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Section 36 in The Indian Trusts Act, 1882
The Indian Trusts Act, 1882
Shri Mahadeo Deosthan Wadali vs Joint Charity Commissioner on 2 December, 1988
The Transfer of Property Act, 1882
Mrs. Fatmabai B. Bachooali, Adv. vs State Of Maharashtra And Others on 12 September, 1990

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Bombay High Court
Both Of Bombay, Indian ... vs Rt on 7 September, 2011
Bench: P. B. Majmudar, R. M. Savant

KPP -1- WP Nos. 1486 & 1814 of 94 rt

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

ou

WRIT PETITION NO. 1486 of 1994

WITH

CHAMBER SUMMONS NO. 63 OF 2005

C

1. M/s. N.D. Construction, a partnership firm ) carrying on business at 4-A, Ceaser Road, ) Amboli, Andheri (West), Bombay-400 058 ) h

2. Nikhil Nupendra Jhaveri )

3.

ig

Digamber Bhaskar Sapare ) Both of Bombay, Indian Inhabitants, Partners of ) H

Petitioner No.1, having their addresses at 4-A, Merry ) Blessings, Ceaser Road, Amboli, Andheri (West), ) Bombay-400 058 ).Petitioners versus

y

1. State of Maharashtra ) ba

2. Charity Commissioner of Bombay, having his office at ) Dharmaday Ayukta Bhawan, Dr. A. Bapat Road, ) Worli, Bombay-400 018 ) om

3. F.E. Dinshaw Trust, a Public Charitable Trust, ) registered under the Bombay Public Trust Act, 1950 ) and having their office at 412 Churchgate Chambers, ) 5, Sir Vithaldas Thakersey Marg, Bombay-400 050 )

4. Nusli Neville Wadia ) B

5. Mrs. Nasreen Nusli Wadia )

6. Mr. Batra ) The Trustees of F.E. Dinshaw Trust, having their office ) at 412, Churchgate Chambers, ) 5, Sir Vithaldas Thakersey Marg, Bombay-400 050 ) ::: Downloaded on - 09/06/2013 17:42:33 ::: KPP -2- WP Nos. 1486 & 1814 of 94

7. Bhattad Leasing and Finance Company Ltd., a Company ) rt

incorporated under the Companies Act 1 of 1956, ) and having their office at 104, Bajaj Bhavan, Nariman ) Point, Bombay-400 021 ).Respondents ou

Ms. Rajani Iyer, Senior Advocate, with Mr. Salil Shah, Mr. Tushar Bhavsar, Ms. Tanmayi Gadre, Mr. R.A. Shah, Ms. Purvi Ashar, Ms. Priyanka Choksi and Ms. Ajinkya Patil, instructed by M/s. Mansukhlal Hiralal & Co., for the petitioners. C

Mr. K.R. Belosey, "A" Panel Counsel for respondent No.1. Mr. N.H. Seervai, Senior Advocate, with Mr. Gautam Ankhad & Ms. Falguni Thakkar, instructed by M/s. Doijode Associates, for respondent Nos. 3 to 6. h

Mr. P.K. Dhakephalkar, Senior Advocate, with Mr. Devrajan, Mr. S. Purohit and ig

Mr. Sameer Singh, instructed b y M/s. Vimadalal & Co., for respondent No.7. Mr. J.B. Chinai, Senior Advocate, with Mr. Sanjay Jain, Ms. Armin Wandrewala and Mr. Vasim Shaikh, instructed by M/s. Pravin Mehta & Mithi & Co., for the H

Applicants-Krisha Developers- in Chamber Summons No. 63 of 2005. WITH

WRIT PETITION NO. 1814 OF 1994

y

1. Nusli N. Wadia ) ba

2. Mrs. Maureen N. Wadia )

3. Rajesh Batra ) om

4. Hudrali Subbana Srinivas ) All of Bombay, All Trustees of F.E. Dinshaw Trust, ) a Public Charitable Trust, Registered at serial No. ) E-6123, under the Bombay Public Trusts Act, 1950 and ) B

Serial No.1 also Administrator of the Estate of E.F. Dinshaw) all having their address at 412 Churchgate Chambers, ) 5 Sir Vithaldas Thackersey Marg, Bombay-400 020 )

5. F.E. Dinshaw Trust, having their address at the ) above mentioned premises. )..Petitioners versus

::: Downloaded on - 09/06/2013 17:42:33 ::: KPP -3- WP Nos. 1486 & 1814 of 94

1. The Charity Commissioner, Maharashtra State ) rt

Bombay, having his office at Dharmadaya Ayukta Bhavan, ) 83, Dr. Annie Besant Road, Worli, Bombay-400 018 ) ou

2. M/s. Bhattad Leasing and Finance Co. Ltd., a company ) incorporated under the provisions of the Companies ) Act, 1956, having its registered/principal office at ) 104 Bajaj Bhavan, Nariman Point, Bombay-400 021. ) C

3. M/s. N.D. Construction, a partnership firm )

4. Nikhil Nupendra Zaveri, Indian Inhabitant ) h

5. Digambar Bhaskar Sapre, Indian Inhabitant ) ig

Respondent Nos. 3 to 5 having office at D-104, Sham Kamal, Agrawal Market, Vile Parle (East), Bombay-400 057 )

).Respondents

H

Mr. N.H. Seervai, Senior Advocate, with Mr. Gautam Ankhad & Ms. Falguni Thakkar, instructed by M/s. Doijode Associates, for the petitioners. Mr. P.K. Dhakephalkar, Senior Advocate, with Mr. Devrajan, Mr. S. Purohit and y

Mr. Sameer Singh, instructed b y M/s. Vimadalal & Co., for respondent No. 2. Ms. Rajani Iyer, Senior Advocate, with Mr. Salil Shah, Mr. Tushar Bhavsar, Ms. ba

Tanmayi Gadre, Mr. R.A. Shah, Ms. Purvi Ashar, Ms. Priyanka Choksi and Ms. Ajinkya Patil, instructed by M/s. Mansukhlal Hiralal & Co., for respondent Nos. 3 to 5.

om

CORAM: P.B. MAJMUDAR &

R.M. SAVANT,

JJ.

DATE: SEPTEMBER 07, 2011.

B

ORAL JUDGMENT: (Per P.B. Majmudar, J.)

1. Both these petitions are directed against the order of the Charity Commissioner dated 27th April, 1994 passed under Section 36 (2) ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -4- WP Nos. 1486 & 1814 of 94 of the Bombay Public Trusts Act, 1950 (hereinafter "the Act"), by which rt

the Charity Commissioner has revoked the sanction granted for sale of the ou

land belonging to F.E. Dinshaw Trust ("the Trust"). The said order of the Charity Commissioner is challenged by the petitioners in Writ Petition No. C

1486 of 1994 in whose favour sanction was granted for sale of the land as well as by the Trust by way of Writ Petition No. 1814 of 1994. The Trust h

has filed the said writ petition only for expunging the remarks made ig

against the Trust by the Charity Commissioner in the impugned order. H

2. The subject matter of the proceedings under Section 36 of the Act is the huge property belonging to the F.E. Dinshaw Trust situated at y

Malad, bearing Survey No. 79 (Part), CTS No. 226 (Pt.), admeasuring ba

94,511 sq.mtrs. The said Trust made an application under Section 36 (1) of the Act to the Charity Commissioner seeking his sanction for the sale of om

the said property. The Charity Commissioner granted sanction to the Trust on 6th April, 1992, by which the Trust had agreed to sell the property to one N.D. Construction (hereinafter "N.D. Construction") i.e. Writ B

Petitioner in Writ Petition No. 1486 of 1994. The order passed by the Charity Commissioner granting such sanction under Section 36 (1) of the Act was challenged by one of the unsuccessful bidders viz. Bhattad Leasing & Finance Co. Ltd. (hereinafter "Bhattad Leasing"), who have been ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -5- WP Nos. 1486 & 1814 of 94 joined as respondents in both the petitions. The said Bhattad Leasing filed rt

Writ Petition No. 931 of 1992 challenging the said sanction. A Division ou

Bench of this Court dismissed the said writ petition on 24th April, 1992, by holding that no interference is called for against the order of the Charity C

Commissioner granting sanction under Section 36 (1) of the Act. The Special Leave Petition filed against the said order was also dismissed by h

the Supreme Court vide its order dated 14th July, 1992. ig

3. Subsequently, the said Bhattad Leasing, whose offer was not H

found favourable by the Charity Commissioner for purchase of the said land, moved an application for revocation of the sanction granted by the y

Charity Commissioner on 6th April, 1992 on various grounds. The said ba

application was preferred under Section 36 (2) of the Act. The Charity Commissioner came to the conclusion that the Trust had concealed om

material aspects at the time when the application under Section 36 (1) of the Act for getting sanction was made. The Charity Commissioner, accordingly, allowed the said application and revoked the sanction granted B

on 6th April, 1992, vide his order dated 27th April, 1994. It is the aforesaid order of the Charity Commissioner which is impugned at the instance of N.D. Construction, in whose favour the sanction was granted. The trust has also filed a substantive petition challenging the said order being Writ ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -6- WP Nos. 1486 & 1814 of 94 Petition No. 1814 of 1994. The Trust has, however, filed this petition only rt

for a limited prayer that the observations made by the Charity ou

Commissioner about about fraud and misrepresentation on the part of the Trustees be expunged. The Trust has not challenged the part of the order C

by which while revoking sanction, the Charity Commissioner has directed fresh bid between N.D. Construction and Bhattad Leasing. h

4.

ig

In so far as Writ Petition No. 1486 of 1994 is concerned, the order of the Charity Commissioner is challenged on various grounds as, H

according to the petitioner of the said writ petition, the Charity Commissioner had no jurisdiction to entertain application under Section y

36 (2) of the Act especially when the order granting sanction under ba

Section 36 (1) of the Act has been confirmed by this Court in Writ Petition No. 931 of 1992 and thereafter by the Apex Court. The said order is also om

challenged on the ground that there was no misrepresentation or fraud on the part of the Trust and the Charity Commissioner, therefore, was not justified in revoking the sanction granted earlier. The said order is also B

challenged on the ground that the Charity Commissioner has no power to review his earlier order while exercising powers under Section 36 (2) of the Act. It is also alleged that at the instance of Bhattad Leasing, the Charity Commissioner ought not to have exercised his power under Section ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -7- WP Nos. 1486 & 1814 of 94 36 (2) of the Act as the offer of Bhattad Leasing was not found favourable rt

initially when the Charity Commissioner decided the matter under Section ou

36 (1) of the Act. It is alleged that the said Bhattad Leasing was aware of the facts on the basis of which allegations and averments were made in the C

application under Section 36 (2) of the Act, yet Bhattad Leasing had taken part in the bidding at the stage of 36 (1) and had not placed at that stage h

nor such issue was raised when they filed the said Writ Petition No. 931 of ig

1992. Considering the conduct of the said Bhattad Leasing, the Charity Commissioner ought not to have exercised his powers at the instance of H

Bhattad Leasing and no cognizance should have been taken about the allegations made by the said Bhattad Leasing. On behalf of N.D. y

Constructions, it is argued that they are not required to disclose any facts ba

before the Charity Commissioner as the matter under Section 36 (1) of the Act is only between the Trust and the Charity Commissioner. On behalf of om

petitioners i.e. N.D. Construction, it is argued by Ms. Iyer, learned Senior Counsel, that in any case on the basis of the sanction granted by the Charity Commissioner, the Petitioners had deposited a substantial amount B

with the Trust and in view of the facts and circumstances of the case, the impugned order is required to be set aside and the sanction granted by the Charity Commissioner is required to be maintained in respect of the transaction in question.

::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -8- WP Nos. 1486 & 1814 of 94 rt

5. In order to appreciate the controversy raised in the matter, it is ou

necessary to refer to certain factual aspects of the matter. C

6. The Trust in question is known as F.E. Dinshaw Trust. It is a Public Trust registered under the said Act. Since there was an extensive h

encroachment over the land in question, the Trust decided to sell the said ig

land and for that purpose, the Trust entered into an agreement for sale of the land in favour of N.D. Construction, which is a partnership firm. Since H

the property of the Trust cannot be sold without the sanction of the Charity Commissioner under Section 36 (1) of the Act, the Trust applied y

for such sanction before the Charity Commissioner. However, before ba

entering into transaction with N.D. Construction, the Trust issued an advertisement in Marathi newspaper Loksatta on 3rd September, 1988 as om

well as in the Free Press Journal dated 8th September, 1988, inviting offers for purchase of property. It is the case of the Trust that in view of the substantial encroachment over the land, it was not possible for the Trust B

to develop the property and for removal of encroachment, the Trust would be required to incur heavy expenditure for filing various suits against the encroachers. After entering into agreement with N.D. Construction, an application was preferred by the Trust under Section 36 (1) of the Act ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -9- WP Nos. 1486 & 1814 of 94 before the Charity Commissioner on 15th June, 1989. The Charity rt

Commissioner, whilst deciding the said application, granted sanction by ou

approving the transaction of the Trust with N.D. Construction. As pointed out earlier, the said order was challenged by Bhattad Leasing by way of C

Writ Petition No. 931 of 1992 as the said Bhattad Leasing had also given its offer and was interested in purchasing the land in question. The said h

writ petition, as stated above, was rejected by this Court by upholding the ig

decision of the Charity Commissioner and Special Leave Petition against that order was also dismissed by the Supreme Court. Subsequently, the H

said Bhattad Leasing preferred an application under Section 36 (2) of the Act. In the aforesaid application, an averment was made about fraud and y

misrepresentation on the part of the Trust at the time of applying for ba

sanction before the Charity Commissioner. In the said application, an averment was made to the effect that the Charity Commissioner was om

totally misled by the Trust that the entire land is encroached by slums and there is no vacant land on the said plot. The said application was preferred mainly on two grounds i.e. (i) that the trust made misrepresentation B

before the Charity Commissioner as regards extent of encroachment over the land in question and (ii) there was concealment on the part of the Trust regarding the transaction which had taken place between N.D. Construction and one Pawan Bairagra by which the intending purchaser, ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -10- WP Nos. 1486 & 1814 of 94 N.D. Construction, had agreed to sell the land for a sum of Rs. 3.16 crores. rt

A grievance was made before the Charity Commissioner that the sanction ou

was obtained from the Charity Commissioner for sale of land at a very meagre price as against that the purchaser N.D. Construction has already C

entered into agreement for sale with the said Pawan Bairagra before the Trust had even applied for sanction. In support of the said contentions, h

averments were made in detail in the application preferred under section ig

36 (2) of the Act. The Charity Commissioner, after hearing the concerned parties, came to the conclusion that the Trust had not disclosed necessary H

factual aspects at the time when the Charity Commissioner granted sanction under Section 36 (1) of the Act. The Charity Commissioner came y

to a conclusion that the Trust has deliberately misled him and an ba

impression was given as if the entire land was under encroachment. It was ultimately found that the entire land was not encroached but only some om

portion of the land was under encroachment. The Charity Commissioner also found that before obtaining sanction under Section 36 (1) of the Act, the fact regarding agreement between the intending purchaser N.D. B

Construction and Pawan Bairagra was suppressed by the Trust especially when a public notice was already issued in the newspapers about such transaction, yet the Trustees had not pointed out the said fact at the time when sanction under Section 36 (1) was obtained. The Charity ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -11- WP Nos. 1486 & 1814 of 94 Commissioner accordingly found that in view of the aforesaid aspect of the rt

matter, the sanction granted under Section 36 (1) of the Act is required to ou

be revoked.

C

7. The learned Senior Counsel Ms. Iyer, appearing for N.D. Construction, vehemently submitted that the Charity Commissioner has h

gravely erred in revoking the sanction as the Charity Commissioner was ig

not exercising reviewing powers. It is submitted by the learned counsel that in any case, the agreement entered into by N.D. Construction and H

Pawan Bairagra was not on behalf of the partnership firm but it was only one of the partners of N.D. Construction who has entered into such an y

agreement which was not a genuine agreement of sale but it was in ba

connection with money transaction between one of the partners of the firm. It is submitted by the learned counsel that the price reflected in the om

said agreement was not genuine consideration and subsequently a suit was filed by the said Pawan Bairagra on the basis of the said agreement and ultimately the same was withdrawn in view of the settlement reached B

between the parties. It is submitted that the said suit was without any basis and even it it was tried, it would have been dismissed by the Court. It is submitted by the learned senior counsel that since considerable portion of the land was under encroachment and since it was not possible for the ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -12- WP Nos. 1486 & 1814 of 94 Trust to remove encroachment without incurring heavy expenditure that rt

ultimately the Trust decided to sell its property and the said N.D. ou

Construction agreed to purchase the same but was required to move the Court for having the encroachment removed for which they were required C

to spend large amount. It is submitted that the Charity Commissioner has committed an error in passing such an order especially when the earlier h

sanction under Section 36 (1) of the Act is confirmed by the High Court ig

and thereafter SLP preferred against the order of the High Court has been dismissed by the Supreme Court. It is submitted that the Charity H

Commissioner decided the matter as if he was reviewing his earlier decision. It is further submitted that it was not obligatory or necessary on y

the part of the said N.D. Construction to disclose the factum of agreement ba

entered into between one of the partners of the firm with Pawan Bairagra at the time when the Charity Commissioner processed the application om

under Section 36 (1) of the Act as, according to the learned counsel, ultimately the Charity Commissioner is required to decide the matter on the basis of the application of the Trust and, therefore, on the basis of the B

case made out by the Trust, sanction under Section 36 (1) was required to be granted. It is submitted that N.D. Construction has no locus standi in any manner in such proceedings and, therefore, there was no question nor any obligation on the part of N.D. Construction to disclose or point out ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -13- WP Nos. 1486 & 1814 of 94 any fact to the Charity Commissioner. It is submitted by Ms. Iyer that since rt

Bhattad Leasing lost upto the Supreme Court while challenging the order ou

passed under Section 36 (1) of the Act, it could not have preferred application under Section 36 (2) of the Act. It is submitted that Bhattad C

Leasing has not pointed out any such aspect at the time when the writ petition was filed against the order under Section 36 (1) of the Act and at h

the instance of such a litigant, the Charity Commissioner should not have ig

exercised his powers under Section 36 (2) of the Act. Ms. Iyer further submits that since the land was under encroachment, the bid of N.D. H

Construction was found to be more reasonable by the Charity Commissioner and having given sanction to such transaction, the order y

under Section 36 (2) of the Act ought not to have been passed by the ba

Charity Commissioner and that the Charity Commissioner has exceeded his jurisdiction while passing the impugned order. In order to substantiate om

this, the learned senior counsel has relied upon the decision of this Court in Writ Petition No. 968 of 1984 decided on 12th September, 1990 in the case of Mrs. Fatmabai B. Bachooali vs. State of Maharashtra and others, B

wherein it is held by the learned single Judge that the power under Section 36 (2) was not a general power of review and could be invoked only if some fraud, misrepresentation or the concealment of the material facts existed. The learned single Judge of this Court has held in the said decision ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -14- WP Nos. 1486 & 1814 of 94 that powers under Section 36 (2) could not have been exercised after the rt

execution of the sale deed between the parties. Ms. Iyer has also relied ou

upon the decision of the Division Bench in the case of Mahadeo Deosthan, Wadali and others vs. Joint Charity Commissioner, Nagpur and others1 C

wherein the Division Bench also taken the view that revocation of sanction granted under Section 36 (1) of the Act is not permissible after execution h

of sale deed pursuant to the grant of sanction. The learned counsel also ig

relied upon certain photographs in order to substantiate her contention that considerable part of the land was under encroachment and it was a H

marshy land and in view of the same the Charity Commissioner ought not to have exercised his powers under Section 36 (2) of the Act. Ms. Iyer has y

also pointed out that in any case regarding the transaction with Pawan ba

Bairagra, a newspaper advertisement was already given and, therefore, it can be presumed that the Trust was having knowledge about the same. It om

was, therefore, the duty of the Trust to point out the said aspect to the Charity Commissioner at the time of hearing of the application under Section 36 (1) of the Act and no fault can be found with N.D. B

Construction in this behalf as they are not expected to disclose anything at the time when sanction was to be given by the Charity Commissioner. 1 1989 Mh. L.J. 269

::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -15- WP Nos. 1486 & 1814 of 94

8. The learned Senior Counsel Mr. Seervai, appearing for the rt

Trust, has also submitted that the Charity Commissioner has gravely erred ou

in coming to the conclusion that the Trust has committed fraud or misrepresented while obtaining sanction under Section 36 (1) of the Act. It C

is submitted that considering the application of the Trust before the Charity Commissioner for the purpose of getting sanction, the Trust has h

stated that the land in question is under encroachment but there was no ig

averment in the application that the entire land was under encroachment. It is submitted that substantial portion of the land was under H

encroachment and even a Valuer's Report was also attached confirming the said aspect and in view of the same, the Charity Commissioner ought y

to have held that substantial portion of the land was under encroachment ba

and, therefore, the Charity Commissioner has committed an error in holding that the Trust has misrepresented or committed fraud as it was not om

the stand of the Trust that the entire land was under encroachment. It is further submitted by Mr. Seervai that even otherwise, the sale was to be effected on the basis of "as is where is basis" and, therefore, the same was B

to be effected with whatever encroachment was there on the land and as per the existing position of the land. It is submitted by Mr. Seervai that it was for the purchaser to go and inspect the land and satisfy himself/herself about the same. It is further submitted by Mr. Seervai that ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -16- WP Nos. 1486 & 1814 of 94 since it was not possible for the Trust to remove encroachment without rt

resorting to litigation and since it was a time consuming as well as money ou

consuming matter, it was decided to sell the land. Mr. Seervai, however, submitted that the Trust was not knowing about the agreement entered C

into on behalf of the intending purchaser N.D. Construction with Pawan Bairagra wherein sale consideration is shown to be on a very high side. It h

is submitted that at the time when Pawan Bairagra filed a civil suit ig

wherein the Trust was also joined as one of the defendants, only on receipt of the Summons that the Trust came to know about such transaction for H

the first time. It is submitted by Mr. Seervai that at the time when application under Section 36 (1) of the Act was preferred, this factual y

aspect was not within the knowledge of the Trust and, therefore, there was ba

no question of suppression on the part of the Trust in this behalf. Mr. Seervai tried to demonstrate that both the grounds on the basis of which om

the order is passed by the Charity Commissioner are not sustainable at all and the remarks made against the Trustees about fraud and misrepresentation is required to be expunged from the order. Mr. Seervai, B

however, submitted that it is true that the intending purchaser N.D. Construction had suppressed material fact from the Charity Commissioner regarding the agreement entered into between N.D. Construction and Pawan Bairagra wherein it was agreed to sell the land at Rs. 3.16 crores ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -17- WP Nos. 1486 & 1814 of 94 and even if it is presumed that the Trustees had acted fraudulently or rt

made misrepresentation before the Charity Commissioner, yet the Charity ou

Commissioner can exercise powers under Section 36 (2) of the Act, if one of the parties i.e. Intending purchaser has suppressed certain facts from C

him. It is submitted by Mr. Seervai that Section 36 (2) of the Act is required to be interpreted in such a manner that any party on whose h

favour sanction is to be given suppresses any material aspects, the Charity ig

Commissioner can still exercise the powers under Section 36 (2) of the Act. It is submitted by Mr. Seervai that in view of the same and considering the H

fact that now considerable time has passed and since no sale deed has been executed in favour of the intending purchaser, the Charity y

Commissioner now may be directed to invite fresh bids so that the Trust ba

may benefit by getting the correct market price prevailing as on today for which the learned senior counsel has relied upon the Full Bench decision om

of this Court in the case of Sailesh Developers and others vs. Joint Charity Commissioner, Maharashtra and others1. Mr. Seervai further submits that the imputations made by the Charity Commissioner against the Trustees in B

the order are not at all sustainable and on the ground of alleged suppression about encroached area, the Charity Commissioner has erred in coming to the conclusion that the Trustees have suppressed the factual 1 2007 (3) Bom. C.R. 7

::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -18- WP Nos. 1486 & 1814 of 94 aspect of the encroachment as, according to him, even if there is some rt

difference in the actual encroached area it cannot be said that there was ou

any mens rea on the part of the Trustees in not actually pointing out the correct encroached area especially when a Valuer's report was also C

attached with the application. It is also submitted by Mr. Seervai that since the advertisement had escaped the notice of the Trustees and since h

the Trustees were not aware about the agreement between N.D. ig

Construction and Pawan Bairagra, the Charity Commissioner has erred in observing that the Trustees had suppressed the said fact about such H

agreement at the time of hearing of the said application. It is submitted by Mr. Seervai that there is nothing on record to show that the Trustees were y

having actual notice about such transaction and, therefore, observations ba

made by the Charity Commissioner against the Trustees in this behalf is required to be expunged and the Charity Commissioner be asked to invite om

fresh bids and take fresh decision. In support of his submissions, Mr. Seervai has relied upon the decision of the Supreme Court in the case of Mehrwan Homi Irani and another vs. Charity Commissioner, Bombay and B

others1. The said judgment is in connection with Section 36 of the Act. The Supreme Court has considered the aspect about the best market price which should be available to the Trust. The learned counsel has relied 1 AIR 2001 SC 2350

::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -19- WP Nos. 1486 & 1814 of 94 upon relevant observations of the Supreme Court in paragraph 9 which rt

reads as under:

ou

"9.The counsel for the appellants also pointed out that it is likely that there would be better from other parties. The C

offer made by the appellants themselves is not very encouraging and the respondents were right in not accepting the same. However, we are told that there were some other offers also from some well known charitable h

institutions. In the best interest of the Trust and its objects, we feel it appropriate that respondents Nos. 2 to 4 should ig

explore the further possibility of having agreements with better terms. The objects of the Trust should be accomplished in the best of its interests. Leasing out of H

major portion of the land for other purposes may not be in the best interests of the Trust. The Charity Commissioner while granting permission under Section 36 of the Bombay Public Trusts Act could have explored these possibilities. Therefore, we are constrained to remit the matter to the y

Charity Commissioner to take a fresh decision in the matter. There could be fresh advertisements inviting fresh proposals ba

and the proposal of the 5th respondent could also be considered. The Charity Commissioner may himself formulate and impose just and proper conditions so that it may serve the best interests of the Trust. We direct that the om

Charity Commissioner shall take a decision at the earliest. We allow the appeal as indicated above and remit the matter to the Charity Commissioner in modification of the orders of the High Court in Writ Petition and that of Charity Commissioner."

B

Relying on the aforesaid judgment, Mr. Seervai submitted that with a view to see that the Trust may be able to get the best offer, the Charity Commissioner may be directed to invite fresh bids and to accept the bid ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -20- WP Nos. 1486 & 1814 of 94 which reflects the true market value of the property. rt

ou

9. On the question of fraud, Mr. Seervai has relied upon the decision of the Supreme Court in the case of Vijay Syal and another vs. C

State of Punjab and others1 wherein the Supreme Court has observed as under in para 24.

h

ig

"24. In order to sustain and maintain the sanctity and solemnity of the proceedings in law courts it is necessary that parties should not make false or knowingly, inaccurate H

statements or misrepresentation and/or should not conceal material facts with a design to gain some advantage or benefit at the hands of the court, when a court is considered as a place where truth and justice are the solemn pursuits. If any party attempts to pollute such a place by adopting y

recourse to make misrepresentation and is concealing material facts it does so at its risk and cost. Such party must ba

be ready to take the consequences that follow on account of its own making. At times lenient or liberal or generous treatment by courts in dealing with such matters is either om

mistaken or lightly taken instead of learning a proper lesson. Hence there is a compelling need to take a serious view in such matters to ensure expected purity and grace in the administration of justice."

B

10. Mr. Seervai has further relied upon the decision of the Supreme Court in the case of Assistant Commissioner, Income tax,Rajkot vs. Saurashtra Kutch Stock Exchange Limited2 in order to substantiate his case 1 (2003) 9 SCC 401

2 (2008) 14 SCC 171

::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -21- WP Nos. 1486 & 1814 of 94 about error apparent on the face of record. In paragraph 38, it has been rt

held by the Supreme Court that rectification of an order stems from the ou

fundamental principle that justice is above all. It is exercised to remove the error and to disturb the finality.

C

11. Mr. Seervai has relied upon another decision of the Supreme h

Court in the case of Meghmala and others vs. G. Narasimha Reddy and ig

others1 on the aspect of fraud and/or misrepresentation. In paragraphs 28 and 32, the Supreme Court has observed as under: H

"28. it is settled proposition of law that where an applicant gets an order/office by making misrepresentation or playing y

fraud upon the competent authority, such order cannot be sustained in the eye of the law. "Fraud avoids all judicial ba

acts, ecclesiastical or temporal" (Vide S.P. Chengalvaraya Naidu v. Jagannath2. In Lazarus Estates Ltd. v. Beasley3 the Court observed without equivocation that : (QB p. 712)" No om

judgment of a court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything."

32. The ratio laid down by this Court in various cases is that dishonesty should not be permitted to bear the fruit and B

benefit to the persons who played fraud or made misrepresentation and in such circumstances the Court should not perpetuate the fraud...."

1 (2010) 8 SCC 383

2 (1994) 1 SCC 1: AIR1994 SC 853

3 (1956) 1 QB 702

::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -22- WP Nos. 1486 & 1814 of 94 Relying on the said observations, it is argued by Mr. Seervai that if the rt

purchaser has suppressed any material facts, the Charity Commissioner ou

under Section 36 (2) can also examine this aspect and may ultimately revoke the sanction even if it is found that the intending purchaser in C

whose favour sanction is to be given has suppressed certain aspects. In the said case, the Supreme Court ha also held that suppression of a h

material document would also amount to fraud. Reference is also made to ig

the decision of this Court in the case of Shri Mahadeo Deosthan, Wadali and others vs. Joint Charity Commissioner, Nagpur and others1 by Mr. H

Seervai. Ms. Iyer, learned counsel has also relied upon the said case to substantiate their argument that revocation of sanction granted under y

Section 36 (1) of the Act is not permissible after execution of the sale ba

deed. Though Mr. Seervai has fairly submitted that in this case no sale deed has been executed, the scope of Section 36 (2) of the Act is therefore om

required to be considered in the light of the observations of the said judgment.

B

12. The learned Senior Counsel Mr. Seervai has relied upon the decision of this Court in the case of Dr. Sam Sarosh Bhacca and others vs. 1 1989 Mh. L.J. 269

::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -23- WP Nos. 1486 & 1814 of 94 P.V. Kakade, Jt. Charity Commissioner and others1 wherein same principal rt

has been reiterated that Section 36 (2) powers can be exercised before ou

execution of the sale deed. It has also been held that the Charity Commissioner is empowered to assess any advantage received by Trustee C

and direct the Trustee to pay compensation to the Trust equivalent to advantage so assessed.

h

13.

ig

Mr. Seervai has relied upon an unreported decision of this Court in the case of Shri Motilal Girdharilal Sharma and others vs. Shri H

Dattatray Bandu Jagtap and others, wherein it is held that the authorities and Courts have powers to recall their orders if they find that their orders y

have been obtained by fraud, misrepresentation or concealment of ba

material facts.

om

14. The learned Senior Counsel Mr. Dhakephalkar, appearing for Bhattad Leasing, has supported the order passed by the Charity Commissioner and submitted that in the instant case the Trustees as well B

as the intending purchasers were guilty of misrepresentation and concealment of facts which may amount to fraud while obtaining the order of sanction under Section 36 (1) of the Act. Mr. Dhakephalkar has 1 (1994) Bom L.R. 714

::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -24- WP Nos. 1486 & 1814 of 94 relied upon the averments made in the application preferred under rt

Section 36 (1) of the Act by the Trust. It is submitted by Mr. ou

Dhakephalkar that as per Rule 24 of the Bombay Public Trusts Rules, 1951 ("the Rules"), certain facts are required to be disclosed before the Charity C

Commissioner which was not disclosed in the instant case. It is submitted that N.D. Construction was having two partners at the relevant time and h

the partners are signatories to the agreement with Pawan Bairagra. It is ig

submitted that it is not possible to believe that the Trust may not have any knowledge about such transaction, especially when the said fact was also H

published in the newspaper. It is submitted by Mr. Dhakephalkar that N.D. Construction had formed a cartel with Pawan Bairagra and y

subsequently with one M/s. Krisha Developers and wanted to purchase the ba

property at a throwaway price. It is submitted that simply because order under Section 36 (1) of the Act is confirmed by this Court and SLP was om

dismissed is no ground for coming to the conclusion that subsequently application under Section 36(2) of the Act is not maintainable. It is submitted by Mr. Dhakephalkar that while deciding the application under B

Section 36 (1) of the Act, neither the Charity Commissioner nor this Court was concerned with the concealment of any fact at the time of granting sanction by the Charity Commissioner. It is submitted that the Charity Commissioner can exercise suo motu powers under Section 36 (2) of the ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -25- WP Nos. 1486 & 1814 of 94 Act, if any fraud or misrepresentation has come to his knowledge while rt

granting sanction under Section 36 (1) of the Act. It is submitted that ou

during the pendency of this petition, Bhattad Leasing has spent certain amount by making payment to the Receiver and if ultimately this Court C

directs the Charity Commissioner to take out fresh proceedings for sale of the land, the expenditure incurred by Bhattad Leasing may be allowed to h

be reimbursed. It is submitted by Mr. Dhakephalkar that fraud vitiates ig

everything and since the Charity Commissioner has, by his detailed reasons, come to the conclusion that he was deceived at the time of H

granting sanction under Section 36 (1) of the Act and, therefore, he was entitled to revoke the order. Learned counsel further submitted that the y

Charity Commissioner may be directed to invite fresh bids, from the ba

income which the Trust may receive, the expenditure incurred by Bhattad Leasing towards security may be allowed to be reimbursed. In order to om

substantiate his argument, Mr. Dhakephalkar has relied upon the judgment of the Supreme Court in the case of Shrisht Dhawan (Smt.) vs. M/s. Shah Brothers1. It has been held by the Supreme Court in the said B

case that fraud and collusion vitiate even the most solemn proceedings in any civilised system of jurisprudence. Fraud arises out of deliberate active role of representator about a fact which he knows to be untrue yet he 1 (1992) 1 SCC 534

::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -26- WP Nos. 1486 & 1814 of 94 succeeds in misleading the representee by making him believe it to be rt

true. The representation to become fraudulent must be of fact with ou

knowledge that it was false. But fraud in public law is not the same as fraud in private law. Nor can the ingredients which establish fraud in C

commercial transaction be of assistance in determining fraud in Administrative Law.

h

15.

ig

Mr. Dhakephalkar has also placed reliance on the decision of the Supreme Court in the case of Church of North India vs. Lavajibhai H

Ratanjibhai and others1. In the said case, the Supreme Court has considered various provisions of the Act in connection with bar of Civil y

Court's jurisdiction. In paragraph 44 it has been held that the Act is a ba

special law. It confers jurisdiction upon the Charity Commissioner and other authorities named therein. The statute has been enacted by the om

Parliament in public interest to safeguard the properties vested in the Trusts as also control and management thereof so that the trust property may not be squandered or the object or purport for which a public trust is B

created may not be defeated by the persons having control thereover. Relying on the aforesaid observations, it is argued by Mr. Dhakephalkar that the Charity Commissioner has rightly passed the order under Section 1 AIR 2005 SC 254

::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -27- WP Nos. 1486 & 1814 of 94 36 (2) of the Act which is not required to be interfered by this Court in its rt

writ jurisdiction.

ou

16. Chamber Summons No. 63 of 2005 has been preferred by one C

M/s. Krisha Developers in the writ petition filed by N.D. Construction with a prayer to implead them as respondent No.8 in the array of parties. Mr. h

Chinai, learned Senior Counsel appearing for the said intervenor, submits ig

that Krisha Developers may be allowed to be joined as party to the present proceedings as, according to him, Krisha Developers has been put in H

possession of the land in view of the transaction entered into between N.D. Construction and Krisha Developers. It is submitted by Mr. Chinai y

that by an ad-interim order of this Court, Receiver is appointed and ba

presently Receiver is in charge of the property for the purpose of safeguarding the property from encroachment. It is submitted that as per om

the Receiver's report it is clear that Krisha Developers was in possession and has carried out construction of compound wall. It is submitted that even if the intervenor may not have any valid title, yet Krisha Developers B

is required to be put in possession by virtue of the provisions of Section 53A of the Transfer of Property Act, 1882 as possession was taken from it by the Court Receiver. It is submitted that Krisha Developers was not party before the Charity Commissioner. Since Receiver has taken over ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -28- WP Nos. 1486 & 1814 of 94 possession of the property, a direction may be given to the Receiver to rt

hand over possession back to Krisha developers and they may be allowed ou

to be joined as a party by allowing the Chamber Summons. In support of his claim regarding establishing the claim for possession, the learned C

counsel has relied upon Receiver's reports dated 12th January, 1995 and 16th January, 1995.

h

17.

ig

We have heard the learned counsel appearing in the matter at great length and have also gone through the voluminous record forming H

part of these proceedings.

y

18. The principal question which the Court is required to consider ba

in these writ petitions is as to whether the order of the Charity Commissioner passed under Section 36 (2) of the Act requires om

interference at our hands in these proceedings and whether the Charity Commissioner has committed any error in passing such an order and whether in the facts and circumstances of the case, the Charity B

Commissioner was justified in invoking his powers under Section 36 (2) of the Act. If ultimately it is held that the order passed by the Charity Commissioner in revoking the sanction granted under Section 36 (1) of the Act is correct, what further directions can be given in view of long ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -29- WP Nos. 1486 & 1814 of 94 passage of time as well as in view of the law laid down by the Full Bench rt

of this Court in the case of Shailesh Developers(supra). The Court is also ou

required to consider as to whether the strictures passed by the Charity Commissioner against the Trustees of the Trust are required to expunged C

or not.

h

19. At this stage it is not necessary to recapitulate the facts of the ig

case as the same have been adverted to earlier. As stated above, the Trust wanted to dispose of its land as it was under heavy encroachment and it H

was not possible for the Trust to take action to remove the large scale encroachment which had taken place on the land in question. The Trust, y

therefore, invited offers by issuing advertisement in the newspapers and ba

ultimately the Trust entered into agreement with N.D. Construction. As per the said transaction, the sale consideration was ultimately finalised at om

Rs.24,00,000/-. The Trust thereafter preferred an application before the Charity Commissioner for sanction to the said transaction. At this stage, it would be relevent to refer to the averments made by the Manager of the B

Trust Mr. V.P. Shah in its application made under Section 36 (1) of the Act. The relevant part of the said application reads thus: "2. The land in question is popularly known as Indira Nagar ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -30- WP Nos. 1486 & 1814 of 94 and is situated on the Western side of Iraniwadi and on the rt

southern side of Mahatma Gandhi Road, Kandivli. The land is under encroachment and constructions have been put up. It would be impracticable to file suits against innumerable ou

encroachers. The litigation would be costly and also lengthy and that too with uncertain results. There is a danger of the encroachers claiming title by adverse possession. C

3. Shri Nikhilbhai Nupendra Zaveri and Shri Digambar Bhaskar Sapre have approached us for the sale of our right, title and interest in the aforesaid land for Rs. 24,00,000/-. The intending purchasers have deposited with us an amount h

of Rs. 2,50,000/-. The Trustees have considered the offer and felt that the said offer is fair and reasonable. ig

Accordingly, we seek your permission for sale of land in question.

H

4. Information on the 4 points enumerated in Rule 24 of the Bombay Public Trusts Rules, 1951 is as mentioned hereunder:-

(i) The Trust Deed gives full power to the Trustees to sell y

the property by private treaty. Attention in this connection is invited to Clause 11 (n) of the Trust ba

Deed.

(ii) The Trustees considered it prudent and necessary to sell the right, title and interest in the property. The om

price realised can be used for the purpose of the Trust. This is further elaborated in the next succeeding clause.

(iii) From the land in question we derive no income at B

present, but carry the liability for payment of non agricultural assessments, increase in land revenue, property taxes, etc. It is not possible to recover the possession of the land without resorting to costly litigation. It is accordingly in the interest of the Trust to sell the land at a fair and reasonable price. The offer of Shri Nikhilbhai Nupendra Zaveri and Shri Digambar Bhaskar Sapre of Rs. 24,00,000/- is ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -31- WP Nos. 1486 & 1814 of 94 considered fair and reasonable.

rt

(iv) Since the proposal to sell the right, title and interest of the land, the question of the terms of past leases ou

does not arise."

C

Along with the application, a Valuer's report was also annexed. As per the Valuer's report dated 13th June, 1989, he has stated that he has inspected h

the land in question. The land is extensively built and has thousands of ig

hutments. In paragraph 4 it has been stated that the entire land was encroached upon and fully occupied and it was almost an impossible task H

for the owners to get possession of the property and any litigation initiated to recover possession would not only be lengthy and costly but y

the result thereof would be uncertain. In paragraph 6 it has been stated ba

that the land in question was extensively encroached and built upon by a very large number of hutment dwellers and from whom it is almost om

impossible to get possession. The Trustee of the Trust viz. Mr. Rajesh Batra has also filed his affidavit on 9th June, 1989, wherein he has stated that the land was under encroachment since several years and B

constructions had been put up. He has stated that it would be impracticable to file suits against innumerable encroachers. He has stated in the said affidavit that S/Shri Nikhil Nupendra Zaveri and Digambar Bhaskar Sapre had approached the Trust for the sale of land for a total ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -32- WP Nos. 1486 & 1814 of 94 price of Rs. 24,00,000/-. It is also stated in the said affidavit that it was rt

also in the interest of the Trust to dispose of such lands, when it was not ou

possible to recover possession. Before the Charity Commissioner, N.D. Construction had also appeared and their bid was also taken into C

consideration which was initially at Rs. 30 lakhs and it was increased to Rs. 53 lakhs, though as per the record it was Rs. 51 lakhs. The Charity h

Commissioner ultimately granted sanction to the transaction between the ig

Trust and N.D. Construction. As pointed out earlier, said sanction which was granted by the Charity Commissioner under Section 36 (1) of the Act H

was subject matter of challenge by Bhattad Leasing before this Court which petition was dismissed against which Special Leave Petition was y

also dismissed by the Supreme Court. Subsequently, the said Bhattad ba

Leasing preferred an application under Section 36 (2) of the Act before the Charity Commissioner in which the impugned order has been passed om

by the Charity Commissioner. At this stage reference is required to be made to the provisions of Section 36 of the Act which read as under: B

" 36. Alienation of immovable property of public trust.- (1) Notwithstanding anything contained in the instrument of trust-

(a) no sale, exchange or gift of any immovable property, and

::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -33- WP Nos. 1486 & 1814 of 94 (b) no lease for a period exceeding ten years in the case rt

of agricultural land or for a period exceeding three years in the case of non-agricultural land or a building,

ou

belonging to a public trust, shall be valid without the previous sanction of the Charity Commissioner. Sanction may be accorded subject to such condition C

as the Charity Commissioner may think fit to impose, regard being had to the interest, benefit or protection of the trust;

h

(c) If the Charity Commissioner is satisfied that in the interest of any public trust any immovable property ig

thereof should be disposed of, he may, on application, authorise any trustee to dispose of such property subject to such conditions as he may think fit to H

impose, regard being had to the interest or benefit or protection of the trust.

(2) The Charity Commissioner may revoke the sanction given under clause (a) or clause (b) of sub-section (1) or the y

ground that such sanction was obtained by fraud or misrepresentation made to him or by concealing from the ba

Charity Commissioner, facts material for the purpose of giving sanction; and direct the trustee to take such steps within a period of one hundred and eighty days from the date of revocation (or such further period not exceeding in om

the aggregate one year as the Charity Commissioner may from time to time determine) as may be specified in the direction for the recovery of the property. (3) No sanction shall be revoked under this Section B

unless the person in whose favour such sanction has been made has been given a reasonable opportunity to show cause why the sanction should not be revoked. (4) If, in the opinion of the Charity Commissioner, the trustee has failed to take effective steps within the period specified in sub-section (2), or it is not possible to recover the property with reasonable effort or expense, the ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -34- WP Nos. 1486 & 1814 of 94 Charity Commissioner may assess any advantage received rt

by the trustee and direct him to pay compensation to the trust equivalent to the advantage so assessed." ou

20. The Charity Commissioner, while considering application under C

Section 36 (1) of the Act is required to apply his mind and is required to make discreet enquiry to find out whether it is in the interest of the trust h

to sanction the transaction in question. Without previous sanction of the ig

Charity Commissioner, no life can be given to any transaction entered into by any Trust and such transaction will have no legal or binding effect. H

The Charity Commissioner is assigned an important duty and is required to act in the financial interest of the Trust in connection with the y

transaction in question for which sanction is sought for. While deciding ba

an application under Section 36 (1) of the Act, it is the duty of the Charity Commissioner to hold an appropriate inquiry and from the material on om

record to find out as to whether the transaction which the Trust wants to enter into is required to be approved or not and any sanction is required to be given or not. At the time of deciding such application, the Charity B

Commissioner is also required to consider as to whether the price which the Trust is likely to receive is appropriate price and whether the transaction in question is genuine or not. In view of the decision of the Full Bench (supra), it is clear that while considering the question about ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -35- WP Nos. 1486 & 1814 of 94 granting sanction, the Charity Commissioner is not required to give rt

sanction only in connection with the particular transaction with any party, ou

for which sanction is sought for, but he is required to see that various bidders can put their own bids before him and ultimately, if in the opinion C

of the Charity Commissioner, the highest bid is required to be accepted and sanction may accordingly be accorded to the highest bidder. The h

Charity Commissioner is required to invite various bids and to find out the ig

best bid. In a given case, the Charity Commissioner is also required to find out as to whether the highest bid given by a person is genuine or not H

and also to find out the credentials of such bidder. The Charity Commissioner while deciding the best offer, is required to take into y

consideration various factors. Considering the scheme of the Act, the ba

Charity Commissioner while accepting the bid of a particular bidder is also required to see whether the said bid is beneficial to the trust. As held by om

the Full Bench, the Charity Commissioner is required to consider the interest of the Trust by inviting bids and the scope of Section 36 cannot be said to be confined only to give approval to a particular transaction which B

the Trust might have entered into and seeking sanction from the Charity Commissioner qua the said transaction. The Full Bench in the case of Sailesh Developers (supra) has held that the power vested in Charity Commissioner under Section 36 of the Act is not only confined merely to ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -36- WP Nos. 1486 & 1814 of 94 grant or refusal of sanction to particular sale transaction in respect of rt

which sanction is sought but also extends to inviting offers from members ou

of public and directing trustees to sell or transfer trust property to a person whose bid or quotation is best having regard to interest, benefit or C

protection of Trust. It has also been held that a party who comes forward to submit his offer directly before the Charity Commissioner and complies h

with requirements as may be laid down by the Charity Commissioner in a ig

pending application under Section 36 of the Act has locus standi to challenge the final order passed in proceedings under Section 36 of the H

Act.

y

21. Considering the aforesaid provision, in our view, it is not ba

possible for us to accept the submission of Ms. Iyer that the bidder i.e. N.D. Construction was not required to disclose anything before the om

Charity Commissioner as the matter is only between the Trust and the Charity Commissioner. It is no doubt true that the application is required to be preferred by the Trust and that is how the things are put into motion B

for the purpose of giving sanction. Nonethless, when the Charity Commissioner is required to consider various bids, it cannot be said that any vital material which is required to be disclosed, the obligation for the same is that of the Trust. The matter is at large before the Charity ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -37- WP Nos. 1486 & 1814 of 94 Commissioner and while approving the sale transaction between the rt

Trust and the bidder, if it is found that the bidder has suppressed vital ou

materials from the Charity Commissioner, in our view, there is no reason as to why the Charity Commissioner cannot invoke the provisions of C

Section 36 (2) of the Act. It is true, as argued by Ms. Iyer that it is also the duty of the Trust to disclose all relevant aspects before the Charity h

Commissioner, but in a given case even inadvertently or deliberately the ig

Trust has not disclosed certain information, the provisions of Section 36 (2) cannot be interpreted in a restricted manner by holding that even if H

purchaser whose bid is accepted by the Charity Commissioner has misled the Charity Commissioner or by way of misrepresentation, the Charity y

Commissioner, in such an eventuality can exercise powers under Section ba

36 (2) of the Act. In our view, it is not possible to give such a restrictive meaning while interpreting Section 36 (2) of the Act. If it is subsequently om

found that such sanction was obtained by fraud or misrepresentation, the Charity Commissioner can revoke the sanction given under clauses (a) and (b) of sub-section (1) of Section 36 of the Act, by passing an appropriate B

order. In our view, such misrepresentation in a given case may be by the Trust or even by the beneficiary to such transaction. It is also required to be noted that even under sub-section (3) of Section 36 of the Act, before passing any order revoking the sanction, the person in whose favour ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -38- WP Nos. 1486 & 1814 of 94 sanction has been made is required to be given reasonable opportunity to rt

show cause why sanction should not be revoked. In our view, if a person ou

in whose favour the transaction is sanctioned has no locus standi or no say in the matter at all, there is no question of hearing him under sub-section C

(3) of Section 36 of the Act. In any case, we are of the opinion that considering the scheme of the Act, the Charity Commissioner in a given h

case may revoke the sanction, if it is found that there was ig

misrepresentation by either the Trust or the intending purchaser, whose bid is accepted by the Charity Commissioner. In view of what is stated H

above, we are of the opinion that in a given case the Charity Commissioner may revoke the sanction under Section 36 (2) of the Act, if y

it is found that either side i.e. the applicant Trust or the beneficiary of ba

such sanction i.e. purchaser has fraudulently misrepresented the facts before the Charity Commissioner.

om

22. The next question which requires consideration is as to whether in the facts of the present case , there was any suppression or B

fraud which can be alleged to the Trust or even to the intending purchaser whose bid is accepted and whether there is any justification in revoking the sanction by resorting to Section 36 (2) of the Act. In this connection, certain factual aspects as such are not in dispute. They are: ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -39- WP Nos. 1486 & 1814 of 94 rt

(i) Before entering into transaction with N.D. Construction, Trust had ou

issued public advertisement inviting offers; (ii) The Trust ultimately decided to sell the land in favour of N.D. C

Construction and sale consideration was fixed at Rs. 24 lakhs. (iii) It is not in dispute that substantial portion of the land in question h

was under encroachment by innumerable encroachers and in fact ig

pucca construction was also carried out by some encroachers. There is nothing on record to show that since how long such H

encroachment was in existence.

(iv) Before N.D. Construction entered into agreement with the Trust, y

they had entered into agreement with Pawan Bairagra wherein the ba

sale consideration was fixed at Rs. 3 crores. (v) It is not in dispute that at the time when the Charity Commissioner om

granted the sanction, the factum about agreement arrived at between N.D. Construction and Pawan Bairagra was not disclosed and was not put to the notice of the Charity Commissioner. B

(vi) Both the partners of N.D. Construction i.e. Nikhil Nupendra Jhaveri and Digamber Bhaskar Sapre are signatories to the agreement. (vii) Substantial portion of the land is marshy land which cannot be put to use effectively.

::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -40- WP Nos. 1486 & 1814 of 94 rt

23. Considering the aforesaid aspect of the matter, the Charity ou

Commissioner at the time when he gave sanction obviously was not posted with the facts about the transaction which had taken place between N.D. C

Construction and Pawan Bairagra. Whether the Trust was aware about the transaction or not is also required to be taken into consideration. If the h

Trust was aware about such transaction by which N.D. Construction has ig

decided to sell the land for a considerable amount of Rs. 3 crores, as against that they had given initial offer of Rs. 24 crores which was H

subsequently increased to Rs. 52 lakhs. In our view, at the time when N.D. Construction gave an offer to the Charity Commissioner to the tune y

of Rs. 52 lakhs, they were aware that they are going to get more than Rs. ba

3 crores as they had entered into agreement with Pawan Bairagra prior to the grant of sanction by the Charity Commissioner, even though they did om

not have title at the relevant time, so as to pass any title in favour of Pawan Bairagra. There is nothing on record to show that the Trust was having actual notice of such a transaction at the relevant time. An B

advertisement in the newspaper can be considered as a constructive notice to the Trust but since there is nothing on record for coming to the conclusion that the Trust had actual notice of the same, it is not possible for us to hold that in a fraudulent and dishonest manner the Trust had ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -41- WP Nos. 1486 & 1814 of 94 suppressed the fact about the agreement entered into between Pawan rt

Bairagra and N.D. Construction. There is nothing on record to indicate ou

that the Trust wanted to favour N.D. Construction or that there was any collusion between N.D. Construction and the Trust in any manner at the C

time of entering into agreement with N.D. Construction. The Trust entered into agreement with N.D. Construction after inviting offers by public h

advertisement. It is possible that the Trust may not have any actual notice ig

about the transaction entered into by N.D. Construction with Pawan Bairagra. Considering the said aspect, though we may accept the H

submission of Mr. Seervai that there was no mens rea or any other intention on the part of the Trust not to point out the said fact to the y

Charity Commissioner at the time of preferring application under Section ba

36 (1) of the Act and in fact Trust has also taken a stand before us that the Trust is interested in getting maximum price available out of the sale om

transaction, in our view it cannot be said that the Trust made a fraudulent attempt to deceive the Charity Commissioner by not disclosing the fact that before entering into transaction, N.D. Construction has arrived at B

agreement with Pawan Bairagra. Regarding the aspect of encroachment, it is true that in the application the Trust has averred that the land in question is under encroachment. As per the Valuer's report, which was initially submitted by the Trust along with their application,it was stated ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -42- WP Nos. 1486 & 1814 of 94 that the land is under extensive encroachment. The area in question is so rt

large and, as submitted by Mr. Seervai, it was impossible at the relevant ou

time to identify exact portion of encroached area. In view of subsequent Valuer's report, it has come on record that some portion of the land was C

vacant and some portion was under heavy encroachment. Considering the aforesaid aspect of the matter, though it is true that the Trust should have h

taken reasonable care in finding out the exact area under encroachment ig

but since from the factual aspect it is revealed that large area was under encroachment, the averment in the application that the land is under H

encroachment itself may not be a suggestive factor that the land was under encroachment. In the application it is stated that the land may be y

considered as substantially encroached or entire land was under ba

encroachment. However, the Valuer's report which the Trust has attached with the application also clearly mentioned that substantial area om

was under encroachment. In our view, while preferring application, the Trust had not taken reasonable care by identifying the exact area under encroachment and possibly a vague statement was made that the land was B

under encroachment, which might have given an impression to the Charity Commissioner that the entire area was under encroachment at the time of granting sanction. The question which requires consideration is whether the Trust, in order to mislead the Charity Commissioner, has made such an ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -43- WP Nos. 1486 & 1814 of 94 averment in the application. By no stretch of imagination, it can ever be rt

said that in order to mislead the Charity Commissioner, a statement was ou

made in the application that the land is under encroachment. It is no doubt true that the Charity Commissioner, at the relevant time while C

granting sanction under Section 36 (1) of the Act, might have been misled perhaps by the averment in the application or was under an h

impression that the entire land was under encroachment. Considering the ig

said aspect, even though sanction of the Charity Commissioner might be on the basis that the entire land is under encroachment, from the record of H

the case as well as from the Valuer's report which the Trust has annexed along with the application, it is not possible for us to believe that the Trust y

with a fraudulent intention has tried to create an impression before the ba

Charity Commissioner that not a single inch of land is free and that the entire land is under encroachment. It is not in dispute that substantial om

portion was under encroachment and large scale construction was made and that was the basis for the Trust to apply for sanction under Section 36 (1) of the Act. It is, however, required to be noted that though it may not B

be possible for us to infer that the Trust has acted in a fraudulent manner before the Charity Commissioner, it seems that the Trust has also not taken appropriate care or at least was negligent in the matter of identifying the actual encroached area. Considering the said fact, it is not ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -44- WP Nos. 1486 & 1814 of 94 possible for us to come to a conclusion that the trust with a dishonest rt

intention and to commit fraud on the Charity Commissioner by concealing ou

certain material facts ultimately got an order of sanction under Section 36 (1) of the Act.

C

24. The next question which requires consideration is as to whether h

in the factual background of this case, whether the Charity Commissioner ig

was justified in invoking Section 36 (2) of the Act. As pointed out earlier, perhaps the Trust could have taken more care while describing the actual H

area under encroachment but that fact itself may not result into a fraudulent act on the part of the Trust. There is nothing on record to show y

that the Trust wanted to commit fraud by misrepresenting certain things ba

before the Charity Commissioner to help the intending purchaser i.e. N.D. Construction. As a matter of fact, before the Charity Commissioner there om

were two bidders i.e. N.D. Construction and Bhattad Leasing. The Charity Commissioner thereafter considered both the bids and ultimately N.D. Construction raised the bid upto Rs. 52 lakhs. There is nothing on record, B

therefore, to suggest that with a view to achieve its object of favouring N.D. Construction that the Trust concealed certain facts. If that be so, simply because meticulous care has not taken by the Trust in preferring the application under Section 36 (1) of the Act, that fact itself cannot be ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -45- WP Nos. 1486 & 1814 of 94 construed as a fraudulent action on the part of the Trust. One can only rt

attribute negligence to the Trustee or the Manager of the Trust but it is not ou

possible to attribute fraud on the part of the Trustees in this behalf. C

25. As pointed out earlier, the Charity Commissioner might have been misguided by the averment in the application and perhaps might h

have thought that the entire land was under encroachment, though it is ig

not in dispute that substantial part of the land was definitely under encroachment and some portion is marshy land which was not possible to H

be utilised. However, the record discloses that the intending purchaser i.e. N.D. Construction at the time of giving its bid before the Charity y

Commissioner suppressed the material fact about transaction which it had ba

entered into with the said Pawan Bairagra. It is not in dispute that N.D. Construction had entered into agreement with Pawan Bairagra before om

getting sanction from the Charity Commissioner for more than Rs. 3 crores and also entered into agreement with one Krisha Developers. All these aspects were not disclosed before the Charity Commissioner. The parties B

before the Charity Commissioner are required to disclose material facts and on that basis the Charity Commissioner can consider the aspect about accepting a particular bid. It is not possible for us to accept the argument of Ms. Iyer that the agreement was entered into only with Pawan Bairagra ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -46- WP Nos. 1486 & 1814 of 94 in connection with some monetary transaction and that ultimately the suit rt

filed by Pawan Bairagra was withdrawn by him. It is required to be noted ou

that Pawan Bairagra ultimately filed a suit wherein even the Trust was joined as a party and we find considerable force in the argument of Mr. C

Seervai that when they received the summons from the Court that they realised that they were duped by N.D. Construction by suppressing the h

said fact. It is also required to be noted that both the partners of N.D. ig

Construction are signatories to the agreement with Pawan Bairagra as the N.D. Construction is a firm of two partners. An attempt was therefore H

made by N.D. Construction to get the property of the Trust at a throw away price and to make huge profit by selling it for more than Rs. 3 crores y

at the relevant time. It is also required to be observed that subsequently ba

even N.D. Construction has entered into another agreement with Krisha Developers and the only object of N.D. Construction seems to be to make om

a huge profit by getting the property of the Trust at a throw away price. In fact, the transaction of N.D. Construction with Pawan Bairagra prior to obtaining sanction order passed by the Charity Commissioner was the B

most relevant material which ought to have been brought to the notice of the Charity Commissioner. The Charity Commissioner has considered this aspect in great detail in his order. Considering the said aspect, since the aforesaid material was not placed before the Charity Commissioner and it ::: Downloaded on - 09/06/2013 17:42:34 ::: KPP -47- WP Nos. 1486 & 1814 of 94 was suppressed from the Charity Commissioner, in our view, the Charity rt

Commissioner was perfectly justified in revoking the sanction granted ou

earlier. It is not in dispute that no sale deed was executed by the Trust in favour of N.D. Construction and no right is therefore created in their C

favour in any manner. Though the Charity Commissioner had granted sanction, however till sale deed is executed, the power under Section 36 h

(2) can still be exercised by the Charity Commissioner and sanction could ig

be revoked, if it is found that he had granted sanction on account of misrepresentation or relevant aspects were not placed before him by the H

Trust. As discussed earlier, the concealment of material aspects cannot be restricted only to the Trust but even any party on whose favour sanction is y

given is ultimately found to have suppressed certain things, the Charity ba

Commissioner can definitely revoke the sanction. The Charity Commissioner is required to see the interest of the Trust and if it is found om

that sanction granted by him in favour of a particular intending purchaser has ultimately not found to be in the interest of the Trust, the Charity Commissioner can revoke the sanction under Section 36 (2) of the Act. B

Before passing the order, the Charity Commissioner has also given hearing to N.D. Construction and by giving cogent reasons sanction accorded under Section 36(1) of the Act has been revoked. As stated above, if the vital material as mentioned above was brought to the notice of the Charity ::: Downloaded on - 09/06/2013 17:42:35 ::: KPP -48- WP Nos. 1486 & 1814 of 94 Commissioner, he possibly would not have granted sanction under Section rt

36 (1) of the Act. Since the entire material facts were subsequently ou

disclosed at the time of hearing of application under Section 36 (2) of the Act, the Charity Commissioner has deemed it fit to revoke the sanction. C

The Charity Commissioner has also made necessary enquires by making spot inspection of the site, etc. Considering the said aspect, the Charity h

Commissioner has ultimately taken a decision in the interest of the Trust ig

and has, in our view, rightly revoked the sanction granted earlier. The argument of Ms. Iyer that once sanction under Section 36 (1) of the Act is H

confirmed till the High Court, proceedings under Section 36 (2) are not maintainable is without any substance. The said argument is required to y

be rejected as, in our view, proceedings under Section 36 (2) of the Act is ba

separate and independent and the Charity Commissioner has rightly exercised those powers in the instant case. The facts of the case make it om

absolutely clear that the relevant material was not placed before the Charity Commissioner and, therefore, the Charity Commissioner has revoked the sanction after considering the material on record at the time B

of deciding application under Section 36 (2) of the Act. It is required to be noted that the concealment has taken place at the behest of N.D. Construction as they have not placed the relevant material on record. Even if either party has concealed or suppressed material facts, the Charity ::: Downloaded on - 09/06/2013 17:42:35 ::: KPP -49- WP Nos. 1486 & 1814 of 94 Commissioner can exercise powers under Section 36 (2) of the Act, if it is rt

found that either side has tried to mislead him or suppress material facts ou

from him.

C

26. As held by the Supreme Court, fraud vitiates everything and when the Charity Commissioner has come to the conclusion that he was h

misled, he was perfectly justified in invoking powers under Section 36 (2) ig

of the Act. In a given case, even the Charity Commissioner has suo motu powers, if any factual aspect is brought to his notice that a particular H

party has committed fraud while getting sanction under Section 36 (1) of the Act.

y

ba

27. It is no doubt true that Bhattad Leasing had not disclosed the said fact earlier and such application was preferred after a considerable om

period of time. In our view, even if the conduct of said Bhattad Leasing may not inspire confidence in this behalf, ultimately when the facts were brought to the notice of the Charity Commissioner, the Charity B

Commissioner was justified at least in invoking his powers under Section 36 (2) of the Act. It is equally true that said Bhattad Leasing also given an offer of only Rs. 50 lakhs, though they knew that N.D. Construction has entered into agreement of sale with Pawan Bairagra for Rs. 3 crores. ::: Downloaded on - 09/06/2013 17:42:35 ::: KPP -50- WP Nos. 1486 & 1814 of 94 rt

28. So far as Chamber Summons preferred by Krisha Developers is ou

concerned, they lay a claim of being in possession of the property on the basis of the reports of the Receiver. The learned counsel appearing for C

Krisha Developers failed to point out as to how Krisha Developers got any title over the property. Since Krisha Developers are not having any right h

and/or title worth the name, assuming that they were in possession, the ig

same cannot be protected by resorting to Section 53 A of the Transfer of Property Act. Section 53A may be applicable in a case where a person is H

put in possession by way of valid transaction without there being any registered document. In such an eventuality, transferee can protect his y

possession. We have our doubts as regards the possession of Krisha ba

Developers. The reports of the Court Receiver, in our view, do not support such a case. If the contention of the learned counsel for the Krisha om

Developers is accepted, then even a trespasser would insist that his possession may be protected. Considering the said aspect, the order passed by the Charity Commissioner under Section 36 (2) of the Act is B

required to be upheld with a modification that the Charity Commissioner shall now invite fresh bids from the public by wide publicity. For the said purpose, advertisement may be given in appropriate newspapers. The cost of such advertisement shall be borne by the Trust. The matter is ::: Downloaded on - 09/06/2013 17:42:35 ::: KPP -51- WP Nos. 1486 & 1814 of 94 accordingly remanded to the Charity Commissioner for the said purpose. rt

The application under Section 36 (1) of the Act be decided de novo. ou

There is also an additional aspect as to why fresh bids should be invited in view of the fact that the Urban Land (Ceiling and Regulation) Act has C

been repealed and naturally, therefore, there may be a further appreciation in the land value in view of the repeal of the ULC Act. h

29.

ig

It is required to be noted that no sanction has been granted by the Charity Commissioner regarding transaction entered into by N.D. H

Construction with the Trust. Even though Krisha Developers claim to be in possession, it is clear that Krisha Developers are not having any valid y

title nor any right is created in their favour by the Trust in any manner. If ba

there is any transaction between N.D. Construction and Krisha Developers, it is for Krisha Developers to file appropriate proceedings om

against N.D. Constructions and the Court is informed that Krisha Developers have already filed a suit. The said Krisha Developers, therefore, are neither a necessary nor a proper party to the proceedings so far as B

proceedings under Section 36 (2) of the Act is concerned. The Chamber Summons for joining them as party respondent is therefore required to be rejected and is accordingly rejected. If Krisha Developers have any right, title or interest in the property, it is for them to agitate their right in ::: Downloaded on - 09/06/2013 17:42:35 ::: KPP -52- WP Nos. 1486 & 1814 of 94 appropriate proceedings in accordance with law. The contention of the rt

learned counsel for the intervenor that Krisha Developers are entitled to ou

be put in possession under Section 53A of the Transfer of Property Act cannot be accepted as we do not find any such right in their favour which C

can be said to be on the basis of any valid transaction. The submission of the learned counsel that the Receiver may be directed to hand over h

possession to Krisha Developers, therefore, cannot be accepted and the ig

said prayer is rejected. Chamber Summons taken out by Krisha Developers is accordingly rejected.

H

30. Considering the aforesaid aspect, Writ Petition No. 1486 of y

1994 is required to be dismissed and the same is accordingly dismissed. ba

Rule is discharged.

om

31. So far as Writ Petition No. 1814 of 1994 is concerned, the same is allowed and the matter is remanded to the Charity Commissioner for deciding the application under Section 36 (1) of the Act afresh, as B

observed earlier. If fresh bids are invited and if any particular bid is accepted, it would be open to Bhattad Leasing to apply to the Charity Commissioner for reimbursement of the expenditure incurred by them towards security charges or any other charges incurred by them. If such an ::: Downloaded on - 09/06/2013 17:42:35 ::: KPP -53- WP Nos. 1486 & 1814 of 94 application is preferred, it is for the Charity Commissioner to decide the rt

same as per the evidence that would be produced in that behalf. The ou

amount i.e. Rs. 52 lakhs which the Trust has received from N.D. Construction be refunded to them within a period of two months with 9 C

per cent interest. The Receiver now shall hand over possession back to the Trust. It is for the Trust to look after the property and to safeguard the h

property by taking appropriate remedial measures. The prayer made by ig

Krisha Developers for staying this order for two weeks regarding handing over possession by the Trust in favour of the Trust is rejected. H

32. At this stage, learned counsel appearing for N.D. Construction y

requests that the Charity Commissioner may be asked not to proceed with ba

the matter for two months as they would like to approach the Supreme Court. The request is reasonable. The Charity Commissioner is directed om

not to take any further action on the basis of this order for a period of two months in order to enable N.D. Construction to approach the Supreme Court.

B

P. B. MAJMUDAR, J.

R.M. SAVANT, J.

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