PUBLIC CHARITABLE TRUSTS IN INDIA

 It is well-settled that no [1]formal document is necessary to create a trust. However, a Trust Deed is recommended for the following benefits:- 

 i.  A written trust deed is a prima facie evidence of existence of a trust.

 ii.  It facilitates devolution of trust property to the trust.

 iii.  It clearly specifies the trust-objectives which enables one to ascertain whether the trust is charitable or otherwise.

 iv.  It is essential for registration of conveyance of immovable property in name of the Trust.

 v.  It is essential for obtaining registration under the Income-tax Act and claiming exemption from tax.

 vi.  It helps to control, regulate and manage the working and operations of the trust.

 vii.  It lays down the procedure for appointment and removal of the trustee(s), his/ their powers, rights and duties.

 viii.  It prescribes the course of action to be followed under any eventuality including dissolution of the trust.

[1] Radha Soami Satsung vs. CIT – (1992) 193 ITR 321 (SC)

In INDIA, Charitable organisations may be registered as follows:- 

a.  Trusts and charitable institutions registered under the Registration Act, 1908; Charitable Endowments Act, 1890; the Maharashtra Public Trusts Act, 1950; and similar other State Acts. 

b.  Non-profit companies incorporated under Section 25 of the Companies Act, 1956 (Section 8 of Companies Act, 2013).

c.  Societies registered under the Societies Registration Act, 1860 and various state Acts.

Though as per the provisions of section 17 & 18 of the Registration Act, 1908, it is not mandatory to register a TRUST DEED. 

However, for the purpose of transparency, authenticity and benefits enumerated herein above, a Public Charitable TRUST is registered under the Registration Act, 1908, in the Office of Sub-registrar under whose jurisdiction the registered office address of the said TRUST is situated.

Public charitable trusts  registered under the Registration Act, 1908, are governed by the TRUST DEED, CHARITABLE AND RELIGIOUS TRUSTS ACT, 1920, and state Public Trust Act, where applicable. 

The Indian Trusts Act of 1882 does not apply to public trusts and charitable trusts. As the preamble of the Act states, it is "an act to define & amend the law relating to private trusts & trustee." Section 1 of the Act says that nothing herein contained "applies to public or private, religious or charitable endowments". Therefore, all charitable trusts are excluded from the operation of the Act.[1]

[1] Delhi high Court - Shanti Devi vs State And Ors. on 23 March, 1982, Equivalent citations: AIR1982DELHI453, 21(1982)DLT404, 1982(3)DRJ207

Petition under Section 7 of the CHARITABLE AND RELIGIOUS TRUSTS ACT, 1920 [1] , seeking for adjudication of a dispute relating to the Management of Trust, is beyond the purview of Section 7 the said Act.  

Section 7 of the Trust Act basically permits the trustees to approach the District Court seeking for an opinion, advice or direction from the Court in the administration or management of Trust property. 

A proceeding under Section 7 of the Trust Act cannot be initiated to determine as to who should or should not manage the Trust.The right to manage the Trust or administer the Trust would basically have to be governed only in accordance with Articles of Trust. 

If there is any alleged breach or mismanagement of the Trust, an adequate remedy is provided in respect of a trust of a charitable nature under Section 92 of the CPC. In law, if any two or more persons having any interest in the subject matter of the trust are aggrieved by the mismanagement of a Trust, they can approach the District Court seeking for appropriate relief in the manner provided therein.[2]

[1] 7. Powers of trustee to apply for directions.— (1) Save as hereinafter provided in this Act, any trustee of an express or constructive trust created or existing for public purpose of a charitable or religious nature may apply by petition to the Court, within the local limits of whose jurisdiction any substantial part of the subject-matter of the trust is situate, for the opinion, advice or direction of the Court on any question affecting the management or administration of the trust property, and the Court shall give its opinion, advice or direction, as the case may be, thereon: 

1.  Provided that the Court shall not be bound to give such opinion, advice or direction on any question which it considers to be a question not proper for summary disposal.

[2] High Court of Karnataka, W.P.No.104185/2021 (GM-R/C) – order dt. 15.12.2021 - Shri. Vanavasi Shri. Ram Mandir Trust Vs. Shri. Raghavendra Sondur and Anr. 

“92. Public Charities.–(1) In the case of any alleged breach of any express or constructive trust created for public purposes of a charitable or religious nature, or where the direction of the Court is deemed necessary for the administration of any such trust, the Advocate- General, or two or more persons having an interest in the trust and having obtained the leave of the Court may institute a suit, whether contentious or not, in the principal Civil Court of original jurisdiction or in any other Court empowered in that behalf by the State Government within the local limits of whose jurisdiction the whole or any part of the subject-matter of the trust is situate to obtain a decree–

(a) removing any trustees;

(b) appointing a new trustee;

(c) vesting any property in a trustee;

(cc) directing a trustee who has been removed or a person who has ceased to be a trustee, to deliver possession of any trust property in his possession to the person entitled to the possession of such property;

(d) directing accounts and inquiries;

(e) declaring what proportion of the trust property or of the interest therein shall be allocated to any particular object of the trust;

(f) authorizing the whole or any part of the trust property to be let, sold, mortgaged or exchanged;

(g) settling a scheme; or

(h) granting such further or other relief as the nature of the case may require.

Supreme Court vide order dt. 11.10.1965 passed in Chairman Madappa vs. M.N. Mahanthadevaru and Others, 2 (1966) 2 SCR 151,  held that the main purpose of Section 92(1) CPC is to give protection to public trusts of a charitable or religious nature from being subjected to harassment by suits being filed against them. That is why it provides that suits under that section can only be filed either by the Advocate General, or two or more persons having an interest in the trust with the consent in writing of the Advocate General. A relief through permission in a suit under section 92 of CPC does not in any way circumscribe or take away from the Trustees of the public Trust the right of ordinary administration of Trust. The presence of a relief being provided in a suit under section 92(1) of CPC does not infer that the right of trustees of the Trust to carry on the ordinary administration of the Trust is in any was affected thereby. If this were so, it would make administration of the Trust by Trustees next to impossible.

Supreme Court vide Order dt. 31.01.2020 passed in CIVIL APPEAL NO. 724 OF 2020 (ARISING OUT OF SLP (CIVIL) NO. 35520 OF 2016), GHAT TALAB KAULAN WALA Vs. BABA GOPAL DASS CHELA SURTI DASS (DEAD) BY LR RAM NIWAS,  held that Section 92 of the Code contemplates a suit against a Trust either for removing any trustee; appointing new trustee; or vesting any property in a trustee etc. and would not be applicable in a suit by a Trust. 

Supreme Court vide Order dt. 03.03.2020 passed in CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.1917 OF 2020 (Arising out of Special Leave Petition (Civil)No.21306 of 2019) ASHOK KUMAR GUPTA & ANR. Vs. M/S SITALAXMI SAHUWALA MEDICAL TRUST AND OTHERS,  clarified and enumerated that three conditions are required to be satisfied by third parties in order to invoke Section 92 of the Code and to maintain an action under said Section, namely, that

(i)  the Trust in question is created for public purposes of a charitable or religious nature;

(ii)  there is a breach of trust or a direction of Court is necessary in the administration of such a Trust; and

(iii)  the relief claimed is one or other of the reliefs as enumerated in said Section.