Bombay High Court
Raunak Corporation vs Sanjay Manohar Kastur on 18 October, 2012
Bench: N.M. Jamdar
1 LPA101-12
Mlns
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
LETTERS PATENT APPEAL NO.101 OF 2012
in
WRIT PETITION NO. 1332 OF 2012
with
CIVIL APPLICATION NO.143 OF 2012
(For Stay)
Raunak Corporation.
A partnership firm, having address at
Laxmi Narayan Residency,
Unnathi Gardens III, Opposite Ma Niketan, ... Appellant
Pokhran Road No. 2, (Respondent No.9
Thane (West) 400 610. in Writ Petition)
Vs.
1. Sanjay Manohar Kastur,
age 59 years, Occupation : Consultant
2. Pushpa Shrikant Kamat,
age 58 yrs., Occupation : House wife.
3. Shankar Shrikant Patil,
age 53 yrs., Occupation : Service.
4. Suresh Vasudeo Mahajan,
age 61 yrs., Occupation : Business.
5. Pradeep Prabhakar Tendulkar,
age 60 yrs., Occupation : Consultant.
6. Vipul Anil Thakur,
age 34 yrs., Occupation : service.
7. Gokul Ganpat Samant,
age 55 yrs., Occupation : Business
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8. Vinayak Digamber Pandit,
age 33 yrs., Occupation Nil
9. Ganesh Dattatray Desai,
age 62 yrs., Occupation : Retired.
All residing at various rooms in Kudal
Deshkar Gaud Brahman Niwas,
Jagannath Shankarshet road,
Girgaon, Mumbai 400 004.
10. Vikas Motiram Desai
11. Geeta Digambar Patkar
12. Achyut Waman Tendulkar
13. Sunil Digambar Samant.
14. Tejshree Desai
15. Tapasya Karnad
16. Ashok R. Nerkar
Respondents Nos.10 to 16 adults,
trustees of Late Rao Bahadur
Anant Shivaji Desai Topiwala,
Charity, having its office at Kudai
Deshkar Brahmin Nivas, Jagannath
Shankarseth Road,
Girgaon, Mumbai 400 004.
17. Late Rao Bahadur Anant
Shivaji Desai Topiwala, Charity,
A Public Trust, registered under ... Respondents
the provisions of the Bombay Public (Respondents Nos.1 to
Trust Act, 1950, having registration 9= Petitioners in Writ
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No. A/751, Mumbai, having its office Petition; Respondents
at Kudai Deshkar Brahmin Nivas, Nos.10 to 17 =
Jagannath Shankarseth Road, Respondents Nos.1
Girgaon, Mumbai 400 004. to 8 in Writ Petition;
Respondent No.18
& 19= Respondent
No.10 and 11 in Writ
Petition respectively)
18. Charity Commissioner,
Maharashtra, Mumbai at Mumbai
having his office at A. Besant Road,
Worli, Mumbai 400 018.
19. State of Maharashtra
Having its office at Mantralaya,
Mumbai -400 032.
Alongwith
LETTERS PATENT APPEAL NO.102 OF 2012
in
WRIT PETITION NO. 11070 OF 2011
with
CIVIL APPLICATION NO.144 OF 2012
(For Stay)
Raunak Corporation.
A partnership firm, having address at
Laxmi Narayan Residency,
Unnathi Gardens III, Opposite Ma Niketan, ... Appellant
Pokhran Road No. 2, (Respondent No.9
Thane (West) 400 610. in Writ Petition)
Vs.
1. Siddhivinayak Construction Pvt. Ltd.
A company incorporated under the
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provisions of Companies Act, 1956,
having its registered address at 3,
Sarwamangal, College Lane,
Dadar (West), Mumbai 400 028.
2. Sachin Khanolkar
Adult, Indian inhabitant,
Having his address at
3, Sarwamangal, College Lane,
Dadar (West), Mumbai 400 028.
3. Vikas Motiram Desai
4. Geeta Digambar Patkar
5. Achyut Waman Tendulkar
6. Sunil Digambar Samant.
7. Tejshree Desai
8. Tapasya Karnad
9. Ashok R. Nerkar
All Adults, Indian Inhabitants,
Trustees of the Late Rao Bahadur
Anant Shivaji Desai Topiwala,
Charity, having their address at
Kudaldeshkar Brahman Niwas,
Girgaon, Mumbai 400 004.
10. The Late Rao Bahadur Anant
Shivaji Desai Topiwala, Charity,
A Public Trust, registered under ... Respondents
the provisions of Bombay Public (Respondents Nos.1 & 2
Trust Act, 1950, under registration = Petitioners in Writ
No. A/751, (Mumbai), having its Petition; Respondents
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5 LPA101-12
address at Kudaldeskar Brahman Nos.3 to 10 =
Niwas, Girgaon, Mumbai 400 004. Respondents Nos.1 to
8 in Writ Petition;
Respondent No.11 =
Respondent No.10 in
Writ Petition)
11. The Charity Commissioner,
Maharashtra, Mumbai
A statutory Officer, under the
provisions of Bombay Public Trust
Act. 1950, having his address at
Annie Besant Road, Worli,
Mumbai 400 018.
ig Alongwith
LETTERS PATENT APPEAL NO.103 OF 2012
in
WRIT PETITION NO. 11070 OF 2011
with
CIVIL APPLICATION NO.145 OF 2012
(For Stay)
1. Dattatraya Baburao Walawalkar
Age - 56, Occupation: Service,
residing at Room No. 8,
Kudaldeshkar G. Brahman
Niwas, J.S.S. Road, Girgaum,
Mumbai 400 004.
2. Yashwant Shrikrishna Desai
Age: 48, Occupation : service,
residing at Room No. 83,
Kudaldeshkar G. Brahman
Niwas, J.S.S. Road, Girgaum,
Mumbai 400 004.
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3. Bhaskar Shivram Samant,
Age : 67, Occupation : Retired
residing at Room No. 24,
Kudaldeshkar G. Brahman Niwas,
J.S.S Road, Girgaum,
Mumbai 400 004.
... Appellants/
Intervenors
4. Satish Gajanan Samant,
Age 60, Occupation Retired,
residing at Room No. 57,
Kudaldeshkar G. Brahman Niwas,
J.S.S. Road, Girgaum,
Mumbai 400 004.
igVs.
1. Siddhivinayak Construction Pvt. Ltd.
A company incorporated under the
provisions of Companies Act, 1956,
having its registered address at 3,
Sarwamangal, College Lane,
Dadar (West), Mumbai 400 028.
2. Sachin Khanolkar
Adult, Indian inhabitant,
Having his address at ... Ori. Petitioners
3, Sarwamangal, College Lane,
Dadar (West), Mumbai 400 028.
3. Vikas Motiram Desai
4. Geeta Digambar Patkar
5. Achyut Waman Tendulkar
6. Sunil Digambar Samant.
7. Tejshree Desai
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8. Tapasya Karnad
9. Ashok R. Nerkar
All Adults, Indian Inhabitants,
Trustees of the Late Rao Bahadur
Anant Shivaji Desai Topiwala,
Charity, having their address at
Kudaldeshkar Brahman Niwas,
Girgaon, Mumbai 400 004.
10. Late Rao Bahadur Anant
Shivaji Desai Topiwala, Charity,
being a Public Trust, registered under
the provisions of Bombay Public
Trust Act, 1950, under registration
No. A/751, (Mumbai), having its
address at Kudaldeskar Brahman
Niwas, Girgaon, Mumbai 400 004.
11. Raunak Corporation.
a firm, claiming to be a Partnership
firm, having its address at Laxmi
Narayan Residency, Unnathi Gardens III,
Opposite Ma Niketan, Pokhran Road No. 2,
Thane (West) 400 610.
12. The Charity Commissioner,
Maharashtra, Mumbai
A statutory Officer, under the
provisions of the Bombay Public Trusts (Respondent No.3
Act, 1950, having his address at to 12 being Original
Annie Besant Road, Worli, Respondent Nos.1
Mumbai 400 018. to 9).
... Respondents
Alongwith
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LETTERS PATENT APPEAL NO.105 OF 2012
in
WRIT PETITION NO. 11070 OF 2011
with
CIVIL APPLICATION NO.152 OF 2012
(For Stay)
1. Vikas Motiram Desai
2. Geeta Digambar Patkar
3. Achyut Waman Tendulkar
4. Sunil Digambar Samant.
5. Tejshree Desai
6. Tapasya Karnad
7. Ashok R. Nerkar
All Adults, Indian Inhabitants,
Trustees of the Late Rao Bahadur
Anant Shivaji Desai Topiwala,
Charity, having their address at
Kudaldeshkar Brahman Niwas,
Girgaum, Mumbai 400 004.
8. Late Rao Bahadur Anant
Shivaji Desai Topiwala, Charity,
being a Public Trust, registered under
the provisions of the Bombay Public
Trusts Act, 1950, under registration
No. A/751, (Mumbai), having its
address at Kudaldeskar Brahman
Niwas, Girgaum, Mumbai 400 004. ... Appellants
(Orig.Respondents
Nos.1 to 8.
Vs.
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1. Siddhivinayak Construction Pvt. Ltd.
A company incorporated under the
provisions of Companies Act, 1956,
having its registered address at 3,
Sarwamangal, College Lane,
Dadar (West), Mumbai 400 028.
2. Sachin Khanolkar
Adult, Indian inhabitant,
Having his address at ... Ori. Petitioners
3, Sarwamangal, College Lane,
Dadar (West), Mumbai 400 028.
3.
Raunak Corporation.
a firm, claiming to be a Partnership
firm, having its address at Laxmi
Narayan Residency, Unnathi Gardens III,
Opposite Ma Niketan, Pokhran Road No. 2,
Thane (West), 400 610.
4. The Charity Commissioner,
Maharashtra, Mumbai
a statutory Officer, under the
provisions of the Bombay Public Trusts (Respondent
Act, 1950, having his address at Nos.9 & 10).
Annie Besant Road, Worli,
Mumbai 400 018. ... Respondents
Alongwith
LETTERS PATENT APPEAL NO.108 OF 2012
in
WRIT PETITION NO. 1332 OF 2012
with
CIVIL APPLICATION NO.154 OF 2012
(For Stay)
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10 LPA101-12
1. Vikas Motiram Desai
2. Geeta Digambar Patkar
3. Achyut Waman Tendulkar
4. Sunil Digambar Samant.
5. Tejshree Desai
6. Tapasya Karnad
7. Ashok R. Nerkar
All Adults, Indian Inhabitants,
Trustees of the Late Rao Bahadur
Anant Shivaji Desai Topiwala,
Charity, having their address at
Kudaldeshkar Brahman Niwas,
Girgaum, Mumbai 400 004.
8. Late Rao Bahadur Anant
Shivaji Desai Topiwala, Charity,
a Public Trust, registered under
the provisions of the Bombay Public
Trust Act, 1950, having registration
No. A/751, (Mumbai), having its
address at Kudal Deshkar Brahmin
Niwas, Jagannath Shankarseth Road,
Girgaon, Mumbai 400 004. ... Appellants
(Orig.Respondents
Nos.1 to 8.
Vs.
1. Sanjay Manohar Kastur,
age 59 years, Occupation : Consultant
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2. Pushpa Shrikant Kamat,
age 58 yrs., Occupation : House wife.
3. Shankar Shrikant Patil,
age 53 yrs., Occupation : Service.
4. Suresh Vasudeo Mahajan,
age 61 yrs., Occupation : Business.
5. Pradeep Prabhakar Tendulkar,
age 60 yrs., Occupation : Consultant.
6. Vipul Anil Thakur,
age 34 yrs., Occupation : service.
7. Gokul Ganpat Samant,
age 55 yrs., Occupation : Business
8. Vinayak Digamber Pandit,
age 33 yrs., Occupation Nil
9. Ganesh Dattatray Desai,
age 62 yrs., Occupation : Retired.
All residing at various rooms in Kudal
Deshkar Gaud Brahman Niwas,
Jagannath Shankarshet road, ... (Orig. Petitioners)
Girgaon, Mumbai 400 004.
10. Raunak Corporation,
a Partnership firm, representing through
its Partners (1) Vijay Mody,
(2) Rajan Bandelkar,
both adults, occupation- business
having its address at Laxmi
Narayan Residency, Unnati Garden No. 3,
Opposite Mahaniketan,Pokhran Road No. 2,
Thane (West) 400 610.
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12 LPA101-12
11. Charity Commissioner,
Maharashtra, at Mumbai
having his office at A. Besant Road,
Worli, Mumbai 400 018.
12. State of Maharashtra, (Orig.Respondents
having its office at Mantralaya, Nos.9, 10 & 11)
Mumbai 400 032. ... Respondents
Mr.P.K.Dhakephalkar, Sr. advocate i/by Rajesh S.Datar, for
appellant in LPA No.101/2012 and LPA 102/2012.
Mr.P.G.Karande, for respondent Nos.1 to 3.
Mr.R.M.Patne, AGP, for respondent-State.
Mr.Harshad Bhadbhade, for appellant in LPA No.103/2012.
Mr.Dinyar Madon, Senior advocate a/w Mr.Snehal K.Shah and
Mr.Ashutosh Gavnekar & Ramchandran N. i/by Narayanan &
Narayanan & Co., for appellant in LPA No.105/ 2012 & LPA
No.108/2012 and for respondent No.10 to 17 in LPA
No.101/2012 and for respondent No.1 to 8 in LPA No.102/2012
and LPA No.103/2012.
Mr.Sanjay Jain a/w Mr.H.S.Khokhawala i/by Nankani &
Associates for respondent No.1 & 2 in LPA No.102/2012 and LPA
No.103/2012.
CORAM :- MOHIT S. SHAH, C J
AND N.M. JAMDAR, J.
RESERVED ON :- 17 August, 2012.
PRONOUNCED ON :- 18 October, 2012
13 LPA101-12
JUDGMENT :- (Per:- N.M. JAMDAR, J)
These Letters Patent Appeals arise from Writ petitions
which were heard together and disposed of by a common
judgment and order by the learned Single Judge on 29 March
2012.
2. The subject matter of the dispute is the property of a
public trust. On an application made by the trustees under
section 36 of the Bombay Public Trust Act, the Charity
Commissioner granted sanction for development-cum-sale of the
trust property to a developer. The learned Single Judge by the
impugned order found that the sanction was not properly granted,
and as there was no advertisement issued the matter needs to be
remanded to the Charity Commissioner and an advertisement
needs to be issued. The developer and trustees have filed these
appeals challenging the judgment and order of the Single Judge.
3. The trust is called 'Late Rao Bahadur Anant Shivaji Desai
Topiwala Charity'. It is in existence since the year 1926. The
Trust was registered as a public Trust on 20 March 1956, after the
Bombay Public Trust Act, 1956 was enacted. The settler of the
trust was late Shri Narayanrao Anant Desai Topiwalla. He formed
the Trust for promotion and benefit of his community-
Kudaldeshkar Adya Gaud Brahmins. The Trust owns properties
situated at C.T.S No.145-A, 1A, 145-4, 145-B, C, D, E, F, G,
bearing city survey No.1443 at Girgaon, Mumbai, admeasuring
3343.53 sq.metres. There are various tenements in the buildings
14 LPA101-12
which have been let out to individual tenants and most of the
tenants belong to the abovementioned community. The premises
are old and are in need of redevelopment. Since the property has
tenants, redevelopment will be governed by Regulation No.33(7) of
Development Control Regulation of Greater Mumbai- (DCR) which
confers certain benefits on the developer, and requires cooperation
of tenants/occupants.
4. On 21 June 2011, the trustees made an application
under section 36 of the Trust Act to the Charity Commissioner,
Mumbai, for sanction for the proposal for redevelopment-cum-sale
of the Trust property. The trustees annexed the scheme of the
Trust showing it's objects. The scheme showed that the object of
the Trust was to work for the benefit of the Kudaldeshkar Adya
Gaud Brahmin Community (the Community) and to provide
accommodation to the members of this Community. About 122
tenants reside in the Trust property, mostly belonging to the
Community. The trustees stressed the need to redevelop the
property since the buildings are more than 75 years old, and
some portion has even collapsed. The Trust stated that the
tenants desire the redevelopment be undertaken by a
Maharashtrian developer as they are apprehensive that a non-
Maharashtrian developer might cheat them. Accordingly they
have searched for a suitable developer who is willing to take up
the project. Out of responses received from four developers, they
have found appellant-Raunak Corporation to be the suitable
candidate for entrusting the work of redevelopment. Accordingly,
the trustees, by their application sought permission from the
15 LPA101-12
Charity Commissioner to alienate the Trust property for
development and sale in favour of Raunak Corporation.
Admittedly there was no advertisement given in any newspaper
inviting applications from prospective developers.
5. The application was filed on 21 June 2011. The
application was heard by the Charity Commissioner on 2 August
2011 and 10 August 2011 and matter was closed for orders. The
application was allowed by the Charity Commissioner by his order
dated 2 September 2011. The operative portion of the order reads
as under-
'(1) Application is allowed.
(2) Sanction is hereby accorded to the trustees of "The
Late Rao Bahadur Anant Shivaji Desai Topiwalla Charity,
Mumbai", P.T.R. No.A/751/Mumbai for development cum
sale of the trust property, viz. CTS No.145A, 1A, 145-4,
145B, C, D, E, F, G. bearing C.S No.1443 admeasuring
3999 sq.yards equivalent to 3343.57 sq.mtrs. or
thereabout together with structures known as
'Kudaldeshkar Brahmin Niwas', in favour of M/s Raunak
Corporation, a registered partnership firm at Laxmi
Narayan Residency, Unnathi Gardens III, Opp. Ma
Niketan, Pokhran Road No.2, Thane (West) - 400 610 for
the monetary consideration of Rs.6,00,00,000/- (Rupees
Six Crores Only) along with developed area of 4000 sq.ft.
built up to be given to the trust, free of costs, and
minimum 460 sq.ft.useable carpet area including flower
beds, inches and service ducts to the tenants, free of
costs, in terms of the Memorandum of Understanding
dated 23-05-2011 and on the following additional terms
and conditions:-
a) The deed for development cum sale of the trust
property is to be executed within a period six months
from the date of this order.
16 LPA101-12
b) All expenses for stamp duty and registration
charges charges and other incidental expenses shall
be borne by the developer.
c) The amount of monetary consideration of
Rs.6,00 Crores shall form part of the corpus of the
trust, which shall remain invested in any of the
Nationalised Banks / Approved Securities in long
term deposits and should not be withdrawn without
prior permission of this authority. Trustees shall be
at liberty to use only the interest amount, which
will be accrued on a sum invested towards
accomplishment of the objects of the trust.
d) This permission shall be subject to all the
relevant laws and rule applicable to the development
cum sale transaction and the property as well.
e) Trustees of the trust to report the change under
section 22 after completion of the development cum
sale transaction to the concerned Assistant / Deputy
Charity Commissioner, Greater Mumbai Region.'
6. Another developer-Siddhivinayak Constructions Ltd. and
some tenants challenged the decision of the Charity Commissioner
by filing Writ Petitions. Writ Petition No.11070 of 2011 was filed by
Siddhivinayak Construction Private Ltd. Writ Petition No.1332 of
2012 was filed by Sanjay Manohar Kastur and others-the tenants.
Siddhivinayak Constructions Pvt. Ltd. contended that it is also
engaged in the business of builders and developers and inspite of
it submitting voluntary offers to the trustees for redevelopment of
the Trust property the offer was not considered. Some of the
tenants who had filed the Writ petition contended that there were
several irregularities in the transaction and consents of tenants
17 LPA101-12
were fraudulent. Two Civil applications were also taken out in the
said Writ petitions by persons who opposed the petitioners as well
as by those in support of petitioners. The petitions and Civil
applications were heard together by the learned Single Judge.
7. Before the learned Single Judge it was an admitted
position that the buildings of the Trust require redevelopment and
that redevelopment will be governed by Regulation No.33(7) of
Development Control Regulations of Greater Mumbai. It was also
not disputed that co-operation from tenants would be required for
the redevelopment under DCR 33(7). It was also admitted position
that no advertisement was issued by the trustees for inviting
applications from interested developers and upon an application
filed for dispensing with public notice the Charity Commissioner
did not direct issuance of any public notice.
8. On behalf of the petitioners, it was urged before the
learned Single Judge that re-development cum sale of property of
a public Trust cannot strictly be in the realm of private law and
there has to be transparency in disposal of trust properties, and
trustees must act bonafide. It was urged that reason for giving
redevelopment work to Raunak Corporation that the tenants
desire a Maharashtrian developer is a complete eye-wash. The
entire procedure for grant of sanction was pushed through in
great haste and inspite of Siddhivinayak developers giving
voluntary offer, they were kept in dark. By placing reliance on
the roznama, it was sought to be urged that the proceedings
before the Charity Commissioner were unusually expedited.
18 LPA101-12
These submissions were countered by the trustees and Raunak
Corporation by contending that Siddhivinayak developers was not
party before the Charity Commissioner and it cannot raise any
grievance in the Writ petition. It was further urged that there is
no mandatory requirement in law for giving advertisement. It was
urged that for redevelopment to be undertaken under the DCR
there are sufficient safeguards and the developer in whom the
trustees and tenants have confidence needs to be selected. It was
also urged that since more than 70 per cent tenants have chosen
Raunak Corporation, the decision of the Charity Commissioner
should not be interfered with.
9. The learned Single Judge heard the petitions finally and
came to the conclusion that there was a need for publication of
advertisement before assigning any rights in favour of Raunak
Corporation for development of the Trust property, so as to secure
best possible offers. The learned Single Judge noted that none of
the reasons given by the trustees for not issuing advertisement
appear to be genuine. The learned Single Judge considered the
judgment relied upon by the parties more particularly the decision
of the Full Bench in the case of Sailesh Developers & anr. vs.
Joint Charity Commissioner & ors.1 and came to the conclusion
that the impugned order needs to be set aside and advertisements
need to be issued inviting applications from interested developers.
Accordingly, the learned Single Judge was pleased to quash and
set aside the order passed by the Charity Commissioner and
1-2007 (3) Mh.L.J. 717
19 LPA101-12
remand the application back to the Charity Commissioner with a
direction to the Charity Commissioner to direct the trustees to
publish an advertisement in reputed newspapers. The learned
Judge disposed of the petitions by directing as under -
'33. ... I am therefore inclined to set aside the impugned
order partly to the extent it grants sanction to alienate
the property in favour of the Respondent No.9 and
remand the application back. The Charity Commissioner
shall thereafter direct the trustees to publish an
advertisement in reputed newspapers like Times of India,
Maharashtra Times, Indian Express and Loksatta and
invite bids from the developers for the redevelopment
and sale of the property of the trust. The bid submitted
by the Respondent No.9 which has been accepted by the
Charity Commissioner should form the reserve price.
Thus, the advertisement will indicate that any bidder who
desires to bid must fulfill the following minimum criteria:
(a) Monetary consideration of Rs.6 Crores to the trust;
(b) Developed area of 4000 sq.ft. built up (3418
sq.ft.carpet area) to be given free of costs to the trust;
(c) usable carpet area of 460 sq. ft. to individual tenants
including flower bed, niches and service ducts.
(d) Corpus fund for the tenant society of such sum, as
may be determined by the Charity Commissioner.
(e) 20 Bank Guarantee of Rs.50 Lakhs each as offered
by Respondent No.9.
(f) Additional consideration of Rs.One Crore to the trust
in case FSI is enhanced from 2.5. to 3.
34. After the bids are received by the trustees in sealed
envelopes, the same shall be opened before the Charity
Commissioner and thereafter notices should be sent to all
the bidders to take part in bidding before the Charity
20 LPA101-12
Commissioner so as to enable individual bidders to
improve upon their bids.
35. Highest bidder who is fulfilling all the aforesaid
criteria will thereafter be chosen and a sanction for
alienation of the trust property shall be granted in favour
of such highest bidder.'
Petitions were accordingly disposed of by Judgment and
order dated 29 March 2012.
10. Being aggrieved, Raunak Corporation and the Trustees
are before us in their respective appeals. We have heard Shri
P.K.Dhakephalkar, learned Senior advocate, Mr.Dinyar Madon,
learned Senior advocate and Mr.Harshad Bhadbhade learned
advocate for the appellants and Mr.P.G.Karande and Mr.Sanjay
Jain learned advocates for the respondents.
11. Learned counsel for the appellants urged:
The principle on which the learned Single Judge has
proceeded to quash the order of Charity Commissioner, that the
trustees must give advertisement prior to sanction of Charity
Commissioner, is not an absolute requirement in law. The
dominant object of seeking sanction from the Charity
Commissioner before alienating the Trust property is to ensure
that the said transaction is in the interest of the Trust. In the
present case, since the majority of tenants are in favour of the
appellant Raunak Corporation, interest of the Trust will be best
served by entrusting the work of redevelopment to Raunak
Corporation. The development work is governed by D.C.
21 LPA101-12
Regulation No.33(7) which requires consent of 70 per cent
tenants and once consent of 70 per cent tenants is obtained, a
developer who does not have the said consents cannot be foisted
on the tenants and the trustees. There was no need to issue any
advertisement as tenants expressed their desire that the property
be redeveloped through a Maharashtrian developer. Pursuant to
this the trustees made all attempts to get proposals from such
developers and Raunak Corporation was found to be suitable.
The judgment of Full Bench in was misconstrued by the learned
Single Judge which in fact is in favour of the appellants. In the
case of Mehrwan Homi Irani and anr v.Charity Commissioner,
Bombay and ors2 . the Apex Court has laid down a that the most
important factor to be ascertained is whether the action of the
trustees should is in the interest of the Trust.
12. On the other hand, learned counsel for the respondents
contended:
Admittedly, there was no advertisement issued calling for
applications from other developers so there is no way of knowing
whether the offer of Raunak Corporation is the best offer for the
trust. There are no reasons given why publicity was not given for
the intention of the Trust for redevelopment of the property. The
reason that the tenants desire development through a
Maharashtrian developer is an eyewash as the directors of Raunak
Corporation do not even satisfy the criteria. The trustees had
predetermined to grant the work of redevelopment to Raunak
2-(2001) 5 SCC 305
22 LPA101-12
Corporation and the ground of 'Maharashtrian developer' for not
calling for applications is just to justify the decision already taken.
The manner in which the application was presented and was
disposed of in great haste creates doubt about the bonafides of the
trustees. The trustees do not have absolute right to dispose of the
property to any person and in the manner they wish. The Charity
Commissioner ought to have performed his statutory duty to
ensure that there was transparency in the decision. Ultimately,
what the learned Single Judge has done is to only remand the
matter back to the Charity Commissioner with a direction to give
an advertisement pursuant to which there will be best possible
offers. The trustees and the tenants cannot possibly have any
objection to such course of action, which will be in the interest of
the Trust. The learned Single Judge has correctly exercised his
jurisdiction and the appeals deserve to be dismissed.
13. Before we consider the rival contentions, nature of the
property in question needs to be noticed. The property
admeasures 3343 sq.metres, contains buildings which houses
several tenants. The buildings are situated at Girgaum in
Mumbai which is in the heart of the city in the prime commercial
and residential area. Prices of immovable properties in this area
are very high. The redevelopment of the property, being a
tenanted, is governed by Development Control Regulations.
These rules permit a developer to exploit additional FSI after
rehousing the tenants. Considering the prices of properties in this
area the financial stakes involved in the transaction are extremely
high. What trustees are seeking to alienate are not just old
23 LPA101-12
dilapidated buildings but are of substantially high value in the
property redevelopment market.
14. At the outset we wish to make it clear that we are not
considering any absolute proposition of law whether it is
mandatory to issue advertisements in respect of every alienation of
properties of trust. We are confining the Judgment only to
ascertain whether the issuance of advertisement was required in
the facts of the case. Though impugned Judgment is assailed on
the ground that the learned Single Judge has elevated the
requirement of prior advertisement to a mandatory status, we do
not propose to read the judgment of the learned Single Judge that
way. Learned Single judge has only found that the issuance of
advertisement was necessary in the facts of the present case. The
Judgment of Full Bench in Sailesh developers (supra) and
various other pronouncements on the subject make it clear that
the Charity Commissioner, before granting sanction for alienation
of the Trust property will consider totality of facts and
circumstances of each case. The decision to the Charity
Commissioner regarding need to issue public advertisement before
seeking alienation, will depend on the facts and circumstances of
each case. The Charity Commissioner must however take into
consideration the object of the Act stressing the need for
supervision and must rest his decision on cogent grounds. The
decision cannot be arbitrary, should be guided by prudence and
realities of the situation and should be reasoned one so that it is
correctable by higher forums. In the following paragraphs we have
24 LPA101-12
indicated the broad legislative policy and some of the facts as that
may provide guidance to the Charity Commissioner while taking
this decision.
15. Charitable Public Trusts are administered by trustees. In
law the trustees are not the owners of the properties but
guardians and custodians. It was long noticed that not all
trustees acted bonafide. There were complaints of misuse by the
trustees as regards funds and properties of the trusts. The
legislature stepped in enacted the Trust Act to regulate the
activities of the trustees. That was in the year 1956. In recent
decades, the need for regulatory mechanism has become stronger
as property prices have shot up, especially in urban areas. The
trusts which was formed with charitable goals, treated it's
properties as mere tools for propogating the charitable work.
However with spiraling real estate prices properties have acquired
immense value by themselves. Such lucrative properties create
temptations for the trustees to stray away from the charitable
intentions. Often the trustees, far removed in time from the noble
intentions of the original settler, fall prey to these temptations and
deal with the properties for their private gains. The object of
legislature of investing the Charity Commissioner with power to
supervise the alienation of properties, has now become more
relevant. The Legislature has not only conferred powers on the
Charity Commissioner but more importantly has cast a duty on
him to ensure that the trust properties are not misused.
16. To achieve the above object the Trust Act contains
25 LPA101-12
elaborate mechanism to supervise actions of the trustees. Merely
because the trustees assert that the action that they propose to
take is in the interest of the trust, their word is not treated as
final. The Charity Commissioner is empowered, albeit, duty
bound to scrutinise and approve the proposal submitted by the
trustees. The Charity Commissioner is expected to ascertain
whether the alienation of the property is required in the interest of
the trust in the first place and how best the interest can be
achieved. He also needs to ensure that trustees are not trying to
jettison the interest of the trust in furtherance of their private
agenda. He has to find out whether the proposed action is in the
interest of the public trust and not in the private interest of the
trustees. Often these two are in conflict. The Charity
Commissioner therefore, cannot go by mere words of the trustees,
and has to ascertain their bonafides.
17. One of the indicators of the bonafides is the manner in
which trustees arrive at a decision to alienate the property. It
reflects whether due care was taken to subserve the interest of
the Trust and the trustees are not acting in their private interest.
If the trustees give widest possible publicity to their decision and
call for the best offers, proceeding in transparent manner then the
Charity Commissioner is prima facie assured that the trustees are
acting in the interest of the Trust. If the trustees take decisions
behind closed doors and arbitrarily select buyers/developers of
their choice, the Charity Commissioner will have to be doubly
cautious. Where the properties are of immense value, the
trustees from the beginning narrow down their search with a
26 LPA101-12
tailor-made criteria, then that may raise a doubt and in such
cases the Charity Commissioner will have to be on guard. Of
course, there may be cases where expenses involved, nature of the
property, absolute lack of prospective purchasers and such other
cogent reasons, it may not be practicable or necessary to give
widest possible publicity. However, in those cases also it is open
for the Charity Commissioner to arrive at appropriate decision and
satisfy himself that the reasons are genuine.
18. The present case has two facets. First is the dispute
between the parties. The second is the need to ensure
transparency in the proceedings regarding dealings of properties of
public trust. The second aspect is relatable to object with which
supervisory mechanism was enacted under the Act. While
considering the impugned order, we are not only required to
consider the dispute interse, but also the need to make the
mechanism to prevent misuse of the trust properties more
effective.
19. The learned counsel for the respondents urged that when
the trustees made application before the Charity Commissioner,
consents of only 25 persons were annexed to the application.
Considering that there were 122 tenants, the number was not
substantial. Counsel contended that there is serious doubt about
the validity of the consents as there are no particulars of notaries,
no identification by advocates. Sometimes three consent letters
have been produced from one tenement. Notarisation also seems
to be done earlier to signing of the consents. In short, it is
27 LPA101-12
submitted that the assumption that 70 per cent occupants are
with the trustees and developers is itself not correct. It is further
submitted that out of the 112 tenants, seven tenements are under
control of Trust therefore, the balance comes to 105. Two tenants
have not given their consent. Furthermore, 11 tenants have
revoked their consent therefore, at the most the number of
consenting tenants is 65 which is less than 70 per cent. Be that
as it may, we are not commenting on those numbers. We are
only examining the absolute claim of trustees that it will be
needless to look for any other developer. We are considering this
fact situation only to ascertain whether issuance of advertisement
would be a futile exercise as contended. To hold so, it must be
satisfactorily demonstrated before us that there is no semblance
of doubt and that it will be needless to call for best offers.
20. The first authority to satisfy itself with these grounds is
the Charity Commissioner. As discussed earlier when the
proposals of this magnitude are presented before the Charity
Commissioner without any advertisement then the Charity
Commissioner is required to satisfy himself why such exercise was
not done. The trustees must give reasons why widest possible
publicity was not given and best offers were not called for.
21. We have gone through the application for sanction. It
appears that the reason given for not giving advertisement was
that the tenants wanted a 'Maharashtrian' developer to develop
the property and Raunak Corporation was the best candidate.
This ground was seriously objected to by the respondents.
28 LPA101-12
According to them such demand is obnoxious. The respondents
urge that when a 'Maharashtrian' developer is referred to, it would
mean its directors and all directors of Raunak Corporation are
not 'Maharashtrians', and even the phrase 'Maharashtrian' is
vague as it would include everyone who is staying in Maharashtra.
We are not commenting on the morality and legality of such
demand. However it was not as if a public advertisement was
issued, and out of best comparable offers, an application of one
was found to be suitable on the ground that the tenants had
confidence in him on the ground of regionality. Such case would
stand on different footing but whether such ground can be taken
even in that fact situation, is something which we are not called
upon to decide as that is not the present case. What we are
examining is whether such a ground was a credible reason in the
fact of the present case or it was a mere front to justify the
decision taken by the trustees to alienate the property in favour of
a developer already chosen.
22. If the trustees genuinely wanted to entrust the work of
development in whom they and tenants had confidence, nothing
stopped them from calling for best offers and then narrowing down
the choice. There are several reputed developers in Mumbai, who
irrespective of their regionality, have acquired reputation through
integrity and honesty. If widest possible choice of best offers from
all such developers was presented before all concerned then the
decision to select Raunak Corporation may or may not have been
taken. The selection of Raunak Corporation on the basis that it is
the best developer is based on an inadequate data.
29 LPA101-12
23. To ascertain whether this was the best option for the
Trust there would have to be a credible data on record of the
Charity Commissioner. To reach to this conclusion it will have to
be considered whether it was a well thought-of and informed
decision. The trustees and developers are placing the tenants in
the fore-front and contending that it is the tenants' desire that
they want a 'Maharashtrian' developer. Admittedly the tenants are
staying in the dilapidated chawls for years and do not belong to a
very rich class. They may or may not have any idea what is the
true worth of the property when it is exploited commercially by a
developer. The intricate calculation of FSI, TDR and the manner
in which they can be commercially exploited are better known to
developers. It is on the basis of these calculations that offers are
made for redevelopment of the property. Tenants may know that
the property is worth substantial amount but may not know
exactly how much, something which a developer would certainly
know. If they perceive the property to be worth Rs.100/- and if
someone offers Rs.150/- then they may happily accept such
proposal. But if proposals come from several other developers
quoting Rs.500/- then the occupants may or may not go by their
original decision and may even abandon their original demand of
having a builder of particular regionality.
24. These are matters of speculation but what needs to be
stated is that it is when properties such as the present one, i.e. old
dilapidated buildings in the heart of commercial areas consisting
of tenants, are put up for alienation, only when competitive bids
30 LPA101-12
are invited that all concerned will have a good idea of what is the
true worth of the properties and how much corpus will be
available. Tenants/occupiers may get tenements of fixed area but
competitive bids may push up the corpus and offer several other
amenities. Then they may discover that it is the builder of their
chosen regionality was in fact cheating them. In the present case
the tenants were not exposed to the true worth of the properties in
their possession and the monies they would receive. Their decision
could not be treated as a well informed one. This decision cannot
certainly be advanced as a reason for the trustees and the
developers to dispense with public advertisement. It appears to be
more of an attempt by trustees to whip up emotive issues to keep
the tenants in dark about the true worth of the properties.
25. The high value of property and no publicity ought to have
put the Charity Commissioner on guard. However unfortunately
the Charity Commissioner mechanically approved the proposal of
Raunak Corporation. The only reason that is given by the Charity
Commissioner in respect of not calling public advertisement is in
paragraph 12 of the order which reads as under :-
'12. It was argued by the learned advocate on behalf of
the trust that trustees had made strong efforts to search
for the developer who shall meet the demands of the
tenants as well as the trust to ensure that the
redevelopment of the trust property is completed
successfully. It was therefore incumbent on the part of
the trustees to personally explain the demands of the
tenants as well as situation to the prospective developers
by personal meeting with them. It was therefore not
possible for the trust to give public notice in news papers
as purpose of the redevelopment of tenanted trust
31 LPA101-12
property can be achieved by personal meetings and
negotiations only. In these circumstances, I am of the
view that the application filed by the appellants for
dispensing with public notice for development cum sale
of the trust property at Exh.3 be allowed'.
This reason to say the least, is highly unsatisfactory and virtually
amounts to abdication of the duty to supervise. There are
absolutely no reasons as to why when such lucrative property is
being alienated, action of not calling for best offer was justified.
If the word of trustees in these matters is to be accepted as gospel
truth then there is no need to have a supervisory mechanism. The
reason given can apply to almost all cases of alienation. The
Charity Commissioner ought to have been more circumspect.
26. It is also urged before us that the entire proceedings was
conducted by the Charity Commissioner on two dates and the
application was disposed of within one month after taking it on
board. It was urged that normally the application under section 36
take months if not years to be decided. We do not find that
merely on this ground the order passed by the Charity
Commissioner is vitiated. But what we do note is that the Charity
Commissioner has not considered the totality of circumstances to
find out whether the action of the trustees in not calling for
advertisements was bonafide. If the observations of the Charity
Commissioner are approved it would mean that in no case a
public advertisement is required. If the Charity Commissioner is
invested with an authority to decide these requirements in facts
and circumstances of each case then it is expected that he would
32 LPA101-12
apply his mind and record his independent reasons. This has not
been done. The learned Judge considered the facts on record and
found that public advertisement was desirable in the facts of the
case.
27. Considering the totality of the circumstances such as the
nature of the property, location, valuation, object of the Act, duties
of the trustees, reasons for not giving advertisements, we find
that the direction of the Single Judge of remand and
advertisement was justified. The learned Single Judge was not in
error in directing the Charity Commissioner to call for
advertisement from all interested developers. Such course of
action cannot be said to be against the interest of the Trust. Such
course of action will not only be in the interest of Trust but would
dispel all doubts. However, we make it clear that we have not
considered the merits of Raunak Corporation as a developer.
The learned Single Judge has kept it open for Raunak
Corporation to bid pursuant to the advertisements. We also do so.
In view of the above, the appeals are dismissed. Civil
Applications stand disposed of accordingly.
CHIEF JUSTICE
N.M.JAMDAR, J.
33 LPA101-12
28. After the Judgment is pronounced, learned counsel for
the appellants pray for extension of ad-interim relief which was
operating during pendency of the appeals, in order to take further
recourse in accordance with law. Hence the ad-interim relief
which was operating during pendency of the appeals, is extended
for a period of six weeks from today.
Record and Proceedings shall be sent back to the
Charity Commissioner.
CHIEF JUSTICE
N.M.JAMDAR, J.
