The Bombay High Court has held that revocation of a sanction granted under Section 36(1) of the Maharashtra Public Trusts Act can be ordered under Section 36(2) only upon proof that the sanction was obtained by fraud, misrepresentation, or concealment of material facts. The Court observed that the jurisdiction under Section 36(2) is not appellate in nature and does not permit the Charity Commissioner to undertake a fresh assessment of the transaction or reconsider the correctness of the original sanction merely because another view may be possible on the same material.

Justice Amit Borkar was hearing a writ petition challenging an order of the Joint Charity Commissioner revoking a sanction granted on 24 May 2018 in favour of the petitioner in relation to trust property. Pursuant to the sanction, a lease deed was executed in September 2018, and the petitioner thereafter exercised an option to purchase reversionary rights, leading to the execution of a conveyance deed. Subsequently, proceedings were initiated under Section 36(2) seeking cancellation of the sanction on the ground that material facts had been suppressed and that the transaction was not in the interest of the trust. The Joint Charity Commissioner revoked the sanction on various grounds.

The Court examined the scheme of Section 36 and observed that the statute contemplates two separate jurisdictions. While granting sanction under Section 36(1), the Charity Commissioner examines the desirability of the transaction, adequacy of consideration and overall benefit to the trust. However, once a sanction has been granted, the inquiry under Section 36(2) is confined to determining whether the sanction was obtained by fraud, misrepresentation, or concealment of material facts. The Court held that revocation proceedings cannot be converted into a rehearing on the merits of the transaction.

“The impugned order is an exercise involving reassessment of the sanction order rather than revocation founded upon statutory grounds. Such an approach is not permissible in law. The power of revocation cannot be converted into an appellate jurisdiction. If such conversion is permitted, the finality attached by the Legislature to completed transactions would stand diluted,” the Court observed.

The Court further observed that where a conveyance has already been executed, the proviso to Section 36(2) restricts revocation even further. At that stage, the only surviving question is whether fraud had been practised upon the Charity Commissioner before the grant of the sanction. Allegations regarding the desirability of the transaction or other perceived irregularities cannot by themselves justify revocation unless they establish fraud.

On the allegation of fraud, the Court observed that fraud cannot be lightly inferred and requires strict pleadings and proof. The Court found that the revocation application contained only general allegations and that no material had been produced to show that the trustees had withheld information with the intention of misleading the Charity Commissioner.

Dealing with the alleged suppression of the termination notice issued to the earlier lessee, the Court observed that there is a distinction between non-disclosure of a relevant fact and fraudulent concealment of a material fact. The original sanction order itself showed that the Charity Commissioner was aware of disputes, encumbrances and earlier transactions relating to the property. In such circumstances, mere non-production of one document could not automatically justify a finding of fraud. At the highest, it could amount to an irregularity, but not fraud within the meaning of Section 36(2).

The Court held that the Joint Charity Commissioner had effectively revisited issues which properly fell for consideration at the stage of grant of sanction rather than confining the inquiry to the limited grounds available under Section 36(2). Since fraud, misrepresentation, or concealment of material facts had not been established, the order revoking the sanction could not be sustained. Accordingly, the Court allowed the writ petition and set aside the impugned order.

Case Title: Bagasarwala Property LLP v. The Joint Charity Commissioner [Writ Petition No. 1736 of 2020]

Citation: 2026 LiveLaw (Bom) 286

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