- 1 - rng IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION TRUST PETITION NO.3 OF 2008 Mr.Haroun Alim A.K.Yusuf & ors ... Petitioners vs Mr.Faruq A.R.Yusuf ... Respondent Ms.Rajani Iyer,Sr.Counsel for Petitioners Mr.Chirag Shah for Respondent Mr.Iqbal Chagla, Sr.Counsel for Ismail Building Tenants Association CORAM: R.V.MORE,J DATED: December 16, 2009 P.C. Heard. 1. Rule. Rule made returnable forthwith. By consent of learned counsel. Trust Petition is taken up for final hearing. Heard Ms.Rajani Iyer,Senior counsel appearing for the Petitioners, Mr.Chirag Shah for Respondent and Mr.Iqbal Chagla, Senior Counsel for the Ismail Building Tenants’ Association. 2. Above Trust Petition is filed by the five trustees of Sir Mohamed Yusuf Ismail Building Trust to sanction - 2 - sale of the ground floor of the trust’s building known as “Ismail Building” in favour of Golden Mount Realtors Pvt.Ltd and balance of the said building to Oriental Realtors Pvt Ltd in terms of the Memorandum of Intent dated 19th December 2006 and 27th July 2007 respectively. 3. The brief facts giving rise to the filing of the present Petition are as follows : Sir Mohammed Yusuf Ismail Building Trust (hereinafter referred to as the said trust) is created by Sir Mohammed Yusuf Kt.of Mumbai in accordance with the provisions of Mohammedan Law by and under a Deed of Wakf dated 8th April, 1940. The petitioners and respondent are trustees of Sir Mohammed Yusuf Ismail Building Trust. The said trust is registered with the Sub Registrar of Assurances at Mumbai on 20th April, 1940. The trust owns a building known as “Ismail Building” consisting of ground and upper floors. This building is constructed prior to 100 years ago and the same is in a dilapidated condition. The building is occupied by various tenants. In view of the Rent Control Laws, rent recovered from the tenants of the building have remained practically frozen for almost fifty years. Consequently, the income received by way of rent and permitted increases has remained limited. On the other hand, municipal taxes and - 3 - other dues payable in respect of the suit property have kept increasing from time to time. The rental income derived from the said property for the Financial year 2006-2007 was Rs.6,98,375.50 whereas property taxes and rent revenue payable by the trust in respect of the said property for the same period came to approximately Rs. 6,78,278/-. In addition to the above expenses, the trust has to spend for administrative and other incidental charges incurred in connection with land and management of trust property. 4. One M/s Prestoplast is occupying the entire ground floor of the suit property admeasuring about 7774.32 sq.ft. together with the existing mezanine floor therein admeasuring 2804.15 sq.ft. The trustees were approached by Golden Mount Realtors Pvt.Ltd with an offer to purchase the reversionary rights of the trustees in the said ground floor premises subject to the trustees agreeing to join in an agreement for transfer of tenancy of the ground premises by M/s Presto Plast to Marie Gold Realtors Pvt.Ltd, a sister concern of Golden Mount. After negotiating Golden Mount Realtors Pvt.Ltd agreed to purchase and acquire the reversionary rights of the trustees in the said ground floor premises for a lump sum consideration of Rs.70,00,000/- (Rupees Seventy lacs only). The trust also resolved that the said offer for purchase of reversionary rights of the ground floor - 4 - premises in favour of Golden Mount Realtors Pvt. Ltd be accepted. Accordingly, a tripartite agreement was executed between the said M/s Presto Plast, the Trust and Marie Gold Realtors Pvt. Ltd and by a Memorandum of Intent dated 29th December, 2006 executed by and between the said trust and Golden Mount Realtors Pvt Ltd, it was agreed to sell, transfer and assign the said ground floor premises to Golden Mount Realtors Pvt.Ltd on ownership basis subject to tenancy rights of the tenants. 5. By a Memorandum of Intent dated 27th July 2007 the petitioners agreed to sell the balance property to Oriental Realtors Pvt.Ltd for a lump sum consideration of Rs.1,50,00,000/- (Rupees One crore fifty lacs only) on “as is where is” basis. This Memorandum of Intent was formally ratified by the trust in its meeting which was held on 2nd August 2007. 6. It is the case of the Petitioners that the above transactions of sale are in the interest of trust and its beneficiaries and therefore, the present petition is filed for sanction of the Court in view of the provisions of clause 22 of the Trust Deed. 7. Ms.Rajani Iyer, learned senior counsel appearing for the Petitioners took me through the Trust Deed annexed at Exhibit A to the petition and particularly - 5 - clause 22 of the said Trust Deed. She invited my attention to the list of beneficiaries annexed at Exhibit N. She further invited my attention to Exhibit O whereunder all the beneficiaries except the respondent gave no objection to the petitioners to make necessary application to this Court for sanctioning the sale. She submitted that having regard to the income derived from the said property and expenses incurred for payment of taxes and management of the property, it is in the interest of the trust and its beneficiaries to sell the ground floor and upper floors to M/s Golden Mount Realtors Pvt.Ltd and Oriental Realtors Pvt.Ltd respectively. She further submitted that the agreed sale price of the said property is fair and reasonable. She lastly submitted that the Petitioner is a private family trust and therefore, the transaction is governed by the Trust Deed and the Petitioners having complied with all the requirements of the trust Deed, sanction of the Court ought to be granted as prayed for. 8. Mr.Shah, learned counsel for the respondent at the outset challenged the maintainability of the Trust Petition filed under section 34 of the Indian Trust Act, 1882. He submitted that the said property is situated at Fort area which is adjacent to the Bombay High Court and the valuation arrived at and on which the Petitioners relied upon is much lower and cannot be believed. He - 6 - submitted that the current market rate of the said property is at least Rs.20,000 per sq.ft. He alleged that the properties are being sold at a very low rate. He also submitted that the said property can be developed by the Trust and a Development Agreement can be entered into by the trustees with the developer offering the highest bid. He alleged that the trustees are interested only in getting money in cash. He also alleged malafides against the Trustees. He lastly submitted that the transaction which the Petitioner-Trustees intended to enter is not for the benefit of the trust and its beneficiaries and in this regard he relied upon the apex Court decision in JOINT COMMISSIONER, HINDU RELIGOUS AND CHARITABLE ENDOWMENTS ADMN DEPARTMENT vs JAYARAMAN AND OTHERS reported in (2006) 1 Supreme Court Cases 257. 9. Mr.Chagla, learned senior counsel appearing on behalf of the Tenants’ Association and others being Intervenors submitted that in view of clause 22 of the Trust Deed, the petitioners cannot sale its property without sanction of this Court. He also submitted that under the Trust Deed 15 % of the income out of the Trust property goes to the charity. Therefore, it is not the exclusive private trust and it is both private and public trust. He further submitted that it is the duty of the trustees to get best possible price. He submitted that the Tenants Association by filing an affidavit in this - 7 - Trust Petition offered an amount of Rs.2 crores for the 1st to 4th floor premises. A statement was made that the Tenants’ Association is ready and willing to increase this amount to Rs.3 crores. He submitted that if the Trust is getting more money then there is no reason for it to refuse the offer. He lastly submitted that in the interest of justice and its beneficiaries the said property deserves to be sold out by public auction allowing the Tenants Association to participate in the sale so that the Petitioner-Trust will get best possible price. He relied upon decision of the Apex Court in M/S SHANTI VIJAY AND CO AND OTHERS vs PRINCESS FATIMA FOUZIA AND OTHERS reported in (1979) 4 Supreme Court Cases 602 and decision in R.VENUGOPALA NAIDU AND OTHERS vs.VENKATARAYULU NAIDU CHARITIES AND OTHERS reported in 1989 Supp (2) Supreme Court Cases 356. 10. I have considered the rival submissions of the learned counsel appearing for the respective parties. I have also gone through the Trust Petition alongwith the Annexures thereto and the ratio of the decisions of the Apex Court mentioned above. At the outset, I will consider the objections raised by Mr.Shah learned counsel for the respondent regarding the maintainability of the Trust Petition under section 34 of the Indian Trust Act, 1882. - 8 - 11. In order to appreciate this aspect, it is worthwhile to reproduce clauses 5 and 22 of the Trust Deed. 5. It shall be lawful for the Mutavalis at any time to demise without any order of the Court the property described in the Schedule hereunder written or any part or parts thereof or any other immovable property held on the trusts of these presents or part or parts thereof for any term of years not exceeding 20 years at such rents and subject to such covenants and conditions as the Mutavalis shall in their absolute discretion think fit. “ 22.Notwithstanding anything to the contrary hereinabove, contained it is expressly agreed and declared that during the life time of the Wakif and after his death during the life time of his son Abdul Rehman Mohammed Yusuf the opinion, discretion and decision of the Wakif or of the said Abdul Rehman Mohamed Yusuf as the case may be shall prevail over the opinion, discretion and decision of his co-mutavalis. The Wakif during his life time and after his death the said Abdul Rehman Mohamed Yusuf during his life time shall be entitled to exercise all the rights and powers of the Mutavalis and to do without any leave of Court all things which the Mutavalis could do with the leave of the Court and in particular shall be entitled without any leave or sanction of Court to sell or exchange Wakf property and or demise the same for any period. After the death of the Wakif and of the said Abdul Rehman Mohamed Yusuf every question shall be decided by majority of votes of the Mutavalis present at the meeting. In case of equality of votes the Chairman of the meeting shall have a second or casting vote. “ Thus, it is clear from the above provisions that it is lawful for the trustees to demise the said property without permission of the Court for any term of years not exceeding 20 years under clause 5 of the Trust Deed. - 9 - Clause 22 of the Trust Deed provides that after the death of the Settlor, every question shall be decided by majority of votes of the Mutavalis. Clause 22 makes it clear that Vakif (Settlor) during his life time, and after his death, his son Abdul Mohammed Yusuf duirng his life time shall be entitled to exercise all rights and powers of the Mutavalis without leave of the Court. However, after the death of Settlor and his son, leave is required to be obtained from the court to sale or exchange Wakf property. 12. Under section 34 of the Indian Trust Deed, 1882 any trustee may without instituting a suit, apply by petition to a principal Civil Court of original jurisdiction for its opinion, advice or direction on any present questions respecting the management or administration of the trust property other than questions of detail, difficulty or importance not proper in the opinion of the Court for summary disposal. 13. The Apex Court in JOINT COMMISSIONER, HINIDU RELIGIOUS AND CHARITABLE ENDOWMENTS ADMN DEPARTMENT vs. JAYARAMAN AND OTHERS, supra was considering an application under section 34 of the Indian Trust Act, 1882 by the trustees for permission to sell the trust property. In this case, initially an application was made before the District Court and the District Court allowed - 10 - the application. The JOINT COMMISSIONER, HINDU RELIGIOUS AND CHARITABLE ENDOWMENTS ADMN DEPARTMENT thereafter filed a Petition under Article 227 of the Constitution of India in the High Court and the High Court confirmed the order of the District Court. The matter was taken thereafter to the Apex Court and the Apex Court allowed the appeal setting aside the order of the District Judge as confirmed by the High Court. It is pertinent to point out that the Apex Court set aside the above permission not on the ground of maintainability of the proceedings but, on merits. The Apex Court found that the District Court accepted the valuation, for which the property was being sold even without making an inquiry about the market value of that property. The Apex Court also observed that Courts should have satisfied itself of the need of the sale and propriety of the sale proposed. Thus, I hold that the petition under section 34 of the Indian Trust Act for permission to sell the trust property is maintainable. 14. This takes me to consider the need for sale and propriety of the sale proposal. The averments made in the petition about the yearly income of the trust property is about Rs.7,00,000/- and the trust is required to pay an amount of Rs.6.78,278.00 towards taxes and land revenue which is not disputed either by the respondent or by the Tenants’ Association the Intervenors. In addition - 11 - to above, the trust is required to incur expenses towards administrative and incidental charges in collection of rent and management of the trust property. The Board of Trustees have also passed a resolution on 23rd November, 2006 unanimously resolving that it was in the interest of the trust and its beneficiaries to sell the ground floor premises in favour of Golden Mount Realtors Pvt.Ltd and balance property in favour of Oriental Realtors Pvt.Ltd. The beneficiaries of the trust have also given no objection to the trustees to sell the trust property to Golden Mount Realtors Pvt.Ltd and Oriental Realtors Pvt.Ltd. Taking into consideration the above aspect I find that the petitioners have made out a case for the need to sell the said property. 15. Now let us consider whether in the facts and circumstances of the case permission deserves to be granted to the petitioners to sell the trust property. The Apex Court in JOINT COMMISSIONER VS JAYARAMAN CASE SUPRA while dealing with an application under section 34 of the Indian Trust Act, 1882 has held that while granting permission Courts must make inquiries into the market value of the property at the relevant time in addition to its satisfaction about the need for sale. The Apex Court in M/S SHANTI VIJAY VS PRINCESS FATIMA FOUZIA & ORS reported in (1979) 4 Supreme Court Cases - 12 - 602 was considering the validity of the sale of a property of a private trust. In para 60 and 61 the Apex Court observed that it is the duty of the trustees to act with prudence and as a body of reasonable man. The apex Court confirmed the conclusion of the High Court that improvident sale of jewellery at low price without due public notice was not bonafide exercise of powers indicative of beneficial management. Thus, the ratio of the above Apex Court decision makes it obligatory on the Court to inquire into the market value of the trust property and secondly to ascertain whether the transaction is bonafide, entered into good faith and the trustees have acted prudently as a body of reasonable men. 16. Reverting to the facts of the present case, the petitioners agreed to sell the ground floor and 1st to 4th floor premises to Golden Mount Realtors Pvt.Ltd and Oriental Realtors Pvt.Ltd for consideration of an amount of Rs.70,00,000/- (Rupees Seventy lacs) and Rs. 1,50,00,000/- (Rupees One crore fifty lacs) respectively. From the affidavit filed by the Tenants’ Association, it is clear that for the 1st to 4th floors the Tenants’ association has offered an amount of Rs.2,00,00,000/- (Rupees Two crores). Mr.Chagla, learned senior counsel for the Tenants’ Association during the course of - 13 - arguments increased this offer to Rs.3,00,00,000/- (Rupees Three crores). The petitioners were also conscious of the fact that they should procure better price. In fact a statement is made in para 7 of the petition that they made efforts to procure better price but, no better offer other than made by Golden Mount Realtors Pvt.Ltd and Oriental Realtors Pvt.Ltd have been forthcoming. This statement made by the petitioners in para 7 stands controverted by the affidavit of the Tenants’ Association and submissions of Mr.Chagla learned senior counsel. Obviously, the offer of the Tenants’ Association is better and is in the interest of the trust and its beneficiaries being higher than that of Oriental Realtors Pvt.Ltd. It is the duty of the trustees to get the best possible price to the trust property. If they fail in this duty then that will amount to breach of the trust confidence which is reposed in them by the Settlor of the Trust Deed. The offer given by the Tenants’ Association in their affidavit and during the course of the arguments of Mr.Chagla goes to show that the trust property is capable of getting much better price than that agreed by Golden Mount Realtors Pvt.Ltd and by Oriental Realtors Pvt. Ltd. In my view, it would be in the interest of the trust and its beneficiaries to sell said property to the highest bidder in a public auction. Needless to mention that the Tenants’ Association can participate in the auction. - 14 - 18. One another aspect deserves consideration. Though the said trust is a private trust however, under clause 2 of the Trust Deed, 15 % of the net rent income is to be spend for charitable purposes mentioned in the said clause. It is pertinent to note that returns of the said trust along with the statement of property are being filed with the Assistant Charity Commissioner, Bombay Region, Bombay. The Apex court in P.R.VENUGOPALA NAIDU supra was dealing with the case of a public trust. In para 13 of the said judgment the Apex Court on the basis of the evidence on record satisfied that the value of the property which the trust got was not the market value and therefore, in para 14 of the said judgment directions were given to sell the property in question by public auction by giving wide publicity regarding the date, time and place of public auction. As stated above, though this decision is not in respect of private trust, in my view, the same can be made applicable to the present facts and circumstances of the case in as much as 15 % of the net income of the trust property is to be utilised for charity purpose. 19. In the light of the discussion made above, I find that though the trust has made out a case for the need to sell the trust property, however, I find that the transaction is not in the interest of trust or its - 15 - beneficiaries and therefore, I refuse to grant permission for sale of the trust property. In the result,Trust Petition is dismissed accordingly. R.V.More, J