of Management of Pachaiyappa Strust Vs. Official Trustee of Madras  INSC
494 (17 November 1993)
AGRAWAL, S.C. (J) AGRAWAL, S.C. (J) VENKATACHALLIAH, M.N.(CJ) ANAND, A.S. (J) CITATION:
1994 SCC (1) 475 JT 1993 (6) 389 1993 SCALE (4)465
Judgment of the Court was delivered by S.C. AGRAWAL, J.-These appeals relating
to grant of a long term lease in respect of immovable property vested in the
Official Trustee as executor and trustee raise questions relating to the
exercise of the supervisory jurisdiction by the High Court under Section 25 of
the Official Trustees Act, 1913, herein referred to as 'the Act'.
a will executed by one C. Kandaswamy Naidu on May 21, 1948, the testator made various bequests in favour of his
children as well as other persons and bequeathed the rest of his properties to
the Trustees of 478 Pachaiyappa's Charities subject to the conditions, payment
and restrictions mentioned therein. The Official Trustee of Madras has been
appointed as the executor and the trustee of the will and he has been empowered
to sell and dispose of the properties, immovable as well as moveable. O.P. No.
278 of 1948 is the original proceeding instituted in the Madras High Court on
the basis of the said will by the Official Trustee. Among the properties vested
in the Official Trustee under the will is a vacant plot of land measuring about
5.65 grounds (13566.85 sq. ft.) situated at No. 21, Barrington Road, Madras. On the western side of the said plot of land, there is a building.
The ground floor of the said building has been let out to Pachaiyappa's Trust
for the Office of the Trust. The first floor of the building is in occupation
of another tenant.
January 29, 1986, R.V.A. & Co., (Respondent 2), a partnership firm
consisting of three unemployed medical graduates, filed an application (C.M.P.
No. 495 of 1986) in O.P. No. 278 of 1948, wherein it was prayed that the
Official Trustee be directed to enter into a lease agreement with the applicant
firm for an initial period of 50 years with an option to the said applicant
firm to renew the lease for a further period of 50 years on such terms and
conditions which the court may deem fit to impose. In the affidavit of M.K. Rajasekar,
one of the partners, filed in support of that application, it was stated that
the partnership had been formed with the object of constructing and running a
Nursing Home at Madras with a view to provide employment to the partners who
were unemployed medical graduates. In the said affidavit, it was also stated
that the applicants wish to take the plot of land on long lease with a view to
construct a medium size hospital with about 30 rooms and they wanted the lease
of the property initially for a minimum period of 50 years with an option to
renew for a like period on the expiry of 50 years. In the said affidavit, it
was also stated that after the expiry of the lease period the applicants would
undertake to deliver the vacant possession of the premises with all the
improvements made in the site ]eased out to them. As regards rent it was stated
that Rs 4,500 per annum was a fair rent payable for the vacant land for the
first year and that for every succeeding year the rent could be increased by 5%
on the rent payable in respect of every preceding year.
said application was opposed by the appellant. In the counter affidavit filed
on its behalf it was stated that the grant of lease for 50 years with an option
to renew for a further period of 50 years was not in the interest of the Trust
and not beneficial to it and it would be detrimental to the interests of the
Trust to lease the property for a long period as it would amount to tying down
the property in the hands of the applicants. It was also stated that the
solvency of the applicants was not clear and that it would not be prudent to
lease the trust property for a long period however laudable the objects of the
partnership may be and it would be highly risky to lease out the property as
Official Trustee also filed a report wherein he admitted the availability of
the vacant space for lease and stated that he had no objection 479 to the court
directing a reasonably long term of lease for the vacant site but according to
him the rent offered by Respondent 2 was very low and that the period of lease
could not be as long as 50 years but it could be a lease for 15 or 20 years.
Official Trustee filed a supplemental report on April 25, 1986 wherein it was
stated that the applicants have no legal right to insist on a lease and that the
applicants could be granted lease only if the court was satisfied that the
applicants are agreeable to the terms and conditions which would really benefit
the trust estate and that the applicants who want the indulgence of a long term
lease in their favour by an order of the court should be prepared to offer
attractive terms for grant of lease in their favour. Thereafter the Official
Trustee set out the factors which may be taken into consideration if at all the
court was inclined to grant the long term lease in favour of the applicants.
The said factors were:
initial rent of Rs 4,500 per annum (Rs 375 per month) offered by the applicants
is very low and that even at the rate of 10 paise per sq. ft. the rent for the
area of 13566.85 sq. ft. comes to about Rs 1,356 per month.
period of lease of 50 years with an option to renew for another 50 years is
definitely not in the interest of the trust estate and that the lease period
can at best be for 15 years.
The rent for the site has to be increased each year by 10%.
That applicants may be directed to deposit a sum of Rs 50,000 with the Official
Trustee as security deposit for the fulfillment of the proposed project which
could be forfeited in the event of applicant failing to carry out the project
or to show adequate progress in pushing through the project within a period of
one year but it would be refunded without interest if the project as envisaged
in the application is completed in full.
applicants may be required to deposit Rs 10,000 as advance repayable without
interest when the applicants vacate the property.
tenancy would stand terminated in the event of the applicants failing to pay
rent continuously for a period of more than 3 months.
superstructure to be put up by the applicants must be surrendered to the trust
estate at the time when they vacate without claiming any compensation for the
The applicants would have no right to sub-lease.
Official Trustee further stated that if for some reason or other the court
holds that the lease in favour of the applicants cannot be granted then the
Official Trustee may be permitted to lease the property by public auction
through M/s Murray and Company or some other public auctioneer on terms quite
favorable to the trust estate after giving due publicity.
8.The said application of Respondent 2 was disposed of by a learned Single
Judge of the High Court (K.M. Natarajan, J.) by order dated May 2, 1986 by treating it as an application under Section 25 of
the Act. The learned Single Judge came to the conclusion that it is beneficial
and in the best interest of the Trust to lease out the property to others.
While considering the offer made by Respondent 2, the learned Single Judge held
that the monthly rent can be fixed at 15 paise per sq. ft. which works out to Rs
2034 for 13566.85 sq. ft. and it could be rounded to Rs 2,000 per month and
that the rent was to be increased by 5% every year for a period of first five
years and thereafter by 10% every year on the rate of the monthly rent of the
regard to the period of lease the learned Single Judge was of the view that the
period can be fixed at 30 years with liberty to the applicants to apply for
extension of the lease period according to the then prevailing circumstances to
the court and abide by the other terms and conditions to be imposed by the
court or such other order of the court.
regards the objections of the appellant the learned Single Judge observed that
even though the appellant Trust is a residuary legatee they have no locus standi
in the matter of granting lease of the trust property. According to the learned
Single Judge in view of Section 25 of the Act and the decision of the Division
Bench of the Madras High Court in B. Muniswami Naidu v. Official Trustee' it is
only the Official Trustee who has to take necessary steps to secure the maximum
advantage for the Trust without prejudice to the security and safety of the
said Trust subject to the supervisory jurisdiction of the High Court. By his
order aforesaid, the learned Single Judge directed the Official Trustee to
lease out the vacant site on the eastern portion of the premises bearing Door
No. 21, Harrington Road, Madras to the extent of 13566.85sq. ft. (5.65 grounds) subject to
the following terms and conditions:
Initially the rent is fixed at Rs 2,000 per month from the date of execution of
the lease deed and the same is to be increased by 5 per cent each year on the
preceding year rate of rent for a period of five years and thereafter 10 per
period of lease is 30 years with liberty to the applicant to apply before the
expiry of the lease period to the Court for such further period and such terms
as fixed by the Court, according to the then prevailing circumstances, and abide
by the order of the Court.
applicant should deposit at the time of execution of the lease a sum of Rs
30,000 with the Official Trustee as security deposit for the fulfillment of the
project and if he fails to carry out the project or fails to show adequate
progress in pushing through this project within a period of one year from the
date of the lease, the Official Trustee is entitled to forfeit the entire sum
of Rs 30,000 to the Trust Estate.
(1980) 1 MLJ 223 (mad) 481 (4)After the project is completed in full as
envisaged in the application, the applicant is entitled to get refund of the
said sum of Rs 30,000 from the Official Trustee.
applicant has also at the time of execution of the lease to deposita sum of Rs
10,000 as advance with the Official Trustee, and the same isrepayable without
interest at the time when the applicant vacates the premises.
the applicant fails to pay the rent continuously for a period of three months,
the tenancy will stand terminated and the Official Trustee is entitled to
recover possession of the demised premises with the superstructure.
applicant has to put up a north- south wall of 23 cm thickness to a length of
63.70 metres at his cost as mentioned in the report filed by the Assistant
Engineer within a period of one year, without claiming any reimbursement or
adjustment in the rent payable.
applicant should also provide necessary gateway for the use of the tenements in
the western side as suggested by the Asst.
in his report within the said period of one year.
applicant must surrender the superstructures and other constructions to be put
up by them to the Trust at the time when they vacate without claiming any
compensation for the same.
applicant has no right to sub-lease the premises to any person.
applicant must at his cost provide suitable alternative arrangements for the
tenant of the ground floor of the building in the western side (now Pachaiyappa's
Charities) to get water from the well. Failure to comply with any of the terms
and conditions the lease is liable to be terminated by Official Trustee." 9.Feeling
aggrieved by the said order of the learned Single Judge, the appellant filed an
appeal (O.S.A. No. 167 of 1986) which was disposed of by a Division Bench of
the said High Court (V. Ramaswami and Bellie, JJ.) by judgment dated April 22, '1987. It was submitted on behalf of the
appellant that, as a residuary legatee, the appellant, is not opposed to grant
of lease as such but the lease should have been given by public auction and
reliance was placed on the observations of the Division Bench of the Madras
High Court in B. Muniswami Naidu v. Official Trustee'. Rejecting the said
contention, the learned Judges held:
the Official Trustee himself wants to lease out the property, the normal
procedure to be adopted is by auction, but when a specific application is made
to the High Court and the learned Judge who hears the application is satisfied
that the terms are fair and just and there is no need for going for a public
auction, it cannot be said that the learned Judge was without jurisdiction in
directing the grant of the lease." 482 10.The learned Judges held that the
learned Single Judge had taken into consideration the rent, nature of the
property, the situation and the purpose for which the lease is asked for and
had come to the conclusion that the direction as prayed should be given subject
to the terms and conditions mentioned by the learned Single Judge and that there
was no ground to interfere with the same. On behalf of the Official Trustee, it
was, however, pointed out that although the order was passed by the learned
Single Judge on May 2, 1986, Respondent 2 had not come forward with payment and
execution of the lease deed and that a specific time- limit should be fixed
within which Respondent 2 should obtain the lease and execute the lease deed.
Accepting the said contention the learned Judges fixed a period of four months
from the date of the judgment as the period within which Respondent 2 should
approach the Official Trustee to have the lease deed settled and executed.
view of Respondent 2 having failed to take any action in pursuance of order
dated May 2, 1986, passed by the learned Single Judge, one Md. Ummer Sheriff
filed an application (C.M.P. No. 5600 of 1986) in O.P. No. 278 of 1948 for
cancellation of the directions regarding grant of lease in favour of Respondent
2 and for direction that the lease be granted to him. He expressed his
willingness to pay a monthly rent of Rs 3,000 and to pay a security deposit of Rs
35,000 and an advance amount of Rs 15,000. In the said application, an
affidavit was filed by M.K. Rajasekar, a partner of Respondent 2, indicating
that the lease granted in favour of Respondent 2 may be cancelled as they do
not want to take the lease.
an application (C.M.P. No. 14618 of 1987) was filed by Respondent 2 in O.S.A.
No. 167 of 1986 whereby it was prayed that the order dated April 22, 1987 in O.S.A.
167 of 1986 may be modified by issuing suitable directions with reference to
the conditions of lease imposed by order dated May 2, 1986 by the learned Single Judge in respect of the following
to delete the provisions with reference to the enhanced rate of rent contained
in clause 2;
provide for the period of lease as 99 years or in any event for 50 years with
an option to renew for a further period of 50 years instead of 30 years as
provided in clause 3;
clause 7 for the termination of the tenancy on the failure of the lessee to pay
the rent continuously for one year instead of 3 months;
the provisions of clause 10 with reference to the surrender of superstructure
and other construction put up by the lessee at the time when the lessee vacates
without claiming compensation; and (v) deleting the prohibition contained in
clause 11 not to sub-lease the premises leased." 13.The said application
was opposed by the appellant as well as the Official Trustee. The appellant
submitted that the application was not 483 maintainable since the terms and
conditions as contained in order of the learned Single Judge dated May 2, 1986
had been affirmed in appeal by the Division Bench of the High Court.
Official Trustee submitted that Respondent 2 having not filed any appeal
against the order dated May
2, 1986 could not seek
to have the said order modified especially when the said order had been
affirmed by the Division Bench by order dated April 22, 1987. It was also submitted on behalf of the Official Trustee
that in view of the affidavit dated April 30, 1987 filed by M.K. Rajasekar (in C.M.P.
No. 5600 of 1986) that he does not want to take the lease this application has
become infructuous. Md. Ummer Sheriff filed a separate application (C.M.P. No.
16607 of 1987) in C.M.P. No. 14618 of 1987 wherein it was prayed that the
Official Trustee be directed to enter into a lease agreement with him. In the
affidavit of Md. Ummer Sheriff dated October 16, 1987 in support of that application the
offer of monthly rent of Rs 3000 per month was reiterated and the deponent
expressed his willingness to abide by all the necessary conditions terms and
restrictions imposed by the court.
application for modification (C.M.P. No. 14618 of 1987) filed by Respondent 2
was disposed of by the Division Bench of the High Court by order dated October 28, 1987.
learned Judges rejected the objection raised by the Official Trustee that
Respondent 2 having failed to file an appeal against the order of the learned
Single Judge dated May
2, 1986 could not seek
its modification. The learned Judges were of the view that since the
application would not have been maintainable if it had been filed before the
learned Single Judge and, instead of allowing the question of merger of the
earlier order of the learned Single Judge in the appellate order being argued
before the learned Single Judge, it was desirable that the matter be dealt with
by the Bench. As regards the affidavit of M.K. Rajasekar filed on behalf of
Respondent 2 stating that they had no inclination to accept the lease, the
learned Judges held that the said affidavit had been filed without the
knowledge of the disposal of the appeal and that Respondent 2 had, thereafter
filed an affidavit in these proceedings stating that they are willing to take
the lease on just and fair terms and that they only want modification of the
with the application for modification on merits, the learned Judges allowed the
said application and permitted the following modifications in the terms and
conditions laid down in the order dated May 2, 1986:
Under clause (2) the increase of rent would be at the rate of 5% on the
original rent of Rs 2,000 for every three years.
Under clause (3) the period of the lease would be 50 years instead of 30 years
with an option to renew for a further period of 50 years.
Under clause (7) the tenancy would be liable to be terminated on the failure of
the lessee to pay rent continuously for a period of one year instead of three
years as originally provided.
(4) Under clause (10) relating to surrender of the superstructure and other
construction at the end of the lease the lessee shall give vacant possession to
the lessor at the end of the lease but it would be open to the lessor to opt to
purchase the property in case if it desired the property as it is at the then
prevailing market value to be fixed by the Public Works Department or at a
figure which may be mutually agreed upon between the parties.
Clause (ii) prohibiting sub-letting deleted.
aggrieved by the judgment dated April 22, 1987 in O.S.A. 167 of 1986 and the order dated October 28, 1987 on C.M.P. No. 14618 of 1987 passed
by the Division Bench of the High Court, the appellant has filed these appeals.
4169 of 1988 is directed against the order dated April 22, 1987 passed in O.S.A. No. 167 of 1986 and C.A. No. 4168 of 1988
has been filed against the order dated October 28, 1987 passed on the application (C.M.P.
No. 14618 of 1987) for modification.
will first take up C.A. No. 4168 of 1988 which is directed against judgment
dated April 22, 1987 affirming the order dated May 2, 1986 passed by the learned Single Judge for grant of
lease in favour of Respondent 2.
mentioned earlier, the application that was filed by Respondent 2 for grant of
lease was treated and disposed of as an application under Section 25 of the Act
which reads as under:
Power of High Court to make orders in respect of property vested in Official
Trustee.-The High Court may make such orders as it thinks fit respecting any
trust property vested in the Official Trustee, or the income or produce thereof
" 18.Section 26 of the said Act prescribes that any order under the Act
may be made on the application of any person beneficially interested in any
trust property or by any trustee thereof. The Act does not envisage an
application being moved by any other person. Respondent 2 were neither
beneficially interested in the trust property nor were they trustees thereof.
The application filed by Respondent 2 was thus clearly not maintainable and the
High Court was in error in entertaining the said application. The proper course
was that Respondent 2 should have approached the Official Trustee with their proposal
for grant of lease and if the Official Trustee, after examining the same, found
it to be in the interest of the Trust, he could move the court for appropriate
from maintainability of the application filed by Respondent 2, we find that in
deciding to grant the lease in favour of Respondent 2 the High Court has failed
to protect the interests of the trust estate. In this context, it is necessary
to mention that the appellant, who is the residuary legatee under the will and
is beneficially interested in the property sought to be leased, had objected to
the proposed lease. The Official Trustee, took the stand that he would have no
objection to grant of lease if the court was satisfied that Respondent 2 was
agreeable to terms which would really 485 benefit the trust estate. His stand
was that if Respondent 2 wanted the indulgence of a long term lease in their favour
by an order of the court they should be prepared to offer attractive terms for
the grant of the lease in their favour.
Official Trustee also indicated the factors which may be taken into
consideration by the court. The High Court has, however, imposed terms for
grant of lease which are more favourable to Respondent 2 as compared to the
terms suggested by the Official Trustee.
this regard it may be mentioned that in view of Section 9 of the Act when the
Official Trustee has been appointed trustee under a will he holds the property
vested in him upon the trust expressed in the will. Under Section 7 of the Act,
the Official Trustee acts as an ordinary trustee and has the same powers,
duties and liabilities and is entitled to the same rights and privileges and is
subject to the same control and orders of the court as any other trustee acting
in the same capacity. According to the Indian Trust Act, 1882 a trustee is
bound to deal with the trust property as carefully as a man of ordinary
prudence would deal with such property if it were his own (Section 15) and a
trustee can do all acts which are reasonable and proper for the realisation,
protection or benefit of the trust property (Section 36). Describing the
standard for fiduciary conduct expected from a trustee, Cardozo, J. has said:
trustee is held to something stricter than the morals of the market place. Not
honesty alone but the punctilio of an honor the most sensitive, is then the
standard of behaviour.
thus has the level of conduct for fiduciaries been kept at a higher level than
that trodden by the crowd." [See: Meinharal v. Salman2] 21..In B. Muniswami
Naidu v. Official Trustee' while referring to the duties of Official Trustee,
it has been held:
long as the property is vested in the Official Trustee, it will be the duty of
the Official Trustee to take such steps and conduct himself in such a manner as
to make the trust get the maximum advantage of any transaction without
prejudice to the security and safety of the trust property itself." 22.In
the said case, it has been further held that if the Official Trustee himself
wants to lease out the property the normal procedure to be adopted is by public
auction. The said view is in consonance with the law laid down by this Court in
the context of alienation of public property.
K.N. Guruswamy v. State of Mysore3 the Court was dealing with the sale of a
liquor contract. It was observed that matters of "consequence to the State
revenue cannot be dealt with arbitrarily and in the secrecy of an office".
Court has emphasized the need for publicity so that people at large have
notice. It was held that "the furtive method adopted of settling a 2
(1928) 249 NY 458, 464 3 (1955) 1 SCR 305: AIR 1954 SC 592 486 matter of this
moment behind the backs of those interested and anxious to compete is
unjustified". (SCR p. 312) 24.In Fertilizer Corporation Kamgar Union (Regd.)
v. Union of India4 it has been observed (Chandrachud, C.J.): (SCC p.
21) "We want to make it clear that we do not doubt the bona fides of the
authorities, but as far as possible, sales of public property, when the
intention is to get the best price, ought to take place publicly. The vendors
are not necessarily bound to accept the highest or any other offer, but the
public at least gets the satisfaction that the Government has put all the cards
on the table." 25.Relying on the said observations this Court in State of
U.P. v. Shiv Charan Sharma5 has held that, "public auction with open
participation and a reserved price guarantees public interest being fully subserved".
Ram & Shyam Co. v. State of Haryana6 it has been laid down:(SCC p.277, para
12) "On the other hand, disposal of public property partakes the character
of a trust in that in its disposal there should be nothing hanky panky and that
it must be done at the best price so that larger revenue coming into the
coffers of the State administration would serve public purpose viz. the welfare
State may be able to expand its beneficent activities by the availability of
larger funds. But where disposal is for augmentation of revenue and nothing
else, the State is under an obligation to secure the best market price
available in a market economy. An owner of private property need not auction it
nor is he bound to dispose it of at a current market price. Factors such as
personal attachment, or affinity, kinship, empathy, religious sentiment or
limiting the choice to whom he may be willing to sell, may permit him to sell
the property at a song and without demur. A welfare State as the owner of the
public property has no such freedom while disposing of the public
property." 27.In Chenchu Rami Reddy v. Govt. of A.P.7 while dealing with
sale of property of a religious endowment governed by the Andhra Pradesh
Charitable and Hindu Religious Institutions and Endowments Act, 1966, this
Court has held that what is true of public property is equally true about the
property belonging to the religious institutions and endowments and has further
pointed out: (SCC pp. 397-98, para 10) "... the trustees or persons authorised
to sell by private negotiations, can, in a given case, enter into a secret or
invisible underhand deal or understanding with the purchasers at the cost of
the concerned institution. Those who are willing to purchase by private
negotiations can also bid at a public auction. Why would they feel shy or be
deterred 4 (198 1) 1 SCC 568: (1981) 2 SCR 52 5 1981 Supp SCC 85 6 (1985) 3 SCC
267 7 (1986) 3 SCC 391 487 from bidding at a public auction? Why then permit
sale by private negotiations which will not be visible to the public eye and
may even give rise to public suspicion unless there are special reasons to
justify doing so? And care must be taken to fix a reserve price after
ascertaining the market value for the sake of safeguarding the interest of the
endowment." 28.The aforesaid observations in the context of public
property and property belonging to religious and charitable endowments and
institutions would equally apply to trust property as in the present case.
Division Bench of the High Court has held that although the Official Trustee,
if he were to lease out the property, should have done so by public auction but
since lease was being granted under order passed by the High Court after being
satisfied that the terms are fair and just, there was no need to go for a
public auction. This raises the question how would the court satisfy itself
that the terms are just and reasonable? For such satisfaction the court must
have adequate material to make a proper assessment. This cannot be possible on
the basis of the terms offered by the applicant approaching the court.
the said terms are just and reasonable, and in the interest of the trust, can
be determined by making a comparative assessment of competing offers and,
therefore, it is necessary that the persons interested in taking the lease must
have an opportunity to make an offer. Public auction is the means for enabling
such persons to make their offers. In the matter of exercise of its supervisory
jurisdiction under Section 25 of the Act the High Court has to be guided by the
same consideration which governs the administration of trust property by the
Official Trustee, namely, "to make the trust get the maximum advantage of
a transaction". Since public auction after adequate publicity ensures
participation of those who are interested and anxious to compete, it normally secures
the best price.
appears to be no reason why this procedure of public auction should not be
adopted when the lease is to be granted under an order passed by the High Court
in exercise of the jurisdiction under Section 25 of the Act. It is no doubt
true that an order under Section 25 of the Act is passed in a judicial
proceeding conducted in open court under public gaze. This necessarily
postulates adequate publicity of the matter under consideration to enable
persons having an interest to appear and put forward their point of view before
the court. If lease is granted by the court on the basis of an application
submitted by an applicant without notice to others who may also be interested
in the lease the consequence would not be very different from that when a lease
is granted in the secrecy of an office. In order to ensure participation by
every person interested in making an offer it is necessary that there should be
wide publicity about the proposal to give the lease and the lease be granted either
by inviting bids at a public auction or by inviting sealed offers by a
procedure followed by the learned Single Judge in passing the order for grant
of lease in favour of Respondent 2 does not fulfill this 488 requirement. It cannot
be disputed that Respondent 2 had a laudable object in constructing a hospital
with 30 rooms.
there can be other applicants with equally laudable objects or other applicants
having the same object who could offer better terms. This could only be known
if wider publicity had been given to the proposal and offers had been invited.
This appears to have been suggested by the Official Trustee also in his
Supplemental Report dated April 25, 1986 wherein he sought permission to lease
the property by public auction through M/s Murray and Company or some other
auctioneer on terms quite favourable to the trust estate after giving due
publicity. We are unable to appreciate why the learned Single Judge did not
choose to adopt the said course.
learned Single Judge was also not right in holding that the appellant has no
locus standi in the matter. Apart from being a tenant on the ground floor of
the building adjacent to the vacant plot of land the appellant trust, is also
the residuary legatee under the will and has a beneficial interest in the trust
property sought to be leased. The appellant was, therefore, entitled to raise
objections regarding grant of lease in favour of Respondent 2 on the ground
that the said lease was not in the interest of the trust property and the said
objections could not be brushed aside on the view that the appellant had no
we find that while directing grant of lease in favour of Respondent 2 the
learned Single Judge has altered the conditions as suggested by the Official
Trustee in the matter of (i) lease period, (ii) rate of increase of rent, and
(iii) the amount of security deposit. The Official Trustee had suggested a
maximum lease period of fifteen years but under clause (2) of the conditions
the lease period has been fixed at 30 years with an option to renew. The
Official Trustee had suggested increase in rent at the rate of 10% per year but
in clause (1) of the conditions the said increase was reduced to 5% for the
first five years. The Official Trustee had suggested a security deposit of Rs
50,000 but in clause (3) of the conditions it was reduced to Rs 30,000. All
these changes were prejudicial to the interest of the trust estate. The learned
Judge has not given any reason why conditions as suggested by the Official
Trustee could not be imposed.
Division Bench, while upholding the order of the learned Single Judge has not
taken note of these infirmities in the said order. For the reasons
aforementioned we are unable to uphold the order dated May 2, 1986 passed by
the learned Single Judge as well as the judgment of the Division Bench dated
April 22, 1987 affirming the said order of the learned Single Judge in appeal.
C.A. No. 4169 of 1988 must, therefore, be allowed.
would now come to C.A. No. 4168 of 1988 which is directed against the order
passed by the Division Bench on the application filed by Respondent 2 for
modification of the order dated April 22, 1987 in O.S.A. No. 167 of 1986.
this context it has to be noted that by judgment dated April 22, 1987 the
Division Bench had dismissed the appeal and affirmed the order dated May 2,
1986 passed by the learned Single Judge. Respondent 2 489 had not chosen to
file an appeal against the said order of the learned Single Judge and they
allowed the said order to become final. By the application for modification
Respondent 2 sought modification of important terms and conditions relating to
(i) period of lease, (ii) rate of increase of rent, (iii) surrender of
superstructure at the time the lessee vacates the land, and (iv) right to
sublet the premises. The modifications were such as to alter the character of
the order sought to be modified. Moreover the modifications that were sought
even went beyond the terms that were offered by Respondent 2, in the affidavit
of M.K. lessor. But, however, it will be open to the lessor to opt Rajasekar
filed in support of the application for grant of lease. In paragraph 11 of the
said affidavit, it was stated:
further state that after the expiry of the lease period the applicant undertake
to deliver vacant possession of the said premises with all the improvements
made in the site leased out to the applicant."
Clause (9) of the terms and conditions imposed by the learned Single Judge was
in the following terms:
applicant must surrender the superstructures and other constructions to be put
up by them to the Trust at the time when they vacate without claiming any
compensation for the same."
the application for modification which has been allowed by the learned Judeges
of the Division Bench of the High Court, clause (9) of the conditions has been
substituted and it has been provided:
provided in the Transfer of Property Act, this clause will be modified to the
effect that at the end of the tenancy, the leasee shall give vacant possession
to the lessor.
however, it will be open to the lessor to opt to purchase the property in case
if it desired the property as it is, at the then prevailing market value, to be
fixed by the Public Works Department or at a figure which may be mutually
agreed upon between the parties." 37. Similarly in paragraph 14 of the
affidavit of M.K.
it was stated:
therefore, state that the applicants offer to pay a rent of Rs 4,500 for the building
site for the first year and for every succeeding years by increasing the rent
by five per cent on the rent payable in respect of every preceding year."
The learned Single Judge in clause (1) of the terms and conditions directed:
Initially the rent is fixed at Rs 2000 per month from the date of execution of
the lease deed and the same is to be increased by 5 per cent each year on the
preceding year rate of rent for a period of five years and thereafter 10 per
the application for modification the modification that was sought was "a
uniform increase of 5 per cent for every five years" and the 490
modification that has been allowed is increase of 5% on the original rent for
every three years.
Notable among the other modifications which have been permitted are (i) the
period of the lease has been raised from 30 years to 50 years with an option to
renew for another 50 years, and (ii) deletion of the prohibition relating to
sub-lease. It would thus appear that on the pretext of modification Respondent
2 has secured substantial alteration in the terms and conditions as contained
in the original order dated May 2, 1986 passed by the learned Single Judge
which had been upheld in appeal by the Division Bench. In other words under the
guise of modification Respondent 2 have obtained review of the order which had
become final. This was impermissible in law. The order passed by the Division
Bench does not give any indication as to why it became necessary to give these
concessions to Respondent 2. It has not been shown that nobody else was
prepared to take the lease on the terms and conditions laid down in the order
dated May 2, 1986 and that without making those modifications the plot of land
could not be given on lease. On the other hand we find that there was another
offer by Md. Ummer Sheriff offering to take the lease on the same terms and
conditions with a higher rent of Rs 3000 per month. The order dated October 28,
1987 passed by the Division Bench on the application for modification (C.M.P.
14618 of 1987) cannot, therefore, be upheld and C.A. 4168 of 1988 filed
against the said order also deserves to be allowed.
Before parting with the case we feel constrained to say that the order dated
May 2, 1986 passed by the learned Single Judge which was affirmed in appeal by
the Division Bench as well as the order dated October 28, 1987 passed by the
Division Bench on the application for modification leave an impression that the
learned Judges were more concerned with the interests of Respondent 2 than
those of the trust estate though the primary duty of the court was to safeguard
the interest of the Trust which was being administered by the Official Trustee
and in doing so they not only ignored the objections raised by the residuary
legate who was the beneficiary under the Trust, but also did not accept the
suggestions made by the Official Trustee in the interest of the Trust. In the
matter of grant of leases and licences and award of contracts by the executive
the decisions of this Court require the authorities to apply standards or norms
which are not arbitrary, irrational or irrelevant.
expect much higher standards from the judiciary and rightly so. It would be a
sad day if an impression gains ground that the judiciary is not free from the
malaise that afflicts other fields of State activity. We need say no more at
the result, the appeals are allowed, the judgment dated April 22, 1987 passed
by the Division Bench in O.S.A.
167 of 1986 as well as the order dated May 2, 1986 passed by the learned Single
Judge on C.M.P. No. 495 of 1986 in O.P. No. 278 of 1948 and the order dated
October 28, 1987 passed by the Division Bench on C.M.P. No. 14613 of 1987 in
O.S.A. No. 167 of 1986 are set aside. The parties are left to bear their own