Q. What is a trust?

1. As per Section 2(13) BPT Act, 1950 Trust means an express or constructive trust for either a public religious or charitable purpose or both and includes a temple, math, a wakf, church, synagogue, agiary or other place of public religious workship, a dharmada or any other religious or charitable endowment and a society formed either for a religious or charitable purpose or for both and registered under the Society Registration Act, 1860. Section 3 of the Indian Trusts Act defines a trust as “an obligation annexed to the ownership of property and arising out of a confidence reposed in and accepted by him for the benefit of another”.

Q. What are the mode of creation of trust?

A. A trust is created by a Deed of trust or by a Will or by scheme framed by a court or by written constitution.

Q. Is trust registration mandatory?

A. According to section 18 sub clause 1 of BPT Act, 1950 it shall be the duty of the trustee of a public trust to get the registration of the trust for which this act has been applied to make an application for registration of public trust. Public Trust

Q. What about the applicability of The Indian Trusts Act, 1882?

A. The Indian Trusts Act, 1882 is applicable to private trusts. The principles of this Act are applied in States that do not have a Public Trusts Act in force. The Bombay Public Trust Act, 1950 is applicable to the whole of Maharashtra.

Q. What is the geographic jurisdiction of the Bombay Public Trusts Act, 1950?

A. It is applicable in the states of Maharashtra and Gujarat, albeit with certain variations in the provisions in the two States.

Q. Is it necessary to register a trust as a Society under the Act of 1860?

A. Where there is no settler and 7 or more people come together, the registration is done under the Societies Act. However, in Maharashtra and Gujarat State, all Societies registered under the Act of 1860 are also required to register as a trust under the BPTA 1950.

Q. What is the difference between a Public and a Private trust?

A. A public charitable trust is, where for the purpose of its objects, the beneficiaries are general public at large, whereas, in a private trust the beneficiaries are known and certain.

Q. How can public purpose be ascertained?

A. In ascertaining whether a purpose is public or private, one has to see if the class to be benefited, or from which the beneficiaries are to be selected, constitute a substantial body of the public. Hence, trusts which lack the public element, such as trusts for the benefit of workmen or employees of a company, however numerous, have been held not to be “public charitable”.

Q. If a trust has members of the same family on the board of trustees, does it lose its public character and become a private trust?

A. The management of a trust or, rather, who manages the trust (i.e., members of one particular family, etc.) does not determine the public nature of a trust. What is essential is whether the purpose of the trust and the application of its income and property are for the benefit of the public, not who controls it.

Q. Who is a Trustee?

A. Trustee means a person in whom either alone or in association with other persons, the trust property is vested and includes a manager. One who has accepted trusteeship and undertake to administer the trust, should know what is expected of him. He must in the first instance examine and study the instrument of trust. A trust is created by a Deed of trust, or by a Will or by a Scheme framed by a Court or by a written constitution.

Q. Is trust the only option for advancing public charitable purpose?

A. The legal framework in India gives non-profits a choice to register either as a trust, society with the office of the Charity Commissioner or section 25 company with R.O.C.

Q. Is trust registration mandatory?

A. Under Section 18 sub clause 1 of B.P.T. Act, 1950, it shall be the duty of the trustee of a public trust to which this Act has been applied to make an application for the registration of the public trust. The mode of making application and the necessary contents are mentioned in Section 18 of B.P.T. Act, 1950.

Q. What are the advantages of registering as a public trust?

A. With regard to simplicity and ease in registration procedures, trust offers the best choice. One needs just two trustees to start (societies require a minimum of seven), the paper work is less elaborate and in certain states where there is no charity commissioner; the trust deed can be easily registered with the sub-registrar’s office.

Trusts also offer autonomy in management/administration. One may remain a trustee for life and new trustees may be selectively appointed over a period of time. On the other hand, in a society or section 25 company, there is need for a general body of members, periodic elections and annual general meetings. The set-up is more democratic. A section 25 company is more stable than a society but less rigid than a Trust.

Q. With whom should public charitable trusts be registered?

A. With the Deputy or Assistant Charity Commissioner of the region in the State. In Mumbai it can be registered at the office of the Charity Commissioner which is at Worli Naka, Mumbai-400 018.

Q. Are all Societies trust?

A. In view of definition of Public Trust under section 2 (13), public trust includes society formed either for a religious or charitable purpose or for both and registered under the Societies Registration Act, 1860. All societies registered under the S.R. Act, 1860 are converted into public trust under B.P.T.Act, 1950 after necessary inquiry and following the procedure under B.P.T. Rules, 1951.

Q. What are the purposes for which a trust may be created?

A. According to section 9(1) of the BPTA, public charitable trusts may be registered with the office of the charity commissioner for any one or more of the following purposes:

1. relief of poverty or distress;

2. education;

3. medical relief;

4. provision for facilities for recreation or other leisure time occupation (including assistance for such provision), if the facilities are provided in the interest of social welfare and public benefit;

5. advancement of any other object of general public utility, but does not include a purpose which relates exclusively to religious teaching or worship.

Q. Is it necessary for a trust to have property?

A. A public charitable trust is generally floated with some property (movable or immovable) which legally vests in the trustees. A trust may be settled with a token property of, say, ₹ 100/-.

Q. Who is a Settler and can he/she be a trustee?

A. A Settler is an individual or institution who creates or settles the trust and entrusts the trust and the trust property to a trustee or trustees. Yes, settler can be a trustee if his / her name is added in the preamble as a trustee.

Q. What is the minimum and maximum number of trustees required to constitute a Board of trustees?

A. The Act is silent in this regard and therefore by inference even a single trustee can be on the Board. However, this is not a good or desirable practice. At the time of registration, the charity commissioner usually insists on minimum of three trustees to start and run a trust. In law, there is no maximum limit to the number of trustees on the Board of a trust. The minimum and maximum number of trustees should be clearly stated in the trust deed.

Q. Is trusteeship for life?

A. Yes, unless a term of office is specified in the trust deed or a trustee decides to voluntarily resign, or the charity commissioner or a court frames a scheme in this regard.

Q. How can new or additional trustees be appointed?

A. The surviving trustees may appoint new trustees (up to the limit prescribed in the trust deed) by resolutions and filing change report with the charity commissioner.

A new or additional trustee can be appointed by the surviving trustees as per the provisions mentioned in the trust deed.

Q. If trustees are not working properly, whom should be approached?

A. If trustees are found not to be working properly as per the constitution of the trust, then any person having an interest can approach the competent authority i.e. Deputy or Asst. Charity Commissioner for redressal under various provisions of B.P.T. Act, 1950.

Q. In whom is trust property vested?

A. All the properties (movable and immovable) of the trust legally vest in the trustees.

Q. How can trustees avoid conflict of interest in matters of property?

A. In principle, a trustee cannot buy the property of the trust himself and he cannot sell any of his properties to the trust either - the mischief in both the cases being the likelihood of a conflict between his interest and his duties as a trustee.

Q. What is the liability of a trustee?

A. In law, a trustee can be held personally liable. Also, all trustees are jointly and severally responsible and liable.

There can be a criminal and or civil liability imposed including prosecutions in some cases on the trustees on account of misappropriation, fraud, etc.. of the trust property.

Q. Can a foreigner or NRI be a trustee?

A. Foreigners or persons who are not citizens of India or a Non Resident Indians, are not specifically debarred under the provisions of the Bombay Public Trusts Act or the Indian Trusts Act from taking up office of a trustee.

Q. Can a trustee delegate his powers?

A. A trustee cannot delegate any of his duties, functions and powers to a co-trustee or any other person though, as a general rule, executive acts may be delegated. However, where a trustee has to exercise discretion, he must exercise the discretion personally and cannot delegate it.

Q. Can a trustee be removed from office?

A. The charity commissioner (only in the state of Maharashtra) has powers under section 41D of the Bombay Public Trusts Act to suspend, remove or dismiss any trustee of a public trust if:

1. there is persistent default in the submission of accounts, report or return;

2. willful disobedience of any lawful order issued by the department;

3. continuous neglect of duty or breach of trust;

4. misappropriation or improper use of trust property;

5. if the trustee is convicted of an offence involving moral turpitude.

Q. What is the procedure for registering a trust?

A. The application for registration of a public charitable trust should be submitted at the office of the charity commissioner having jurisdiction over the region/sub-region of the state in which the trust is to be registered.

The application should be made within 3 months from the date of execution of trust deed, in the prescribed form (Schedule II) providing details regarding name of the trust, names and addresses of the trustees, mode of succession, etc.

The trust deed should be executed on non-judicial stamp paper, the value of which would depend on the valuation of the trust property.

In Maharashtra state, the trustee applying for registration is also required to submit an affidavit, and all co-trustees are required to sign a consent letter. A nominal registration fee is also charged. The DCC/ACC, before making certain enquiries for registration may order the applicant to issue a public notice for any objection from public.

Q. In case of complaint about trust, trustee or trust property, who must be approached?

A. In case of any grievance about administration of trust, trust properties or functioning of a trustee, complaint can be filed by any person to the Deputy or Asst. Charity Commissioner within whose jurisdiction the trust is situated.

Q. Can any citizen get information about any trust?

A. Yes. Any person can get information about any trust from the concerned P.T.R. Office on depositing the necessary charges for inspection or obtaining the certified copies. The right to get information is now also governed by Right to Information Act, 2005.

Q. Who is supervising authority of trust?

A. Deputy or Asst. Charity Commissioner is the supervising authority of the trust situated within his territorial jurisdiction. Charity Commissioner is the head of organization for entire Maharashtra. Joint Charity Commissioners are the head of offices of regional level and Deputy or Asst. Charity Commissioners are the head of offices at District level.

Q. Can information be gathered about funds of any trust?

A. Every trust is required to submit audited statement of accounts with the office of Assistant Charity Commissioner. The information about the income and expenditure of the trust for annual year can be gathered from the audited statements submitted to the authority.

Q. Is it necessary to record or inform any change to the authority?

A. Yes. It is mandatory to inform any change which occurs in the trust in respect of the trustees, moveable or immovable properties etc. within a period of 90 days from the change as provided under section 22 of the B.P.T. Act, 1950. The change so informed is necessary to be recorded on satisfaction of its legality and validity to the authority. It is the duty of trustee to inform the change and also substantiate the same with record about its legality and validity.

Q. Are trusts required to convene Annual General Meetings and periodic elections?

A. Unlike societies, trusts generally do not have a general body of subscribing members and, as such, there is no legal necessity for annual general meetings or annual reports for members or periodic elections.

Q. How many meetings should the trust convene during a year and is there a procedure for it?

A. The statute books do not lay down the minimum number of times Board members must meet. The Board of trustees may meet as often as required or as prescribed in the trust deed. Ideally, the board may meet four to six times a year. However, this may vary. Procedures for calling and conducting meetings are usually laid down in the trust deed. Fifteen days prior notice is generally adequate. The chairman presides over all meetings of the Board and usually enjoys a casting vote.

Q. Are trusts allowed to generate profit?

A. Yes. Trusts are often referred to as “non-profit organizations”. The term “non-profit” or “not-for-profit” means “non-profit distributing”. “Non-profit” does not mean the trust should not generate a profit and run in perpetual loss. Profit, if any, should be ploughed back into the organization for “charitable purposes” and not distributed by way of dividends, etc., to trustees or members of the organizations.

Q. What are the sources of income for a trust?

A. A trust may have the following sources of income:

1. donations from individuals, companies, trusts/foundations, government, foreign agencies, charity cash box, etc.;

2. interest/dividends On short/long-term investments;

3. sale of products: usually prepared by beneficiaries of the trust;

4. rent: If the trust leases out its property like office space, hall, etc.;

5. membership fees/subscriptions.

Q. Can a trust receive corpus donation?

A. Yes. Provided the donor gives such a direction to the trust in writing.

Q. Can a trust receive anonymous donations?

A. From the financial year 2006-07, anonymous donations to charitable trusts and institutions will be taxed. However, anonymous donations to religious trusts and institutions will not be taxed. Anonymous donations to trusts and institutions having both religious and charitable objects will not taxed as long as they are given for religious purpose.

Q. Can a trust give a corpus donation to another trust?

A. Yes. However, under the Income Tax Act, as amended a few years ago, one trust can donate to another trust only from its current income and not from its accumulated funds. Yes one trust can give corpus donation to another trust from the current income and not from the accumulated income, otherwise it will not be treated as application of income.

Q. Can a trust sell, alienate, lease or gift immovable property?

A. Permission of the Charity Commissioner is necessary prior to sale, exchange, lease or gift of immovable property of the trust u/s 36 of the Act.

Q. Is there a provision in the Act to prevent waste or damage to trust property?

A. Section 41E of the BPTA also empowers the charity commissioner to grant temporary injunction or to pass any other order with the intent of staying and preventing waste, damage or improper alienation (transfer) of trust property.

Q. Should changes in the Board of trustees be reported to the charity commissioner?

A. Under section 22 of the Bombay Public Trusts Act, whenever a change in any moveable or immovable property or names of trustees, etc., takes place, a change report should be filed with the department in the prescribed Schedule III.

Q. Are trusts required to contribute two per cent of the income to the charity commissioner?

A. According to section 58 of the Bombay Public Trusts Act, “Every public trust shall pay to the Public Trusts Administration Fund annually such contribution at a rate or rates not exceeding 5% of the gross annual income, or of the gross annual collection or receipt, as the case may be, as may be notified, from time to time, by the State Government”. Gross annual income does not include corpus donations or deductions allowed by Rule 32 of the Bombay Public Trusts Rules, 1951.

Public trusts exclusively for secular education, medical relief, veterinary treatment of animals, and relief of distress caused by natural calamity are exempted from payment of contribution. In the case of multi-purpose trusts, deductions are allowed for the portion of the gross income or collection or receipt spent for any one or more of the aforesaid purposes.

Various deductions are also permitted as mentioned in rule 32 out of the gross income of the trust.

The rate of contribution since April 1, 1989 has been 2% of the income chargeable to contribution calculated as per rule 32.

Presently in response to a P I L filed against the Charity Commissioner the Mumbai High court has stayed the collection of the contribution since 2009. In response to the said interim order the office of the C.C. is accepting the accounts without payment of contribution subject to the final decision of the High Court or any amendment or any instruction or notification of the Govt.

Q. Is amalgamation of trusts possible?

A. Section 50A(2) of the Bombay Public Trusts Act allows two or more public trusts to be amalgamated or merged into one single legal entity by framing a common scheme of management or administration.

Q. What is the procedure for amalgamation?

A. The procedure for amalgamation requires a proper application with court fee stamp to be made to the charity commissioner who, in turn, may also require the trustees to publish a notice in this regard in a newspaper. There should be proper justification for the amalgamation, and the consent for amalgamation should preferably be unanimous on the part of the trustees of all the trusts to be amalgamated.

After the final order is passed by the charity commissioner, those trusts which are amalgamated cease to exist as separate legal entities and instead, a new legal entity in the form of a new amalgamated trust emerges with a new registration number and scheme of management.

Q. What can be done if the objects of a trust become obsolete?

A. In case it becomes difficult to carry out the obsolete objects of the trust, the doctrine of cy pres (i.e., changing the objects as close to the original as possible) can be applied for changes. Such an order can be obtained from a civil court.

Q. Can a trust be dissolved?

A. A trust may be extinguished or terminated if “its purpose becomes unlawful” (vide section 77 of the Indian Trusts Act, 1882). However, when a public charitable trust is properly and completely constituted, it becomes irrevocable, even though it is voluntary. Accordingly, there is no provision under the various Public Trusts Acts (including the Bombay Public Trusts Act, 1950) to legally terminate or dissolve a valid public charitable trust.

Q. Can a duplicate Certificate of Registration be obtained?

A. Yes. In case the Certificate of Registration is lost, destroyed or defaced the DCC/ACC on an application may issue a duplicate certificate on payment of a nominal fee. Along with the FIR from the police station.

Q. What is a Register of public trust?

A. The office of Charity Commissioner maintains certain details of every public trust in a Register as required by the Section-22 of the B.P.T. Act. Any change in any of the particulars recorded in this register is to be reported by the trustee in the form of Schedule III (Change Report). It is advisable for every trust to obtain a certified copy of the Schedule I for their record.

Q. Can we inspect the entries made in the public trust register?

A. Yes. Subject to certain conditions and on payment of a nominal fee with an application, any person having interest or permitted on this behalf is allowed to inspect any entry or portion thereof in the register of public trust or any statement, notice, intimation, account, audit report or any other document filed under the Act.

Q. Can copies of the entries made in the public trust register be obtained?

A. Again, on payment of a nominal fee with an application any person having interest or is permitted on this behalf can obtain certified copies of any entry made in the register or any statement, notice, intimation, account, audit report or any document filed under the Act, proceedings of any inquiry, appeal before charity commissioner or any certificate issued by C.C. / DCC / ACC.

Q. Is it compulsory for every trust to file a budget for the next year?

A. A trustee of a Public Trust which has an annual income exceeding ₹ 5000/- for public religious trust and ₹ 10,000/- in other cases, shall at least one month before the commencement of each accounting year, prepare a budget in the form of Schedule VII-A showing the probable receipts and disbursements of the trust and submit them to the office of the Charity Commissioner. From last one year it as become compulsory to file the budget and also law provides that the trust needs to file the budget.

Q. Who is responsible to maintain the accounts and to get them audited?

A. Every trustee of a public trust shall keep regular accounts of all the receipts, movable and immovable properties and of all encumbrances created and all payments and alienations made. The accounts are to be kept in a manner which will facilitate preparation of the final accounts in the prescribed form of Schedule VIII (Balance sheet) and IX (Income and expenditure A/c) and preparation of statement of income chargeable to contribution in Schedule IXC.

Q. Within what time limit the accounts should be audited and submitted to the office of the C.C.?

A. The accounts are required to be audited within six months from the last date of the accounting period and AUDITOR shall forward a copy of balance sheet and the income expenditure account along with his audit report and Schedule IXC to the office of the C.C. within a fortnight of the audit. The Auditor will forward the audited accounts along with the audit report to the trustees who in turn will forward the same to the office of CC. Only if the office of CC specifically requires the Auditor to file the audited accounts, than only it is the responsibility of the Auditor to file the audited accounts in the Office of CC.

Q. For how many years a trust has to keep accounts and other related papers?

A. There is no such time limit prescribed in the B.P.T. Act. In that case one view can be taken that the accounts are to be maintained since the inception of the trust.

Q. Creation of trust outside India regarding property lying in India, whether possible?

A. For moveable property it is possible, but for immoveable property it is not possible.

Q. Can a minor act a trust?

A. No, minor cannot act as a trustee, as he/she is not competent to enter into contract.

Q. Whether Section 25 company needs to be registered under the BPT Act, 1950?

A. The question is debatable as one of the case law which was decided on 16-9-1971 in the High Court of Mumbai, clearly states that the if a company registered under the Companies Act, 1956 is authorized by its objects clause in its Memorandum of Association to hold property for public, religious or charitable purposes, its ownership of property for such purposes forms a public trust and as such the trust is liable to be registered under the Bombay Pubic Trust Act, 1950 and the Company as a trustee, “Akhil Deshastha Rigvedi Brahmin Madhyawarti Mandal v. Jt. Charity Commissioner, Maharashtra State, 74 Bom.L.R.337 : AIR 1972 Bom.313. As per the definition of Public Trust u/s.2 (13) it is clearly stated in the Bombay Public Trust Act, 1950 that “The BPT Act, 1950 however does not apply to a company registered under sec.25 of the Companies Act, 1956.”

Q. What are the conditions necessary for creation of a valid Trust?

A. The following conditions are necessary for creation of a valid Trust,

1. Intention to create a trust.

2. The purpose or object of the trust.

3. The beneficiary of the trust.

4. The trust property.

Q. What is the procedure for obtaining permission u/s.36 of the BPT Act, 1950 for Alienation of Immovable Property of Public Trust?

A. S.36. Alienation of Immovable Property of Public Trust: The procedure for sanction of alienation is as under

1. First you need to check the sort of alienation of immovable property is being requested for (i.e. whether sale, gift, transfer or lease?)

2. The Necessity of alienation is required as an affidavit.

3. Particulars of concrete proposal, if any on hand, such as the name of the purchaser / lessees / transferee, etc. and consideration he has offered

4. Clarification of how the proposal is in the interest of the Trust.

5. Trustee’s resolution in favour of alienation passed unanimously or by required majority under the trust deed.

6. How the property to be alienated was acquired by the trust. Clarification along with the document of transfer will need to be seen.

7. A copy of the document creating the trust to check what provisions with regards to alienation of immovable property have been mention and whether trust deed contains any prohibition of alienation.

8. Certified copy of the Schedule – 1 to check out that whether the property in question is on the record of the Charity Commissioner or not.

9. The offers of lease or sale should be invited by way of advertisements in two prominent news papers – the offers should be received in sealed envelopes to be opened in the presence to the bidders who should be then be given a chance to enhance their offers.

10. Valuation report of experts such as Architects, Engineers, etc., showing detailed - working out of the current market value of the property in question. In case of agricultural lands valuation report of talathi, patwari or Gram – Panchayat, etc.

11. A copy of draft lease in case of Lease, draft Sale deed in case of Sale.

12. Whether the property in question is involved any litigation or in subject-matter of any suit or whether any person has professed any claim on the property.

13. In case of the agricultural land to obtain an exemption certificate under section 88B of the Bombay Tenancy and Agricultural Lands Act, 1948.

Q. Can Trust borrow money and what documents are required to be submitted at the Office of Charity Commissioner?

A. Yes, a trust can borrow money after following the provisions mentioned u/s.36A of the BPT Act, 1950. The following details/clarifications are required to the Office of the Charity Commissioner for obtaining sanction for borrowing money for a trust

1. Whether the instrument of trust contains any directions with respect to borrowing of money ( whether by way of mortgage or otherwise)

2. What is the necessity of the proposed borrowing?

3. Whether all the trustees are unanimously in favour of the proposed borrowing?

4. The name of the person / institutions from whom monies are to be borrowed and their relation with trust or trustees, if any.

5. Loan amount

6. Banks approval letter to advance of loan containing terms and conditions of the loan etc.

7. File an affidavit in support of the application along with the undertaking that the loan will be used only for the purpose it is being raised

8. What is rate of interest?

9. State whether accounting reports are filled up-to date or not?

10. How the loan is proposed to be repaid?

11. If the loan is being raised for the construction of the building then the estimation cost of the construction

12. Whether copy of the budget scheme is submitted in the office of the charity commissioner or not?

13. What is the cadastral Survey Number along with the full schedule of the property address I any immovable property has to be mortgaged

14. What is the present net annual income from the property?