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Judgment
R.M. Savant, J.—The challenge in the above petitions filed under Article 226 of the Constitution of India, is to the order dated 8-5-2000 passed by the Charity Commissioner in exercise of the powers u/s 36 of the Bombay Public Trust Act, by which order the sanction was granted for sale of the property in question in favour of the respondent No. 3 in the above petition.
The question poised in the above petitions is whether in view of Clause 6 of the Lease Deed dated 1-9-1975, the permission of the Charity Commissioner u/s 36(1) of the Bombay Public Trust Act, 1950 (for the sake of brevities, hereinafter referred to as the said "Act") is a mere formality and that the Charity Commissioner has to grant such permission for the asking.
To appreciate the controversy, the factual matrix needs to be stated, which is stated thus :
The subject-matter of the proceedings u/s 36 of the Act, is the property situated at 289/307, Yusuf Meherali Road, Masjid Bunder, Mumbai -400 003, together with me building known as Shree Krishna Niwas. By a declaration of Trust, certain properties were declared unto and in favour of the Trust known as Vallabhdas Karsandas Natha Trust, which was established by him. The said Sheth Vallabhdas Karsandas Natha, on 15-6-1983, executed his last Will and Testament and creating therein the life interest in respect of the said property in favour of one of his wives namely Bai Vijkorbai. After me death of Vijkorbai, the said property was to be bequeathed to the said Vallabhdas Karsandas Natha Trust. It appears that on 4-9-1964, Sheth Vallabhdas executed a Codicil to his last Will and Testament dated 15-6-1963. It appears that his wife Vijkorbai predeceased him some time in the year 1963, whereas Sheth Vallabhdas expired on 13-12-1964 after publishing his aforesaid last Will and Testament and Codicil thereto. A Probate came to be issued by this Court in respect of the last Will and Testament dated 15-11-1963 in favour of the executor of his Will, one of whom is the petitioner No. 2 herein, who has since expired during the pendency of the above petitions.
The defining facts as it were, which are relevant for the present petitions, unfolded thereafter, namely on 1-9-1975, the executor of the last Will and Testament of the said Vallabhdas, executed a lease in respect of the said property for a period of 25 years in favour of M/s. Shah Jhaveri & Associates, the respondent No. 3 herein.
From the point of view of the controversy involved in the above petitions, Clause 6 of the Lease Deed is material and is reproduced hereunder :
It is agreed by and between the parties hereto that during the form of these presents the Lessees shall have absolute option to purchase the property more particularly described in the first schedule hereunder written at or for the price of Rs. 8 lakhs. Such option shall be exercised Lessees by giving three months notice in writing to the Lessors. All our of pocket expenses of and incidental to such sale including stamp and registration charges shall be borne and paid by the Lessors and Lessees in equal share.
It appears that after the execution of the said lease by the executor, a dispute arose between the trustees of the said Vallabhdas Karsandas Natha Trust and the executor, sometime in the year 1985 and the dispute was as regards the manner of transfer of the properties and the residuary estate of the said late Sheth Vallabhdas Karsandas Natha Trust. The parties agreed to the arbitration of Justice K.K. Desai (Retd.) The learned Arbitrator, after hearing all the concerned parties, declared his Award on 30-10-1985, in which he inter alia held that the property in question belongs to the said Vallabhdas Karsandas Natha Trust and directed the executor to write to the respondent No. 3 to attorn the tenancy in favour of the said Trust. In view of the law then prevailing i.e. Arbitration Act, 1940, the said Award came to be made a decree of this Court on 15-1-1987. Thereafter, on 5-3-1987 the said property came to be registered as a property of the said Trust in the Register of the Public Trust maintained by the Charily Commissioner. It appears that the respondent No. 3 herein, relying on the said Clause 6 of the lease deed dated 1-9-1975, addressed letters to the Trust either itself and also through its Advocates, indicating to the Trust the exercise of the option which was vested in it under Clause 8 of the said lease deed to purchase the said property for the lumpsum consideration of ` 8,00,000/-. It appears that by the letter dated 12-6-1996, the Solicitors of the respondent No. 3 wrote to the Trust that the respondent No. 3 was exercising its option to purchase the property in question in terms of Clause 6 for the lumpsum consideration of ` 8,00,000/-, less the amount of ` 1,55,000/- already lying in deposit with the Trust in pursuance of the said lease deed. It appears that the respondent No. 3 offered to increase its offer by a further sum of ` 3,00,000/-, thus making an aggregate of ` 11,00,000/-, less amount of ` 1,55,000/- which was lying in deposit with the Trust in pursuance of the said lease deed. The Trust accordingly, acceding to the request of the respondent No. 3 filed an application u/s 36 of the said Act, before the respondent No. 2 seeking sanction for the sale of the said property for the aggregate consideration of ` 11,00,000/-. It was inter alia averred in the said application that the respondent No. 3 had a lease deed in its favour dated 1-9-1975 and in terms of Clause 6 of the said lease deed, the respondent No. 3 had an option to purchase the said property, pursuant to which the Trust had thought it fit to make an application u/s 36 of the said Act. The said application was heard from time to time by the Charity Commissioner. It appears that though the Trust had initially approached the Charity Commissioner to seek sanction of the transaction pursuant to Clause 6 of the lease deed dated 1-9-1975. The Trust in the proceedings before the Charity Commissioner inter alia urged two contentions. It questioned the validity of the lease deed dated 1-9-1975, as also the validity of the purchase option, as contained in the said lease deed on the ground that no sanction of the Charity Commissioner as required u/s 36 of the said Act had been obtained by the Trust prior to entering into the said lease deed. The said contentions were raised on the basis of the legal advise that the Trust had received namely to the effect that in the absence of the sanction of the Charity Commissioner to the execution of the lease deed, the lease deed as well as the clause giving option to the respondent No. 3 had no legal or binding effect.
The tenants of the said property and the occupants of the said Krishna Niwas Building, getting knowledge of the transaction between the Trust and the respondent No. 3, intervened in the said proceedings u/s 36 of the Act before the Charity Commissioner and offered to purchase the said property from the Trust for a consideration in excess of ` 11,00,000/-, which was offered by the respondent No. 3. The tenants under the name of ''Shree Krishna Niwas Bhadut Sangh'' (for short the ''Bhadut Sangh'') filed an intervention application before the Charity Commissioner and sought themselves to be impleaded as a party to the proceedings. The said Bhadut Sangh offered to purchase the said property for a lumpsum consideration of ` 16,00,000/- and sought the sanction of the Charity Commissioner for such a sale. The intervention application filed by the said Bhadut Sangh came to be allowed, though the Bhadut Sangh was not impleaded, the respondent No. 4 in his capacity as representative of the Bhadut Sangh was impleaded as a party to the said proceedings. The respondent No. 4 thereafter, filed his reply to the said application filed by the Trust. The sum and substance of the reply of the respondent No. 4 was that the Trust could not have entered into a lease deed without the formal sanction of the Charity Commissioner. The Bhadut Sangh, it appears, whilst the proceedings were pending before the Charity Commissioner, obtained a valuation report from M/s. Subhash Shah and Associates, who valued the said property at ` 28,82,000/-. In the light of the said valuation report, the respondent No. 4 offered to purchase the said property for the lumpsum consideration of ` 29,00,000/-. In view of the said offer made by the respondent No. 4, the Trust had second thoughts as regards its transaction with the respondent No. 3 and as a consequence of which, filed its reply, wherein it sought permission from the Charity Commissioner for the sale of the property in favour of the respondent No. 4 for the lumpsum consideration of ` 29,00,000/-. Thereafter, certain events have intervened, which according to us, have no bearing to the issue raised in the above petition, namely as regards the apprehension of the respondent No. 3 of its dispossession from the property in question. Insofar as the proceedings before the Charity Commissioner were concerned, the said proceedings culminated in the order dated 8-5-2000, by which order the Charity Commissioner granted sanction for the sale of the property to the respondent No. 3 herein, for lumpsum consideration of ` 12,55,000/-, less the amount of ` 1,55,000/- which was already lying and deposit with the Trust. The Charity Commissioner directed the Trust to execute the sale deed in favour of respondent No. 3 within three months from the date of the receipt of the sale consideration. As indicated above, it is the said order dated 8-5-2000 passed by the Charity Commissioner in exercise of his powers u/s 36 of the said Act, which is the subject-matter of the above petitions.
At this stage, it would be apposite to reproduce paragraphs 16, 17 and 18 of the impugned order of the Charity Commissioner dated 8-5-2000, which are relevant and which are reproduced as under :
The learned Counsel for the purchaser has relied on the decision reported in 1979 Mh. LJ 104. It is laid down in this decision that the Charity Commissioner has power to either sanction or reject the permission sought for. It is not open to the Charity Commissioner to consider uninvited offers from the third parties except for ascertaining the market price of the property. In the present case, the said Bhadut Sangh or Shri Jamnadas Thakker has come forward as invited purchasers. The right to purchase the property has already been decreed in favour of the present purchaser. Therefore, their offer howsoever high and favourable to the financial interest of the Trust, may be, cannot be accepted.
The only question that is required to be determined is whether the offer given by the present purchaser for an amount of Rs. 11 lakhs is required to be accepted or rejected. This agreement was entered into some time on 1-9-1975 and at that time the price of the property was settled at Rs. 8 lakhs. In pursuance of the said agreement, the purchaser continued as lessee and further sub leased the property to the members of the present Bhadut Sangh. The purchaser was discharged from obligation of payment of rent of Rs. 2500/- per month and this arrangement is going on since such a long period. Amount of Rs. 1,55,000/- is also lying deposit with the Executors till 1987 and thereafter, with the Trustees. This amount is kept as deposit and the Trustees were enjoying all the interest of the said amount. It is nobody''s case that in the year 1975, the price settled was too low or there was any fraud practiced by any of the parties. On the contrary, this agreement has been merged into Award and Decree as referred to above. Therefore, in my opinion, when there is a binding Decree between the Trust and the purchaser, this Authority cannot nullify its effect by rejecting the sanction because the price does not tally with the present market price.
By letter dated 12-6-1996, the purchaser M/s. Shah Jhavery and Associates, had exercised option to purchase the property for Rs. 8 Lakhs and requested for the adjustment of the amount of Rs. 1,55,000/- which was received by the Trustees as deposit from the Executors in pursuance of the Award and Decree referred to above. From the basis of this letter, there were negotiations and the parties agreed to settle the price at Rs. 11 lakhs. This amount of Rs. 11 lakhs is now payable to the Trustees by way of the price in view of the fact that the Resolution dated 7-11-1998 does not show about the deduction of amount of Rs. 1,55,000/- from me said price and also taking into account the better interest of the Trust. I am of the opinion that this price of Rs. 11 lakhs should be in addition to the amount which is deposited with the Trust and the interest accrued thereon since beginning. That will equitable adjustment of the price. It will also give valid discharge to the parties for satisfaction of the Decree passed in the Award proceeding. The rights of the Tenants would not be affected as the purchase would be by the company through whom they are claiming. During the course of the argument the ld. Counsel for the Intervener has pointed out from the pleadings that the application was drafted and initiated by the Advisor of the Purchaser. This is not the application signed by the purchaser but it is made on behalf of the Trust. When there is a decree binding between the parties in my opinion, even if the draft is given by the purchaser no adverse inference can be drawn neither this fact can lead to the conclusion that no permission u/s 36 can be granted.
We have heard the learned counsel for the parties.
Submissions on behalf of the petitioners in WP No. 1429 of 2000 by the learned Counsel Shri Snehal Shah :
(i) That the Charity Commissioner has erred in granting sanction inasmuch as the Charity Commissioner has failed to appreciate that there was no sanction to the Trust for executing the lease deed on 1-9-1975. (ii) That the sanction has been granted for sale of the property for the sum of ` 11,00,000/-, which was a highly undervalued price of the property when the respondent No. 4 had given an offer of ` 29,00,000/-. (iii) That the Charity Commissioner erred in granting sanction in the teeth of the valuers report, by which the property was valued in the sum of ` 28,82,000/-. (iv) That after the said property became the Trust property in the year 1987, the operation of Clause 6 of the said lease deed was circumscribed by the powers of the Charity Commissioner u/s 36(1) and the Charity Commissioner therefore, ought to have taken into consideration the relevant factors which are required to be considered whilst granting sanction u/s 36.
In support of the said submissions, the learned counsel relied upon the judgment of the Full Bench of this Court in Sailesh Developers, a registered Partnership Firm and Mr. Ramesh Bhavarlal Nahar Vs. The Joint Charity Commissioner Maharashtra, Greater Mumbai Region and Others, . That assuming that the respondent No. 3 had a right in its favour, still in terms of the law laid down by the Full Bench, the Charity Commissioner ought not to have granted sanction to the offer of respondent No. 3 in the teeth of the valuers report as well as offer of respondent No. 4 Bhadut Sangh and in terms of the law laid down in Sailesh Developers case (supra), ought to have opened the field for the general public by calling offers by public advertisement, (vi) That the Charity Commissioner has erred in laying too much emphasis on the Award passed by the Arbitrator, as the Arbitrator was only concerned as regards the property of the said Sheth Vallabhdas and the issue before the Arbitrator was not as regards whether a particular property is a Trust property, (vii) Assuming that the respondent No. 3 has a right in its favour to purchase the property under Clause 6 of the lease deed dated 1-9-975, still an obligation is cast on the Charity Commissioner to exercise the power u/s 36 on the basis of the well laid principle applicable to the same, namely whether the sale of the property in question is in the best interest of the Trust and whether the property has fetched the real market price, (viii) That in view of sections 333 and 336 of me Indian Succession Act, by operation of law on the death of Sheth Vallabhdas, the property in question became the property of the Trust in the year 1964 and therefore, the permission of the Charity Commissioner was required for execution of the lease on 1-9-1975 and since such permission was not obtained prior to the execution of the said lease, the said lease deed is of no avail to the respondent No. 3.
Submissions on behalf of the petitioners in WP No. 3585 of 2000 by learned Counsel Mrs. Jadhav :-
The learned counsel for the petitioners in the said petition, adopted the arguments of Shri Snehal Shah, the learned counsel appearing in WP No. 1429 of 2000. She however, contended that in view of the judgment in Sailesh Developers case (supra), the offer of the Bhadut Sangh, which was higher than the offer of the respondent No. 3 should have been accepted or if the Charity Commissioner did not deem it appropriate to accept the said offer, me Charity Commissioner then in the alternative, should have called for fresh offers from the public by opening the sale of the property to the public at large by issuing an advertisement.
Submissions on behalf of respondent No. 3 by learned Counsel Mr. Pandit :-
(a) That it is not open for the Trust to challenge the order of the Charity Commissioner granting sanction after having applied for sanction u/s 36(1) for sale of the property to the respondent No. 3 by lease deed dated 1-9-1975, as at the said time, the property was vesting in the executor and in terms of section 307 of the Indian Succession Act, the executor was vested with the power to dispose of the property of the said Vallabhdas. (b) That in terms of Clause 6 of the lease deed, the respondent No. 3 had a vested right to opt for the purchase of (he property, (c) That in view of the Award of the Arbitrator dated 30-10-1985 wherein there is a direction for attornment of tenancy on the respondent No. 3, the Trust is bound by the terms of the lease, though it was not a party to the original lease, (d) That in view of the conduct of the Trust wherein it has accepted an amount of ` 1,55,000/- and also applied for grant of sanction to the Charity Commissioner, the Trust is now estopped from resiling from its obligation under Clause 6. In support of the said contention, the learned Counsel relied upon the judgment of the Apex Court in the case of B.L. Sreedhar and Others Vs. K.M. Munireddy (Dead) and Others, of the said Judgment was relied upon by the learned counsel, which is reproduced herein under:
Though estoppel is described as a mere rule of evidence, it may have the effect of creating substantive rights as against the person estopped. An estoppel which enable a party as against another party to claim a right of property which in fact he does not possess is described as estoppel by negligence or by conduct or by representation or by holding out ostensible authority.
(e) That the law enunciated by the Full Bench in Sailesh Developers case (supra) cannot be made applicable to the facts of the present case, firstly on the ground that in view of Clause 6 of the lease deed, the judgment could have no application as the respondent No. 3 has a vested right to opt for purchase of the property and secondly, that the said judgment has come long after the Trust has applied for sanction in the year 1999. (f) That the power u/s 36 cannot be exercised in a manner by the Charity Commissioner so as to take away the right of respondent No. 3 which has accrued to it by virtue of Clause 6 of the lease deed dated 1-9-1975.
Consideration :
Having heard the learned counsel for the parties, we have bestowed our anxious consideration to the rival contentions of the parties. Since the core issue is as regards the powers of the Charity Commissioner u/s 36(1) of the said Act, vis-a-vis the right of the respondent No. 3 under Clause 6 and since both the parties have led much store on the judgment of the Full Bench of this Court in Sailesh Developers case (supra), in our view, it would be apposite to consider the said judgment at the outset.
A reference was made to the Full Bench in view of the divergence of views between two Division Benches as regards the powers of the Charity Commissioner u/s 36(1) of the said Act. The divergence of views was on account of the judgment rendered by two Division Benches in the case of Jigna Construction Co., Mumbai vs. State of Maharashtra and in the case of Mr. A.R. Khan Construwell and Co. Vs. Youth Education and Welfare Society and Others, . Insofar as the judgment in the former case is concerned, a Division Bench comprising of (A.P. Shah, J. as His Lordship then was and Dr. D.Y. Chandrachud, J.) insofar as the power u/s 36 is concerned, held as under :
The proceeding u/s 36 of the Act are not a lis between the parties to adjudicate contesting claims. The mandate of section 36 is that no transfer of the trust property shall be valid unless approved by the Charity Commissioner with previous sanction. The Charity Commissioner as per the scheme has to accord the sanction, having regard to the interest or benefit of the Trust. The Charity Commissioner in these proceedings after inquiry has to record satisfaction in this behalf. Section 36 merely authorises the Charity Commissioner to ascertain as to whether the trustees acted in the best interest of the trust. The petitioners since neither necessary nor proper party to the proceedings u/s 36, cannot claim any entitlement to invoke Articles 226 and 227 of the Constitution of India to canvas their grievance against sanction accorded under sub-section (1) of section 36 of the Act.
Insofar as the case of Mr. A.R. Khan Construwell is concerned, a Division Bench of this Court (Coram : H.L. Gokhale, J., as His Lordship then was, and Mrs. R.S. Dalvi, J.) held as under :
It is quite clear that the principle of locus standi has been expanded and any such parties, who want to give their offers in the interest of the trust, cannot be restrained from participating in the proceedings before the Charity Commissioner or later on by challenging his decision. The proposition in (Girdhar Nichani vs. Rev.E.H. Lewellen) 1992 (Supp) Bom.C.R. (N.B.) 817 : 1991 Mh.L.J. 891 (supra) by a Single Judge cannot be said to be a good one in the light of the approach adopted by the Apex Court in Mehrwan Homi Irani and Another Vs. Charity Commissioner, Bombay and Others, . Similarly, the proposals of uninvited offers cannot be restricted only to ascertain the market price as held in Arunodaya earlier. It is clear from the judgment in Mehrwan Homi Irani that the Charity Commissioner can explore the possibility of having agreements with other parties on better terms.
In view of the said divergence of views, a Reference was therefore, made to a Larger Bench and the two issues which were referred to, can be conveniently reproduced as under :
(i) Whether the power vesting in the Charity Commissioner u/s 36 of the Bombay Public Trust 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 u/s 36 and gives his offer?
(ii) Whether the party who comes forward to submit his offer directly before the Charity Commissioner in a pending application u/s 36 of the said Act of 1950 has locus standi to challenge the order passed in a proceeding u/s 36?
The Full Bench whilst answering the said issues inter alia held that whilst exercising powers u/s 36 of the said Act, two fold obligation is cast on the Charity Commissioner, firstly to see whether the trust property is required to be alienated. Secondly, if he comes to the conclusion that it is to be alienated, then the obligation is to see that the best offer available is accepted so that the transaction is to the benefit and interest of the trust. Hence, towards achieving that end, whilst considering an application u/s 36(1), the Charity Commissioner in a given case, the Charity Commissioner can opt for public auction or can call for fresh bids. Para 29 of the said judgment from the point of view of present petitions is material and the same is reproduced herein under:
29) While exercising power either under clause (b) or clause (c), the Charity Commissioner can impose conditions having regard to the interest, benefit or protection of the trust. Before passing an order of sanction or authorisation, the Charity Commissioner has to be satisfied that the trust property is required to be alienated. Once the Charity Commissioner is satisfied that the alienation of the trust property is necessary in the interest of the trust or for the benefit of the trust or for the protection of the trust, it is very difficult to accept the submission that the power of the Charity Commissioner is restricted either to grant sanction to a particular proposal of the trustees or to reject it. It is the duty of the Charity Commissioner to ensure that the transaction of alienation is beneficial to the trust and its beneficiaries. He has to ensure that the property is alienated to a purchaser or buyer whose offer is the best in all respects. It is not necessary in every case that the Charity Commissioner has to ensure that property is sold by the trustees to the person offering highest price or consideration. What is the best offer in the interest of the trust will again depend on facts and circumstances of each case. In a given case, while alienating the trust property, the trustees may provide that as a part of consideration for alienation, the purchaser should construct a building on a part of the trust property for the use by the trustees for the objects of the trust. In such a case, it may be necessary to ascertain the reputation and capacity of the purchaser apart from the consideration offered. When the Charity Commissioner is satisfied that trust property needs to be alienated and when he finds that the offer received by the trustees may not be the best offer, he can always direct that bids be invited by a public notice. When a better offer is received in public bidding or auction, it is very difficult to say that the power of the Charity Commissioner is restricted and he cannot enjoin the trustees to sell or transfer the trust property to a third party who has given an offer which is the best in the interest of the trust. The Trustees approach the Charity Commissioner only when they are satisfied that there is a necessity to alienate the trust property. The trustees hold the property for the benefit of the beneficiaries and therefore, once they express desire to alienate the property, it is obvious that Charity Commissioner can always impose condition while granting sanction that the property shall be sold or transferred to a person who has come with an offer which is the best offer in the interests of the trust, The section gives a power to the Charity Commissioner to impose conditions and the said conditions will include a requirement of selling or transferring or alienating the trust property to a purchaser who has offered the best deal having regard to the interest and benefit of the beneficiaries and the protection of the trust. The power to impose conditions cannot be a limited power when the law requires the Charity Commissioner to exercise the said power having regard to the interest, benefit and protection of the trust. Once the Charity Commissioner accepts the necessity of alienating the trust property, the trustees cannot insist that the property should be sold only to a person of their choice though the offer given by the person may not be the best offer. The property may be vesting in the trustees but the vesting is for the benefit of the beneficiaries. The Charity Commissioner has jurisdiction to ensure that the property is sold or transferred in such a manner that the maximum benefits are available to the beneficiaries of the trust. Under Clause (b) of section 36 of the said Act, the Charity Commissioner has jurisdiction to decide whether it is in the interest of the trust that the property of the trust be sold or transferred. Once the learned Charity Commissioner is satisfied that the property is required to be transferred or sold in the interest of the Trust, the learned Charity Commissioner cannot remain silent spectator when he finds that the transaction proposed by the trustees is not in the interest of the trust or its beneficiaries. Once the necessity of sale or transfer is established, the Charity Commissioner can certainly ensure that best available offer is accepted, so that the transaction is for the benefit of the trust. If the trustees were to be the final authority to judge what is in the interest of the Trust, the legislature would not have enacted provision requiring prior sanction. While deciding which is the best offer, the learned Charity Commissioner is bound to take into consideration various 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 the 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 u/s 36(1) of the said Act of 1950, in a given case, 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.
The Reference was answered by the Full Bench and which answer can be culled out from para No. 31 from the said report, which is reproduced herein under:
Hence, we answer the questions referred to our decision as under :
(i) The power vesting in the Charity Commissioner u/s 36 of the Bombay Public Trust Act, 1950 is not confined merely to grant or refusal of sanction to a particular sale transaction in respect of which sanction is sought u/s 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 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 u/s 36 of the said Act of 1950 has a locus standi to challenge the final order passed in a proceeding u/s 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.
Hence what is crystallized by the Judgment of the Full Bench in Sailesh Developers case (supra) is that the power vested in the Charity Commissioner u/s 36 is not only confined merely to grant or refusal to sanction a particular sale in respect of which sanction is sought by the Trust, but also extends to inviting offers from members of the public and approving such sale which sub-serves the interest and is also beneficial to the trust.
Now coming to the submissions of the learned counsel Mr. Shah and Mr. Pandit as regards whether the property in question was a trust property or not at the relevant time, both the learned counsel made submissions for and against their respective assertions as to whether the property in question was a trust property at the relevant time on 1-9-1975, when the lease deed was entered into by the Trust in favour of the respondent No. 3, or whether the property was vesting in the executor at the time of the execution of the Lease deed and he had the right to dispose of the property.
Learned counsel Mr. Shah and Mr. Pandit appearing for the petitioners and the respondent No. 3, adverted to various provisions of the Indian Succession Act, in support of their respective contentions. Learned counsel Mr. Shah relied upon sections 333 and 336 of the Indian Succession Act, to contend that the property in question became trust property on the death of the testator Vallabhdas in the year 1964 itself. Whereas, Mr. Pandit appearing for the respondent No. 3 relied upon sections 211 and 307, to buttress his submission that the property was vesting in the executor which has also been acknowledged by the learned Arbitrator and became the trust property only in the year 1987 when the Award was made a decree of the Court, and when an entry was made for the first time in the PTR register of the Trust.
Insofar as the said contentions urged by the learned counsel for the parties, in our view, though there is much to be said in favour of either side in view of the statutory provisions as contained in the Indian Succession Act, in our view, the said issue need not be addressed since nothing much would turn on the answer to the said issue, and therefore, the said issue need not detain us any further. Learned counsel for the petitioners Mr. Shah fairly stated that he is laying more emphasis on the aspect as to whether the Charity Commissioner has exercised the power u/s 36 of the said Act, in terms of the mandate now enunciated by the Full Bench in Sailesh Developers case (supra). The learned counsel appearing for the respondent No. 3 Shri Pandit also fairly stated that though the property in question has become trust property in the year 1987, nevertheless sanction of the Charity Commissioner would be required for the sale of the said property to the respondent No. 3, however, it is his contention that sanction in view of Clause 6 is a mere formality. Therefore, proceeding on the premise that the property has become trust property in the year 1987, the fact remains that there is a statutory obligation on the trustees to obtain the permission of the Charity Commissioner u/s 36 of the said Act. In the said context, it is now required to be seen whether a right in favour of the respondent No. 3 in terms of the said Clause 6 would make the sanction of the Charity Commissioner a mere formality.
In the said context, the judgment in Sailesh Developers case (supra) is required to be adverted to. As held in the said judgment, the obligation of the Charity Commissioner is not restricted to grant or refuse sanction to a particular sale, but the obligation is to see to it that the transaction in question is to the benefit and interest of the said trust and towards that end, the Charity Commissioner is vested with the power to invite offers from members of the public and approving such sale which he feels is to the benefit and interest of the trust.
In the instant case, it is pertinent to note that the Bhadut Sangh, who had intervened before the Charity Commissioner had obtained a valuation report. In the said valuation report, the valuers had valued the property at ` 28,82,000/-. It is also required to be noted that the said Bhadut Sangh, who was represented by the respondent No. 4 had offered a sum of ` 29,00,000/- for the property in question. It is further significant to note that the respondent No. 3 had also agreed to pay ` 3,00,000/- more than what was contemplated by Clause 6 of the Lease Deed. In our view, the Charity Commissioner could not have ignored the aforesaid facts in the light of the law laid down by the Full Bench in Sailesh Developers case (supra). It is therefore, not possible to accept the submission of Mr. Pandit, the learned counsel for the respondent No. 3 that in view of Clause 6, the sanction of the Charity Commissioner is a mere formality. Merely by Clause 6, an option is vested in the respondent No. 3 to opt for purchase of the property, the Charity Commissioner could not have shut his eyes and ignored the higher offer made by the respondent No. 4 acting on behalf of Bhadut Sangh. The powers of the Charity Commissioner as held by the Full Bench u/s 36, could not have been exercised by the Charity Commissioner in a restricted manner in view of Clause 6, the Charity Commissioner in our view, has erred in observing that in view of the Award of the Arbitrator which has been made a decree of this Court, the permission was required to be granted for sale of the property of ` 11,00,000/- in favour of the respondent No. 3. In our view, the said Clause 6 is circumscribed by the powers of the Charity Commissioner u/s 36 of the said Act. The said power as held by catena of judgments, has to be exercised by the Charity Commissioner in the paramount interest of the trust. Hence, the submission of the learned counsel for the respondent No. 3 that in view of Clause 6, the sanction of the Charity Commissioner is a mere formality is required to be rejected. At the highest, in view of Clause 6, the respondent No. 3 would be entitled to be given preference if it were to match the highest bid.
Now coming to the submission of Mr. Pandit that the trust is estopped from resiling from its obligation under Clause 6, in our view, the said submission is bereft of any merit. The learned counsel is losing sight of the fact that even if Clause 6 is to operate, nevertheless the permission of the Charity Commissioner would have to be obtained, which permission the Charity Commissioner is obliged to give by applying the well settled principles of law laid down by this Court as well as the Apex Court in a catena of judgments, a useful reference can be made to the case of Mehrwan Homi Irani and Another Vs. Charity Commissioner, Bombay and Others, as also the judgment in Sailesh Developers case (supra). It requires no debate that there can be no estoppel against statute. It would therefore, not lie in the mouth of a party to contend that power u/s 36 is to be exercised by the Charity Commissioner in a particular manner in view of certain contractual obligations. It is well settled as stated hereinabove that the said power is to be exercised by the Charity Commissioner and the paramount interest is the benefit that would accrue to the Trust.
As regards the submission of the learned counsel for the Respondent No. 3 that since the judgment in Sailesh Developers case (supra) laying down the exposition as regards section 36 of the said Act, has come much later and therefore, cannot be applied to a case where the sanction was obtained by the Trust in the year 1987, can only be stated to be rejected, when this Court interprets a particular provision of law, the declaration is as regards the law which always stood right from the inception.
In our view, the Charity Commissioner has erred in according sanction to the transaction between the trust and the respondent No. 3 based on Clause 6 by glossing over certain relevant facts, namely the higher offer made by the respondent No. 4 and the valuation report. In that view of the matter, the impugned order dated 8-5-2000 of the Charity Commissioner is required to be quashed and set aside and is accordingly quashed and set aside and the matter is remanded back to the Charity Commissioner for a de novo consideration, by issuing the following directions.
(i) The Charity Commissioner is directed to call for fresh bids/offers for sale of the property in question from the public by issuing an advertisement in the local newspapers.
(ii) The Charity Commissioner to accord sanction on the basis of the fresh bids/offers that would be received keeping in mind the well settled principles applicable whilst according such sanction.
(iii) The Charity Commissioner is directed to call for valuation report valuing the property as on date, on the basis of applicability of Regulation 33(7) of the D.C. Regulations, 1991.
(iv) The cost of the advertisement and the expenses relating to valuation report to be borne by the trust.
(v) If the respondent No. 3 matches the highest bid that would be received, it would be open for the Charity Commissioner to consider the matching highest bid of the respondent No. 3 and give it preference having regard to Clause 6 of the lease deed dated 1-9-1975.
(vi) We clarify that in addition to the proposal which has already been made, the Trust may file supplementary proposal on the basis of the applicability of the Regulation 33(7) of the Development Control Regulation, 1991, which according to the learned Counsel for the petitioners is applicable to the property in question i.e. Krishna Niwas Building.
(vii) Since the amount of ` 1,55,000/- which was deposited by the respondent No. 3 with the Trust at the time of the execution of the lease deed dated 1-9-1975 is lying with the Trust and since the said amount was to be adjusted against the sale price of ` 11,00,000/-, in the event, the respondent No. 3 is not successful in getting the property in question in the fresh bids/offers that would be invited by the Charity Commissioner pursuant to this order, we direct the petitioners in Writ Petition No. 1429 of 2000 to refund the said amount to the respondent No. 3 with simple interest @ 9% p.a. calculated from September, 2000.
(viii) In the event the fresh bid/offer of respondent No. 3 is accepted, the said amount with simple interest @ 9% p.a., calculated from September, 2000 to be adjusted against the final price that the respondent No. 3 would pay for the property in question.
(ix) The petitioner in Writ Petition No. 3585 of 2000 would also be entitled to the benefit of adjustment of the amount of ` 4,00,000/- without interest paid by it against the final price, which he would be liable to pay in the event his offer, pursuant to the fresh bids/offers is accepted by the Charity Commissioner.
At this stage, Mr. Pandit, learned counsel appearing for the respondent No. 3, seeks stay of operation of this judgment. In our view, considering the directions given in this judgment, the implementation of which would take some time, we do not find any necessity to stay our judgment. The request is accordingly rejected.
Both the above writ petitions are accordingly allowed to the aforesaid extent and the Rule is accordingly made absolute to the said extent with parties to bear their respective costs.