Case: Cyrus Rustom Patel Vs. The Charity Commissioner, Maharashtra, State &amp; Others

valuable property of the trust, which was derogatory to its interest and would have defeated the very object of the creation of the trust for the preservation and protection of religion and Parsi culture. 29. The joint venture development was not an intended transaction; sale option was mentioned dubiously in the agreement; same indicated that transaction was not bonafide. It was a cloak or a device adopted by the Trust so as to sell the property, and the transaction could not be said to be in the interest and benefit of the trust at all. Unfortunately, Joint Charity Commissioner totally failed in observance of statutory duties and did not look into the various aspects, neither conducted an enquiry envisaged under Section 36 of the Act. Thus, we find that the transaction could not have been sanctioned, considering the spirit of the provisions of Section 36 of the Act. Though the aforesaid Full Bench decision of High Court has come later on, however, intendment of the statutory provision, even for a moment, could not be to sanction such a derogatory transaction. The decisions of this court were available, even in the absence of exposition of the ambit of Section 36 of the Act by the high court; they had been conveniently ignored. The sanction at a glance had been granted in flagrant violation of basic principles of the law; it cannot withstand judicial scrutiny. 30. Apart from that, it is also apparent that prayer was made in the application to dispense with public notice in a newspaper on the pretext that it was joint venture agreement and development was to be made by trustees, whereas it was, in fact, not the actual factual situation. There was a clause for sale, and lease of 999 years would also tantamount to a sale, and admittedly sale option had been exercised. In the application, that was filed under Section 36 before Charity Commissioner, supported by the affidavit of Mr.Hoshang N. Wania, one of the trustees of B.C. Batliwala Trust, it was mentioned in para 6 thus:?EXEMPTION FROM INSERTING PUBLIC NOTICE IN NEWSPAPER? (a) xxx that the arrangement contemplated in the said MOU is that of joint venture and the development is being done by the Trustees themselves with the active support and financial resources of Astral and hence the question of inserting public notice in newspaper does not arise. In any event, the Trustees pray that this procedural formality may please be waived in this case. (b) Further, no useful purpose will be achieved by inserting Public Notice, as the said property is totally encumbered and not easily marketable in its present form. (c) Also, some of the disgruntled occupants may find it convenient to stop the proposal and may embroil the trust in wasteful litigation."31. It is apparent from aforesaid averment that there was a necessity of publishing a public notice in a newspaper, which requirement was sought to be waived on the ground that it was a joint venture and that development was being done by the trustees themselves, due to that, a public notice was not necessary. However, as a matter of fact, in Joint venture itself, the sale was contemplated and in fact it had taken place. The issuance of public notice could not have been waived. Inviting an offer by public notice would have disclosed actual worth of property; the aforesaid averments had been made designedly to evade the public notice, and it was not in the interest or for the benefit of the Trust to act in such a clandestine manner. It is clear that the application under Section 36 of the Act was not filed with clean hands, and it illegally aimed to get rid of public notice and unfortunately trustees succeeded in it. There was misrepresentation made as to the actual transaction that was intended and had ultimately taken place, in as much as it was stated in the application that no purpose would have been served by issuance of the public notice, as it was joint development venture, however, the property was totally unencumbered and easily marketable in its present form. The Joint Charity Commissioner also omitted to take into account actual nature of transaction how such property has to be sold and conveniently overlooked the provisions of the Act and decisions of this court. 32. As a matter of fact, the trust could not have entered into such negotiations with M/s. Astral Builders without public notice, which was admittedly not given in the instant case and, thus, the joint venture-cum-sale and lease for 999 years amounted to a sale. In such a manner and method, the application could not have been entertained at all, much less allowed, by the Joint Charity Commissioner. 33. The High Court has also failed to consider the various aspects, and has rejected the petition mainly on the basis of the delay, that was not very material in the facts, as no development had taken place. When such a prime and valuable public property was involved, the aforesaid delay could not be said to be fatal in the facts and circumstances of the case. The High Court has also not looked into the market value of the property and has dismissed the writ application on untenable and flimsy grounds. 34. We refrain from making any further remarks in the matter. Suffice it to say that such a frivolous prayer could not have been entertained, and the order of the Joint Charity Commissioner is absolutely illegal. Learned counsel for the trust stated that it would be difficult to repay the money. When trust has obtained money, obviously it has to repay. Let trust repay the amount of Rs.2,95,00,000/- to the developer. Considering the value of the property and the arguments made on behalf of the trustees, we are of the view that the trustees were not up to the task of protecting the interest of the trust, and clearly colluded with the developer while entering into such an agreement for development-cum-sale.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]9. It has not been disputed that so far the Municipal Corporation of Mumbai has not granted the permission for the aforesaid development, as such no development has taken place.The power to grant sanction has to be exercised by the Charity Commissioner, taking into consideration three classic requirements i.e. ?the interest, benefit, and protection? of the Trust. The expression that sanction may be accorded subject to such conditions as Charity Commissioner may think fit under section 31(1)(b) and Section 36 (1)(c). The Charity Commissioner has to be objectively satisfied that property should be disposed of in the interest of public trust; in doing so, he has right to impose such conditions as he may think fit, taking into account aforesaid triple classic requirements. It is also open to the Charity Commissioner, in exercise of power of Section 36(2) of the Act, to revoke the sanction, given under clauses (a) and (b) of Section 36 of the Act, on the ground that the sanction had been obtained by fraud or misrepresentation or those material facts have been suppressed while obtaining sanction. The intendment of the revocation provision is also to sub-serve the interest, benefit, and protection of the Trust and its property.In the instant case, the Joint Charity Commissioner was required to consider the interest and benefit of the Trust. We are compelled to observe that Joint Charity Commissioner has totally abdicated its duty, and failed to act as per the mandate of Section 36. The observations made by Joint Charity Commissioner in its Order clearly reflect that Charity Commissioner has failed to exercise the duties enjoined upon to protect trust under Section 36 of the Act. It has not considered the interest, benefit, and protection of the trust at all. The order is wholly perverse. Joint Commissioner abdicated its responsibilities, in as much as it observed that it was the outlook of the Trust as to whom it wanted to sell the property, and as certain development was to be made; as such market value of the property was not a relevant consideration. There is the sale made in the form of Joint Venture development cum sell agreement and lease was for 999 years. Right from the beginning, it was to be a joint venture agreement coupled with a sale option, as apparent from the minutes of the meeting of the trust. The trustees had been acting in collusion with developer even before resolution had been passed. Negotiations were going on with M/s. Astral Enterprises- developer.It was not disputed at Bar, by the trust or the developer, that it was a case of the sale, and right from beginning an option for sale was made. No effort has been made by the Trust, in case the sale was necessary, to ascertain the real market value of the property, nor has it been ascertained by the Joint Charity Commissioner. The property is located in a prime location of the city of Mumbai, at Malabar Hill Division near Central Mumbai Railway Station, and that the market value was, obviously, sky high as compared to paltry sum offered.This is a prestigious locality, where one would cherish to own a property, and in the true sense, it would be like a treasure house. We unhesitatingly take judicial notice of the fact, that such a huge area could not have been sold for a paltry sum of Rs.2,95,00,000/-. Trustees, as well as Joint Commissioner, have failed to act in the interest, benefit and to protect the Trust, and the same could not have been sold by such private negotiations. In our opinion, the value was many a time more at the time of entering into the agreement. The paltry sum that was reserved by the Trust could not be said to be in the interest and benefit of the trust. Merely obtaining a valuation report, from a person of choice, without making any serious effort to ascertain the market value by way of any method known to law, and fixing its reserve price, was an eyewash; such a dubious transaction was not at all acceptable, and it shocks conscience as to how such a valuable property could have been sold at such a throw-away price. Thus, we find, on the basis of the principles laid down in aforesaid decisions, and even on the basis of the decision relied upon by the learned counsel appearing on behalf of the developer, in Vedica Procon Private Limited (supra), that the respondents have no case at all. In the later decision, this court unequivocally held that sale should be at market price. In this case, no such effort had been made; it has not been considered as to why trust should sell such a valuable property at all, and as to what was the compelling necessity. Ordinarily, the trust property is to be protected, such property is held in trust; in case its condition was not good, there could be several other ways to improve it; it could not have been achieved by virtually throwing away the property.The joint venture development was not an intended transaction; sale option was mentioned dubiously in the agreement; same indicated that transaction was not bonafide. It was a cloak or a device adopted by the Trust so as to sell the property, and the transaction could not be said to be in the interest and benefit of the trust at all. Unfortunately, Joint Charity Commissioner totally failed in observance of statutory duties and did not look into the various aspects, neither conducted an enquiry envisaged under Section 36 of the Act. Thus, we find that the transaction could not have been sanctioned, considering the spirit of the provisions of Section 36 of the Act. Though the aforesaid Full Bench decision of High Court has come later on, however, intendment of the statutory provision, even for a moment, could not be to sanction such a derogatory transaction. The decisions of this court were available, even in the absence of exposition of the ambit of Section 36 of the Act by the high court; they had been conveniently ignored. The sanction at a glance had been granted in flagrant violation of basic principles of the law; it cannot withstand judicial scrutiny.Apart from that, it is also apparent that prayer was made in the application to dispense with public notice in a newspaper on the pretext that it was joint venture agreement and development was to be made by trustees, whereas it was, in fact, not the actual factual situation. There was a clause for sale, and lease of 999 years would also tantamount to a sale, and admittedly sale option had been exercised.It is apparent from aforesaid averment that there was a necessity of publishing a public notice in a newspaper, which requirement was sought to be waived on the ground that it was a joint venture and that development was being done by the trustees themselves, due to that, a public notice was not necessary. However, as a matter of fact, in Joint venture itself, the sale was contemplated and in fact it had taken place. The issuance of public notice could not have been waived. Inviting an offer by public notice would have disclosed actual worth of property; the aforesaid averments had been made designedly to evade the public notice, and it was not in the interest or for the benefit of the Trust to act in such a clandestine manner. It is clear that the application under Section 36 of the Act was not filed with clean hands, and it illegally aimed to get rid of public notice and unfortunately trustees succeeded in it. There was misrepresentation made as to the actual transaction that was intended and had ultimately taken place, in as much as it was stated in the application that no purpose would have been served by issuance of the public notice, as it was joint development venture, however, the property was totally unencumbered and easily marketable in its present form. The Joint Charity Commissioner also omitted to take into account actual nature of transaction how such property has to be sold and conveniently overlooked the provisions of the Act and decisions of this court.As a matter of fact, the trust could not have entered into such negotiations with M/s. Astral Builders without public notice, which was admittedly not given in the instant case and, thus, the joint venture-cum-sale and lease for 999 years amounted to a sale. In such a manner and method, the application could not have been entertained at all, much less allowed, by the Joint Charity Commissioner.The High Court has also failed to consider the various aspects, and has rejected the petition mainly on the basis of the delay, that was not very material in the facts, as no development had taken place. When such a prime and valuable public property was involved, the aforesaid delay could not be said to be fatal in the facts and circumstances of the case. The High Court has also not looked into the market value of the property and has dismissed the writ application on untenable and flimsy grounds.We refrain from making any further remarks in the matter. Suffice it to say that such a frivolous prayer could not have been entertained, and the order of the Joint Charity Commissioner is absolutely illegal. Learned counsel for the trust stated that it would be difficult to repay the money. When trust has obtained money, obviously it has to repay. Let trust repay the amount of Rs.2,95,00,000/- to the developer. Considering the value of the property and the arguments made on behalf of the trustees, we are of the view that the trustees were not up to the task of protecting the interest of the trust, and clearly colluded with the developer while entering into such an agreement for development-cum-sale.