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

2. The B.C. Batliwala Agiary Trust is registered under the Bombay Public Trusts Act, 1950 (hereinafter referred to as the Act). The Trust, in its meeting dated 20-01-2003, decided to enter into an agreement with M/s. Astral Enterprises. It was noted in the minutes of the meeting that the tenants in the premises had, in principle, agreed to the development of the Trust property at Tardeo, on the condition that the interest of the tenants would be looked after and that the tenants would be provided flats in new buildings on ownership basis, and that the development would be completed in a time bound manner by the said developer.The minutes of the Trustees meeting dated 20-01-2003 states that Shri Suresh Mehta, partner of M/s. Astral Enterprises, had been invited to the meeting. It was decided that in case there was any difficulty in carrying out the development agreement, it would be converted into an outright sale. The Trustee would have an exit option. It was decided that development would be on a time-bound basis. The registration charges of the deed would be borne by the developer, as well as the cost of construction. Trustees would have an exit option if trustees felt that it was not in the interest of the Trust to carry on with the joint venture development; the Trustees alone shall have the option to convert the joint venture arrangement into a sale, in that event M/s. Astral Enterprises would require paying a fixed pre-determined price to the Trust. The application was filed under the provisions of Section 36 of the Act, for granting sanction to enter into joint venture cum sale agreement between the trust as well as the M/s. Astral Enterprises.The aforesaid development agreement was with respect to ?Fire Temple?, bearing Cadastral Survey No.727 of Malabar Hill Division, Mumbai admeasuring about 3012 sq. meters, situated at 160 Tardeo, Mumbai. On the said property stand a ?Parsi Fire Temple? and certain other structures that are occupied by 21 occupants in the capacity of tenants. There was no further availability of F.S.I.It was mentioned in the application filed under Section 36 of the Act that construction of the temple was done prior to 1940, it was old and in a dilapidated condition, and required extensive repairs. The Trust was getting a meager income from the building. It was in need of funds to meet the objectives of the trust; as such trustees decided to develop the property after prolonged discussions. As trust had no such funds as were required for carrying out the construction work, it was considered necessary to take help of the developer. M/s. Astral Enterprises was ready to provide the necessary services to the trust, with a proposal to jointly develop the property. It transpires that agreement for joint venture development-cum-sale had been entered into and ultimately sale had been effected, for a sum of Rs.2, 95,00,000/-.The Charity Commissioner had accorded the sanction under Section 36 of the Act. Though it was noted by the Charity Commissioner that no public notice had been published in the newspaper for inviting the offers, yet for non-publication of the same in newspapers, the applicant, gave an explanation by way of an affidavit, that public notice was not mandatory in all cases, before a grant of sanction.Charity Commissioner has further observed that it was concerned only with according or refusing sanction to a particular sale which the trustees propose to make and that it was for the trustees to decide to whom they should sell the property, subject to the sanction of the Charity Commissioner. There was no necessity to invite others by way of public advertisement. It was not open to the Charity Commissioner to invite offers from third parties. As per the development agreement, the temple would be renovated and 33% of the built-up area would be given out of balance F.S.I. In addition, a sum of Rs.2,95,00,000/- as sale consideration was given; and the alienation was for the compelling necessity, and in the interest of the public trust. At the same time, while considering whether the offer was proper, fair and adequate, as compared to the market value, the Joint Charity Commissioner has observed that it was not the case of an outright sale; and further that it was not necessary to take into consideration the market value of the property as the developer had agreed to make the extension of Fire Temple, and to re-house the tenant, and to give 33 % of the constructed portion out of the balance F.S.I. As such, the transaction has been found by the Joint Charity Commissioner to be in the interest of the trust and sanctioned sell and lease for 999 years of the property. It was ordered that joint venture agreement for development-cum-sale with the Astral Enterprises may be entered into, as per MOU dated 3-04-2003, following order has been2. The Trustees are permitted to enter into the joint venture agreement coupled with the sale option in terms of the memorandum of Understanding dt.3.4.03 Ex.5 executed between the trustees and the Astral enterprises.The Trustees are permitted to enter into joint venture with astral enterprises in terms of Memorandum of Understanding dt.3.4.03 (Ex.5) executed between the trustees and the Astral Enterprises & consequently permitted the trustees to execute a lease of the balance land i.e. the said property minus the land underneath Agiary building, which Agiary building land admeasures 620 sq. mtrs or thereabouts for a term of 999 years at a token annual rent of Rs.1/- in favour of Astral Enterprises or its nominee.In the event of trustees exercise the option as provided in cl. 18 of the said MOU Ex.5 they are permitted to sell the development rights in respect of the balance land i.e. the said entire property minus the land underneath the Agiary building admeasuring 620 sq.mtrs for a total consideration of Rs.2, 95,00,000 (Rupees two crores ninety-five lacs only) to Astral Enterprises and consequently the trustees are permitted to lease the balance land of a term of 999 years at a token annual rent of Rs.1/- in favour of Astral Enterprises or its nominee. In the event, the B.E.S.T. Authorities so require as a precondition to providing the necessary electrical power, the trustees are permitted to transfer such area as may be necessary but not exceeding 100 sq. m. out of the said property in favour of B.E.S.T. undertaking to accommodate a subsection. The trustees are permitted to hand over such setback area as may be ultimately determined to be handed over to the Bombay Municipal Corporation on such terms and for such consideration as may be stipulated by the Corporation or by any statutory Authority and execute such documents as may necessary or incidental for completing the process of such handling over of the setback area.Necessary and relevant documents are executed within a period of six months from the date of passing of this order for giving effect to the Memorandum of Understanding dt.2.4.2003 (Ex.5).All the expenses are required to be made for the development of the trust and for executing the document, shall be made by the Astral Enterprises.The above permission is granted subject to the provisions and prohibition contained in any other act and laws for the time being in force, relating to trust property in question.The consideration amount, income received by the trust in view of the transaction permitted shall be utilized in carrying out the objects of the trust and for protecting the interest of the trust and its property.The trustees shall invest the amount, which will be received in this transaction in the fixed deposits in any Nationalized Bank or Public Securities of their choice. It shall form the part of the corpus of the trust property.The trustees are directed to file necessary change report under Sec.22 of the Bombay Public Trust Act, 1950 before the Competent Authority after the transaction. The appellant Cyrus Rustom Patel filed writ application in the High Court of Bombay. The High Court dismissed the same, mainly, on the ground of delay, as petitioner was aware of the transaction w.e.f. the year 2003. The High Court has observed that offer made by the Nilkanth Realtors in respect of sale transaction of an amount of Rs.55 crores was not proper. It was to acquire property rights on a freehold basis and not in the form where the setback line runs through the Sanctum Sanctorum. The High Court opined that offer may have been tempting, but could not be said to be genuine as per provisions contained in Section 36 of the Act.

Court's reasoning:
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.