- 1 - IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE LETTER PATENT APPEAL NO. 449 OF 2004 IN WRIT PETITION NO.6458 OF 2003 Mr.A.R.Khan Construwell & Co. ...Appellants Vs. 1. Youth Education & Welfare Society 2. Silver Realtors Pvt. Ltd. 3. National (India) Contractors & Engineers 4. Al-Haj Ajmal Sarfaraj Khan 5. Mr. Wasim Sujjauddin Pirjade 6. M/s. Suyojit Buildech Pvt. Ltd. 7. Joint Charity Commissioner, Nashik 8. State of Maharashtra ...Respondents Mr. B.P. Apte Senior Advocate with Mr. S.S. Kulkarni for the Appellants. Mr.Mahendra Shah, Senior Advocate with Mr.Ranjit More for Respondent No.1. Mr.S.M.Oak for Respondent No.2. Mr. R.L. Majgaonkar for Respondent No.3. Mr.S.G.Deshmukh for Respondent No.4 and 5 Mr.Nitin Thakkar, Senior Advocate with Mr.Bhandare with Ms.Suman Jain for Respondent No.6. Mr.S.R. Nargolkar, A.G.P. for Respondents 7 & 8. AND LETTER PATENT APPEAL NO.454 OF 2004 IN WRIT PETITION NO.6518 OF 2003 1. Al-Haj Ajmal Sarfaraj Khan 2. Wasim Sujauddin Pirjade ...Appellants Vs. 1. Youth Education & Welfare Society - 2 - Nashik 2. Silver Realtors Pvt. Ltd. 3. National (India) Contractors 4. A.R. Khan Construwell Company 5. M/s. Suyojit Buildtech Pvt. Ltd. 6. The Joint Charity Commissioner Nashik 7. State of Maharashtra ...Respondents Mr. S.G. Deshmukh for the Appellants. Mr.Mahendra Shah, Senior Advocate with Mr.Ranjit More for Respondent No.1. Mr. S.M. Oak for Respondent No.2. Mr.Nitin Thakkar, Senior Advocate with Mr.Bhandare with Ms. Suman Jain for Respondent No.3. Mr. S.S. Kulkarni For Respondent No.4. Mr.B.P. Apte, Senior Advocate with Mr.S.S. Kulkarni for Respondent No.4. Mr. S.R. Nargolkar, AGP for Respondent Nos.6 & 7. AND LETTER PATENT APPEAL NO.448 OF 2004 IN WRIT PETITION NO.6459 OF 2003 1. Ahmed Dagumiya Shaikh 2. Murtaz Abdul Razak Chanegav 3. Abdul Razak N. Chanegaon 4. Rafique N. Chanegaon 5. Iqbal Gafoor Shaikh ...Appellants Vs. 1. New Education and Welfare Society 2. Silvar Realtors Pvt. Ltd. 3. National (India) Contractor - 3 - 4. Appellant Haji Ajmal Sarfaraj Khan 5. Wasim Sajauddin Peerzade 6. A.R. Khan, Construwel Company 7. M/s Suyajit Built-tech Pvt. Ltd. 8. Joint Charity Commissioner 9. State of Maharashtra ...Respondents Mr. K.S. Bapat for the Appellants. Mr.Mahendra Shah, Senior Advocate with Mr. Ranjit More for Respondent No.1 Mr. S.M. Oak for Respondent No.2. Mr. Nitin Thakkar, Senior Advocate with Mr.Bhandare with Ms. Suman Jain for Respondent No.3. Mr. S.G. Deshmukh for Respondent Nos.4 to 6. Mr. S.R. Nargolkar, AGP for Respondent Nos.8 & 9. CORAM: H.L. GOKHALE & CORAM: H.L. GOKHALE & CORAM: H.L. GOKHALE & SMT.R.S.DALVI, JJ. SMT.R.S.DALVI, JJ. SMT.R.S.DALVI, JJ. DATE OF RESERVING THE JUDGMENT : DATE OF RESERVING THE JUDGMENT : DATE OF RESERVING THE JUDGMENT : 21ST JULY 2005 21ST JULY 2005 21ST JULY 2005 DATE OF PRONOUNCING THE JUDGMENT: 23RD SEPTEMBER 2005 DATE OF PRONOUNCING THE JUDGMENT: 23RD SEPTEMBER 2005 DATE OF PRONOUNCING THE JUDGMENT: 23RD SEPTEMBER 2005 JUDGMENT: (Per H.L. Gokhale, J.) JUDGMENT: (Per H.L. Gokhale, J.) JUDGMENT: (Per H.L. Gokhale, J.) 1. These three LPAs are concerned with an immovable property of the first Respondent bearing Survey No.643-b corresponding to CTS No.614-b or final Plot No.127 and PTR No.F/1892/at Nasik admeasuring 40 gunthas which is a Charitable Trust registered under the Bombay Public Trusts Act, 1950 (for brevity the Act is referred to hereinafter or the BPT Act). The first Respondent Trust has obtained the said property upon transfer from a previous trust Anjuman Khairul Islam to whom it was - 4 - transferred by one Muslim Education Society, Nashik which was granted the said property under a State Government Sanad dated 9th February, 1934. As per the terms of the Sanad a structure consisting of 12 rooms has been constructed. The property was required to be used as a hostel for muslim boys. 2. The said Muslim Education Society, Nashik was dissolved under a resolution passed on 29th July, 1973 under which its properties came to be transferred to one Anjuman C. Khairul Islam, Bombay with the consent of the then Charity Commissioner and this Trust later on transferred it to Respondent No.1 in July, 1989 as per the previous permission and consent of the then Charity Commissioner dated 24th November, 1988. 3. The objects of the first Respondent Trust are educational. They include maintaining schools, colleges, hostels, libraries, educational institutions for technical, pharmaceutical, medical, polytechnical and agricultural courses, to award scholarship to deserving students, to supply books, stationary etc. to students, to maintain dispensaries, hospital, medical centres and grant relief to public, to arrange for sports and to amalgamate with any other institutions with similar objects. - 5 - 4. The aforesaid Trust property is stated to be worth Rs.40 lakhs. It has an old dilapidated construction of 12 rooms used as a hostel for muslim boys stated to be worth Rs.1.20 lakhs. The Trust property therefore, in its entirety is valued at Rs.41.20 lakhs. 5. The property houses about 35 students. Respondent No.1 Trust intends to cater to the increasing demand of the students by making a provision for 200 students. 6. The Trustees of Respondent No.1 therefore sought to develop their property. They got a tender document prepared for inviting tenders for developing their plot of land. The tender document was prepared by one Advocate M/s. Deshpande and the Architect of the Trust. A public notice was issued in two newspapers circulated in Nashik, one in English and the other in Marathi. The offerers were to purchase the tender forms at a cost of Rs.10,000/- each. In all 14 offerers collected the tender forms and out of them eight submitted the tender forms. Four were found not eligible in terms of the conditions of the tender. The Trustees examined the tenders of 4 offerers who were found eligible. The Trustees thereafter increased the rate of the tender for the benefit of the Trust. Certain offerers offered - 6 - higher bids. Ultimately the tender of Respondent No.6 came to be accepted being the highest and better suited. 7. The Trustees applied to the learned Charity Commissioner to sanction the lease to be executed upon the development of the property of the Trust under Section 36 of the BPT Act, 1950. 8. The Appellants and Respondents 2 to 5 in L.P.A. No.449 of 2004 opposed the sanction (Respondent Nos.4 and 5 in L.P.A. No.449 of 2004 are the Appellants in L.P.A. No.454 of 2004). The learned Charity Commissioner by his judgment and order dated 26th June, 2003 granted sanction for the development of the property of the first Respondent Trust under Section 36(1)(b) under the BPT Act, 1950 in favour of Respondent No.6 for an increased premium amount of Rs.7.25 crores and upon certain terms and conditions as stated in the judgment. 9. The Appellants in these LPAs challenged the judgment and order of the learned Charity Commissioner by filing Writ Petition Nos.6458 of 2003, 6459 of 2003 and 6518 of 2003. 10. A learned Single Judge of this Court, who heard the Petitioners, finally dismissed the said Petitions by - 7 - his Judgment and Order dated 1st October, 2004. The status-quo order which was operating pending the Writ Petitions, was however continued for four weeks. These LPAs challenge the said order. 11. The powers and duties of the Trustees to act in the interest of the Trust and the powers of the Charity Commissioner to consider the interest, benefit and protection of the Trust whilst dealing with the immovable property of the Trust for its development come up for consideration in these applications. 12. It need hardly be stated that the Trustees are enjoined to use and utilise the trust properties to the highest extent possible for a benefit and interest of the Trust and to attain the objects of the Trust. 13. The Trust property has been granted under a Sanad of the Government. The Sanad is for utilising the Trust property for construction of a structure on 1/4th of the Trust property for a hostel for muslim boys. However, the Trust has wider objects which require to be accomplished. The construction on the Trust property had become dilapidated. In the meanwhile, the demand for the hostel accommodations has increased manifold. The Trust property was not being used for any purpose or for carrying out any other objects of the Trust other - 8 - than as a hostel. The Trustees wanted to develop the Trust property so as to procure funds for obtaining other immovable properties to realise the other objects of the Trust. 14. Under these circumstances, the Trust invited tenders and considered them. The tender document would itself show the endeavour of the Trustees to obtain the best possible offer of development that the property is capable of. 15. The tender form was to be collected by the offerers upon payment of Rs.10,000/-. The offerers were required to submit a Demand Draft of Rs.50 lakhs as a refundable deposit in the name of the Trust along with the tender. The tenderers/offerers (developers) were to obtain the required statutory sanction from the Charity Commissioner, Collector, Revenue Authorities, Urban Land Ceiling Office, and obtain the necessary building plan approved from the Nashik Municipal Corporation at their cost under Clauses 7 to 9 of the Tender document. 16. Further under Clauses 11 to 18, which dealt with the construction of the building, its FSI as well as future inflow of the Trust, the Trust was to receive the following :- - 9 - (a) The Trust was to remain the exclusive owner of the building so constructed. The minimum FSI of 1:1 was to be used for the development. A further increase of FSI of 1:2 upon bringing in TDR for additional construction was to be considered. (b) The basement was to be retained by the Trust for "pay and park". (c) The top floor of the building having an area of 9568 sq. ft. was to be in the exclusive use of the Trust for the students’ hostel purpose. These two premises were to be constructed as per specifications given in Annexure-B to the Tender. (d) The terrace of the building was to belong to the Trust and no advertisement boards could be put up by any one without the permission of the Trust. (e) The construction was to be put upon a foundation and plinth to bear the load of 7 floors. This provision was to be made although for construction of FSI of 1:1, only ground plus 3 upper floors could be constructed. (f) The Trustees were to give lease of 99 years to the successful tenderer and at the end of the period of lease the lessee would not be entitled for the - 10 - compensation of any constructed area of the property and the constructed property would have to be surrendered to the Trust free of cost and without damage. (g) The Trust was to receive a rent at the rate of Rs.2/- per sq. ft. for the shopping galas on the ground floor of the constructed building and at the rate of Rs.1/- per sq. ft. for the office premises on the first and the upper floors. (h) The tenderer as the lessee would be required to deposit an amount of Rs.100/- per sq. ft. for the maintenance of the building. (i) The successful tenderer as a lessee would not be entitled to transfer his leasehold rights without the prior consent of the Trust and to pay transfer charges at the rate of Rs.100/- per sq. ft. for the upper floors along with rentals at the rate of 10% more than the existing rent. 17. It may be stated that for obtaining such inflow of funds to the Trust (which could be used for realising the other objects of the Trust other than running the hostel for muslim boys simplicitor), the financial strength and condition of the offerers to the specified minimum extent were laid down in clause 29 of the - 11 - tender. Under that clause the following conditions were deemed essential:- (i) The prior construction works of the offerers were required to be to the extent of Rs.2 lakhs sq. ft. for the last 5 years prior to making the offer. (ii) The last 3 years income-tax returns were to be submitted to show their financial stability. (iii) The offerers were to submit a letter from their Bank showing their capability of giving Bank guarantee for payment of future sums. (iv) The offerers were to show the infrastructure available with them for the completion of the proposed building within the time specified under clause 18 (which was 2 years for the construction of FSI to the extent of 1:1, and 3 years for the construction of the FSI to the extent of 1:2 from the date of the sanction of the Charity Commissioner). (v) The offerer was to have a minimum turn over of Rs.2 crores per year for the last 5 years. (vi) The offerer was to be a Class-A Registered and certified Contractor with the PWD of the State - 12 - Government. 18. The minimum total construction as proposed was to be to the extent of 43056 sq. ft. as stated in clause 34 of the tender, and as specified in Annexures A & B thereto. 19. The tender of Respondent No.6 came to be accepted as Respondent No.6 agreed with each of the conditions under clauses 11 to 18 and qualified under clause 29 of the tender. It is the case of the first Respondent that no other tenderer qualified completely. The qualifications of Respondent No.6 have not been disputed. The objections of the Appellants as well as Respondents 2 and 3 in LPA No.449 of 2003 are with regard to only the fact that according to them their objections were not correctly considered by the learned Charity Commissioner. Respondents 2 and 3 in LPA No.449 of 2003 do not now contest the offer in favour of Respondent No.6 any more. Hence, only the Appellants in these 3 Petitions remain as objectors to the lease and development of the Trust property. 20. The case of the Appellants in Petition No.449 of 2004 is essentially that they qualify with regard to 5 out of the 6 requirements of clause 29 of the tender and that the last term of clause 29 of the tender should not - 13 - have been incorporated therein to obtain the best quote. As noted above, the last condition required the certification of the applicant as Class-A contractor of the Government. Such certificate is issued to those Contractors who have the capacity of unlimited contracts which is over 25 crores as per income-tax clearance of the Contractors submitted to the Government. It is contended on behalf of the Appellants in LPA No.449 of 2004 that even other Contractors who carry on only private contracts and who may not have obtained the Government Certificate may be otherwise equally eligible and capable with regard to their contract work, but the embargo under the said clause eliminates such contractors whose services would enure to the benefit of that it is not for the offerers or the objectors to lay down the parameters of what the Trustees would deem fit and proper as the minimum requirement for developing their property. It would be for the Charity Commissioner to consider whether the offers received by the Trust from those found eligible under the yard-stick of the Trustees would enure for the benefit of the Trust. 21. The learned Charity Commissioner has considered the tender of the first Respondent Trust, the best offer of Respondent No.6 as well as the objections of the Appellants and concluded with reasons that the offer of - 14 - Respondent No.6 is for the benefit of the Trust. The learned Charity Commissioner has further caused an increase of the offers by the 4 eligible offerers resulting in the higher cash component being paid to the Trust ultimately by Respondent No.6. Consequently the cash component of Rs.6,74,56,219 has been raised to Rs.7.25 Crores as noted by the learned Charity Commissioner and as accepted by the Respondent No.6. 22. The objections of the Appellants in LPA No.454 of 2004 (who are Respondents 4 and 5 in LPA No.449 of 2004) and of the Appellants in LPA No.448 of 2004 are essentially that they are the well-wishers and donors and beneficiaries of the Trust and desire to protect and safeguard the Trust and the Trust property. They have contended initially that the Trust property was in good condition and does not require repairs and renovations and hence, there was no necessity to give the land on lease for any development. Alternatively, they contended that they would obtain donations from another Trust being one Maulana Azad Education Foundation for repair and renovation of the Trust property to run a hostel for muslim boys. It is however pointed out on behalf of the Trustees that there is a ceiling on the extent of donation which can be granted by that Trust to the first Respondent Trust and which would be grossly inadequate to meet the present demand of additional - 15 - students requiring hostel accommodation and would not allow any other objects of the Trust at all to be fulfilled. 23. Therefore, as an alternative the Appellants/ Respondents 3 and 4 have at the stage of the hearing of the Writ Petition before the learned Single Judge and upon his query brought another developer one Mr. Chapalkar to give a higher bid. However, the trustees point out that he does not qualify with regard to some of the requirements of clause 29 of the tender. 24. Though the Appellants have contended that the insistence upon Class-A grade Certificate of the Government would cause a loss to the extent of Rs.3.26 crores to the Trust, they have not shown any offer of 3.26 crores more than the offer of 7.25 crores cash component of Respondent No.6. Hence, it is difficult to accept such statement. 25. The Appellants further contend that the first Respondent Trust is not the owner of the trust property which continues in the name of the Muslim Education Society in the Revenue records. We are told that the contention had been taken up by them and rejected before the Circle Officer, Nashik with regard to a disputed entry made in the Revenue records by his order dated - 16 - 19th August, 1996. A copy of the said order produced by Respondent No.1 Trust shows the objection taken by the Appellants/Respondents 3 and 4 under their application dated 23rd May, 1996. The said order has considered how the said Muslim Education Society came to be dissolved under a resolution dated 29th July, 1973 with the permission of the Charity Commissioner granted on 26th August, 1974 and how its properties came to be transferred to Respondent No.1 Trust on 22nd May, 1989 under another prior permission of the Charity Commissioner dated 24th November, 1988, which remained unchallenged until that application came to be filed on 23rd May, 1996. The entry in the Revenue records in favour of the Respondent No.1 Trust came to be certified under the reasoned order of the Circle Officer dated 19th September, 1996 and hence, the said contention lacks bonafides apart from the fact that it is taken up by the Appellants/Respondents 3 and 4 belatedly. 26. The learned Charity Commissioner has dealt with these objections also in the impugned judgment. 27. It would be material to primarily understand what benefits and rights the first Respondent Trust obtains under their transaction with Respondent No.6 for the development of the trust property and to compare the merits and de-merits, if any, of all the offerers of the - 17 - Appellants in both these appeals. 28. Mr.Thakkar, on behalf of Respondent No.6, has submitted a statement showing the expenses required to be incurred by Respondent No.6 on the project and its outflow. The Trust would stand to gain about Rs.13.25 crores from this project. The total construction cost at the rate of Rs.600/- per sq.ft. for the total construction of 57408 sq.ft. totals to Rs.3.50 crores for the construction of basement and ground + 3 upper floors under clause 34 of the Tender Notice. The nazrana fees payable to the Government for the transfer of the rights under the Sanad of 1934 is Rs.2 crores. The cash premium amount as determined by the Charity Commissioner upon the increase of the amount payable to the Respondent No.1 Trust is Rs.7.25 crores. Rs.50 lakhs have already been deposited by Respondent No.6 with Respondent No.1 Trust as per the terms of the tender. Further, Respondent No.6 would have to bear the stamp duty and registration charges. All these aspects have been considered by the learned Charity Commissioner. 29. Besides these, the inflow in terms of actuals which would accrue to the Trust is stated to be under two heads: (a) One time payment of maintenance deposit for - 18 - 33488 sq.ft. at the rate of Rs.100/- per sq. ft. amounting to Rs.33,48,800/-. (b) The recurring income which would accrue to the Trust upon the agreed rent payable at the rate of Rs.2/- per sq. ft. for the shopping galas and Rs.1/- per sq. ft. of the office premises would be Rs.3,72,000/- per annum and Rs.2,48,000/- per annum respectively. (c) Further the transfer charges payable on transfer of the car parking charges for the pay and park in the basement would be additional income of the Trust. 30. As against this, the offer of the Appellants in Appeal No.449 of 2004 shows the non-performance of the conditions set out in clause 29 of the tender almost entirely. (a) Whereas the works carried out by the offerers to the extent of 2 lakhs sq. ft. are required to be shown in the last 5 years prior to the tender offer, the Appellants have shown the experience of their firm as well as their sister concerns, (without particulars of their own independent contracts), for the 24 years that they have been in business. Consequently, reply of the Appellants does not answer the question of the Trustees. The list of certain contracts provided by the Appellants - 19 - show the works executed not only by them but by their sister concerns between 1981 to 1997 as against the tender requiring the last 5 years contracts before 2002. However, the documents of the Appellants themselves do not show any single material contract of the Appellants within the specified period of five years. It is rightly contended on behalf of the Trustees that the Trust was not interested in the contracts executed by the sister concerns of the Appellants firm and that their financial stability would not be reflected in the contracts of the last 24 years as on the date of the tender. (b) The income-tax returns required to be submitted show no stability of the Appellants with respect to payments expected and required to be made under the contract. The income tax returns reflect a poor position of the Appellants financial condition. They show that their income, meagre as it is, (atleast as reflected in the income tax returns), is mostly available out of gift funds. The first Respondents have obtained an opinion of the C.A. which shows that the income-tax returns of the Appellants do not reflect any investment of the Appellants in the firm or any income from the firm for the relevant assessment years. The tax returns not having been submitted for certain years, it can be seen that the firm was not assessed to income - 20 - tax during those years. The returns further show that the firm had no business income and business activity and that the Appellants’ firm was a defunct firm with a capital of merely Rs.20 lakhs which would be grossly inadequate to meet the liabilities of the Trustees’ project of about 13 crores. The income tax returns are not at all commensurate with the returns expected of the developer of a project running into several crores. (c) The letter required from