Supreme Court Declares Trust Property Sale Illegal: Charity Commissioner’s Order Quashed

The case of Shri Ambadevi Sanstha & Ors. vs. Joint Charity Commissioner & Ors. is a significant ruling concerning the sale of trust properties and the powers of the Charity Commissioner under the Bombay Public Trusts Act, 1950. The Supreme Court, in this case, examined whether the sale of the trust properties was lawful and in the best interest of the trust. The judgment also highlights the necessity of transparency and due diligence in disposing of trust assets.

The Trust had sought to sell immovable properties, and the Joint Charity Commissioner granted permission. However, objections were raised, and the matter was taken to the High Court. When the High Court upheld the Charity Commissioner’s decision, the case reached the Supreme Court, which ultimately quashed the sale transactions.

Background of the Case

Shri Ambadevi Sanstha, a registered Public Trust, filed appeals against the orders passed by the High Court of Judicature at Bombay. The High Court had dismissed the writ petitions challenging the order of the Joint Charity Commissioner, which had permitted the sale of trust properties.

The properties in question included multiple land parcels and houses situated in Amravati, Maharashtra. The sales were conducted at rates allegedly lower than market value, prompting objections from various parties, including newly elected trustees who opposed the transactions.

Key Issues Raised

• Whether the sale of trust properties was conducted in compliance with Section 36 of the Bombay Public Trusts Act, 1950.
• Whether the Joint Charity Commissioner followed due process while granting permission.
• Whether the sale price was fair and in the best interest of the trust.
• Whether the objections raised by the newly elected trustees were valid and properly considered.

Arguments by the Petitioner

The petitioners, Shri Ambadevi Sanstha & Ors., contended that the sale of properties was not justified and violated the principles governing trust property transactions. The key points raised by the petitioners were:

• The Joint Charity Commissioner did not adhere to the requirements of Section 36 of the Act, which mandates prior permission and a transparent process for selling trust properties.
• The trustees had opposed the sale, and their objections should have been considered.
• The price at which the properties were sold was significantly lower than the market value.
• Other buyers had offered higher amounts, but their offers were ignored without any valid reason.
• The High Court failed to appreciate the irregularities in the sale and dismissed the writ petitions unfairly.

Arguments by the Respondents

The respondents, including the Joint Charity Commissioner, defended the sale transactions on the following grounds:

• The Trust was in financial distress and needed funds to construct a hospital.
• The sale process was initiated through public advertisements, and the highest bid was accepted.
• The valuation reports were considered before granting permission.
• The objections were raised after the sale process was completed and were motivated by internal disputes among trustees.
• The new trustees’ opposition did not override the decision made by the previous body of trustees.

Supreme Court’s Observations

The Supreme Court analyzed the case in light of previous rulings and the principles governing trust property transactions. The Court made several key observations:

• Trust property must be protected: The Court reiterated that trust properties should be safeguarded, and any sale must be in the best interest of the trust.
• Public auction should be the preferred mode: The Court cited previous judgments emphasizing that public auctions ensure transparency and prevent favoritism.
• Proper valuation is essential: The sale prices approved in this case were significantly lower than market rates, and the process lacked due diligence.
• New trustees’ objections were ignored: The newly elected trustees had valid concerns that were not adequately addressed.
• Illegal transactions should not be validated: The Court held that accepting earnest money without prior approval was improper and could not be used to justify the sale.

Important Judgment Excerpts

The Supreme Court quoted past rulings to support its decision. One such observation was:

“We direct the Trust not to fritter away with the properties in the manner in which it has been done. In future also, let the properties of the Trust and its legacy be protected and guarded and it should not be sold away in the manner as has been done in the present case.”

The Court also noted:

“The Charity Commissioner has failed to consider the interest, benefit, and the protection of the property of the Trust. The permission to sell was granted illegally.”

Final Judgment

• The Supreme Court set aside the High Court and Joint Charity Commissioner’s orders.
• The sale transactions were annulled, restoring the properties to the Trust.
• The possession of the properties must be returned within two months.
• The authorities were directed to ensure compliance and report within ten weeks.

Conclusion

This ruling reinforces the importance of due diligence in trust property transactions. It serves as a precedent for ensuring that trust properties are not sold without a transparent process that genuinely benefits the trust and its beneficiaries.

Petitioner Name: Shri Ambadevi Sanstha & Ors..
Respondent Name: Joint Charity Commissioner & Ors..
Judgment By: Justice Arun Mishra, Justice Vineet Saran.
Place Of Incident: Amravati, Maharashtra.
Judgment Date: 25-09-2018.

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