GANESH RAMCHANDRA JADHAV versus GOVARDHAN SANSTHA (REGD) WAI PUNE AND OTHERS on 19 July 2021

[2021] 6 S.C.R. 491

GANESH RAMCHANDRA JADHAV

v.

GOVARDHAN SANSTHA (REGD) WAI PUNE AND OTHERS

(Civil Appeal No 2748 of 2021)

JULY 19, 2021

[DR. DHANANJAYA Y CHANDRACHUD AND

M. R. SHAH, JJ.]

Maharashtra Public Trust Act, 1950 – Tender – In 2015, atender notice was issued by the first respondent-registered charitabletrust inviting bids for the development of the property – Bids weretendered by the appellant and the second respondent – There werevarious rounds of litigation between the first respondent, secondrespondent, third respondent-Joint Charity Commissioner and theappellant regarding the bids offered – In 2021, the appellant filedan intervention application in the writ proceedings, allegingcollusion between the first and second respondent for the sale ofthe said property – Appellant offered an amount of Rs. 75 lakhs forthe property – However, appellant did not abide by its offer despitevarious opportunities given by the High Court – Thereafter, secondrespondent made an offer of Rs.80 lakhs and accordingly, the HighCourt directed to complete the transaction with the secondrespondent – Before the Supreme Court, the appellant submittedthat he was ready with Rs. 75 lakhs and High Court should havegranted further extension of time – On 18.03.2021, the appellantwas directed to deposit Rs.1 crore in the High Court to hisbona fides and the same was complied with – It was contended bythe second respondent that all along, it was second respondent whohas participated in the process of auction sale and the appellanthad failed to avail of the opportunities which were granted by theHigh Court – It was urged that having regard to the principles oflaw which have evolved by the judgments of the Supreme Court, itwould be necessary to reject the offer which is now made by theappellant and to award the property to the second respondent –Held: At the present time, the appellant has deposited an amount ofRs. 1 crore before the High Court – To accept the bid of the secondrespondent in the amount of Rs. 80 lakhs will deprive the trust ofthe opportunity of realising the full market value – The decision of

A

B

CDEF

GH

Athe High Court to award the sale in favour of the second respondentwould cause serious jeopardy to the interests of the public charitabletrust – The manner in which the second respondent has increasedhis offer in driblets (from Rs.50 lakhs to Rs.75 lakhs and thereafter,to Rs.80 lakhs) leads to a reasonable inference that the true valueof the property was not realized – The appropriate direction wouldBbe to require the third respondent to conduct the auction process byinviting fresh bids after a proper valuation – Accordingly, directionsissued.

Allowing the appeal, the Court

Allowing the appeal, the Court

CHELD: 1. The offer which was made by the secondrespondent initially was in the amount of Rs 50 lakhs. It was onlyafter the appellant had indicated before the High Court that anamount of Rs 75 lakhs would be offered and failed to do so, thatthe second respondent stated before the High Court that he waswilling to match the offer of the appellant and to go beyond it byDan amount of Rs 5 lakhs. At the present time, the appellant hasdeposited an amount of Rs 1 crore before the High Court. Toaccept the bid of the second respondent in the amount of Rs 80lakhs will deprive the trust of the opportunity of realising the fullmarket value. In this view of the matter, this Court is of the viewEthat the submission which has been urged on behalf of theappellant is worthy of acceptance. This Court is unable tosubscribe to the submission of the second respondent for thesimple reason that the course of dealings would indicate that eventhe second respondent has progressively enhanced its offers fromRs 50 lakhs to Rs 75 lakhs and, thereafter, to Rs 80 lakhs. BeforeFthis Court, now it has been indicated that the second respondentwould be willing to match the offer of the appellant of Rs 1 crore.There has undoubtedly been a default on the part of the appellantbefore the High Court. But the decision of the High Court toaward the sale in favour of the second respondent would causeGserious jeopardy to the interests of the public charitable trust.The manner in which the second respondent has increased hisoffer in driblets leads to a reasonable inference that the true valueof the property has not been realized. Hence, the order of theHigh Court to dismiss the petition cannot be sustained. This Court H

is of the view that the appropriate direction would be to requirethe third respondent to conduct the auction process by invitingfresh bids after a proper valuation and to issue furtherconsequential directions for the submission of a report in theproceedings before the Bombay High Court. Accordingly, thefollowing directions are issued: (i) The third respondent shallobtain a fresh valuation report for the property, and shall fix anupset price which shall not, in any circumstances, be less thanthe amount of Rs 1 crore. The upset price shall be based on thevaluation, subject to the minimum of Rs 1 crore; (ii) The thirdrespondent shall invite fresh bids by publishing an advertisementin at least two widely circulated local newspapers for the sale ofthe property; (iii) Both the appellant and the second respondentshall be at liberty to submit their fresh bids, which shall beconsidered by the third respondent together with all other bidswhich are received; (iv) The third respondent shall, upon thebids so received, submit a report to the High Court, which shallconsider the report while passing such final directions as arenecessary in the writ petition; (v) Consequently, the impugnedorder of the High Court dated 26 February 2021 dismissing thepetition shall stand set aside. The writ petition, being Writ PetitionNo 3894 of 2019, shall hence stand restored to the file of theHigh Court. The High Court shall upon the receipt of the reportof the third respondent take an appropriate view and decide uponthe merits of the petition in respect of which all the rights andcontentions of the parties on all aspects are kept open; and (vi)The amount of Rs 1 crore which has been deposited with theBombay High Court by the appellant, shall be invested in a FixedDeposit of a nationalized bank to be renewed periodically duringthe pendency of the writ petition and shall abide by such furtherdirections as may be issued by the High Court. In the event thatthe appellant desires to bid for the property at the auction, itwould be open to him to move a Civil Application before the HighCourt to adjust the amount of Rs 1 crore deposited in pursuanceof the order of this Court towards the bid. [Para 18][500-C-H;501-A-G]

Cyrus Rustom Patel v Charity Commissioner (2018) 14SCC 761 : [2017] 9 SCR 277 – relied on.

AB

C

D

EF

G

H

ACase Law Reference

[2017] 9 SCR 277relied onPara 17

CIVIL APPELLATE JURISDICTION: Civil Appeal No.2748 of

BFrom the Judgment and Order dated 26.02.2021 of the High Courtof Judicature at Bombay in Writ Petition No.3894 of 2019.

Dilip Annasaheb Taur, Adv. for the Appellant.

Vikas Mishra, Ms. Shivani Shah, Sanchit Gawri, Ms. B.Vijayalakshmi Menon, M. V. Mukunda, Kailas Bajirao Autade, Ms.CSheetal Patil, Prashant Shantaram Chaudhari, Advs. for the Respondents.

The Judgment of the Court was delivered by DR. DHANANJAYA Y CHANDRACHUD, J.

1. Leave granted.D2. This appeal arises from a judgment and order of the High Courtof Judicature at Bombay dated 26 February 2021.

3. The subject matter of the dispute relates to a parcel of land[1]admeasuring 2 hectares 48 ares belonging to the first respondent, ShriGovardhan Sanstha (Regd) Wai, which is a registered charitable trust,Ebearing registration No F-133 (Pune), under the Maharashtra PublicTrust Act, 1950[2]. The property is comprised in Survey No 90, Hisra No6, at Village Dabewadi, Taluka and District Satara.

4. In 2015, a tender notice was published by the first respondentinviting bids for the development of the property. During the course ofFthe tender process, two bids were received, out of which one was tenderedby the appellant and the other by the second respondent. The firstrespondent accepted the offer of the second respondent in its meetingon 6 November 2015, in which the second respondent had offered acash consideration of Rs 32 lakhs along with 6000 sq. ft. of constructedGarea in the property, admeasuring 30 ares.

5. On 4 January 2016, an application for the grant of approvalunder Section 36(1) of the Act was filed by the first respondent beforethe third respondent, the Joint Charity Commissioner, Pune. The application 1 the “property“H2 the “Act“

was rejected by the third respondent on 8 February 2017, by noting thatthe first respondent had not filed a copy of the resolution dated 19November 2015 in which its members had decided to sell the subjectproperty. Further, that the second respondent’s offer was held not to bereasonable since the Assistant Charity Commissioner, Satara’s reportvalued the land at Rs 5 crores. Finally, the Joint Charity Commissioneralso held that there was no legal necessity to sell the property, since thefirst respondent was not getting offers for the property due to its ongoingdisputes with tenants, which should be resolved prior to the sale.

6. The order of the Joint Charity Commissioner, Pune resulted inthe first respondent instituting a writ petition[3] for challenging the orderdated 8 February 2017. The High Court of Judicature at Bombay, by ajudgment and order dated 21 June 2018, set aside the order dated 8February 2017. It directed the third respondent to decide the firstrespondent’s application afresh and the first respondent was granted anopportunity to file a copy of their resolution deciding to sell the subjectproperty and to also to address the merits of the valuation report reliedupon by the third respondent in respect of the subject property.

7. It appears that on 1 August 2018, a fresh valuation report wasobtained from a government approved valuer, according to which themarket value of the property was determined to be Rs 1,82,25,000.

8. Thereafter, the third respondent by an order dated 22 October2018, once again dismissed the first respondent’s application under Section36(1) of the Act. The third respondent noted that the second respondent’soffer had not changed since the last order which was passed on 8February 2017, and during the course of the proceedings, the secondrespondent also indicated their inability to enhance their offer. As heldpreviously, this offer by the second respondent was not reasonable, inlight of the valuation report. Further, it was noted that the fact that tenantsof the property were not paying rent was not an adequate reason to sellthe property, when the first respondent could file and contest a suit forpossession.

9. Another writ petition[4] was then instituted before the BombayHigh Court by the first respondent on 23 January 2019. During thependency of the petition, the High Court by an order dated 7 August 3 Writ Petition No 8625 of 2017

4 Writ Petition No 3894 of 2019

AB

CD

E

F

G

H

A2019 directed the third respondent to call for fresh bids by issuing afresh advertisement. In pursuance of this order, the third respondentinvited fresh bids, in pursuance of which, only one offer, that of thesecond respondent, was received for an amount of Rs 50 lakhs.

10. On 6 January 2021, the appellant filed an interventionBapplication[5] in the writ proceedings, alleging collusion between the firstand second respondent for the sale of the property. The appellant alsooffered an amount of Rs 75 lakhs for the property, while highlighting hiswillingness to further increase the amount. In pursuance of the aforesaidposition, the writ petition was listed before the High Court on severaloccasions and orders were passed on 11 January 2021, 20 January 2021,C5 February 2021, 15 February 2021 and 22 February 2021. The appellantdid not abide by its offer to deposit Rs 75 lakhs.

11. On 26 February 2021, the High Court declined to grant anyfurther time to the appellant to make good the offer of Rs 75 lakhs. TheHigh Court was of the view that though sufficient opportunities wereDgranted to the appellant to deposit an amount of Rs 75 lakhs, nocompliance had been effected. However, the second respondent matchedthe offer of Rs 75 lakhs made by the appellant by increasing the offerfurther by an amount of Rs 5 lakhs to make a total offer of Rs 80 lakhs.The High Court accordingly directed the third respondent to complete Ethe sale formalities by entering into a sale transaction with the secondrespondent for a consideration of Rs 80 lakhs.12. Aggrieved by the order of the High Court, the appellant movedthese proceedings under Article 136 of the Constitution.

13. On 18 March 2021, the following order was passed by thisCourt:F

“1 Permission to file the Special Leave Petition is granted.

2 Mr Dilip Annasaheb Taur, learned counsel appearing on behalfof the petitioner submits that the petitioner was ready with aDemand Draft in the amount of Rs 75 lakhs and the High CourtGshould have granted a further extension of time. From the recordit emerges that the High Court had granted several opportunitiesto the petitioner to comply with the statement of depositing Rs 75lakhs, but the petitioner was unable to do so and a cheque whichwas issued was, in fact, dishonored.

H5 Intervention Application St No 499 of 2021

GANESH RAMCHANDRA JADHAV v. GOVARDHAN SANSTHA(REGD) WAI PUNE [DR. DHANANJAYA Y CHANDRACHUD, J.]

3 In order to test the bona fides of the petitioner and having regardto the fact that the property in question belongs to a charitabletrust, we direct the petitioner to deposit an amount of Rs 1 crorein the Registry of the High Court of Judicature at Bombay withina period of two weeks from today. In order to facilitate thepetitioner in making the deposit, we order the status quo to bemaintained for a period of two weeks. The petitioner shall file onaffidavit in the Registry of this court a receipt indicating proof ofdeposit on or before 9 April 2021, failing which the Special LeavePetition shall stand dismissed without further reference to thisCourt. In the event, the proof of deposit is produced, notice shallissue, returnable on 23 April 2021 and the order of status quo willstand extended till the next date of listing.

4 In the event that the petitioner fails to effect deposit, in addition,to the consequences which have been envisaged above, thepetitioner would be saddled with exemplary costs, in which eventan office report shall be placed before this Court for directions.

5 After the order was dictated, Mr Dilip Taur had requested theCourt to pass over the case in order to enable him to get specificinstructions from his client whether they were ready and willingto abide by the above understanding, as reflected in the order.

6 After seeking instructions, Mr Dilip Taur states that his clienthas been made aware and he is agreeable to the above terms.”

14. In pursuance of the above order, the appellant has producedproof of having effected a deposit of an amount of Rs 1 crore in theHigh Court of Bombay and an affidavit dated 5 April 2021 has been filedin compliance of the order dated 18 March 2021. It is at this stage thatthe matter now appears before this Court for resolution.

15. Mr Dilip Taur, learned counsel appearing on behalf of theappellant submits that the appellant has indicated his bona fides incomplying with the direction of this Court of depositing the amount of Rs75 lakhs, and the appellant has gone even beyond that by depositing anamount of Rs 1 crore before the High Court. Hence, it was urged thatthe order of the High Court may be set aside and the writ petition maybe restored before the High Court.

16. On the other hand, Mr Vikas Mishra, learned counsel appearingon behalf of the second respondent, submitted that all along, it has been AB

C

D

E

F

G

H

Athe second respondent who has participated in the process of auctionsale and the appellant had failed to avail of the opportunities which weregranted by the High Court. It has been urged on behalf of the secondrespondent that having regard to the principles of law which have beenevolved by the judgments of this Court, it would be necessary to rejectthe offer which is now made by the appellant and to award the propertyBto the second respondent.

17. The property which is sought to be sold belongs to a publiccharitable trust. A two-Judge Bench of this Court In Cyrus RustomPatel v Charity Commissioner[6], noted the principles laid down by thisCourt with respect to the duties enjoined upon a trustee in the matter ofCsale of trust properties:

“17. …This Court held [Chenchu Rami Reddy v. State of A.P.,(1986) 3 SCC 391] that in view of the provisions contained inSection 74(1) of the Andhra Pradesh Charitable and HinduReligious and Endowments Act, 1966, the Government mustDbe satisfied that it was in the interest of the institution orendowment to permit the sale of the lands concernedotherwise than by a public auction, and then reasons toreach that satisfaction must be recorded in the order.

18. It was also observed by this Court in Chenchu Rami ReddyE[Chenchu Rami Reddy v. State of A.P., (1986) 3 SCC 391] that publicofficials and public-minded citizens entrusted with the care of“public property” have to show exemplary vigilance; the propertyof religious and charitable institutions or endowments must bejealously protected. The sale of such a property by private negotiationsFwhich will not be visible to the public eye, and may even give rise topublic suspicion, should not be, therefore, made, unless there are reasonsto justify the same…

19. Again, in R. Venugopala Naidu [R. Venugopala Naidu v.Venkatarayulu Naidu Charities, 1989 Supp (2) SCC 356], this CourtGobserved that fraudulent sale of the property of public charities by wayof private negotiations should not be permitted. This Court furtherheld that reserved price should be fixed after ascertaining themarket value and offer of higher price by filing an affidavit…ThisCourt had considered the fact that the value of the property which the H6 (2018) 14 SCC 761

GANESH RAMCHANDRA JADHAV v. GOVARDHAN SANSTHA(REGD) WAI PUNE [DR. DHANANJAYA Y CHANDRACHUD, J.]

Trust got was not the market value, and quashed and set aside the saleorder of the subordinate court and the consequent sale…

20. In Bhaskar Laxman Jadhav [Bhaskar Laxman Jadhav v.Karamveer Kakasaheb Wagh Education Society, (2013) 11 SCC531], this Court considered the alienation of the immovableproperties of public trust under Section 36 of the Bombay PublicTrusts Act, 1950; sanction was sought from the CharityCommissioner to alienate the property of the public trust, therewas continuation of negotiations between trustees of public trustand prospective purchasers. There were successive applicationssubmitted, seeking permission to alienate after each negotiation.This Court held [Bhaskar Laxman Jadhav v. KaramveerKakasaheb Wagh Education Society, (2013) 11 SCC 531]that it would tantamount to an abuse of the process of lawand that such an act of the party meant that they were tryingto take advantage of the absence of any clear-cut provisionsunder the Act relating to the sale. To prevent the abuse, thisCourt considered the factual scenario that trustees and thepetitioners had been indulging in a flip-flop, and in a sense takingadvantage of the absence of any clear-cut statutory measuresdesigned to prevent abuse of the process of law in the Act. It washeld by this Court that the Charity Commissioner had rightlyrejected the first application for two reasons, firstly since thetrustees were not voluntarily selling the trust land and secondly, inthe given circumstances, the sale transaction was not for the benefit,and in the interest of, the Trust. This Court also considered thebackground facts, as also the compromise effected between thetrustees and the petitioners in the High Court on 28-8-2008, whichappeared to this Court to be suspicious. On an overallconsideration of the facts and circumstances of the case, itobserved that it was not possible to rule out the possibilityof collusion between the trustees and the petitioners.

21. This Court in Bhaskar Laxman Jadhav [Bhaskar LaxmanJadhav v. Karamveer Kakasaheb Wagh Education Society,(2013) 11 SCC 531] further observed that the lack of bonafide of trustees and the petitioners could not have beenoverlooked by the High Court. Therefore, the safest coursewas to sell off the trust land through auction. It was alsoobserved that it was quite clear that due to the passage of time, ABC

DEF

G

H

Athe value of the trust land had increased considerably, and that itwould be in the best interest of the Trust if the maximum price ismade available for the trust land from the open market. ThisCourt also observed that Section 36 of the Act enjoinsduties on the Charity Commissioner to consider the saleof immovable property of the Trust, with regard being hadBto the “interest, benefit or protection” of the Trust…”

(emphasis supplied)

18. The offer which was made by the second respondent initiallywas in the amount of Rs 50 lakhs. It was only after the appellant hadCindicated before the High Court that an amount of Rs 75 lakhs would beoffered and failed to do so, that the second respondent stated before theHigh Court that he was willing to match the offer of the appellant and togo beyond it by an amount of Rs 5 lakhs. At the present time, the appellanthas deposited an amount of Rs 1 crore before the High Court of Judicatureat Bombay. To accept the bid of the second respondent in the amount ofDRs 80 lakhs will deprive the trust of the opportunity of realising the fullmarket value. In this view of the matter, we are of the view that thesubmission which has been urged on behalf of the appellant is worthy ofacceptance. We are unable to subscribe to the submission of the secondrespondent for the simple reason that the course of dealings would indicateEthat even the second respondent has progressively enhanced its offersfrom Rs 50 lakhs to Rs 75 lakhs and, thereafter, to Rs 80 lakhs. Beforethis Court, Mr Vikas Mishra has now indicated that the second respondentwould be willing to match the offer of the appellant of Rs 1 crore. Therehas undoubtedly been a default on the part of the appellant before theHigh Court. But the decision of the High Court to award the sale inFfavour of the second respondent would cause serious jeopardy to theinterests of the public charitable trust. The manner in which the secondrespondent has increased his offer in driblets leads to a reasonableinference that the true value of the property has not been realized. Hence,the order of the High Court to dismiss the petition cannot be sustained.GWe are not inclined to conduct an auction process within the precinctsof this Court and are accordingly of the view that the appropriate directionto be passed would be to require the third respondent to conduct theauction process by inviting fresh bids after a proper valuation and toissue further consequential directions for the submission of a report inthe proceedings before the Bombay High Court. We accordingly issueHthe following directions:

(i) The third respondent shall obtain a fresh valuation reportAfor the property, and shall fix an upset price which shall not,in any circumstances, be less than the amount of Rs 1 crore.The upset price shall be based on the valuation, subject tothe minimum of Rs 1 crore;

(ii) The third respondent shall invite fresh bids by publishing anBadvertisement in at least two widely circulated localnewspapers for the sale of the property;

(iii) Both the appellant and the second respondent shall be atliberty to submit their fresh bids, which shall be consideredby the third respondent together with all other bids whichCare received;

(iv) The third respondent shall, upon the bids so received, submita report to the High Court of Judicature at Bombay, whichshall consider the report while passing such final directionsas are necessary in the writ petition; D

(v) Consequently, the impugned order of the High Court dated26 February 2021 dismissing the petition shall stand setaside. The writ petition, being Writ Petition No 3894 of 2019,shall hence stand restored to the file of the High Court.The High Court shall upon the receipt of the report of thethird respondent take an appropriate view and decide uponthe merits of the petition in respect of which all the rightsand contentions of the parties on all aspects are kept open;and E

(vi) The amount of Rs 1 crore which has been deposited withthe Bombay High Court by the appellant, shall be investedin a Fixed Deposit of a nationalized bank to be renewedperiodically during the pendency of the writ petition andshall abide by such further directions as may be issued bythe High Court. In the event that the appellant desires tobid for the property at the auction, it would be open to himto move a Civil Application before the High Court to adjustthe amount of Rs 1 crore deposited in pursuance of theorder of this Court towards the bid.

F

G

19. We clarify that there was no challenge before this Court inregard to the findings on the aspect of legal necessity in selling the subject H

502SUPREME COURT REPORTS

Aproperty, as a consequence of which, the present order shall not disturbthe findings of the High Court in that regard. The third respondent shallact immediately on the receipt of a certified copy of this order andendeavour to complete the process on or before 31 December 2021.

20. The appeal is accordingly allowed in the above terms.B21. Pending applications, if any, stand disposed of.

Ankit Gyan

Appeal allowed.

C

D

E

F

G

H