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2004 DIGILAW 416 (BOM)

R. v. Ranade VS State of Maharashtra

2004-03-31

A.H.JOSHI, D.Y.CHANDRACHUD

body2004
JUDGMENT :-Rule. Learned Counsel for the respondents waive service. By consent taken up for hearing and final disposal. 2. Several decades ago, the Vidarbha Sahitya Sangh ("VSS") was allotted a land in what is now essentially the heart of the city of Nagpur. By an Indenture dated 21st April, 1951, the Governor of Madhya Pradesh agreed to grant free of premium, on a nomtnal ground rent of Re. 1/-, a piece of Nazul Land containing 1.12 acres out of Khasra No. 88/1- 89/5- 89/6. The terms of the grant provided that the allottee had agreed to accept the allotment for the construction of buildings for cultural and educational purposes and for purposes appurtenant thereto. The land was liable to be resumed inter alia if the land was not used for the specific purpose for which it was granted or if it was not used to the satisfaction of Government. By another lease dated 19th June, 1957, the Governor of the then State of Bombay similarly granted and allotted a plot on Nazul land admeasuring 10,902 sq. ft. or 0.26 acres forming part of Khasra No. 88/1, 89/5 and 89/6. The terms of the aforesaid grant will fall for consideration in greater detail subsequently but at this stage it would be material to note that the land was granted on the payment of a nominal assessment of Rs. 4/- per annum for the purpose of constructing and maintaining on the land a building for cultural and educational purposes and for purposes ancillary thereto. 3. In 1958 an auditorium was constructed by VSS on the land. Some time in 1974-75 a proposal was moved by the then President of VSS, who was a prominent literary figure, to construct a new theatre along with a commercial complex on the land. The proposal was moved since the acoustics in the existing auditorium were defective and a need was felt to construct a modern theatre. Culture is not always commercially profitable. VSS is stated to have been in financial distress at the relevant time and it was proposed that the construction of commercial complex with theatres would provide a source of revenue. The Managing Body passed a resolution in 1974 for the construction of a new theatre together with a commercial complex by demolishing the existing auditorium. VSS is stated to have been in financial distress at the relevant time and it was proposed that the construction of commercial complex with theatres would provide a source of revenue. The Managing Body passed a resolution in 1974 for the construction of a new theatre together with a commercial complex by demolishing the existing auditorium. On 27th July, 1991 the Trustees passed a resolution approving the project and appointing the ninth respondent as a Developer to implement the Scheme. The Executive Committee and the General Body of the Trust ratified this resolution and on 23rd October, 1992, an agreement was entered into by VSS with the 9th respondent. 4. The land in question was initially under reservation in the sanctioned Development Plan as a public - semi public Zone. In view of the proposal which was formulated by VSS, the State of Maharashtra issued a notification under section 37 of the Maharashtra Regional and Town Planning Act, 1966, deleting the said reservation after following due process of law so as to include the land in a commercial zone. The building plan was sanctioned by the Nagpur Improvement Trust on 7th July, 1993. In so far as is material, the plan provided that apart from a construction involving a commercial component, there would be a centrally air conditioned auditorium of a capacity of 1250 seats, a mini theatre with a capacity of 350 sets and an ampit theatre with a capacity of 750 seats. Besides this, the construction would include two mini halls of 1500 sq. ft each, an Art Gallery of 2000 sq. ft., a recording studio of 450 sq. ft., a reference library of 1500 sq. ft., an office of 1500 sq. ft and other cultural facilities. The Joint Charity Commissioner, Nagpur, passed an order on 13th July, 1994, in exercise of powers under section 36 of Bombay Public Trust Act, 1950. As would be noted hereinafter - the property was the subject matter of litigation and it was only in 1996 that the existing Auditorium could be demolished. On 20th July, 2000, the Joint Charity Commissioner granted permission to VSS to lease out that part of the premises which was to be utilised for commercial purposes for a period or 30 years. A supplementary agreement was entered into on 14th January, 2001 with the Developer by which the terms of the original agreement came to be modified. On 20th July, 2000, the Joint Charity Commissioner granted permission to VSS to lease out that part of the premises which was to be utilised for commercial purposes for a period or 30 years. A supplementary agreement was entered into on 14th January, 2001 with the Developer by which the terms of the original agreement came to be modified. The petition before this Court which has bee filed in the public interest has been instituted on 21st April, 2003. 5. In the petition, wide ranging reliefs have been sought, inter alia, for the appointment of a Committee to enquire into the transactions involving the contract which has been entered into for the development of the land of the Trust; for the Charity Commissioner to enquire into the affairs of the Trust; and for quashing the orders passed by the Charity Commissioner on 13th July, 1994 and 20th July, 2000. An interim order was passed in these proceedings by the Division Bench on 1st October, 2003. The petitioners stated before the Court that they were not aware of the steps which have been taken by the Charity Commissioner in pursuance of an inquiry which had been initiated at their behest. This Court, therefore, directed that an affidavit of the Joint Charity Commissioner should be filed so as to bring on the record the steps which have been taken in the inquiry. The authority was directed to submit its report to the Court. In pursuance of these directions, the Joint Charity Commissioner has placed his report on affidavit in the course of these proceedings. 6. When the petition was called out for hearing, Counsel appearing on behalf of the original petitioners stated that the grievances of the petitioners would be redressed, if the Court were to record the statement of the Trust and the Developer as to the period within which the construction of the facility for the benefit of the Trust would be completed. Learned Counsel stated that if a time bound schedule were to be communicated for carrying out and completing the construction, the petitioners would not be inclined to urge their submissions on merits in support of their petition. A civil application has been filed in these proceedings (C.A. No. 4388/03) for impleading the applicants as co-petitioners to the petition. Learned Counsel stated that if a time bound schedule were to be communicated for carrying out and completing the construction, the petitioners would not be inclined to urge their submissions on merits in support of their petition. A civil application has been filed in these proceedings (C.A. No. 4388/03) for impleading the applicants as co-petitioners to the petition. Since the petition has been instituted in the public interest, we have permitted the applicants to the civil application to intervene in the proceedings. The first applicant to the civil application is a life member of VSS; the second is a Journalist; the third is a life member of VSS, an Advocate and a Journalist and the fourth applicant is a life member. These proceedings being in the nature of a public interest litigation, we were and are of the view that, irrespective of the position which the original petitioners may not wish to adopt in regard to their challenge to the development which has been undertaken and the transactions with the developer; it is manifestly necessary that the Court should consider the matter on merits in respect of the challenge which has been made in this proceeding. That is particularly so since the interveners have through their Counsel urged specific grounds in support of the reliefs which have been claimed in the petition. 7. Four submissions have been urged on behalf of the interveners: (i) Under the terms of the Grant, the land has been allotted for cultural and educational purposes and these terms cannot be changed or altered; (ii) The permission which has been granted by the Joint Charity Commissioner under section 36 of the Bombay Public Trust Act, 1950, is contrary to the terms of the Grant and is, therefore, void; (iii) The original agreement that was entered into between the Trust and the Developer on 23rd October, 1992 stipulated a time bound schedule for completion of the structure which has not been followed with the result that seventeen years after the agreement was entered into, the project is not yet been completed; and (iv) The terms of the agreement between the Trust and the Developer are in favour of the Developer in regard to the payment of premium, the utilisation of commercial space and the benefits which are to be made available to the Trust. In the circumstances, it is urged that the Court should grant the reliefs which have been sought in the petition. 8. While considering the tenability of the submissions which have been urged before the Court, it would at the outset be necessary to have due regard to the terms of the two indebtures in pursuance whereof the land came to be granted and allotted in 1951 and 1957. The first indenture of 21st April, 1951, which was entered into between VSS and the Governor of Madhya Pradesh specifies that the land has been allotted for the construction of a building for cultural and education purposes and for purposes appurtenant thereto, Clause 1(a) of the deed then makes the following provisions. "that the land shall be liable to be resumed by the State Government if used for other than the specific purposes for which it is granted or if the institution is not conducted or the land is not used to the satisfaction of the Government." The second indenture was entered into between the Governor of the then State of Bombay and VSS on 19th June, 1957. Clauses (ii), (iii) and (iv) of the aforesaid deed are material for the purpose of the present case and are as follows : (ii) The grantee shall use the said land for the purposes of constructing and maintaining thereon a building or buildings for cultural and educational purposes and for purposes ancillary thereto and shall not use it or the building or building constructed thereon or any part thereof or permit the same to be used for any other purpose what so ever (iii) The grantee shall not assign, sublet or otherwise transfer the said land or any part thereof or any right acquired under this grant without the previous sanction in writing of the Governor. (iv) The grantee shall construct the buildings and works to be executed on the said land in accordance with the plans and design approved by the Governor and the Nagpur Improvement Trust in accordance with the building and zoning and other regulations and shall not construct any other buildings thereon without the previous sanction in writing of the Governor and the Nagpur Improvement Trust." These clauses from the two deeds in pursuance of which the land came to be allotted to VSS stipulate that the land was being allotted for constructing and maintaining buildings for cultural and educational purposes and for purposes appurtenant or ancillary thereto. Clause (3) of the second deed also contains a prohibition of assignment or transfer without the previous sanction of the Governor and Clause (4) provides that construction shall be carried out in accordance with the plans and designs approved by the Governor and by the Nagpur Improvement Trust in accordance with the building zoning and other regulations. Reading the two indentures as they stand, we cannot subscribe to the wide proposition which has been urged on behalf of the intervenors that any use of the land for purposes other than cultural and educational is absolutely proscribed. Both the deeds, as noted earlier, clearly contemplate the carrying out of a construction for cultural and agricultural purposes and related activities. The first lease uses the expression, "for purposes appurtenant thereto", while the second lease uses the expression, "for purposes ancillary thereto". Moreover, it would be necessary to note that the second lease refers both to the construction and the maintenance of buildings for cultural and educational purposes and for purposes ancillary thereto. Obviously the deployment of the land for commercial purposes unrelated to the cultural and educational activities which are sought to be carried out by the Trust would be impermissible. Equally, cultural and educational activities need to be financed and the construction of appropriate facilities even for cultural and educational purposes requires a substantial investment and outlay. The Trust had constructed an auditorium in 1958 and it has been place on the record that the facilities were found to be inadequate. Equally, cultural and educational activities need to be financed and the construction of appropriate facilities even for cultural and educational purposes requires a substantial investment and outlay. The Trust had constructed an auditorium in 1958 and it has been place on the record that the facilities were found to be inadequate. In such circumstances, if the Trust contemplated a Scheme whereby a part of the land would be used for commercial purposes in order to generate an adequate source of finance for providing the nucleus for constructing modern facilities that would be used for cultural purposes that cannot be regarded as being extraneous to the object of the Trust or ultra vires the conditions which were imposed in the covenants of the two indentures. So long as the use of the land is ancillary to the cultural and educational purpose, the restrictions contained in the two indentures would not be deviated from. In the present case on 15th October, 1991, the Collector of Nagpur, granted his no objection to the proposal which was placed before him for carrying out of construction. The State Government initiate the process of sanctioning the modification of the development plan by taking recourse to its powers under section 37 of the Maharashtra Regional and Town Planning Act, 1966. Neither the petitioners nor any of the intervenors objected to the proposed modification of the Development plan. The modification as sanction after due compliance with the provisions of law. The Scheme which has been propounded by the Trust and which has been implemented by the developer essentially provides for the developer handing over to the Trust free of cost built up and constructed facilities for the benefit of the Trust. The developer has to provide a centrally air conditioned Auditorium with a capacity of 1250 scats. The proposal also envisages (i) a mini theatre for experimental purposes with 350 seats; (ii) an ampit theatre with a capacity of 750 seats; (iii) two halls each of 1500 sq.ft.; (iv) an Art Gallery of 2000 sq.ft; (v) a reference library of 1500 sq.ft,; (vi) office space 1500 sq.ft.; (vii) five guest rooms and (viii) a covered parking area of 30,000 sq.ft. A terrace garden is to be provided in front of the Auditorium admeasuring an area of 15,000 sq.ft. A terrace garden is to be provided in front of the Auditorium admeasuring an area of 15,000 sq.ft. These facilities which are being provided by the Developer to VSS would demonstrate that the dominant object and purpose of using the land for cultural and educational purposes is duly fulfilled by the terms of the contract which has been entered into with the Developer. The Trust is to be provided with a built up area equivalent to an FSI of 60,000 sq.ft. These facilities which are to be made available to the Trust free of cost are to be financed by the Commercial Component of the project. In so far as commercial use is concerned, what is contemplate is the leasing out of shops which would be constructed in the commercial component of the construction. The Developer would be entitled to the premium which he receives for the grant of a lease of 30 years. The financial aspect of the transactions would be considered a little later. At this stage what is material to note is that the terms of the agreement between the Trust and the Developer require the Developer to provide extensive facilities free of cost to the Trust. We, therefore, do not consider any merit in the first submission since we are of the view that the dominant object and purpose of using the land for cultural and educational purposes is not destroyed or deviated from as a result of the agreement. 9. The second submission which has been urged is that the agreements which have been entered into between the Trust and the Developer and weighed in favour of the Developer and must be, therefore, set aside by the Court. In this regard, it would be necessary to advert to some of the salient aspects of the two agreements. The first agreement between the Trust and the Developer was entered into on 23rd October, 1992. The agreement stipulated in Clause (1) that the construction is to be divided in two inter connected parts- one part is the commercial component while the second would the facility of an Auditorium and other related areas for the use of the Trust. The first agreement between the Trust and the Developer was entered into on 23rd October, 1992. The agreement stipulated in Clause (1) that the construction is to be divided in two inter connected parts- one part is the commercial component while the second would the facility of an Auditorium and other related areas for the use of the Trust. Clause (2) of the agreement contemplated that the Developer would execute the Scheme of development on a turn key basis incorporating a no profit no loss principle the agreement provided that the Developer would pay to VSS a minimum sum of Rs. 25 lacs on the completion of the Scheme of development. If the total profit that was generated by the Developer exceeded Rs. 25 lacs the entire amount was to be paid over to the Trust. If there was a short fall, the Developer agreed to make it good so as to provide the Trust a minimum of Rs. 25 lacs. The agreement provided that the funds for the execution of the Scheme for development would be generated by leasing of shops in the commercial component on a long term lease of 30 years. The monthly rent was to be fixed at Re. 1/- per sq. ft. but the entire amount collected by the Developer by way of premium from lessees would be utilised for meeting expenses of the Scheme. The unutilised amount would be paid over by the Developer to the Trust. Clause 13 contemplated that the execution of the Scheme would be completed within a period of three years from the date on which work was commenced. 10. Though the original agreement was entered into between the Trust and the Developer on 23rd October, 1992, the implementation of the Scheme was enrolled in several difficulties arising out of litigation involving the Trust. The Charity Commissioner has in pursuance of the interim direction of the Court placed on record his report dated 8th October, 2003. The report which has been filed before the Court discloses several difficulties that were encountered by the Trust after the execution of the first agreement in 1992. A portion of the lands had been encroached upon by a Choukidar, who had initiated proceedings in a Court of law. The report which has been filed before the Court discloses several difficulties that were encountered by the Trust after the execution of the first agreement in 1992. A portion of the lands had been encroached upon by a Choukidar, who had initiated proceedings in a Court of law. On a portion of the land there was a sub station of Maharashtra State Electricity Board and efforts were being made to persuade the Board to vacate the land. A part of the property had been allotted for use by background artists who has claimed a tenancy right in respect of the premised. The report also notes that thereafter due to a steep decline in the market conditions, it was not possible to find ready offers for the allotment and booking of commercial space that was envisaged in the Scheme. 11. The parties arrived at a supplementary agreement of 14th January, 2001 in this background. The earlier agreement that was entered into between the parties provided that the Developer would undertake the development on a no profit no loss basis and would guarantee minimum payment of Rs. 25 lacs to the Trust. The progress of the work under the Scheme was held up for a number of reasons which have been noted above. Under the Supplementary agreement, the Developer agreed to take over the project at his risk and cost. By and as a result of the supplementary agreement that was entered into on 14th January, 2001 it came to be provided that the developer would pay to the Trust an amount of Rs. One crore as a fixed amount instead of a minimum amount of Rs. 25 lacs that was payable under the terms of the original agreement. This amount was liable to be paid within a period of 2½ years from the date of execution of the agreement, being the period which was fixed for completion of the Scheme. Moreover, it was stipulated that this payment would be made whether or not any profit was generated from the Scheme by the developer. In the event that the Developer was not able to complete the construction within a period of 2½ years as envisaged, it was provided that the Trust would be entitled to interest at 18% per annum on the amount of Rs. 1 crore and to penalty of Rs. 2,500/- per day. In the event that the Developer was not able to complete the construction within a period of 2½ years as envisaged, it was provided that the Trust would be entitled to interest at 18% per annum on the amount of Rs. 1 crore and to penalty of Rs. 2,500/- per day. The supplementary agreement also provided that in view of the poor response which has been received in the market to the proposed lease of commercial premises, the rate of rent to be paid by the prospective lessees should stand reduced to Rs. 0.50 per square feet per month. 12. Counsel appearing on behalf of the developer has stated before the Court that it was the Trust which had approached the developer with a plea for the modification of the original agreement in view of the fact that the Scheme that was envisaged in 1992 could not be implemented on account of litigation involving the Trust and because of the poor market response to the proposed development. By and as a result of the supplementary agreement the Trust was assured a fixed return of Rs. 1 crore, apart from the facilities which were to be provided free of cost with a further assurance of the payment of interest at the rate of 18% per annum if the monies are not paid within a period of 2½ years of the aforesaid agreement. Before this Court a statement has been made by Counsel for the developer that if the Trust considers even at this stage that the terms in the first agreement are more beneficial to it, the Developer would have no objection to accepting the terms of the original agreement dated 23rd October, 1992. 13. On considering the submissions which have been urged with regard to the challenge to the transaction that was entered into between the parties, we do not find any merit in the objections. In the present case, the original agreement of 1992 could not be implemented on account of the serious difficulties which arose. Even the work of demolishing the existing auditorium was held up till 1996 due to circumstances which have already been noted earlier. Thought under the terms of the first agreement, the developer had assured the Trust of a minimum payment of Rs. 25 lacs and agreed to work on a "no profit no loss" basis, the project could not be implemented. Thought under the terms of the first agreement, the developer had assured the Trust of a minimum payment of Rs. 25 lacs and agreed to work on a "no profit no loss" basis, the project could not be implemented. By and as a result of the subsequent agreement, the developer has assumed responsibility for the successful completion of the project at his risk and cost by assuring to the Trust a minimum sum of Rs. 1 crore. This is in addition to the facilities which have been agreed to be provided to the Trust. On the basis of the material which has been placed on record, we do not find that these terms are unconscionable so as to warrant the exercise of the extra-ordinary jurisdiction of this Court under Article 226. We have taken due note of the submission that the developer obtains under the terms of the Scheme the benefit of the premium which would be yielded on the shops which would be leased out for a period of 30 years. It is necessary to bear in mind the circumstance that the developer has taken upon himself the obligation of providing to the Trust facilities with an FSI of 60,000 sq.ft. The developer has to be provided with means to finance the Scheme and it is by leasing out the commercial space that he recoups his investment. A self generating Scheme of the kind which has been propounded in the present case cannot be struck down. In an ideal situation, the Trust would take upon itself the role of carrying out the entire development, both of the commercial space and of the component which would be used for benefit of the Trust. However, the kind of outlay and investment that would be involved in the successful completion of the Scheme is evidently beyond the resources of the Trust. A developer has hence been appointed to implement the Scheme. Having given our anxious consideration, we do not find any merit in the challenge to the Scheme. 14. This Court must also have due regard to the fact that the original agreement that was entered into between the parties is of October 1992. The demolition of the existing auditorium was completed in the year 1996. At least some of the parties who have moved this Court in these proceedings under Article 226 are members of the Trust. 14. This Court must also have due regard to the fact that the original agreement that was entered into between the parties is of October 1992. The demolition of the existing auditorium was completed in the year 1996. At least some of the parties who have moved this Court in these proceedings under Article 226 are members of the Trust. They have stood silent for over 10 years. The petition has been instituted only on 21st April, 2003. There is a gross and unexplained delay on the part of the petitioners and the intervenors in moving this Court, which is sufficient in itself to disentitle them to any relief. However, in order to satisfy the Court of the bona fides of the Trust in implementing the Scheme, we have considered and dealt with the objections on merits. 15. Counsel appearing on behalf of the Trust as indeed the original petitioners, submitted before the Court that the developer should now be held down to a time limit by which the Scheme should be completed and the facilities which have to be provided free of cost to VSS should be handed over. Counsel appearing on behalf of the developer has stated that the entire Scheme (except for what is curved out in Clause 12 of the supplementary agreement dated 14th January, 2001) shall be complete by 31st March, 2005 and that the facilities will be handed over to VSS complete in all respects. During the course of the hearing, we were of the view that the developer must secure the unpaid balance out of the amount of Rs. 1 crore which is to be provided to the Trust under the terms of the supplementary agreement in the meantime. Counsel for the developer has stated on instructions that within a period of six weeks from today, the developer shall furnish to the Trust a bank guarantee of a nationalised bank for the unpaid amount of Rs. 85 lacs subject to the Trust furnishing its no objection to the developer creating security proportionately in respect of the shops in the commercial component of the Scheme in order to secure a bank guarantee. Permission to do so is granted. 85 lacs subject to the Trust furnishing its no objection to the developer creating security proportionately in respect of the shops in the commercial component of the Scheme in order to secure a bank guarantee. Permission to do so is granted. The Trust will be entitled to invoke the guarantee on 31st March, 2005 unless all the monies due and payable under the terms of the agreement are paid in the meantime to the satisfaction of the Trust. The developer also undertakes to pay the Trust within a period of six weeks the unpaid penalty and interest up to date. Subject to the aforesaid directions, we do not consider it appropriate to interfere on any of the grounds which have been urged in the petition or by the intervenors. The petition shall stand disposed of. No costs. Petition allowed. -----