Court’s Decision
The Bombay High Court allowed the writ petition filed by Bagasarwala Property LLP and set aside the order dated 29 January 2020 passed by the Joint Charity Commissioner under Section 36(2) of the Maharashtra Public Trusts Act, 1950.
The impugned order had cancelled the earlier sanction granted on 24 May 2018 for dealing with the trust property and had directed the trustees to refund ₹6,53,00,000/- to the petitioner, along with yearly rent of ₹30,000/- if paid. It had also directed restoration of the property in the trust records.
Justice Amit Borkar held that once a conveyance had already been executed pursuant to sanction granted under Section 36(1), the power of revocation under Section 36(2) could be exercised only if the sanction was obtained by fraud practised upon the Charity Commissioner. The Court found that no such fraud, misrepresentation, or concealment of material facts was established.
The Court clarified that it was not deciding any independent title, tenancy, leasehold, ownership, succession, or proprietary claims of the parties, and all such issues were kept open to be raised before the appropriate forum.
The request for stay on implementation of the judgment made on behalf of respondent Nos.2(a) and 2(b) was rejected.
Facts
Respondent No.3 was a public trust. The trust property had a long history, including a lease deed dated 5 April 1917 and an assignment deed dated 6 December 1932.
According to the petitioner, the Trust issued a notice in 2016 stating that lease and assignment rights in respect of the property stood terminated. Thereafter, on 27 April 2018, the Trust approached the Joint Charity Commissioner seeking permission to grant the property to the petitioner on lease for 29 years.
The proposal also contained provisions giving the petitioner a right to renew the lease from time to time and a right to purchase reversionary rights in the property.
On 24 May 2018, the Joint Charity Commissioner granted sanction. Pursuant to this sanction, a lease deed was executed in favour of the petitioner on 18 September 2018. Shortly thereafter, on 20 September 2018, the petitioner exercised the option to purchase reversionary rights, resulting in execution of a conveyance deed in favour of the petitioner.
The Trust then filed a change report seeking deletion of the property from trust records, which was accepted on 12 October 2018.
Subsequently, respondent No.2 initiated proceedings under Section 36(2) of the Maharashtra Public Trusts Act seeking cancellation of the sanction dated 24 May 2018. By order dated 29 January 2020, the Joint Charity Commissioner cancelled the sanction.
The cancellation was based mainly on allegations that the termination notice issued to the earlier lessee was not placed before the authority, the public advertisement did not disclose renewal rights and reversionary rights, valuation was defective, the Trust had not shown need for the transaction, and the process was completed in unusual haste.
Aggrieved, the petitioner approached the Bombay High Court under Articles 226 and 227 of the Constitution of India.
Issues
- Whether the Joint Charity Commissioner could revoke a completed trust property transaction under Section 36(2) of the Maharashtra Public Trusts Act without clear proof of fraud.
- Whether alleged non-disclosure of the termination notice, renewal rights, reversionary rights, valuation issues, and alleged lack of transparency amounted to fraud or concealment of material facts.
- Whether Section 36(2) proceedings could be used to reopen or reassess the correctness of the original sanction order granted under Section 36(1).
- Whether tenancy, title, leasehold, succession, and proprietary disputes could be adjudicated in revocation proceedings under Section 36(2).
- Whether respondent No.2 had locus to initiate proceedings under Section 36(2).
Petitioner’s Arguments
The petitioner argued that the application filed by respondent No.2 under Section 36(2) was not maintainable because respondent No.2 was neither a trustee nor a person having legally recognised interest in the management, benefit, or welfare of the Trust.
It was submitted that respondent No.2 was claiming as a heir/legal representative of the earlier assignee and was attempting to advance claims adverse to the Trust. Such a person, according to the petitioner, could not invoke Section 36(2) merely to defeat a transaction validly entered into by the Trust and approved by the competent authority.
The petitioner further argued that allegations of fraud were vague and unsupported by proper pleadings or evidence. Merely using the word “fraud” was not enough. No oral or documentary evidence had been produced to establish fraud, suppression, or concealment.
It was also submitted that all important terms of the proposed transaction were contained in the tender documents, and the public advertisements directed interested persons to those documents. Therefore, the process was transparent.
On valuation, the petitioner contended that a proper valuation report was prepared on accepted market principles, reflecting the value a willing purchaser would pay to a willing seller in an open market transaction.
The petitioner also argued that the sanction application disclosed that the earlier tenancy had been terminated and that the Trust had become responsible for maintenance, preservation, taxes, and liabilities related to the property. These were valid reasons for entering into the transaction.
On reversionary rights, the petitioner submitted that the Joint Charity Commissioner wrongly treated the grant of reversionary rights as an impermissible transfer of trust property. The petitioner argued that disputes regarding termination of tenancy or continuation of leasehold rights could only be decided in appropriate proceedings before a competent forum, and not in Section 36(2) proceedings.
Respondents’ Arguments
Respondent Nos.2(a) and 2(b) supported the impugned order.
They argued that they possessed ownership rights in the structure standing on the land and that the option for renewal of lease granted to the petitioner was not disclosed in the public advertisement. According to them, this deprived other interested persons of an opportunity to make informed offers and showed lack of transparency.
They further contended that the Trust had no authority to create the lease because respondent No.2 continued to claim leasehold rights. Therefore, if the lease itself was invalid, the grant of reversionary rights flowing from it would also be invalid.
It was also argued that lease rights do not automatically end merely because a termination notice is issued. Such rights continue unless lawfully determined.
The respondents supported the findings of the Joint Charity Commissioner on lack of transparency, defective valuation, non-disclosure, and the transaction not being in the best interest of the Trust.
Respondent Nos.3 to 7, who were trustees, supported the petitioner. They submitted that the original sanction order under Section 36(1) had considered all relevant material, including earlier lease arrangements, pending proceedings before the Court of Small Causes, encumbrances, the “as is where is” nature of the property, valuation, structural audit reports, and the condition of the building.
They argued that the Charity Commissioner was aware of the disputes concerning the property before granting sanction, and therefore it could not be said that sanction was obtained by fraud or suppression.
Analysis
The Court examined the statutory scheme of Section 36 of the Maharashtra Public Trusts Act, 1950.
It held that Section 36 is intended to protect immovable properties belonging to public trusts. Trust property is held for charitable and public purposes, and therefore cannot be sold, transferred, leased, or otherwise dealt with in a manner causing loss to the trust.
Under Section 36(1), previous sanction of the Charity Commissioner is required for sale, exchange, gift, or long-term lease of trust property. At that stage, the Charity Commissioner must consider whether the transaction is in the interest, benefit, and protection of the trust.
However, the Court emphasised that Section 36(2), which deals with revocation of sanction, operates in a much narrower field.
The Court held that revocation can be ordered only where sanction was obtained by fraud, misrepresentation, or concealment of material facts. Section 36(2) is not appellate in nature. It does not permit the authority to reconsider the correctness of the original sanction merely because another view is possible.
The proviso to Section 36(2) was considered crucial. The Court held that once a conveyance is executed pursuant to sanction, the sanction cannot be revoked except on the ground that fraud was practised upon the Charity Commissioner before grant of sanction.
In this case, sanction was granted on 24 May 2018. A lease deed was executed on 18 September 2018, and a conveyance deed was thereafter executed in favour of the petitioner. Therefore, by the time the impugned order was passed, the transaction had already been completed. The Joint Charity Commissioner could interfere only if fraud was clearly established.
The Court found that fraud was not established.
It observed that fraud is a serious allegation and cannot be lightly inferred. It requires strict pleadings and proof. Fraud cannot be based on suspicion or on the fact that another authority may take a different view on the same material.
The person alleging fraud must identify the false representation, the person who made it, how it was false, the intention behind it, and how it resulted in obtaining the order. The Court found that the revocation application did not contain such particulars.
On the alleged non-disclosure of the termination notice, the Court held that every non-disclosure does not amount to fraud. There is a distinction between omission to disclose a relevant fact and fraudulent concealment of a material fact. Fraudulent concealment requires intention to deceive.
The Court noted that the Charity Commissioner was aware of disputes surrounding the property, earlier transactions, pending proceedings, and encumbrances. The property was not projected as free from litigation or complications. Therefore, non-production of one additional document could not automatically amount to fraud.
On the alleged non-disclosure of renewal rights and reversionary rights in the advertisement, the Court held that the detailed tender documents contained the actual terms of the transaction and formed part of the sanction proceedings. The newspaper advertisement was only for inviting interested persons. Even if the advertisement could have been clearer, that did not establish fraud.
On the tenancy and title disputes, the Court held that such issues belong to a different area of law. Questions regarding whether the earlier tenancy had lawfully ended, whether respondent No.2 continued to possess rights, or whether there were ownership rights in the structure, could not be adjudicated in Section 36(2) proceedings unless they directly established fraud, misrepresentation, or concealment.
On valuation, the Court held that valuation is an estimate. Different valuers may arrive at different figures. The record showed that a Government-approved valuer had prepared a valuation report after considering the condition of the building, disputes, encumbrances, and liabilities. Mere later disagreement with valuation could not prove fraud.
On reversionary rights, the Court held that whether such rights could be granted and on what conditions were matters to be considered at the stage of sanction under Section 36(1). Once sanction had been granted, the authority exercising power under Section 36(2) could not revisit the same issue merely because another view was possible.
Precedent / Legal Principle Applied
The judgment primarily turns on the interpretation of Section 36(1), Section 36(2), and the proviso to Section 36(2) of the Maharashtra Public Trusts Act, 1950.
The key legal principles applied are:
- Trust property cannot be alienated without prior sanction of the Charity Commissioner where Section 36 applies.
- At the stage of granting sanction under Section 36(1), the Charity Commissioner must consider the interest, benefit, and protection of the trust.
- Revocation under Section 36(2) is limited to fraud, misrepresentation, or concealment of material facts.
- Once conveyance is executed, revocation is even more restricted and can be ordered only on the ground of fraud practised upon the Charity Commissioner before grant of sanction.
- Section 36(2) is not an appellate power and cannot be used to reassess the merits of the original sanction.
- Fraud must be specifically pleaded and strictly proved; it cannot be presumed from suspicion, procedural lapses, valuation disagreement, or subsequent difference of opinion.
- Section 36(2) proceedings cannot become a forum for deciding tenancy, title, succession, possession, leasehold, or proprietary disputes.
Reasoning
The Court reasoned that the Joint Charity Commissioner had exceeded the limited jurisdiction under Section 36(2).
The impugned order did not rest on established fraud. Instead, it reassessed the original sanction order on issues such as advertisement disclosure, valuation, necessity of transaction, termination notice, renewal rights, and reversionary rights.
According to the Court, these issues may have been relevant at the stage of granting sanction under Section 36(1), but after completion of the transaction and execution of conveyance, they could not justify revocation unless they proved fraud practised upon the Charity Commissioner.
The Court found that the original sanction order showed awareness of disputes, encumbrances, earlier transactions, pending proceedings, property condition, valuation, and related circumstances. Therefore, it could not be said that the Charity Commissioner acted in ignorance of material facts.
The Court also held that respondent No.2’s claims concerning tenancy, ownership in the structure, succession, or leasehold rights may be pursued before the appropriate forum, but such private rights could not expand the scope of inquiry under Section 36(2).
The Court concluded that the impugned order converted revocation proceedings into a rehearing on merits, which is not permissible.
Conclusion
The Bombay High Court allowed the writ petition and set aside the order dated 29 January 2020 passed by the Joint Charity Commissioner.
The sanction order dated 24 May 2018 granted under Section 36(1) of the Maharashtra Public Trusts Act, 1950 was held to continue as valid and operative in accordance with law.
The directions requiring refund of ₹6,53,00,000/- and restoration of the property in trust records were also set aside.
The Court clarified that it had not decided any independent rights relating to title, tenancy, leasehold rights, ownership rights in structures, succession claims, proprietary claims, or validity of the termination notice. All such issues were kept open.
The request for stay of the judgment was rejected.
Implications
This judgment is significant for trust property transactions under the Maharashtra Public Trusts Act.
It makes clear that once a trust property transaction has been sanctioned and completed, it cannot be reopened casually or treated as a fresh appeal against the earlier sanction order.
The ruling protects finality of completed transactions while still preserving the power to revoke sanctions obtained by actual fraud.
The judgment also draws an important distinction between irregularity and fraud. A procedural lapse, imperfect advertisement, valuation dispute, or non-production of one document may raise questions, but unless there is proof of intentional deception, Section 36(2) cannot be invoked to undo a completed transaction.
For public trusts, developers, purchasers, lessees, and persons dealing with trust property, the ruling confirms that transparency and disclosure remain important. However, revocation of sanction after conveyance requires a much higher threshold.
For persons claiming independent tenancy, title, or proprietary rights, the judgment clarifies that such claims must be pursued before the proper forum and cannot be indirectly decided in Section 36(2) revocation proceedings.