• Can a Public Charitable Trust transfer an asset of the Trust to another Public Charitable Trust?

Hi,

My late grandfather started a Public Charitable Trust that's registered in Madurai, along with his children. The Trust was registered in 1983. In 2006 the Managing Trustee (son in law) transferred an asset of my Grandfather's Trust to a Trust formed by the son in law. That Trust is also registered in Madurai. The said property is an one acre (1.10 acres) school with playground located in Madurai. There is no cash consideration and a Gift Deed was executed. The stamp value was properly paid by the son in law's Trust. Our family learnt about this "gift" only two years ago.

My question is can one Trust transfer by way of gift an asset to another Trust?

Kind advise.
Asked 2 years ago in Property Law
Religion: Hindu

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11 Answers

SECTION 36 OF THE MAHARASHTRA PUBLIC TRUST ACT 1950.

Section 36 states, prior permission of Charity Commissioner is required for –

1. Sale, exchange or gift of immovable property

2. Lease for a period of 3 years or more (10 years for agricultural land).

 

There are certain binding duties on the trustees of the public trust and they are imparted with certain obligations also and therefore even if the trustees have power to deal with the property of the trust, they cannot do so before obtaining prior sanction of Charity Commissioner.

 

2) kindly check whether prior permission d charity commissioner was obtained by son in law 

 

 

Ajay Sethi
Advocate, Mumbai
99775 Answers
8145 Consultations

If the charitable trust had transferred the said property as a donation  to another charitable trust then that donation made by one Charitable Organisation to another shall be considered as application of income for the objectives of the organisation provided the donee organisation also have objects similar to the object of donor organisation.

The trustee must distribute the property in accordance with the settlor's instructions and desires.

It is possible to transfer a property through trust. The concept of trust revolves around the 3 parties. The first party is the grantor. The second party is the trustee of the property and the last party is the beneficiary.

If the managing trustee acted against the interest of the beneficiaries of the trust and it is contradicting the deed of trust then the beneficiaries can sue the managing trustee for this act of violation of rules and and other related offences namely misuse, misappropriation, embezzlement, fraud, cheating or any other offences. 

T Kalaiselvan
Advocate, Vellore
89977 Answers
2492 Consultations

Yes it can transfer

Prashant Nayak
Advocate, Mumbai
34514 Answers
249 Consultations

First, the trust deed needs to be examined in order to ascertain if such a transfer is within the powers of the trust. Assuming it is, the transfer by way of a registered gift deed is legally valid.

Swaminathan Neelakantan
Advocate, Coimbatore
3070 Answers
20 Consultations

As per the Delhi High Court, trust property cannot be sold, mortgaged, transferred or exchanged without the court's prior approval , all trusts, public or private, are subject to this order. A private trust is established for the benefit of the beneficiary, a specific group of people.

- Hence, the said transfer of the assets by way of gift without taking the consent of all the beneficiaries are invalid.

Mohammed Shahzad
Advocate, Delhi
15814 Answers
242 Consultations

The transaction is required to be examined. Managing trustee alone cannot transfer property without following required procedure. Transfer can be challenged, if so required. 

Siddharth Srivastava
Advocate, Delhi
1551 Answers

A Public Charitable Trust is a legal entity that is created for the benefit of the general public or a section of the public. A Public Charitable Trust can own and manage property for its charitable objects and purposes. A Public Charitable Trust can also transfer its property to another Public Charitable Trust by way of gift, sale, exchange, lease, or any other mode of transfer, subject to certain conditions and restrictions.

Some of the conditions and restrictions for transferring an asset by a Public Charitable Trust to another Public Charitable Trust are as follows :

  • The transfer must be in accordance with the provisions of the trust deed and the objects and purposes of the trust. The transfer must not be contrary to the intention of the settlor or the donor of the property.
  • The transfer must be in the interest of the trust and its beneficiaries. The transfer must not result in any loss or detriment to the trust or its beneficiaries.
  • The transfer must be authorized by the trustees or the managing committee of the trust. The transfer must be approved by a resolution passed by a majority of the trustees or the managing committee members present and voting at a meeting duly convened for that purpose.
  • The transfer must be registered with the appropriate authority under the relevant law. The transfer must also comply with the applicable stamp duty and registration charges.
  • The transfer must be reported to the Income Tax Department and other concerned authorities. The transfer must also satisfy the conditions for exemption from income tax and other taxes.

In your case, since your grandfather’s trust transferred an asset to your father-in-law’s trust by way of gift deed, you have to check whether these conditions and restrictions were followed or not. If they were not followed, then you may have a chance to challenge the validity and legality of the transfer in court. You may also have to prove that the transfer was made without your consent or knowledge, and that it was done with fraud, coercion, undue influence, misrepresentation, mistake, or any other defect.

You should also check whether your grandfather’s trust deed had any clause regarding your rights as an adopted child or as a beneficiary of the trust. You should also check whether your father-in-law’s trust deed had any clause regarding your rights as a relative or as a beneficiary of the trust. You should also check whether you have any other legal claim over the property based on inheritance, succession, partition, etc.

You should take some steps to protect your rights and interests in the property. You can do the following:

  • File a suit for declaration and cancellation of the gift deed in the civil court having jurisdiction over the property. You should also seek an injunction to restrain your father-in-law’s trust from alienating or encumbering the property until the suit is decided. You should also seek damages for the loss and injury caused by their fraud and misrepresentation.
  • File a complaint with the police against your father-in-law and his trust for cheating, forgery, criminal breach of trust, and criminal intimidation. You should also mention that they have taken possession of the original deed of the property and refused to return it.
  • File a complaint with the Charity Commissioner and other concerned authorities against your father-in-law and his trust for violating the rules and regulations governing Public Charitable Trusts. You should also mention that they have failed to report and pay taxes on the transfer of property.

 

Muraleedharan R
Advocate, Trivandrum
386 Answers
2 Consultations

Yes, subject to following a certain procedure and permission.

Gaurav Ahuja
Advocate, Faridabad
136 Answers

Yes but since it was done by misusing the position by MT, this transfer can be challenge in court. 

Yogendra Singh Rajawat
Advocate, Jaipur
23079 Answers
31 Consultations

One public charitable trust can transfer the property to another trust.

Pradeep Bharathipura
Advocate, Bangalore
5625 Answers
339 Consultations


Dear Client
In India, a Public Charitable Trust is usually created for a specific charitable purpose, and the assets of such a trust are meant to be used for that purpose. The transfer of trust property, especially valuable assets like land and buildings, from one trust to another can be a complex legal matter and may require court approval in some cases. Here are some points to consider:

Trust Deed Provisions: You should carefully review the Trust Deed of your late grandfather's Trust to see if there are any provisions that allow for the transfer of assets to another trust.

Benefit to the Charitable Purpose: Any transfer of assets from one charitable trust to another should ideally be for the benefit of the charitable purpose of both trusts. The transfer should not be for personal gain or benefit.

Gift Deed: If a Gift Deed was executed for the transfer, it is crucial to determine whether it was done in accordance with the provisions of the Trust Deed and Indian law. It's also important to verify if the stamp duty and other legal requirements were properly fulfilled.

Anik Miu
Advocate, Bangalore
11014 Answers
125 Consultations

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