Bombay Public Trusts Act

The Charity Commissioner has powers of supervision,
regulation and control of public trusts. All public trusts must register
under the Act with the Charity Commissioner. It should be remembered
that all public trusts are trusts, but all trusts need not be public
trusts. The Act does not apply to section 25 companies which are created
under the Companies Act, 1956. The Bombay Chartered Accountants’
Society is an instance of a public trust registered under this Act.

Definitions:
A
public trust is defined to mean an express or constructive trust for
either public or charitable purpose or both and includes a temple, a
math, a wakf, church, synagogue, agiary or any other religious or
charitable endowment and a society formed either for religious or
charitable purposes or both and registered under the Societies
Registration Act, 1860.

The word ‘trust’ is not defined under
the Act and hence, one needs to refer to the definition under the Indian
Trusts Act, 1882. Section 3 of the said Act defines a ‘trust’ as an
obligation annexed to the ownership of property and arising out of a
confidence reposed in and accepted by the owner or declared and accepted
by him for the benefit of another or of another and the owner. A public
trust must be for the public at large or some significant portion of
the public. However, the number of beneficiaries must be a fluctuating
body. It is the extensiveness of object which affords some indication of
the public nature of the trust — Prakash Chandra v. Subodh Chandra, AIR
1937 Cal. 67. A trust cannot be held to be for charitable purpose if it
is not for public benefit. Thus, private charitable trusts are not
governed by this Act. The term public purpose is not capable of any
strict definition and depends upon the facts and circumstances of each
case. No rigid rules can be applied to define the same — State of Bombay
v. S. R. Nanji, AIR 1956 SC 294.

The Supreme Court in
Radhakanta Deb v. Commissioner of Hindu Religious Endowments, Orissa,
AIR 1981 SC 798, the Court held that “the cardinal point to be decided
is whether it was the intention of the founder that specified
individuals are to have the right of worship at the shrine, or the
general public or any specified portion thereof.” Thereafter, the Court
observed that the mere fact that members of the public are allowed to
worship by itself would not make an endowment a public, unless it is
proved that the members of the public had a right to worship in the
temple.

The Supreme Court formulated four tests as providing
sufficient guidelines to determine on the facts of each case whether an
endowment is of a private or of a public nature. The four tests are as
follows:

(a) Whether the use of the temple by members of the public is of right;
(b)
Whether the control and management vests either in a large body of
persons or within the members of the public and the founder does not
retain any control over the management;
(c) Whether the dedication
of the properties is made by the founder who retain the control and
management and whether control and management of the temple is also
retained by him; and
(d) Where the evidence shows that the founder
of the endowment did not make any stipulation for offerings or
contributions to be made by the members of the public to the temple,
this would be an important intrinsic circumstance to indicate the
private nature of the endowment.

Charitable purpose is defined u/s. 9 of the Act to include:

(a) relief of poverty or distress
(b) education
(c) medical relief
(d)
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, and
(e)
the advancement of any other object of general public utility, but does
not include a purpose which relates exclusively to religious teaching
or worship.

Hence, a trust for both religious and charitable
purposes is feasible under the Bombay Public Trust Act, although the
same is not recognised u/s. 11 of the Income-tax Act (if created after
1-4-1961).

The term ‘public’ does not mean the humanity as a
whole, but some indefinite class of persons, a crosssection of the
community — CIT v. Radhaswami Satsang Sabha, 25 ITR 472 (All). Charity
need not benefit the entire mankind but should at least benefit an
ascertainable section of the community — Hazarat Pirmahomed Sahah Sahib
Roza Committee, 63 ITR 490 (SC). The trustees can decide on such
charitable purpose as they deem fit — Smith v. Massey, (1960) ILR 30
Bom. 500. A trust does not become invalid if the discretion of selecting
the charitable purpose is left to the trustees and they are free to
apply the fund in such manner and at such time and to such charities as
they deem fit — Sardar Bahadur Indra Singh Trust, AIR 1956 Cal. 164.

Registration:
Section 18 of the Act and the Bombay Public Trust Rules lay down the procedure for registration of a trust as follows:

(a) Apply to the Deputy Charity Commissioner of the region in Schedule II within three months of creation of the trust.

(b)
The application must contain the names and details of the trustees, the
trust, list of movable and immovable properties along with their
approximate market values, etc. A copy of the trust deed should also be
annexed. A memorandum must also be sent, which must contain the
prescribed particulars relating to the immovable property of the trust.
Schedule IIA to the Rules contains the format for the same. Section 22C
of the Act also provides for particulars of the memorandum.

On
receipt of the application, the Deputy Commissioner would make an
inquiry u/s.19 for ascertaining whether there exists a public trust and
whether the trust falls within its jurisdiction. The principles of
natural justice must be followed in this inquiry process. On completion
of the inquiry, the Deputy Commissioner shall record his findings with
reasons as to the matters inquired by him and may make an order for the
payment of the registration fee. The Charity Commissioner shall maintain
a Register containing all details of the trust.

Investment of trust money:
The
funds of the trust which cannot be deployed for the purposes of the
trust shall be deposited either with a bank or invested in designated
public securities. Public securities means those issued by the
Central/State Government/Railways/Local Authorities, etc.

The
money may also be invested in the first mortgage of immovable property
if the property is not leasehold for a term of years, i.e., the lease
must be indefinite, and secondly, the value of the property must exceed
the mortgage money by one-half times. Thus, if the value of the property
is Rs.1.50 crores, the investment permissible in the first mortgage is
Rs.1 crore.

Purchase of an immovable property as an investment
of trust funds would also require the permission of the Charity
Commissioner. If the property is purchased without its permission, then
the trustees would become liable for penalty for contravention of the
Act. However, the transaction is not void ab initio. This is contrary to
the provisions for sale of an immovable property. Any sale transaction
without the Commissioner’s permission is void ab initio.

Trustees
cannot borrow money for the purpose of or on behalf of