Writ Petition No.3764 of 2009

8th April, 2010

Petitioner Counsel: Shri. N. V. GAWARE
Respondent Counsel: Shri. K. M. SURYAWANSHI,Shri. S. P. BRAHME,Shri. P. M. SHAH,Shri. G. K. THIGLE

Cases Cited:
Sailesh Developers Vs. Joint Charity Commissioner, Maharashtra, 2007(4) ALL MR 100 (F.B.)=2007(3) Mh.L.J. 717 [Para 6]

JUDGMENT

JUDGMENT :- Heard respective counsel appearing for the parties.

2. Rule. With the consent of parties, the matter is taken up for final disposal at the stage of admission.

3. The order passed by the respondent No.1 - in-charge Joint Charity Commissioner, Maharashtra State, according permission to alienate the property of the Trust in exercise of powers conferred under section 36 of the Bombay Public Trust Act, 1950, is the subject matter of challenge in this writ petition.

4. The disputed property is Gat No.288 admeasuring 12 H., 20 R. situated at village Supa, Taluka Parner, District Ahmednagar. The property is owned by the Trust and in order to carry out the development activities initiated by the Trust and in order to secure finance, said property, is required to be alienated. A proposal in that respect was presented to the authorities. It is stated that the property is converted to non-agricultural use and the same is divided into 132 plots. It is also contention of the Trust that with a view to finalize its transaction, bids were invited and total 8 bids were received. The offer of respondent No.4 being a highest one, same was accepted. The respondent No.4 has offered to pay consideration amount of Rs.1,62,00,000/-. After acceptance of the bid floated by the respondent No.4 a memorandum of understanding is stated to have been executed between the respondent trust and respondent Nos.4 and 5, the respective purchasers. In accordance with the provisions of law permission is required to be secured for alienating the property and as such, the proposal was moved and after considering all the relevant aspects, the said proposal has been accepted by the Charity Commissioner, Maharashtra State.

5. The order passed by the Charity Commissioner is subjected to challenge by the petitioner, mainly on the ground that the value of the property is far more than what is quoted by purchasers. It is contended that the proposed transaction is not in the interest of the Trust. So far as the necessity to alienate the property for development activities of the trust is concerned, the petitioner has not challenged that part of the order. Thus, it is not disputed by either parties that there is necessity to alienate the property belonging to the Trust. The only dispute that has been raised is in respect of valuation of the property and the offer made by the prospective purchasers i.e. respondent Nos.4 and 5.

6. After presentation of the petition, on 22nd June, 2009 notices were directed to be issued and the petitioner was directed to present an undertaking that he would get a prospective buyer for the property in question who would be willing to offer a minimum amount of Rs.1,75,00,000/-. It is contended by the counsel for the petitioner in the petition that the property is worth Rs.2 to 5 crores and in this view of the matter, the transaction entered in to is questionable. It transpires that though the petitioner has tendered an undertaking, however, he could not bring forth the prospective purchaser, who would be willing to offer the price matching with the bid offer made by the respondent Nos.4 and 5. At one stage of the proceedings, the petitioner made request to the Court to permit him to withdraw the petition. This Court, however, refused the permission for withdrawal of the petition. Since the permission in respect of alienation under section 36 of the Act is subject matter of challenge and the aspects as regards the validity and justifiability of such permission needed to be examined, hence, this Court by order dated 29th of January, 2010 declined request made by the petitioner in respect of withdrawal of the petition. In this situation, the dispute brought before this Court needs to be considered. My attention is invited to provisions of Section 36(2) of the Bombay Public Trust Act. The counsel appearing for the Trust/respondent contends that the Charity Commissioner is invested with the power to revoke the sanction given under clause (a) or (b) of sub-section (1) on the grounds noted in sub-section (2) of section 36. It is the contention raised by the counsel appearing for the respondent Trust that in view of availability of remedy of approaching the Charity Commissioner as provided under section 36(2) of the Act, this petition need not be entertained. It is to be noted that the issue raised in the matter is in respect of the valuation of the property. There are conflicting reports in respect of the valuation of the property placed on record. In this situation, it is difficult to comment or to pass any verdict as regards the correctness of the reports or the offer made by the prospective buyer, and to record conclusion that offer made by prospective purchaser is matching with the prevailing market rate. Necessary guidance can be found by referring to observations by the Full Bench in the decision reported in 2007(3) Mh.L.J. 717 : [2007(4) ALL MR 100 (F.B.)] in the matter of Sailesh Developers and another Vs. Joint Charity Commissioner, Maharashtra and others.

"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 officer ?

The Full Bench while answering the issue, has recorded thus :

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 of transaction 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 Vs. State of Maharashtra and others does not lay down correct law."

7. On perusal of the judgment of Full Bench, it is clear that the Charity Commissioner is invested with the power to take decision for protecting interest of the Trust. It is open for the Charity Commissioner to permit the Trust to invite offers from members of public or to do the needful himself and to sell or transfer the Trust property to such a person whose bid or quotation is found to be in the best interest of the Trust. While arriving at this conclusion, in paragraph 28 of the judgment, the Full Bench has recorded that interest of the Trust would be paramount consideration.

"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 Commission 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, 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 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 very 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 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 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 sanction 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 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 benefit 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 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."

8. In view of the observations made by the Full Bench in the judgment cited supra, I am of the opinion that the controversy involved in the matter can be considered by the Charity Commissioner. The Charity Commissioner will have due regard to the observations made by the Full Bench noted above and will take the appropriate decision. The scope of inquiry by the Charity Commissioner shall, of course, be restricted to consider whether the offer made by the prospective purchaser can be accepted being in the best interest of Trust. The Charity Commissioner may have liberty to pass appropriate orders for protecting the interest of the Trust. The Charity Commissioner shall have all the options open to protect the interest of the Trust.

9. In this view of the matter, the order passed by the Charity Commissioner on 30.3.2009 in Application No.J-4/61/2008 under section 36(1)(a) of the Bombay Public Trust Act, 1950 is quashed and set aside and the matter is remitted back to the Charity Commissioner for fresh determination in accordance with the above observations made by this Court. The Charity Commissioner may decide the matter as expeditiously as possible preferably within three months from today. The parties agree to appear before the Charity Commissioner on 26th April, 2010 and as such, no separate notice requiring their presence would be necessary. Rule is accordingly made absolute. No costs. Authenticated copy be supplied to the parties as per their request.

10. In view of the disposal of the petition, pending civil application, if any, does not survive and stands disposed of.

Ordered accordingly.