The Bombay High Court has clarified that while a public trust may seek post-facto sanction under Section 36 of the Bombay Public Trusts Act for a property sale, purchasers are not entitled to automatic recovery of amounts paid beyond what is conclusively proven. The judgment underscores the limited scope of judicial intervention in trust administration and the burden on third parties to substantiate financial claims.
Background & Facts
The Dispute
The dispute arose from the attempted sale of a property owned by the Lad Shakhiya Vani Samaj Sanstha (the "Trust"), a registered public trust under the Bombay Public Trusts Act, 1950. The Trust, which operated a marriage hall on CTS No. 1319, Dhule, resolved in 1989, 1998, and 1999 to sell the property and acquire a larger one. After multiple advertisements between 1999 and 2001, the Petitioners, Arun and Savita Shinkar, submitted the highest bid of Rs. 31,11,000, exceeding the government-approved valuation of Rs. 22,47,000. An Agreement to Sale was executed on 11.12.2001 for this amount, with an advance payment of Rs. 2,00,000 via cheque.
Key Facts
- The Trust applied for sanction under Section 36 of the Bombay Public Trusts Act on 24.12.2001 (Application No. 120/01)
- The Petitioners paid Rs. 2,00,000 as advance on 11.12.2001
- The Trust received Rs. 18,00,000 on 23.02.2004 and Rs. 15,00,000 on 11.08.2004, according to the Petitioners
- The Trust allegedly handed over possession of the property to the Petitioners after the first payment
- The Trust used the proceeds to purchase a larger plot at Gat No. 177, Mohadi, Dhule
- The Petitioners claim the new property is now worth Rs. 16 crore, while the original property is valued at Rs. 5 crore
- The Trust’s former President, Waman Shinkar, was related to the Petitioners
- The Trust failed to submit audited accounts to the Charity Commissioner despite repeated directions
- On 02.06.2003, Ashok Shravan Patkar filed an objection, offering Rs. 50,00,000 for the property, but failed to deposit the amount as directed
- The Trust’s management was taken over by court order in 2007 after removal of the previous trustees
- The new trustees denied receipt of any amounts beyond Rs. 2,00,000 and did not challenge the Charity Commissioner’s order
Procedural History
- 1989: Trust resolves to sell CTS No. 1319 and acquire larger property
- 1998: Trust reiterates resolution to sell property
- 1999: General Body meeting passes resolution to sell property
- 31.05.1999: Trust resolves to advertise for sale
- 03.07.1999, 04.07.1999, 21.01.2001, 11.10.2001: Four advertisements published in regional newspapers
- 18.11.2001: Trust resolves to accept Petitioners’ bid of Rs. 31,11,000
- 11.12.2001: Agreement to Sale executed; Rs. 2,00,000 advance paid
- 24.12.2001: Trust files application under Section 36 for sale sanction
- 02.06.2003: Ashok Patkar files objection; ordered to deposit Rs. 50,00,000; fails to comply
- 23.02.2004: Petitioners claim payment of Rs. 18,00,000
- 11.08.2004: Petitioners claim payment of Rs. 15,00,000
- 30.10.2007: Joint Charity Commissioner rejects sale application, directs return of property, and notes failure to produce audited accounts
- 2008: Writ Petition No. 6226 of 2008 filed before Bombay High Court
- 24.09.2025: High Court dismisses writ petition
- 09.01.2026: Supreme Court sets aside High Court’s order and remands matter with direction to reconsider all points
Relief Sought
The Petitioners sought:
- Setting aside of the Joint Charity Commissioner’s order dated 30.10.2007
- Directing the Trust to refund Rs. 33,00,000 paid as consideration
- Alternatively, transferring the property purchased at Gat No. 177 to them
- Granting post-facto sanction under the 2017 amendment to the Act
The Legal Issue
The central questions were: (1) Whether a public trust may apply for sanction under Section 36 after executing an Agreement to Sale; (2) Whether purchasers are entitled to refund of amounts paid beyond the advance if the sale is denied; and (3) Whether purchasers have locus to challenge the Charity Commissioner’s refusal of sanction when the Trust itself accepts the order.
Arguments Presented
For the Petitioner
The Petitioners, through Senior Advocate P. R. Katneshwarkar, argued that:
- Section 36 permits post-facto sanction, as held in Parsi Zoroastrian Anjuman v. Sub-Divisional Officer (2022)
- The transaction was transparent, with multiple advertisements and competitive bids
- The bid of Rs. 31,11,000 exceeded government valuation by over 38%
- The Trust received Rs. 33,00,000 and reinvested it in a new property
- The Charity Commissioner has no power to dispossess third-party purchasers
- The 2017 amendment to the Act allows post-facto sanction for bona fide transactions
- The Trust’s failure to produce audited accounts does not invalidate the Petitioners’ payments
For the Respondent
The Trust, through Senior Advocate V. D. Hon, contended that:
- The Agreement to Sale was executed before obtaining sanction, violating Section 36
- The Trust never received Rs. 33,00,000; only Rs. 2,00,000 was documented
- The new trustees, appointed after court-ordered removal of the old management, dispute all further payments
- The Petitioners are related to the former President, raising suspicion of collusion
- The Trust has accepted the Charity Commissioner’s order and does not challenge it
- The Petitioners have no standing to challenge the order since they are not parties to the trust’s internal proceedings
- The property at Gat No. 177 is encumbered and not purchased solely from Petitioners’ funds
The Court's Analysis
The Court examined the scope of Section 36 and the rights of third-party purchasers. It held that while a trust may apply for sanction after executing an Agreement to Sale, such an agreement does not vest any right in the purchaser until sanction is granted. The Court relied on Suburban Education Society v. Charity Commissioner (2004) to affirm that the Charity Commissioner’s role is limited to assessing whether the sale is in the interest of the trust and its beneficiaries, not to substitute commercial judgment.
"The Agreement to Sale is subject to the sanction being granted by the learned Joint Charity Commissioner and does not create any right in favour of the purchasers qua the property."
The Court found that the Trust’s conduct in accepting payments and handing over possession during pendency of the application was irregular. However, the Petitioners failed to produce any documentary evidence - bank statements, receipts, or ledger entries - to substantiate the payment of Rs. 31,00,000 beyond the Rs. 2,00,000 advance. The Trust’s failure to produce audited accounts further undermined the credibility of the claimed transactions.
The Court emphasized that the new trustees, appointed after court intervention, had no knowledge of or involvement in the earlier transactions and had explicitly denied receipt of the additional amounts. The relationship between the former President and the Petitioners raised legitimate concerns of collusion, which the Petitioners did not rebut.
The Court also held that purchasers cannot challenge the Charity Commissioner’s refusal of sanction when the trust itself accepts the order. Their remedy lies in recovering the amount paid, not in compelling the trust to complete the sale.
The Verdict
The Petitioners succeeded only in part. The Court directed the Trust to refund Rs. 2,00,000 to the Petitioners, the only amount conclusively proven by cheque. The direction to return possession of the property to the Trust was upheld. The Court preserved all other findings of the Joint Charity Commissioner. The Petitioners were granted liberty to institute a civil suit to prove and recover any additional amounts paid, if they can substantiate them. The status quo regarding the Trust property was maintained for four weeks from the date of judgment.
What This Means For Similar Cases
Proof of Payment Is Non-Negotiable
- Practitioners must insist on bank records, receipts, or notarized acknowledgments for any payment made to a trust
- Oral testimony or self-serving affidavits are insufficient to establish payment beyond the initial advance
- In trust-related property disputes, the burden of proof lies squarely on the purchaser
Third Parties Cannot Override Trust Decisions
- Purchasers have no standing to challenge a charity commissioner’s refusal of sanction if the trust accepts the order
- The purchaser’s only recourse is recovery of proven payments, not enforcement of sale
- Courts will not interfere with internal trust governance absent clear fraud or illegality
Post-Facto Sanction Is Not a Cure-All
- While the 2017 amendment permits post-facto sanction, it does not validate transactions tainted by procedural violations or lack of transparency
- Courts will examine the bona fides of the transaction, including the relationship between parties and financial documentation
- The amendment does not override the requirement for fiduciary accountability under Section 35
