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