Development Activities Needed To Generate Funds: Bombay High Court Says Wadia Trust Empowered To Develop Lands To Fund Charitable Activities

Background

A single judge bench of Justice Abhay Ahuja was considering the Originating Summons filed by the trustees (plaintiffs nos. 2 to 5) of the A. H. Wadia Trust (plaintiff no. 1).

Through the Originating Summons, the plaintiffs sought the opinion of the Court on whether the trustees are empowered to undertake any development activities on its land covered pursuant to notices issued by the Slum Rehabilitation Authority (SRA). Further, whether the Trust could collaborate with a partner/joint venture to undertake such activities.

The SRA issued notices to the Trust seeking to submit Slum Rehabilitation Scheme to the Trusts' lands, failing which the SRA would initiate the process of acquisition of the lands.

The plaintiffs stated that the Trust has to spend large amount of money to generate revenue for its charitable activities and that the revenue depends on funds generated from the sale of its lands to a certain extent.

The plaintiffs stated that the Trust sells its land which are either not generating any value or are completely encroached upon since the process of eviction would require huge expenditure. They further stated that the Trust lacks expertise in exploiting the development potential of these lands and thus generally opt to sell such lands.

The plaintiffs sought the opinion of the Court as there is no express provision permitting the Trust to undertake development activities in the Will and Testament establishing the Trust.

Development activities needed to generate funds for charitable activities

The Court noted that the provisions of the Will and Testament plaintiff-Trust indicate that the trustees have been given full discretionary power to sell the trust property. It stated that such discretion would be subject to the provisions of Section 36 of the Public Trusts Act, which provides that any sale of immovable property of a public trust would not be valid without sanction of the Charity Commissioner.

It observed, “In my view, the power to sell is a much wider power which would include the power to develop singly or jointly subject to the provisions of the Public Trusts Act and applicable law and regulations including the Slums Act. Moreover, under Section 36A(2) of the said Trusts Act, the Trustees are conferred with all powers to do things necessary for the achievement of the objects of the Trust.”

The Court noted that the Will creating the Trust was written in 1882 and remarked that at this time “the problem of encroachment of lands by slum dwellers did not exist, at least to the extent as it exists today nor was the concept of development of land so very prevalent in the manner it is understood now.”

It opined that the Testator would not have appreciated the development potential of the land back then and that the Testator would not have foreseen the exigencies that would make it necessary to provide power to the Trust to meet its expenses.

The Court noted that the Trust disburses a large portion of its income towards providing medical and educational aid and financial assistance to individuals and institutions. Thus, the Trust would need to continue to generate funds for its charitable activities and that the said lands would generate the revenue.

It observed that clearing encroachments from the land would require considerable expenses. Further, that if SRA acquires the land, the compensation would be meagre, depriving the Trust of the benefit of the charitable purposes.

The Court was of the view that to achieve its charitable objectives, it may become necessary for the Trust to develop the lands, either singly or also jointly, as it lacks expertise in development activities.

The Court thus held that the trustees have the power to sell and undertake development activities on its lands, singly or jointly.

Case title: A. H. Wadia Trust & Ors. vs. The Charity Commissioner (Originating Summons No. 1 Of 2022)