Indian Trust Act

and
Formation of Societies
Social Work Assignment

By
Amitesh (1547),
Deepa (1161)
And, Harsh Meena (1560)
Introduction
In India, social service and voluntarism have a long history. With the exception of the Maurya
and Gupta eras, which had extensive public welfare programmes, it has been the primary source
of welfare and development since Vedic times. Mahatma Gandhi had a huge impact on the rise
of voluntarism throughout the colonial era. He firmly believed that the only means by which
the nation could be developed was via volunteer action. Rural reconstruction was the goal of
the Gandhian voluntary organisation in addition to political independence.
Gandhian voluntary organisations dominated the national scene after independence. They
focused on cooperatives, education, khadi and village industries, livestock and agriculture
programmes, and cooperatives. But, in the 1960s and 1970s, this consensus on development
strategy began to break down, which had an impact on the rise of volunteer action. People's
distrust of the government throughout the latter half of the 1980s and the beginning of the
1990s contributed to a significant growth in the number of volunteer organisations, as did the
availability of finances from both domestic and international sources. The creation of nonprofit
organisations that offered instruction, assessment, and documentation to other grassroots
nonprofit organisations was a significant achievement at this time. Additionally, the country's
population grew quickly without a corresponding increase of resources, which tipped the
population-resource balance and led to Service Organisation poverty, hunger, malnutrition, and
other socio-economic ills. In this context, voluntary organisations (VOs), also known as non-
governmental organisations (NGOs) in UN nomenclature, have developed as an alternative
development model. The sector has always had a significant role to play in driving and putting
new concepts into practise in the area of social development.
These Voluntary Organisations:
• are independent of government and business;
• are non-profit making;
• provide a wider public benefit that goes beyond any membership.

To put it another way, trusts and societies can be formed when a group of people have a
shared goal and the desire to further their vision and mission. Often, these are established to
promote the welfare of the populace or the advancement of the arts and civilizations. Due to
the tax benefits associated with these organisations, the concept of "trusts" has gained more
prominence in modern times. A trust is a separate tax entity, and under certain conditions, a
charity or religious trust is almost entirely excluded from paying taxes on its revenue. In
addition to that, trusts provide a larger range of advantages for the development of a country.

Indian Trust Act, 1882

Trust is a unique type of organisation that results from a will. Exclusive ownership of a property
to be used for a certain purpose is transferred by the will maker. A Private Trust is created when
the goal is to help specific people, and a Public Trust is created when the goal is to benefit the
general public or the community at large. The Indian Trusts Act, 1882, India's first trust law,
went into effect in that year and was primarily intended for the administration of private trusts.
The Act defines what is legally referred to as a trust and specifies who is eligible to serve as its
trustees.
Section 3 of the Indian Trusts Act, 1882 defines a 'trust' as: ''A trust is 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".
• The person who reposes or declares the confidence is called 'author of the trust;
• The person who accepts the confidence is called the 'trustee';
• The person for whose benefit the confidence is accepted is called the 'beneficiary';
• The subject matter of the trust is called 'trust property' or 'trust money';
• The beneficial interest or 'interest' of the beneficiary is his right against the trustee as
owner of the trust property;
• and the instrument if any, by which the trust is declared is called the instrument of trust
or trust deed.
Hence every trust contains the following elements: The author of the trust, The trustee, The
beneficiary, The trust-property or the subject matter of the trust, and the objects of the
trust.

Trust can be majorly divided into two types: Private Trust and Public Trust.

Private Trust
A trust created for a person's family that is enforceable by the beneficiaries is considered a
private trust. Usually, this Trust is intended for close friends, family members, and neighbours.
Personal trusts may choose to have actual beneficiaries as one of their possibilities. Also, the
establishment of a private trust gives transactions a legal form. It makes sure that resources or
property are only used for the benefit of designated beneficiaries, and the trustee requires that
it be handled in accordance with the plan.

Public Trust
A public trust, in contrast to a private trust, is established for charitable purposes. There is no
All-India Level Act that applies to public charitable trusts. General Public Trust Act has been
passed by numerous Indian states. In contrast, there is no trust legislation in the majority of
Indian states. Only in accordance with a public trust act may an NGO be formed. Public trust
acts at the state level have been delegated to Madhya Pradesh and Rajasthan. States like West
Bengal, Jharkhand, and Bihar don't actively pursue public trust registration. There is only one
way to create a trust. An equivalent, however, has the flexibility to function in a wide range of
 circumstances. All organisations registered as "Societies" in the state of Gujarat are also
automatically registered as trusts.
Both of these trust types are intended to serve different purposes and functions, which are
guided by various features and legal provisions.

Salient Features and Legal Provisions of

Trust
Following Points highlight various legal aspects and features of Indian Trust Act, 1882:

• According to section 4, a trust may be created for any lawful purpose. Any trust with
The purpose of a trust
an unlawful purpose is void.
is lawful unless it is (i) It is forbidden by law
(ii) It is of unlawful nature, if permitted, it would violate the provisions of any law
(iii) It is fraudulent
(iv) It implies or causes injury to another person or property
(v) It is regarded as immoral or opposes public policy as said by the court

• In accordance with section 6 of the Indian Trust Act of 1882, a trust is created when
the author of the trust with reasonable certainty shows an intention on his part to
create a trust, the purpose of the trust, the beneficiary, and the trust- property.
• Any person who is competent to hold a property can form a trust. Section 7 contains
provisions with regards to persons who may create a trust.
(i) Every person competent to contract (in accordance with section 11 of Indian
Contract Act, 1872)
(ii) By or on behalf of minor with permission of principal civil court of original
jurisdiction
(iii) Trust of a Hindu Undivided Family
(iv) Persons of Association
(v) Company

• As per Section 9, every person capable of holding property can be a beneficiary. A

beneficiary is the third party for whose benefits the property is being transferred to the
trustee.
• The Beneficiary of the trust holds certain rights in the trust deed. It includes Right to
Rent and Profit, inspect documents of trust deed, Sue for execution of trust and to
ensure that the trust property is properly protected.
• Section 10, states the provisions for a person to be a trustee. A trustee can be any
person who has been transferred the property by the settlor or a person who is
competent to contract.
• No person can be bound to accept a trust. The trustee has the right to accept or reject
the trusteeship. Once the trusteeship is accepted, trustee shall assume all the rights,
responsibilities, and liabilities of the transferred property.
• When a trustee commits a breach a trust, he is liable to make for the loss faced by the
trust property or beneficiary, unless; beneficiary by fraud has induced trustee to
commit breach or beneficiary.
 • Responsibilities of trustee include: To Execute Trust; Protect title to Trust Property; to
take reasonable care of the property; To be Impartial; and to keep accurate
information regarding trust property at all times.
• Rights of Trustees include: Right to title deed; Right to reimbursement of expenses (A
trustee may repay himself, or pay or discharge out of trust property); Right to
indemnity from gainer by breach of trust; and the Right to apply to Court for opinion
in management of trust property

All of these provisions with various other sections and sub sections are being listed in the
Indian trust Act, 1882, Which serve as a detailed judicial guide in formation of trust (mostly
private).
Just like private trusts, Non-Government Organisations or Societies can also be registered as
a Trust (as described in the preceding section). The process of registration and formation may
vary from state to state. Following section shed light on this aspect.

Formation of Society and organization

Any group of people with similar interests can organise and govern their own society. These
like-minded individuals frequently work together to accomplish a specific goal. A volunteer
organization's principal goal is to work for the betterment of a certain target population
effectively and passionately. The initiatives address a variety of social issues, including
education, human rights, health, the environment, and other social activities. They also address
economic issues, including trade union activities, the growth of cooperatives, the formation of
self-help organisations, etc.
The organization's overall goals are largely determined by the financial and infrastructural
resources that are required for it to function. Also, the organization's focus and prior experience
in the area are both important factors in defining its goals. For instance, one can observe the
expansion of volunteer organisations and activities on health issues, particularly HIV/AIDS, in
the current development sector. These organisations' goals range from raising awareness to
giving the target group assistance with their emotions, health, and jobs.
To obtain a legal identity and standing, one must register under the relevant state rules. The
non-profit organisations must take responsibility for their actions and inform the authorities
about how funds were used. In order to request income tax exemptions on the grants they
receive, they should register with the income tax authorities. The foreign monies they receive
should likewise be registered separately.

Significance of registration of an organisation

❖ Registering offers the organisation permanence and continuity.
❖ Collective liability as opposed to personal liability.
❖ Collective activity and thought rather than solitary action.
❖ It provides the reflection of an independent and responsible entity to the community.
❖ It ensures the benefit to members of being relieved from unlimited financial liability. It
can sue or be sued as an organisation.
Registration Process
Before moving forward with the registration process, an organisation must create a constitution
for itself. The constitution of a society consists of two parts related to each other namely,
memorandum of association, and rules and regulations.
The objectives of the organisation are broadly defined in the constitution which also contains
the duties, powers and functions of the various functionaries Procedure for Establishing and
Running Social Service Organisation Social Administration of the organisation. The
memorandum of association deals with the objectives of the organisation. Whereas the byelaws
contain the detailed rules and regulations governing the day-to-day functioning of the
organisation. They are the guidelines for the internal management. Thus, a constitution can be
understood as a brief statement spelling out the broad goals and objectives of the organisation,
often including the quantitative goals too. It often does not include the detailed procedures to
be followed for the attainment of these objectives; which are incorporated in the byelaws.

The Form
After having a concrete Constitution for the society, Members can move forward with filling
the registration form, which is available from the office of Registrar in state capitals.
By signing their names to a memorandum of association and submitting it to the Registrar of
Societies or another officer designated under that Act by the state Government, any group of
seven or more members who wish to work for any humanitarian initiative or cause may
establish a society.
The Memorandum of Association contains the following particulars:
o Name and address of the association: The name should be simple, short, and
comprehensible; and also, should be reflecting the objectives of organisation. It must
not be identical with that of any other organisation.
o Purpose: The broad aims and objectives for which the organisation has been set up
should be clearly stated.
o Membership requirements: The qualifications required to become a member of the
organisation should be clearly stated. It includes financial provisions; minimum age;
special interest and contribution of a member in the programme.
o Other particulars: It should also contain aspects such as Board of Directors; Office
Bearers; Elections; Sub Committees; Meetings; Financial year; Amendments to the
constitution; Finances: Maintenance and operation of bank accounts; Assets and
Dissolution.

Submission
The Memorandum and Rules and Regulations must be written in a way that safeguards both
the organisation and its members from present and potential future legal challenges in order to
be filed and subsequently registered at the Office of Registrar. Additionally, the society will be
represented in all lawsuits filed by or against it. Therefore, it is advised to get legal counsel
when creating the document and submitting it to the Registrar.
The Memorandum written in this format and signed by seven or more members who are
sponsoring the organisation would be presented to the Registrar together with the required fee.
According to the Act, the Registrar would register the society's name and issue a certificate of
registration. The registered body would periodically submit to the Registrar the yearly list of
management body members and other data as specified by the Act. Following registration, the
society will own all assets, both movable and non-movable, and all legal actions taken by or
against the society will be brought or defended in the society's registered name.

Conclusion
Voluntary Organisations or Non-Government organizations are non-profit, independent
organisations intended to bring greater benefit to the society or to a particular section of
underprivileged group. They can be registered or formed through various acts, two of them are
Society Registration Act,1860 and Indian Trust Act, 1882. Indian trust Act particularly focuses
on Private trusts (which are created for some private entity). It lays down detailed procedure
for the rights of Trustee and beneficiary and process of transfer of trust subject from Author to
the Beneficiary. In case of Public Trust, the beneficiary is a large segment of society, for whom
the trust has been registered. Each state allow the creation of society as a trust with some minor
variations in the process. After Formation a Trust comes under government’s recognition and
gains various privileges in form of monetary grants from government, Foreign agencies and
Companies.

References
❖ Lexis Nexis’s The Indian Trusts Act, 1882 (Bare Act)- 2023 Edition
❖ Official Website, Income Tax Department of India - https://incometaxindia.gov.in
❖ Official Website, Ministry of Law and Justice - https://legislative.gov.in
❖ Official Website, NGO Darpan, by Niti Aayog - https://ngodarpan.gov.in
❖ Official Website, Ministry of Social Justice and Empowerment, Government of India -
https://socialjustice.gov.in