Sailesh Developers, A Registered … vs The Joint Charity Commissioner … on 14 February, 2007

JUDGMENT

1. A Division Bench of this Court (Coram Smt. Ranjana Desai and Abhay S. Oka, JJ) found that there was a divergence of opinion between two Division Benches of this Court as regards powers of Charity Commissioner under Section 36(1) of The Bombay Public Trusts Act, 1950 (hereinafter referred to as the said Act of 1950). Therefore, a direction was issued to place the papers of these petitions before the Honourable the Chief Justice for passing appropriate direction in accordance with Rule 28 of the High Court, (O.S.) Rules for making a reference to larger Bench. The questions formulated by the Division Bench for a decision by a larger Bench read thus:

i) Whether the power vesting in the Charity Commissioner under Section 36 of the Bombay Public Trusts Act, 1950 is confined to grant or refusal of sanction to a particular sale transaction which the trustees propose to make or it extends to compelling trustees to sell or transfer the property to another party who participates in the proceedings under Section 36 and gives his offer?

ii) Whether the party who comes forward to submit his offer directly before the Charity Commissioner in a pending application under Section 36 of the said Act of 1950 has locus standi to challenge the order passed in a proceeding under Section 36?

2. The Division Bench referred to a decision of another Division Bench (Coram : A.P. Shah and Dr. D.Y. Chandrachud, JJ) in the case of Jigna Construction Co., Mumbai v. State of Maharashtra and Ors. decided on 2nd December 2005. The relevant part of the decision of Division Bench reads thus:

The proceeding under Section 36 of the Act are not a lis between the parties to adjudicate contesting claims. The mandate of Section 36 is that no transfer of the trust property shall be valid unless approved by the Charity Commissioner with previous sanction. The Charity Commissioner as per the scheme has to accord the sanction,having regard to the interest or benefit of the trust. The Charity Commissioner in these proceedings after inquiry has to record satisfaction in this behalf. Section 36 merely authorises the Charity Commissioner to ascertain as to whether the trustees acted in the best interest of the trust. The petitioners since neither necessary nor proper party to the proceedings under Section 36, cannot claim any entitlement to invoke Articles 226 and 227 of the Constitution of India to canvas their grievance against sanction accorded under Sub-section (1) of Section 36 of the Act.

3. Another Division Bench of this Court (Coram: H.L.Gokhale and Mrs.R.S.Dalvi,JJ) in Letters Patent Appeal No. 419 of 2004, 454 of 2004 and 448 of 2004 (Mr. A.R. Khan Construwell and Co. v. Youth Education and Welfare Society and Ors.) decided on 23rd September 2005 held thus:

It is quite clear that the principle of locus standi has been expanded and any such parties, who want to give their offers in the interest of the trust, cannot be restrained from participating in the proceedings before the Charity Commissioner or later on by challenging his decision. The proposition in Girdhar Nichani (supra) by a Single Judge cannot be said to be a good one in the light of the approach adopted by the Apex Court in Mehrwan Homi Irani. Similarly, the proposals of uninvited offers can not be restricted only to ascertain the market price as held in Arunodaya earlier. It is clear from the judgment in Mehrwan Homi Irani that the Charity Commissioner can explore the possibility of having agreements with other parties on better terms.

RELEVANT PROVISIONS OF LAW:

4. The said Act of 1950 was brought into force on 31st May 1950. Prior to the enactment of the said Act of 1950, Section 92 of the Code of Civil Procedure, 1908 was on the Statute book which deals with alienation of immovable property of a Trust. Section 92 of the said Code reads thus:

92. Public Charities-(1) In the case of any alleged breach of any express or constructive trust created for public purposes of a charitable or religious nature, or where the direction of the Court is deemed necessary for the administration of any such trust, the Advocate-General, or two or more persons having an interest in the trust and having obtained the [leave of the Court,) may institute a suit, whether contentious or not, in the principal Civil Court of original jurisdiction or in any other Court empowered in that behalf by the State Government within the local limits of whose jurisdiction the whole or any part of the subject-matter of the trust is situate to obtain a decree

(a) removing any trustee;

(b) appointing a new trustee;

(c) vesting any property in a trustee; [(cc) directing a trustee who has been removed or a person who has ceased to be a trustee, to deliver possession of any trust property in his possession to the person entitled to the possession of such property;]

(d) directing accounts and inquiries;

(e) declaring what proportion of the trust property or of the interest therein shall be allocated to any particular object of the trust;

(f) authorizing the whole or any part of the trust property to be let, sold, mortgaged or exchanged;

(g) settling a scheme, or

(h) granting such further or other relief as the nature of the case may require. Section 36 of the said Act of 1950 as it originally stood reads as under:

36. Alienation of immovable property of public trust.

(1) Subject to the directions in the instrument of trust

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

(b) no lease for a period exceeding ten years in the case of agricultural land or for a period exceeding three years in the case of non-agricultural land or a building belonging to a public trust, shall be valid without the previous sanction of the Charity Commissioner.

5. The first amendment to Section 36 was made by Bombay Act No. 6 of 1960. By the said amendment, the words “subject to the directions in the instrument of trust” were replaced by the words “Notwithstanding anything contained in the instrument of trust”. The Section underwent further amendment by the Maharashtra Act No. 20 of 1971. Section 36 of the said Act of 1950 as amended by Bombay Act 6 of 1960 and Maharashtra Act 20 of 1971 reads thus:

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) no lease for a period exceeding ten years in the case of agricultural land or for a period exceeding three years in the case of non-agricultural land or a building belonging to a public trust, 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;

(c) if the Charity Commissioner is satisfied that in the interest of any public trust any immovable property 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 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) on the ground that such sanction was obtained by fraud or misrepresentation made to him or by concealing from the 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 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 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 Charity Commissioner may assess any advantage received by the trustee and direct him to pay compensation to the trust equivalent to the advantage so assessed.]

6. SUBMISSIONS MADE BY THE COUNSEL APPEARING FOR THE PARTIES:

The learned Counsel appearing for the Petitioners have made detailed submissions. They have placed reliance on various decisions of the Apex Court and High Court. We are summarising the submissions made before us. We have dealt with the relevant decisions relied upon by the learned Counsel appearing for the parties in the later part of this Judgment.

Mr. D.J. Khambata, learned Senior Counsel appearing for the Petitioner in Writ Petition No. 1641 of 2005 submitted that the law laid down by the Division Bench of this Court in the case of M/s A.R.Khan Construwell & Company v. Youth Education & Welfare (supra) is the correct view. He has taken us through various provisions of the said Act of 1950. He has relied upon various decisions. The submissions of Mr.Khambata, learned senior counsel can be summarised as under:

(a) The enquiry to be held by the Charity Commissioner under Section 36 is a Judicial enquiry in view of Provisions of Section 73 and 73(A) of the said Act of 1950. Even Rule 7 of The Bombay Public Trusts Rules, 1951 (hereinafter referred to as “the said Rules of 1951”) expressly provides that while deciding application under Section 36 of the said Act of 1950, the Charity Commissioner shall, as far as possible, follow the procedure prescribed for trial of suits under the Presidency Small Cause Courts Act, 1882. The enquiry under Section 36 is a quasi judicial enquiry.

(b) He submitted that by virtue of Clause (b) of Sub section 1 of Section 36 of the said Act of 1950 and Sub rule 2 of Rule 24 of the Rules of 1951, express powers have been conferred on the Charity Commissioner to grant sanction for alienation by imposing such conditions as are necessary, regard being had to the interest, benefit or protection of the trust.

(c) Relying upon certain decisions of the Apex Court, he submitted that sale of property of a Public Trust will be governed by the same constraints which apply to an alienation of Public property.

(d) He submitted that after the decision of learned Single Judge of this Court in the case of Arunodaya Prefab v. M.D.Kambli and Ors. 1979 MH.L.J. page 104 (supra), the concept of locus standi has been considerably broadened by the Apex Court. He submitted that Section 73-A of the said Act of 1950 read with Rule 7 of the said Rules of 1951 clearly permits third parties to participate in the proceedings under Section 36 of the said Act of 1950.

(e) A Trust property is not a personal property the Trustees and the Charity Commissioner the custodian of the Public Trusts can ensure that property is alienated by the to a purchaser who has offered the best deal in the interest of trust and its beneficiaries. ofbeingalwaystrustees

(f) He submitted that in the case of Mehrwan Homi Irani and Anr. v. Charity Commissioner, Bombay and Ors. , the Apex Court has held that Charity Commissioner can invite bids from the Members of the public with a view to ensure that the Trust is benefitted by the best available bargain.

(g) He submitted that if bids are invited from the Members of the Public only for a limited purposes of ascertaining market value of the property as held by learned Single Judge in Arunodayas case (supra), a genuine prospective buyer will never come before the Charity Commissioner and there is every possibility that some interested persons may come out with inflated offers with a view to scuttle the transaction proposed to be enterted into by the trustees.

(h) He submitted that the Division Bench dealing with the case of M/s.A.R.Khan Construwell Company (supra) has correctly laid down the law on the point.

(i) There is an internal aid in Section 36 for the aforesaid interpretation. The said internal aid is as provided by Clause ( c ) of Section 36(1).

7. Shri Sunil Manohar appearing for Petitioners in one of the Petitions has also made regards power of learned Charity Commissioner directions to the trustees under Section 36 of the said Act. His submissions can be summarised as under : submissions to asissue

(a) None of the earlier decision in Arunodaya considered the effect of Section 1 of Section 36 of the said Act of 1950. decisions Prefabs Clause including case (c) of thehasSub

(b) He submitted that the Clause (c) of Section 36(1) is identical to Section 92(1)(f) of the Code of Civil Procedure, 1908. Relying upon certain decisions of the Apex Court, he submitted that under Clause (c) of Section 36(1) of the said Act of 1950, the Charity Commissioner possesses a power to direct sale of property belonging to a Public Trust. He submitted that the power under Clause (c) is very wide. He submitted that considering Section 36A of the said Act of 1950, it is obvious that the Charity Commissioner has a power to issue direction to the trustees to transfer a trust property to a particular person on the terms and conditions fixed by him. He submitted that the power to issue lawful directions under Section 36-A is very wide. He submitted that the term lawful, implies what is authorised or at any rate what is not forbidden by law. “Lawful” is wider in connotation than legal and means something which is not forbidden by law. Thus unless statutorily forbidden, the Charity Commissioner can issue all directions which are “lawful”. Placing reliance on various sections of the said Act of 1950, he submitted that the Charity Commissioner has vast powers including a power to invite fresh bids and directing that no property should be sold only to a bidder which the Charity Commissioner finds to be more suitable.

C) Reading provisions of Section 73 and 73-A of the said Act of 1950 and Rules 7, 7-A and 24 of the said Rules of 1951, it is apparent that the Charity Commissioner has to conduct a detailed enquiry in the matter while deciding application under Section 36 of the said Act of 1950. Therefore, the Charity Commissioner can himself invite offers and authorise the sale of the trust property to any person who has submitted a bid before him.

8. Shri Tulzapurkar, learned senior counsel appearing for the Respondent No. 7 in Writ Petition No. 2499 of 2005 canvassed that the decision of the Division Bench in the case of M/s Jigna Construction Company (supra) and the decision of learned single Judge in the case of Arunodaya Prefab v. M.D. Kambli 1979 Mh.L.J. P.104 lay down the correct proposition of law. The submissions made by Shri Tulzapurkar, learned senior counsel can be summarised as under:

(a) He submitted that Clause (a) of Sub section 1 of Section 36 of the said Act of 1950 imposes fetters upon the powers of the trustees to alienate trust property. He submitted that the trustees being legal owners of the property always have a right to alienate the trust property.

(b) Section 36(1)(a) does not confer any power on the Charity Commissioner and it only imposes fetters on the powers of the Trustees. Therefore the Charity Commissioner cannot compel the trustees of a public trust to sell or transfer the trust property to a third party who participates in the proceeding under Section 36(1)(a) and gives his offer.

(c) He submitted that primary rule of construction of a statute is that the intention of the legislature must be gathered from the words used by the legislature itself. He submitted that in the present case when the words used by the legislature in Section 36 were so clear, for interpreting the said provision, any external aid is not required.

(d) He submitted that power under the Statute is to grant sanction to the alienation proposed by the trustees and the power is not of directing sale. The power of the Charity Commissioner is to ratify the action of the trustees and to sanction the sale or alienation proposed by the Trustees. The use of words sanction, permission or authorisation cannot confer a power on Charity Commissioner to order sale of the property in favour of a particular party.

(e) Hardship or meaning of plain language legislature.

f) The functions inconvenience cannot alter theemployed by the of the Charity Commissioner under the said Act of 1950 can be broadly divided into four categories:

(i) Advisory (Section 56);

(ii) Administrative (Section 35, 36, 50, 50-A and 51 of the Act;

(iii) Supervisory (Sections 31A, 32, 34, 37 and 38 ) and

(iv) Quasi-Judicial (Sections 18, 39, 40, 41-A to 41-E and 59).

(g) He submitted that the power of Charity Commissioner under Section 36(1)(a) is confined to ascertaining whether the transaction proposed by the trustees is in the interest of the trust. (h) Placing reliance on a decision of a Division Bench of this Court in the case of Bomi Jal Mistry v. Joint Charity Commissioner 2002 (5) MH.L.J. 660, he submitted that power under Clauses (a) and (b) of Sub section 1 of Section 36 is to accord sanction to the transaction and the power under Clause (c) is to grant authorisation to the trustees to dispose of the property. He submitted that Clause (c) was introduced by an amendment to avoid delay caused in obtaining orders from Civil Court by filing suit under Section 50 of the said Act 1950. He submitted that the Division Bench has held that in a case where the instrument of the trust does not permit the trustees to alienate trust property, after obtaining authorisation under Clause (c), sanction under Clause (b) of Sub-section (1) of Section 36 will have to be obtained.

(vii) He submitted that if construction sought to be given to Section 36 is accepted, it will render the said Section ultra vires Article 26 of the Constitution of India.

(viii) The decision of Mehrwan Homi Commissioner, Bombay lay down any case of A.R. reading the said decision as proposition of law. the Apex Court in the case of Irani and Anr. v. Charity does notlaw and the Division Bench in theKhan (supra) committed an error by laying down a

(ix) He submitted that the matter of sanction is only between the trustees of a Public Charitable Trust and the Charity Commissioner and at the most between the Charity Commissioner and the beneficiaries of the trust. He submitted that one who gives an offer cannot claim any interest in the trust property and therefore he has no locus standi. He submitted that only a person having interest in the trust may be joined in any proceedings before the Charity Commissioner. He submitted that only the trustees or the beneficiaries or at highest the person in respect of whose transaction the sanction is sought are having locus standi.

9. Shri P.K.Samdani, learned senior Counsel also made extensive submissions. His submissions can be summarised as under:

(1) The immovable property of a trust vests in the trustees. He submitted that trustees being the legal owners of the property hold the property for the benefit of beneficiaries and not on behalf of the beneficiaries.

(2) Section 36 of the said Act of 1950 puts fetters on the freedom of the trustees and therefore, the provision is required to be construed strictly.

(3) He submitted that the position of the Charity Commissioner is therefore that of a supervisor who screens the proposed alienation and if he finds that the proposed alienation in the interest or for the benefit or for the protection of the trust, he is obliged to grant sanction to the alienation.

(4) He submitted that if Charity Commissioner finds that the proposed alienation is neither in the interest nor for the benefit of the trust, he is empowered to refuse sanction to the proposed alienation. He submitted that while granting sanction applied for, the Charity Commissioner may impose conditions guided by the interest, benefit or protection of the trust such as providing time frame within which the transaction has to be completed, making provision for payment of interest on delayed payment if the payment is to be made by instalments. He submitted that power to impose conditions cannot be extended to issue directions. He submitted that imposition of conditions can be only to the sanction applied for and not to a sanction which is not applied for.

(5) He submitted that any offerer who comes before the Charity Commissioner has no legal right or interest. His offer remains a mere offer until it is accepted by the trustees. As there is no legal right in favour of such offerer, obviously he cannot challenge the sanction.

10. Shri Shyam Mehta appearing for some of the parties submitted that what is required to be granted under Section 36 is a sanction to the alienation which is proposed by the trustees. He placed reliance on certain decisions of the Apex Court and Allahabad High Court.

11. Shri V.A. Thorat, learned senior Counsel appearing for petitioners in some of the petitions supported Shri. Tulzapurkar to some extent. He submitted that power to issue direction can be read at highest in Clause (c) of Sub section 1 of Section 36 of the said Act. He submitted that so far as Clause (a) and (b) are concerned, such a power cannot be read in the statute as the power is limited either to grant or reject sanction to the proposal submitted by the trustees.

12. Shri Owen Menezes, learned Counsel has made submissions mainly on the issue of locus standi. He placed reliance on several decisions for showing that the concept of locus standi has been considerably widened by the Apex Court.

13. Shri Kapadia appearing for one of the Petitioners submitted that even after a sanction is granted by the Charity Commissioner, the trustees are not bound to execute the document of transfer. He submitted that even under Clause c of Sub section 1 of Section 36, there is no power vesting in the Charity Commissioner to give direction to the trustees to sell the trust property in a particular manner and to a particular person.

CONSIDERATION OF LEGAL POSITION:

14. A reference will have to be made to the decision of learned Single Judge in the case of Arunodaya Prefab (supra). The learned Single Judge was dealing with a case where trustees of a public trust had entered into an agreement for sale in respect of the trust property in favour of the Respondent No. 2 before the learned Single Judge. On the basis of the said agreement, the trustees (the Respondent Nos. 3 to 9 before the learned Single Judge) applied for a sanction before the learned Charity Commissioner under Section 36 of the said Act of 1950. The learned Charity Commissioner directed the trustees to advertise the property for sale. However,the trustees did not advertise the property. One of the Petitioners before the learned Single Judge had made an offer before the Charity Commissioner to buy the property at a higher price than what was offered by the second Respondent and showed willingness even to enhance the offer. The Charity Commissioner called a meeting to consider the offers of the Petitioners. In the said meeting, the offer was raised to Rs. 85.00 Lacs by the said petitioner. Another offer was submitted by another Petitioner before the learned Charity Commissioner. In a meeting called by the Charity Commissioner, the trustees declined to ask the second Respondent to enhance his offer. However, the second Respondent gave a revised offer and the Charity Commissioner ultimately sanctioned the sale. As stated earlier, petitions were filed by the Petitioners who had offered higher price before the learned Charity Commissioner. In Paragraph 8 of his decision, the learned Single Judge held thus:

8. In the present case the trustees made an application to the Charity Commissioner for sanction of the proposed sale to the second respondent. To ascertain whether the price offered by the second respondent was reasonable, the Charity Commissioner directed the trustees to invite offers for the sale of the said property. The trustees declined to do so on the ground that they had already entered into an agreement for sale in favour of the 2nd respondent and had morally committed themselves to the 2nd respondent. There is substance in the contention of the trustees to which I shall advert later. The petitioners submitted offers for the purchase of the said land uninvited to the Charity Commissioner and the trustees. Under Section 36 it was not open to the Charity Commissioner to consider the said offers except only to the extent that they might disclose to him what might be the market value of the said land. It was certainly not open to the Charity Commissioner to sell the said land to the Petitioners or to require the trustees to sell the said land to any one other than the 2nd respondent. If he considered the proposed sale to the 2nd respondent adverse to the interests of the trust he could only decline sanction.

In Paragraph 9 of his decision, the learned Single Judge held thus:

9. Looked at in that light, it is clear that the Charity Commissioner owned no legal duty to the petitioners, and, merely by sending offers to him for purchase, of the said property, the petitioners acquired no legal rights. It would not be correct to hold as Mr.Rana has urged me to do, that the Charity Commissioner was obliged to associate the petitioners with the enquiry that he was required to institute or that he was obliged to consider the offers made by the Petitioners. In my view, the petitioners have no legal right which has been infringed by the impugned order and the Charity Commissioner owned no legal duty to the petitioners.

About the locus standi of the petitioners, learned Single Judge in Paragraph 19 held thus:

Since the Charity Commissioner was concerned only with according or not according sanction to the agreement of sale placed before him by the trustees there was no question of his giving any hearing to the petitioners or of considering any bids made by them. The Petitioners and the 2nd respondents cannot be treated on par for the 2nd respondent was the party to whom the trustees proposed to sell the said land and in respect of which proposed sale they sought the Charity Commissioners sanction. It is, therefore, not legitimate for the petitioners to contend that there has been any breach of any principle of natural justice in the Charity Commissioner not hearing the petitioners or not associating the petitioners with any inquiry held by him. Inasmuch as the Charity Commissioner was not entitled to call for or to consider any offers with the object of concluding a sale of the said land on the basis thereof the petitioners cannot make a grievance of the fact that their offers were not considered by him nor does the impugned order become a nullity in law because it does not state the reasons why the petitioners bids are not accepted.

In Paragraph 22, the learned Single Judge observed thus

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.

15. The Division Bench in the case of Jigna Construction Co. Mumbai v. The State of Maharashtra and Ors. (supra) approved the law laid down by the learned Single Judge in the case of Arunodaya Prefab (supra). The Division Bench referred to another decision of learned Single Judge of this Court in the case of Girdhar C. Nichani v. REV. E.H. Lewellen and Anr. 1991 Mh. L.J. 891. In paragraph 8, the Division Bench proceeded to hold that:

8. The view taken by Bharucha J. was also followed by the Division Bench in Suburban Education Society v. Charity Commissioner . The Division Bench held that the scope and authority which is exercised by the Charity Commissioner under Section 36(1)(a) of the Public Trust Act is very limited. The Charity Commissioner in the first instance is required to consider whether the trust has 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.

Even on the issue of locus standi, the Division Bench expressed agreement with the view taken by the learned Single Judge in the case of Arunodaya Prefab.

16. In so far as the decision of the Division Bench in the case of A.R. Khan Construwell & Co. v. Youth Education Welfare Society (supra) is concerned, the Division Bench relied upon the decision of the Apex Court in the case of Mehrwan Homi Irani (supra). In paragraph 49, the Division Bench observed thus:

It is quite clear that the principle of locus standi has been expanded and any such parties, who was to give their offers in the interest of the Trust cannot be restrained from participating in the proceedings before the Charity Commissioner or later on by challenging his decision. The proposition in Girdhar Nichani (supra) by a Single Judge cannot be said to be a good one in the light of the approach adopted by the Apex Court in Mehrwan Homi Irani. Similarly, the proposals of uninvited offerers cannot be restricted only to ascertain the market price as held in Arunodaya earlier. It is clear from the judgment in Mehrwan Homi Irani that the Charity Commissioner can explore the possibility of having agreements with other parties on better terms. That was also the view of a Division Bench of this Court in Madhukar v. S.K. Laul (supra) when the Division Bench observed that the terms of agreement of sale are liable to be examined by the Charity Commissioner at the time when he grants the sanction. To that limited extent, the role of the Charity Commissioner while scrutinising the Proposal before him cannot be compared to the role of a writ court examining the terms of a Government tender. In that sense, the reliance by the learned Single Judge on the judgment in Director of Education (supra) for interpreting the role of the Charity Commissioner under Section 36 of the BPT Act was not apt. Section 36 of the BPT Act gave wide powers to the Charity Commissioner which are obviously given in the interest, benefit or protection of the Trust. The section itself provides that while according the sanction to the proposed lease or sale, the Charity Commissioner may impose such conditions as he may think fit to impose for this purpose. He can undoubtedly refuse to accord sanction. He may as well formulate and impose just and proper conditions which may serve the interest of the Trust as held in Mehrwan Homi Irani (supra).

17. Before we proceed to the other decisions relied upon by the learned Counsel appearing for the parties, we will have to refer to the relevant provisions of the said Act of 1950 and the rules framed thereunder which deal with nature of the proceedings under Section 36. Section 73 and 73-A of the said Act of 1950 read thus:

73. powers of civil courtsOfficers holding inquiries to have In holding inquiries under Officer holding the same shall powers as are vested in courts the following matters under the Code of Civil Procedure, 1908 in trying a suit this have in Act, the respect thesameof

(a) proof of facts by affidavits,

(b) summoning and enforcing the attendance of any person and examining him on oath,

[(c) Ordering discovery and inspection, and compelling the production of documents.]

(d) issuing of commissions.

[73A. Power of Inquiry Officer to join persons as party to proceedings

In any proceedings under this Act, any person having interest in the public trust may be joined as a party to such proceedings on an application made by such person or such terms and conditions as the officer holding the inquiry may order.]

Rule 7 of the said Rules of 1951 lays down the manner in which inquiries contemplated under certain Sections of the said Act of 1951 should be held. The Rule provides that:

7. Manner of inquiries. Except as otherwise provided in the Act and these rules, inquiries under or for purpose 19, 22, 22A, 28, 29, 36, 39, 41D, 41E(3), 43(2)(a), 47, 50A, 51, 54(3) and 79AA or any other inquiry which the Charity Commissioner may direct to be held for the purpose of the Act, shall be held, as far as possible, in the Greater Bombay Region in accordance with the procedure prescribed for the trial of suits under the Presidency Small Cause Courts Act, 1882 , and elsewhere under the Provincial Small Cause Court Act, 1887, In any inquiry a party may appear in person or by his recognised agent or by a pleader duly appointed to act on his behalf:

Provided that any such appearance shall, if the Deputy or Assistant Charity Commissioner so directs, made by the party in person.

Rule 7 will have to be read with Rule 24, which reads as under:

24. Applications under Section 36 for sanction of alienations.

(1) Every application for sanction of an alienation shall contain information inter alia on the following points:

(i) Whether the instrument of trust contains any directions as to alienation of immovable property;

(ii) what is the necessity for the proposed alienation;

(iii) how the proposed alienation is in the interest of the public trust; and (iv) in the case of a proposed lease, the terms of the past leases, if any, such application shall be accompanied, as far as practicable, by a valuation report of an expert.

(2) The Charity Commissioner, before according or refusing sanction, may make such inquiry as he may deem necessary.

(3) In according sanction, the Charity Commissioner may impose such conditions or give such direction as he may deem fit.

There cannot be any dispute that an enquiry is contemplated under Section 36. Enquiry will be governed by procedure prescribed for trial of suits under the Presidency Small Cause Courts Act, 1882 or Provincial Small Cause Court Act, 1887, as the case may be. Under the provisions of both the said enactments, it is provided that the provisions of The Code of Civil Procedure, 1908 in so far as the same are not inconsistent will apply to the trials under the said Acts. Thus on a plain reading of Rule 7, it is obvious that the enquiry contemplated under Section 36 of the said Act of 1950 is a Judicial enquiry and the provisions of The Code of Civil Procedure, 1908 will apply to such enquiry, as far as possible. Therefore it cannot be accepted that the Charity Commissioner discharges only an administrative function while exercising the power under Section 36. In fact he discharges a judicial function. What is the scope of powers of the Charity Commissioner is the question which is required to be decided.

18. Before dealing with the question, it will be necessary to refer to the Legislative history. The said Act of 1950 was brought on the Statute Book with the object of regulating and making better provision for the administration of Public Religious and Charitable Trusts in the State of Bombay. Prior to coming into the force of the said Act, Section 92 of the Code of Civil Procedure, 1908 was already on the Statute Book which dealt with Public charities. Section 92 provides that where the direction of the Court is deemed necessary for administration of any Trust, the Advocate General or two or more persons having an interest in the trust and having obtained leave of the Court may institute a suit, whether contentious or not, in the Principal Civil Court of original jurisdiction to obtain a decree authorising the whole or any part of the trust property to be let, sold, mortgaged or exchanged. Section 52 of the said Act of 1950 provides that:

Notwithstanding anything contained in the said Code, the provisions of Section 92 and 93 of the said Code shall not apply to a Public Trust.

Thus after coming into force of the said Act of 1950, Section 92 of The Code had no application to a Public Trust. Prior to the amendment effected to the said Act of 1950 by the Maharashtra Act No. 20 of 1971, the provisions of Section 50 were different and in fact entire Section 50 was substituted by the Act 20 of 1971. Prior to coming into force of the amending Act of 1971, it was permissible under Section 50 of the said Act of 1950 for persons having interest in the trust to file a suit for seeking directions of the Court for alienation of the trust property. The said provision does not find place in the Section 50 substituted by the Maharashtra Act No. 20 of 1971.

19. Section 36 as originally incorporated in the said Act of 1950 reads thus:

36. Subject to the directions in the instrument of the trust:

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

(b) no lease for a period exceeding ten years in the case of agricultural land or for a period exceeding three years in the case of non-agricultural land or a building, belonging to a public trust, shall be valid without the previous sanction of the Charity Commissioner.

The said provision was read to mean that where the instrument of trust authorised the trustees to alienate the trust property, there was no requirement of obtaining the prior sanction of the Charity Commissioner. Therefore, to make the provision more effective, by Bombay Act No. 6 of 1960 the words “subject to the directions in the instrument of trust” were substituted by inserting the words “Notwithstanding anything contained in the instrument of the trust”. The amendment brought into force by Bombay Act No. 6 of 1960 made it very clear that notwithstanding the authority granted by the instrument of the trust to the trustees to alienate the trust property, no alienation shall be valid without the previous sanction of the Charity Commissioner. As stated earlier, Clause (c) of Sub section 1 of Section 36 was brought on the Statute Book by the Maharashtra Act No. 20 of 1971. Clause (b) of Sub section 1 of Section 36 was amended by the said amending Act by addition of the following portion:

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.

In the statement of objects and reasons of the Act No. 20 of 1971, it was stated that “power is taken to the Charity Commissioner to authorise any trustee to dispose of immovable property subject to conditions which he may think fit to impose.” By the said amendment, Sub-Sections 2, 3 and 4 of Section 36 were brought on the statute book.

One of the questions to be decided will be whether the amendment made to Clause (b) by adding the aforesaid words, authorises the Charity Commissioner to direct the Trustees not to sell or alienate the property to the party in whose favour the trustees have proposed alienation and whether the said amendment empowers the Charity Commissioner to direct the trustees to alienate the trust property in favour of a third party who according to the Charity Commissioner has given a better offer considering the interest, benefit and protection of the trust. The other question which arises is whether Clauses (a) and (b) and Clause (c) of Sub section 1 of Section 36 operate in different fields. If Clauses (a) and (b) were already in existence, which permitted the trustees to alienate the trust property with the prior sanction of the Charity Commissioner, what was the necessity of incorporating Clause (c) which empowers the Charity Commissioner, on application, to authorise any trustee to dispose of the trust property when he is satisfied that in the interest of the trust, the trust property should be disposed of.

20. A Division Bench of this Court has dealt with said issue in the case of Bomi Jal Mistry and Ors. v. Joint Charity Commissioner, Maharashtra and Ors. 2002(3) ALL M.R. P.749. The Division Bench dealt with the amendments made by the Maharashtra Act No. 20 of 1971 to Section 36 and 50 of the said Act of 1950. After referring the objects and reasons of Maharashtra Act No. 20 of 1971, in Paragraph No. 15, the Division Bench dealt with the scope of the amendments made by the Maharashtra Act No. 20 of 1971 to Section 36 and 50 of the said Act of 1950. In paragraph 15 the Division Bench observed thus:

The objects and reasons for this amendment was that it was observed that powers of the Charity Commissioner under the then existing provisions of Act 1950 were considerably limited and hence many a time it was found by the Charity Commissioner difficult to enforce the effective working of the public trusts. This is the fulcrum of the amendment of 1971. It needs to be mentioned that prior to 1971, the legal position as obtained was that the Charity Commissioner could only accord sanction to the alienation of the immovable property of the public trust and he had no power to authorise the trustee of any public trust to alienate any immovable propert of the public trust. In other words, in cases where the trust deed expressly or impliedly prohibited the trustees from alienating the immovable property of the public trust or for that matter made no provision with regard to such power, it was incumbent upon the trustees to first obtain relief in this behalf from the Civil Court under Section 50 of the Act. Accordingly, the position prior to 1971 was that, authorisation for alienation of the immovable property of public trust could be granted only by the Civil Court, in cases where such authorisation was necessary. However, after amendment of 1971, this position has obviously undergone change. As observed earlier, the objects and reasons for amendment of 1971 was to give necessary powers to the Charity Commissioner to effectively supervise the administration and management of the public trust.

21. In Paragraph No. 16 of the said decision, the Division Bench proceed to consider the scope of Clause (c). In Paragraph No. 16, the Division Bench observed thus:

Therefore, Legislature introduced Clause (C) empowering the Charity Commissioner to authorise the trustees to dispose of any immovable property of the trust in the interest or benefit or protection of the trust. The plenitude of this power no doubt apparently appears to be wide. Indubitably, the power of the Charity Commissioner is plenipotentiary, but is specific and limited to the cause of interest or benefit or protection of the trust. We are not at all impressed by the argument of the objectors that Clause (c) has been inserted to cover matters which were left out from Clause (a) and (b). This submission would virtually require us to construe expression “authorise” in Clause (c) as only “sanction”. This cannot be countenanced, for the legislature can be ascribed the knowledge of distinction between the two, especially when both these expressions are used in one section. Besides it would mean that all transactions in respect of immovable property of the public trust would require sanction, which is obviously negating the purport of Clauses (a) and (b). Moreover, it is seen that Section 36 opens with Non-obstante clause, for it provides that; “Notwithstanding anything contained in the instrument of trust”. On its plain language it would mean that even if the instrument of trust prohibits the trustees either expressly or impliedly, even then the Charity Commissioner would be empowered, may, obliged to authorise any trustee to dispose of such property on an application made in that behalf, regard being had to the interest or benefit or protection of the trust. In any case when the instrument of trust is silent or aphonic about the authority of the trustees in that regard or that it does not expressly or impliedly prohibit the trustees, then surely in such a case the Trustees can approach the Charity Commissioner under Section 36(1)(c) for giving authority to dispose of any immovable property of the public trust. The present case, would, in our view, fall at least in this category of cases enabling the Charity Commissioner to exercise powers under Section 36 of the Act. We say so because the subject instrument of trust does not expressly prohibit the trustees from alienating any trust property nor does it impliedly do so. We have come to this conclusion on carefully reading the instrument of trust as a whole. Even for this reason we would conclude without any hesitation that by virtue of Section 36(1)(c), the Charity Commissioner had power to authorise the respondents-trustees to dispose of the immovable property of the public trust-in particular the one referred to in the application under Section 36 of the Act and the subject agreement entered with the respondent No. 6.

The Division Bench held that in the same section two different words namely sanction and authorise have been used and therefore both the words will have to be given different meaning. The Division Bench observed that even if the instrument of trust prohibits trustees either expressly or impliedly from selling the trust property, then under Clause (c), the Charity Commissioner can authorise the trustees to sell the trust property on terms and conditions incorporated by the Charity Commissioner. Thus, according to the Division Bench Clauses (a) and (b) of Sub-section 1 will apply to a case where there is an express authorisation in the instrument of trust in favour of the trustees to sell the trust property or where there is no prohibition in the instrument of the trust against the alienation of the trust property by the trustees. In these categories of cases, there cannot be a valid alienation of the trust property without prior sanction of the Charity Commissioner. Where there is an express or implied prohibition in the instrument of trust, the trustees will have to apply for authorisation under Clause (c) and it will not be necessary for the trustees to file a suit governed by Section 50. The Division Bench therefore proceeded to observe that after authorisation is granted under Clause (c), the trustees will be obliged to apply for sanction under Clause (b). In our view, only this part of the reasoning adopted by the Division Bench is incorrect.

Under Clause (c). the Charity Commissioner can authorise the trustees to sell the trust property only if he satisfied that it is in the interest of the trust that the immovable property should be disposed of. While granting authorisation, the Charity Commissioner is empowered to impose such conditions as he may think fit after considering the interest, benefit or protection of the trust. The Division Bench held that Clause (c) was brought on the statute book to prevent the mischief caused by long delay in disposal of the suits filed by invoking provision of Section 50 of the said Act of 1950. While granting sanction under Clause (b), the Charity Commissioner must be satisfied that it is in the interests of public trust to dispose of the property. While granting sanction, he can impose conditions having regard to the interest, benefit or protection of the trust. Thus, the jurisdiction of the Charity Commissioner under Clauses (b) and (c) is not different. Jurisdiction under Clause (b) is to be exercised where under the instrument of the trust the trustees are authorised to alienate the trust property or where there is no prohibition in the instrument of trust against alienation of the trust property. The jurisdiction under Clause (c) has to be exercised where there is an express or implied prohibition in the instrument of the Trust. While exercising powers under both the sections, the factors which are required to be considered are the same. Therefore, once authorisation is granted under Clause (c), it is not necessary for the trustees to again apply for sanction as the authorisation is bound to be in respect of a specific property of the trust in favour of a particular buyer and in no case it can be a general or blanket authorisation.

Shri Tulzapurkar relied upon the dictionary meaning of the word “sanction” in various dictionaries. He referred to Blacks Law Dictionary where meaning of the word “sanction” is stated as official approval or authorisation. In the Advanced Law Lexicon, the meaning of the word “sanction” is again “official approval” or “authorisation”. Another meaning given to the word “sanction” in the said Advanced Law Lexicon is “an express authorisation”, “permission” or “recognision”. The said Law Lexicon also states that “sanction” not only means prior approval; generally, it also means ratification. Reliance is also placed on Strouds Judicial Dictionary of Words and Phrases. The said dictionary gives the meaning of the word “sanction” as not only a prior approval; generally, it also means ratification.

Though the word “sanction” has been used in Clause (a) and (b) and the word authorise is used in Clause c, both the words have the same meaning. However, Clause (b) and Clause (c) operate in different fields as indicated above.

22. Now we turn to the controversy regarding scope of powers of the Charity Commissioner. Clause (b) after amendment of 1971 gives power to the Charity Commissioner to impose such conditions as the Charity Commissioner may think fit to impose regard being had to the interest, benefit or protection of the trust. In Clause (b), power is conferred on the Charity Commissioner to impose conditions while granting sanction. While imposing conditions, the Charity Commissioner will have to keep in mind the interest, benefit or protection of the trust. Shri. Samdani, learned senior counsel made a submission that the trustees are the legal owners of the trust property and they are not holding the property on behalf of the beneficiaries. He submitted that the trust property vests in the trustees for the benefit of the beneficiaries. He placed reliance on the decision of the Apex Court in the case of W.O. Holdsworth and Ors. v. The State of Uttar Pradesh . The Apex Court in Paragraph No. 23 has held thus:

(23) These definitions emphasize that the trustee is the owner of the trust property and the beneficiary only has a right against the trustee as owner of the trust property. The trustee is thus the legal owner of the trust property and the property vests in him as such. He no doubt holds the trust property for the benefit of the beneficiaries but he does not hold it on their behalf. The expressions “for the benefit of” and “on behalf of” are not synonymous with each other. They convey different meanings.

The Apex Court, in the said case was considering a question relating to interpretation of Section 11(1) of the U.P. Agricultural Income Tax Act, 1948. The Appellants before the Apex Court were the trustees of the estate settled on trust under the last will and testament of one J.J. Holdsworth. Under the said Act of 1949, notice of assessment of Agricultural Income-tax was issued to the trustees. The trustees applied under Section 24(2) of the said Act of 1949 before the Agricultural Income Tax Board. Ultimately a statement of case was drawn up by the Board and was submitted to the High Court. The question of law which was referred to the High Court for decision was “whether on the facts and in the circumstances of the case the trustees can be said to be holding land on behalf of beneficiaries and can the beneficiaries be said to be jointly interested in the land or in the agricultural income derived therefrom within the meaning of Section 11(1) of the said Act of 1948”. The High Court answered the question by holding that the trustees could be said to be holding land on behalf of beneficiaries, but it cannot be said that beneficiaries were jointly interested in the land or the agricultural income. In the said context, the Apex Court has made the observations which are quoted above. In paragraph No. 24, the Apex Court observed thus:

If on a true reading of the provisions of the deed of trust the interest which is created in the beneficiaries is a separate or individual interest of each of the beneficiaries in the land or in the agricultural income derived therefrom, merely because they have a common interest therein, that cannot make that interest a joint interest in the land or in the agricultural income derived therefrom. The words “jointly interested” have got to be understood in their legal sense and having been used in a statute are not capable of being understood in a popular sense as meaning a common interest or an interest enjoyed by one person in common with another or others.

The said decision may not be helpful for deciding the scope of powers of the Charity Commissioner of imposing conditions in the interest and for the benefit of the trust.

23. The Apex Court in the case of T. Venugopala Naidu v. Venkatarayulu Naidu Charities was dealing with an appeal arising out of a suit filed under Section 92 of the said Code. The prayer in the suit was for removal of the defendanttrustee from the office and to recover the trust property fraudulently alienated by the defendant. In the said suit, the trial Court permitted the trustee to continue and framed a scheme for future management and administration of the trust. In the said suit, the trustees subsequently filed an application seeking permission to sell trust property. The trial Court granted permission. The plaintiff and three others applied for setting aside the order granting permission. The application was dismissed by the trial court holding that they had no locus. Revision application preferred before the High Court was dismissed on the ground that two out of four applicants who were Muslims cannot have interest in the administration of the trust. The order of the High court was challenged in the Apex Court. In paragraph No. 13, Apex Court held thus:

13. The subordinate court and the High Court did not go into the merits of the case as the appellants were not-suited on the ground of locus standi. We would have normally remanded the case for decision on merits but in the facts and circumstances of this case we are satisfied that the value of the property which the trust got was not the market value. Two persons namely S.M. Mohamed Yaaseen and S.N.M. Ubayadully have filed affidavits offering Rs. 9.00 lacs and Rs. 10.00 lacs respectively for these properties. In support of their bona fide they have deposited 10% of the offer in this Court. This Court in Chenchu Ram Reddy v. Govt. of Andhra Pradesh has held that the property of religious and charitable endowments or institutions must be jealously protected because large segment of the community has beneficial interest therein. Sale by private negotiations which is not visible to the public eye and may even give rise to public suspicion should not, therefore, be permitted unless there are special reasons to justify the same. It has further been held that care must be taken to fix the reserve price after ascertaining the market value for safeguarding the interest of the endowment.

24. The submission of the learned senior counsel Shri. Khambata was that the property held by the public trust is to be treated on par with a public property and therefore principles laid down by the Apex Court in the case of Ram and Shyam Co. v. State of Haryana will apply to alienation of trust property. On this point, it will be necessary to refer to the decision of the Apex Court in the case of Committee of Management of Pachaivappas Trust v. Official Trustee of Madras and Anr. . The subject matter of the property in appeal before the Apex Court was immovable property vested in the official trustee as an executor and trustee. The dispute was regarding grant of long term lease in respect of the said property and exercise of supervisory jurisdiction of High Court under Section 25 of the Official Trustees Act, 1913. A Partnership firm applied before the High Court praying that the Official Trustee be directed to execute a lease agreement in favour of the said firm for a period of 50 years with an option to renew the same for further period of 15 years. The said application was opposed by the appellants before the Apex Court. It was contended that grant of such long term lease was not in the interest of the trust and in fact it would be detrimental to the interest of the trust. The official trustee submitted a report recording no objection for issuing a direction for the execution of long term lease. A supplementary report was filed by Official trustee putting on record the terms of the proposed long term lease. The learned Single Judge of the High Court disposed of the said application by treating the same as one under Official Trustees Act, 1913. The learned Single Judge held that it was in the best interest of the trust to lease out the property. The learned Single Judge directed the official trustee to lease the portion of the property on the terms and conditions indicated in the order.

The order of the learned single Judge was challenged in appeal before a Division Bench of the High Court. Submission before the Division Bench was that the Appellant was not opposed to grant of lease but the lease should have been given by a public auction. The Division Bench refused to interfere with the order of learned Single Judge by holding that the learned Single Judge had taken into consideration the rent, nature of the property, situation and purpose for which the lease is asked for and had come to the conclusion that the direction as prayed should be given subject to certain terms and conditions as provided in his order.

Subsequently an application was filed before the learned Single Judge for cancellation of direction issued earlier. The said application was filed by a third party one Mohammed Ummer Sheriff. In the said application, he expressed willingness to pay monthly rent of Rs. 3,000/-and to pay security deposit of Rs. 35,000/-and an advance amount of Rs. 15,000/-. The Official Trustee, therefore, filed an application for modification of the original order passed by the learned Single Judge. By the said application a prayer was made for modification of the conditions incorporated in the original order passed by the learned Single Judge. The Division Bench of the High Court allowed the application for modification and modified the terms and conditions in the original order. The order passed by the Division Bench was challenged before the Apex Court. The Apex Court dealt with Section 25 of the said Act of 1913 which reads thus:

25. Power of High Court to make orders in respect of property vested in Official Trustee. -The High Court may make such orders as it thinks fit respecting any trust property vested in the Official Trustee, or the income or produce thereof.

Section 26 of the said Act of 1913 provides that an order under Section 25 may be made on the application of any person beneficially interested in any trust property or by any trustee of the trust. The Apex Court noted that the Act does not envisage an application being moved by any other person. The question before the Apex Court was whether the application made at the instance of the 2nd Respondent M/s R.V.A. & Company was maintainable. The Apex Court referred to its earlier decision in the case of Chenchu Rami Reddy and Anr. v. The Government of Andhra Pradesh and Ors. . In the said decision, the Apex Court had observed that the trustees or persons authorised to sell by private negotiations, can, in a given case, enter into a secret or invisible underhand deal or understanding with the purchasers at the cost of the concerned institution. The Apex Court in the said case held that those who are willing to purchase by private negotiations can also bid at a public auction. The Apex Court in the said case of Chenchu Rami Reddy v. Govt. of Andhra Pradesh (supra) held as under:

Why then permit sale by private negotiations which will not be visible to the public eye and may even give rise to public suspicion unless there are special reasons to justify doing so? And care must be taken to fix a reserve price after ascertaining the market value for the sake of safeguarding the interest of the endowment.

While dealing with the powers of Official Trustee, the Apex Court in paragraph No. 21 and 22 of the decision in “Committee of Management” held as under:

21. In B. Muniswami Naidu v. Official Trustee while referring to the duties of Official Trustee, it has been held:

So long as the property is vested in the Official Trustee, it will be the duty of the Official Trustee to take such steps and conduct himself in such a manner as to make the trust get the maximum advantage of any transaction without prejudice to the security and safety of the trust property itself.

22. In the said case, it has been further held that if the Official Trustee himself wants to lease out the property the normal procedure to be adopted is by public auction. The said view is in consonance with the law laid down by this Court in the context of alienation of public property.

In paragraph Nos. 27 and 28, the Apex Court held as under:

27. In Chenchu Rami Reddy v. Govt. of A.P. While dealing with sale of property of a religious endowment governed by the Andhra Pradesh Charitable and Hindu Religious Institutions and Endowments Act, 1966, this Court has held that what is true of public property is equally true about the property belonging to the religious institutions and endowments and has further pointed out: (SCC pp. 397-98, para 10)
…the trustees or persons authorised to sell by private negotiations, can, in a given case, enter into a secret or invisible underhand deal or understanding with the purchasers at the cost of the concerned institution. Those who are willing to purchase by private negotiations can also bid at a public auction. Why would they feel shy or be deterred from bidding at a public auction? Why then permit sale by private negotiations which will not be visible to the public eye and may even give rise to public suspicion unless there are special reasons to justify doing so? And care must be taken to fix a reserve price after ascertaining the market value for the sake of safeguarding the interest of the endowment.

28. The aforesaid observations in the context of public property and property belonging to religious and charitable endowments and institutions would equally apply to trust property as in the present case.

In Paragraph 29, the Apex Court proceeded to hold as under:

29. The Division Bench of the High Cout has held that although the Official Trustee, if he were to lease out the property, should have done so by public auction but since lease was being granted under order passed by the High Court after being satisfied that the terms are fair and just, there was no need to go for a public auction. This raises the question how would the court satisfy itself that the terms are just and reasonable? For such satisfaction the court must have adequate material to make a proper assessment. This cannot be possible on the basis of the terms offered by the applicant approaching the Court. Whether the said terms are just and reasonable, and in the interest of the trust, can be determined by making a comparative assessment of competing offers and, therefore, it is necessary that the persons interested in taking the lease must have an opportunity to make an offer. Public auction is the means for enabling such persons to make their offers. In the matter of exercise of it supervisory jurisdiction under Section 25 of the Act the High Court has to be guided by the same consideration which governs the administration of trust property by the Official Trustee, namely, “to make the trust get the maximum advantage of a transaction.” Since public auction after adequate publicity ensures participation of those who are interested and anxious to compete, it normally secures the best price. There appears to be no reason why this procedure of public auction should not be adopted when the lease is to be granted under an order passed by the High Court in exercise of the jurisdiction under Section 25 of the Act. It is no doubt true that an order under Section 25 of the Act is passed in a judicial proceeding conducted in open court under public gaze. This necessarily postulates adequate publicity of the matter under consideration to enable persons having an interest to appear and put forward their point of view before the court. If lease is granted by the court on the basis of an application submitted by an applicant without notice to others who may also be interested in the lease the consequence would not be very different from that when a lease is granted in the secrecy of an office. In order to ensure participation by every person interested in making an offer it is necessary that there should be vide publicity about the proposal to give the lease and the lease be granted either by inviting bids at a public auction or by inviting sealed offers by a specified date.

There is no reason why the law laid down by the Apex Court by the said decision should not be applied to an alienation governed by Section 36 of the said Act of 1950.

25. The Division Bench in the case of M/s A.R. Khan Construwell & Co. (supra) has referred to the decision of the Apex Court in the case of Mehrwan Homi Irani and Anr. v. Charity Commissioner, Bombay and Ors. . The subject matter of the case before the Apex Court was a property of a Public Trust duly registered under said Act of 1950. The trustees of the trust received an offer from the fifth Respondent before the Apex Court for acquiring the trust property. The trustee entered into an agreement of the lease with fifth Respondent whereby two acres of trust property was to be alienated and given on lease to the fifth Respondent for a period of 99 years and the fifth Respondent agreed to construct eight blocks of area of 450 sq. ft each for the benefit of the trust which would form part of sanatorium of the trust. The trustees applied for permission under Section 36(1) of the said Act of 1950. The Charity Commissioner on the said application advised the trustees to give publicity of the intended transaction of lease. Accordingly advertisements were published in daily newspapers at the instance of the Appellants. On the basis of the said advertisements, two offers including the offer by the fifth Respondent were received. The trustees accepted the offer of the fifth Respondent. The Appellants before the Apex Court intervened in the proceedings and contended that the trustees had no power to grant long lease. The Charity Commissioner proceeded to grant sanction in favour of the trustees for alienation of the trust property in favour of the fifth Respondent. The order of the Charity Commissioner was challenged by the Appellants before the High Court by filing a writ petition. The contentions of the Appellants was there could be a better proposal from other parties. The High Court, however upheld the decision of the Charity Commissioner. The Apex Court noted that important point to be considered was whether agreements entered into between the trustees and the fifth Respondent were capable of carrying out the objects of the trust to provide a Sanatorium for convalescing and sick persons. The Apex Court noted that there were offers received from well known charitable institutions by the trustees. The Apex Court proceeded further to direct as under:

However, we are told that there were some other offers also from some well known charitable institutions. In the best interests of the Trust and its objects, we feel it appropriate that respondents Nos. to 4 should 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 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 Charity Commissioner to take a fresh decision in the matter. There could be fresh advertisements inviting fresh proposals 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 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.

26. The submission of Shri. Tulzapurkar, learned senior counsel was that the decision of the Apex Court in the case of Mehrwan (supra) does not lay down any proposition of law and the said case is decided on its peculiar facts. This submission is not correct. The Apex Court does hold that the Charity Commissioner while exercising the power under Section 36(1) must explore possibility of having a deal of the Trust property on better terms as the object of the Trust should be accomplished in the best of its interest.

Shri Tulzapurkar relied upon the decision of the Supreme Court in the case of Tribhovandas Purshottamdas Thakkar v. Ratilal Motilal Patel and Ors. AIR Supreme Court 372. He relied upon the observations of the Court to the effect that Section 36 imposes only a fetter upon the power of the trustee. The relevant portion of the decision of the Apex Court relied upon by Shri Tulzapurkar reads thus:

For the purpose of te present case, we do not deem it necessary to express any opinion on the question whether a sale in exercise of authority derived from the trustees, e.g. a covenant for sale under an English mortgage executed by the trustees or a sale in terms of a consent decree attracts the application of Section 36 of Act. We have no doubt, however, that the Legislature did not intend to put any restriction upon the power of the Civil Court executing a decree for recovery of money due from the trust, by sale of the property of the trust. The section imposes a fetter upon the power of the trustees: it is not intended hereby to confer upon the Charity Commissioner an overriding authority upon actions of the Civil Court in execution of decrees.

The question before the Apex Court was whether expression sale in Clause (a) of Section 36 would only mean transfer of property by the trustees for a price or will include a sale of the property of a public trust in execution of a decree of a Civil Court for recovery of debt due by the trust. The said decision cannot be read as laying down a ratio that powers of the Charity Commissioner under Section 36 are limited either to grant of sanction or to reject sanction. The said decision is not helpful in deciding the scope of powers of Charity Commissioner under Section 36.

27. While exercising powers under Section 36 of the said Act of 1950, the Charity Commissioner has to safeguard the interests of the trust as well as the interests of beneficiaries. The learned Single Judge in the case of Arunodaya Prefab (supra) has held thus:

It may not be open for the Charity Commissioner to consider the offers of third parties except only to the extent that they might disclose to him what might be the market value of the land only for the limited purposes of ascertaining the market value of the land.

The said view was rightly criticised before us by pointing out that if Charity Commissioner was to invite offers only for the purpose of ascertaining the market value of the property, no genuine buyer or purchaser will come forward and offer a genuine competitive price. It was submitted that no genuine buyer would be interested in coming forward with the offer if his offer is to be considered only for a limited purpose of finding out as to what was the market value on the relevant date. If offers are invited only for this purpose, there is every possibility that the offers will not be bonafide and genuine.

28. While exercising power either under Clause (b) or Clause (c), the Charity Commissioner can impose conditions having regard to the interest, benefit or protection of the trust. Before passing an order of sanction or authorisation, the Charity Commissioner has to be satisfied that the trust property is required to be alienated. Once the Charity Commissioner is satisfied that the alienation of the trust property is necessary in the interest of the trust or for the benefit of the trust or for the protection of the trust, it is very difficult to accept the submission that the power of the Charity Commissioner is restricted either to grant sanction to a particular proposal of the trustees or to reject it. It is the duty of the Charity Commissioner to ensure that the transaction of alienation is beneficial to the trust and its beneficiaries. He has to ensure that the property is alienated to a purchaser or buyer whose offer is the best in all respects. It is not necessary in every case that the Charity Commissioner has to ensure that property is sold by the trustees to the person offering highest price or consideration. What is the best offer in the interest of the trust will again depend on facts and circumstances of each case. In a given case, while alienating the trust property, the trustees may provide that as a part of consideration for alienation, the purchaser should construct a building on a part of the trust property for the use by the trustees for the objects of the trust. In such a case, it may be necessary to ascertain the reputation and capacity of the purchaser apart from the consideration offered. When the Charity Commissioner is satisfied that trust property needs to be alienated and when he finds that the offer received by the trustees may not be the best offer, he can always direct that bids be invited by a public notice. When a better offer is received in public bidding or auction, it is very difficult to say that the power of the Charity Commissioner is restricted and he cannot enjoin the trustees to sell or transfer the trust property to a third party who has given an offer which is the best in the interest of the trust. The Trustees approach the Charity Commissioner only when they are satisfied that there is a necessity to alienate the trust property. The trustees hold the property for the benefit of the beneficiaries and therefore once they express desire to alienate the property, it is obvious that Charity Commissioner can always impose condition while granting sanction that the property shall be sold or transferred to a person who has come with an offer which is the best offer in the interests of the trust. The Section gives a power to the Charity Commissioner to impose conditions and the said conditions will include a requirement of selling or transferring or alienating the trust property to a purchaser who has offered the best deal having regard to the interest and benefit of the beneficiaries and the protection of the trust. The power to impose conditions cannot be a limited power when the law requires the Charity Commissioner to exercise the said power having regard to the interest, benefit and protection of the trust. Once the Charity Commissioner accepts the necessity of alienating the trust property, the trustees cannot insist that the property should be sold only to a person of their choice though the offer given by the person may not be the best offer. The property may be vesting in the trustees but the vesting is for the benefit of the beneficiaries. The Charity Commissioner has jurisdiction to ensure that the property is sold or transferred in such a manner that the maximum benefits are available to the beneficiaries of the Trust. Under Clause (b) of Section 36 of the said Act, the Charity Commissioner has jurisdiction to decide whether it is in the interest of the trust that the property of the trust be sold or transferred. Once the learned Charity Commissioner is satisfied that the property is required to be transferred or sold in the interest of the Trust, the learned Charity Commissioner cannot remain silent spectator when he finds that the transaction proposed by the Trustees is not in the interest of the Trust or its beneficiaries. Once the necessity of sale or transfer is established, the Charity Commissioner can certainly ensure that best available offer is accepted, so that the transaction is for the benefit of the trust. If the trustees were to be the final authority to judge what is in the interest of the Trust, the legislature would not have enacted provision requiring prior sanction. While deciding which is the best offer, the learned Charity Commissioner is bound to take into consideration various factors which cannot be exhaustively listed. However, the paramount consideration is the interest, benefit and protection of the trust. It is obvious from the scheme of Section 36 that legislature never intended that trustees could sell or transfer the trust property vesting in them as if it was their personal property. It is the duty of Charity Commissioner to ensure that the property should be alienated in such a manner that maximum benefits are accrued to the trust. The Charity Commissioner while considering an application under Section 36(1) of the said Act of 1950, in a given case can opt for public auction or can invite bids.

Thus narrow interpretation sought to be given to the power of Charity Commissioner under Clauses (a) and (b) of Sub section 1 of Section 36 cannot be accepted. Thus the view taken in the case of A.R. Khan Construwell and Co. (supra) is the correct view. The case of Arunodaya Prefab is not correctly decided.

29. The second question referred to the Full Bench for decision is regarding locus standi of a person who appears before the Charity Commissioner and offers his bid to challenge the order passed by the Charity Commissioner. The trustees and persons having an interest in the Trust can always challenge the order. We have already held that the proceeding under Section 36 of the said Act before the learned Charity Commissioner is a judicial proceeding. The Apex Court has held that a trust property is on par with a public property so far as its sale or transfer is concerned. It is, therefore, very difficult to say that such a person who appears before the Charity Commissioner and offers his bid has no locus standi to challenge the final order passed by the Charity Commissioner. Such a person will certainly have locus standi to file the petition under Articles 226 and 227 of The Constitution of India for challenging the final order passed under Section 36 of the said Act. However, the scope of challenge will be naturally limited. Such a person will be in a position of a bidder challenging the auction or tender process of sale of a public property. The challenge by such a person to the order will be limited to the decision making process of the Charity Commissioner. In the case of A.R. Khan Construwell the Division Bench has rightly held that after the decision in the case of Arunodaya Prefab, the concept of locus standi has been expanded.

30. Hence, we answer the questions referred to our decision as under:

(i) The power vesting in the Charity Commissioner under Section 36 of the Bombay Public Trust Act 1950 is not confined merely to grant or refusal of sanction to a particular sale transaction in respect of which sanction is sought under Section 36 of the said Act. The power of the Charity Commissioner extends to inviting offers from the members of the public and directing the trustees to sell or transfer the trust property to a person whose bid or quotation is the best having regard to the interest, benefit or protection of the trust. Hence we declare that the decision of the Division Bench of this Court in the case of Jigna Construction Co. Mumbai v. State of Maharashtra and Ors. does not lay down correct law.

(ii) The party who comes forward and submits his offer directly before the Charity Commissioner and complies with other requirements as may be laid down by the Charity Commissioner in a pending application under Section 36 of the said Act of 1950 has a locus standi to challenge the final order passed in a proceeding under Section 36. However, the scope of the challenge will be limited as indicated in paragraph 29 above.

(iii) We direct the Office to place the Writ Petitions before the appropriate Benches for deciding the same in accordance with law.