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2010 SCC OnLine Bom 918 : (2011) 2 Mah LJ 879 : (2011) 5 Bom
CR 340 : (2011) 1 AIR Bom R (NOC 13) 4

In the High Court of Bombay

(Aurangabad)
Sanction to Alienate Trust Property: Permissibility
(BEFORE R.K. DESHPANDE, J.)

Terna Public Charitable Trust, Osmanabad …

Petitioner;
Versus
Joint Charity Commissioner, Latur and others …
Respondents.
W.P. Nos. 5888 and 6073 of 2009
Decided on July 3, 2010

Bombay Public Trusts Act (29 of 1950), S. 36(1) — Sanction to alienate

trust property — Permissibility — Application rejected on ground that
applicant — trust failing to establish genuine need to sell property although,
finding is recorded that proposed alienation is in interest of trust — Need,
not found genuine — Refusal to grant sanction was proper.
The Charity Commissioner, while according sanction under section 36(1) of the
Public Trust Act read with section 73 and Rule 7 and Rule 24 of the Rules, has to be
satisfied that the property should be disposed of. Such a satisfaction has to be
reached, only upon an enquiry as to the necessity for the proposed alienation, and
that such alienation is in the interest of Trust. Hence, the findings in respect of
following three things apart from other aspects involved in each case, is must/fl)
That, there is need to alienate the property; (2) That, the need put-forth is found to
be genuine; and (3) That, the alienation is in the interest of the trust and is
beneficiaries. In the absence of all the three findings, no order of sanction under
section 36(1) of the said Act, can be passed. Thus, merely because the Charity
Commissioner has recorded a finding that the proposed alienation is in the interest
of trust, that by itself is not enough to accord his sanction. If it is found that there is
no need to alienate the property or that the need put-forth is not found to be
genuine, the sanction can be refused. In the instant case, the Joint Charity
Commissioner, after going through the entire evidence put-forth by the
petitioner/trust recorded a finding that there is no need to sell the property and in
fact, the need put-forth is not found to be genuine. No constraints can be read in
the power of Charity Commissioner and it can extend to find out the object,
propriety, legality and justification for such alienation. 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 obtaining of prior sanction. The findings recorded
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cannot, therefore, be said to be beyond the scope of power under section 36(1) of
the said Act. 2006 (1) Mh.L.J. 809, Not. Foil, in view of 2007 (3) Mh.L.J. 717 (FB).
(Paras 14 to 18)
In both Petitions:
For Petitioner: Vinit Ngik holding for Sachin Deshmukh and I.M.
Khairdi
For Respondent Nos. 1 to 3: K.M. Suryawanshi, A.G.P.
For Respondent No. 4: K.C. Sant

List of cases referred:

1. Suburban Education Society, Mumbai v. Charity (Paras 9, 13)

Commissioner of Maharashtra State, 2004 (2)
Mh.L.J. 792

Page: 880

2. Bara Imam Masjid Trust v. Charity Commissioner, (Paras 9, 18)

Maharashtra State, 2006 (1) Mh.L.J. 809

3. Sailesh Developers v. Joint Charity Commissioner, (Para 12)

Maharashtra, 2007 (3) Mh.LJ. 717

ORAL JUDGMENT
1. The Joint Charity Commissioner, Latur Region, Latur by his order
dated 11-11-2008, has rejected Application No. 04/2008, filed by the
petitioner/trust, for grant of sanction under section 36(1) of the
Bombay Public Trust Act, 1950 (hereinafter referred to as “the said
Act”) to alienate the property in question, on the ground that the
petitioner/trust has failed to establish the genuine need to sell the
property. This is the subject-matter of challenge in Writ Petition No.
5888/2009, filed by the petitioner/trust. By an order dated 23rd
January, 2009, the Joint Charity Commissioner has rejected the
subsequent Application No. 13/2008, filed by the petitioner/trust,
trying to make out a case that the need for alienation of the property is
genuine. It has been rejected, on the ground that the second
application for the same relief is not maintainable. Hence, this order is
the subject-matter of challenge in second Writ Petition No. 6073/2009,
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filed by the petitioner/trust.

2. This Court had issued notice before admission on 8th September,
2009 in Writ Petition No. 5888/2009. In Writ Petition No. 6073/2009,
notice before admission was issued on 14th September, 2009 and it
was directed that both the matters shall be heard together. Shri Vinit
Naik, the learned counsel holding for Shri Sachin Deshmukh and Shri
I.M. Khairadi appeared for the petitioner in both the writ petitions,
whereas Shri K.M. Suryawanshi, the learned A.G.P. appeared for
respondent Nos. 1 to 3 in both the petitions and Shri K.C. Sant, the
learned counsel appeared for respondent No. 4 in both the petitions.
The learned counsels for the parties agreed that the matter can be
disposed of finally at the stage of admission. Hence, on 30-6-2010,
Rule was made returnable forthwith. The learned counsels appearing for
the respondents waived the service of notice. By consent of parties, the
matter was heard finally. After hearing was concluded, operative
portion of the judgment was dictated as under:
“For the reasons to follow, both writ petitions are dismissed. Rule is
discharged. No order as to costs.”
3. Now, I proceed to state the facts as under:—
The petitioner/trust owns the following properties, which were the
subject-matter of proceedings under section 36(1) of the Bombay
Public Trusts Act, given below:—
(1) Open plot No. 09, Sector No. 12, Panvel, admeasuring 2287.50
Sq. Mtrs.
(2) Open plot No. 18/B, Sector No. 13, Panvel, admeasuring 1036.29
Sq. Mtrs.
(3) Plot No. 13, Sector No. 12, Panvel, admeasuring 4516.57 Sq.
Mtrs. with construction thereon admeasuring 35,000 Sq. Fts. plus
two storied building for hospital.
All the aforesaid properties, hereinafter referred to as “the property
in question.”
4. The petitioner/trust was running a public charitable hospital on
the property in question, since 1991. The said hospital was closed down
in the year

Page: 881

2004. The petitioner/trust filed an application dated 4-3-2008 in the

prescribed form under section 36(1)(a)/(b) of the said Act, before the
Joint Charity Commissioner, Latur Region, Latur for grant of sanction to
alienate the property in question. The reasons for alienation, as were
stated in the application, are reproduced below:
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“The trust was running a hospital for quite some time on the
property. But due to low patient response and due to the better
Commercial medical facilities available at the same area the Trust
was not in a position to run the hospital due to non-recovery of
MINIMUM MAINTENANCE cost and it was just not possible for the
Trust to run the hospital with such a poor turn out of the patients
and hence the Trust had to discontinue its hospital services 3 years
back i.e. it was closed in the year 2004, by incurring losses.
Presently, it is being abandoned without any activity and on the
contrary the Trust is incurred losses for the maintenance of the
hospital and the property and thus it is just and equitable to dispose
of the property in the interest of the Trust.”
5. On 16-8-2008, the order was passed by the Joint Charity
Commissioner for inviting fresh bids in respect of the property in
question, by publishing an advertisement in English daily newspaper
“Times of India” and Marathi daily newspaper “Loksatta”. It seems that
accordingly, notices were published on 24-9-2008 in both the
newspapers. The highest bid was that of I.T.M. Business School,
Mumbai, the respondent No. 4 herein, for an amount of Rs.
6,80,00,000/. The said bidder deposited 10% of the amount of offer i.e.
Rs. 68,00,000/in the office of the Joint Charity Commissioner, as was
required.
6. The Joint Charity Commissioner by his order dated 11-11-2008,
rejected the application No. 4/2008, filed by the petitioner for grant of
sanction for alienation of the property in question. Although, it is held
that the alienation is in the interest and for the benefit of the trust, it is
also held that the trust has failed to prove the genuine need for
alienation of the property in question. It was held that the property in
question was allotted by CIDCO at concessional rate, only because the
petitioner/trust showed willingness to run the charitable hospital, for
the poor persons from the society, at Panvel area. The property in
question was granted on lease to the petitioner/trust by CIDCO at
meagre rent, keeping in view the purpose for which, the property was
asked for. Although, it was accepted that the trust was running the
hospital since 1991 to 2004, when it was closed down, it was held that
the petitioner/trust has failed to establish that it was not in a position
to run the hospital, for want of sufficient income. It was held that the
trustees have forgotten, that the charity and the profitable income,
cannot run together and the petitioner/trust, which is found to be
financially sound, was expected to run the hospital, for charitable
purpose and not for the purpose of earning profits out of it. It was held
that the trust can make out loss, out of the income from other profit
making units of the trust like medical and engineering colleges run by
the said trust. The Joint Charity Commissioner also noted that the
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valuation report submitted by the petitioner/trust from Bharadwaj

Company shows the distress sale value of the said property at Rs.
5,85,00,000/-, whereas the actual market value of the property was
found to be Rs. 6,80,00,000/-. Thus, for all such reasons, the
application filed by the petitioner/trust was rejected and

Page: 882

it was directed that the cheque/draft of deposit of 10% amount given

by I.T.M. Business School, Mumbai be returned.

7. The petitioner/trust filed another Application No. 13/2008 on 27-

11-2008, seeking permission to alienate the property, after filing
necessary documents, showing the income and expenditure over the
hospital and trying to justify the need for sale of the property. This
application was rejected by the Joint Charity Commissioner by his order
dated 23rd January, 2009, holding that the second application for the
same relief, is not tenable and the question that the trust was having
genuine need for alienation of the property, does not arise.
8. The learned counsel for the petitioner has urged that the property
in question was granted on lease by CIDCO for the purpose of running
charitable hospital. However, by communication dated 14-3-2007,
placed on record of the Joint Charity Commissioner, no objection for
transferring the property in question, to the trust having the same
objective, was granted, subject to the grant of permission by the
Charity Commissioner. According to him, there was no impediment for
transfer of such property by CIDCO. The learned counsel has further
urged that the petitioner/trust has established its genuine need and the
Joint Charity Commissioner was in error in holding that the
petitioner/trust has failed to establish genuine need for alienation of the
property in question. He has urged that in fact the question, whether
there is need or such a need is genuine or not, cannot be gone into by
the Joint Charity Commissioner under section 36(1) of the said Act, as
it would amount to exercising appellate jurisdiction over the decision of
the trustees of the trust. According to him, there is a presumption that
the trustees shall be acting for the welfare and benefit of the trust, in
taking such decision and the Joint Charity Commissioner cannot sit in
appeal to judge the object, propriety and justification of the decision
taken by the trustees.
9. The learned counsel for petitioner further urged that what the
Charity. Commissioner is required to see under section 36(1) of the
said Act, is that the alienation sought to be made, is in the best
interest of the trust and the trust gets the best price upon alienation of
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the tmst property. He submits that the Joint Charity Commissioner has
carried out such exercise and was satisfied that the sale of the property
at Rs. 6,80,00,000/- would be in the interest of the trust and having
recorded such finding, could not have rejected the application, on the
ground that the trust has not established the genuine need for
alienation. He further submits that the Charity Commissioner has also
erred in holding that instead of selling the property, the trust can very
well construct boys hostel and other buildings required for the medical
college, run by the trust at Nerul. According to him, the Joint Charity
Commissioner cannot substitute his decision for the decision of the
trust. He further submits that the Charity Commissioner has interfered
with the decision of the trustees to sale the property, on the grounds,
which are not germane to the object and purpose of the powers
conferred under section 36(1) of the said Act. He relies upon the
following decisions of this Court.
(a) 2004 (2) Mh.L.J. 792, Suburban Education Society, Mumbai v.
Charity Commissioner of Maharashtra State, (b) 2006 (1) Mh.L.J.
809, Bara Imam Masjid Trust v. Charity Commissioner, Maharashtra
State.

Page: 883

He further submits that at the most, the Charity Commissioner could

have imposed such conditions as he deems fit and proper, regard being
had to the interest, benefit or protection of the trust property as
contemplated by section 36(1)(b) of the said Act, but sanction could
not have been refused.
10. The learned A.G.P. supports the order passed by the Joint
Charity Commissioner, whereas Shri K.C. Sant, learned counsel
appearing for respondent No. 4 in both the writ petitions, supports the
arguments advanced by Shri Vinit Naik, learned counsel for petitioner,
as it was the bid of the respondent No. 4.
11. The question is, whether the Joint Charity Commissioner was
justified in refusing to grant sanction under section 36(1) of the said
Act on the ground that the trust has failed to establish the genuine
need, although, a finding is recorded that the proposed alienation is in
the interest of trust.
12. The Full Bench of this Court in its judgment reported in 2007 (3)
Mh.L.J. 717 in the case of Sciilesh Developers v. Joint Charity
Commissioner, Maharashtra had an occasion to consider the scopfc of
the powers conferred upon the Charity Commissioner under section 36
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of the said Act, read with section 73 and Rule 7 and 24 of the Rules
framed under the said Act. It has been held in paragraph 17 that the
Charity Commissioner under section 36 of the said Act, discharges
judicial function and in paragraph 28, it has been held that before
passing an order of sanction or authorization, the Charity Commissioner
has to be satisfied, that the trust property is required to be alienated
and once the necessity of sale or transfer is established, then the
Charity Commissioner can certainly ensure that the best available offer
is accepted, so that the transaction is for the benefit of the trust. In the
same paragraph, it has been further held that 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.
13. In another decision of the Division Bench of this Court reported
in 2004 (2) Mh.L.J. 792 cited supra, which is infact relied upon by the
learned counsel for the petitioner, it has been observed in para 12 of
the said judgment, that the Apex Court as also this Court, has time and
again held that the Charity Commissioner should consider the need of
the trust and grant permission, wherever the property of the trust is
being sold after following the procedure, so that the market value of the
property is received by the trust. In para 16 of the said judgment, it
has been held that the Charity Commissioner, in the first place, is
required to consider, whether the trust has a genuine need for the
purpose of selling its immovable property and secondly, whether the
said property is being sold in the interest of the trust and its
beneficiaries. In view of these two judgments, I need not delve upon
the scope of powers of Charity Commissioner under section 36 of the
said Act, any more.
14. In view of aforesaid two judgments of this Court, it is apparent
that the Charity Commissioner, while according sanction under section
36(1) of the said Act read with section 73 and Rule 7 and Rule 24 of
the Rules, has to be satisfied that the property should be disposed of.
Such a satisfaction has to be reached, only upon an enquiry as to the
necessity for the proposed alienation, and that such alienation is in the
interest of Trust. Hence, the findings in respect of following three things
apart from other aspects involved in each case, is must.

Page: 884

(1) That, there is need to alienate the property;

(2) That, the need put forth is found to be genuine; and
(3) That, the alienation is in the interest of the trust and its
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beneficiaries.
In the absence of all the three findings, no order of sanction under
section 36(1) of the said Act, can be passed. Thus, merely because the
Charity Commissioner has recorded a finding that the proposed
alienation is in the interest of trust, that by itself is not enough to
accord his sanction. If it is found that there is no need to alienate the
property or that the need put forth is not found to be genuine, the
sanction can be refused.
15. In the instant case, the Joint Charity Commissioner, after going
through the entire evidence put forth by the petitioner/trust, has
recorded a finding that there is no need to sell the property and in fact,
the need put forth is not found to be genuine. The finding is recorded
that the valuation report submitted by the Trust showed the distress
sale value of the property at Rs. 5,85,00,000/- as against the real
market value of Rs. 6,80,00,000/-. It is also the finding recorded that
the trust has failed to establish that it is not in a position to run the
hospital for want of sufficient income from it. The further finding is
recorded that the trust has very good financial position, as it is running
the engineering and medical colleges and the object and purpose for
which the property is allotted by CIDCO would be frustrated, if property
in question is alienated. Such a findings on facts based upon relevant
consideration and material placed on record, cannot be reopened in
exercise of jurisdiction of this Court under Articles 226 and 227 of the
Constitution of India. There is neither any illegality, irrationality or
perversity in recording such findings pointed out. Hence, no
interference is called for.
16. Section 36(1) of the said Act regulates the power of Trustees to
alienate the property, subject to the control of Charity Commissioner, to
grant sanction. While exercising such control, the Charity Commissioner
being the custodian of the trust property, is competent to find out, that
the trustees are interested in protecting and preserving the property of
the Trust, that there subsists a real and genuine need, and that the
decision to alienate is taken for genuine purpose and lawful necessity.
In view of Nature, Scope and Power of inquiry conferred upon the
Charity Commissioner under section 36(1), 73 of the said Act read with
Rule 24 of the Rules, no constraints can be read in the power of Charity
Commissioner and it can extend to find out the object, propriety,
legality and justification for such alienation. As pointed out earlier, the
Full Bench has held that 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 obtaining of prior sanction. The findings
recorded cannot, therefore, be said to be beyond the scope of power
under section 36(1) of the said Act.
17. The learned counsel for the petitioner has urged that the Joint
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Charity Commissioner ought to have seen that the Trust was not in a
position to run and maintain the hospital which was closed down in the
year 2004. According to him, sanction could have been granted by
imposing certain conditions as the Joint Charity Commissioner may
deem fit and proper for alienation of the property in question. However,
he could not have refused to accord his sanction, particularly when, it is
found that the proposed alienation is in the interest of the trust. The

Page: 885

submission cannot be accepted for the reason that the Charity

Commissioner, having once found that there was no necessity to sell
the trust property, the question of imposing conditions to grant
sanction would not arise. Merely because Trust has closed down the
hospital in the year 2004, would not establish there is need to sell the
property in question and that such need is genuine.

18. The decision relied upon by the learned counsel for the petitioner
in case of Bara Imam Masjid cited supra for the proposition that the
Charity Commissioner cannot substitute the decision of the trust, is of
no help for the reason that the Charity Commissioner has merely
discussed the alternate avenues, open for the trustees. As pointed out
earlier, in order to judge the object, propriety, justification and legality
of such alienation, it has to be seen, whether trustees have tried to
explore other possibilities. Unless a specific direction is issued by the
Charity Commissioner to utilize the property in question, for any
particular purpose, it cannot be said that there is substitution of opinion
of trustees. In this case, there is no direction issued to the trust to
utilize the said property for other purposes. When the Charity
Commissioner has refused to grant his sanction under section 36(1) of
the said Act, the question of substituting his own opinion, does not
arise. It is true that in the said judgment of the learned Single Judge, it
has been held that the Charity Commissioner cannot go into the validity
of the decision, whether the property should be rightly decided to be
sold or not, and this is not the ground on which the decision of the
trustees to sell the property can be inferred with and/or set aside by
the Charity Commissioner in his exercise of his jurisdiction under
section 36(1) of the said Act, still the said observations are contrary to
the law laid down by the Division Bench and Full Bench of this Court
which is referred to in earlier para, wherein it has been expressly held
that the Charity Commissioner can find out the actual necessity of sale
or transfer of the property and whether need put forth for alienation is
genuine or not. I am bound by the decision of the larger bench. Hence,
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the contention raised by the learned counsel is rejected.

19. The Writ Petition No. 6073/2009, challenges the decision of the
Joint Charity Commissioner, holding that in view of his earlier decision
rendered on the application under section 36(1) of the Bombay Public
Trusts Act, the second application for the same relief is not tenable. The
decision given cannot be faulted with as it is based upon the principle
of public policy. The same is legal and proper and needs no
interference.
20. In the result, there is no substance in the instant writ petitions.
The same are, therefore, dismissed. Rule is discharged. No order as to
costs.
Petitions dismissed.
———
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