SCA/4185/2008 1/15 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 4185 of 2008 For Approval and Signature: HONOURABLE MR.JUSTICE M.S.SHAH AND HONOURABLE MR.JUSTICE RAVI R.TRIPATHI ================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================= UPENDRABHAI SHANTILAL MANIAR - Petitioner(s) Versus SHETH SHRI MORARJIBHAI DHANJIBHAI PADIYA & 1 - Respondent(s) ================================================= Appearance : MR PRASHANT G DESAI for Petitioner(s) : 1, MR.VARUN K.PATEL for Respondent(s) : 1, MR PR ABICHANDANI for Respondent(s) : 2, ================================================= CORAM : HONOURABLE MR.JUSTICE M.S.SHAH and HONOURABLE MR.JUSTICE RAVI R.TRIPATHI Date : 06/05/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE M.S.SHAH) Leave to amend. 2. Sheth Shri Morarjibhai Dhanjibhai Padiya, Brahmakshatriya Boarding Trust, respondent no.1 herein runs a hostel for the students belonging to Brahmakshatriya community in the city of SCA/4185/2008 2/15 JUDGMENT Bhavnagar, on Plot No.2178, City Survey No.2973, admeasuring 2780.875 sq. meters. The hostel building suffered severe damage on account of the earthquake on 26th January 2001, as a result of which out of 24 rooms, 4 rooms were so severely damaged that they had to be pulled down. The building required major repairs and renovations. The expenses were more than the income of the Trust. On 5th March 2007, out of 19 trustees, 18 resolved to sell the land with building so that from out of the funds generated upon such sale, the trust could construct a new hostel building at another place near the newly established professional colleges, like the colleges of medicine, homeopathic, engineering, etc. 3. The trustees accordingly filed an application before the Joint Charity Commissioner, Rajkot seeking sanction to sell the above property under section 36 of the Bombay Public Trusts Act, 1950 (hereinafter referred to as “the Act”). The petitioner herein filed his objections on 01.02.2008 and also requested that his objections may be decided first before the application of the trustees for sanction is granted. 4. The Joint Charity Commissioner permitted the trustees to invite offers through a public advertisement published in leading newspapers. The offers were invited by 11.03.2008. The petitioner moved the present petition contending that until his objections were heard and decided, the Joint Charity Commissioner should not allow the trustees to proceed with the procedure of inviting tenders and considering the bids received for sale of 2780.875 sq. meters of land with building thereon. Since the Joint Charity Commissioner did not decide the application, the petitioner filed the present petition. SCA/4185/2008 3/15 JUDGMENT The thrust of the petitioner's case in the present petition is that as per the decisions of this Court, the trustees cannot be allowed to sell its property in absence of any compelling necessity and that unless and until the Joint Charity Commissioner decides the petitioner's objections and gives decision and thereafter the petitioner has an opportunity to challenge such decision before the appellate authority, viz. Gujarat Revenue Tribunal, under section 36(3) of the said Act, and the Appellate Tribunal renders its decision, till then no steps should be taken in the process of consideration of tenders. 5. While issuing notice on 10th March 2008, we had made it clear that there was no stay against receiving tenders or opening tenders, but the respondents shall not take any final decision on the tenders received. It was, however, clarified that there was no stay against considering the objections received by the Joint Charity Commissioner. The Joint Charity Commissioner has accordingly considered the petitioner's objections and rejected the same by the order dated 03.04.2008 which is challenged before us by amending the petition. 6. The petition has been opposed by the trustees on whose behalf affidavit in reply dated 21.03.2008 has been filed. 7. At hearing of this petition, Mr. Prashant G. Desai, learned counsel for the petitioner has vehemently submitted that in the matter of Thakorebhai Gangaram Vs. Ramanlal Maganlal Reshamwala, 1993 (1) GLH 473; and in Hasam Ibrahim Abdul Latif Supediwala Vs. Bhaichand Pranlal Dhoneja & others, 1999 (3) GLR 2296, two learned Single Judges of this Court have laid down in emphatic terms that before granting sanction under section 36 of the said Act, the Charity Commissioner must be satisfied that there SCA/4185/2008 4/15 JUDGMENT is a compelling necessity to justify the alienation in question. However, in the facts of this case, the respondents have not shown such a compelling necessity nor has the Joint Charity Commissioner given any such finding about the compelling necessity justifying the proposed alienation of the land with the hostel building. It is submitted that the petitioner and some other people had lodged their objections and the petitioner had even submitted an alternative plan to show that without selling any part of the land, the respondent-trust can renovate the hostel building and the open land can be used as a party plot for generating regular income of Rs.2 to 3 lacs every year. 8. On the other hand, Mr. Soparkar, learned counsel for respondent no.1-trust has opposed the petition and submitted that the trustees have taken a bona fide decision to sell the land with the hostel building for cogent reasons and the learned Joint Charity Commissioner has found those reasons to be valid. Hence this Court should not interfere with the order of the learned Joint Charity Commissioner. Mr. Soparkar has further submitted as under :- (a) The hostel building was constructed in the year 1951, near old Shyamaldas College, which was the only college in the entire city of Bhavnagar at that time. At that time this area was in the outskirts of Bhavnagar town and therefore, a very quiet and serene area convenient for pursuing academic studies. However, with the passage of more than half a century, the area is now penetrated by not only residential premises but also commercial premises, restaurants, etc. which is not conducive to pursuit of academic studies without distractions. It is submitted that now professional colleges, like medical, homeopathic, engineering, etc. are established in far away places of Bhavnagar city and therefore, also it is SCA/4185/2008 5/15 JUDGMENT necessary to shift the hostel to a place nearer such newly established professional colleges. (b) The hostel building is almost 60 years old and has suffered extensive damage during the earthquake of January 2001, which compelled the trust to pull down 4 rooms out of 24 rooms of the hostel building. The trust has no funds to reconstruct 4 rooms in place of the old ones or repair the other existing rooms in the hostel building. (c) The value of the land with building as indicated in the Valuation Report is Rs.1.37 crores. The upset price was therefore, fixed at Rs.1.50 crores as indicated in the advertisement, but after inter se bidding, the highest bid received is Rs.5.95 crores. With such amount the trust will be in a position not only to have a new and larger hostel building at a place near the professional colleges (instead of 20 rooms for accommodating 40 students in the present hostel building, it will be possible to have a new hostel building of more rooms so that 100 students can be accommodated) but also surplus funds to run the hostel. (d) The learned Joint Charity Commissioner has given a finding that after receipt of the highest bid of Rs.5.95 crores, neither the petitioner nor any other person has made even any allegation about any undue benefit or advantage to be derived by any of the trustees. (e) The observations made by two learned Single Judges of this Court in the above reported decisions need to be read in the context of the facts of those cases and the expression, 'compelling necessity' cannot be read out of context. SCA/4185/2008 6/15 JUDGMENT 9. Having heard the learned counsel for the parties, we find considerable substance in the submissions made on behalf of the respondent-trust about the present condition of the hostel building, present income of the trust, location of the land and the fact that the professional colleges like medical, homeopathic and engineering colleges are situated far away and that the present land is now surrounded by not only residential premises but also commercial premises and also considering the highest offer of Rs.5.95 crores, the decision of the learned Charity Commissioner rejecting the petitioner's objections cannot be said to be illegal. The Joint Charity Commissioner has taken into account all the relevant factors including the fact that out of 19 trustees, as many as 18 trustees have resolved to sell the property in question for achieving the objects of the trust more effectively. 10. Before examining the facts of the case, we may refer to the concept of 'compelling necessity” vehemently invoked by Mr Prashant Desai, learned counsel for the petitioner. In Thakorebhai Gangaram vs. Ramanlal Maganlal Reshamwala, 1993 (1) GLH 473, a learned Single Judge of this Court held as under :- “It is very obvious that before Charity Commissioner sanctions alienation of trust property he has to apply his mind to following material questions, namely (i) whether there is a compelling necessity to justify the alienation in question ?, (ii) whether the proposed alienation is fair and justice ?, (iii) whether the proposed alienation, if any way, adversely affects the interest of the trust ?” [emphasis supplied] The learned Single Judge thereafter proceeded to observe SCA/4185/2008 7/15 JUDGMENT that keeping the aforesaid three considerations in mind, the Charity Commissioner is required to examine the matter and after allowing the parties with ample opportunity to lead evidence and to satisfy as to how the need to alienate the property of the trust has arisen and whether it would be in the interest of justice or not, he would proceed to grant or refuse the sanction. The learned Single Judge then also set out various factors to be considered :- “Number of factors, such as, financial position of the trust, location of the property, the use of particular property to the trust, market position, income which the property is fetching or would continue to fetch compared to the income which the property would bring to the trust if the property is disposed of, the liabilities of trust, income of the trust, and last but not the least, the price at which the property is being sold are required to be taken into account. This is not the exhaustive list of factors to be taken into account. Over and above these factors, many other relevant and genuine factory may need consideration of the Charity Commissioner.” This judgment was followed in Hasam Ibrahim Abdul Latif Supediwala Vs. Bhaichand Pranlal Dhoneja & others, 1999 (3) GLR 2296. 11. In our view, the expression, “compelling necessity' appears to have been employed by the two learned Single Judges of this Court on the basis of the decision of the Apex court in Sridhar vs. Shri Jagan Nath Temple, AIR 1976 SC 1860 where the Court was examining the power of the manager or a shebait to grant permanent lease of a parcel of land of the public temple of Lord JagannathJi in Puri on a fixed annual rent of Rs. 7 enhanceable upto Rs.14 per annum in case superstructure was constructed on the land. The Apex Court relied upon the following Treatises :- (i) Mulla's Hindu Law (11th Ed. Page 489)] “The power of a shebait or a mohunt to alienate debutter SCA/4185/2008 8/15 JUDGMENT property is analogous to that of a manager for an infant heir as defined by the Judicial Committee in Hunooman Pershad v. Mt. Babooee, (1856) 6 Moo Ind App 393 (PC). As held in that case, he has no power to alienate debutter property except in a case of need or for the benefit of the estate. He is not entitled to sell the property for the purpose of investing the price of it so as to bring in an income larger than that derived from the property itself. Nor can he, except for legal necessity grant a permanent lease of debutter property, though he may create proper derivative tenures and estates conformable to usage.” (ii) Mayne's Treatise on Hindu Law (11th Ed. Page 931) :- “It is beyond the powers of a manager to grant a permanent lease at a fixed rent in the absence of unavoidable necessity; for, to fix the rent, though adequate at the time, in perpetuity in lieu of giving the endowment the benefit of an augmentation of a variable rent from time to time would be a breach of duty on the part of the manager.” [vide Talaniappa Chetty vs. Streemath Devasikamony, AIR 1917 PC 33)] The prohibition, if one could at all be inferred, is against granting a permanent lease on a fixed rent but not against alienation per se. 12. We may now refer to the expressions 'legal necessity' and 'for the benefit of the estate' as used in the uncodified Hindu Law with regard to the powers of the Manager or Karta of the Hindu Undivided Family to alienate the joint family property. Restrictions on powers of Karta would certainly be necessary where the joint family has minors and women. The principles of Hindu Law regarding alienation by manager of coparcenary property for legal necessity and alienation by manager for the benefit of the estate, broadly stated, are as under (§ 240 to 241A from Mulla's Hindu Law, 19th Edition (2005), pages SCA/4185/2008 9/15 JUDGMENT 429 to 439) :- (1) The power of the manager of a joint Hindu family to alienate the joint family property is analagous to that of a manager for an infant heir, as defined by the Judicial Committee (Hunooman Persaud v Musummat (1856) 6 MIA 393 :- “The power of the manager for an infant heir to charge an estate not his own, is, under the Hindu law, a limited and qualified power. It can only be exercised rightly in a case of need or for the benefit of the estate. But where, in the particular instance, the charge is one that a prudent owner would make, in order to benefit the estate, the bona fide lender is not affected by the precedent mismanagement of the state. The actual pressure on the estate, the danger to be averted, or the benefit to be conferred upon it, in the particular instance, is the thing to be regarded.” [emphasis supplied] (2) The manager of a joint Hindu family has the power to alienate for value, joint family property, so as to bind the interest of both adult and minor coparceners in the property, provided that the alienation is made for legal necessity or for the benefit of the estate. (3) Legal necessity includes payment of government revenue, maintenance of the coparceners and their family members, marriage expenses, funeral expenses, costs of litigation for the estate, costs of defending a criminal trial against a family member or payment of debts incurred for family business or other family necessary purpose. SCA/4185/2008 10/15 JUDGMENT (4) ALIENATION BY MANAGER FOR “THE BENEFIT OF THE ESTATE' (para 241A) “There was a conflict of opinion as to the meaning of the words 'for the benefit of the estate' which occur in the judgment of the Judicial Committee in Hunooman Persaud's case .... ... One view was that a transaction cannot be said to be for the benefit of the estate, unless it is of a defensive character calculated to protect the estate from some threatened danger or destruction. Another view was that for a transaction to be for the benefit of the estate, it is sufficient, if it is such as a prudent owner, or rather a trustee, would have carried out with the knowledge that was available to him at the time of the transaction. In Balmukund vs. Kamla Wati (AIR 1964 SC 1385), the Supreme Court observed that for a transaction to be regarded as for the benefit of the family, it need not be of a defensive character. In each case, the court must be satisfied from the material before it, that it was in fact such as conferred or was reasonably expected to confer benefit on the family at the time it was entered into. Where adult members are in existence, the judgment is not to be of the manager of the family alone, but of all the adult members of the family including the manager.” [emphasis supplied] 13. In Balmukund vs. Kamla Wati (supra), the Apex Court adopted the reasoning which had commended to the Full Bench of the Allahabad High Court in Jagat Narain vs. Mathura Das, AIR 1928 Allahabad 454. After examining all the decisions of the Privy Council, the Full Bench held that nowhere is there a hint in the Privy Council decisions that there need be necessarily any element of “danger to be averted”. In other words, transactions justifiable on the principle of benefit to the estate are not limited to those SCA/4185/2008 11/15 JUDGMENT which are of a defensive nature. Prudence or otherwise of the transaction must be judged in light of the circumstances which were within the knowledge of the manager, or knowledge of which he could reasonably be expected to have acquired. In view of the fact that the manager is not the sole owner of the property, but others had an interest in the property, the degree of prudence required of him would be greater, as in the case of a trustee, than if he were the sole owner. 14. Having given anxious consideration to the issue involved, we are of the view that the learned Single Judges had evolved the test of “compelling necessity” without taking into consideration the aforesaid decisions of the Privy Council and the Apex Court in terms holding that for a transaction to be regarded as for the benefit of the estate, it need not be of a defensive character. In KC Kappor vs. Radhika Devi, (Dead) by LRs., AIR 1981 SC 2128, the Apex Court has also held that this expression must be interpreted with due regard to the conditions of modern life. A three Judge Bench of the Apex Court quoted with approval the following observations made by Shah, J. and Fawcett, J. in their separate but concurring judgments in Nagindas Maneklal vs. Mahomed Yusuf Mithcella, AIR 1922 Bombay 122 :- "The expression (in Gujarati) Kutumbarthe – (for the benefit of the estate) used must be interpreted with due regard to the conditions of modern life. I am not at all sure that Vijnanesvara intended to curtail the scope of the word kutumbarthe while explaining it. I do not see any reason why a restricted interpretation should be placed upon the word 'necessity' so as to exclude a case like the present in which defendants Nos. 1 and 2, on all the facts proved, properly and wisely decided to get rid of the property which was in such a state as to be a burden to the family. I think that the facts of the case fairly satisfy the test." Fawcett, J., who agreed with these observations added a separate short note of his own and relied upon the SCA/4185/2008 12/15 JUDGMENT following passage in Hunoomanpersaud Panday v. Mt. Babooee Munraj Koonweree, (1856) 6 Moo Ind App 393 (PC) : "But where, in the particular instance the charge is one that a prudent owner would make, in order to benefit the estate, the bona fide lender is not affected by the precedent mismanagement of the estate. The actual pressure on the estate, the danger to be averted, or the benefit to be conferred upon it, in the particular instance, is the thing to be regarded." (Emphasis supplied) The Apex Court then added as under :- “Although these remarks were made in relation to a charge created on the estate of an infant heir by its manager under the Hindu law, it is well settled that the principles governing an alienation of property of a joint Hindu family by its Karta are identical. 15. The parameters of the (Gujarati) expression kutumbarthe (for the benefit of the family), as interpreted in Nagindas's case (AIR 1922 Bom 122) (supra) which meets with our unqualified approval, fully embrace the facts of the present case in so far as legal necessity for the disputed sale is concerned.” While various factors to be considered by the Charity Commissioner as indicated in para 5 of the judgment in Thakorebhai Gangaram case (supra) are certainly relevant, we are of the view that the expression “compelling necessity” cannot be used for the purpose of tying down the trustees to the property for all time to come or for preventing them from making much better bona fide use of the assets of the trust with the sanction of the Charity commissioner. 15. In our view, the following could be additional reasons for restricting powers of trustees to alienate the property of the trust and for requiring them to obtain the sanction of the Charity SCA/4185/2008 13/15 JUDGMENT Commissioner. Sometimes apprehensions may be entertained that the actual consideration for sale of the property may not be reflected in the document and the trustees derive undue and illegitimate benefit out of such transaction. The powers may also be required to be restricted where the trustees are not likely to utilize the sale proceeds for a bona fide purpose or the sale proceeds may be apprehended to be squandered away or invested in unsafe investments. 16. The above apprehensions will have to be taken care of by ensuring that the property fetches maximum market value in response to advertisements to be published in newspapers with wide circulation in the State as well as in local newspapers, that the entire sale price is fully reflected in the document and also by ensuring that the sale proceeds received by the trust are properly utilized and/ or invested in accordance with the provisions of Section 35 of the Act providing for investment of public trust money, but the first question to be posed would be whether the property is required to be sold by the trustees for a genuine need bordering on necessity rather than putting a virtual embargo on the power of the trustees by applying the extremely narrower test of 'compelling necessity' . 17. The facts in the instant case are closer to the facts in the cases of Jagat Narain (supra) and Balmukund (supra) rather than in Sridhar's case (supra). As per the findings given by the Joint Charity Commissioner in the impugned order, the trust will be in a position to construct a hostel building at a place near the newly established professional colleges, i.e. colleges of medicine, homeopathic, engineering, etc. and the trust will also be able to SCA/4185/2008 14/15 JUDGMENT provide better facilities and amenities to the students. We may also record the statement being made by Mr. Soparkar, learned counsel for the respondent trust that the trust will construct a building which can accommodate 100 students as against the capacity of the present building to accommodate only 40 students. Thus, the students of the community would certainly benefit. 18. Since the Joint Charity Commissioner is yet to pass orders on the trustees' application for sanction under section 36 of the Act, the learned Joint Charity Commissioner shall take the aforesaid observations into consideration while passing orders on the said application. In order to ensure that the students do not suffer any inconvenience for an indefinite time, it will also be open to the learned Joint Charity Commissioner to give a reasonable time limit for the trustees to provide for a new hostel building for 100 students and such other safeguards as may be deemed fit in light of the observations made in this