Madras High Court
In Re: Sri Kanchi Kamakoti Peetam ... vs Unknown on 31 January, 2006
Equivalent citations: AIR2006MAD230
Author: R. Banumathi
Bench: R. Banumathi
JUDGMENT R. Banumathi, J.
1. The Plaintiffs have filed the Suit seeking permission/authorisation to dispose of the Suit Schedule properties being Sri Jayendra Saraswathi Institute of Medical Sciences and Sri Kanchi Kamakoti Sankara Hospital in "as is where is" basis in favour of M/s. Chettinad Hospitals, so as to enable the Plaintiff Trust to discharge the liabilities.
2. Case of the Plaintiffs is as follows: The First Plaintiff is a Charitable Trust founded by one T. J. Mani by a Deed of Settlement dated 27-11-1987 for charitable purposes including relief to the poor, education, medical relief and any other object of general public utility. The First Plaintiff Trust is represented by its Chairman and Managing Trustee B. Chandrasekhar the Second Plaintiff. Sri Jayendra Saraswathi Institute of Medical Sciences and Sri Kanchi Kamakoti Sankara Hospital were established in the year 2003 by the First Plaintiff herein with a view to provide medical education at an affordable cost to deserving students in the middle and lower income groups. The Hospital was established as a teaching hospital attached to the college. The Hospital caters to the needs of 47 villages around Perumbakkam, near Sholinganallur. The Hospital has so far treated 2,55,255 out patients of which 75% are from poorer section of the society. The inpatients treated till the date filing the Plaint is 22,241. The College and the Hospital were established with an initial Capital Investment of Rs. 4,00,10,000/- by the Plaintiff Trust and a Secured Loan of Rs. 12,16,22,260/- obtained from State Bank of India. In the year 2004-2005, the Capital Investment and Loan Capital of the Trust was increased. Further case of the Plaintiffs is that the total Income of the Hospital run by the Trust from inception has been Rs. 5.87 crores and the expenditure has been 28.49 crores, thereby resulting in a Revenue loss of Rs. 22.62 crores. The Revenue loss incurred by the Hospital of the Plaintiffs has completely eroded the Capital contributed by the Trust and as on date, the networth of the Hospital is negative. The Hospital's average income per month is Rs. 30 lakhs and the expenses incurred by the Hospital per month works out to Rs. 103 lakhs and the monthly deficit is around Rs. 73 lakhs. The repayment of Principal and Interest for the year 2006-2007 works out to Rs. 11.52 crores. At the present level of operations, the Plaintiff Trust would not be able to meet its liability to the banks and its account will become a Non-performing Asset to the bank and the Plaintiff Trust would be compelled to dispose of its assets in distress.
3. The entire project of the Medical College and Hospital was conceived with the hope of getting necessary approval from the State Government and the Medical Council of India. The Plaintiff Trust was under a bona fide belief of obtaining the approval for its Medical College. However, the requisite approval has not been given to the Plaintiff Trust in spite of the fact that the College and the Hospital have sufficient infrastructure, satisfying the requirements of Medical Council of India for establishment of a Medical College. Without any prospect of a Medical College, the Hospital is not a viable project. The Plaintiff Trust enjoys a good reputation and credit rating. In view of the financial constraints, the Plaintiff is compelled to dispose of the assets of the College and the Hospital to meet its commitment towards the secured and unsecured creditors. With the object of setting up a Medical College, many aspirants have approached the Plaintiff with their offers to purchase the Assets of the Hospital. The offer made by M/s. Chettinad Hospitals Private Limited, offering Rs. 105 Crores to take over the Assets of the Plaintiff's Hospital and the College is most favourable for the First Plaintiffs Trust. In considering the said Company's financial capacity and capability to establish and run the Medical College and Hospital, the Board of Trustees of the First Plaintiff Trust unanimously resolved to sell Sri Jayendra Saraswathi Institute of Medical Sciences and Sri Kanchi Kamakoti Sankara Hospital owned by the First Plaintiff Trust. Hence, the Plaintiffs have filed the Suit seeking permission/authorisation to the Plaintiffs to dispose of the Plaint Schedule mentioned Properties in "as is where is" basis.
4. Praying for the permission of the Court, learned Counsel for the Plaintiffs has submitted that the Plaintiff Trust has no funds to run the Hospital. It is further submitted that the expenses far exceeds the Income and the Plaintiff's Trust finds it difficult to run the Hospital. It is also submitted that the State Government has not issued the "No Objection Certificate" for the Plaintiff's Medical College and running the Hospital without a Medical College would not be viable. It is further submitted that if the negative Assets with the present liability of the Plaintiff's Trust is allowed to continue, the functioning of the Trust would be crippled and hence, permission is to be granted to the Plaintiffs Trust to sell Sri Jayendra Saraswathi Institute of Medical Sciences and Sri Kanchi Kamakoti Sankara Hospital.
5. Section 92, C. P. C. provides that suits under the Section can only be filed either by the Advocate General or two or more persons having an interest in the Trust with the leave of the Court because main purpose of the section is to give protection to public Trusts of a Charitable or religious nature from being subjected to harassment by suits being filed against them. The main purpose of Section 92 is to give protection to public Trusts of a Charitable or religious nature from being subjected to harassment by suits filed against them. In order to apply Section 92, C. P. C., the following condition must be satisfied:
(a) There is a Trust created for public purposes of a Charitable or generous nature;
(b) There is a breach alleged of such Trust, or the direction of the Court is necessary for the administration of such Trust;
(c) The suit must be a representative one on behalf of the public and is not by individuals for their own interest;
and
(d) the relief claimed in the suit is the one or other reliefs mentioned in the Section.
Clause (f) of Section 92, C. P. C. inter alia gives certain power to the Court, which may be exercised in situation requiring Courts sanction for alienation.
6. On the basis of the Plaint averments and the materials produced and other circumstances, it is to be considered whether the Plaintiff Trust is in a situation compelling to sell Sri Jayendra Saraswathi Institute of Medical Sciences and Sri Kanchi Kamakoti Sankara Hospital and whether the power of the Court is to be exercised granting permission. To resolve the point arising for determination, the Court has to consider:
i. Object of the Trust;
ii. Whether the Sale is benevolent to the Trust?
iii. Whether permission is to be given to the Plaintiffs to sell Sri Jayendra Saraswathi Institute of Medical Sciences and Sri Kanchi Kamakoti Sankara Hospital to the proposed Purchaser M/s. Chettinad Hospitals Private Limited.
7. The First Plaintiff Trust was formed in 1987 under the Deed of Settlement dated 27-11-1987 with the benevolent objects of establishing Educational Institutions to organise Education and Training and to maintain Libraries and to establish, manage and run hospitals in Rural and Urban areas to alleviate the sufferings of the humanity. We may usefully refer to certain benevolent objects of the Trust:
i. To grant donations and other kinds of financial assistance to Schools, Colleges, Universities and Educational Institutions, Training Centres and Societies/Associations/Institutions founded for the cause of education and training.
ii. To establish, manage and run schools, colleges, training institutions, Patasalas to impart education, training in the different fields of education.
iii and iv....
v. To establish, promote and maintain libraries, reading rooms....
vi. To organise and hold lecture, seminars, conferences, workshops and other media of propagation for the promotion, instruction, diffusion and preservation of knowledge in general and in literature, science, philosophy, vedas, sastras, Agamas, Srowthas etc., arts, culture, research etc., in various fields of educational and training.
vii and viii....
ix. To establish, manage and run Hospitals, dispensaries, clinics in allopathic, Ayurvedic, Homeopathy, Natural cure or in any recognised methods/fields for the relief of the suffering of humanity.
x. To establish, promote and maintain Medical Aid Facilities such as Dispensaries, Medical Camps in Rural and Urban areas.
xi. To grant donations or other kinds of financial assistance to (a) persons requiring medical aid (b) persons who are poor, indigent, economically vulnerable or destitute and in particular such of those who are aged widows and young in age; (c) persons in distress caused by the elements of nature and to extend assistance to societies/associations/Institutions engaged in the relief of such persons.
xii....
xiii. The advancement of any other object of general public utility and which is not restricted to or for the benefit of any particular religious community or castes and which does not involve the carrying on of any activity for profit.
xiv....
8. Under clause 16, for the effective carrying out of the above objects on behalf and for the Trust, the Trustees may:
(a) acquire, receive and hold property of any kind;
(b) collect dividend, interests, rent and other income;
(c) construct and maintain buildings;
(d) manage, sell, transfer, exchange or otherwise dispose of or deal with property of any kind belonging to the Trust at such time and for such items of contribution that the Trustees may deem fit, insofar as any such transaction does not offend the provisions of Section 13 of the Income-tax Act, 1961, or any statutory modification or re-enactment thereof for the time being in force.
9. Sri Jayendra Saraswathi Institute of Medical Sciences and Sri Kanchi Kamakoti Sankara Hospital were established in the year 2003 with a view to provide Medical Education at an affordable cost to deserving students in the middle and lower income groups. The Hospital was established as a Teaching Hospital attached to the College. The Hospital is said to be catering the needs of 47 villages around Perumbakkam, near Sholinganallur, which is to achieve the object of the Trust in providing health care to the poor and in rural areas. It is stated that the Hospital has so far treated 2,55,255 outpatients out of which 75% are from poorer section of the society. Providing health care to considerable percentage of poorer sections of the Society clearly shows that the Hospital has been functioning in furtherance of achieving the objects of the Trust by serving the Poor.
10. In the Plaint, it is stated that the total income of the Hospital run by the Trust from inception has been Rs. 5.87 crores and the expenditure has been Rs. 28.49 crores. It is further stated that the Revenue Loss incurred by the Hospital of the Plaintiff has completely eroded the Capital contributed by the Trust and as on date, networth of the Hospital is negative. The Plaintiff Trust is said to be in financially pressing circumstances and unable to repay either the Principal or Interest due to the Banks.
11. It is further alleged that the First Plaintiff Trust was hoping to get necessary approval from the State Government and the Medical Council of India for commencing the Medical College. However, the requisite approval has not been given to the Plaintiff Trust. Pointing out the location of the Medical College around the area and the insufficiency of outpatients strength, the State Government has passed the order, ...that there is no desirability or feasibility to establish a Medical College by Sri Kanchi Kamakodi Peetam Charitable Trust at Cheran Nagar, Perumbakkam, Chennai. Hence, the request of Sri Kanchi Kamakoti Peetam Charitable Trust to issue essentiality Certificate to them to establish a Medical College in the name of Sri Jayendra Saraswathi Institute of Medical Sciences and Research at Cheran Nagar, Perumbakkam, Chennai is hereby rejected. ...
Drawing the attention of the Court to the above said G. O. (D) No. 301 Health and Family Welfare (MCA 2) Department dated 15-4-2005, learned Counsel for the Plaintiffs has submitted that when the State Government has not given the Essentiality Certificate, running of the Hospital is not a viable project for the Plaintiff Trust.
12. The Liabilities and Assets of the Plaintiff Trust is stated as under:
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LIABILITIES IN CRORES ASSETS IN CRORES
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Capital Fund Fixed Assets : Land &
14.00 Building (Book Value) 42.91
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Loan Funds Equipments and other (Borrowings assets from Banks) 75.22 25.70
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Current Current Assets, Loans Liabilities 3.55 and Advances 1.47
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Pre-Operative Expenses 22.69
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TOTAL 92.77 TOTAL 92.77
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The Outstanding of the Plaintiff's Loan Accounts maintained with State Bank of India, Commercial Branch, Guindy, Chennai as on 30-11-2005 is as under:
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Account No. Facility Outstanding
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10565650666 Term Loan 14,59,57,812.63
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10565650837 Funded Interest
Term Loan 1,00,85,811.29
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Union Bank of India, Mylapore, Chennai branch has certified that the Loan Account of Sri Kanchi Kamakoti Sankara Hospital, Sankara Nagar, Perumbakkam, Chennai is Rs. 59,61,87,807.20.
13. Though the plaintiff Trust has shown its liabilities as aforesaid, no materials or detailed statements are produced showing how the liability swelled up to such huge amount. Only if the entire material particulars relating to the functioning of Sri Jayendra Saraswathi Institute of Medical Sciences and Sri Kanchi Kamakoti Sankara Hospital had been furnished particularly from the period 2003, the Court would have been in a position to assess whether there was proper administration of the Trust and to consider whether the plaintiff trust could have been better administration. The reasons stated in the Plaint for swelling up the liability are vague.
14. As noted earlier, the Hospital had been established catering Health care need of 47 villages around Perumbakkam, near Sholinganallur. The Hospital has so far treated 2,55,255 out patients of which 75% are from poorer section of the society. The inpatients treated till date is 22,241. The running of the Hospital by the plaintiff Trust alone would best subserve the poorer section of the Society and thereby achieving the Object of the Trust.
15. Medical College was conceived by the Trust with the hope of getting necessary approval from the State Government. Though presently, the State Government had not given the Essentiality Certificate, things might change in future and the outpatients strength might also increase. The plaintiff trust has not chosen to wait even for a reasonable time, but has hurriedly taken the decision to sell away Sri Jayendra Saraswathi Institute of Medical Sciences and Sri Kanchi Kamakoti Sankara Hospital in "as is where is" basis in favour of M/s. Chettinad Hospitals. The hasty step taken by the Plaintiff Trust cannot be approved.
16. The plaintiff trust has expressed difficulties in running Sri Jayendra Saraswathi Institute of Medical Sciences and Sri Kanchi Kamakoti Sankara Hospital. It is stated that the average income per month is Rs. 30 lakhs and the expenses incurred by the Hospital per month works out to Rs. 103 lakhs and the monthly deficit is nearly Rs. 73 lakhs, which is accumulating. Learned Counsel for the plaintiffs has also submitted that the Institution is even unable to pay the salary to the Working and Teaching Staff. The difficulties in running the Institution and the Hospital cannot be reason to sell away the entire assets. No details of other Trust properties and the income derived thereon are furnished. Learned Counsel for the plaintiffs has submitted that the sale proceeds of Sri Jayendra Saraswathi Institute of Medical Sciences and Sri Kanchi Kamakoti Sankara Hospital (after discharging the liabilities) would be utilised for better serving all other objects of the Trust. Admittedly, the plaintiff trust runs several other organisations. No other alternative suggestion of disposing any other assets, which could be adjusted in running of the hospital is forthcoming. The question arises as to why Sri Jayendra Saraswathi Institute of Medical Sciences and Sri Kanchi Kamakoti Sankara Hospital (which better serves the interest of the poor in Rural area) alone is to be sold. No convincing reasons are forthcoming.
17. The plaintiff's Trust has stated that there are many aspirants with the object of setting up a new Medical College with their offer to purchase the Assets of the Hospital. In the minutes of the meeting of Board of Trustees, the details of offer received are stated as under:
i. Mahatma Gandhi Medical College. Pondicherry:
Rs. 100.01 Crores, with initial advance of Rs. 8,01 crores; taking over bank liabilities an amount of Rs. 11 crores to be paid within 30 days from the date of signing of MOU and the balance of Rs. 10 crores to be paid on or before 30-6-2006.
ii. Java Educational Trust. Chennai:
Have given an offer of Rs. 100 Crores out of which Rs. 75 Crores to be settled through the Bankers; Rs. 5 Crores to be given for settling of unsecured Creditors; Balance amount of Rs. 20 Crores to be settled within a reasonable period, against which they have offered for conveyance of 30 acres of land immediately and the balance of 17.88 acres to be conveyed on the settlement of the balance consideration.
iii. Messrs. Ispat Industries. Delhi:
Have informed that they will be interested to take over the Assets. The consideration will be restricted to the Book Value without pre-operative expenditure. The offer comes to Rs. 70.08 crores.
iv. Chettinad Hospitals Private Ltd.. Chennai:
Total consideration for the Assets, Moveable and Immovable is Rs. 105 crores, free from any encumbrances and liabilities, their Offer is valid upto 31-1-2006. Pending application in Medical Council of India, may be assigned in their favour, Court permission to be obtained for the disposal of the Assets. The entire consideration of Rs. 105 crores will be settled by them after seeking Court Permission on the date of Registration for transfer of Assets on or before 31-1-2006.
18. Amongst the offers received by the plaintiff trust, it has found that the offer made by M/s. Chettinad Hospitals Private Ltd. Chennai is the most favourable for the plaintiff trust. The offer of sale by such private negotiations, which is not visible to the public eye gives rise to suspicion. There are no such reasons forthcoming for permitting the Plaintiff Trust to effectuate such private negotiations by the order of the Court.
19. The proposed purchaser M/s. Chettinad Hospitals Private Limited has given the offer of Rs. 105 crores for outright acquisition of the assets of Sri Jayendra Saraswathi Institute of Medical Sciences and Sri Kanchi Kamakoti Sankara Hospital. If the plaintiff trust is allowed to sell to the proposed Bidder or any other bidders offering such huge amount for acquisition of the Assets, the Purchaser, who is investing such huge amount would only be acting for earning maximum profit. If the Institute of Medical Sciences and Hospital are allowed to run for earning profit, the Institute of Medical Sciences and the Hospital would cease to be for charitable purposes and would become profit earning. Such commercial activities by the Proposed Purchasers for earning profit is not in any way for the advancement of the object of the trust.
20. The predominant object and the activity of the trust is to serve the general public utility and to subserve the charitable purposes. The plaintiff trust has been acting only for the advancement of the objects of the Trust - for the advancement of the Charitable Purposes. If the Institute of Medical Sciences and the Hospital is sold to the purchasers, then profit making would become the predominant object of the Hospital and the Institute of Medical Sciences. Resultantly, the purpose would cease to be a charitable purpose and the Institute of Medical Sciences and the Hospital would loose its character as a Charitable organisation, which cannot be permitted.
21. Learned Counsel for the plaintiffs has submitted that if permission is granted to sell the Institute of Medical Sciences and the Hospital, the funds would be utilised to discharge the existing liabilities and the remaining funds would be utilised for other charitable purposes. The question arises as to why some other properties of the Trust be sold and be utilised for discharging the existing liability of the Hospital and keeping the Hospital running thereby serving the basic requirement of the rural masses viz., health care.
22. Under Section 92, CPC the Court has to consider the interest of the Trust and to ensure that the Charitable purpose and the object of the Trust is not in any way to be defeated. For construction of the Institute of Medical Sciences and the Hospital, funds must have been raised from the Public. The Court has to objectively consider the facts and circumstances of the case. If permission is granted to the proposed sale, the Institute of Medical Sciences and the Hospital would become a profit making Institution, defeating the very object of the plaintiff trust.
23. In considering the objects of the trust and to ensure that the Objects of the Trust are to be achieved for charitable purposes, this Court is of the view that the proposed sale would be detrimental to the interest and the object of the Trust. The situation as contemplated under Section 92, CPC is not shown to the satisfaction of the Court, permitting the sale of Sri Jayendra Saraswathi Institute of Medical Sciences and Sri Kanchi Kamakoti Sankara Hospital in "as is where is" basis in favour of M/s. Chettinad Hospitals.
24. For the reasons stated above, permission/authorisation sought for by the plaintiffs to dispose of the Suit Schedule properties being Sri Jayendra Saraswathi Institute of Medical Sciences and Sri Kanchi Kamakoti Sankara Hospital in "as is where is" basis in favour of M/s. Chettinad Hospitals cannot be granted. Hence, this suit is liable to be dismissed and the same is dismissed.