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INTHEHIGHCOURTOFJUDICATUREATBOMBAY ORDINARYORIGINALCIVILJURISDICTION WRITPETITIONNO.1486of1994 WITH CHAMBERSUMMONSNO.63OF2005 1. M/s.N.D.Construction,apartnershipfirm carryingonbusinessat4A,CeaserRoad, Amboli,Andheri(West),Bombay400058 NikhilNupendraJhaveri DigamberBhaskarSapare BothofBombay,IndianInhabitants,Partnersof PetitionerNo.1,havingtheiraddressesat4A,Merry Blessings,CeaserRoad,Amboli,Andheri(West), Bombay400058 versus 1. 2. StateofMaharashtra CharityCommissionerofBombay,havinghisofficeat DharmadayAyuktaBhawan,Dr.A.BapatRoad, Worli,Bombay400018 F.E.DinshawTrust,aPublicCharitableTrust, registeredundertheBombayPublicTrustAct,1950 andhavingtheirofficeat412ChurchgateChambers, 5,SirVithaldasThakerseyMarg,Bombay400050 NusliNevilleWadia Mrs.NasreenNusliWadia Mr.Batra TheTrusteesofF.E.DinshawTrust,havingtheiroffice at412,ChurchgateChambers, 5,SirVithaldasThakerseyMarg,Bombay400050 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ).Petitioners

2. 3.

3.

4. 5. 6.

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7.

BhattadLeasingandFinanceCompanyLtd.,aCompany incorporatedundertheCompaniesAct1of1956, andhavingtheirofficeat104,BajajBhavan,Nariman Point,Bombay400021

) ) ) ).Respondents

Ms.RajaniIyer,SeniorAdvocate,withMr.SalilShah,Mr.TusharBhavsar,Ms. TanmayiGadre,Mr.R.A.Shah,Ms.PurviAshar,Ms.PriyankaChoksiandMs. AjinkyaPatil,instructedbyM/s.MansukhlalHiralal&Co.,forthepetitioners. Mr.K.R.Belosey,APanelCounselforrespondentNo.1. Mr. N.H. Seervai, Senior Advocate, with Mr. Gautam Ankhad & Ms. Falguni Thakkar,instructedbyM/s.DoijodeAssociates,forrespondentNos.3to6. Mr.P.K.Dhakephalkar,SeniorAdvocate,withMr.Devrajan,Mr.S.Purohitand Mr.SameerSingh,instructedbyM/s.Vimadalal&Co.,forrespondentNo.7. Mr.J.B.Chinai,SeniorAdvocate,withMr.SanjayJain,Ms.ArminWandrewala andMr.VasimShaikh,instructedbyM/s.PravinMehta&Mithi&Co.,forthe ApplicantsKrishaDevelopersinChamberSummonsNo.63of2005. WITH WRITPETITIONNO.1814OF1994 1. 2. 3. 4. NusliN.Wadia Mrs.MaureenN.Wadia RajeshBatra HudraliSubbanaSrinivas ) ) ) )

AllofBombay,AllTrusteesofF.E.DinshawTrust, ) aPublicCharitableTrust,RegisteredatserialNo. ) E6123,undertheBombayPublicTrustsAct,1950and ) SerialNo.1alsoAdministratoroftheEstateofE.F.Dinshaw) allhavingtheiraddressat412ChurchgateChambers, ) 5SirVithaldasThackerseyMarg,Bombay400020 ) 5. F.E.DinshawTrust,havingtheiraddressatthe abovementionedpremises. ) )..Petitioners

versus

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1.

TheCharityCommissioner,MaharashtraState ) Bombay,havinghisofficeatDharmadayaAyuktaBhavan, ) 83,Dr.AnnieBesantRoad,Worli,Bombay400018 ) M/s.BhattadLeasingandFinanceCo.Ltd.,acompany incorporatedundertheprovisionsoftheCompanies Act,1956,havingitsregistered/principalofficeat 104BajajBhavan,NarimanPoint,Bombay400021. M/s.N.D.Construction,apartnershipfirm NikhilNupendraZaveri,IndianInhabitant DigambarBhaskarSapre,IndianInhabitant ) ) ) ) ) ) ) ) ).Respondents

2.

3. 4. 5.

RespondentNos.3to5havingofficeatD104,ShamKamal, AgrawalMarket,VileParle(East),Bombay400057

Mr. N.H. Seervai, Senior Advocate, with Mr. Gautam Ankhad & Ms. Falguni Thakkar,instructedbyM/s.DoijodeAssociates,forthepetitioners. Mr.P.K.Dhakephalkar,SeniorAdvocate,withMr.Devrajan,Mr.S.Purohitand Mr.SameerSingh,instructedbyM/s.Vimadalal&Co.,forrespondentNo.2. Ms.RajaniIyer,SeniorAdvocate,withMr.SalilShah,Mr.TusharBhavsar,Ms. TanmayiGadre,Mr.R.A.Shah,Ms.PurviAshar,Ms.PriyankaChoksiandMs. AjinkyaPatil,instructedbyM/s.MansukhlalHiralal&Co.,forrespondentNos. 3to5.

CORAM:P.B.MAJMUDAR& R.M.SAVANT, JJ. DATE:SEPTEMBER07,2011. ORALJUDGMENT:(PerP.B.Majmudar,J.) 1. Both these petitions are directed against the order of the

CharityCommissionerdated27thApril,1994passedunderSection36(2)

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oftheBombayPublicTrustsAct,1950(hereinaftertheAct),bywhich theCharityCommissionerhasrevokedthesanctiongrantedforsaleofthe landbelongingtoF.E.DinshawTrust(theTrust).Thesaidorderofthe CharityCommissionerischallengedbythepetitionersinWritPetitionNo. 1486of1994inwhosefavoursanctionwasgrantedforsaleofthelandas wellasbytheTrustbywayofWritPetitionNo.1814of1994.TheTrust hasfiledthesaidwritpetition onlyforexpungingthe remarks made againsttheTrustbytheCharityCommissionerintheimpugnedorder.

2.

ThesubjectmatteroftheproceedingsunderSection36ofthe

ActisthehugepropertybelongingtotheF.E.DinshawTrustsituatedat Malad, bearing Survey No. 79 (Part), CTS No. 226 (Pt.), admeasuring 94,511sq.mtrs.ThesaidTrustmadeanapplicationunderSection36(1) oftheActtotheCharityCommissionerseekinghissanctionforthesaleof thesaidproperty.TheCharityCommissionergrantedsanctiontotheTrust on6th April,1992,bywhichtheTrusthadagreedtosellthepropertyto one N.D. Construction (hereinafter N.D. Construction) i.e. Writ PetitionerinWritPetition No.1486of1994. Theorderpassedbythe CharityCommissionergrantingsuchsanctionunderSection36(1)ofthe Act was challenged by one of the unsuccessful bidders viz. Bhattad Leasing&FinanceCo.Ltd.(hereinafterBhattadLeasing),whohavebeen

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joinedasrespondentsinboththepetitions.ThesaidBhattadLeasingfiled WritPetitionNo.931of1992challengingthesaidsanction.A Division BenchofthisCourtdismissedthesaidwritpetitionon24thApril,1992,by holdingthatnointerferenceiscalledforagainsttheorderoftheCharity Commissioner granting sanction under Section 36 (1) of the Act. The SpecialLeavePetitionfiledagainstthesaidorderwasalsodismissedby theSupremeCourtvideitsorderdated14thJuly,1992.

3.

Subsequently, the said Bhattad Leasing, whose offer was not

foundfavourable bythe CharityCommissioner for purchase ofthesaid land,movedanapplicationforrevocationofthesanctiongrantedbythe CharityCommissioner on6th April,1992on various grounds. The said applicationwaspreferredunderSection36 (2)oftheAct. TheCharity Commissioner came to the conclusion that the Trust had concealed materialaspectsatthetimewhentheapplicationunderSection36(1)of the Act for getting sanction was made. The Charity Commissioner, accordingly,allowedthesaidapplicationandrevokedthesanctiongranted on6thApril,1992,videhisorderdated27thApril,1994.Itistheaforesaid orderoftheCharityCommissionerwhichisimpugnedattheinstanceof N.D.Construction,inwhosefavourthesanctionwasgranted. Thetrust hasalsofiledasubstantivepetitionchallengingthesaidorderbeingWrit

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PetitionNo.1814of1994.TheTrusthas,however,filedthispetitiononly for a limited prayer that the observations made by the Charity Commissioneraboutaboutfraudandmisrepresentationonthepartofthe Trusteesbeexpunged.TheTrusthasnotchallengedthepartoftheorder bywhichwhilerevokingsanction,theCharityCommissionerhasdirected freshbidbetweenN.D.ConstructionandBhattadLeasing.

4.

Insofaras WritPetitionNo.1486of1994isconcerned,the

orderoftheCharityCommissionerischallengedonvariousgroundsas, according to the petitioner of the said writ petition, the Charity CommissionerhadnojurisdictiontoentertainapplicationunderSection 36 (2) of the Act especially when the order granting sanction under Section36(1)oftheActhasbeenconfirmedbythisCourtinWritPetition No.931of1992andthereafterbytheApexCourt.Thesaidorderisalso challengedonthegroundthattherewasnomisrepresentationorfraudon thepartoftheTrustandtheCharityCommissioner,therefore,wasnot justifiedinrevokingthesanctiongrantedearlier.Thesaidorderisalso challengedonthegroundthattheCharityCommissionerhasnopowerto reviewhisearlierorderwhileexercisingpowersunderSection36(2)of the Act. It is also alleged that at the instance of Bhattad Leasing, the CharityCommissioneroughtnottohaveexercisedhispowerunderSection

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36(2)oftheActastheofferofBhattadLeasingwasnotfoundfavourable initiallywhentheCharityCommissionerdecidedthematterunderSection 36(1)oftheAct.ItisallegedthatthesaidBhattadLeasingwasawareof thefactsonthebasisofwhichallegationsandavermentsweremadeinthe applicationunderSection36(2)oftheAct,yetBhattadLeasinghadtaken partinthebiddingatthestageof36(1)andhadnotplacedatthatstage norsuchissuewasraisedwhentheyfiledthesaidWritPetitionNo.931of 1992. ConsideringtheconductofthesaidBhattadLeasing,theCharity Commissioneroughtnottohaveexercisedhispowersattheinstanceof Bhattad Leasing and no cognizance should have been taken about the allegations made by the said Bhattad Leasing. On behalf of N.D. Constructions,itisarguedthattheyarenotrequiredtodiscloseanyfacts beforetheCharityCommissionerasthematterunderSection36(1)ofthe ActisonlybetweentheTrustandtheCharityCommissioner.Onbehalfof petitionersi.e.N.D.Construction,itisarguedbyMs.Iyer,learnedSenior Counsel, that in any case on the basis of the sanction granted by the CharityCommissioner,thePetitionershaddepositedasubstantialamount withtheTrustandinviewofthefactsandcircumstancesofthecase,the impugnedorderisrequiredtobesetasideandthesanctiongrantedbythe Charity Commissioner is required to be maintained in respect of the transactioninquestion.

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5.

Inordertoappreciatethecontroversyraisedinthematter,itis

necessarytorefertocertainfactualaspectsofthematter.

6.

TheTrustinquestionisknownasF.E.DinshawTrust.Itisa

PublicTrustregisteredunderthesaidAct. Sincetherewasanextensive encroachmentoverthelandinquestion,theTrustdecidedtosellthesaid landandforthatpurpose,theTrustenteredintoanagreementforsaleof thelandinfavourofN.D.Construction,whichisapartnershipfirm.Since the property of the Trust cannot be sold without the sanction of the CharityCommissionerunderSection36(1)oftheAct,theTrustapplied for such sanction before the Charity Commissioner. However, before entering into transaction with N.D. Construction, the Trust issued an advertisementinMarathinewspaperLoksattaon3rd September,1988as wellasintheFreePressJournaldated8thSeptember,1988,invitingoffers forpurchaseofproperty.ItisthecaseoftheTrustthatinviewofthe substantialencroachmentovertheland,itwasnotpossiblefortheTrust todevelopthepropertyandforremovalofencroachment,theTrustwould berequiredtoincurheavyexpenditureforfilingvarioussuitsagainstthe encroachers. After entering into agreement with N.D. Construction, an applicationwas preferredbythe TrustunderSection 36(1)of the Act

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before the Charity Commissioner on 15th June, 1989. The Charity Commissioner,whilstdeciding the saidapplication,grantedsanctionby approvingthetransactionoftheTrustwithN.D.Construction.Aspointed outearlier,thesaidorderwaschallengedbyBhattadLeasingby wayof WritPetitionNo.931of1992asthesaidBhattadLeasinghadalsogiven itsofferandwasinterestedinpurchasingthelandinquestion. Thesaid writpetition,asstatedabove,wasrejectedbythisCourtbyupholdingthe decisionoftheCharityCommissionerandSpecialLeavePetitionagainst thatorderwasalsodismissedbytheSupremeCourt. Subsequently,the saidBhattadLeasingpreferredanapplicationunderSection36(2)ofthe Act.Intheaforesaidapplication,anavermentwasmadeaboutfraudand misrepresentation on the partof the Trustatthe time of applyingfor sanction beforetheCharityCommissioner. Inthesaidapplication,an averment was made to the effect that the Charity Commissioner was totallymisledbytheTrustthattheentirelandisencroachedbyslumsand thereisnovacantlandonthesaidplot.Thesaidapplicationwaspreferred mainly on two grounds i.e. (i) that the trust made misrepresentation beforetheCharityCommissionerasregardsextentofencroachmentover thelandinquestion and(ii)therewasconcealmentonthepartofthe Trust regarding the transaction which had taken place between N.D. ConstructionandonePawanBairagrabywhichtheintendingpurchaser,

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N.D.Construction,hadagreedtosellthelandforasumofRs.3.16crores. AgrievancewasmadebeforetheCharityCommissionerthatthesanction wasobtainedfromtheCharityCommissioner forsaleoflandatavery meagrepriceasagainstthatthepurchaserN.D.Constructionhasalready enteredintoagreementforsalewiththesaidPawanBairagrabeforethe Trusthadevenappliedforsanction. Insupportofthesaidcontentions, avermentsweremadeindetailintheapplicationpreferredundersection 36(2)oftheAct.TheCharityCommissioner,afterhearingtheconcerned parties,cametotheconclusionthattheTrusthadnotdisclosednecessary factual aspects at the time when the Charity Commissioner granted sanctionunderSection36(1)oftheAct.TheCharityCommissionercame to a conclusion that the Trust has deliberately misled him and an impressionwasgivenasiftheentirelandwasunderencroachment.Itwas ultimatelyfoundthattheentirelandwasnotencroachedbutonlysome portionofthelandwasunderencroachment.TheCharityCommissioner alsofoundthatbeforeobtainingsanctionunderSection36(1)oftheAct, the fact regarding agreement between the intending purchaser N.D. ConstructionandPawanBairagrawassuppressedbytheTrustespecially whenapublicnoticewasalreadyissuedinthenewspapers aboutsuch transaction,yettheTrusteeshadnotpointedoutthesaidfactatthetime when sanction under Section 36 (1) was obtained. The Charity

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Commissioneraccordinglyfoundthatinviewoftheaforesaidaspectofthe matter,thesanctiongrantedunderSection36(1)oftheActisrequiredto berevoked.

7.

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

Construction, vehemently submitted that the Charity Commissioner has gravelyerredinrevokingthesanctionastheCharityCommissionerwas notexercising reviewing powers.Itissubmittedbythe learnedcounsel thatinanycase,theagreemententeredintoby N.D.Constructionand PawanBairagrawasnotonbehalfofthepartnershipfirmbutitwasonly oneofthepartnersofN.D.Constructionwhohasenteredintosuchan 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.Itissubmittedbythelearnedcounselthatthepricereflectedinthe saidagreementwasnotgenuineconsiderationandsubsequentlyasuitwas filedbythesaidPawanBairagraonthebasisofthesaidagreementand ultimately the same was withdrawn in viewof the settlementreached betweentheparties.Itissubmittedthatthesaidsuitwaswithoutanybasis andevenititwastried,itwouldhavebeendismissedbytheCourt.Itis submittedbythelearnedseniorcounselthatsinceconsiderableportionof thelandwasunderencroachmentandsinceitwasnotpossibleforthe

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Trusttoremove encroachmentwithoutincurringheavyexpenditurethat ultimately the Trust decided to sell its property and the said N.D. Constructionagreedtopurchasethesamebutwasrequiredtomovethe Courtforhavingtheencroachmentremovedforwhichtheywererequired tospendlargeamount.ItissubmittedthattheCharityCommissionerhas committedanerrorinpassingsuchanorderespeciallywhen theearlier sanctionunderSection36(1)oftheActisconfirmedbytheHighCourt andthereafterSLPpreferredagainsttheorderoftheHighCourthasbeen dismissed by the Supreme Court. It is submitted that the Charity Commissioner decided the matter as if he was reviewing his earlier decision.Itisfurthersubmittedthatitwasnotobligatoryornecessaryon thepartofthesaidN.D.Constructiontodisclosethefactumofagreement enteredintobetweenoneofthepartnersofthefirmwithPawanBairagra at the time when the Charity Commissioner processed the application under Section 36 (1) of the Act as, according to the learned counsel, ultimatelytheCharityCommissionerisrequiredtodecidethematteron thebasisoftheapplicationoftheTrustand,therefore,onthebasisofthe casemadeoutbytheTrust,sanctionunderSection36(1)wasrequiredto begranted.ItissubmittedthatN.D.Constructionhasnolocusstandiin anymannerinsuchproceedingsand,therefore,therewasnoquestionnor anyobligationonthepartof N.D.Constructiontodiscloseorpointout

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anyfacttotheCharityCommissioner.ItissubmittedbyMs.Iyerthatsince BhattadLeasinglostuptotheSupremeCourtwhilechallengingtheorder passed under Section 36 (1) of the Act, it could not have preferred applicationunderSection36(2)oftheAct. ItissubmittedthatBhattad Leasinghasnotpointedoutanysuchaspectatthetimewhenthewrit petitionwasfiledagainsttheorderunderSection36(1)oftheActandat theinstanceofsuchalitigant,theCharityCommissionershouldnothave exercisedhispowersunderSection36(2)oftheAct. Ms.Iyerfurther 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 underSection 36(2)of the Actoughtnottohave been passedbythe CharityCommissioner andthattheCharityCommissionerhasexceeded hisjurisdictionwhilepassingtheimpugnedorder.Inordertosubstantiate this,thelearnedseniorcounselhasrelieduponthedecisionofthisCourt inWritPetitionNo.968of1984decidedon12thSeptember,1990inthe case of Mrs.FatmabaiB.Bachooalivs.StateofMaharashtraandothers, whereinitisheldbythelearnedsingleJudgethatthepowerunderSection 36(2) wasnotageneralpowerofreviewandcouldbeinvokedonlyif somefraud,misrepresentation ortheconcealmentofthematerialfacts existed.ThelearnedsingleJudgeofthisCourthasheldinthesaiddecision

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thatpowersunderSection36(2)couldnothavebeenexercisedafterthe executionofthesaledeedbetweentheparties. Ms.Iyerhasalsorelied uponthedecisionoftheDivisionBenchinthecaseofMahadeoDeosthan, Wadali and others vs. Joint Charity Commissioner, Nagpur and others1 whereintheDivisionBenchalsotakentheviewthatrevocationofsanction grantedunderSection36(1)oftheActisnotpermissibleafterexecution ofsaledeedpursuanttothegrantofsanction.Thelearnedcounselalso reliedupon certain photographsin order tosubstantiate her contention thatconsiderablepartofthelandwasunderencroachmentanditwasa marshylandandinviewofthesametheCharityCommissioneroughtnot tohaveexercisedhispowersunderSection36(2)oftheAct.Ms.Iyerhas also pointedoutthatinanycaseregardingthetransactionwithPawan Bairagra,anewspaperadvertisementwasalreadygivenand,therefore,it canbepresumedthattheTrustwashavingknowledgeaboutthesame.It was,therefore,thedutyoftheTrusttopointoutthesaidaspecttothe 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. Constructioninthisbehalfastheyarenotexpectedtodiscloseanythingat thetimewhensanctionwastobegivenbytheCharityCommissioner.

1 1989 Mh. L.J. 269

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8.

The learned Senior Counsel Mr. Seervai, appearing for the

Trust,hasalsosubmittedthattheCharityCommissionerhasgravelyerred in coming to the conclusion that the Trust has committed fraud or misrepresentedwhileobtainingsanctionunderSection36(1)oftheAct.It is submitted that considering the application of the Trust before the CharityCommissionerforthepurposeofgettingsanction,theTrusthas statedthatthelandinquestionisunderencroachmentbuttherewasno avermentintheapplicationthattheentirelandwasunderencroachment. It is submitted that substantial portion of the land was under encroachmentandeven aValuersReportwasalsoattachedconfirming thesaidaspectandinviewofthesame,theCharityCommissionerought tohaveheldthatsubstantialportionofthelandwasunderencroachment and, therefore, the Charity Commissioner has committed an error in holdingthattheTrusthasmisrepresentedorcommittedfraudasitwasnot thestandoftheTrustthattheentirelandwasunderencroachment.Itis furthersubmittedbyMr.Seervaithatevenotherwise,thesalewastobe effectedonthebasisofasiswhereisbasisand,therefore,thesamewas tobeeffectedwithwhateverencroachmentwasthereonthelandandas pertheexistingpositionoftheland.ItissubmittedbyMr.Seervaithatit was for the purchaser to go and inspect the land and satisfy himself/herselfaboutthesame.ItisfurthersubmittedbyMr.Seervaithat

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sinceitwasnotpossiblefortheTrusttoremoveencroachmentwithout resortingtolitigationandsinceitwasatimeconsumingaswellasmoney consumingmatter,itwasdecidedtoselltheland.Mr.Seervai,however, submittedthattheTrustwasnotknowingabouttheagreemententered intoonbehalfoftheintendingpurchaserN.D.ConstructionwithPawan Bairagrawhereinsaleconsiderationisshowntobeonaveryhighside.It is submitted that at the time when Pawan Bairagra filed a civil suit whereintheTrustwasalsojoinedasoneofthedefendants,onlyonreceipt oftheSummonsthattheTrustcametoknowaboutsuchtransactionfor 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 aspectwasnotwithintheknowledgeoftheTrustand,therefore,therewas noquestionofsuppressiononthepartoftheTrustinthisbehalf. Mr. Seervaitriedtodemonstratethatboththegroundsonthebasisofwhich theorderispassedbytheCharityCommissionerarenotsustainableatall and the remarks made against the Trustees about fraud and misrepresentationisrequiredtobeexpungedfromtheorder.Mr.Seervai, however, submitted that it is true that the intending purchaser N.D. ConstructionhadsuppressedmaterialfactfromtheCharityCommissioner regarding the agreement entered into between N.D. Construction and PawanBairagrawhereinitwasagreedtosellthelandatRs.3.16crores

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and evenifitispresumedthattheTrusteeshadactedfraudulentlyor mademisrepresentationbeforetheCharityCommissioner,yettheCharity CommissionercanexercisepowersunderSection36(2)oftheAct,ifone ofthepartiesi.e.Intendingpurchaserhassuppressedcertainfactsfrom him. Itis submitted byMr.Seervaithat Section 36(2) of the Actis required to be interpreted in such a manner that any party on whose favoursanctionistobegivensuppressesanymaterialaspects,theCharity CommissionercanstillexercisethepowersunderSection36(2)oftheAct. ItissubmittedbyMr.Seervaithatinviewofthesameandconsideringthe factthatnowconsiderabletime haspassedandsince nosaledeedhas been executed in favour of the intending purchaser, the Charity CommissionernowmaybedirectedtoinvitefreshbidssothattheTrust maybenefitbygettingthecorrectmarketpriceprevailingasontodayfor whichthelearnedseniorcounselhasreliedupontheFullBenchdecision ofthisCourtinthecaseof SaileshDevelopersandothersvs.JointCharity Commissioner,Maharashtraandothers1. Mr.Seervaifurthersubmitsthat theimputationsmadebytheCharityCommissioneragainsttheTrusteesin the order are not at all sustainable and on the ground of alleged suppressionaboutencroachedarea,theCharityCommissionerhaserredin comingtotheconclusionthatthe Trusteeshavesuppressedthefactual
1 2007 (3) Bom. C.R. 7

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aspectoftheencroachmentas,accordingtohim,evenifthereissome differenceintheactualencroachedareaitcannotbesaidthattherewas anymensreaonthepartoftheTrusteesinnotactuallypointingoutthe correct encroached area especially when a Valuers report was also attachedwiththe application. It is alsosubmittedbyMr.Seervaithat sincetheadvertisementhadescapedthenoticeoftheTrusteesandsince the Trustees were not aware about the agreement between N.D. ConstructionandPawanBairagra,theCharityCommissionerhaserredin observing that the Trustees had suppressed the said fact about such agreementatthetimeofhearingofthesaidapplication.Itissubmittedby Mr.SeervaithatthereisnothingonrecordtoshowthattheTrusteeswere havingactualnoticeaboutsuchtransactionand,therefore,observations madebytheCharityCommissioneragainsttheTrusteesinthisbehalfis requiredtobeexpungedandtheCharityCommissionerbeaskedtoinvite fresh bids and take fresh decision. In support of his submissions, Mr. SeervaihasrelieduponthedecisionoftheSupremeCourtinthecaseof MehrwanHomiIraniandanothervs.CharityCommissioner,Bombayand others1.ThesaidjudgmentisinconnectionwithSection36oftheAct.The Supreme Court has considered the aspect about the best market price whichshouldbeavailabletotheTrust. Thelearnedcounselhasrelied
1 AIR 2001 SC 2350

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uponrelevantobservationsoftheSupremeCourtinparagraph9which readsasunder:

9.Thecounselfortheappellantsalsopointedoutthatitis likely that there would be better from other parties. The offer made by the appellants themselves is not very encouraging and the respondents were right in not acceptingthesame.However,wearetoldthattherewere some other offers also from some well known charitable institutions.InthebestinterestoftheTrustanditsobjects, wefeelitappropriatethatrespondentsNos.2to4should 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 majorportionofthelandforotherpurposesmaynotbein thebestinterestsoftheTrust. TheCharityCommissioner whilegrantingpermissionunderSection36oftheBombay Public Trusts Act could have explored these possibilities. Therefore,weareconstrained toremitthematter tothe CharityCommissionertotakeafreshdecisioninthematter. Therecouldbefreshadvertisementsinvitingfreshproposals and the proposal of the 5th respondent could also be considered. The Charity Commissioner may himself formulateandimposejustandproperconditionssothatit mayservethebestinterestsoftheTrust.Wedirectthatthe CharityCommissionershalltakeadecisionattheearliest. We allow the appeal as indicated above and remit the mattertotheCharityCommissionerinmodificationofthe ordersoftheHighCourtinWritPetitionandthatofCharity Commissioner. Relyingontheaforesaidjudgment,Mr.Seervaisubmittedthatwithaview to see that the Trust may be able to get the best offer, the Charity Commissionermaybedirectedtoinvitefreshbidsandtoacceptthebid

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whichreflectsthetruemarketvalueoftheproperty.

9.

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

decisionoftheSupremeCourtinthecaseof VijaySyalandanothervs. StateofPunjabandothers1 whereintheSupremeCourthasobservedas underinpara24.

24. In order to sustain and maintain the sanctity and solemnityoftheproceedingsinlawcourtsitis necessary thatpartiesshouldnotmakefalseorknowingly,inaccurate statementsormisrepresentationand/orshouldnotconceal material facts with a design to gain some advantage or benefitatthehandsofthecourt,whenacourtisconsidered asaplacewheretruthandjusticearethesolemnpursuits.If any party attempts to pollute such a place by adopting recourse to make misrepresentation and is concealing materialfactsitdoessoatitsriskandcost.Suchpartymust bereadytotaketheconsequencesthatfollowonaccountof its own making. At times lenient or liberal or generous treatmentbycourtsindealingwithsuchmattersiseither mistakenorlightlytakeninsteadoflearningaproperlesson. Hencethereisacompellingneedtotakeaseriousviewin such matters to ensure expected purity and grace in the administrationofjustice.

10.

Mr. Seervai has further relied upon the decision of the

SupremeCourtinthecaseofAssistantCommissioner,Incometax,Rajkotvs. SaurashtraKutchStockExchangeLimited2inordertosubstantiatehiscase
1 (2003) 9 SCC 401 2 (2008) 14 SCC 171

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abouterrorapparentonthefaceofrecord.Inparagraph38,ithasbeen heldbytheSupremeCourtthatrectificationofanorderstemsfromthe fundamentalprinciplethatjusticeisaboveall. Itisexercisedtoremove theerrorandtodisturbthefinality.

11.

Mr.SeervaihasrelieduponanotherdecisionoftheSupreme

Court in the case of Meghmala and others vs. G. Narasimha Reddy and others1ontheaspectoffraudand/ormisrepresentation.Inparagraphs28 and32,theSupremeCourthasobservedasunder:

28.itissettledpropositionoflawthatwhereanapplicant getsanorder/officebymakingmisrepresentationorplaying frauduponthecompetentauthority,suchordercannotbe sustainedintheeyeofthelaw.Fraudavoidsalljudicial acts, ecclesiastical or temporal (Vide S.P. Chengalvaraya Naiduv.Jagannath2.InLazarusEstatesLtd.v.Beasley3the Courtobservedwithoutequivocationthat:(QBp.712)No judgmentofacourt,noorderofaMinister,canbeallowed tostandifithas been obtainedbyfraud.Fraudunravels everything. 32. TheratiolaiddownbythisCourtinvariouscasesis thatdishonestyshouldnotbepermittedtobearthefruitand benefit to the persons who played fraud or made misrepresentation and in such circumstances the Court shouldnotperpetuatethefraud....

1 (2010) 8 SCC 383 2 (1994) 1 SCC 1: AIR1994 SC 853 3 (1956) 1 QB 702

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Relyingonthesaidobservations,itisarguedbyMr.Seervaithatifthe purchaser hassuppressedanymaterialfacts, theCharityCommissioner under Section 36(2)can alsoexamine this aspectandmayultimately revoke the sanction even if it is found that the intending purchaser in whosefavoursanctionistobegivenhassuppressedcertainaspects. In the said case, the Supreme Court ha also held that suppression of a materialdocumentwouldalsoamounttofraud.Referenceisalsomadeto thedecisionofthisCourtinthecaseof ShriMahadeoDeosthan,Wadali and others vs. Joint Charity Commissioner, Nagpur and others1 by Mr. Seervai. Ms.Iyer,learnedcounselhasalsorelieduponthesaidcaseto substantiate their argument that revocation of sanction granted under Section36(1)oftheActisnotpermissibleafterexecutionofthesale deed. ThoughMr.Seervaihasfairlysubmittedthatinthiscasenosale deedhasbeenexecuted,thescopeofSection36(2)oftheActistherefore required to be considered in the light of the observations of the said judgment.

12.

The learned Senior Counsel Mr. Seervaihas relied upon the

decisionofthisCourtinthecaseofDr.SamSaroshBhaccaandothersvs.
1 1989 Mh. L.J. 269

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P.V.Kakade,Jt.CharityCommissionerandothers1whereinsameprincipal hasbeenreiteratedthat Section36(2)powerscanbeexercisedbefore execution of the sale deed. It has also been held that the Charity CommissionerisempoweredtoassessanyadvantagereceivedbyTrustee and direct the Trustee to pay compensation to the Trust equivalent to advantagesoassessed.

13.

Mr. Seervai has relied upon an unreported decision of this

Courtinthecaseof ShriMotilalGirdharilalSharmaandothersvs.Shri DattatrayBanduJagtapandothers,whereinitisheldthattheauthorities andCourtshavepowerstorecalltheirordersiftheyfindthattheirorders have been obtained by fraud, misrepresentation or concealment of materialfacts.

14.

ThelearnedSeniorCounselMr.Dhakephalkar,appearingfor

Bhattad Leasing, has supported the order passed by the Charity CommissionerandsubmittedthatintheinstantcasetheTrusteesaswell as the intending purchasers were guilty of misrepresentation and concealment of facts which may amount to fraud while obtaining the orderofsanctionunderSection36(1)oftheAct.Mr.Dhakephalkarhas
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. DhakephalkarthatasperRule24oftheBombayPublicTrustsRules,1951 (theRules),certainfactsarerequiredtobedisclosedbeforetheCharity Commissionerwhichwasnotdisclosedintheinstantcase.Itissubmitted thatN.D.Constructionwashavingtwopartnersattherelevanttimeand thepartnersaresignatoriestotheagreementwithPawanBairagra.Itis submittedthatitisnotpossibletobelievethattheTrustmaynothaveany knowledgeaboutsuchtransaction,especiallywhenthesaidfactwasalso publishedin the newspaper. Itis submittedbyMr.Dhakephalkarthat N.D. Construction had formed a cartel with Pawan Bairagra and subsequentlywithoneM/s.KrishaDevelopersandwantedtopurchasethe propertyatathrowawayprice.Itissubmittedthatsimplybecauseorder underSection36(1)oftheActisconfirmedbythisCourtandSLPwas dismissed isnogroundforcomingtotheconclusionthatsubsequently application under Section 36(2) of the Act is not maintainable. It is submittedbyMr.Dhakephalkarthatwhiledecidingtheapplicationunder Section36(1)oftheAct,neithertheCharityCommissionernorthisCourt wasconcernedwiththeconcealmentofanyfactatthetimeofgranting sanctionbytheCharityCommissioner. ItissubmittedthattheCharity CommissionercanexercisesuomotupowersunderSection36(2)ofthe

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Act,ifanyfraudormisrepresentationhascometohisknowledgewhile grantingsanctionunderSection36(1)oftheAct. Itissubmittedthat duringthependencyofthis petition,BhattadLeasinghasspentcertain amountbymakingpaymenttotheReceiverandifultimatelythisCourt directstheCharityCommissionertotakeoutfreshproceedingsforsaleof theland,theexpenditureincurredbyBhattadLeasingmaybeallowedto bereimbursed. ItissubmittedbyMr.Dhakephalkarthatfraudvitiates everything and since the Charity Commissioner has, by his detailed reasons, come to the conclusion that he was deceived at the time of grantingsanctionunderSection36(1)oftheActand,therefore,hewas entitledtorevoketheorder.Learnedcounselfurthersubmittedthatthe Charity Commissioner may be directed to invite fresh bids, from the incomewhichtheTrustmayreceive,theexpenditureincurredbyBhattad Leasingtowardssecuritymaybeallowedtobereimbursed. Inorderto substantiate his argument, Mr. Dhakephalkar has relied upon the judgmentoftheSupremeCourtinthecaseofShrishtDhawan(Smt.)vs. M/s.ShahBrothers1. IthasbeenheldbytheSupremeCourtinthesaid casethatfraudandcollusionvitiateeventhemostsolemnproceedingsin anycivilisedsystemofjurisprudence.Fraudarisesoutofdeliberateactive roleofrepresentatoraboutafactwhichheknowstobeuntrueyethe
1 (1992) 1 SCC 534

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succeeds in misleading the representee by making him believe it to be true. The representation to become fraudulent must be of fact with knowledgethatitwasfalse.Butfraudinpubliclawisnotthesameas fraud in private law. Nor can the ingredients which establish fraud in commercial transaction be of assistance in determining fraud in AdministrativeLaw.

15.

Mr.Dhakephalkarhasalsoplacedrelianceonthedecisionof

the Supreme Court in the case of Church of North India vs. Lavajibhai Ratanjibhai and others1. In the said case, the Supreme Court has consideredvariousprovisionsoftheAct inconnectionwithbarofCivil Courtsjurisdiction. Inparagraph44ithasbeenheldthattheActisa 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 Trustsasalsocontrolandmanagementthereofsothatthetrustproperty maynotbesquanderedortheobjectorpurportforwhichapublictrustis created may not be defeated by the persons having control thereover. Relyingontheaforesaidobservations,itisarguedbyMr.Dhakephalkar thattheCharityCommissionerhasrightlypassedtheorderunderSection
1 AIR 2005 SC 254

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36(2)oftheActwhichisnotrequiredtobeinterferedbythisCourtinits writjurisdiction.

16.

ChamberSummonsNo.63of2005hasbeenpreferredbyone

M/s.KrishaDevelopersinthewritpetitionfiledbyN.D.Constructionwith aprayertoimpleadthemasrespondentNo.8inthearrayofparties.Mr. Chinai,learnedSeniorCounselappearingforthesaidintervenor,submits thatKrishaDevelopersmaybeallowedtobejoinedaspartytothepresent proceedings as, according to him, Krisha Developers has been put in possession of the landin viewofthe transaction entered intobetween N.D.ConstructionandKrishaDevelopers. ItissubmittedbyMr.Chinai that by an adinterim order of this Court, Receiver is appointed and presently Receiver is in charge of the property for the purpose of safeguardingthepropertyfromencroachment.Itissubmittedthatasper theReceiversreportitisclearthatKrishaDeveloperswasinpossession andhascarriedoutconstructionofcompoundwall.Itissubmittedthat eveniftheintervenormaynothaveanyvalidtitle,yetKrishaDevelopers isrequiredtobeputinpossessionbyvirtueoftheprovisionsofSection 53AoftheTransferofPropertyAct,1882aspossessionwastakenfromit bytheCourtReceiver.ItissubmittedthatKrishaDeveloperswasnotparty before the Charity Commissioner. Since Receiver has taken over

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possessionoftheproperty,adirectionmaybegiventotheReceiverto handoverpossessionbacktoKrishadevelopersandtheymaybeallowed tobejoinedasapartybyallowingtheChamberSummons.Insupportof his claim regarding establishing the claim for possession, the learned counselhasrelieduponReceiversreportsdated12thJanuary,1995and 16thJanuary,1995.

17.

Wehaveheardthelearnedcounselappearinginthematterat

greatlengthandhavealsogonethroughthevoluminousrecordforming partoftheseproceedings.

18.

TheprincipalquestionwhichtheCourtisrequiredtoconsider

in these writ petitions is as to whether the order of the Charity Commissioner passed under Section 36 (2) of the Act requires interferenceatourhandsintheseproceedingsandwhethertheCharity Commissioner has committed any error in passing such an order and whether in the facts and circumstances of the case, the Charity CommissionerwasjustifiedininvokinghispowersunderSection36(2)of the Act. If ultimately it is held that the order passed by the Charity CommissionerinrevokingthesanctiongrantedunderSection36(1)of theActiscorrect,whatfurtherdirectionscanbegiveninviewoflong

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passageoftimeaswellasinviewofthelawlaiddownbytheFullBench ofthisCourtinthecaseof ShaileshDevelopers(supra).TheCourtisalso requiredtoconsideras towhetherthestricturespassedbythe Charity CommissioneragainsttheTrusteesoftheTrustarerequiredtoexpunged ornot.

19.

Atthisstageitisnotnecessarytorecapitulatethefactsofthe

caseasthesamehavebeenadvertedtoearlier.Asstatedabove,theTrust wantedtodisposeofitslandasitwasunderheavyencroachmentandit wasnotpossiblefortheTrusttotakeactiontoremovethelargescale encroachmentwhichhadtakenplaceonthelandinquestion.TheTrust, therefore,invitedoffersbyissuingadvertisementinthenewspapersand ultimatelytheTrustenteredintoagreementwithN.D.Construction.As perthesaidtransaction,thesaleconsiderationwasultimatelyfinalisedat Rs.24,00,000/.TheTrustthereafterpreferredanapplicationbeforethe CharityCommissionerforsanctiontothesaidtransaction.Atthisstage,it wouldbereleventtorefertotheavermentsmadebytheManagerofthe TrustMr.V.P.ShahinitsapplicationmadeunderSection36(1)ofthe Act.Therelevantpartofthesaidapplicationreadsthus:

2.ThelandinquestionispopularlyknownasIndiraNagar

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andissituatedontheWesternsideofIraniwadiandonthe southernsideofMahatmaGandhiRoad,Kandivli.Theland isunderencroachmentandconstructionshavebeenputup. Itwouldbeimpracticabletofilesuitsagainstinnumerable encroachers.Thelitigationwouldbecostlyandalsolengthy andthattoowithuncertainresults.Thereisadangerofthe encroachersclaimingtitlebyadversepossession. 3.ShriNikhilbhaiNupendraZaveriandShriDigambar BhaskarSaprehaveapproachedusforthesaleofourright, titleandinterestintheaforesaidlandforRs.24,00,000/. Theintendingpurchasershavedepositedwithusanamount ofRs.2,50,000/.TheTrusteeshaveconsideredtheoffer and felt that the said offer is fair and reasonable. Accordingly, we seek your permission for sale of land in question. 4.Informationonthe4pointsenumeratedinRule24of the Bombay Public Trusts Rules, 1951 is as mentioned hereunder: (i) TheTrustDeedgivesfullpowertotheTrusteestosell the property by private treaty. Attention in this connection is invited to Clause 11 (n) of the Trust Deed. TheTrusteesconsidereditprudentandnecessaryto selltheright,titleandinterestintheproperty.The price realised can be used for the purpose of the Trust. This is further elaborated in the next succeedingclause.

(ii)

(iii) From the land in question we derive no income at present, but carry the liability for payment of non agricultural assessments, increase in land revenue, propertytaxes, etc.Itisnot possibletorecoverthe possession of the land without resorting to costly litigation.ItisaccordinglyintheinterestoftheTrust to sell the land at a fair and reasonable price. The offer of Shri Nikhilbhai Nupendra Zaveri and Shri Digambar Bhaskar Sapre of Rs. 24,00,000/ is

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consideredfairandreasonable. (iv) Sincetheproposaltoselltheright,titleandinterest oftheland,thequestionofthetermsofpastleases doesnotarise.

Alongwiththeapplication,aValuersreportwasalsoannexed.Asperthe Valuersreportdated13thJune,1989,hehasstatedthathehasinspected thelandinquestion.Thelandisextensivelybuiltandhasthousandsof hutments. In paragraph4it has been statedthat the entire landwas encroacheduponandfullyoccupiedanditwasalmostanimpossibletask for the owners to get possession of the property and any litigation initiatedtorecoverpossessionwouldnotonlybelengthyandcostlybut theresultthereofwouldbeuncertain.Inparagraph6ithasbeenstated thatthelandinquestionwasextensivelyencroachedandbuiltuponbya very large number of hutment dwellers and from whom it is almost impossibletogetpossession. TheTrusteeofthe Trustviz.Mr.Rajesh Batrahasalsofiledhisaffidaviton9thJune,1989,whereinhehasstated that the land was under encroachment since several years and constructions had been put up. He has stated that it would be impracticabletofilesuitsagainstinnumerableencroachers.Hehasstated in the saidaffidavit thatS/Shri Nikhil Nupendra Zaveri andDigambar BhaskarSaprehadapproachedtheTrustforthesaleoflandforatotal

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priceofRs.24,00,000/.Itisalsostatedinthesaidaffidavitthatitwas alsointheinterestoftheTrusttodisposeofsuchlands,whenitwasnot possible to recover possession. Before the Charity Commissioner, N.D. Construction had also appeared and their bid was also taken into considerationwhichwasinitiallyatRs.30lakhsanditwasincreasedto Rs.53lakhs,thoughaspertherecorditwasRs.51lakhs. TheCharity Commissionerultimatelygrantedsanctiontothetransactionbetweenthe TrustandN.D.Construction.Aspointedoutearlier,saidsanctionwhich wasgrantedbytheCharityCommissionerunderSection36(1)oftheAct was subject matter of challenge by Bhattad Leasing before this Court whichpetition was dismissedagainstwhichSpecialLeavePetition was alsodismissedbytheSupremeCourt. Subsequently, thesaidBhattad LeasingpreferredanapplicationunderSection36(2)oftheActbefore theCharityCommissionerinwhichtheimpugnedorderhasbeenpassed by the Charity Commissioner. At this stage reference is required to be madetotheprovisionsofSection36oftheActwhichreadasunder:

36.Alienationofimmovablepropertyofpublictrust. (1)Notwithstandinganythingcontainedintheinstrument oftrust (a) nosale,exchangeorgiftofanyimmovableproperty, and

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(b)

noleaseforaperiodexceedingtenyearsinthecase ofagriculturallandorforaperiodexceedingthree years in the case of nonagricultural land or a building, belongingtoapublictrust,shallbevalidwithoutthe previous sanction of the Charity Commissioner. Sanctionmaybeaccordedsubjecttosuchcondition astheCharityCommissionermaythinkfittoimpose, regardbeinghadtotheinterest,benefitorprotection ofthetrust;

(c)

If the Charity Commissioner is satisfied that in the interestofanypublictrustanyimmovableproperty thereofshouldbedisposedof,hemay,onapplication, authorise any trustee to dispose of such property subject to such conditions as he may think fit to impose,regardbeinghadtotheinterestorbenefitor protectionofthetrust.

(2)TheCharityCommissionermayrevokethesanction givenunderclause(a)orclause(b)ofsubsection(1)orthe ground that such sanction was obtained by fraud or misrepresentationmadetohimorbyconcealingfromthe Charity Commissioner, facts material for the purpose of giving sanction; and direct the trustee to take such steps withinaperiodofonehundredandeightydaysfromthe dateofrevocation(orsuchfurtherperiodnotexceedingin theaggregateone year as theCharity Commissionermay from time to time determine) as may be specified in the directionfortherecoveryoftheproperty. (3) NosanctionshallberevokedunderthisSection unlessthepersoninwhosefavoursuchsanctionhasbeen made has been given a reasonable opportunity to show causewhythesanctionshouldnotberevoked. (4) If,intheopinionoftheCharityCommissioner, the trustee has failed to take effective steps within the periodspecifiedinsubsection(2),oritisnotpossibleto recoverthepropertywithreasonableeffortorexpense,the

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Charity Commissioner may assess any advantage received bythetrusteeanddirecthimtopaycompensationtothe trustequivalenttotheadvantagesoassessed.

20.

TheCharityCommissioner,whileconsideringapplicationunder

Section36(1)oftheActisrequiredtoapplyhismindandisrequiredto makediscreetenquirytofindoutwhetheritisintheinterestofthetrust tosanctionthetransactioninquestion.Withoutprevioussanctionofthe CharityCommissioner,nolifecanbegiventoanytransactionenteredinto byanyTrustandsuchtransactionwillhavenolegalorbindingeffect. TheCharityCommissionerisassignedanimportantdutyandisrequired to act in the financial interest of the Trust in connection with the transactioninquestionforwhichsanctionissoughtfor. Whiledeciding anapplicationunderSection36(1)oftheAct,itisthedutyoftheCharity Commissionertoholdanappropriateinquiryandfromthematerialon recordtofindoutastowhetherthetransactionwhichtheTrustwantsto enterintoisrequiredtobeapprovedornotandanysanctionisrequired tobegivenornot.Atthetimeofdecidingsuchapplication,theCharity Commissionerisalsorequiredtoconsiderastowhetherthepricewhich the Trust is likely to receive is appropriate price and whether the transactioninquestionisgenuineornot. Inviewofthedecisionofthe FullBench(supra),itisclearthatwhileconsideringthequestionabout

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granting sanction, the Charity Commissioner is not required to give sanctiononlyinconnectionwiththeparticulartransactionwithanyparty, forwhichsanctionissoughtfor,butheisrequiredtoseethatvarious bidderscanputtheirownbidsbeforehimandultimately,ifintheopinion oftheCharityCommissioner,thehighestbidisrequiredtobeaccepted and sanction may accordingly be accorded to the highest bidder. The CharityCommissionerisrequiredtoinvitevariousbidsandtofindoutthe bestbid. Inagivencase,theCharityCommissionerisalsorequiredto findoutastowhetherthehighestbidgivenbyapersonisgenuineornot 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 schemeof the Act,the CharityCommissionerwhileacceptingthebidofaparticularbidderisalso requiredtoseewhetherthesaidbidisbeneficialtothetrust.Asheldby the Full Bench, the Charity Commissioner is required to consider the interestoftheTrustbyinvitingbidsandthescopeofSection36cannotbe saidtobeconfinedonlytogiveapprovaltoaparticulartransactionwhich theTrustmighthaveenteredintoandseekingsanctionfromtheCharity Commissionerquathesaidtransaction. TheFullBench inthecaseof Sailesh Developers (supra) has held that the power vested in Charity CommissionerunderSection36oftheActisnotonlyconfinedmerelyto

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grant or refusal of sanction to particular sale transaction in respect of whichsanctionissoughtbutalsoextendstoinvitingoffersfrommembers of public and directing trustees to sell or transfer trust property to a personwhosebidorquotationisbesthavingregardtointerest,benefitor protectionofTrust.Ithasalsobeenheldthatapartywhocomesforward tosubmithisofferdirectlybeforetheCharityCommissionerandcomplies withrequirementsasmaybelaiddownbytheCharityCommissionerina pending application under Section 36 of the Act has locus standi to challengethefinalorderpassedinproceedingsunderSection36ofthe Act.

21.

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

possibleforustoacceptthesubmissionofMs.Iyerthatthebidderi.e. N.D. Construction was not required to disclose anything before the CharityCommissioner asthematterisonlybetweentheTrustandthe CharityCommissioner.Itisnodoubttruethattheapplicationisrequired tobepreferredbytheTrustandthatishowthethingsareputintomotion for the purpose of giving sanction. Nonethless, when the Charity Commissionerisrequiredtoconsidervariousbids,itcannotbesaidthat anyvitalmaterialwhichisrequiredtobedisclosed,theobligationforthe 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 Trustandthebidder,if itisfoundthatthebidderhassuppressedvital materialsfromtheCharityCommissioner,inourview,thereisnoreason as to why the Charity Commissioner cannot invoke the provisions of Section36(2)oftheAct.Itistrue,asarguedbyMs.Iyerthatitisalso thedutyoftheTrusttodiscloseallrelevantaspectsbeforetheCharity Commissioner,butinagivencaseeveninadvertentlyordeliberatelythe Trusthasnotdisclosedcertaininformation,theprovisionsofSection36 (2)cannotbeinterpretedinarestrictedmannerbyholdingthatevenif purchaserwhosebidisacceptedbytheCharityCommissionerhasmisled the Charity Commissioner or by way of misrepresentation, the Charity Commissioner,insuchaneventualitycanexercisepowersunderSection 36(2)oftheAct.Inourview,itisnotpossibletogivesucharestrictive meaningwhileinterpretingSection36(2)oftheAct.Ifitissubsequently foundthatsuchsanctionwasobtainedbyfraudormisrepresentation,the CharityCommissionercanrevokethesanctiongivenunderclauses(a)and (b)ofsubsection(1)ofSection36oftheAct,bypassinganappropriate order.Inourview,suchmisrepresentationinagivencasemaybebythe Trustorevenbythebeneficiarytosuchtransaction.Itisalsorequiredto benotedthatevenundersubsection(3)ofSection36oftheAct,before passing any order revoking the sanction, the person in whose favour

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sanctionhasbeenmadeisrequiredtobegivenreasonableopportunityto showcausewhysanctionshouldnotberevoked.Inourview,ifaperson inwhosefavourthetransactionissanctionedhasnolocusstandiornosay inthematteratall,thereisnoquestionofhearinghimundersubsection (3)ofSection36oftheAct. Inanycase,weareoftheopinionthat consideringtheschemeoftheAct,theCharityCommissionerinagiven case may revoke the sanction, if it is found that there was misrepresentationbyeithertheTrustortheintendingpurchaser,whose bidisacceptedbytheCharityCommissioner. Inviewofwhatisstated above, we are of the opinion that in a given case the Charity CommissionermayrevokethesanctionunderSection36(2)oftheAct,if itisfoundthateithersidei.e.theapplicantTrustorthebeneficiaryof such sanction i.e. purchaser has fraudulently misrepresented the facts beforetheCharityCommissioner.

22.

The next question which requires consideration is as to

whetherinthefactsofthepresentcase,therewasanysuppressionor fraudwhichcanbeallegedtotheTrustoreventotheintendingpurchaser whosebidisacceptedandwhetherthereisanyjustificationinrevoking thesanctionbyresortingtoSection36(2)oftheAct.Inthisconnection, certainfactualaspectsassucharenotindispute.Theyare:

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(i)

BeforeenteringintotransactionwithN.D.Construction,Trusthad issuedpublicadvertisementinvitingoffers;

(ii)

The Trust ultimately decided to sell the land in favour of N.D. ConstructionandsaleconsiderationwasfixedatRs.24lakhs.

(iii)

Itisnotindisputethatsubstantialportionofthelandinquestion wasunderencroachmentby innumerableencroachersandinfact puccaconstructionwasalsocarriedoutbysomeencroachers.There is nothing on record to show that since how long such encroachmentwasinexistence.

(iv)

Before N.D. Construction entered into agreement with the Trust, theyhadenteredintoagreementwithPawanBairagrawhereinthe saleconsiderationwasfixedatRs.3crores.

(v)

ItisnotindisputethatatthetimewhentheCharityCommissioner granted the sanction, the factum about agreement arrived at betweenN.D.ConstructionandPawanBairagrawasnotdisclosed andwasnotputtothenoticeoftheCharityCommissioner.

(vi)

BoththepartnersofN.D.Constructioni.e.NikhilNupendraJhaveri andDigamberBhaskarSaprearesignatoriestotheagreement.

(vii) Substantialportionofthelandismarshylandwhichcannotbeput touseeffectively.

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23.

Considering the aforesaid aspect of the matter, the Charity

Commissioneratthetimewhenhegavesanctionobviouslywasnotposted withthefactsaboutthetransactionwhichhadtakenplacebetweenN.D. ConstructionandPawanBairagra.WhethertheTrustwasawareaboutthe transactionornotisalsorequiredtobetakenintoconsideration.Ifthe TrustwasawareaboutsuchtransactionbywhichN.D.Constructionhas 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 subsequentlyincreasedtoRs.52lakhs. Inourview,atthetimewhen N.D.ConstructiongaveanoffertotheCharityCommissionertothetune ofRs.52lakhs,theywereawarethattheyaregoingtogetmorethanRs. 3croresastheyhadenteredintoagreementwithPawanBairagrapriorto thegrantofsanctionbytheCharityCommissioner,eventhoughtheydid nothavetitleattherelevanttime,soastopassany titleinfavourof PawanBairagra.ThereisnothingonrecordtoshowthattheTrustwas having actual notice of such a transaction at the relevant time. An advertisement in the newspaper can be considered as a constructive noticetotheTrustbutsincethereisnothingonrecordforcomingtothe conclusionthattheTrusthadactualnoticeofthesame,itisnotpossible forustoholdthatinafraudulentanddishonestmannertheTrusthad

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suppressed the fact about the agreement entered into between Pawan BairagraandN.D.Construction.Thereisnothingonrecordtoindicate thattheTrustwantedtofavourN.D.Constructionorthattherewasany collusionbetweenN.D.ConstructionandtheTrustinanymanneratthe timeofenteringintoagreementwithN.D.Construction.TheTrustentered into agreement with N.D. Construction after inviting offers by public advertisement.ItispossiblethattheTrustmaynothaveanyactualnotice 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 intentiononthepartoftheTrustnottopointoutthesaidfacttothe CharityCommissioneratthetimeofpreferringapplicationunderSection 36(1)oftheActandinfactTrusthasalsotakenastandbeforeusthat theTrustisinterestedingettingmaximumpriceavailableoutofthesale transaction,inourviewitcannotbesaidthattheTrustmadeafraudulent attemptto deceivetheCharityCommissionerbynotdisclosingthefact that before entering into transaction, N.D. Construction has arrived at agreementwithPawanBairagra.Regardingtheaspectofencroachment,it is true that in the application the Trust has averred that the land in question is underencroachment.Asperthe Valuers report,whichwas initiallysubmittedbytheTrustalongwiththeirapplication,itwasstated

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thatthelandisunderextensiveencroachment.Theareainquestionisso largeand,assubmittedbyMr.Seervai,itwasimpossibleattherelevant timetoidentifyexactportionofencroachedarea.Inviewofsubsequent Valuersreport,ithascomeonrecordthatsomeportionofthelandwas vacantandsomeportionwasunderheavyencroachment.Consideringthe aforesaidaspectofthematter,thoughitistruethattheTrustshouldhave takenreasonablecareinfindingouttheexactareaunderencroachment butsincefromthefactualaspectitisrevealedthatlargeareawasunder encroachment, the averment in the application that the land is under encroachment itself may not be a suggestive factor that the land was underencroachment.Intheapplicationitisstatedthatthelandmaybe considered as substantially encroached or entire land was under encroachment. However, the Valuers report which the Trust has attachedwiththeapplicationalsoclearlymentionedthatsubstantialarea wasunderencroachment. Inourview,whilepreferringapplication,the Trusthadnottakenreasonablecarebyidentifyingtheexactareaunder encroachmentandpossiblyavaguestatementwasmadethatthelandwas underencroachment,whichmighthavegivenanimpressiontotheCharity Commissionerthattheentireareawasunderencroachmentatthetimeof grantingsanction.Thequestionwhichrequiresconsiderationiswhether theTrust,inordertomisleadtheCharityCommissioner,hasmadesuchan

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avermentintheapplication.Bynostretchofimagination,itcaneverbe saidthatinordertomisleadtheCharityCommissioner,astatementwas 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 impressionthattheentirelandwasunderencroachment.Consideringthe saidaspect,eventhoughsanctionoftheCharityCommissionermightbe onthebasisthattheentirelandisunderencroachment,fromtherecordof thecaseaswellasfromtheValuersreportwhichtheTrusthasannexed alongwiththeapplication,itisnotpossibleforustobelievethattheTrust withafraudulentintentionhastriedtocreateanimpressionbeforethe CharityCommissionerthatnotasingleinchoflandisfreeandthatthe entirelandisunderencroachment. Itisnotindisputethatsubstantial portionwasunderencroachmentandlargescaleconstructionwasmade andthatwasthebasisfortheTrusttoapplyforsanctionunderSection36 (1)oftheAct.Itis,however,requiredtobenotedthatthoughitmaynot bepossibleforustoinferthattheTrusthasactedinafraudulentmanner before the Charity Commissioner, it seems that the Trust has also not taken appropriate care or at least was negligent in the matter of identifyingtheactualencroachedarea.Consideringthesaidfact,itisnot

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possibleforustocometoaconclusionthatthetrustwithadishonest intentionandtocommitfraudontheCharityCommissionerbyconcealing certainmaterialfactsultimatelygotanorderofsanctionunderSection36 (1)oftheAct.

24.

Thenextquestionwhichrequiresconsiderationisastowhether

inthefactualbackgroundofthiscase,whethertheCharityCommissioner wasjustifiedininvokingSection36(2)oftheAct.Aspointedoutearlier, perhapstheTrustcouldhavetakenmorecarewhiledescribingtheactual area under encroachment but that fact itself may not result into a fraudulentactonthepartoftheTrust.Thereisnothingonrecordtoshow thattheTrustwantedtocommitfraudbymisrepresentingcertainthings beforetheCharityCommissionertohelptheintendingpurchaseri.e.N.D. Construction.Asamatteroffact,beforetheCharityCommissionerthere weretwobiddersi.e.N.D.ConstructionandBhattadLeasing.TheCharity Commissioner thereafter considered both the bids and ultimately N.D. ConstructionraisedthebiduptoRs.52lakhs.Thereisnothingonrecord, therefore,tosuggestthatwithaviewtoachieveitsobjectoffavouring N.D. Construction that the Trust concealed certain facts. If that be so, simplybecausemeticulouscarehasnottakenbytheTrustinpreferring theapplicationunderSection36(1)oftheAct,thatfactitselfcannotbe

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construedasafraudulentactiononthepartoftheTrust.Onecanonly attributenegligencetotheTrusteeortheManageroftheTrustbutitisnot possibletoattributefraudonthepartoftheTrusteesinthisbehalf.

25.

Aspointedoutearlier,theCharityCommissionermighthave

beenmisguidedbytheavermentintheapplication andperhapsmight havethoughtthattheentirelandwasunderencroachment,thoughitis not in dispute that substantial part of the land was definitely under encroachmentandsomeportionismarshylandwhichwasnotpossibleto beutilised.However,therecorddisclosesthattheintendingpurchaseri.e. N.D. Construction at the time of giving its bid before the Charity Commissionersuppressedthematerialfactabouttransactionwhichithad enteredintowiththesaidPawanBairagra.ItisnotindisputethatN.D. Construction had entered into agreement with Pawan Bairagra before gettingsanctionfromtheCharityCommissionerformorethanRs.3crores andalsoenteredintoagreementwith one Krisha Developers.All these aspectswerenotdisclosedbeforetheCharityCommissioner.Theparties beforetheCharityCommissionerarerequiredtodisclosematerialfacts andonthatbasistheCharityCommissionercanconsidertheaspectabout acceptingaparticularbid.Itisnotpossibleforustoaccepttheargument ofMs.IyerthattheagreementwasenteredintoonlywithPawanBairagra

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inconnectionwithsomemonetarytransactionandthatultimatelythesuit filedbyPawanBairagrawaswithdrawnbyhim.Itisrequiredtobenoted thatPawanBairagra ultimatelyfiledasuitwhereineventheTrustwas joinedasapartyandwefindconsiderableforceintheargumentofMr. Seervaithatwhentheyreceived thesummonsfromtheCourtthatthey realisedthattheyweredupedbyN.D.Constructionbysuppressingthe saidfact.ItisalsorequiredtobenotedthatboththepartnersofN.D. ConstructionaresignatoriestotheagreementwithPawanBairagraasthe N.D. Construction is a firm of two partners. An attempt was therefore madebyN.D.ConstructiontogetthepropertyoftheTrustatathrow awaypriceandtomakehugeprofitbysellingitformorethanRs.3crores attherelevanttime.Itisalsorequiredtobeobservedthatsubsequently evenN.D.ConstructionhasenteredintoanotheragreementwithKrisha DevelopersandtheonlyobjectofN.D.Constructionseemstobetomake ahugeprofitbygettingthepropertyoftheTrustatathrowawayprice.In fact,thetransactionofN.D.ConstructionwithPawanBairagrapriorto obtaining sanction order passed by the Charity Commissioner was the mostrelevantmaterialwhichoughttohavebeenbroughttothenoticeof theCharityCommissioner.TheCharityCommissionerhasconsideredthis aspectingreatdetailinhisorder.Consideringthesaidaspect,sincethe aforesaidmaterialwasnotplacedbeforetheCharityCommissionerandit

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wassuppressedfromtheCharityCommissioner,inourview,theCharity Commissioner was perfectly justified in revoking the sanction granted earlier.ItisnotindisputethatnosaledeedwasexecutedbytheTrustin favourofN.D.Construction andnorightisthereforecreatedin their favour in any manner. Though the Charity Commissioner had granted sanction,howevertillsaledeedisexecuted,thepowerunderSection36 (2)canstillbeexercisedbytheCharityCommissionerandsanctioncould be revoked, if it is found that he had granted sanction on account of misrepresentationorrelevantaspectswerenotplacedbeforehimbythe Trust.Asdiscussedearlier,theconcealmentofmaterialaspectscannotbe restrictedonlytotheTrustbutevenanypartyonwhosefavoursanctionis givenisultimatelyfoundtohavesuppressedcertainthings,theCharity Commissioner can definitely revoke the sanction. The Charity CommissionerisrequiredtoseetheinterestoftheTrustandifitisfound thatsanctiongrantedbyhiminfavourofaparticularintendingpurchaser hasultimatelynotfoundtobeintheinterestoftheTrust,theCharity CommissionercanrevokethesanctionunderSection36(2)oftheAct. Beforepassingtheorder,theCharityCommissionerhasalsogivenhearing to N.D. Construction and by giving cogent reasons sanction accorded underSection36(1)oftheActhasbeenrevoked.Asstatedabove,ifthe vitalmaterialasmentionedabovewasbroughttothenoticeoftheCharity

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Commissioner,hepossiblywouldnothavegrantedsanctionunderSection 36 (1) of the Act. Since the entire material facts were subsequently disclosedatthetimeofhearingofapplicationunderSection36(2)ofthe Act,theCharityCommissionerhasdeemeditfittorevokethesanction. TheCharityCommissionerhasalsomadenecessaryenquiresby making spotinspectionofthesite,etc.Consideringthesaidaspect,theCharity CommissionerhasultimatelytakenadecisionintheinterestoftheTrust andhas,inourview,rightlyrevokedthesanctiongrantedearlier. The argumentofMs.IyerthatoncesanctionunderSection36(1)oftheActis confirmedtilltheHighCourt,proceedingsunderSection36(2)arenot maintainableiswithoutanysubstance.Thesaidargumentisrequiredto berejectedas,inourview,proceedingsunderSection36(2)oftheActis separate and independent and the Charity Commissioner has rightly exercisedthosepowersintheinstantcase.Thefactsofthecasemakeit absolutely clear that the relevant material was not placed before the Charity Commissioner and, therefore, the Charity Commissioner has revokedthesanctionafterconsideringthematerialonrecordatthetime ofdecidingapplicationunderSection36(2)oftheAct.Itisrequiredto be noted that the concealment has taken place at the behest of N.D. Constructionastheyhavenotplacedtherelevantmaterialonrecord.Even if either party has concealed or suppressed material facts, the Charity

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CommissionercanexercisepowersunderSection36(2)oftheAct,ifitis foundthateithersidehastriedtomisleadhimorsuppressmaterialfacts fromhim.

26.

AsheldbytheSupremeCourt,fraudvitiateseverythingand

whentheCharityCommissionerhascometotheconclusionthathewas misled,hewasperfectlyjustifiedininvokingpowersunderSection36(2) oftheAct.Inagivencase,eventheCharityCommissionerhassuomotu powers,ifanyfactualaspectisbroughttohisnotice thataparticular partyhascommittedfraudwhilegettingsanctionunderSection36(1)of theAct.

27.

ItisnodoubttruethatBhattadLeasinghadnotdisclosedthe

saidfactearlierandsuchapplicationwaspreferredafteraconsiderable periodoftime.Inourview,eveniftheconductofsaidBhattadLeasing maynotinspireconfidenceinthisbehalf,ultimatelywhenthefactswere brought to the notice of the Charity Commissioner, the Charity CommissionerwasjustifiedatleastininvokinghispowersunderSection 36(2)oftheAct.ItisequallytruethatsaidBhattadLeasingalsogivenan offerofonlyRs.50lakhs,thoughtheyknewthatN.D.Constructionhas enteredintoagreementofsalewithPawanBairagraforRs.3crores.

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28.

SofarasChamberSummonspreferredbyKrishaDevelopersis

concerned,theylayaclaimofbeinginpossessionofthepropertyonthe basisofthereportsoftheReceiver. Thelearnedcounselappearingfor KrishaDevelopersfailedtopointoutastohowKrishaDevelopersgotany titleovertheproperty.SinceKrishaDevelopersarenothavinganyright and/ortitleworththename,assumingthattheywereinpossession,the samecannotbeprotectedbyresortingtoSection53AoftheTransferof PropertyAct.Section53Amaybeapplicableinacasewhereapersonis put in possession by way of valid transaction without there being any registereddocument. Insuchaneventuality,transfereecanprotecthis possession. We have our doubts as regards the possession of Krisha Developers.ThereportsoftheCourtReceiver,inourview,donotsupport 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 order passedbytheCharityCommissionerunderSection36(2)oftheActis requiredtobeupheldwithamodificationthattheCharityCommissioner shallnowinvitefreshbidsfromthepublicbywidepublicity.Forthesaid purpose,advertisementmaybegiveninappropriatenewspapers.Thecost of such advertisement shall be borne by the Trust. The matter is

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accordinglyremandedtotheCharityCommissionerforthesaidpurpose. The application under Section 36 (1) of the Act be decided de novo. Thereisalsoanadditionalaspectastowhyfreshbidsshouldbeinvitedin viewofthe factthattheUrbanLand(Ceiling andRegulation)Acthas been repealed and naturally, therefore, there may be a further appreciationinthelandvalueinviewoftherepealoftheULCAct.

29.

Itisrequiredtobenotedthatnosanctionhasbeengrantedby

the Charity Commissioner regarding transaction entered into by N.D. ConstructionwiththeTrust.EventhoughKrishaDevelopersclaimtobe inpossession,itisclearthatKrishaDevelopersarenothavinganyvalid titlenoranyrightiscreatedintheirfavourbytheTrustinanymanner.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 Developershavealreadyfiledasuit.ThesaidKrishaDevelopers,therefore, are neitheranecessarynoraproperpartytotheproceedingssofaras proceedingsunderSection36(2)oftheActisconcerned.TheChamber Summonsforjoiningthemaspartyrespondentisthereforerequiredtobe rejectedandisaccordinglyrejected.IfKrishaDevelopershaveanyright, title or interest in the property, it is for them to agitate their right in

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appropriateproceedingsinaccordancewithlaw. Thecontentionofthe learnedcounselfortheintervenorthatKrishaDevelopersareentitledto beputinpossessionunder Section53AoftheTransferofPropertyAct cannotbeacceptedaswedonotfindanysuchrightintheirfavourwhich canbesaidtobeonthebasisofanyvalidtransaction.Thesubmissionof the learned counsel that the Receiver may be directed to hand over possession toKrisha Developers,therefore,cannot be accepted andthe said prayer is rejected. Chamber Summons taken out by Krisha Developersisaccordinglyrejected.

30.

Considering the aforesaid aspect, Writ Petition No. 1486 of

1994isrequiredtobedismissedandthesameisaccordinglydismissed. Ruleisdischarged.

31.

SofarasWritPetitionNo.1814of1994isconcerned,thesame

isallowedandthematterisremandedtotheCharityCommissionerfor deciding 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 toapply to the Charity Commissioner for reimbursement of the expenditure incurred by them towardssecuritychargesoranyotherchargesincurredbythem.Ifsuchan

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applicationispreferred,itisfortheCharityCommissionertodecidethe sameaspertheevidencethatwouldbeproducedinthatbehalf. The amount i.e. Rs. 52 lakhs which the Trust has received from N.D. Constructionberefundedtothemwithinaperiodoftwomonthswith9 percentinterest.TheReceivernowshallhandoverpossessionbackto theTrust.ItisfortheTrusttolookafterthepropertyandtosafeguardthe propertybytakingappropriateremedialmeasures. Theprayermadeby KrishaDevelopersforstayingthisorderfortwoweeksregardinghanding overpossessionbytheTrustinfavouroftheTrustisrejected.

32.

Atthisstage,learnedcounselappearingforN.D.Construction

requeststhattheCharityCommissionermaybeaskednottoproceedwith thematterfortwomonthsastheywouldliketoapproachtheSupreme Court.Therequestisreasonable.TheCharityCommissionerisdirected nottotakeanyfurtheractiononthebasisofthisorderforaperiodoftwo months inordertoenableN.D.ConstructiontoapproachtheSupreme Court. P.B.MAJMUDAR,J.

R.M.SAVANT,J.