MANU/MH/0218/2007

Equivalent/Neutral Citation: 2007(4)ALLMR100, 2007(3)BomC R7

IN THE HIGH COURT OF BOMBAY

Writ Petition Nos. 759 of 1993, 1641 and 2499 of 2005
Decided On: 14.02.2007
Sailesh Developers and Ors. Vs. The Joint Charity Commissioner Maharashtra, Greater
Mumbai Region and Ors.
Hon'ble Judges/Coram:
F.I. Rebello, V.K. Tahilramani and Abhay Shreeniwas Oka, JJ.
Counsels:
For Appellant/Petitioner/Plaintiff: D.J. Khambatta, Sr. Counsel, M.S. Doctor and D.G.
Rangras, Advs. in Writ Petition No. 1641 of 2005, Ajit Kapadia and Aditya Chitale,
Advs.,i/b., Purohit and Purohit, Advs. in Writ Petition No. 759 of 1993, Sunil V. Manohar
and Chandana Salgaocar Radia, Advs. in Writ Petition No. 3023 of 2005
For Respondents/Defendant: R.M. Sawant, Govt. Pleader for Respondent No. 1, Shyam
Mehta and Cyrus Ardeshir, Advs., Madekari/b., Co. for Respondent Nos. 2 and 3,
Virendra V. Tulzapurkar and P.K. Samdani, Sr. Counsels, Sandeep Parekh, Adv.,i/b.,
Kishore Thakordas, & Co. for Respondent No. 8 in Writ Petition No. 1641 of 2005, S.M.
Dandekar, AGP for Respondent No. 1, Phiroze Colabawala, Adv., Mulla andi/b., Mulla,
and Craigie Blunt and Caroe for Respondent Nos. 2 to 6, V.A. Thorat, Sr. Counsel and
P.M. Rustomkhan, Adv. for Respondent Nos. 8 and 9 in Writ Petition No. 759 of 1993,
R.M. Sawant, Govt. Pleader for Respondent No. 1, Shyam Mehta and Cyrus Ardeshir,
Advs., Madekari/b., & Co. for Respondent Nos. 2 and 3, Virendra V. Tulzapurkar and
P.K. Samdani, Sr. Counsels, Sandeep Parekh, Adv., Kishore Thakordasi/b., & Co. for
Respondent No. 8 in Writ Petition No. 3023 of 2005
For Intervenor: Owen Menezes, Adv.
Case Note:
Trusts and Property - trust property - Section 36 of the Bombay Public Trusts
Act, 1950 - power vested to Charity Commissioner under Section 36 is not
restricted merely to grant or refuse sanction to a particular sale transaction -
power of the Charity Commissioner also 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 of the trust - while deciding which is the best offer the Charity
Commissioner is bound to take into consideration various factors which
cannot be exhaustively listed - the party who submits his offer directly before
the Charity Commissioner has to comply with requirements as may be laid
down in this regard - such person has a locus standi to challenge the final
order passed in a proceeding under Section 36
Ratio Decidendi:
the party who submits his offer directly before the Charity Commissioner has
to comply with requirements as may be laid down in this regard ""
JUDGMENT
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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.

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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
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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

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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. MANU/MH/0258/1978 :
1979 MH.L.J. 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. of being always trustees
(f) He submitted that in the case of Mehrwan Homi Irani and Anr. v. Charity
Commissioner, Bombay and Ors. MANU/SC/0299/2001 : AIR2001SC2350 , 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 benefited 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 entered 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).
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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 as
issue
(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
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 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 the employed 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
MANU/SC/0299/2001 : AIR2001SC2350 does not law and the Division
Bench in the Khan (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

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 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 installments. 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.
1 3 . Shri Kapadia appearing for one of the Petitioners submitted that even after a

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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

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 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. MANU/MH/1019/1991 : 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 MANU/MH/1017/2003 :
2004(2)MhLj792 . 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.

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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).
1 7 . 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 courts Officers 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 the same of
(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.
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 [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
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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
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 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 property 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

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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
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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 Stroud's 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.
2 2 . 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 MANU/SC/0072/1957 : [1958]33ITR472(SC) . The Apex
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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
MANU/SC/0433/1989 : AIR1990SC444 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
defendant trustee 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:

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 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 MANU/SC/0372/1986 : [1986]1SCR989 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 MANU/SC/0017/1985 : AIR1985SC1147 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. MANU/SC/0585/1994 : (1994)1SCC475 . 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
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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.
MANU/SC/0372/1986 : [1986]1SCR989 . 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:

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 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 Court 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
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 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. MANU/SC/0299/2001 : AIR2001SC2350 . 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
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 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 the 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.
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2 8 . 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

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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.
2 9 . 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.

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