On September 30, 2020, a bill seeking to regulate public trust in Tamil Nadu was tabled in the Legislative Assembly. The current applicable laws to public trusts of charitable nature, other than any Hindu religious endowments or wakfs are the Charitable and Religious Trusts Act, 1920. The Tamil Nadu Public Trusts Bill, 2020 (“Bill”) attempts to regulate public trusts by providing for a registration process, disqualification criteria for a trustee, maintenance of accounts by trusts and the trust’s requirement of audit, etc.
The Intent Behind the Bill
It appears that the Bill is a reaction by the State Government to put in place express legislation based on multiple representations requesting for guidelines for the proper functioning of Public Trusts. The High Court of Madras in its order dated 05.07.2018 in W.P. (M.D) No. 12686 of 2018 had requested the State Government to consider representation, to frame a scheme/set of guidelines relating to the proper functioning of public trusts. Similarly, the Supreme Court of India in its order dated 02.07.2018 in W.P. (Civil) No. 472/2018 had stated that the lack of law concerning public trusts might be taken into consideration by concerned states in proper perspective.
The Bill primarily seems to be similar to the Bombay Public Trusts Act, 1950 sans a Charity Commissioner requirement but with the same position being held by the registrar of each such district. It is relevant to note that the allied rules relating to the Bill have not yet been tabled.
A Breakdown of the Bill
The Bill can be broken into 15 simple points as below:
- Any new public trusts that are to be created must compulsorily be registered under the Bill by applying to the relevant registrar.
- In case of any public trusts that have existed before September 2020, a re-application is necessary under the Bill within a timeframe of 3 months from the commencement of the enactment.
- The Bill states further that public trust may cease to exist after four months if such registration of faith is not complete or if the application has been disposed of, whichever occurs earlier.
- A trust may be formed by any person competent to contract under the Indian Contract Act, 1872 or with the permission of a Court by or on behalf of a minor.
- An application is required to be submitted to the registrar of the relevant district where the principal place of the trust is situated, and the activities of the trust are being carried on with any such other details relating to the trust being specified. The Bill provides for a specified non-exhaustive list of items that must be mandatorily specified in the application. The fee to be paid for such an application is INR 5,000/-.
- Upon receipt of an application or on an application by a person interested in a public trust or on the registrar’s motion, the registrar may by the Bill inquire in the manner stipulated.
- The registrar shall then make relevant entries in his/her register that the findings are final and conclusive.
- In the event of any changes being required in the entries made by the registrar, a working trustee within 90 days may request the registrar to make the necessary changes per the procedure to be notified/prescribed.
- In case trust properties are situated in more than one district, the registrar is permitted to send copies to the relevant collectors of such districts where trust properties are located, and the same shall be put on record in the register of such district.
- The Bill provides for nine express grounds for disqualification from appointment as a trustee of a public trust which includes (i) conviction by a criminal court of any offence, (ii) not being a citizen of India, (iii) except in case of a hereditary trustee, if he is less than 25 years of age, (iv) if he is an undischarged insolvent, (v) unsound mind/suffering from mental defect or infirmity, (vi) if he has been removed or dismissed from service under the Central or State Government or local authority, (vii) if he has acted against the interests of public trust, (viii) if he is in arrear of any kind due by him to any public trust or (ix) if a proclamation has been issued against him under Section 82 of the Code of Criminal Procedure, 1973.
- All money required for the expenditure of the trust shall be kept in a scheduled bank or post office savings bank or any bank registered under the Tamil Nadu Cooperative Societies Act, 1983. The relevant registrar may permit the trust to invest the money in any other manner.
- Accounts of the trust are required to be audited by a Chartered Accountant and shall then be sent to the registrar. If the gross annual income of the trust exceeds INR 1,00,000/-, the trust shall submit to the registrar, a budget that shows probably receipts and disbursements by the trust during the following year.
- For a public trust created by a will, the registration under the Bill will be required to be done within a time frame of 3 months where the probate of the will has been granted by the relevant court. In a case where probate is not required, registration must be done within a 6-month time frame.
- Any transfers of immovable property may only be done with the prior consent of the registrar.
- Any appeals against the holdings of a registrar (concerning any material defects in the administration of the public trust etc.) shall be before the Principal Civil Court of original jurisdiction within 60 days of receipt of an order of the registrar.
The Key Takeaway
The Bill attempts to resolve the prevalent mischief around the unregulated space of public trusts by bringing the same under compulsory scrutiny of the state government. Considering that no express law like the Indian Trusts Act, 1882 has been enacted for public trusts, the Bill, if passed, maybe a welcome change that might provide clarity to the manner of administration of public trusts.
Considering that the Charitable and Religious Trusts Act, 1920 only provides for certain limited purposes, the Bill seems to be looking to provide the relevant authorities with the necessary ammunition to combat malpractices around public trusts.
Karthik Jayakumar is a partner at K Legal.
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There is one aspect of the proposed ‘The Tamilnadu Public Trusts Bill’ that would create a major disruption on many existing charitable trusts. That has to do with the clause (Sec 17.(b)) requiring only Indian citizens to be trustees of public trusts. This is an unprecedented move by Tamilnadu. No other state, nor the central government, has such a requirement. There are many who have emigrated from Tamilnadu, settled down and become citizens of foreign countries, have set up charitable trusts in Tamilnadu as a way of giving back to their homeland. The proposed bill would suddenly disqualify them from being trustees. Furthermore, the bill does not give a provision for foreign citizens who have become residents of India and set up trusts. I believe it would be prudent on the part of the government to remove or modify the clause 17(b) to allow ‘Overseas Citizens of India (OCI)’ with valid OCI cards issued by the Goverment of India, as well as foreign citizens who have become residents of India to be trustees of public trusts. Otherwise Tamilnadu stands to loose the benefits of charitable intensions of many overseas citizens.