# 9 s·.c.R. 277 · CYRUS RUSTOM PATEL v. THE CHARITY COMMISSIONER MAHARASHTRA, STATE & ORS

- **Citation:** [2017] 9 S.C.R. 277
- **Court:** Supreme Court of India
- **Decided:** 2017
- **Case number:** Civil Appeal No. 1745 of2010
- **Bench:** Arun Mishra, Mohan M. Shantanagoudar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/9-s-c-r-277-cyrus-rustom-patel-v-the-charity-commissioner-maharashtra-state-ors-32381
- **Pages:** 26

## Headnote

Trusts and Charities: ·
Bombay Public Trusts Act, 1950 - s. 36 - Alienation of
immovable property of public trust - On facts, a Trust property
admeasuring about 3012 sq mtrs wherein stood a Parsi Fire Temple
and other structures with 21 tenants - Joint venture agreement for
development-cum-sale between Trust and the developer for_ a sum
A
B
c
of Rs. 2,95,00,0001- - Accord of sanction to development-cum-sale. D
tr_ansaction by Joint Charity Commis.l'ioner uls. 36 - Uphelc!.bJ! ,the
High Court ~ On appeal, held: Joini<:;ha;·ity Commissioner -ivas
'
.
4
• 1"4~.
.
..... t ..
required to consider the interest, bei1efit and protection of the trust
- Charity Commissioner totally abdicated its diit)\ and failed to ai::t
as per 'the mandate of s. 36 - Trustee as well as Joint Commissioner
E
failed to act in the interest, benefi{and to protect the Trust - Order
is wholly perverse - Such a huge area in a prestigious locality could
hot have -bee11 sold for a paltry sum of Rs.2,95,00,000/- and that
too by a private negotiations - No effort made to ascertain the
market value - No urgency to throw away the valuable property of
the tr~st, which was derogatory to its interest - Requireinent _of F ·
publishing a publip notice in a newspaper, cOuld not have b_een
waived _:___ Inviting an offer by public noiice would haye disclosed _
actual 1-Yoi:th of property _:___ Order passed by the Charity
_ Commissioner as well as High Court set aside - Trust to reP.ay the
amount of Rs.2,95,00,0001- to the developer - Imposition of cost of G
Rs.J,00,0001- on the developer - Costs.
Allowing the appeal, the Court
HELD: 1.1 It is apparent from the provisions of Section
36 of the Bombay Public Trusts Act, 1950 that sale, exchange or
277
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278
SUPREME COURT REPORTS
[2017] 9 S.C.R.
A gift of an} 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. The power to grant
B
c
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 3l(l)(b) and Section
36(l)(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 the said triple classic requirements.
It is also open to the Charity Commissioner, in exercise of power
of Section 36(2), to revoke the sanction, on the ground that the
D sanction had been obtained by fraud or misrepresentation or those
material facts have been suppressed while obtaining sanction.
[Paras 22-23)(294-F-H;. 295-A, BJ
E
F
1.2 In the instant case, the Joint Charity Commissioner
was required to consider the interest and benefit of the Trust.
The Charity Commissioner totally abdicated its duty, and failed
to act as per the mandate of Section 36. The observations made
by the Commissioner in its Order clearly reflect that Charity
Commissioner failed to exercise the duties enjoined upon to
protect trust under Section 36. It has not considered the interest,
benefit, and protection of the trust at all. The order is wholly
perverse. 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.
G Negotiations were going on with the developer. [Para 24](295C-E]
H
1.3 This is a prestigious locality, where one would cherish
to own a property. Jud

## Text

_Characters 0–39,714 of 61,953. This is a partial read: ask again with offset=39714 for what follows._

[2017] 9 s·.c.R. 277 ·
CYRUS RUSTOM PATEL
v.
THE CHARITY COMMISSIONER MAHARASHTRA,
STATE & ORS.
(Civil Appeal No. 1745 of 20 I 0)
SEPTEMBER2l,2017
[ARUN MISHRA AND
MOHAN M. SHANTANAGOUDAR, JJ;J
Trusts and Charities: ·
Bombay Public Trusts Act, 1950 - s. 36 - Alienation of
immovable property of public trust - On facts, a Trust property
admeasuring about 3012 sq mtrs wherein stood a Parsi Fire Temple
and other structures with 21 tenants - Joint venture agreement for
development-cum-sale between Trust and the developer for_ a sum
A
B
c
of Rs. 2,95,00,0001- - Accord of sanction to development-cum-sale. D
tr_ansaction by Joint Charity Commis.l'ioner uls. 36 - Uphelc!.bJ! ,the
High Court ~ On appeal, held: Joini<:;ha;·ity Commissioner -ivas
'
.
4
• 1"4~.
.
..... t ..
required to consider the interest, bei1efit and protection of the trust
- Charity Commissioner totally abdicated its diit)\ and failed to ai::t
as per 'the mandate of s. 36 - Trustee as well as Joint Commissioner
E
failed to act in the interest, benefi{and to protect the Trust - Order
is wholly perverse - Such a huge area in a prestigious locality could
hot have -bee11 sold for a paltry sum of Rs.2,95,00,000/- and that
too by a private negotiations - No effort made to ascertain the
market value - No urgency to throw away the valuable property of
the tr~st, which was derogatory to its interest - Requireinent _of F ·
publishing a publip notice in a newspaper, cOuld not have b_een
waived _:___ Inviting an offer by public noiice would haye disclosed _
actual 1-Yoi:th of property _:___ Order passed by the Charity
_ Commissioner as well as High Court set aside - Trust to reP.ay the
amount of Rs.2,95,00,0001- to the developer - Imposition of cost of G
Rs.J,00,0001- on the developer - Costs.
Allowing the appeal, the Court
HELD: 1.1 It is apparent from the provisions of Section
36 of the Bombay Public Trusts Act, 1950 that sale, exchange or
277
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278
SUPREME COURT REPORTS
[2017] 9 S.C.R.
A gift of an} 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. The power to grant
B
c
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 3l(l)(b) and Section
36(l)(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 the said triple classic requirements.
It is also open to the Charity Commissioner, in exercise of power
of Section 36(2), to revoke the sanction, on the ground that the
D sanction had been obtained by fraud or misrepresentation or those
material facts have been suppressed while obtaining sanction.
[Paras 22-23)(294-F-H;. 295-A, BJ
E
F
1.2 In the instant case, the Joint Charity Commissioner
was required to consider the interest and benefit of the Trust.
The Charity Commissioner totally abdicated its duty, and failed
to act as per the mandate of Section 36. The observations made
by the Commissioner in its Order clearly reflect that Charity
Commissioner failed to exercise the duties enjoined upon to
protect trust under Section 36. It has not considered the interest,
benefit, and protection of the trust at all. The order is wholly
perverse. 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.
G Negotiations were going on with the developer. [Para 24](295C-E]
H
1.3 This is a prestigious locality, where one would cherish
to own a property. Judicial notice is taken of the fact, that such a
huge area could not have been sold for a paltry sum of
CYRUS RVSTOM PATEL v. THE CHARITY COMMISSIONER
279
MAHARASHTRA, STATE & ORS.
Rs.2,95,00,000/-. Trustees, as well as Joint Commissioner, have A
failed to act in the interest, benefit and to protect the Trust, and
the same could not have been sold by such private negotiations.
The value was many a time more at the time of entering into the
agreement. The paltry sum that was n•served by the Trust could
- not be said to be in the interest and benefit of the trust. Merely
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. It was not considered
. as to why trust should sell such a valuable property at all, and as
8
c
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 D
throwing away the property. [Para 26] [295-H; 296-A-E]
1.4 Sale of trust property, which is like public property, if
at all 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. [Para 28][300-B-C]
_ 1.5 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. Thus, the transaction could
not have been sanctioned, considering the spirit .of the· provisions
ofSection 36 of the Act. The sanction had been granted in flagrant
violation of basic principles of the law; it cannot withstand judicial
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SUPREME COURT REPORTS
[2017] 9 S.C.R.
A scrutiny. [Para 29][300-C-F]
1.6 The 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
B a clause for sale, and lease of999 years would also tantamount to
a sale, and admittedly sale option had been exercised. [Para
30][300-G]
c
1.7 It is apparent from the 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 hy 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
D offer by public notice would have disclosed actual worth of
property; the said 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
E
F
G
the application under Section 36 of the Act was not filed with
clean hands, and it illegally 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. [Para 31)(301-DG]
1.8 The trust could not have entered into such negotiations
with the builder 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,
H much less allowed, by the Joint Charity Commissioner. The High
CYRUS RUSTOM PATEL v. THE CHARITY COMMISSIONER
281
MAHARASHTRA, STATE & ORS.
Court did not look into the market value of the property, and A
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 said delay could not be said to be fatal in the facts and
circumstances of the case. [Paras 32-33][301-H; 302-A-C]
1.9 Such a frivolous prayer could not have been
entertained, and the order of'the Joint Charity Commissioner is
absolutely illegal. When trust has obtained money, obvfously it
B
has to repay the amount of Rs.2,95,00,000/~ to the developer.
Considering the value of the property and the arguments made,
the trustees were. not up to the task of protecting the interest of C
the trust, and Clearly colluded with the developer while entering
into such· an agreement for development-cum•s·ale. The order
passed by the Charity Commissioner as well as by the High Court.
is set aside. The costs -0f Rs;l,00,000/- to be deposited .by the
developer with the S'upreine Court Advocate~ Bar Association · o
Welfare Fund. [Paras 34-35][302-D-F]
,'. '.
Sciilesh Developers v. The Joint Charity C.b'm111issioner ··
Maharashtra 2007 (4) ALL MR 100 : 2007 (3) Born.•
CR7; Chenchu Rami Reddy and Another v. Govt. of
A.P. and Others [1986] 1 SCR 989 : (1986) 3 SCC
391; R. Venugopata Naidu and Ors. v. Venkatarayulu
Naidu Charities and Ors. (1989) 1 Suppl. SCR 760 :
(1989) Supp. 2 sec 356; Bhaskar Laxman Jadhav V.
Karamveer Kakasaheb Wagh Education Society
(2012] 11 SCR 767 : (2013) 11 SCC 531; Vedica
Procon Private Limited v. Batleshwar Greens Private
Limited and Ors [2015] 8 SCR.1099 :. (2015) 10 SCC
94 - referred to.
Case Law Reference
2007 (4) ALL MR 100
referred to
. Para 10
[1986] 1 SCR 989
referred to
Para 11
[1989] 1 Suppl. SCR 760
referred to
Para 11
[2012] 11 SCR 767
referred to
Parall
[2015] 8 SCR 1099
referred to
Para 14
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SUPREME COURT REPORTS
[2017] 9 S.C.R.
A
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1745
of2010.
From the Judgment and Order dated 04.02.2008 passed by the
High Court of Bombay in Writ Petition No. 2655 of2007.
Chandra Shekhar, S. K. Verma. Saurabh Upadhyay,
B Ms.Akansha Verma, Chandok,Arindam Mukharji, Ms. Gargi Tuli, Ad vs.
for the AppeJlant.
Jaideep Gupta, Gopal Jain, Atul Yeshwant Chitale, Sr. Advs.,
Sum it Goel, Ms. S. Lakshmi Iyer, Ms. Anwesha Padhi, Ms. Kriti Awasthi
(for Mis. Parekh & Co.), Ms. SuchitraAtul Chitale, Gurjyot Sethi, Kuna I
C Cheema, N ishant Katneshwarkar, Yogesh Ahirrao, Amar Dave, Mahesh
Agarwal, Rishabh Parikh, Himanshu Satija, E. C. Agrawala, Advs. for
the Respondents.
The Judgment of the Court was delivered by
D
ARUN MISHRA, J. I. This appeal has been preferred
questioning the dismissal of the Writ Petition by the High Court, vi de
impugned Judgment and Order dakd 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.
E
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 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
F
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
G that Shri Suresh Mehta, partner of Mis. 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 wel I as the cost
H
CYRUS RUSTOM PATEL v. THE CHARITY COMMISSIONER
283
MAHARASHTRA, STATE & ORS. [ARUN MISHRA, J.]
of construction. Trustees would have an exit option if trustees felt that it A
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 was filed under the provisions of Section 36 of the Act, for
8
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
C
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 ofF.S.l.
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 D
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. Mis. Astral Enterprises was
E
ready to provide the necessary services to the trust, with a proposal to
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 ofRs.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. Ther<l was no necessity to invite others by
F
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284
SUPREME COURT REPORTS
[2017] 9 S.C.R.
A 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.J. In addition, a sum ofRs.2,95,00,000/- as sale
consideration was given; and the alienation was for the compelling
B
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necessity. and in the interest of the public trust. At the same time, while
considering whether the offer was proper, fair arid 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 rehouse 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
D.
d
passe :
"!. xxxxxx
2. The Trustees are permitted to enter into the joint venture
agreement coupled with the sale option in terms of the
E
memorandum of Understanding dtJ .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
F
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 of999 years
at a token annual rent of Rs. I/- in favour of Astral Enterprises
or its nominee.
G
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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 propertv minus the land underneath the Agiary building
admeasuring 620 sq.mtrs for a total consideration of Rs.2.
CYRUS RUSTOM PATEL v. THE CHARITY COMMISSIONER
285
MAHARASHTRA, STATE & ORS. [ARUN MISHRA, J.]
95,00,000 {Rupees two crores ninety-five lacs only) to Astral
A
Enterprises and consequently the trustees are permitted to lease
the balance land of a term of999 years at a· token annual rent of
Rs. I/- in favour of Astral Enterprises or its nominee. Jn the event,
the B.E.S.T. Authorities so require as a precoii'dition to providing
the necessary electrical power, the trustees are permitted to . 8
transfer such area as may be necessary but ~ot exceeding I 00
sq. m. out of the said property in favour ofB.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 c
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 cif passing of this order for D
giving effect to the Memorandum of Understanding dt.2.4.2003
(Ex.5).All the expenses are required to ,be made for the
development of the trust and for executing the-<locuinent, shall
be made by the Astral Enterprises.
6. The above permission is grante1i subject to the-provisions and
E
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
p
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 Seci1rities of their choice. It shall form the part of the
corpus of the trust property.
G
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)
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[2017] 9 S.C.R.
A
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.ef 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
8
was not proper. ft 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 Cou1t 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.
c
9. It has not"beeri disputed that so far the Municipal Corporation
of Mumbai has not granted the permission forthe aforesaid development,
as such no development has taken place.
I 0. 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
D 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 MRI 00= 2007 (3) Born. CR7. in which it
E 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.
11. Learned counsel for the appellant has also relied upon the
decisions of this Court .in Chenchu Rami Reddy and Another v. Govt.
F of A.P. and Others (1986) 3 SCC 391; R. Venugopa!a 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 53 l.
12. He has submitted that sale of the property could only be
G done in the prescribed method and manner in which it was to be done, as
apparent from the minutes of the meeting dated 201h January 2003, that
in the said meeting only Mis. 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
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CYRUS RUSTOM PATEL v. THE CHARITY COMMISSIONER
287
MAHARASHTRA, STATE & ORS. [ARUN MISHRA, J.]
not be said to be beneficial for the Trust. The trustees had failed to live
A
upto the expectations of the beneficiaries and creator of the trust and to
protect the property of Trust.
l 3. On the other hand, learned counsel appearing for the
respondents contended that no case for inte1ference was made out 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 corning forth so as to develop the property by
keeping intact the "Fire Temple". The prope1ty 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
B
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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
D
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 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
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be said to have retrospective effect. It was also submitted on behalf of F
the trust that at present the trust would not be in a position to repay the
amount ofRs.2.95 crores \Vhich 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 Comi with respect
to the duties enjoined upon the trustee in the matter of sale of trust
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properties.
17. This Comi in Chenchu Ram Reddy (supra) considered the
sale of immovable property belonging to public religious and charitable
endowments by private negotiatior.s. The Government had sanctioned
the sale of land by private negotiations for a sum ofRs.20.00.000/- without
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A 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 disposal of public prope11y should normally be done
by public auction. with full application of mind by the competent authority.
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This Court made the observations on consideration of the provisions
contained in Article 14 of the Constitution oflndia. This Court held that
in view of the provisions contained in Section 74 (I) oftheAndhra 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
D 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:
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"l 0. 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 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-bestattention 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
CYRUS Rl}STOM PATEL v. THE CHARITY COMMISSIONER
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MAHARASHTR_A, STATE & OR.S. [ARUN MISHRA, J.]
then permit sale by private negotiations, which will not be visible. A
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.
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18. Again, in R. Veni1gopala 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 forther 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. C
Court and the High Court, instead of going into the merits of the case.
non-suited the plaintiffs on the ground of locus standi. This Court had
considered the fact that the value of the prope11y which the trust got
was not the market vaJue, and quashed and set aside the sale order of
the subordinate court and the consequerit sale. Relying on Chenchu
Ram Reddy (supra), this Court observed:
D
'"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
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the trust got was riot the market value. Two persons namely
S.M. Mohamed Ya.aseen ad S.N.M. l)bayadully have filed
affidavit offering Rs.9.00 lacs and Rs. 10.00 lacs respectively
for these properties. In suppo11 of their bonafide, they have
deposited I 0% of the offer in this Court. This Court in Chenchu
Ram Reddy and another v. Government of Andhra Pradesh and
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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,
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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.
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19. In Bhaskar Laxman Jadhav (supra), this Cotirt considered
the alienation of the immovable pro petties of public Trust under Section
36 of the Bombay Public Trusts Act, 1950; sanction was 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 Cou1t 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 clearcut 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
D 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 Trnst. 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
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to be suspicious. On an overall 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 honafide 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 ciear 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 Comt also observed that under Section 3 6
of the Act enjoins duties on the Charity Commissioner to consider the
G 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 Cou1t was to mold the relief and to direct
the Charity Commissioner to have a relook at all the bids received
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CYRUS RUSTOM PATEL v. THE CHARITY COMMISSIONER
291
MAHARASHTRA, STATE & ORS. [ARUN MISHRA, J.]
pursuant to the public notice dated 19-02-2007. In Bhaskar Laxman A ·
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
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passed for the ultimate benefit of the trust. In support of this
submission learned counsel for respondent No. I 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 C
Irani v. Charity Co111111issio11er (200 I) 5 SCC 305.
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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 o
had received an offer higherthan that given by respondent No. I.
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
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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.
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50. Section 36 of the Act clearly provides that the trustees may
be allowed by the Charity Commissioner to dispose ofimmovable
property of the trust with regard being had to the "interest. benefit
or protection" of the trust. It cannot be doubted that the interest
of the trust would be in getting the maximum for its .immovable
G
property.
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53. In Mehrwan Homi Irani (2001) 5 SCC 305, it was
categorically held that the Charity Commissioner while granting
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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 pot1ion 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 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 respondentdeveloper in Vedica Procon Private Limited (supra). In that case, this
G 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
H valid reason. Once the Court reaches a conclusion that adequate price
CYRUS RUSTOM PATEL v. THE CHARITY COMMISSIONER
293
MAHARASHTRA, STATE & ORS. [ARUN MISHRA, J.]
was offered, a subsequent increase in the value, or any subsequent higher A
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:
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"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 C
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 D
principle laid down in Navalkha & Sons. We have already
explained what exactly is the departure and how such a departure .
was notj ustified.
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22. The provisibns contained in Section 36 of the Act are extracted
hereunder:
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36. Alienation of immovable property of public trust
[(I)] [N:otvv.ithstanding anything ~ontained in the instrument of
trust~]
(a) no sale, exchange or gift of any immovable property, and
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(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 ofnon-agricultural land ora building, belonging to-a public
trust, shall be valid without the previous sanction of the Charity
Commissioner.