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Section 36(1) in The Unit Trust Of India Act, 1963
The Unit Trust Of India Act, 1963
Article 226 in The Constitution Of India 1949
The Societies Registration Act, 1860
The Indian Penal Code, 1860
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Sailesh Developers, A Registered ... vs The Joint Charity Commissioner ... on 14 February, 2007

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Bombay High Court
Suburban Education Society And ... vs Charity Commissioner Of ... on 29 November, 2003
Equivalent citations: 2004 (2) MhLj 792
Author: V Kanade
Bench: S Radhakrishnan, V Kanade

JUDGMENT

V.M. Kanade, J.

1. The petitioners have filed this petition under Article 226 of the Constitution of India and are seeking writ of certiorari or any other appropriate writ for quashing the Order dated 6th August, 2001 passed by the Charity commissioner refusing permission to sell the property owned by the Petitioner No. 1 - Trust to the third parties and for direction directing the 1st respondent to sanction the said application in respect of the said Plot Nos. 154 and 155 situated at Goregaon (West).

2. Brief facts which are relevant for the purpose of deciding the present petition are as follows :

3. The petitioner No. 1 is registered under the Societies Registration Act, 1860 and the Bombay Public Trust Act, 1950 and the petitioner No. 2 is the General Secretary-Trustee of the 1st petitioner. Respondent No. 1 is the Charity Commissioner of the Maharashtra State. Respondent No. 2 is the State of Maharashtra and respondent No. 3 is the Ex-Vice President of the Parents Teachers Association of the Mount Mary High School. It is an admitted position that the 3rd respondent is an ex-parent and his children are no longer taking education in the said Institution.

4. The 1st petitioner's aim and object is to run the Educational Institution and to do all acts and things which are necessary for the promotion of the said object. It is stated in the petition that the total present strength of the student is about 850. The petitioners case is that the School was started in the year 1961 and the School has produced excellent results over a long period of time and on several occasions it has achieved 100% results at the SSC Examinations conducted by the Board. It is the case of the petitioners that the petitioners -Trust had earmarked various plans for the upliftment of the infrastructural set up of the existing School. The Trust had decided to make provisions for developing the infrastructural set up by constructing a multipurpose hall for extra activities and Moor games, as well as setting up of a mini garden for the purpose of installing various types of playing equipments and also to provide working computer laboratory for the students. Petitioners' case is that in order to execute the said projects, they did not have requisite funds and, therefore, they had taken a decision to sell two plots which they had purchased in 1978 which were at the distance of about 3 kilometers from the school premises. Accordingly a Resolution was passed by the Managing Committee dated 14-6-1998. Two parties approached the petitioner and the petitioners - Trust executed Memorandum of Understanding with the said parties and certain advances were given to the petitioners. Thereafter, as per the provisions of the Bombay Public Trust Act, 1950 applications bearing Nos. J/4/75-2001 and J/4/76-2001, both dated 25-7-2001 were made to the Charity Commissioner for seeking sanction under Section 36(1)(a) of the said Act.

5. After the said applications were filed, respondent No. 3 who claimed to be the Vice President of Parents - Teachers Association filed objections to the said applications. The petitioners and respondent No. 3 were heard by the Charity Commissioner and by Order dated 6-8-2001, both the applications preferred by the petitioners were dismissed with costs.

6. The petitioners have filed this petition under Article 226 of the Constitution of India and are challenging the said Judgment and Order which is passed by the Charity Commissioner. This Court, by Order dated 22-1-2002 granted rule and directed that the matter be placed for final hearing on 4-2-2002. However, on the said date the matter was not finally heard and, thereafter, on 18-11-2003 this Court had directed that the matter be placed for final hearing on 29-11-2003.

7. We have heard the learned Counsel appearing on behalf of the petitioners and the learned Counsel appearing on behalf of respondent Nos. 1 and 2 and respondent No. 3.

8. The learned Counsel appearing on behalf of the petitioners submitted that the petitioner No. 1 had preferred an application in which all details were mentioned as to why the said Plots had to be sold. Petitioner No. 1 also in the said applications had given details regarding the procedure which was followed by the petitioners for securing the purchasers. It was also mentioned that the public notice was published in the News-paper dated 21st July 1999 and pursuant to the said notice two offers were given by two parties viz. Swetamber Murtipujak Jain and M/s Vasupujya Enterprise. M/s Swetamber Murtipujak Jain agreed to purchase Plot No. 155 for a sum of Rs. 40,00,000/- and M/s Vasupujya Enterprises also agreed to purchase Plot No. 154 for a sum of Rs. 40,00,000/-subject to the permission by the Charity Commissioner. It was stated in the said application that the Valuation Report was obtained from the Chartered Architect who had valued the said property at Rs. 29,88,000/- for each plot as on 22-11-1998. It was stated that the price which was offered by the purchaser was much more than what is stated in the Valuation Report which was submitted by the Chartered Architect.

9. It was submitted by the learned Counsel appearing on behalf of the petitioner that the Charity Commissioner, in his order, did not dispute the financial need of the Trust in providing infrastructure to the students. However, he submitted that the Charity Commissioner observed that the said problem could be solved by securing loans from the Institutions like Banks and other financial Institutions and it was not necessary to sell the plots. It was further submitted by the learned Counsel appearing on behalf of the petitioner that the reasons which were assigned by the Charity Commissioner in rejecting the said applications were not in consonance with the provisions of Section 36(1)(a) of the said Act.

10. The learned Counsel appearing on behalf of respondent No. 3 vehemently opposed the submissions made by the learned Counsel appearing on behalf of the petitioner. He admitted that the respondent No. 3 was an Ex-President of the Parents Association and that his children are no longer taking education in the said school. However, he submitted that respondent No. 3 had filed objection to the sale of the said plots in the interest of the children. The learned AGP appearing on behalf of respondent Nos. 1 and 2 also vehemently opposed the submissions made by the learned Counsel appearing on behalf of the petitioner. He has taken us through the affidavit in reply filed by the petitioners. He submitted that the petitioners had entered into negotiations with third parties before taking previous approval of the Charity Commissioner and had accepted Rs. 20 lakhs as an advance amount and, thereafter, applications were preferred in the year 2001. He submitted that the very fact that the petitioners were ready to return the said amount of Rs. 20 lakhs if the permission is not granted by the Charity Commissioner itself disclosed that they had sufficient funds at their disposal.

11. The short controversy in the present case is as to whether the impugned order which is passed by the Charity Commissioner under Section 36(1)(a) of the Bombay Public Trust Act dated 6-8-2001 is sustainable in law particularly when the Charity Commissioner has come to the conclusion that the financial need of the Trust is genuine and that there is no dispute regarding the fact that the consideration which is to be received by the Trust is more than adequate consideration. Before the controversy between the parties can be decided, it would be relevant to refer to the provisions of Section 36(1)(a) of the Bombay Public Trust Act which reads as under :--

"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

(b) .......................................................... shall be valid without the previous sanction of the Charity Commissioner. Sanction may be accorded subject to such condition as the Charity Commissioner may think fit to impose, regard being had to the interest, benefit or protection of the trust."

12. From the perusal of the above section, it is clear that the Charity Commissioner is empowered to scrutinize any application for sale or transfer of the immovable property which is owned by the Trust in order to ensure that the property is being sold for an adequate consideration and that the money is going to be utilised for fulfilling the aims and objects of the Trust and is not likely to be frittered away by the Trustees. The Apex Court as also this Court has time and again held that the Charity Commissioner should consider the need of the Trust and grant permission wherever the property of the Trust is being sold after following proper procedure so that the market value of the said property is received by the Trust.

13. The Division Bench of this Court in the case of Madhukar Sunderlal Sheth and Ors. v. S.K. Laul and Ors. reported in 7995 Mh.L.J. 1107 (the Judgment delivered by Mrs. Sujata Manohar, J. as she then was) has observed in paragraph No. 5 as under :--

"5. The Charity Commissioner, under the Bombay Public Trust Act is required to give his sanction bearing in mind the interest, benefit and protection of the trust. He has to apply his mind, inter alia, to the price at which the property is to be sold under the agreement. The Charity Commissioner has the power, in a given case, to come to the conclusion that the price at which the trustees have agreed to sell the property is not the price which would secure adequate benefit to the trust and he may reject the agreement on that ground. Even the terms of the agreement of sale which the trustees may have entered into, are liable to be examined by the Charity Commissioner at the time when he grants his sanction. Approval by the Charity Commissioner ensures reasonableness of the agreement of sale. These factors will also have to be borne in mind by the Income Tax Authorities while exercising their power under Section 269UD. The discretionary power under that section cannot be exercised arbitrarily. It will have to be exercised bearing in mind the purpose for which it is conferred. Hence the submission of the petitioner that if there is delay on the part of the Charity Commissioner in granting sanction, and there is a rise in the property market, the purchaser of such a property will be at a disadvantage, loses its force. The question of consideration has to be considered by the income-tax authorities in the context of the special circumstances which accompany a sale by a public trust. The purchaser can also apply in accordance with law for an early sanction by the Charity Commissioner."

Similarly, the learned Single Judge of this Court (Shri S.P. Bharucha, J., as he then was) in the case of Arunodaya Prefab v. M.D. Kambli and Ors., reported in 7979 Mh.L.J. 104 in paragraph No. 22 of the Judgment has laid down what is the duty of the Charity Commissioner when an application is made under Section 36. The Paragraph No. 22 reads as under :

"22. Before parting with this case, I would add this note of caution. If the Charity Commissioner directs trustees to invite offers for sale of trust property in respect whereof the trustees have already entered into an agreement for sale and applied for sanction thereof, there are bound to be difficulties of the sort which have occurred in this petition. If the Charity Commissioner is inclined to direct the trustees to invite offers for the sale of trust property, he must first ascertain that the trustees would be willing to sell the property to one of these offers. Where an agreement for sale has been arrived at and is sent up for sanction, the Charity Commissioner must satisfy himself of the adequacy of the price offered upon the basis of instance of sale in the locality or upon an architects report or upon some similar basis."

14. We have perused the application which is made by the petitioners. In the said applications in para 5 the Objects of the said Trust are given and the main objects contained in the Memorandum of Association are reproduced in the said paragraph. In para 6, the details regarding the property belonging to the Trust are given and it is mentioned that the Trust had purchased the property in February 1978. The area of the said Plot as also the boundaries of the said Plot have been mentioned. It is also mentioned that the said property was acquired out of the own generation of the funds of the Trust over a period. A copy of the agreement for sale dated 17-2-1978 as also the latest accounts and Balance Sheet was annexed to the said application. Thereafter, in para 8, the petitioners had given the need for alienation of the said property. The need has been elaborately mentioned in para 8(a) to (1). It is clearly mentioned that initially the property was acquired with a view to shifting the school run by the said Trust and the idea was to expand the said School. It is mentioned in the said applications that the Trust does not have any fund for the said expansion. Thereafter, it is mentioned that the Management proposed to provide better conducive infrastructure to the children at Junior and Senior KG levels to provide better foundational education to them and other facilities which are to be provided are also mentioned. In para 8 it is mentioned that already there are two English Medium Schools in the said Bangur Nagar area where the plots are situated within the radius of 100 meters from either schools and within the radius of 400-500 meters of the said plots, there are three English Medium Schools. It was, therefore, mentioned that starting another unaided school within this area would not be economically viable. In para 8, it is mentioned that there are three other plots which are reserved for Municipal School in the said area and in the Blue Print of Bangur Nagar, Plot Nos. 154 and 155 are not earmarked for development of the school. It is further mentioned that, initially, the plots were purchased for providing school play ground and the Management spent over a lakh of rupees to reclaim and level the ground. However, since these plots are three Kilometers away from the school, majority of the students living in the neighbourhood would not be in a position to reach the ground as it can be reached only by taking a bus-ride journey. In para 8(d) the provisions of Grant-in-Aid Code have been mentioned and have been reproduced to show that the Government is not in a position to provide additional aid and the recognition would not be granted by the State Government. Further, in paras 8(e), (f) and (g) reference is made with regard to the other statutory provisions as a result of which the plots in question cannot be developed. It is further mentioned in para 8(h) that the Primary School did not receive aid from the Municipal Corporation for the last two years. In this view of the matter, it was mentioned that there was no other way but to sell the aforesaid two Plot Nos. 154 and 155 in Bangur Nagar area. In Para 14, it is mentioned that the prevailing market price was much lesser than what the Trust was getting by selling the said plots. The Valuer had valued the plot at Rs. 29,80,000/- for each plot whereas the Trust was getting Rs. 40 lakhs for each plot which is quite higher than the market price. The Applicant therefore stressed the need that there was a compelling necessity for the Trust to dispose of its property. It must be mentioned here that the Charity Commissioner while deciding the said application has not disputed the need of the petitioner to dispose of the said Plots.

15. Thereafter, in paragraphs Nos. 17 and 18, the petitioners have stated the efforts which have been taken by the Management in disposing of the property by inviting offers from the public at large by publishing notices in two News-papers viz. Free Press Journal and Navshakti. The Trust also annexed the Valuation Report of the Architect who had valued the market value of the said property at Rs. 29,88,000/- for each plot. It is also mentioned in para 18 that in terms of the valuation published by the Architects Publishing Corporation of India, the value of the said property works out to Rs. 33,99,816. Thus the price which was offered to the petitioner was much higher than the said price which was shown in both the Valuation Reports. In para 22, the manner in which the said amount was to be utilized has been mentioned and it is explained that this was done for the purpose of pursuing objections of the Trust which were mainly educational.

16. The Charity Commissioner does not dispute the fact that the Trust has no funds for expansion or that due to growing strength of students it was necessary to provide additional facilities for their cultural and other activities. The Charity Commissioner, however, conies to the conclusion that though the offer of the purchaser in both the proceedings is highest, he records a finding that these Plots are purchased out of the funds raised by the parents donations given by the parents at the time of admission of their children to the School and that this fact should not be ignored. He further states that the Trust requires open land in future and the same would not be available in that locality. In our view, the finding that the plots are purchased out of the funds raised by the parents and donations given by the parents at the time of admission is not borne out by the record, except the mere statement of respondent No. 3. There is no evidence to suggest that these plots have been purchased out of the donations which have been given by the parents at the time of taking admission for their children. The observation of the Charity Commissioner that, in future, the Trust requires the open land also is equally unfounded. The Charity Commissioner also, in our view, has completely erred in observing as under :--

"Moreover, Swetamber Murtipujak Jain Sangh is intending to construct temple. As a matter of fact at present our nation required more educational institutions than the temples. A prayer to the God can even be made by sitting in one corner of our residential house, but school cannot be maintained in our residence."

In our view the said observation made by the Charity Commissioner is absolutely unfounded inasmuch as the scope of authority which is exercised by the Charity Commissioner under Section 36(1)(a) is very limited. The Charity Commissioner in the first place is required to consider whether the Trust has a genuine need for the purpose of selling its immovable property and secondly whether the said property is being sold in the interest of the Trust and its beneficiaries. The Charity Commissioner is not supposed to substitute his own ideas and views vis-a-vis the functioning of the Trust. It is very strange that the Charity Commissioner has observed as under :--

"No doubt the trust intending to provide better conductive infrastructure to the children of junior and senior K. G. level to provide better fundamental education to them, which requires heavy funds. However, that problem can be solved by securing loans from other Institutions like banks and other financial institutions etc. It is not necessary to put the plots for sale."

These observations clearly demonstrate that the Charity Commissioner does not dispute the fact that the funds are required by the Trust. However, he is of the view that instead of selling the plots, the Trust should approach the Financial Institutions for loan. In our view, the said approach of the Charity Commissioner is absolutely unwarranted.

17. In our view, therefore, the order of rejection of the said applications of the petitioner for permission to sell the plots of land is totally baseless and is not in consonance with the provisions of the Section 36(1)(a) of the Act.

18. We are satisfied after perusing the applications which are made by the petitioner that the need of the petitioner in raising the funds is genuine which is also not disputed by the Charity Commissioner. We are also of the view that the decision of the Trust for selling these two plots for the various reasons mentioned in the said applications have not been considered by the Charity Commissioner and we feel that the two Resolutions which have been passed by the Trust in 1998 and 2001 cannot be said to be improper. The learned Counsel appearing on behalf of the Charity Commissioner submitted that because the petitioner had accepted the advance money and had entered into an agreement for sale without obtaining previous permission of the Charity Commissioner, the transaction itself was liable to be rejected. We do not find any merit in the said submission. From the perusal of Section 36(1)(a), it is very clear that the Trust is supposed to make an application to the Charity Commissioner after complying with various formalities. It is not expected that the Trust would approach the Charity Commissioner without first issuing the advertisement and receiving offers from the various purchasers. If the submission of the learned Counsel appearing on behalf of the Charity Commissioner is accepted, it would mean that the entire procedure of sale would commence after the application is made to the Charity Commissioner. In our view, the provisions of Section 36(1)(a) are very clear and such an interpretation cannot be given to the said provisions. It is obvious that the monies, if any, which are received in advance by the Trust are subject to final permission which is granted by the Charity Commissioner and in the event such permission is rejected, the Trust will be under a legal obligation to return the said amount which it has received from the purchaser.

19. In the result, the Order passed by the Charity Commissioner dated 6-8-2001 in Application Nos. J/4/75-2001 and J/4/76-2001 is quashed and set aside and the respondent No. 1 is directed to give permission for the sale of two plots i.e. Plot Nos. 154 and 155 situated in Survey No. 161 (p) i.e. Plot Nos. 1033 to 1034, Village Pahadi, Bangur Nagar, Goregaon (W), as stated in the applications preferred by the petitioners.

20. Accordingly, the Writ Petition is made absolute in the above terms. In the circumstances, there shall be no order as to costs.