charity commissioner receiver

7/31/2019 Charity Commissioner Receiver

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

WRIT PETITION NO. 1486 of 1994WITH

CHAMBER SUMMONS NO. 63 OF 2005

1. M/s. N.D. Construction, a partnership firm )carrying on business at 4-A, Ceaser Road, )

Amboli, Andheri (West), Bombay-400 058 )

2. Nikhil Nupendra Jhaveri )

3. Digamber Bhaskar Sapare )

Both of Bombay, Indian Inhabitants, Partners of )Petitioner No.1, having their addresses at 4-A, Merry )Blessings, Ceaser Road, Amboli, Andheri (West), )Bombay-400 058 ).Petitioners

versus

1. State of Maharashtra )

2. Charity Commissioner of Bombay, having his office at )Dharmaday Ayukta Bhawan, Dr. A. Bapat Road, )Worli, Bombay-400 018 )

3. F.E. Dinshaw Trust, a Public Charitable Trust, )registered under the Bombay Public Trust Act, 1950 )

and having their office at 412 Churchgate Chambers, )5, Sir Vithaldas Thakersey Marg, Bombay-400 050 )4. Nusli Neville Wadia )

5. Mrs. Nasreen Nusli Wadia )

6. Mr. Batra )

The Trustees of F.E. Dinshaw Trust, having their office )at 412, Churchgate Chambers, )5, Sir Vithaldas Thakersey Marg, Bombay-400 050 )


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7. Bhattad Leasing and Finance Company Ltd., a Company )incorporated under the Companies Act 1 of 1956, )

and having their office at 104, Bajaj Bhavan, Nariman )Point, Bombay-400 021 ).Respondents

Ms. Rajani Iyer, Senior Advocate, with Mr. Salil Shah, Mr. Tushar Bhavsar, Ms.Tanmayi Gadre, Mr. R.A. Shah, Ms. Purvi Ashar, Ms. Priyanka Choksi and Ms.

Ajinkya Patil, instructed by M/s. Mansukhlal Hiralal & Co., for the petitioners.

Mr. K.R. Belosey, A Panel Counsel for respondent No.1.

Mr. N.H. Seervai, Senior Advocate, with Mr. Gautam Ankhad & Ms. Falguni

Thakkar, instructed by M/s. Doijode Associates, for respondent Nos. 3 to 6.

Mr. P.K. Dhakephalkar, Senior Advocate, with Mr. Devrajan, Mr. S. Purohit andMr. Sameer Singh, instructed b y M/s. Vimadalal & Co., for respondent No.7.

Mr. J.B. Chinai, Senior Advocate, with Mr. Sanjay Jain, Ms. Armin Wandrewalaand Mr. Vasim Shaikh, instructed by M/s. Pravin Mehta & Mithi & Co., for the

Applicants-Krisha Developers- in Chamber Summons No. 63 of 2005.

WITHWRIT PETITION NO. 1814 OF 1994

1. Nusli N. Wadia )

2. Mrs. Maureen N. Wadia )

3. Rajesh Batra )

4. Hudrali Subbana Srinivas )

All of Bombay, All Trustees of F.E. Dinshaw Trust, )

a Public Charitable Trust, Registered at serial No. )E-6123, under the Bombay Public Trusts Act, 1950 and )Serial No.1 also Administrator of the Estate of E.F. Dinshaw)all having their address at 412 Churchgate Chambers, )5 Sir Vithaldas Thackersey Marg, Bombay-400 020 )

5. F.E. Dinshaw Trust, having their address at the )above mentioned premises. )..Petitioners

versus


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1. The Charity Commissioner, Maharashtra State )Bombay, having his office at Dharmadaya Ayukta Bhavan, )

83, Dr. Annie Besant Road, Worli, Bombay-400 018 )

2. M/s. Bhattad Leasing and Finance Co. Ltd., a company )incorporated under the provisions of the Companies )

Act, 1956, having its registered/principal office at )104 Bajaj Bhavan, Nariman Point, Bombay-400 021. )

3. M/s. N.D. Construction, a partnership firm )

4. Nikhil Nupendra Zaveri, Indian Inhabitant )

5. Digambar Bhaskar Sapre, Indian Inhabitant )

Respondent Nos. 3 to 5 having office at D-104, Sham Kamal, ) Agrawal Market, Vile Parle (East), Bombay-400 057 ).Respondents

Mr. N.H. Seervai, Senior Advocate, with Mr. Gautam Ankhad & Ms. FalguniThakkar, instructed by M/s. Doijode Associates, for the petitioners.

Mr. P.K. Dhakephalkar, Senior Advocate, with Mr. Devrajan, Mr. S. Purohit andMr. Sameer Singh, instructed b y M/s. Vimadalal & Co., for respondent No. 2.

Ms. Rajani Iyer, Senior Advocate, with Mr. Salil Shah, Mr. Tushar Bhavsar, Ms.Tanmayi Gadre, Mr. R.A. Shah, Ms. Purvi Ashar, Ms. Priyanka Choksi and Ms.

Ajinkya Patil, instructed by M/s. Mansukhlal Hiralal & Co., for respondent Nos.3 to 5.

CORAM: P.B. MAJMUDAR & R.M. SAVANT, JJ.

DATE: SEPTEMBER 07, 2011.

ORAL JUDGMENT: (Per P.B. Majmudar, J. )

1. Both these petitions are directed against the order of the

Charity Commissioner dated 27 th April, 1994 passed under Section 36 (2)


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of the Bombay Public Trusts Act, 1950 (hereinafter the Act), by which

the Charity Commissioner has revoked the sanction granted for sale of the

land belonging to F.E. Dinshaw Trust (the Trust). The said order of the

Charity Commissioner is challenged by the petitioners in Writ Petition No.

1486 of 1994 in whose favour sanction was granted for sale of the land as

well as by the Trust by way of Writ Petition No. 1814 of 1994. The Trust

has filed the said writ petition only for expunging the remarks made

against the Trust by the Charity Commissioner in the impugned order.

2. The subject matter of the proceedings under Section 36 of the

Act is the huge property belonging to the F.E. Dinshaw Trust situated at

Malad, bearing Survey No. 79 (Part), CTS No. 226 (Pt.), admeasuring

94,511 sq.mtrs. The said Trust made an application under Section 36 (1)

of the Act to the Charity Commissioner seeking his sanction for the sale of

the said property. The Charity Commissioner granted sanction to the Trust

on 6th

April, 1992, by which the Trust had agreed to sell the property toone N.D. Construction (hereinafter N.D. Construction) i.e. Writ

Petitioner in Writ Petition No. 1486 of 1994. The order passed by the

Charity Commissioner granting such sanction under Section 36 (1) of the

Act was challenged by one of the unsuccessful bidders viz. Bhattad

Leasing & Finance Co. Ltd. (hereinafter Bhattad Leasing), who have been


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joined as respondents in both the petitions. The said Bhattad Leasing filed

Writ Petition No. 931 of 1992 challenging the said sanction. A Division

Bench of this Court dismissed the said writ petition on 24 th April, 1992, by

holding that no interference is called for against the order of the Charity

Commissioner granting sanction under Section 36 (1) of the Act. The

Special Leave Petition filed against the said order was also dismissed by

the Supreme Court vide its order dated 14 th July, 1992.

3. Subsequently, the said Bhattad Leasing, whose offer was not

found favourable by the Charity Commissioner for purchase of the said

land, moved an application for revocation of the sanction granted by the

Charity Commissioner on 6 th April, 1992 on various grounds. The said

application was preferred under Section 36 (2) of the Act. The Charity

Commissioner came to the conclusion that the Trust had concealed

material aspects at the time when the application under Section 36 (1) of

the Act for getting sanction was made. The Charity Commissioner,accordingly, allowed the said application and revoked the sanction granted

on 6 th April, 1992, vide his order dated 27 th April, 1994. It is the aforesaid

order of the Charity Commissioner which is impugned at the instance of

N.D. Construction, in whose favour the sanction was granted. The trust

has also filed a substantive petition challenging the said order being Writ


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Petition No. 1814 of 1994. The Trust has, however, filed this petition only

for a limited prayer that the observations made by the Charity

Commissioner about about fraud and misrepresentation on the part of the

Trustees be expunged. The Trust has not challenged the part of the order

by which while revoking sanction, the Charity Commissioner has directed

fresh bid between N.D. Construction and Bhattad Leasing.

4. In so far as Writ Petition No. 1486 of 1994 is concerned, the

order of the Charity Commissioner is challenged on various grounds as,

according to the petitioner of the said writ petition, the Charity

Commissioner had no jurisdiction to entertain application under Section

36 (2) of the Act especially when the order granting sanction under

Section 36 (1) of the Act has been confirmed by this Court in Writ Petition

No. 931 of 1992 and thereafter by the Apex Court. The said order is also

challenged on the ground that there was no misrepresentation or fraud on

the part of the Trust and the Charity Commissioner, therefore, was not justified in revoking the sanction granted earlier. The said order is also

challenged on the ground that the Charity Commissioner has no power to

review his earlier order while exercising powers under Section 36 (2) of

the Act. It is also alleged that at the instance of Bhattad Leasing, the

Charity Commissioner ought not to have exercised his power under Section


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36 (2) of the Act as the offer of Bhattad Leasing was not found favourable

initially when the Charity Commissioner decided the matter under Section

36 (1) of the Act. It is alleged that the said Bhattad Leasing was aware of

the facts on the basis of which allegations and averments were made in the

application under Section 36 (2) of the Act, yet Bhattad Leasing had taken

part in the bidding at the stage of 36 (1) and had not placed at that stage

nor such issue was raised when they filed the said Writ Petition No. 931 of

1992. Considering the conduct of the said Bhattad Leasing, the Charity

Commissioner ought not to have exercised his powers at the instance of

Bhattad Leasing and no cognizance should have been taken about the

allegations made by the said Bhattad Leasing. On behalf of N.D.

Constructions, it is argued that they are not required to disclose any facts

before the Charity Commissioner as the matter under Section 36 (1) of the

Act is only between the Trust and the Charity Commissioner. On behalf of

petitioners i.e. N.D. Construction, it is argued by Ms. Iyer, learned Senior

Counsel, that in any case on the basis of the sanction granted by theCharity Commissioner, the Petitioners had deposited a substantial amount

with the Trust and in view of the facts and circumstances of the case, the

impugned order is required to be set aside and the sanction granted by the

Charity Commissioner is required to be maintained in respect of the

transaction in question.


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5. In order to appreciate the controversy raised in the matter, it is

necessary to refer to certain factual aspects of the matter.

6. The Trust in question is known as F.E. Dinshaw Trust. It is a

Public Trust registered under the said Act. Since there was an extensive

encroachment over the land in question, the Trust decided to sell the said

land and for that purpose, the Trust entered into an agreement for sale of

the land in favour of N.D. Construction, which is a partnership firm. Since

the property of the Trust cannot be sold without the sanction of the

Charity Commissioner under Section 36 (1) of the Act, the Trust applied

for such sanction before the Charity Commissioner. However, before

entering into transaction with N.D. Construction, the Trust issued an

advertisement in Marathi newspaper Loksatta on 3 rd September, 1988 as

well as in the Free Press Journal dated 8 th September, 1988, inviting offers

for purchase of property. It is the case of the Trust that in view of thesubstantial encroachment over the land, it was not possible for the Trust

to develop the property and for removal of encroachment, the Trust would

be required to incur heavy expenditure for filing various suits against the

encroachers. After entering into agreement with N.D. Construction, an

application was preferred by the Trust under Section 36 (1) of the Act


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before the Charity Commissioner on 15 th June, 1989. The Charity

Commissioner, whilst deciding the said application, granted sanction by

approving the transaction of the Trust with N.D. Construction. As pointed

out earlier, the said order was challenged by Bhattad Leasing by way of

Writ Petition No. 931 of 1992 as the said Bhattad Leasing had also given

its offer and was interested in purchasing the land in question. The said

writ petition, as stated above, was rejected by this Court by upholding the

decision of the Charity Commissioner and Special Leave Petition against

that order was also dismissed by the Supreme Court. Subsequently, the

said Bhattad Leasing preferred an application under Section 36 (2) of the

Act. In the aforesaid application, an averment was made about fraud and

misrepresentation on the part of the Trust at the time of applying for

sanction before the Charity Commissioner. In the said application, an

averment was made to the effect that the Charity Commissioner was

totally misled by the Trust that the entire land is encroached by slums and

there is no vacant land on the said plot. The said application was preferredmainly on two grounds i.e. (i) that the trust made misrepresentation

before the Charity Commissioner as regards extent of encroachment over

the land in question and (ii) there was concealment on the part of the

Trust regarding the transaction which had taken place between N.D.

Construction and one Pawan Bairagra by which the intending purchaser,


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N.D. Construction, had agreed to sell the land for a sum of Rs. 3.16 crores.

A grievance was made before the Charity Commissioner that the sanction

was obtained from the Charity Commissioner for sale of land at a very

meagre price as against that the purchaser N.D. Construction has already

entered into agreement for sale with the said Pawan Bairagra before the

Trust had even applied for sanction. In support of the said contentions,

averments were made in detail in the application preferred under section

36 (2) of the Act. The Charity Commissioner, after hearing the concerned

parties, came to the conclusion that the Trust had not disclosed necessary

factual aspects at the time when the Charity Commissioner granted

sanction under Section 36 (1) of the Act. The Charity Commissioner came

to a conclusion that the Trust has deliberately misled him and an

impression was given as if the entire land was under encroachment. It was

ultimately found that the entire land was not encroached but only some

portion of the land was under encroachment. The Charity Commissioner

also found that before obtaining sanction under Section 36 (1) of the Act,the fact regarding agreement between the intending purchaser N.D.

Construction and Pawan Bairagra was suppressed by the Trust especially

when a public notice was already issued in the newspapers about such

transaction, yet the Trustees had not pointed out the said fact at the time

when sanction under Section 36 (1) was obtained. The Charity


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Commissioner accordingly found that in view of the aforesaid aspect of the

matter, the sanction granted under Section 36 (1) of the Act is required to

be revoked.

7. The learned Senior Counsel Ms. Iyer, appearing for N.D.

Construction, vehemently submitted that the Charity Commissioner has

gravely erred in revoking the sanction as the Charity Commissioner was

not exercising reviewing powers. It is submitted by the learned counsel

that in any case, the agreement entered into by N.D. Construction and

Pawan Bairagra was not on behalf of the partnership firm but it was only

one of the partners of N.D. Construction who has entered into such an

agreement which was not a genuine agreement of sale but it was in

connection with money transaction between one of the partners of the

firm. It is submitted by the learned counsel that the price reflected in the

said agreement was not genuine consideration and subsequently a suit was

filed by the said Pawan Bairagra on the basis of the said agreement andultimately the same was withdrawn in view of the settlement reached

between the parties. It is submitted that the said suit was without any basis

and even it it was tried, it would have been dismissed by the Court. It is

submitted by the learned senior counsel that since considerable portion of

the land was under encroachment and since it was not possible for the


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Trust to remove encroachment without incurring heavy expenditure that

ultimately the Trust decided to sell its property and the said N.D.

Construction agreed to purchase the same but was required to move the

Court for having the encroachment removed for which they were required

to spend large amount. It is submitted that the Charity Commissioner has

committed an error in passing such an order especially when the earlier

sanction under Section 36 (1) of the Act is confirmed by the High Court

and thereafter SLP preferred against the order of the High Court has been

dismissed by the Supreme Court. It is submitted that the Charity

Commissioner decided the matter as if he was reviewing his earlier

decision. It is further submitted that it was not obligatory or necessary on

the part of the said N.D. Construction to disclose the factum of agreement

entered into between one of the partners of the firm with Pawan Bairagra

at the time when the Charity Commissioner processed the application

under Section 36 (1) of the Act as, according to the learned counsel,

ultimately the Charity Commissioner is required to decide the matter onthe basis of the application of the Trust and, therefore, on the basis of the

case made out by the Trust, sanction under Section 36 (1) was required to

be granted. It is submitted that N.D. Construction has no locus standi in

any manner in such proceedings and, therefore, there was no question nor

any obligation on the part of N.D. Construction to disclose or point out


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any fact to the Charity Commissioner. It is submitted by Ms. Iyer that since

Bhattad Leasing lost upto the Supreme Court while challenging the order

passed under Section 36 (1) of the Act, it could not have preferred

application under Section 36 (2) of the Act. It is submitted that Bhattad

Leasing has not pointed out any such aspect at the time when the writ

petition was filed against the order under Section 36 (1) of the Act and at

the instance of such a litigant, the Charity Commissioner should not have

exercised his powers under Section 36 (2) of the Act. Ms. Iyer further

submits that since the land was under encroachment, the bid of N.D.

Construction was found to be more reasonable by the Charity

Commissioner and having given sanction to such transaction, the order

under Section 36 (2) of the Act ought not to have been passed by the

Charity Commissioner and that the Charity Commissioner has exceeded

his jurisdiction while passing the impugned order. In order to substantiate

this, the learned senior counsel has relied upon the decision of this Court

in Writ Petition No. 968 of 1984 decided on 12th

September, 1990 in the

case of Mrs. Fatmabai B. Bachooali vs. State of Maharashtra and others ,

wherein it is held by the learned single Judge that the power under Section

36 (2) was not a general power of review and could be invoked only if

some fraud, misrepresentation or the concealment of the material facts

existed. The learned single Judge of this Court has held in the said decision


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that powers under Section 36 (2) could not have been exercised after the

execution of the sale deed between the parties. Ms. Iyer has also relied

upon the decision of the Division Bench in the case of Mahadeo Deosthan,

Wadali and others vs. Joint Charity Commissioner, Nagpur and others 1

wherein the Division Bench also taken the view that revocation of sanction

granted under Section 36 (1) of the Act is not permissible after execution

of sale deed pursuant to the grant of sanction. The learned counsel also

relied upon certain photographs in order to substantiate her contention

that considerable part of the land was under encroachment and it was a

marshy land and in view of the same the Charity Commissioner ought not

to have exercised his powers under Section 36 (2) of the Act. Ms. Iyer has

also pointed out that in any case regarding the transaction with Pawan

Bairagra, a newspaper advertisement was already given and, therefore, it

can be presumed that the Trust was having knowledge about the same. It

was, therefore, the duty of the Trust to point out the said aspect to the

Charity Commissioner at the time of hearing of the application under

Section 36 (1) of the Act and no fault can be found with N.D.

Construction in this behalf as they are not expected to disclose anything at

the time when sanction was to be given by the Charity Commissioner.

1 1989 Mh. L.J. 269


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8. The learned Senior Counsel Mr. Seervai, appearing for the

Trust, has also submitted that the Charity Commissioner has gravely erred

in coming to the conclusion that the Trust has committed fraud or

misrepresented while obtaining sanction under Section 36 (1) of the Act. It

is submitted that considering the application of the Trust before the

Charity Commissioner for the purpose of getting sanction, the Trust has

stated that the land in question is under encroachment but there was no

averment in the application that the entire land was under encroachment.

It is submitted that substantial portion of the land was under

encroachment and even a Valuers Report was also attached confirming

the said aspect and in view of the same, the Charity Commissioner ought

to have held that substantial portion of the land was under encroachment

and, therefore, the Charity Commissioner has committed an error in

holding that the Trust has misrepresented or committed fraud as it was not

the stand of the Trust that the entire land was under encroachment. It is

further submitted by Mr. Seervai that even otherwise, the sale was to beeffected on the basis of as is where is basis and, therefore, the same was

to be effected with whatever encroachment was there on the land and as

per the existing position of the land. It is submitted by Mr. Seervai that it

was for the purchaser to go and inspect the land and satisfy

himself/herself about the same. It is further submitted by Mr. Seervai that


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since it was not possible for the Trust to remove encroachment without

resorting to litigation and since it was a time consuming as well as money

consuming matter, it was decided to sell the land. Mr. Seervai, however,

submitted that the Trust was not knowing about the agreement entered

into on behalf of the intending purchaser N.D. Construction with Pawan

Bairagra wherein sale consideration is shown to be on a very high side. It

is submitted that at the time when Pawan Bairagra filed a civil suit

wherein the Trust was also joined as one of the defendants, only on receipt

of the Summons that the Trust came to know about such transaction for

the first time. It is submitted by Mr. Seervai that at the time when

application under Section 36 (1) of the Act was preferred, this factual

aspect was not within the knowledge of the Trust and, therefore, there was

no question of suppression on the part of the Trust in this behalf. Mr.

Seervai tried to demonstrate that both the grounds on the basis of which

the order is passed by the Charity Commissioner are not sustainable at all

and the remarks made against the Trustees about fraud andmisrepresentation is required to be expunged from the order. Mr. Seervai,

however, submitted that it is true that the intending purchaser N.D.

Construction had suppressed material fact from the Charity Commissioner

regarding the agreement entered into between N.D. Construction and

Pawan Bairagra wherein it was agreed to sell the land at Rs. 3.16 crores


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and even if it is presumed that the Trustees had acted fraudulently or

made misrepresentation before the Charity Commissioner, yet the Charity

Commissioner can exercise powers under Section 36 (2) of the Act, if one

of the parties i.e. Intending purchaser has suppressed certain facts from

him. It is submitted by Mr. Seervai that Section 36 (2) of the Act is

required to be interpreted in such a manner that any party on whose

favour sanction is to be given suppresses any material aspects, the Charity

Commissioner can still exercise the powers under Section 36 (2) of the Act.

It is submitted by Mr. Seervai that in view of the same and considering the

fact that now considerable time has passed and since no sale deed has

been executed in favour of the intending purchaser, the Charity

Commissioner now may be directed to invite fresh bids so that the Trust

may benefit by getting the correct market price prevailing as on today for

which the learned senior counsel has relied upon the Full Bench decision

of this Court in the case of Sailesh Developers and others vs. Joint Charity

Commissioner, Maharashtra and others1

. Mr. Seervai further submits that

the imputations made by the Charity Commissioner against the Trustees in

the order are not at all sustainable and on the ground of alleged

suppression about encroached area, the Charity Commissioner has erred in

coming to the conclusion that the Trustees have suppressed the factual

1 2007 (3) Bom. C.R. 7


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aspect of the encroachment as, according to him, even if there is some

difference in the actual encroached area it cannot be said that there was

any mens rea on the part of the Trustees in not actually pointing out the

correct encroached area especially when a Valuers report was also

attached with the application. It is also submitted by Mr. Seervai that

since the advertisement had escaped the notice of the Trustees and since

the Trustees were not aware about the agreement between N.D.

Construction and Pawan Bairagra, the Charity Commissioner has erred in

observing that the Trustees had suppressed the said fact about such

agreement at the time of hearing of the said application. It is submitted by

Mr. Seervai that there is nothing on record to show that the Trustees were

having actual notice about such transaction and, therefore, observations

made by the Charity Commissioner against the Trustees in this behalf is

required to be expunged and the Charity Commissioner be asked to invite

fresh bids and take fresh decision. In support of his submissions, Mr.

Seervai has relied upon the decision of the Supreme Court in the case of

Mehrwan Homi Irani and another vs. Charity Commissioner, Bombay and

others 1. The said judgment is in connection with Section 36 of the Act. The

Supreme Court has considered the aspect about the best market price

which should be available to the Trust. The learned counsel has relied

1 AIR 2001 SC 2350


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upon relevant observations of the Supreme Court in paragraph 9 which

reads as under:

9.The counsel for the appellants also pointed out that it islikely that there would be better from other parties. Theoffer made by the appellants themselves is not very encouraging and the respondents were right in notaccepting the same. However, we are told that there were

some other offers also from some well known charitableinstitutions. In the best interest of the Trust and its objects, we feel it appropriate that respondents Nos. 2 to 4 shouldexplore the further possibility of having agreements withbetter terms. The objects of the Trust should beaccomplished in the best of its interests. Leasing out of major portion of the land for other purposes may not be inthe 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 theCharity Commissioner to take a fresh decision in the matter.There could be fresh advertisements inviting fresh proposalsand the proposal of the 5 th respondent could also beconsidered. The Charity Commissioner may himself formulate and impose just and proper conditions so that itmay serve the best interests of the Trust. We direct that theCharity Commissioner shall take a decision at the earliest.We allow the appeal as indicated above and remit the

matter to the Charity Commissioner in modification of theorders of the High Court in Writ Petition and that of Charity Commissioner.

Relying on the aforesaid judgment, Mr. Seervai submitted that with a view

to see that the Trust may be able to get the best offer, the Charity

Commissioner may be directed to invite fresh bids and to accept the bid


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which reflects the true market value of the property.

9. On the question of fraud, Mr. Seervai has relied upon the

decision of the Supreme Court in the case of Vijay Syal and another vs.

State of Punjab and others 1 wherein the Supreme Court has observed as

under in para 24.

24. In order to sustain and maintain the sanctity andsolemnity of the proceedings in law courts it is necessary that parties should not make false or knowingly, inaccuratestatements or misrepresentation and/or should not concealmaterial facts with a design to gain some advantage orbenefit at the hands of the court, when a court is consideredas a place where truth and justice are the solemn pursuits. If any party attempts to pollute such a place by adoptingrecourse to make misrepresentation and is concealingmaterial facts it does so at its risk and cost. Such party mustbe ready to take the consequences that follow on account of its own making. At times lenient or liberal or generoustreatment by courts in dealing with such matters is eithermistaken or lightly taken instead of learning a proper lesson.Hence there is a compelling need to take a serious view insuch matters to ensure expected purity and grace in the

administration of justice.

10. Mr. Seervai has further relied upon the decision of the

Supreme Court in the case of Assistant Commissioner, Income tax,Rajkot vs.

Saurashtra Kutch Stock Exchange Limited 2 in order to substantiate his case

1 (2003) 9 SCC 4012 (2008) 14 SCC 171


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about error apparent on the face of record. In paragraph 38, it has been

held by the Supreme Court that rectification of an order stems from the

fundamental principle that justice is above all. It is exercised to remove

the error and to disturb the finality.

11. Mr. Seervai has relied upon another decision of the Supreme

Court in the case of Meghmala and others vs. G. Narasimha Reddy and

others 1 on the aspect of fraud and/or misrepresentation. In paragraphs 28

and 32, the Supreme Court has observed as under:

28. it is settled proposition of law that where an applicantgets an order/office by making misrepresentation or playingfraud upon the competent authority, such order cannot besustained in the eye of the law. Fraud avoids all judicialacts, ecclesiastical or temporal (Vide S.P. ChengalvarayaNaidu v. Jagannath 2. In Lazarus Estates Ltd. v. Beasley 3 theCourt observed without equivocation that : (QB p. 712) No

judgment of a court, no order of a Minister, can be allowedto stand if it has been obtained by fraud. Fraud unravelseverything.

32. The ratio laid down by this Court in various cases isthat dishonesty should not be permitted to bear the fruit andbenefit to the persons who played fraud or mademisrepresentation and in such circumstances the Courtshould not perpetuate the fraud....

1 (2010) 8 SCC 383

2 (1994) 1 SCC 1: AIR1994 SC 8533 (1956) 1 QB 702


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KPP -22- WP Nos. 1486 & 1814 of 94

Relying on the said observations, it is argued by Mr. Seervai that if the

purchaser has suppressed any material facts, the Charity Commissioner

under Section 36 (2) can also examine this aspect and may ultimately

revoke the sanction even if it is found that the intending purchaser in

whose favour sanction is to be given has suppressed certain aspects. In

the said case, the Supreme Court ha also held that suppression of a

material document would also amount to fraud. Reference is also made to

the decision of this Court in the case of Shri Mahadeo Deosthan, Wadali

and others vs. Joint Charity Commissioner, Nagpur and others 1 by Mr.

Seervai. Ms. Iyer, learned counsel has also relied upon the said case to

substantiate their argument that revocation of sanction granted under

Section 36 (1) of the Act is not permissible after execution of the sale

deed. Though Mr. Seervai has fairly submitted that in this case no sale

deed has been executed, the scope of Section 36 (2) of the Act is therefore

required to be considered in the light of the observations of the said

judgment.

12. The learned Senior Counsel Mr. Seervai has relied upon the

decision of this Court in the case of Dr. Sam Sarosh Bhacca and others vs.

1 1989 Mh. L.J. 269


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KPP -23- WP Nos. 1486 & 1814 of 94

P.V. Kakade, Jt. Charity Commissioner and others 1 wherein same principal

has been reiterated that Section 36 (2) powers can be exercised before

execution of the sale deed. It has also been held that the Charity

Commissioner is empowered to assess any advantage received by Trustee

and direct the Trustee to pay compensation to the Trust equivalent to

advantage so assessed.

13. Mr. Seervai has relied upon an unreported decision of this

Court in the case of Shri Motilal Girdharilal Sharma and others vs. Shri

Dattatray Bandu Jagtap and others , wherein it is held that the authorities

and Courts have powers to recall their orders if they find that their orders

have been obtained by fraud, misrepresentation or concealment of

material facts.

14. The learned Senior Counsel Mr. Dhakephalkar, appearing for

Bhattad Leasing, has supported the order passed by the Charity

Commissioner and submitted that in the instant case the Trustees as well

as the intending purchasers were guilty of misrepresentation and

concealment of facts which may amount to fraud while obtaining the

order of sanction under Section 36 (1) of the Act. Mr. Dhakephalkar has

1 (1994) Bom L.R. 714


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relied upon the averments made in the application preferred under

Section 36 (1) of the Act by the Trust. It is submitted by Mr.

Dhakephalkar that as per Rule 24 of the Bombay Public Trusts Rules, 1951

(the Rules), certain facts are required to be disclosed before the Charity

Commissioner which was not disclosed in the instant case. It is submitted

that N.D. Construction was having two partners at the relevant time and

the partners are signatories to the agreement with Pawan Bairagra. It is

submitted that it is not possible to believe that the Trust may not have any

knowledge about such transaction, especially when the said fact was also

published in the newspaper. It is submitted by Mr. Dhakephalkar that

N.D. Construction had formed a cartel with Pawan Bairagra and

subsequently with one M/s. Krisha Developers and wanted to purchase the

property at a throwaway price. It is submitted that simply because order

under Section 36 (1) of the Act is confirmed by this Court and SLP was

dismissed is no ground for coming to the conclusion that subsequently

application under Section 36(2) of the Act is not maintainable. It issubmitted by Mr. Dhakephalkar that while deciding the application under

Section 36 (1) of the Act, neither the Charity Commissioner nor this Court

was concerned with the concealment of any fact at the time of granting

sanction by the Charity Commissioner. It is submitted that the Charity

Commissioner can exercise suo motu powers under Section 36 (2) of the


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Act, if any fraud or misrepresentation has come to his knowledge while

granting sanction under Section 36 (1) of the Act. It is submitted that

during the pendency of this petition, Bhattad Leasing has spent certain

amount by making payment to the Receiver and if ultimately this Court

directs the Charity Commissioner to take out fresh proceedings for sale of

the land, the expenditure incurred by Bhattad Leasing may be allowed to

be reimbursed. It is submitted by Mr. Dhakephalkar that fraud vitiates

everything and since the Charity Commissioner has, by his detailed

reasons, come to the conclusion that he was deceived at the time of

granting sanction under Section 36 (1) of the Act and, therefore, he was

entitled to revoke the order. Learned counsel further submitted that the

Charity Commissioner may be directed to invite fresh bids, from the

income which the Trust may receive, the expenditure incurred by Bhattad

Leasing towards security may be allowed to be reimbursed. In order to

substantiate his argument, Mr. Dhakephalkar has relied upon the

judgment of the Supreme Court in the case of Shrisht Dhawan (Smt.) vs.

M/s. Shah Brothers 1. It has been held by the Supreme Court in the said

case that fraud and collusion vitiate even the most solemn proceedings in

any civilised system of jurisprudence. Fraud arises out of deliberate active

role of representator about a fact which he knows to be untrue yet he

1 (1992) 1 SCC 534


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KPP -26- WP Nos. 1486 & 1814 of 94

succeeds in misleading the representee by making him believe it to be

true. The representation to become fraudulent must be of fact with

knowledge that it was false. But fraud in public law is not the same as

fraud in private law. Nor can the ingredients which establish fraud in

commercial transaction be of assistance in determining fraud in

Administrative Law.

15. Mr. Dhakephalkar has also placed reliance on the decision of

the Supreme Court in the case of Church of North India vs. Lavajibhai

Ratanjibhai and others 1. In the said case, the Supreme Court has

considered various provisions of the Act in connection with bar of Civil

Courts jurisdiction. In paragraph 44 it has been held that the Act is a

special law. It confers jurisdiction upon the Charity Commissioner and

other authorities named therein. The statute has been enacted by the

Parliament in public interest to safeguard the properties vested in the

Trusts as also control and management thereof so that the trust property

may not be squandered or the object or purport for which a public trust is

created may not be defeated by the persons having control thereover.

Relying on the aforesaid observations, it is argued by Mr. Dhakephalkar

that the Charity Commissioner has rightly passed the order under Section

1 AIR 2005 SC 254


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KPP -27- WP Nos. 1486 & 1814 of 94

36 (2) of the Act which is not required to be interfered by this Court in its

writ jurisdiction.

16. Chamber Summons No. 63 of 2005 has been preferred by one

M/s. Krisha Developers in the writ petition filed by N.D. Construction with

a prayer to implead them as respondent No.8 in the array of parties. Mr.

Chinai, learned Senior Counsel appearing for the said intervenor, submits

that Krisha Developers may be allowed to be joined as party to the present

proceedings as, according to him, Krisha Developers has been put in

possession of the land in view of the transaction entered into between

N.D. Construction and Krisha Developers. It is submitted by Mr. Chinai

that by an ad-interim order of this Court, Receiver is appointed and

presently Receiver is in charge of the property for the purpose of

safeguarding the property from encroachment. It is submitted that as per

the Receivers report it is clear that Krisha Developers was in possession

and has carried out construction of compound wall. It is submitted thateven if the intervenor may not have any valid title, yet Krisha Developers

is required to be put in possession by virtue of the provisions of Section

53A of the Transfer of Property Act, 1882 as possession was taken from it

by the Court Receiver. It is submitted that Krisha Developers was not party

before the Charity Commissioner. Since Receiver has taken over


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KPP -28- WP Nos. 1486 & 1814 of 94

possession of the property, a direction may be given to the Receiver to

hand over possession back to Krisha developers and they may be allowed

to be joined as a party by allowing the Chamber Summons. In support of

his claim regarding establishing the claim for possession, the learned

counsel has relied upon Receivers reports dated 12 th January, 1995 and

16 th January, 1995.

17. We have heard the learned counsel appearing in the matter at

great length and have also gone through the voluminous record forming

part of these proceedings.

18. The principal question which the Court is required to consider

in these writ petitions is as to whether the order of the Charity

Commissioner passed under Section 36 (2) of the Act requires

interference at our hands in these proceedings and whether the Charity

Commissioner has committed any error in passing such an order and whether in the facts and circumstances of the case, the Charity

Commissioner was justified in invoking his powers under Section 36 (2) of

the Act. If ultimately it is held that the order passed by the Charity

Commissioner in revoking the sanction granted under Section 36 (1) of

the Act is correct, what further directions can be given in view of long


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KPP -29- WP Nos. 1486 & 1814 of 94

passage of time as well as in view of the law laid down by the Full Bench

of this Court in the case of Shailesh Developers (supra). The Court is also

required to consider as to whether the strictures passed by the Charity

Commissioner against the Trustees of the Trust are required to expunged

or not.

19. At this stage it is not necessary to recapitulate the facts of the

case as the same have been adverted to earlier. As stated above, the Trust

wanted to dispose of its land as it was under heavy encroachment and it

was not possible for the Trust to take action to remove the large scale

encroachment which had taken place on the land in question. The Trust,

therefore, invited offers by issuing advertisement in the newspapers and

ultimately the Trust entered into agreement with N.D. Construction. As

per the said transaction, the sale consideration was ultimately finalised at

Rs.24,00,000/-. The Trust thereafter preferred an application before the

Charity Commissioner for sanction to the said transaction. At this stage, it

would be relevent to refer to the averments made by the Manager of the

Trust Mr. V.P. Shah in its application made under Section 36 (1) of the

Act. The relevant part of the said application reads thus:

2. The land in question is popularly known as Indira Nagar


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KPP -30- WP Nos. 1486 & 1814 of 94

and is situated on the Western side of Iraniwadi and on thesouthern side of Mahatma Gandhi Road, Kandivli. The landis under encroachment and constructions have been put up.It would be impracticable to file suits against innumerableencroachers. The litigation would be costly and also lengthy and that too with uncertain results. There is a danger of theencroachers claiming title by adverse possession.

3. Shri Nikhilbhai Nupendra Zaveri and Shri DigambarBhaskar Sapre have approached us for the sale of our right,title and interest in the aforesaid land for Rs. 24,00,000/-.

The intending purchasers have deposited with us an amountof Rs. 2,50,000/-. The Trustees have considered the offerand felt that the said offer is fair and reasonable.

Accordingly, we seek your permission for sale of land inquestion.

4. Information on the 4 points enumerated in Rule 24 of the Bombay Public Trusts Rules, 1951 is as mentionedhereunder:-

(i) The Trust Deed gives full power to the Trustees to sellthe property by private treaty. Attention in thisconnection is invited to Clause 11 (n) of the TrustDeed.

(ii) The Trustees considered it prudent and necessary tosell the right, title and interest in the property. Theprice realised can be used for the purpose of theTrust. This is further elaborated in the next

succeeding clause.(iii) From the land in question we derive no income at

present, but carry the liability for payment of nonagricultural assessments, increase in land revenue,property taxes, etc. It is not possible to recover thepossession of the land without resorting to costly litigation. It is accordingly in the interest of the Trustto sell the land at a fair and reasonable price. Theoffer of Shri Nikhilbhai Nupendra Zaveri and ShriDigambar Bhaskar Sapre of Rs. 24,00,000/- is


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KPP -31- WP Nos. 1486 & 1814 of 94

considered fair and reasonable.

(iv) Since the proposal to sell the right, title and interestof the land, the question of the terms of past leasesdoes not arise.

Along with the application, a Valuers report was also annexed. As per the

Valuers report dated 13 th June, 1989, he has stated that he has inspected

the land in question. The land is extensively built and has thousands of

hutments. In paragraph 4 it has been stated that the entire land was

encroached upon and fully occupied and it was almost an impossible task

for the owners to get possession of the property and any litigation

initiated to recover possession would not only be lengthy and costly but

the result thereof would be uncertain. In paragraph 6 it has been stated

that the land in question was extensively encroached and built upon by a

very large number of hutment dwellers and from whom it is almost

impossible to get possession. The Trustee of the Trust viz. Mr. Rajesh

Batra has also filed his affidavit on 9th

June, 1989, wherein he has statedthat the land was under encroachment since several years and

constructions had been put up. He has stated that it would be

impracticable to file suits against innumerable encroachers. He has stated

in the said affidavit that S/Shri Nikhil Nupendra Zaveri and Digambar

Bhaskar Sapre had approached the Trust for the sale of land for a total


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KPP -32- WP Nos. 1486 & 1814 of 94

price of Rs. 24,00,000/-. It is also stated in the said affidavit that it was

also in the interest of the Trust to dispose of such lands, when it was not

possible to recover possession. Before the Charity Commissioner, N.D.

Construction had also appeared and their bid was also taken into

consideration which was initially at Rs. 30 lakhs and it was increased to

Rs. 53 lakhs, though as per the record it was Rs. 51 lakhs. The Charity

Commissioner ultimately granted sanction to the transaction between the

Trust and N.D. Construction. As pointed out earlier, said sanction which

was granted by the Charity Commissioner under Section 36 (1) of the Act

was subject matter of challenge by Bhattad Leasing before this Court

which petition was dismissed against which Special Leave Petition was

also dismissed by the Supreme Court. Subsequently, the said Bhattad

Leasing preferred an application under Section 36 (2) of the Act before

the Charity Commissioner in which the impugned order has been passed

by the Charity Commissioner. At this stage reference is required to be

made to the provisions of Section 36 of the Act which read as under:

36. Alienation of immovable property of public trust.-(1) Notwithstanding anything contained in the instrumentof trust-

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


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KPP -33- WP Nos. 1486 & 1814 of 94

(b) no lease for a period exceeding ten years in the caseof agricultural land or for a period exceeding three

years in the case of non-agricultural land or abuilding,

belonging to a public trust, shall be valid without theprevious sanction of the Charity Commissioner.Sanction may be accorded subject to such conditionas the Charity Commissioner may think fit to impose,regard being had to the interest, benefit or protectionof the trust;

(c) If the Charity Commissioner is satisfied that in theinterest 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 toimpose, regard being had to the interest or benefit orprotection of the trust.

(2) The Charity Commissioner may revoke the sanctiongiven under clause (a) or clause (b) of sub-section (1) or theground that such sanction was obtained by fraud ormisrepresentation made to him or by concealing from theCharity 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 thedate of revocation (or such further period not exceeding inthe 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 Sectionunless the person in whose favour such sanction has beenmade has been given a reasonable opportunity to showcause 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 theperiod specified in sub-section (2), or it is not possible torecover the property with reasonable effort or expense, the


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Charity Commissioner may assess any advantage receivedby the trustee and direct him to pay compensation to thetrust equivalent to the advantage so assessed.

20. The Charity Commissioner, while considering application under

Section 36 (1) of the Act is required to apply his mind and is required to

make discreet enquiry to find out whether it is in the interest of the trust

to sanction the transaction in question. Without previous sanction of the

Charity Commissioner, no life can be given to any transaction entered into

by any Trust and such transaction will have no legal or binding effect.

The Charity Commissioner is assigned an important duty and is required

to act in the financial interest of the Trust in connection with the

transaction in question for which sanction is sought for. While deciding

an application under Section 36 (1) of the Act, it is the duty of the Charity

Commissioner to hold an appropriate inquiry and from the material on

record to find out as to whether the transaction which the Trust wants to

enter into is required to be approved or not and any sanction is requiredto be given or not. At the time of deciding such application, the Charity

Commissioner is also required to consider as to whether the price which

the Trust is likely to receive is appropriate price and whether the

transaction in question is genuine or not. In view of the decision of the

Full Bench (supra), it is clear that while considering the question about


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granting sanction, the Charity Commissioner is not required to give

sanction only in connection with the particular transaction with any party,

for which sanction is sought for, but he is required to see that various

bidders can put their own bids before him and ultimately, if in the opinion

of the Charity Commissioner, the highest bid is required to be accepted

and sanction may accordingly be accorded to the highest bidder. The

Charity Commissioner is required to invite various bids and to find out the

best bid. In a given case, the Charity Commissioner is also required to

find out as to whether the highest bid given by a person is genuine or not

and also to find out the credentials of such bidder. The Charity

Commissioner while deciding the best offer, is required to take into

consideration various factors. Considering the scheme of the Act, the

Charity Commissioner while accepting the bid of a particular bidder is also

required to see whether the said bid is beneficial to the trust. As held by

the Full Bench, the Charity Commissioner is required to consider the

interest of the Trust by inviting bids and the scope of Section 36 cannot besaid to be confined only to give approval to a particular transaction which

the Trust might have entered into and seeking sanction from the Charity

Commissioner qua the said transaction. The Full Bench in the case of

Sailesh Developers (supra) has held that the power vested in Charity

Commissioner under Section 36 of the Act is not only confined merely to


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KPP -36- WP Nos. 1486 & 1814 of 94

grant or refusal of sanction to particular sale transaction in respect of

which sanction is sought but also extends to inviting offers from members

of public and directing trustees to sell or transfer trust property to a

person whose bid or quotation is best having regard to interest, benefit or

protection of Trust. It has also been held that a party who comes forward

to submit his offer directly before the Charity Commissioner and complies

with requirements as may be laid down by the Charity Commissioner in a

pending application under Section 36 of the Act has locus standi to

challenge the final order passed in proceedings under Section 36 of the

Act.

21. Considering the aforesaid provision, in our view, it is not

possible for us to accept the submission of Ms. Iyer that the bidder i.e.

N.D. Construction was not required to disclose anything before the

Charity Commissioner as the matter is only between the Trust and the

Charity Commissioner. It is no doubt true that the application is required

to be preferred by the Trust and that is how the things are put into motion

for the purpose of giving sanction. Nonethless, when the Charity

Commissioner is required to consider various bids, it cannot be said that

any vital material which is required to be disclosed, the obligation for the

same is that of the Trust. The matter is at large before the Charity


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Commissioner and while approving the sale transaction between the

Trust and the bidder, if it is found that the bidder has suppressed vital

materials from the Charity Commissioner, in our view, there is no reason

as to why the Charity Commissioner cannot invoke the provisions of

Section 36 (2) of the Act. It is true, as argued by Ms. Iyer that it is also

the duty of the Trust to disclose all relevant aspects before the Charity

Commissioner, but in a given case even inadvertently or deliberately the

Trust has not disclosed certain information, the provisions of Section 36

(2) cannot be interpreted in a restricted manner by holding that even if

purchaser whose bid is accepted by the Charity Commissioner has misled

the Charity Commissioner or by way of misrepresentation, the Charity

Commissioner, in such an eventuality can exercise powers under Section

36 (2) of the Act. In our view, it is not possible to give such a restrictive

meaning while interpreting Section 36 (2) of the Act. If it is subsequently

found that such sanction was obtained by fraud or misrepresentation, the

Charity Commissioner can revoke the sanction given under clauses (a) and(b) of sub-section (1) of Section 36 of the Act, by passing an appropriate

order. In our view, such misrepresentation in a given case may be by the

Trust or even by the beneficiary to such transaction. It is also required to

be noted that even under sub-section (3) of Section 36 of the Act, before

passing any order revoking the sanction, the person in whose favour


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sanction has been made is required to be given reasonable opportunity to

show cause why sanction should not be revoked. In our view, if a person

in whose favour the transaction is sanctioned has no locus standi or no say

in the matter at all, there is no question of hearing him under sub-section

(3) of Section 36 of the Act. In any case, we are of the opinion that

considering the scheme of the Act, the Charity Commissioner in a given

case may revoke the sanction, if it is found that there was

misrepresentation by either the Trust or the intending purchaser, whose

bid is accepted by the Charity Commissioner. In view of what is stated

above, we are of the opinion that in a given case the Charity

Commissioner may revoke the sanction under Section 36 (2) of the Act, if

it is found that either side i.e. the applicant Trust or the beneficiary of

such sanction i.e. purchaser has fraudulently misrepresented the facts

before the Charity Commissioner.

22. The next question which requires consideration is as to whether in the facts of the present case , there was any suppression or

fraud which can be alleged to the Trust or even to the intending purchaser

whose bid is accepted and whether there is any justification in revoking

the sanction by resorting to Section 36 (2) of the Act. In this connection,

certain factual aspects as such are not in dispute. They are:


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KPP -39- WP Nos. 1486 & 1814 of 94

(i) Before entering into transaction with N.D. Construction, Trust had

issued public advertisement inviting offers;

(ii) The Trust ultimately decided to sell the land in favour of N.D.

Construction and sale consideration was fixed at Rs. 24 lakhs.

(iii) It is not in dispute that substantial portion of the land in question

was under encroachment by innumerable encroachers and in fact

pucca construction was also carried out by some encroachers. There

is nothing on record to show that since how long such

encroachment was in existence.

(iv) Before N.D. Construction entered into agreement with the Trust,

they had entered into agreement with Pawan Bairagra wherein the

sale consideration was fixed at Rs. 3 crores.

(v) It is not in dispute that at the time when the Charity Commissioner

granted the sanction, the factum about agreement arrived at

between N.D. Construction and Pawan Bairagra was not disclosedand was not put to the notice of the Charity Commissioner.

(vi) Both the partners of N.D. Construction i.e. Nikhil Nupendra Jhaveri

and Digamber Bhaskar Sapre are signatories to the agreement.

(vii) Substantial portion of the land is marshy land which cannot be put

to use effectively.


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KPP -40- WP Nos. 1486 & 1814 of 94

23. Considering the aforesaid aspect of the matter, the Charity

Commissioner at the time when he gave sanction obviously was not posted

with the facts about the transaction which had taken place between N.D.

Construction and Pawan Bairagra. Whether the Trust was aware about the

transaction or not is also required to be taken into consideration. If the

Trust was aware about such transaction by which N.D. Construction has

decided to sell the land for a considerable amount of Rs. 3 crores, as

against that they had given initial offer of Rs. 24 crores which was

subsequently increased to Rs. 52 lakhs. In our view, at the time when

N.D. Construction gave an offer to the Charity Commissioner to the tune

of Rs. 52 lakhs, they were aware that they are going to get more than Rs.

3 crores as they had entered into agreement with Pawan Bairagra prior to

the grant of sanction by the Charity Commissioner, even though they did

not have title at the relevant time, so as to pass any title in favour of

Pawan Bairagra. There is nothing on record to show that the Trust washaving actual notice of such a transaction at the relevant time. An

advertisement in the newspaper can be considered as a constructive

notice to the Trust but since there is nothing on record for coming to the

conclusion that the Trust had actual notice of the same, it is not possible

for us to hold that in a fraudulent and dishonest manner the Trust had


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KPP -41- WP Nos. 1486 & 1814 of 94

suppressed the fact about the agreement entered into between Pawan

Bairagra and N.D. Construction. There is nothing on record to indicate

that the Trust wanted to favour N.D. Construction or that there was any

collusion between N.D. Construction and the Trust in any manner at the

time of entering into agreement with N.D. Construction. The Trust entered

into agreement with N.D. Construction after inviting offers by public

advertisement. It is possible that the Trust may not have any actual notice

about the transaction entered into by N.D. Construction with Pawan

Bairagra. Considering the said aspect, though we may accept the

submission of Mr. Seervai that there was no mens rea or any other

intention on the part of the Trust not to point out the said fact to the

Charity Commissioner at the time of preferring application under Section

36 (1) of the Act and in fact Trust has also taken a stand before us that

the Trust is interested in getting maximum price available out of the sale

transaction, in our view it cannot be said that the Trust made a fraudulent

attempt to deceive the Charity Commissioner by not disclosing the factthat before entering into transaction, N.D. Construction has arrived at

agreement with Pawan Bairagra. Regarding the aspect of encroachment, it

is true that in the application the Trust has averred that the land in

question is under encroachment. As per the Valuers report, which was

initially submitted by the Trust along with their application,it was stated


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KPP -42- WP Nos. 1486 & 1814 of 94

that the land is under extensive encroachment. The area in question is so

large and, as submitted by Mr. Seervai, it was impossible at the relevant

time to identify exact portion of encroached area. In view of subsequent

Valuers report, it has come on record that some portion of the land was

vacant and some portion was under heavy encroachment. Considering the

aforesaid aspect of the matter, though it is true that the Trust should have

taken reasonable care in finding out the exact area under encroachment

but since from the factual aspect it is revealed that large area was under

encroachment, the averment in the application that the land is under

encroachment itself may not be a suggestive factor that the land was

under encroachment. In the application it is stated that the land may be

considered as substantially encroached or entire land was under

encroachment. However, the Valuers report which the Trust has

attached with the application also clearly mentioned that substantial area

was under encroachment. In our view, while preferring application, the

Trust had not taken reasonable care by identifying the exact area underencroachment and possibly a vague statement was made that the land was

under encroachment, which might have given an impression to the Charity

Commissioner that the entire area was under encroachment at the time of

granting sanction. The question which requires consideration is whether

the Trust, in order to mislead the Charity Commissioner, has made such an


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KPP -43- WP Nos. 1486 & 1814 of 94

averment in the application. By no stretch of imagination, it can ever be

said that in order to mislead the Charity Commissioner, a statement was

made in the application that the land is under encroachment. It is no

doubt true that the Charity Commissioner, at the relevant time while

granting sanction under Section 36 (1) of the Act, might have been

misled perhaps by the averment in the application or was under an

impression that the entire land was under encroachment. Considering the

said aspect, even though sanction of the Charity Commissioner might be

on the basis that the entire land is under encroachment, from the record of

the case as well as from the Valuers report which the Trust has annexed

along with the application, it is not possible for us to believe that the Trust

with a fraudulent intention has tried to create an impression before the

Charity Commissioner that not a single inch of land is free and that the

entire land is under encroachment. It is not in dispute that substantial

portion was under encroachment and large scale construction was made

and that was the basis for the Trust to apply for sanction under Section 36(1) of the Act. It is, however, required to be noted that though it may not

be possible for us to infer that the Trust has acted in a fraudulent manner

before the Charity Commissioner, it seems that the Trust has also not

taken appropriate care or at least was negligent in the matter of

identifying the actual encroached area. Considering the said fact, it is not


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possible for us to come to a conclusion that the trust with a dishonest

intention and to commit fraud on the Charity Commissioner by concealing

certain material facts ultimately got an order of sanction under Section 36

(1) of the Act.

24. The next question which requires consideration is as to whether

in the factual background of this case, whether the Charity Commissioner

was justified in invoking Section 36 (2) of the Act. As pointed out earlier,

perhaps the Trust could have taken more care while describing the actual

area under encroachment but that fact itself may not result into a

fraudulent act on the part of the Trust. There is nothing on record to show

that the Trust wanted to commit fraud by misrepresenting certain things

before the Charity Commissioner to help the intending purchaser i.e. N.D.

Construction. As a matter of fact, before the Charity Commissioner there

were two bidders i.e. N.D. Construction and Bhattad Leasing. The Charity

Commissioner thereafter considered both the bids and ultimately N.D.Construction raised the bid upto Rs. 52 lakhs. There is nothing on record,

therefore, to suggest that with a view to achieve its object of favouring

N.D. Construction that the Trust concealed certain facts. If that be so,

simply because meticulous care has not taken by the Trust in preferring

the application under Section 36 (1) of the Act, that fact itself cannot be


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construed as a fraudulent action on the part of the Trust. One can only

attribute negligence to the Trustee or the Manager of the Trust but it is not

possible to attribute fraud on the part of the Trustees in this behalf.

25. As pointed out earlier, the Charity Commissioner might have

been misguided by the averment in the application and perhaps might

have thought that the entire land was under encroachment, though it is

not in dispute that substantial part of the land was definitely under

encroachment and some portion is marshy land which was not possible to

be utilised. However, the record discloses that the intending purchaser i.e.

N.D. Construction at the time of giving its bid before the Charity

Commissioner suppressed the material fact about transaction which it had

entered into with the said Pawan Bairagra. It is not in dispute that N.D.

Construction had entered into agreement with Pawan Bairagra before

getting sanction from the Charity Commissioner for more than Rs. 3 crores

and also entered into agreement with one Krisha Developers. All theseaspects were not disclosed before the Charity Commissioner. The parties

before the Charity Commissioner are required to disclose material facts

and on that basis the Charity Commissioner can consider the aspect about

accepting a particular bid. It is not possible for us to accept the argument

of Ms. Iyer that the agreement was entered into only with Pawan Bairagra


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in connection with some monetary transaction and that ultimately the suit

filed by Pawan Bairagra was withdrawn by him. It is required to be noted

that Pawan Bairagra ultimately filed a suit wherein even the Trust was

joined as a party and we find considerable force in the argument of Mr.

Seervai that when they received the summons from the Court that they

realised that they were duped by N.D. Construction by suppressing the

said fact. It is also required to be noted that both the partners of N.D.

Construction are signatories to the agreement with Pawan Bairagra as the

N.D. Construction is a firm of two partners. An attempt was therefore

made by N.D. Construction to get the property of the Trust at a throw

away price and to make huge profit by selling it for more than Rs. 3 crores

at the relevant time. It is also required to be observed that subsequently

even N.D. Construction has entered into another agreement with Krisha

Developers and the only object of N.D. Construction seems to be to make

a huge profit by getting the property of the Trust at a throw away price. In

fact, the transaction of N.D. Construction with Pawan Bairagra prior toobtaining sanction order passed by the Charity Commissioner was the

most relevant material which ought to have been brought to the notice of

the Charity Commissioner. The Charity Commissioner has considered this

aspect in great detail in his order. Considering the said aspect, since the

aforesaid material was not placed before the Charity Commissioner and it


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was suppressed from the Charity Commissioner, in our view, the Charity

Commissioner was perfectly justified in revoking the sanction granted

earlier. It is not in dispute that no sale deed was executed by the Trust in

favour of N.D. Construction and no right is therefore created in their

favour in any manner. Though the Charity Commissioner had granted

sanction, however till sale deed is executed, the power under Section 36

(2) can still be exercised by the Charity Commissioner and sanction could

be revoked, if it is found that he had granted sanction on account of

misrepresentation or relevant aspects were not placed before him by the

Trust. As discussed earlier, the concealment of material aspects cannot be

restricted only to the Trust but even any party on whose favour sanction is

given is ultimately found to have suppressed certain things, the Charity

Commissioner can definitely revoke the sanction. The Charity

Commissioner is required to see the interest of the Trust and if it is found

that sanction granted by him in favour of a particular intending purchaser

has ultimately not found to be in the interest of the Trust, the Charity Commissioner can revoke the sanction under Section 36 (2) of the Act.

Before passing the order, the Charity Commissioner has also given hearing

to N.D. Construction and by giving cogent reasons sanction accorded

under Section 36(1) of the Act has been revoked. As stated above, if the

vital material as mentioned above was brought to the notice of the Charity


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Commissioner, he possibly would not have granted sanction under Section

36 (1) of the Act. Since the entire material facts were subsequently

disclosed at the time of hearing of application under Section 36 (2) of the

Act, the Charity Commissioner has deemed it fit to revoke the sanction.

The Charity Commissioner has also made necessary enquires by making

spot inspection of the site, etc. Considering the said aspect, the Charity

Commissioner has ultimately taken a decision in the interest of the Trust

and has, in our view, rightly revoked the sanction granted earlier. The

argument of Ms. Iyer that once sanction under Section 36 (1) of the Act is

confirmed till the High Court, proceedings under Section 36 (2) are not

maintainable is without any substance. The said argument is required to

be rejected as, in our view, proceedings under Section 36 (2) of the Act is

separate and independent and the Charity Commissioner has rightly

exercised those powers in the instant case. The facts of the case make it

absolutely clear that the relevant material was not placed before the

Charity Commissioner and, therefore, the Charity Commissioner hasrevoked the sanction after considering the material on record at the time

of deciding application under Section 36 (2) of the Act. It is required to

be noted that the concealment has taken place at the behest of N.D.

Construction as they have not placed the relevant material on record. Even

if either party has concealed or suppressed material facts, the Charity


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Commissioner can exercise powers under Section 36 (2) of the Act, if it is

found that either side has tried to mislead him or suppress material facts

from him.

26. As held by the Supreme Court, fraud vitiates everything and

when the Charity Commissioner has come to the conclusion that he was

misled, he was perfectly justified in invoking powers under Section 36 (2)

of the Act. In a given case, even the Charity Commissioner has suo motu

powers, if any factual aspect is brought to his notice that a particular

party has committed fraud while getting sanction under Section 36 (1) of

the Act.

27. It is no doubt true that Bhattad Leasing had not disclosed the

said fact earlier and such application was preferred after a considerable

period of time. In our view, even if the conduct of said Bhattad Leasing

may not inspire confidence in this behalf, ultimately when the facts werebrought to the notice of the Charity Commissioner, the Charity

Commissioner was justified at least in invoking his powers under Section

36 (2) of the Act. It is equally true that said Bhattad Leasing also given an

offer of only Rs. 50 lakhs, though they knew that N.D. Construction has

entered into agreement of sale with Pawan Bairagra for Rs. 3 crores.


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28. So far as Chamber Summons preferred by Krisha Developers is

concerned, they lay a claim of being in possession of the property on the

basis of the reports of the Receiver. The learned counsel appearing for

Krisha Developers failed to point out as to how Krisha Developers got any

title over the property. Since Krisha Developers are not having any right

and/or title worth the name, assuming that they were in possession, the

same cannot be protected by resorting to Section 53 A of the Transfer of

Property Act. Section 53A may be applicable in a case where a person is

put in possession by way of valid transaction without there being any

registered document. In such an eventuality, transferee can protect his

possession. We have our doubts as regards the possession of Krisha

Developers. The reports of the Court Receiver, in our view, do not support

such a case. If the contention of the learned counsel for the Krisha

Developers is accepted, then even a trespasser would insist that his

possession may be protected. Considering the said aspect, the orderpassed by the Charity Commissioner under Section 36 (2) of the Act is

required to be upheld with a modification that the Charity Commissioner

shall now invite fresh bids from the public by wide publicity. For the said

purpose, advertisement may be given in appropriate newspapers. The cost

of such advertisement shall be borne by the Trust. The matter is


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KPP -51- WP Nos. 1486 & 1814 of 94

accordingly remanded to the Charity Commissioner for the said purpose.

The application under Section 36 (1) of the Act be decided de novo.

There is also an additional aspect as to why fresh bids should be invited in

view of the fact that the Urban Land (Ceiling and Regulation) Act has

been repealed and naturally, therefore, there may be a further

appreciation in the land value in view of the repeal of the ULC Act.

29. It is required to be noted that no sanction has been granted by

the Charity Commissioner regarding transaction entered into by N.D.

Construction with the Trust. Even though Krisha Developers claim to be

in possession, it is clear that Krisha Developers are not having any valid

title nor any right is created in their favour by the Trust in any manner. If

there is any transaction between N.D. Construction and Krisha

Developers, it is for Krisha Developers to file appropriate proceedings

against N.D. Constructions and the Court is informed that Krisha

Developers have already filed a suit. The said Krisha Developers, therefore,are neither a necessary nor a proper party to the proceedings so far as

proceedings under Section 36 (2) of the Act is concerned. The Chamber

Summons for joining them as party respondent is therefore required to be

rejected and is accordingly rejected. If Krisha Developers have any right,

title or interest in the property, it is for them to agitate their right in


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appropriate proceedings in accordance with law. The contention of the

learned counsel for the intervenor that Krisha Developers are entitled to

be put in possession under Section 53A of the Transfer of Property Act

cannot be accepted as we do not find any such right in their favour which

can be said to be on the basis of any valid transaction. The submission of

the learned counsel that the Receiver may be directed to hand over

possession to Krisha Developers, therefore, cannot be accepted and the

said prayer is rejected. Chamber Summons taken out by Krisha

Developers is accordingly rejected.

30. Considering the aforesaid aspect, Writ Petition No. 1486 of

1994 is required to be dismissed and the same is accordingly dismissed.

Rule is discharged.

31. So far as Writ Petition No. 1814 of 1994 is concerned, the same

is allowed and the matter is remanded to the Charity Commissioner fordeciding the application under Section 36 (1) of the Act afresh, as

observed earlier. If fresh bids are invited and if any particular bid is

accepted, it would be open to Bhattad Leasing to apply to the Charity

Commissioner for reimbursement of the expenditure incurred by them

towards security charges or any other charges incurred by them. If such an


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application is preferred, it is for the Charity Commissioner to decide the

same as per the evidence that would be produced in that behalf. The

amount i.e. Rs. 52 lakhs which the Trust has received from N.D.

Construction be refunded to them within a period of two months with 9

per cent interest. The Receiver now shall hand over possession back to

the Trust. It is for the Trust to look after the property and to safeguard the

property by taking appropriate remedial measures. The prayer made by

Krisha Developers for staying this order for two weeks regarding handing

over possession by the Trust in favour of the Trust is rejected.

32. At this stage, learned counsel appearing for N.D. Construction

requests that the Charity Commissioner may be asked not to proceed with

the matter for two months as they would like to approach the Supreme

Court. The request is reasonable. The Charity Commissioner is directed

not to take any further action on the basis of this order for a period of two

months in order to enable N.D. Construction to approach the SupremeCourt.

P. B. MAJMUDAR, J.

charity commissioner receiver

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