Dr Dhananjaya Y Chandrachud, J
1 Leave granted.
2 This appeal arises from a judgment and order of the High Court of Judicature
at Bombay dated 26 February 2021.
3 The subject matter of the dispute relates to a parcel of land1 admeasuring 2
hectares 48 ares belonging to the first respondent, Shri Govardhan Sanstha
1 the “property”
Chetan Kumar CA 2748/2021
(Regd) Wai, which is a registered charitable trust, bearing registration No F-
133 (Pune), under the Maharashtra Public Trust Act, 19502. The property is
comprised in Survey No 90, Hisra No 6, at Village Dabewadi, Taluka and
District Satara.
4 In 2015, a tender notice was published by the first respondent inviting bids
for the development of the property. During the course of the tender process,
two bids were received, out of which one was tendered by the appellant and
the other by the second respondent. The first respondent accepted the offer
of the second respondent in its meeting on 6 November 2015, in which the
second respondent had offered a cash consideration of Rs 32 lakhs along
with 6000 sq. ft. of constructed area in the property, admeasuring 30 ares.
5 On 4 January 2016, an application for the grant of approval under Section
36(1) of the Act was filed by the first respondent before the third respondent,
the Joint Charity Commissioner, Pune. The application was rejected by the
third respondent on 8 February 2017, by noting that the first respondent had
not filed a copy of the resolution dated 19 November 2015 in which its
members had decided to sell the subject property. Further, that the second
respondent’s offer was held not to be reasonable since the Assistant Charity
Commissioner, Satara’s report valued the land at Rs 5 crores. Finally, the
Joint Charity Commissioner also held that there was no legal necessity to sell
the property, since the first respondent was not getting offers for the
2 the “Act” CA 2748/2021
property due to its ongoing disputes with tenants, which should be resolved
prior to the sale.
6 The order of the Joint Charity Commissioner, Pune resulted in the first
respondent instituting a writ petition3 for challenging the order dated 8
February 2017. The High Court of Judicature at Bombay, by a judgment and
order dated 21 June 2018, set aside the order dated 8 February 2017. It
directed the third respondent to decide the first respondent’s application
afresh and the first respondent was granted an opportunity to file a copy of
their resolution deciding to sell the subject property and to also to address
the merits of the valuation report relied upon by the third respondent in
respect of the subject property.
7 It appears that on 1 August 2018, a fresh valuation report was obtained from
a government approved valuer, according to which the market value of the
property was determined to be Rs 1,82,25,000.
8 Thereafter, the third respondent by an order dated 22 October 2018, once
again dismissed the first respondent’s application under Section 36(1) of the
Act. The third respondent noted that the second respondent’s offer had not
changed since the last order which was passed on 8 February 2017, and
during the course of the proceedings, the second respondent also indicated
their inability to enhance their offer. As held previously, this offer by the
second respondent was not reasonable, in light of the valuation report.
3 Writ Petition No 8625 of 2017 CA 2748/2021
Further, it was noted that the fact that tenants of the property were not
paying rent was not an adequate reason to sell the property, when the first
respondent could file and contest a suit for possession.
9 Another writ petition4 was then instituted before the Bombay High Court by
the first respondent on 23 January 2019. During the pendency of the petition,
the High Court by an order dated 7 August 2019 directed the third
respondent to call for fresh bids by issuing a fresh advertisement. In
pursuance of this order, the third respondent invited fresh bids, in pursuance
of which, only one offer, that of the second respondent, was received for an
amount of Rs 50 lakhs.
10 On 6 January 2021, the appellant filed an intervention application5 in the writ
proceedings, alleging collusion between the first and second respondent for
the sale of the property. The appellant also offered an amount of Rs 75 lakhs
for the property, while highlighting his willingness to further increase the
amount. In pursuance of the aforesaid position, the writ petition was listed
before the High Court on several occasions and orders were passed on 11
January 2021, 20 January 2021, 5 February 2021, 15 February 2021 and 22
February 2021. The appellant did not abide by its offer to deposit Rs 75
lakhs.
4 Writ Petition No 3894 of 2019 5 Intervention Application St No 499 of 2021 CA 2748/2021
11 On 26 February 2021, the High Court declined to grant any further time to
the appellant to make good the offer of Rs 75 lakhs. The High Court was of
the view that though sufficient opportunities were granted to the appellant to
deposit an amount of Rs 75 lakhs, no compliance had been effected.
However, the second respondent matched the offer of Rs 75 lakhs made by
the appellant by increasing the offer further by an amount of Rs 5 lakhs to
make a total offer of Rs 80 lakhs. The High Court accordingly directed the
third respondent to complete the sale formalities by entering into a sale
transaction with the second respondent for a consideration of Rs 80 lakhs.
12 Aggrieved by the order of the High Court, the appellant moved these
proceedings under Article 136 of the Constitution.
13 On 18 March 2021, the following order was passed by this Court:
“1 Permission to file the Special Leave Petition is granted.
2 Mr Dilip Annasaheb Taur, learned counsel appearing on
behalf of the petitioner submits that the petitioner was
ready with a Demand Draft in the amount of Rs 75 lakhs
and the High Court should have granted a further
extension of time. From the record it emerges that the
High Court had granted several opportunities to the
petitioner to comply with the statement of depositing Rs
75 lakhs, but the petitioner was unable to do so and a
cheque which was issued was, in fact, dishonored.
3 In order to test the bona fides of the petitioner and having
regard to the fact that the property in question belongs to
a charitable trust, we direct the petitioner to deposit an
amount of Rs 1 crore in the Registry of the High Court of
Judicature at Bombay within a period of two weeks from
today. In order to facilitate the petitioner in making the
deposit, we order the status quo to be maintained for a CA 2748/2021
period of two weeks. The petitioner shall file on affidavit in
the Registry of this court a receipt indicating proof of
deposit on or before 9 April 2021, failing which the Special
Leave Petition shall stand dismissed without further
reference to this Court. In the event, the proof of deposit is
produced, notice shall issue, returnable on 23 April 2021
and the order of status quo will stand extended till the
next date of listing.
4 In the event that the petitioner fails to effect deposit, in
addition, to the consequences which have been envisaged
above, the petitioner would be saddled with exemplary
costs, in which event an office report shall be placed
before this Court for directions.
5 After the order was dictated, Mr Dilip Taur had requested
the Court to pass over the case in order to enable him to
get specific instructions from his client whether they were
ready and willing to abide by the above understanding, as
reflected in the order.
6 After seeking instructions, Mr Dilip Taur states that his
client has been made aware and he is agreeable to the
above terms.”
14 In pursuance of the above order, the appellant has produced proof of having
effected a deposit of an amount of Rs 1 crore in the High Court of Bombay
and an affidavit dated 5 April 2021 has been filed in compliance of the order
dated 18 March 2021. It is at this stage that the matter now appears before
this Court for resolution.
15 Mr Dilip Taur, learned counsel appearing on behalf of the appellant submits
that the appellant has indicated his bona fides in complying with the
direction of this Court of depositing the amount of Rs 75 lakhs, and the
appellant has gone even beyond that by depositing an amount of Rs 1 crore CA 2748/2021
before the High Court. Hence, it was urged that the order of the High Court
may be set aside and the writ petition may be restored before the High
Court.
16 On the other hand, Mr Vikas Mishra, learned counsel appearing on behalf of
the second respondent, submitted that all along, it has been the second
respondent who has participated in the process of auction sale and the
appellant had failed to avail of the opportunities which were granted by the
High Court. It has been urged on behalf of the second respondent that having
regard to the principles of law which have been evolved by the judgments of
this Court, it would be necessary to reject the offer which is now made by the
appellant and to award the property to the second respondent.
17 The property which is sought to be sold belongs to a public charitable trust. A
two-Judge Bench of this Court In Cyrus Rustom Patel v Charity
Commissioner6, noted the principles laid down by this Court with respect to
the duties enjoined upon a trustee in the matter of sale of trust properties:
“17. …This Court held [Chenchu Rami Reddy v. State of A.P.,
(1986) 3 SCC 391] that in view of the provisions contained in
Section 74(1) of the Andhra Pradesh Charitable and Hindu
Religious and Endowments Act, 1966, the Government must
be satisfied that it was in the interest of the institution
or endowment to permit the sale of the lands concerned
otherwise than by a public auction, and then reasons to
reach that satisfaction must be recorded in the order.
6 (2018) 14 SCC 761 CA 2748/2021
18. It was also observed by this Court in Chenchu Rami Reddy
[Chenchu Rami Reddy v. State of A.P., (1986) 3 SCC 391] that
public officials and public-minded citizens entrusted with
the care of “public property” have to show exemplary
vigilance; the property of religious and charitable
institutions or endowments must be jealously protected.
The sale of such a property by private negotiations which will
not be visible to the public eye, and may even give rise to
public suspicion, should not be, therefore, made, unless there
are reasons to justify the same…
19. Again, in R. Venugopala Naidu [R. Venugopala Naidu v.
Venkatarayulu Naidu Charities, 1989 Supp (2) SCC 356], this
Court observed that fraudulent sale of the property of public
charities by way of private negotiations should not be
permitted. This Court further held that reserved price
should be fixed after ascertaining the market value and
offer of higher price by filing an affidavit…This Court had
considered the fact that the value of the property which the
Trust got was not the market value, and quashed and set aside
the sale order of the subordinate court and the consequent
sale…
20. In Bhaskar Laxman Jadhav [Bhaskar Laxman Jadhav v.
Karamveer Kakasaheb Wagh Education Society, (2013) 11 SCC
531], this Court considered the alienation of the immovable
properties of public trust under Section 36 of the Bombay Public
Trusts Act, 1950; sanction was sought from the Charity
Commissioner to alienate the property of the public trust, there
was continuation of negotiations between trustees of public
trust and prospective purchasers. There were successive CA 2748/2021
applications submitted, seeking permission to alienate after
each negotiation. This Court held [Bhaskar Laxman Jadhav
v. Karamveer Kakasaheb Wagh Education Society, (2013)
11 SCC 531] that it would tantamount to an abuse of the
process of law and that such an act of the party meant
that they were trying to take advantage of the absence
of any clear-cut provisions under the Act relating to the
sale. To prevent the abuse, this Court considered the factual
scenario that trustees and the petitioners had been indulging in
a flip-flop, and in a sense taking advantage of the absence of
any clear-cut statutory measures designed to prevent abuse of
the process of law in the Act. It was held by this Court that the
Charity Commissioner had rightly rejected the first application
for two reasons, firstly since the trustees were not voluntarily
selling the trust land and secondly, in the given circumstances,
the sale transaction was not for the benefit, and in the interest
of, the Trust. This Court also considered the background facts,
as also the compromise effected between the trustees and the
petitioners in the High Court on 28-8-2008, which appeared to
this Court to be suspicious. On an overall consideration of
the facts and circumstances of the case, it observed that
it was not possible to rule out the possibility of collusion
between the trustees and the petitioners.
21. This Court in Bhaskar Laxman Jadhav [Bhaskar
Laxman Jadhav v. Karamveer Kakasaheb Wagh Education
Society, (2013) 11 SCC 531] further observed that the
lack of bona fide of trustees and the petitioners could
not have been overlooked by the High Court. Therefore,
the safest course was to sell off the trust land through
auction. It was also observed that it was quite clear that due to CA 2748/2021
the passage of time, the value of the trust land had increased
considerably, and that it would be in the best interest of the
Trust if the maximum price is made available for the trust land
from the open market. This Court also observed that
Section 36 of the Act enjoins duties on the Charity
Commissioner to consider the sale of immovable
property of the Trust, with regard being had to the
“interest, benefit or protection” of the Trust…”
(emphasis supplied)
18 The offer which was made by the second respondent initially was in the
amount of Rs 50 lakhs. It was only after the appellant had indicated before
the High Court that an amount of Rs 75 lakhs would be offered and failed to
do so, that the second respondent stated before the High Court that he was
willing to match the offer of the appellant and to go beyond it by an amount
of Rs 5 lakhs. At the present time, the appellant has deposited an amount of
Rs 1 crore before the High Court of Judicature at Bombay. To accept the bid of
the second respondent in the amount of Rs 80 lakhs will deprive the trust of
the opportunity of realising the full market value. In this view of the matter,
we are of the view that the submission which has been urged on behalf of
the appellant is worthy of acceptance. We are unable to subscribe to the
submission of the second respondent for the simple reason that the course of
dealings would indicate that even the second respondent has progressively
enhanced its offers from Rs 50 lakhs to Rs 75 lakhs and, thereafter, to Rs 80
lakhs. Before this Court, Mr Vikas Mishra has now indicated that the second CA 2748/2021
respondent would be willing to match the offer of the appellant of Rs 1 crore.
There has undoubtedly been a default on the part of the appellant before the
High Court. But the decision of the High Court to award the sale in favour of
the second respondent would cause serious jeopardy to the interests of the
public charitable trust. The manner in which the second respondent has
increased his offer in driblets leads to a reasonable inference that the true
value of the property has not been realized. Hence, the order of the High
Court to dismiss the petition cannot be sustained. We are not inclined to
conduct an auction process within the precincts of this Court and are
accordingly of the view that the appropriate direction to be passed would be
to require the third respondent to conduct the auction process by inviting
fresh bids after a proper valuation and to issue further consequential
directions for the submission of a report in the proceedings before the
Bombay High Court. We accordingly issue the following directions:
(i) The third respondent shall obtain a fresh valuation report for the
property, and shall fix an upset price which shall not, in any
circumstances, be less than the amount of Rs 1 crore. The upset price
shall be based on the valuation, subject to the minimum of Rs 1 crore;
(ii) The third respondent shall invite fresh bids by publishing an
advertisement in at least two widely circulated local newspapers for the
sale of the property;
(iii) Both the appellant and the second respondent shall be at liberty to CA 2748/2021
submit their fresh bids, which shall be considered by the third
respondent together with all other bids which are received;
(iv) The third respondent shall, upon the bids so received, submit a report to
the High Court of Judicature at Bombay, which shall consider the report
while passing such final directions as are necessary in the writ petition;
(v) Consequently, the impugned order of the High Court dated 26 February
2021 dismissing the petition shall stand set aside. The writ petition,
being Writ Petition No 3894 of 2019, shall hence stand restored to the
file of the High Court. The High Court shall upon the receipt of the
report of the third respondent take an appropriate view and decide upon
the merits of the petition in respect of which all the rights and
contentions of the parties on all aspects are kept open; and
(vi) The amount of Rs 1 crore which has been deposited with the Bombay
High Court by the appellant, shall be invested in a Fixed Deposit of a
nationalized bank to be renewed periodically during the pendency of
the writ petition and shall abide by such further directions as may be
issued by the High Court. In the event that the appellant desires to bid
for the property at the auction, it would be open to him to move a Civil
Application before the High Court to adjust the amount of Rs 1 crore
deposited in pursuance of the order of this Court towards the bid.
19 We clarify that there was no challenge before this Court in regard to the
findings on the aspect of legal necessity in selling the subject property, as a CA 2748/2021
consequence of which, the present order shall not disturb the findings of the
High Court in that regard. The third respondent shall act immediately on the
receipt of a certified copy of this order and endeavour to complete the
process on or before 31 December 2021.
20 The appeal is accordingly allowed in the above terms.
21 Pending applications, if any, stand disposed of.
[Dr Dhananjaya Y Chandrachud]
[M R Shah] New Delhi; July 19, 2021 CKB CA 2748/2021
ITEM NO.29 Court 5 (Video Conferencing) SECTION IX
Petition(s) for Special Leave to Appeal (C) No.4969/2021
(Arising out of impugned final judgment and order dated 26-02-2021 in WP No.3894/2019 passed by the High Court of Judicature at Bombay)
GANESH RAMCHANDRA JADHAV Petitioner(s)
VERSUS
GOVARDHAN SANSTHA (REGD) WAI PUNE & ORS. Respondent(s)
(With appln.(s) for IA No.36852/2021-EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT and IA No.36850/2021-PERMISSION TO FILE SLP and IA No. 49215/2021 - APPLICATION FOR PERMISSION)
Date : 19-07-2021 These matters were called on for hearing today.
CORAM :
For Petitioner(s)
Mr. Dilip Annasaheb Taur, AOR
For Respondent(s) Mr. Vikas Mishra, Adv.
Ms. Shivani Shah, Adv.
Mr. Sanchit Gawri, Adv.
Ms. B. Vijayalakshmi Menon, AOR
Mr. M.V. Mukunda, Adv.
Mr. Kailas Bajirao Autade, Adv.
Ms. Sheetal Patil, Adv.
Mr. Prashant Shantaram Chaudhari, Adv. CA 2748/2021
UPON hearing the counsel the Court made the following
O R D E R
1 Leave granted.
2 The appeal is allowed in terms of the signed order.
3 Pending applications, if any, stand disposed of.
A.R.-cum-P.S. Court Master
(Signed order is placed on the file)