1950”), has filed the instant appeals against the judgments and

orders dated 3.5.2013 and 10.5.2013 passed by the  High  Court of

Judicature at Bombay, dismissing the writ petitions filed by the

appellant herein and confirming the order dated 8.10.1998 of the Joint

Charity Commissioner with respect to sale of the properties of the Trust.

The  Trust  had  been  permitted to execute sale  deeds  of field  Survey

No.270/A/1 of  village  Khar,  Talegaon,  admeasuring 11 acres  and 28

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gunthas and field Survey No.11 of Chandpur, admeasuring 4 acres and

8 gunthas to Mr. J.M. Karwa, field Survey No.202 of Khar, Talegaon,

admeasuring 16 acres to Mr. Manish Jaikishore Karwa and 15 acres and

33 gunthas out of field Survey No.202 of Khar, Talegaon to Shri Ashish

Jaikishore Karwa and 15 acres and 15 gunthas from Survey No.12 of

Chandpur to Shri Girish Jaikishore Karwa at the rate of Rs.7,651/­ per

acre.

2. The permission had also been granted by Joint Charity

Commissioner to sell the immovable properties belonging to Trust i.e.,

House  No.210,  Plot  No.228,  Sheet  No.  92­A, admeasuring  174.8 sq.

meters situated in Ward No.15 in Bhaji Bazar Mohalla at Amravati for

Rs.3,11,000.

3. Permission had also been granted by the Joint Charity

Commissioner to sell  House No.998  in Ward No.59 Taluka Bedmaru,

District Amravati for sum of Rs.1,00,000/­ (Rupees One Lakh Only).  

4. The erstwhile Secretary of the old body of Trust had applied to the

Joint Charity Commissioner for grant of permission to sell the properties

of Trust.   At least two persons had raised objections before the Joint

Charity Commissioner that they were ready to purchase the land at a

much higher price up to Rs.25,000/­ and Rs.11,000/­ per acre.   The

newly elected body of the Trust approached the Joint Charity

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Commissioner and 15 trustees stated that Trust does not want to sell

the properties.   Despite the objection, the Joint Charity Commissioner

had granted permission to sell the properties.   Aggrieved thereby, the

writ petitions were filed before the High Court by the Trust.   The High

Court vide impugned judgments and orders has dismissed the  writ

petitions.  Hence, the appeals have been preferred.

5. The Trust has raised the ground that Joint Charity Commissioner

did not act as per intendment of Section 36 of the Act of 1950.   The

Joint Charity Commissioner has failed to observe that when the Trustees

have stated on behalf of Trust that the properties should not be sold, the

Joint Charity Commissioner ought not have passed the order directing

sale of the properties.  The principles governing exercise of power under

Section 36 had not been adhered to.  There was no necessity to sell the

Trust properties.   Apart from that, the permission for sale of properties

for a meagre amount was not at all in the interest of the Trust.   The

objections were rejected by the Joint Charity Commissioner for no good

reason.  The High Court has also committed illegality in dismissing the

writ petitions.

6. It  was contended on behalf  of  respondents that permission was

granted to sell properties in the interest of the Trust as the Trust was

not having proper income.  The land is situated at a distance of 25 kms

from Amravati.  Three out of four lands are situated about 5 kms away

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from the  locality of Khar Talegaon.   The Trust wanted to construct a

hospital.  The Trust was in dire need of money and had decided to invite

tenders on 1.6.1994 by advertisement for the sale of land and only one

offer from Mr. Naresh Laxmanrao Bhatkar was received for purchase of

land admeasuring  15  acres 15 gunthas at  Chandpur at the rate of

Rs.4,500/­ per acre.   However, the said offer was not accepted by the

Trust in the meeting dated 9.8.1994.  Thereafter, second advertisement

was  published in the local  newspapers in  November  and  December,

1994.  Varying offers for land between Rs.6,000/­ to Rs.9,000/­ per acre

were received.  Late Mr. Jaikishore Karwa submitted offer of Rs.7,651/­

per acre  for purchase of  the entire  land of the Trust  i.e.,  63 acres 4

gunthas, whereas the offer of Mr. M.K. Lakde was for Rs.9,000/­ per

acre for certain piece of land i.e., 11 acres 28 gunthas.  The offer of Late

Mr. Jaikishore Karwa, husband of respondent no.2­Smt. Tarabai, was

accepted. The entire land was sold as indicated by Mr. Jaikishore Karwa

in the names of several persons. The Trust in its meeting dated

13.3.1995 passed a resolution and accepted earnest money also.

7. It was further contended on behalf of respondents that the price

offered was proper and valuation report was called  from Talathi  with

respect to the land in question.   Talathi had indicated that the market

value of the land was Rs.8,000/­ per acre at Khar Talegaon and

Rs.5,000/­ per acre at Chandpur, at the time of issuance of

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advertisement in the year 1994.   The Joint Charity Commissioner has

considered the valuation report of the Talathi and the offer made by Mr.

Jaikishore Karwa was found to be proper.

8. It was contended by the respondents that Joint Charity

Commissioner did  not grant permission in a  mechanical  way.   Two

objectors namely Mr. Vinod Tank and Mr. Vijay Jaiswal had submitted

their  higher offers  before the  Joint  Charity  Commissioner  during  the

pendency of the application.  Mr. Vinod Tank had neither participated in

the tender process.   It was not proper for him to submit a higher offer

once the earnest money had been paid.  The offer of Mr. Vinod Tank was

rightly rejected.  Similarly, the offer made by Mr. Narayanprasad Jaiswal

and Mr. Shankarlal Jaiswal of Rs.25,000/­ per acre after 2 ½ years from

the date of acceptance of earnest money by the Trusts, was also rightly

rejected.   The Joint Charity Commissioner did not allow the objection

raised by 15 newly added trustees as there was a dispute between old

and the new trustees.   The land was sold by the previous body of the

Trust, as such the objection raised by the new body was rightly rejected.

The Trust, in fact, had not passed any resolution dated 27.9.2018 before

the decision was rendered by the Joint Charity Commissioner, not to sell

the properties.   Resolution dated 27.9.1998 was not submitted before

the Joint Charity Commissioner.   The Trustees did not pray before the

Joint Charity Commissioner to withdraw the application filed for grant of

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permission to sell the properties.   The Trust did not file the aforesaid

resolution dated 27.09.1998 even before the High Court.   No meeting

was held on  the aforesaid date.   It  was also contended on behalf  of

respondents that Trust  has filed false and fabricated  affidavit dated

18.11.1997, which was not filed by the Trust before the Joint Charity

Commissioner.   The objectors  Mr. Vinod Tank  and others have  not

approached the High Court against the order of Joint Charity

Commissioner.   In other appeals also,  it  was contended that order of

Joint  Charity  Commissioner  was appropriate  and  in  accordance with

law.

9. This  Court  has considered  the  duty  of  a  Charity  Commissioner

under Section 36 of  the Act of  1950  in the recent decision  in  Cyrus

Rustom Patel  v.  Charity Commissioner Maharashtra, (2017) 13 SCALE

44.   This Court has observed that three classic requirements have to be

considered by the Charity Commissioner i.e., the interest, benefit and

protection of  Trust.  The Charity  Commissioner has  to  be objectively

satisfied that there is necessity to dispose of the property in the interest

of public Trust.  The power of Charity Commissioner extends to inviting

offers from members of public and can also direct the trustees to sell or

transfer the trust property to a person whose bid or quotation is the

best.

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10. In Chenchu Rami Reddy v. Govt. of Andhra Pradesh, (1986) 3 SCC

391, it was observed that there has to be full application of mind while

granting permission to sell by the competent authority and the disposal

of  public  property should  normally  be  done  by  public  auction.  The

public­minded citizens have to show exemplary vigilance and the

property of religious and charitable institutions or endowment must be

jealously  protected.  Property  should  be sold  by  public  auction after

fixing reserve price. This Court observed:

“10. We cannot conclude without observing that property of such institutions or endowments must be jealously protected. It must be protected, for, a large segment of the community has 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 closest­and­best­ 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 underhand 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.”

(emphasis supplied)

11. In  R. Venugopala Naidu v. Venkatarayulu Naidu Chairities, 1989

Supp (2) SCC 356, this Court has reiterated that sale should be free from

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suspicion and reserved price should be fixed after ascertaining the

market value. This Court has observed:

“13. The subordinate court and the High Court did not go into the merits of the case as the appellants were non­suited 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 lakhs and Rs. 10 lakhs respectively for these properties. In support of their bona fides they have deposited 10 per cent of the offer in this Court. This Court in Chenchu Ram Reddy v. Government of Andhra Pradesh, (1986) 3 SCC 391, has held that the property of religious and charitable endowments or institutions must be jealously protected because a large segment of the community has 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.”

12. In  Bhaskar Laxman Jadhav v. Karamveer Kakasaheb Wagh

Education Society, (2013) 11 SCC 531, this Court took note of the fact

that Trustees and petitioners had been indulging in a flip­flop and

taking advantage of the absence of  any clear­cut  statutory  measures

designed to prevent abuse of the process of law.   The Charity

Commissioner was justified in rejecting the application for permission to

sell 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.   It

was further observed that lack of bonafide of trustees could not have

been overlooked by the High Court.  Due to passage of time, the value of

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the Trust land had increased considerably and it was necessary to have

made efforts for obtaining maximum price from the open market.   This

Court observed:

“53. In Mehrwan Homi Irani v. Charity Commr., (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.”

13. In  Cyrus Rustom Patel  (supra), the Court observed that previous

sanction of the Charity Commissioner has to be obtained for sale of the

Trust property:

“24.   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 non­agricultural land or a building, belonging to a public trust  shall not be valid without previous sanction of the Charity Commissioner.

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25.  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 sub­serve the interest, benefit, and protection of the Trust and its property.”

(emphasis supplied)

The Court has also observed that the trustees hold the property for

the benefit of the beneficiaries.   In case 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.   Best available offer should be accepted in

the case of sale.

14. When we consider the order passed by the Joint Charity

Commissioner  on  8.10.1998 in the instant  case, several  applications

were decided by common order.  The Joint Charity Commissioner noted

that objection was raised by 15 newly elected Trustees not to sell the

properties.   It was incumbent upon the Joint Charity Commissioner to

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ascertain the proper valuation of  the properties.   In the case of  time

barred  transaction, it  was held that it  was not for the Joint  Charity

Commissioner  to  reject the offer  on  the ground that transaction had

become time barred, but it was for the Civil Court to consider the said

aspect for transaction  entered into in  1990  and  1994 for  which the

applications for grant of permission were filed in 1997/1998.

15. The reserved price of various properties was also not fixed in the

instant matter and the Joint Charity Commissioner has failed to

consider what was the actual price as on the date of grant of permission

and when transactions were entered into.   The permission to sell the

properties had been granted in mechanical manner ignoring illegality of

transactions.   The action of the Trust seeking permission to sell after

accepting the earnest money was wholly improper and impermissible.

The transactions  could  not  have  been  finalised  nor  possession could

have been handed over before filing application to Joint Charity

Commissioner under Section 36 of the Act of 1950.  Prior sanction was

necessary to create any right in the properties.

16.   The offers were invited for land in 1994 and the applications were

filed in the year 1997­98 for grant of permission to sell the properties of

the Trust.  The prices of 1994, thus, could not have been considered to

be the value as on the date the permission was applied for.  Apart from

that, no serious efforts were made by the Joint Charity Commissioner to

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ascertain the value of the properties in the years 1990, 1994 or 1998.

After the advertisement inviting offer was issued in respect to lands, it is

apparent that the offer of Mr.M.K. Lakde was for Rs.9,000/­ per acre for

a part of land, nonetheless it was much more than the value accepted by

the Joint Charity Commissioner.   Merely on the ground that Trust had

accepted the earnest money from Mr. Jaikishore Karwa of Rs.21,000/­,

no equity was created in his favour to purchase the property. It was not

open to the Joint Charity Commissioner to permit the sale on the ground

of receipt of earnest money in illegal manner. Before permission to sell

no such agreement could have been entered into.   The same indicated

predisposition of Trust to sell it in illegal manner.  The valuation report

from Talathi was based on ipse dixit  indicated the value of the land as

Rs.8,000/­ per acre.  The offer could not have been accepted in view of

the available higher offers.   The Joint Charity Commissioner has failed

to protect the interest of the Trust.

17. Mere statement by the Trust that earnest money was received from

prospective purchasers of house in the year 1990, thus, it  should be

sold to them, could not be said to be a legally permissible approach.  It

was not legally permissible to receive earnest money or to create any

interest without grant of prior permission to sale.   Thus, no equitable

consideration could have arisen in favour of purchasers by the payment

of earnest money of Rs.1,60,000/­ in the year 1990.

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18. The Joint  Charity  Commissioner had also observed  in its  order

that if the request of Trust to sell the land to prospective purchaser was

rejected, the Trust was likely to be forced to face litigation at the

instance of the prospective purchasers as they claimed to be in

possession of the land for which they have paid the earnest money.  This

kind of illegal transaction could not have been sanctioned by the Joint

Charity  Commissioner.   It  was  wholly impermissible and  violative  of

intendment of the provisions contained under Section 36 of the Act of

1950.

19. No effort was made to ascertain the valuation of the house and no

reserved price  was fixed, thus, the sale  of the  properties  was  wholly

impermissible.  The Joint Charity Commissioner has also observed that

it was not for him to consider the effect of enormous delay in

approaching for grant of permission.  No such delayed application could

have been entertained to validate illegal transaction.  The Joint Charity

Commissioner has failed to consider the interest, benefit and the

protection of the property of the Trust.  The permission to  sale  with

respect to agricultural lands as well as the house was granted illegally.

20. In view of the above, it is not necessary to go into the question that

newly elected  body of the Trust  had opposed the sale of the Trust

properties by old trustees.  When there was such a dispute between old

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and new body, the Joint Charity Commissioner was required to be on

the guard and in view of the objection raised by 15 Trustees by

presenting themselves before the Joint Charity Commissioner that Trust

properties should not be sold as recorded by the Joint Charity

Commissioner could have waited and should have ascertained the

genuineness of the objection and need for sale of properties and whether

sale was in the interest of Trust.  The High Court had also recorded that

the resolution was passed on 27.9.1998 not to proceed with sale.

Though, it was disputed that it was not actually passed.   Be that as it

may.  Fact remains that Trustees themselves presented before the Joint

Charity Commissioner before arguments were heard and, in the

circumstances, it was not at all proper or justified to sell the properties

of the  Trust.  No  necessity for  sale  of the  properties  was  made out.

Thus, the sale of the Trust properties was wholly uncalled for.

21. In view of the above, we direct the Trust not to fritter away with the

properties in the manner in which it has been done.  In future also, let

the properties of the Trust and its legacy be protected and guarded and

it  should  not  be  sold  away  in the  manner  as  has  been done in the

present case.   We allow the civil appeals and set aside the judgments

and  orders  passed  by the  High  Court  and that  of the  Joint  Charity

Commissioner.  Transactions of sale are annulled.

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22. It was contended on behalf of purchasers that they have made the

land cultivable by spending the amount and have levelled it also.  As a

matter of fact, under an illegal sale, they have enjoyed the properties for

more  than two decades.   It  was wholly impermissible  and they have

earned more than the value of the land as in the Land Acquisition Act,

the compensation is granted in the absence of exemplar sale evidence on

the basis of usufruct of 10 years.  They have enjoyed the properties for

more than two decades, thus there is absolutely no equity in their favour

and they are not entitled to retain the possession of the same.  Let the

possession be restored forthwith within a period of two months, failing

which we direct the concerned authority to take the possession of land

and houses with the help of police authorities.  Let compliance of order

be reported to this Court within 10 weeks.

………………………….J. (Arun Mishra)

New Delhi; ……………………….…J. September 25, 2018. (Vineet Saran)