Union of India Vs. Mool Chand Khairati Ram Trust [July 9, 2018]
2018 Latest Caselaw 446 SC

Union of India Vs. Mool Chand Khairati Ram Trust

[Civil Appeal No. 3155 of 2017]

[Civil Appeal Nos.3153 - 3154 of 2017]

[Civil Appeal No. 3156 of 2017]

[Civil Appeal Nos.3157 - 3158 of 2017]

ARUN MISHRA, J.

1. The question involved in the appeals is with respect to the validity of Circular issued by the Government of NCT of Delhi (GNCTD) on 2.2.2012 whereby it intimated the hospitals to implement the judgment of Delhi High Court with regard to free treatment to the weaker sections of the society in terms of the judgment dated 22.3.2007 in the case of Social Jurists v. Government of NCT of Delhi & Ors. Thereafter, the Land & Development Officer (in short, 'L & DO') passed an order dated 2.2.2012 wherein it was stated that the Government of India had taken a policy decision that all the hospitals which have been provided land by L & DO have to strictly follow the policy of providing free treatment as provided in it.

That the said conditions were applicable to Moolchand Hospital and St. Stephens Hospital as they were allotted land by L & DO. Communication on similar lines was issued by Government of NCT of Delhi to Sitaram Bhartia and the Foundation of Cancer Research imposing condition of providing free treatment to 10% indoor patients and 25% to outdoor patients of poor strata of the society.

The decision was taken in the light of the decision of Delhi High Court in Social Jurists case (supra) which was referred by this Court in Special Leave Petition [Civil] No.18599 of 2007 vide order dated 1.9.2011 in which this Court observed that 25% OPD and 10% IPD have to be given treatment free of cost. Said patients should not be charged with anything. However, the concerned hospital could make the arrangements of the cost either by meeting the treatment/medicines cost from its funds or resources or by way of sponsorships or endowments or donations. As the respondentshospitals were not a party, they have questioned imposition of said conditions in the impugned order by filing writ applications. The High Court has quashed the imposition of conditions hence, the appeals have been preferred.

2. The factual matrix reflects that the Government of India in the year 1949 took a decision to provide all possible help to the hospitals by allotting land to the hospitals and schools at highly concessional rates so as to involve them in achieving the larger social objective of providing health and education to the people. Pursuant to the decision taken in the meeting dated 10.6.1949 under the Chairmanship of the Secretary (Finance) it was decided that the land would be allotted to the hospitals and schools at the rate of Rs.2000/to Rs.5000/per acre.

The hospitals and schools were treated as charitable institutions. While the first safeguard relating to institutions being secular and noncommunal in character, free help by allotment of land to schools and hospitals was unanimously accepted. It was also agreed that nonprofit making bodies be 4 included under the term "charitable institution" with the aforesaid institutions. The test should be that the institute should be run for the good of the public without any profit motive. The relevant portion of policy decision dated 10.6.1949 is extracted hereunder:

"1) It should be clearly laid down that the land will be made available only for institutions of secular and non-communal character, schools and hospitals should be freely helped by allotment of land but applications from other types of charitable institutions should be considered individually on merits. It would be risky to lay down a general rule as regards the latter.

2) Recognition by an appropriate authority to the Government should be a condition precedent the allotment of land to schools, hospitals etc.

2) The first safeguard was unanimously accepted. It was understood that an institution of secular and non-communal character was one which did not discriminate against any class of people on any ground while making an admission. It was also agreed that institutions like Arts and Crafts Society and other non-profit making bodies should be included under the term "Charitable Institution". The test should be that the institution should be run for the good of the public without any profit motive."

3. It was also deliberated upon on 10.6.1949 that what should be premium and ground rent chargeable to a charitable institution. As per the policy laid down by the Government of India in the letter of the Department of Education, Land, dated 25.7.1943, the premium charged was too high, to be easily payable by any charitable institution much less by any displaced institution from Pakistan. According to that formula, any charitable institution will have to pay a premium at the rate of 25,000 to 35,000 per acre, plus ground rent @ 15% on the premium per annum, that would be obviously too high. Hence, it was agreed that the premium chargeable on land allocated to charitable institutions in Delhi should vary from Rs.2000/to Rs.5000/per acre. Facts relating to Mool Chand Khairati Ram Trust :

4. In the year 1927 one Lala Kharaiti Ram of Lahore made a Will with a codicil registered at Lahore by which Moolchand Khairati Ram Trust was constituted by Lala Kharaiti Ram with the name of his father Shri Moolchand. The relevant clauses of the Will are extracted hereunder :

"(8) After meeting the above-mentioned allotments the following instructions shall be observed with regard to the property of every description that may remain after my death:-

(a) All the remaining property of every description shall constitute a Trust known as Moolchand Kharaiti Ram Trust, Lahore, the objects of which shall be as follows:-

(1) Imparting education in and preaching Sanskrit according to Sanatan Dharm Methods, and

(2) Devising means for imparting education in and improving the Ayurvedic System of Medicine and preaching the same. In order to gain object No.2 it is not prohibited to take help from the English or Yunani or any other system of medicine and according to need one or more than one Ayurvedic Hospital may be opened."

5. It was the case of the Trust that the author neither used the word charity nor charitable while creating the Trust in the Will. In law, it became a charitable trust on account of the provisions of section 2 of the Charitable Endowments Act, 1890. Mool Chand hospital acquired the perception of being charitable not from the Will or the purpose set out for the Trust but from the very nature of the activity of providing medical relief, more so in view of section 2(15) of the Income Tax Act, 1961 which defines charitable purpose.

6. The Trust was running a hospital in Lahore in the name of Moolchand Kharaiti Ram Hospital. After partition, the trustees had to leave Pakistan and migrate to India as refugees in 1947. The Ministry of Rehabilitation allotted nine acres of land at Lajpat Nagar to the Trust on 17.4.1951 on which land at Lajpat Nagar, Delhi, the Trust built a hospital which has been running since then. At the time of allotment Lajpat Nagar was not a prime location of Delhi.

7. It was further the case of the Trust that in the allotment letter there was no term or condition to provide free treatment to patients belonging to economically weaker sections of the society at the hospital. Subsequently, lease deed was formally executed between the President of India and Moolchand Kharaiti Ram Trust which was to be effective from 17.4.1951 for a period of 99 years. In this lease deed also, there was no such condition regarding free treatment to any patient.

Thus, it was not open to the Government to impose the obligation of providing free medical treatment by an executive order. The policy of 1949 regarding institution should be run for the good of the public without any profit motive was applicable to other institutions like Arts & Crafts Society and not to hospitals. At the most, the only rider in the policy was that the institution would be run for the good of the public without any profit motive.

This policy/test was to be applied at the time of allotment of land and only such institutions were to be allotted land which in the opinion of the Government fulfilled the said criteria. Since the policy has not been converted into law by enactment of an Act by the legislature, only insistence could be that the institution should be run without any profit motive and not that the institution be required to provide free treatment to any specified number of patients. The DDA (Disposal of Developed Nazul Land) Rules, 1981 are not applicable in the case of Trust. Clause 14 of the lease deed did not authorize the Government to impose such conditions.

That the decision of Social Jurists case (supra) is not applicable as in that case there was either conditions of allotment, or the stipulations in the lease deed under which the hospitals were obliged to provide access to significant percentage of the IPD and OPD facilities. Right to carry on any occupation, trade or business is fundamental under Article 19(1)(g) as such, such restriction could have been imposed by enacting a law under Article 19(6) of the Constitution of India by Parliament or the State legislature. Such condition could not have been imposed by executive feat in exercise of power under Article 162. In the decision in Social Jurists (supra) which has been affirmed by this Court, the Trust was not a party. The condition of lease could not have been altered unilaterally.

This Court while dismissing the SLP on 1.9.2011 by a speaking order, did not intend such result. This Court never intended to pass adverse order against a person who had not been given notice or heard in the matter. A contempt petition was filed in the High Court for proceeding against the hospital run by the trust. The same was dismissed by the High Court as they were not parties to the case of Social Jurists (supra). Land was given by way of incentivizing the Trust to open a hospital in that locality because at that time not so many people were willing to open hospitals or schools. As these services were to be provided by the State, the land was not given at the concessional rate.

It was the market rate that prevailed in the year 1951. Report of Justice Qureshi Committee was not relied upon by the High Court while deciding the case of Social Jurists (supra) and High Court had appointed a Committee namely Mr. N.N. Khanna Committee. At that time when Justice Qureshi Committee's report was prepared, it was based upon the statement made by disgruntled workmen who were having dispute with the management of the hospital as such said report cannot be looked into. It was also submitted that there are specialist doctors in the Trust run since 1958 who devote one hour each day to OPD patients from the weaker sections of the society without charging them anything and they will continue to do so. Facts regarding St. Stephen hospital :

8. In the case of St. Stephen hospital, it was averred by the hospital that it was established in the year 1885 by a group of missionary women in Chandni Chowk, Delhi. In 1908 it moved to its present location to Tees Hazari, Delhi. Land admeasuring 1.37 acres, 2331 sq.yds. and 1.29 acres was allotted to it by L & DO vide allotment letters dated 12.6.1970, 25.2.1972 and 19.1.1976 for its additional requirements. Subsequent to the agreement, the lease deeds were signed and perpetual lease deeds were executed. There was no such condition in the allotment letters/lease deeds for providing free care/treatment to the patients. The hospital having regard to its objective has always been providing substantial treatment to the needy.

In the writ petition, the order passed by L & DO on 2.2.2012 was questioned regarding the condition of free care as part of the terms and conditions of the lease deed. Same has been allowed by the High Court. Though land had been obtained for purpose of the charitable institution it was not open to imposing such riders by executive order. There was no condition of free care in the 1949 policy. Unilateral amendment of the lease deed could not have been made. The decision of Social Jurists (supra) is not applicable as 20 hospitals were dealt with in the said decision. There was no stipulation regarding free care in the allotment letters/lease deeds. The order is without jurisdiction. Hence, the writ petition was filed in the High Court.

Facts regarding Sitaram Bhartiya Institute of Science & Research:

9. Sitaram Bhartiya Institute of Science & Research was a registered society. On 30.3.1984, it applied for allotment of land admeasuring 3 acres for establishing a multidisciplinary research complex in New Delhi. On 22.10.1984 the DDA allotted land admeasuring 1.52 acres @ Rs.6 lakhs per acre. Request was made by the said society to charge at the concessional rate that was declined on 20.11.1984. On 2.9.1985 lease deed was signed by which a consideration of Rs.8,76,000/for 1.46 acres was transferred to the petitioner. The case of Social Jurists (supra) was filed in the High Court. The writ petition was disposed of by the High Court. Pursuant to the decision in Social Jurists (supra), Circular was issued by the Government on 20.1.2012 to the hospitals/societies to whom land had been allotted at concessional rates to provide free treatment to the eligible patients or weaker sections category free of charge. The society took the stand that it was not allotted the land for the purpose of hospital at concessional rate.

Hospital was asked by the department on 28.6.2012 to provide free treatment. On 28.6.2012 it directed that it was making arrangement to comply with the order. On 12.7.2012 the society informed the Director of Health Services about the stand taken by it to comply with the said directions. However, on 13.3.2012 contempt application filed against it for not complying with the directions, was disposed of by the High Court holding that no contempt was made out.

On 18.4.2013 and 29.4.2013, Director of Health Services required the accounts of hospitals for the purpose of scrutiny for the last two years from the date on which the possession of land was given. Petitioner pointed out on 4.5.2013 that there was no condition to provide free treatment to economically weaker sections category as such the hospital was not similarly situated. Condition was not applicable. However, name of petitioner was not removed from the hospitals that failed to provide free treatment hence the writ petition was filed in the High Court.

Moreover, similar are the facts of Foundation for Applied Research in Cancer.

The stand of the Government:

10. On behalf of the State it was contended that the stand of the Government was that as per the policy decision taken in the year 1949, it was decided to allot the land at concessional rates i.e. @ Rs.2000/to Rs.5000/per acre to the institutions which was far lesser than the already prevailing concessional rate of Rs.25,000/to Rs.30,000/per acre fixed vide letter dated 25.7.1943.

11. In the case of Moolchand Khairati Ram Trust vide allotment letter dated 17.4.1951 land was allotted at the rate of Rs.2000/to Rs.5000/per acre and ground rent @ 5% on the premium per annum. Thereafter, a lease deed was executed for 99 years on 24.4.1968 in favour of Moolchand Khairati Ram Trust.

12. St. Stephens hospital was similarly allotted 1.37 acres of land vide allotment letter dated 12.6.1970 which was followed by lease deed dated 3.7.1970, whereafter, further land admeasuring 2331 sq. yds. was allotted vide allotment letter dated 25.2.1972 at the rate of Rs.5000/per acre and ground rent at the rate of 5% per annum.

13. Sitaram Bhartiya Institute of Science & Research was allotted 1.52 acres of land at the rate of Rs.6/lakhs per acre on 22.10.1984 followed by lease deed dated 2.9.1985 in respect of another plot of 1.46 acres for a consideration of Rs.8,76,000/. The Government of Delhi with the approval of Lt. Governor of Delhi constituted a Committee headed by Mr. Justice A.S. Qureshi to review the existing free facility extended by the charitable hospitals and various other hospitals which had been allotted land at concessional terms/rates by the Government. Amongst other measures the Committee opined as under:

"1. Most of the representatives of the hospital submitted that 25% of beds earmarked for poor patients were excessive since the cost of medicines was too high. It was agreed that it should not be more than 15% in any case, but 10% would be ideal. Therefore, the Committee recommended 10% indoor beds free for poor patients for all purposes including medicines and consumables. The free treatment services should be available to 25% of total OPD patients. This condition should be made applicable to all hospitals that have been allotted land by the govt."

(emphasis supplied)

14. The recommendations of the Qureshi Committee were accepted with some variation in the meeting of the GNCTD presided over by the Chief Secretary on 23.10.2002.

15. Earlier, a writ petition was filed by Social Jurists under Article 226 of the Constitution of India in the High Court of Delhi seeking that conditions of allotment of land to hospital particularly in regard to free treatment to poor people be complied with and action be taken in respect of recommendations of the Justice Qureshi Committee. The writ petition was decided on 22.3.2007. Various directions were issued, inter alia, as under:

"A. All the 20 hospitals stated in this judgment and/or all other hospitals identically situated shall strictly comply with the term of free patient treatment to indigent/poor persons of Delhi as specified above i.e. 25 OPD and 10% IPD patients completely free of charges in all respects."

16. The High Court of Delhi vide order dated 17.7.2007 directed all the hospitals which had been given land on concessional rates to abide by the order of free treatment. The special leave petitions were preferred by the hospitals which were dismissed by a speaking order 16 by this Court. This Court observed that 25% OPD and 10% of IPD patients have to be given treatment free of cost. The said patients should not be charged with anything.

17. Thereafter the GNCTD came out with a Circular on 20.1.2012 intimating hospitals to implement the directions of the High Court with regard to free treatment in terms of judgment dated 2.3.2007. Land & Development Officer passed an order in this regard to follow the policy. Similar letters were issued to Sitaram Bhartiya and Foundation for Applied Research in Cancer.

18. The Foundation for Applied Research in Cancer was allotted a plot admeasuring 0.9 acres @ Rs.28,50,000/per acre provisionally with annual ground rent at 2.5% per annum, the premium was revised to Rs.39,00,000/per acre on 22.10.1991. In August 1992, it represented to the Lt. Governor that as per notification dated 11.09.1991, the price of the land allotted to it was fixed at Rs.3,25,000/and sought a refund, however, the request was declined.

19. The High Court of Delhi had allowed the writ applications, hence, the appeals have been preferred. Social Jurists, a civil rights group has filed Civil Appeal Nos.31573158 of 2017 against the judgment and order passed in the case of Moolchand Kharaiti Ram Trust and others. Other appeals have been filed by Union of India/NCT of Delhi.

Rival Submissions

20. It was urged by Mr. Sandip Sethi, learned Additional Solicitor General on behalf of the appellants that the High Court erred in allowing the writ applications. The condition of providing 10% IPD and 25% OPD free medical treatment to poor strata of the society cannot be considered to be a restriction in terms of Article 19(6) of the Constitution of India putting fetters on the right of the respondent hospitals to carry on their trade and profession under Article 19(1)(g) of the Constitution of India. The direction has been issued in terms of the policy of allotment in public interest which must override the business interest of an individual. The High Court erred in holding it to be a restraint under Article 19(6) which can be imposed only by a legislation. It was within the competence of the Government to pass Government Order to implement the recommendations of Mr. Justice A.S. Qureshi Committee.

The respondents Moolchand Khairati Ram Trust and St. Stephens hospital were given land at the concessional rate being charitable institutions with the purpose of providing medical aid to poor and needy sections of the society. The concessional rates in 1949 were reduced substantially as per policy from the rates in 1943 with respect to charitable institutions. The Moolchand Khairati Ram Trust and St. Stephens hospital have taken benefit of State largesse on account of being charitable institutions cannot turn around and question the conditions imposed by the Government to provide free medical aid to the percentage of patients.

It was also urged by learned counsel on behalf of the appellants that in Writ Petition [C] No.2866 of 2002 Social Jurists v. GNCTD & Ors. decided by the High Court, the cases were similarly placed. The allotment was made in those cases also at the concessional rate by the Government. Though there was some stipulation in some of the lease deeds of the said hospitals to provide free service to the extent from 10% to 70%. However, Justice A.S. Qureshi Committee recommended a uniform standard of 10% IPD and 25% OPD free treatment in all hospitals that had been given land by the Government at a concessional rate.

21. It was also urged that in the cases of Sitaram Bhartia Institute of Science & Research and Foundation for Applied Research in Cancer, there was a stipulation in the lease deed under clause 7 as under:

"7. The DDA reserves its right to alter any terms and conditions on its discretion."

The Government was well within its powers to impose the condition in terms of the aforesaid clause.

22. It was also urged that Sunder Lal Jain Charitable hospital had challenged the said order by preferring a special leave petition that was dismissed by this Court on 1.9.2011 by a speaking order. Thus, the issue had attained finality and it was incumbent upon the hospitals in question to provide free services to the poor.

23. Sitaram Bhartia Institute of Science & Research and Foundation for Applied Research in Cancer were given land as per the DDA, 1981 Rules, in particular Rules 3, 4, 5, 6 and 20 at 20 concessional rates. The predetermined rates are nowhere close to market rates. A bare reading of the rules would reflect that a separate process is given for the sale of plots by auction or tender. Thus, allotment of land at predetermined rates is also concessional.

24. It was also urged that the definition of 'charitable' as given in Incometax Act would not govern the field in the present case. Word 'charitable' is to be seen in the legal sense. Word 'charitable' is used and has been relied upon in the Law Lexicon by P. Ramanatha Aiyar, 2nd Edition, 1997, which defines the 'charitable' as under: "includes every gift for a general public use, to be applied consistent with existing laws, for benefit of an indefinite number of persons, and designed to benefit them from an educational, religious, moral, physical or social standpoint."

25. On the other hand, learned senior counsel appearing on behalf of the respondentshospitals contended that legal obligation of a person can be created by an agreement or statutory law and in no other manner. The court cannot pass an order on account of sympathy in contravention of the settled law as the function of this court is to protect and preserve the rule of law which has been held to be basic feature of the Constitution in the case of Kesavananda Bharti. In the case of Moolchand Khairati Ram Trust, in the Will, the executor of the Will by which he created the Trust, never intended that free treatment should be provided to the poor and needy. Reliance has been placed on the definition of 'charity' in Charitable Endowment Act, 1890 and Income Tax Act, 1961 and the land had been allotted to the Trust as per the directions issued by the Ministry of Rehabilitation as the trustees came to India as refugees from Pakistan.

The policy decision in 1949 did not envisage free treatment to the patients neither the conditions in allotment letter nor in the lease deed executed for 99 years. The condition in the policy dated 10.6.1949 that the institution should be run for good of the public without any profit motive was not applicable to hospitals. Even if it was applicable to hospitals it only provided that the institutions would be run for the public good without any profit motive. Thus, condition of free treatment could not have been imposed. The DDA Rules of 1981 are not applicable. Clause 14 of the lease deed would not cover imposition of such onerous condition. The decision in Social Jurists (supra) is not applicable.

Thus, such a condition could have been imposed in view of provision under Article 19(6) of the Constitution by enacting a statutory law as defined in Article 13. It was not open to the Executive to impose such conditions. The order of this Court dated 1.9.2011 is not applicable to respondenthospitals as they were not parties to the said decision and this Court could not have issued such directions without hearing them. Contempt petition filed in the High Court against the Trust for violating decision in Social Jurists (supra), was dismissed. As a matter of fact allotment was made at the market rates prevailing in 1951. Free services are being provided in the hospital since 1958 at its own level.

26. In the case of St. Stephens hospital similar arguments have been raised, apart from that it was urged by learned senior counsel that though charity is being performed by the missionaries as such conditions could not have been imposed by the appellants. There was no such stipulation in the allotment letters/sale deeds. The interpretation of the lease deed made by L & DO was impermissible. Unilaterally such conditions could not have been imposed. It could have been done by enacting statutory law. The conditions were impermissible, arbitrary and violative of Article 14.

The lease deeds are not governed by the provisions of the Government Grants Act. The Executive power referred to in Articles 73 and 298 of the Constitution did not empower the State to unilaterally amend the terms of a perpetual lease deed granted by it. The fundamental rights cannot be abridged by an executive order. Decision in Social Jurists (supra) is distinguishable. There was no similar stipulation in the lease deeds of respondents. Judgment of the High Court in Social Jurists (supra) was faulty to the extent that it imposed a condition of free care on hospitals in whose lease deeds there was no such condition. It was not open to the court to first create a law or an obligation and then seek to enforce it.

Charity would not mean free services to be provided. Medical relief itself is a charitable purpose. It would not mean that it cannot charge for services provided by it. Though while seeking allotment by the missionaries as charitable society, do not get actuated by a profit motive. Surplus income is also utilized for charitable purpose for providing medical care. The fact that the land was allotted on concessional rates would not confer any right on the Government of India to unilaterally amend the lease deed. There was no provision for free care in 1949 policy.

27. On behalf of Sitaram Bhartiya Institute of Science & Research, inter alia, it was urged that it was not covered by the judgment of Delhi High Court in Social Jurists (supra). The land was not given to respondent No.1 at concessional rates. No condition for providing free treatment was prescribed in the allotment letter or in the lease deed. Since lease was in perpetuity there was no right to impose a further condition on the lessee which may have financial implications. Clause 7 of the allotment letter does not authorize the lessee to change or alter any terms of the lease. As no such condition was there in the letter of allotment, as such new condition could not have been imposed.

Lease rental is liable to be increased after every 30 years. The condition of free treatment is not legally tenable or justified. Since the work of the institute was not charitable in nature, such conditions could not have been imposed. Respondent No.1 Sitaram Bhartiya Institute provides medical services as part of its agenda, as the same generates valuable research data and funds for respondent No.1's research activities. A show cause notice was issued to the society on 9.2.2005 alleging that it was running a hospital on commercial lines.

It was required to show cause as to why the allotment and lease deed should not be canceled, and it was informed to the Commissioner, Institutional Branch, DDA that it was pursuing its mission of research in healthcare and medicine. The clinical/hospital portion generates valuable research data and funds which enable respondent No.1 to finance research activities. It was further contended that there were three categories, government organisations, charitable organisations and other institutions, for the purposes of allotment of land.

Other institutions were allotted land at the zonal variant rates that were the rate paid by the respondent. There was no such condition. The condition would have serious financial consequences as entire feasibility and viability would have to be worked out, whether it would be economically viable to undertake the project at all or not. Such unconscionable, unreasonable and arbitrary condition could not have been imposed. Some of the medicines are very expensive. Its cost cannot be borne by the hospital and it cannot form part of free medical treatment except possibly in Government hospitals. No profit no loss condition would not mean that it was allotted on a concessional basis.

Respondent No.1 is a selfsupporting society, is doing medical research also. In case free medical treatment is provided it would diminish the respondent's ability to invest in research. Populist and misplaced policies could not 26 have been framed or imposed. Similar arguments have been raised by the Foundation for Applied Research in Cancer.

28. Following questions arise for consideration:

1. Whether by virtue of fact that Moolchand Kharaiti Ram Trust and St. Stephens Hospital have obtained the land for charitable purposes at a concessional rate, it was open to the Government to impose a condition of 10% in IPD and 25% in OPD services to be provided free of cost to patients of economically weaker sections?

2. Whether in view of the condition No.7 of the allotment letter issued in the case of Sitaram Bhartiya Institute and Foundation for Applied Research in Cancer, the imposition of the aforesaid condition of free treatment was permissible?

3. Whether the imposition of aforesaid conditions amounts to restriction under Article 19(6) to carry on profession, trade or business under Article 19(1)(g) of the Constitution of India?

4. What is the effect of the previous decision rendered in the case of Social Jurists (supra)?

In reference to question nos.1 & 2:

29. In order to decide the main question, it is necessary to ponder on the question with respect to the meaning of charity. In the background of the fact that Government of India in the year 1949 took a decision for allotment of land at the concessional rate to the charitable institutions. The hospitals and schools inter alia were treated as charitable institutions of secular and noncommunal character with a further rider that the same should be run for the good of public without any profit motive. It was observed that as per the policy decision dated 25.7.1943, the premium charged was too high. As per that formula, the premium was Rs.25,000 to Rs.35,000 per acre per annum plus ground rent at 5% on the premium per annum. It was decided to allot the land at the concessional rates between Rs.2,000/to Rs.5,000/per acre. A substantial area of 9 acres in Lajpat Nagar the heart of Delhi to Moolchand Khairati Ram Trust and 2.66 acres & 2331 sq. yards to St. Stephens hospital was allotted.

30. It was urged on behalf of the Moolchand Kharaiti Ram Trust that creator of the Trust never intended that free treatment should be provided to the poor and needy. Reliance has been placed on the definition of charity in Charitable Endowment Act, 1890 and Income Tax Act, 1961. The policy decision taken in 1949, did not envisage free treatment to the patients. In the allotment letter, there was no such condition that free treatment shall have to be provided to the patients belonging to economically weaker sections of the society at the hospital. The lease deed was executed for 99 years. The only condition was that the institution should be run for the good of the public without any profit motive. The aforesaid condition was not applicable to the hospitals, even if it was applicable, the only rider was that it should run without any profit motive. The free treatment was not envisaged in the aforesaid expression.

31. It was urged that the hospital by itself is a charitable institution. It carries out obligation and stipulations of free treatment at its own level. In order to appreciate the submission made, we deem it appropriate to consider the meaning of charitable, charitable purpose, charitable corporation and charitable trust in common parlance.

32. The Black's Law Dictionary, Ninth Edition defines 'charitable', 'charitable purpose', 'charitable corporation' and 'charitable trust' thus:

"Charitable - Dedicated to a general public purpose, usu. for the benefit of needy people who cannot pay for benefits received.

Charitable purpose - The purpose for which an organization must be formed so that it qualifies as a charitable organization under the Internal Revenue Code - Also termed charitable use.

Charitable corporation - A nonprofit corporation that is dedicated to benevolent purposes and thus entitled to special tax status under the Internal Revenue Code. - Also termed eleemosynary corporation.

Charitable trust - A trust created to benefit a specific charity, specified charities, or the general public rather than a private individual or entity.

Charitable trusts are often eligible for favorable tax treatment. If the trust's terms do not specify a charity or a particular charitable purpose, a court may select a charity. - Also termed public trust; charitable use."

33. In Webster's New World Dictionary, the expressions of 'charitable' and 'charity' are defined thus:

"Charitable -

1. Kind and generous in giving money or other help to those in need.

2. of or for charity.

3. kindly in judging others; lenient.

Charity -

1. in Christianity, the love of God for man or of man for his fellow men.

2. an act of good will or affection.

3. the feeling of good will; benevolence.

4. the quality of being kind or lenient in judging others.

5. a giving of money or other help to those in need; benefaction.

6. an institution, organization, or fund for giving help to those in need."

34. The Halsbury's Laws of England, Vol.5, Fourth Edition while dealing with the definition of 'charity' for the purpose of the Charities Act, 1960, has discussed the matter thus:

"501. Definition of "charity". For the purposes of the Charities Act, 1960 "charity" means any institution, corporate or not, which is established for charitable purposes and is subject to the control of the High Court in the exercise of its jurisdiction with respect to charities. "Institution" includes any trust or undertaking; and "charitable purposes" means purposes which are exclusively charitable according to the law of England and Wales. The question of whether purposes are or are not charitable is therefore determined according to the same principles as before 1960.

The requirement that an institution is subject to the control of the High Court in the exercise of the court's jurisdiction with respect to charities is satisfied if the institution is subject to that jurisdiction in any significant respect. It does not have to be subject to that jurisdiction which the court only exercises over charities and not over other trusts or other corporate bodies, and it is sufficient if the court could restrain the institution from applying its property ultra vires or in breach of trust. The Charities Act 1960 establishes a register of charities and it is the duty of the charity trustees of any charity which is required to be registered to apply for registration. The effect of registration is that an institution is for all purposes other than rectification of the register conclusively presumed to be or to have been a charity at any time when it is or was on the register of charities.

The Act does not provide that an institution which, if it were a charity, would be required to be registered, but which is not registered, is for that reason, not a charity."

35. Again, the Halsbury's Laws of England while dealing with the meaning of charity, has discussed the matter thus:

"502. Meaning of "charity". Since the Charities Act, 1960 provides no statutory definition of what purposes are and what are not charitable, all the cases previously decided on the subject are still relevant. The legal meaning of "charitable purposes" is said to be precise and technical, and the phrase is a term of art, but it is probably incapable of definition.

The popular use of the expressions "charity", "charitable", "charitable objects" and "charitable purposes" does not coincide with their technical legal meaning according to the law of England. The word "charitable", when used in its legal sense, covers many objects which a layman might not consider to be included under that word, but it excludes some benevolent or philanthropic activities which a layman might consider charitable.

Charitable uses or trusts form a distinct head of equity, and it is the court's duty to determine whether particular purposes are charitable. To be charitable a purpose must satisfy certain tests; it must either fall within the list of purposes enumerated in the preamble to the ancient statute of Elizabeth I (sometimes referred to as the Statute of Charitable Uses or the Charitable Uses Act, 1601) or within one of the four categories of charitable purposes laid down by Lord Macnaghten and derived from the preamble and in the case of the fourth of those categories it must be within the spirit and intendment of the ancient statute, either directly or by analogy with decided cases on the same point, or it must have been declared to be charitable by some other statute. In addition, it must be for the public benefit, that is to say, it must be both beneficial and available to a sufficient section of the community. References to "charity" in any legislative Act should be construed in their technical legal sense unless a contrary intention appears from the context.

For income tax purposes "charity" means any body of persons or trust established for charitable purposes only. References in any enactment or document to a charity within the meaning, purview, and interpretation of the ancient statute of Elizabeth I, or of the preamble to it, are to be construed as references to a charity within the meaning which the word bears as a legal term according to the law of England and Wales. An activity which is charitable in the legal sense is not any the less charitable because it is being carried on without any regular organization by a person who may discontinue it at any time. Such an activity would come within the statutory definition of charity as a trust or undertaking."

36. The charitable trust can be enforced by the Court, which knows about what charitable purposes are. In the Halsbury's Laws of England, the following discussion has been made in this regard : "504. Purposes must be exclusively charitable. To be a charity in law, a trust or institution must be established for purposes which are exclusively charitable; a charitable trust can be enforced by the court at the suit of the Attorney General, for the court knows what are charitable purposes and can apply the trust property accordingly, but a trust for benevolent purposes cannot be so enforced and is therefore void for uncertainty."

37. Public welfare is one of the essential requirements of legal charity, which has been discussed in Halsbury's Laws of England in paragraph 505, which is extracted hereunder:

"505. Public benefit essential. It is a clearly established principle of the law of charities that a purpose is not charitable unless it is directed to the public benefit so that the element of public benefit is the necessary condition of legal charity. There are two distinct elements in this requirement: the purpose itself must be beneficial and not harmful to the public, and the benefit of the purpose must be available to a sufficient section of the public. The line of distinction between purposes of a public and a private nature is fine and practically incapable of definition."

38. The benefit to the poor is one of the essential requirements of charity. The concept has been discussed in paragraph 509 of Halsbury's Laws of England, which reads thus: "509. Benefit to rich as well as poor. An object may be charitable in the legal sense notwithstanding that it will benefit the rich as well as the poor, but it is difficult to believe that a trust would be held charitable if the poor were excluded from its benefits."

39. In Incorporated Council of Law Reporting for England and Wales vs. AG (1971) 3 All ER I029, CA, it was observed that when a purpose has been proved to be of general public welfare or beneficial to the community, it will be held to be charitable unless there is some reason for holding that it is not within the spirit and intendment of the Preamble.

40. The Cypres doctrine is applied by the Courts in England to administer a charitable trust of which the particular mode of application has not been defined. Where a clear charitable intention is expressed, it will not be permitted to fail because the mode, if specified, cannot be executed, but the law will substitute another mode. The Cypres doctrine has been discussed in paragraph 696 of Halsbury's Laws of England, which is extracted hereunder:

"696. The cy-pres doctrine. Where a clear charitable intention is expressed, it will not be permitted to fail because the mode, if specified, cannot be executed, but the law will substitute another mode cy-pres, that is, as near as possible to the mode specified by the donor. An application cy-pres results from the exercise of the court's ordinary jurisdiction to administer a charitable trust of which the particular mode of application has not been defined by the donor. Where he has in fact prescribed a particular mode of application and that mode is incapable of being performed, but he had a charitable intention which transcended the particular mode of application prescribed, the court, in the exercise of this jurisdiction, can carry out the charitable intention as though the particular direction had not been expressed at all.

However, where the particular mode of application prescribed by the donor was the essence of his intention, which may be shown by a condition or by particularity of language, and that mode is incapable of being performed, there is nothing left upon which the court can found its jurisdiction, so that in such circumstances the court has no power to direct any other charitable application in place of that which has failed. Where the particular mode of application does not exhaust a gift, these principles apply to the surplus. There can be no question under English law of a cypres application of property subject to trusts which are not charitable in law."

41. It has also been observed in the Halsbury's Laws that not all hospitals are charitable institutions, for there may be hospitals run commercially, with a view to the profit of private individuals or hospitals, the services of which are not available to a sufficient section of the public. The mere fact that a hospital is supported by the payment of fees does not prevent its being a charitable corporation. In paragraph 707, the following discussion has been made:

"707. Hospital supported partly by fees. Not all hospitals are charitable institutions, for there may be hospitals run commercially, with a view to the profit of private individuals, or hospitals the services of which are not available to a sufficient section of the public. The mere fact that a hospital is supported by the payment of fees does not prevent it's being a charitable corporation, and the same is true of schools. Furthermore, the Charity Commissioners have the power to authorize the committee of management of a voluntary hospital to provide facilities for paying patients in certain circumstances."

42. In the Law Lexicon, the Encyclopedic Law Dictionary by P. Ramanatha Aiyer, the discussion has been made with the help of certain decisions and dictionaries, with regard to charitable, charitable object, charitable purpose, charity and charitable trust of public nature, relevant parts of which are reproduced hereunder: "Charitable. Having the character or purpose of a charity. The word "charitable", in a legal sense, includes every gift for a general public use, to be applied consistent with existing laws, for benefit of an indefinite number of persons, and designed to benefit them from an educational, religious, moral, physical or social standpoint.

This term is synonymous with "beneficent", "benevolent", and "eleemosynary". (Black) Connected with an object of charity, of the nature of charity [S.49, Indian Evidence Act and S.92(1), C.P.C.] Charitable purpose. In Charitable Endowments Act "Charitable purpose" includes relief of the poor, education, medical relief, and advancement of any other object of general public utility, but does not include a purpose which related exclusively to religious teaching or worship. Act VI of 1890 (Charitable Endowments),

S. 2. Per MUKERJI, J.

The expression "charitable purposes" in Act XXI of 1860 should be understood in a wide sense. If relief wants of occasioned by lack of pecuniary means is charity, adoption of preventive measures to ward off pecuniary wants is also charity. 51 CLJ 272 = AIR 1930 Cal 397.

CHARITABLE PURPOSES, technically, and in the eye of a Court of justice, "has a meaning so extensive as to include everything which is expressly described as a 'charitable use' in 43 Eliz. c. 4, S. 1, or is within what has been called the equity of the statute, but there is perhaps not one person in a thousand who knows what is the technical and 38 legal meaning of the word 'charity'.

Per Lord CAIRNS in Dolan v. Macdermott, (1868) 3 Ch App 678. This term has the legal technical meaning given it by English law. Commissioners of Income Tax v. Pemsel, (1891), App Cas 532; and see Cunnack v. Edwards, (1896) 2 Ch 679 (CA). [In the Income Tax Act, 1842 (5 & 6 Vic. c. 35), sch. A, S. 61] "Charitable purposes" in S. 4 of the Income-tax Act would include relief of the poor, education, medical relief and the advancement of any other object of general public utility. Trusts for the benefit of the inhabitants of a particular locality are regarded as charitable, but trusts for the benefit of a particular political party or for the advancement of particular political purposes or opinions are not regarded as charitable.

A gift for such purposes as a particular individual or individuals may consider to be charitable is not a good charitable purpose although a gift for such charitable purposes as the managing committee of a trust may think fit would be good, because the committee would be bound to keep within the ambit of charity, and if they go beyond the legal boundary, they can be controlled by the Court.

Bom LR 1027 = 1942 Bom

61. The definition includes relief of the poor. Relief of the poor by itself would not be a charitable object unless it involved an object of general public utility. Relief for the poor relations of the settlor or donor will not be a charitable purpose within the definition. Trustees of Gordhandas Govindram Family Charity Trust v. Commissioner of Income Tax, AIR 1952 Bom 346. [S. 4(3)(i) Income Tax Act 1992] 'Charitable purpose' - the dominant purpose of a State Bar Council is to ensure quality service of competent lawyers to the litigating public, a spread legal literacy, promote law reforms and provide legal assistance to the poor, such purpose is the advancement of the object of general public utility and it will be a charitable purpose. C.I.T. Bombay v. Bar Council of Maharashtra, AIR 1981 SC 1462, 1467. [Income Tax Act (43 of 1961), Ss. 2(15) and 11.] Charity.

"In the broadest sense charity includes whatever proceeds from a sense of moral duty or from humane feelings towards others, uninfluenced by one's own advantage or pleasure." (Doyle v. Lyun, 19 Am Rep 431.). In Jones v. Williams, Ambll. 651, Lord CAMDEN defined a charity to be "a gift to a general public use, which may extend to the poor as well as to the rich." It embraces all that is usually understood by the words "benevolence, "Philanthropy" and "good will". A gift to a home for the friendless is a gift to charity. This "word", in its widest sense, denotes all the good affections men ought to bear towards each other; in its most restricted and common sense, Relief of the Poor. In neither of these senses is it employed in the English Chancery Courts.

Here its signification is derived chiefly from the Statute of Elizabeth (43 Eliz. c. 4.). Those purposes are considered charitable which that statute enumerates, or which by analogies are deemed within its spirit and intendment". Per GRANT, M.R., Morice v. Dhurhan Bp., 9 Ves. 405. The term "charity" under the Hanafi School of Mahommedan Law has a more general import than under the English Law. A wakf of property by a Mahommedan to defray the expenses of the poor, the fakirs, the orphans, the needy and the indigent, and to defray the expenses of good deeds, creates a trust for public purposes of a charitable nature. (32 All 499 = 7 ALJ 420=6 IC 188.)

n common parlance, the word 'charity' means a giving to some one in necessitous circumstances and in law it means a giving for public good. A private gift to one's own self or Kith and Kin may be meritorious and pious but is not a charity in the legal sense. Fazlul Rabhi v. State of West Bengal, AIR 1965 SC 1722, 1727. [West Bengal Estates Acquisition Act, 1953 (1 of 1954), S. 6(1)(i)] A benevolence, specially to the poor [S. 378, ill. (n), I.P.C.]"

43. From the aforesaid discussion, it is apparent that charitable is the public purpose for the benefit of the needy people, who cannot pay for benefits received. The Internal Revenue Code may define it separately for its purposes what is charitable so as to claim the benefit under the Act. The charitable trust is a trust which is for the benefit of general public. Charitable is a kind and generous in giving money or other help to those in need as defined in Webster's New World Dictionary and Black's Law Dictionary. The Halsbury's Laws of England discussed the meaning of charity, which provides that if there is no statutory definition of charitable purposes, to be a charitable purpose, it must satisfy certain tests.

It must be for the public benefit and available to a sufficient section of the community. The reference to charity should be construed in their technical legal 41 sense. For income tax purpose, the charity may be defined in the Act and in that light, the interpretation of the Act has to be made. Public benefit is an essential ingredient of charitable activities. There are two distinct requirements, the purpose itself must be beneficial and not harmful to the public. In paragraph 509 of Halsbury's Laws of England, it has been discussed that it is difficult to believe that a trust would be held charitable if the poor are excluded from its benefits.

44. The cypres doctrine has been discussed in paragraph 696 of Halsbury's Laws of England. The said doctrine can be clearly pressed into service in the instant matter when the Government land has been allotted to the hospitals even if the mode of giving charity was not specified. It can be specified later on and the Court is not powerless to enforce that purpose of the charitable trust, of which the particular mode of the application had not been defined by the donor or otherwise.

In Ironmongers' Co. vs. AG (1844) 10 CI & Fin 908 at 927, HL, it was observed that where a testator intends to benefit several charitable objects, one of which fails, the fund must not be distributed among other objects if the one that fails bears no 42 resemblance to the other. In reference Lambeth Charities (1853) 22 LJ Ch 959, it was observed that when trusts have been altered by a scheme, and the trusts of the scheme become impossible so that a new cypres scheme is required, the trusts of the new scheme must be as close as possible to the original trusts of the gift.

45. The relief of the poor is one of the essential requirements of the charity. All hospitals are not charitable institutions as there may be hospitals which run commercially. The hospitals, which are operating under the guise of charity, are in fact being run on a commercial basis and it has become impossible for the poor to afford the lifesaving drugs at an affordable price. Their right to life is in jeopardy. Merely by the expression hospital, it could not be successfully claimed by the respondent hospitals that they are charitable.

They can be directed to fulfill their obligation and fulfill the purpose by undertaking charitable activities and give it the real meaning by giving free services as envisaged in the policy. The claim of the hospitals that they are undertaking charity at their own level cannot be used as a shield to the performance of charity in an organized way. The very spirit of the argument that as they do charity, it cannot be fastened upon them, is self destructive and tends by its tenor to negate unjust obstruction created in the path of real charity

46. The definition of "charitable purpose" as defined in the Charitable Endowments Act, 1890 is extracted hereunder:

"2. Definition. - In this Act "charitable purpose" includes relief of the poor, education, medical relief and the advancement of any other object of general public utility, but does not include a purpose which relates exclusively to religious teaching or worship." It is apparent from the definition that charitable purpose includes relief of the poor, education and medical needs. As per the provisions of the Charitable Endowments Act, 1890, relief of the poor and medical relief is included as such conditions which had been imposed are clearly within the parameters of aforesaid definition.

47. The charity in the broadest sense includes whatever proceeds from a sense of moral duty or from humane feelings towards others uninfluenced by one's own advantage or pleasure. In its widest sense, denotes all the good affections men ought to bear towards each other; in its most restricted and common sense, relief of the poor. In 44 the Mahommedan Law, the charity has a more general import than under the English Law. A wakf of property by a Mahommedan to defray the expenses of the poor, the fakirs, the orphans, the needy and the indigent and to defray the expenses of good deeds, creates a trust for public purposes of a charitable nature. In common parlance, the word charity means giving to someone in any necessitous circumstances and in law, it means a giving for public good.

48. In P.C. Raja Ratnam Institution vs. Municipal Corporation of Delhi & Ors., 1990 (Supp) SCC 97, wherein this Court considered the definition of 'charitable purpose' under Section 115 (4) (a) of the Delhi Municipal Corporation Act, 1957, the school in question was run by a Society. It was claimed that it was a nonprofit making registered society and its object was to organize and run schools in Delhi and elsewhere with a view to promoting education and welfare. The question arose whether it was necessary for the educational institution to qualify for exemption from the tax liability to offer medical relief. In that context, it was observed by this Court that the test of charitable purpose would be satisfied by the proof of any of the three conditions, namely, relief of the poor, education or medical relief.

The fact that some fee was charged from the students was not decisive. The explanation was held inclusive and not exhaustive. This Court observed thus:

"3. The learned Counsel for the petitioner has contended that in view of the language of Section 115(4)(a), quoted below, it is not correct to suggest that to qualify for exemption from the tax liability it is necessary for a society to offer medical relief: "(a) lands and buildings or portions of lands and buildings exclusively occupied and used for public worship or by a society or body for a charitable purpose: Provided that such society or body is supported wholly or in part by voluntary contributions, applies its profits, if any, or other income in promoting its objects and does not pay any dividend or bonus to its members.

Explanation-"Charitable purpose" includes relief of the poor, education and medical relief but does not include a purpose which relates exclusively to religious teaching;" The argument is well founded. The test of 'charitable purpose' is satisfied by the proof of any of the three conditions, namely, relief of the poor, education, or medical relief. The fact that some fee is charged from the students is also not decisive inasmuch as the proviso indicates that the expenditure incurred in running the society may be supported either wholly or in part by voluntary contributions. Besides, the explanation is in terms inclusive and not exhaustive. The impugned judgment must, therefore, be held to be erroneous."

The question in the aforesaid case was altogether different with respect to the meaning of charitable purpose as defined under Section 115 (4) (a).

49. In Municipal Corporation of Delhi vs. Children Book Trust, (1992) 3 SCC 390, this Court considered the provisions of Section 115(4)(a) of Delhi Municipal Corporation Act, 1957 and dealt with the question of charitable purpose, context of property tax in respect of lands and buildings and exemption to lands and buildings occupied and used by a society for charitable purpose. It was held that conditions for applicability of the tax exemption were firstly on the society must be charitable and not earn a profit.

This Court considered the meaning of charitable purpose for imparting education sans an element of public welfare not per se charitable. Secondly, society must be supported wholly or in part by voluntary contribution and lastly, society must utilize its income in promoting its object and must not pay any dividend or bonus to its members. This Court observed that the tax liability of a registered society running recognized private unaided school should be considered in the light of the above conditions. Transfer of funds by the school to the society even in the name of contribution would amount to transfer by the society itself and, therefore, cannot be considered for the purposes of the exemption.

It was also observed that where running of school by the society generating positive income from the fees and donations received from the students/parents, the activity of the school was not for a charitable purpose but for commercial purpose. The conditions of charitable purposes having not been fulfilled, society was not entitled to tax exemption. This Court has further observed that where the predominant object is to subserve charitable purpose and not to earn a profit, it would be a charitable purpose.

This Court has observed thus:

"68. Therefore, an element of public benefit or philanthropy has to be present. The reason why we stress on this aspect of the matter is if education is run on commercial lines, merely because it is a school, it does not mean it would be entitled to the exemption under Section 115(4) of the Act.

xxx xxx xxx

76. In view of the above rulings, it would be clear that where the predominant object is to subserve charitable purpose and not to earn profit it would be a charitable purpose. However, the argument of the appellant is as per the Delhi School Education Act and the rules framed thereunder, if the society cannot utilise the fund and the school cannot be run for private gain in the absence of any profit, it would be a charitable purpose.

77. We have already seen that merely because education is imparted in the school, that by itself, cannot be regarded as a charitable object. Today, education has acquired a wider meaning. If education is imparted with a profit motive, to hold, in such a case, as charitable purpose, will not be correct. We are inclined to agree with Mr. B. Sen, learned counsel for the Delhi Municipal Corporation in this regard. Therefore, it would necessarily involve public benefit.

78. The rulings arising out of Income Tax Act may not be of great help because in the Income Tax Act "charitable purpose" includes the relief of the poor, education, medical relief and the advancement of any other object of general public utility. The advancement of any other object of general public utility is not found under the Delhi Municipal Corporation Act. In other words, the definition is narrower in scope. This is our answer to question No. 1.

xxx xxx xxx

85. The last aspect of the matter is utilisation of the income in promoting its objects and not paying any dividend or bonus to its members. The learned counsel