The lessons to be learned

Anybody wishing to sell, lease or alienate community property has to tread circumspectly. Nothing should be taken for granted. Even with all procedures adhered to, permissions obtained, a person bent on sabotaging the deal can do so.

The judgment by a two-member bench of the Supreme Court (SC) comprising Justices Arun Mishra and Mohan Shantanagoudar in the Behramji Cowasji Batliwala Agiary Trust is a case in point. The Justices castigated the trustees for leasing/selling the land adjacent to the fire temple located at Tardeo. The duo also criticized the Joint Charity Commissioner (JCC) for granting permission and the Bombay High Court (BHC) for dismissing an appeal against the proposal.

People acquainted with the Trust note they had tried for a number of years to find a party to develop the adjacent plot and thereby fill the depleting coffers of the Trust. The land has a tenanted building with 21 occupants. The Trust told the Court the fire temple structure was "old and in a dilapidated condition, and required extensive repairs. The Trust was getting a meager income from the building...There was no further availability of FSI (floor space index which determines how much development is permitted on the land)... It was in need of funds to meet the objectives of the Trust." The approach road to the land is said to be narrow, allowing only one vehicle to pass at a time. In order to widen the road, a developer would have to compensate or relocate the shops and establishments on the side.

Astral Enterprises made an offer of Rs 2,95,00,000. The next best was said to be for Rs 1,40,00,000. "The tenants in the premises had, in principle, agreed...on the condition that (their) interest...would be looked after and (they) would be provided flats in (the) new buildings on ownership basis...in a time bound manner...The registration charges of the deed would be borne by the developer, as well as the cost of construction. (The) trustees would have an exit option if (they) felt that it was not in the interest of the Trust to carry on with the joint venture," the lawyers argued.

"No public notice had been published in the newspapers inviting offers," as the trustees had claimed such an advertisement "was not mandatory." The Trust justified not publicizing the proposal as it was "a joint venture," the property was "totally encumbered and not easily marketable in its present form" and that "some of the disgruntled occupants may find it convenient to stop the proposal and may embroil the Trust in wasteful litigation." The JCC noted, "It was for the trustees to decide to whom they should sell the property," subject to the Charity Commissioner’s (CC) sanction. "There was no necessity to invite others by way of public advertisement. It was not open to the CC to invite offers from third parties." An order was passed by the JCC sanctioning the lease/sale in 2004.

Four years later, Delhi based Cyrus Patel, the son of a former chairman of the Trust, Rustom, filed a writ application in the BHC challenging the proposal. The BHC dismissed the appeal pointing to the delay in filing the application as "the petitioner was aware of the transaction with effect from 2003." An offer of Rs 55 crores made by Nilakantha Realtors, as cited by the petitioner, "was not proper," the BHC noted. Patel then moved the apex court.

But the SC did not accept the Trust’s, the CC’s or the BHC’s justifications or arguments. The Justices note, "There was a necessity of publishing a public notice in a newspaper... The joint venture-cum-sale and lease of 999 years amounted to a sale...Inviting an offer by public notice would have disclosed the actual worth of the property... It was not in the public interest or for the benefit of the Trust to act in such a clandestine manner."

The Justices cited the observations made by the SC in Chenchu Ram Reddy vs Government of Andhra Pradesh, "Those who are willing to purchase by private negotiations can also bid at a public auction." In the matter of Mehrwan Homi Irani (2001) before the SC, "It was categorically held that the CC while granting sanction...must explore the possibility of getting the best price for the trust premises." In the Batliwala matter, the Justices noted, "Merely obtaining a valuation report from a person of choice, without making any serious effort to ascertain the market value...was an eyewash... Sale of trust property, which is like public property, if necessary, is not permissible by way of private negotiations." The sale can "only be done on exceptional circumstances for reasons to be recorded. (This sale) would have defeated the very object of the creation of the Trust for the preservation and protection of religion and Parsi culture."

The apex court faulted both the JCC and the BHC for not ascertaining the market value of the property and instructed the Trust to repay the amount to the developer. In conclusion the Justices remarked, "The trustees were not up to the task of protecting the interests of the Trust, and clearly colluded with the developer."

Whether the accusations are warranted, is debatable. The Trust reportedly did not appoint a lawyer in the SC to represent their side, citing paucity of funds. They relied on the developer’s legal team. A hearing in the SC, depending on the lawyers engaged, can cost between Rs 10 to 20 lakhs per day and more. Such charges are beyond the means of most individuals and trusts.

But even where advertisements are issued, and auctions ordered by the CC, some party may make a higher bid and later withdraw the offer, leaving the trust in the lurch.

Of course, some objectors are genuinely concerned about the interest of the trust and act out of the purest motives. Often valuable trust property is sold at a throwaway price with the connivance of the trustees. More often though, trustees neglect their duties on account of other commitments, ill health, age, indifference and so on. Property is encroached upon under the trustees’ watch. Thus it is understandable if the citizenry is cynical and distrusting.

Though The Federation of the Parsi Zoroastrian Anjumans of India has strived to monetize the property of defunct anjumans, not a single transaction has gone through in the past 35 years. Objections are raised, the property is encroached and lost to the community. Citizens have to be alert. But separating the conscientious objectors from those out to settle scores or past enmity is not easy. The legal system has to be better tuned to separate the genuine whistleblowers from the mala fide ones.

Unless there is some clarity, trustees may be deterred from acting in the best interests of the trust. As it is trusteeship is an onerous responsibility. By making it more so, nobody’s interest is served.