Summary
A beneficiary challenged sanction for development-cum-sale and a 999-year lease of valuable Mumbai trust property privately negotiated with a developer. The Court found that the trustees and Charity Commissioner had failed to protect the trust, ascertain market value or justify dispensing with public notice. It set aside the sanction and High Court judgment and directed repayment of the consideration.
Issues
- What duties Section 36 imposes when sanctioning alienation of public trust property.
- Whether the private development-cum-sale transaction and waiver of public notice safeguarded the trust.
- Whether delay barred interference where development had not commenced.
Provisions considered
- Section 36, Bombay Public Trusts Act, 1950Prior sanction must protect the interest, benefit and protection of the trust. The Commissioner must objectively examine necessity, terms and value, and can invite competitive offers and impose appropriate conditions. (¶ 22–29)
Held
- The Charity Commissioner’s role is not confined to accepting the trustees’ chosen purchaser. The statutory duty requires examination of the necessity and benefit of alienation, and permits public offers to secure the best transaction for the trust. Private negotiation of trust property requires exceptional circumstances supported by reasons. (¶¶ 20, 22–23, 27–28)
- Calling the arrangement a joint venture did not remove its sale character: it included a sale option and a 999-year lease, and the option was exercised. The Commissioner wrongly disregarded market value, and no serious lawful effort established it. The Court found the low consideration, absence of competitive notice and misrepresentation of the transaction contrary to the trust’s interests. (¶¶ 24–26, 29–32)
- A later higher offer alone does not reopen a properly conducted sale at an adequate price. That principle did not protect this transaction, where the original process and adequacy of consideration were themselves defective. (¶¶ 21, 25–26)
- Delay was not fatal on these facts because no development had taken place and valuable trust property required protection. The trust’s asserted difficulty in refunding consideration did not excuse repayment. The Court found collusion between trustees and developer. (¶ 33–34)
Result
Appeal allowed; Charity Commissioner’s and High Court’s orders set aside. Trust directed to repay Rs. 2.95 crore to the developer. Developer to deposit Rs. 1 lakh costs with the Supreme Court Advocates Bar Association Welfare Fund within six weeks.