Do we know how many trusts are created in India, and among those, how many of those have been registered? Why should a trust be created, and is it necessary to register a trust? And is there any advantage for registration of trust? This article will look into the procedure involved in the registration of trusts in India.
What is trust? Who are the trustee and beneficiaries?
Before looking into the procedure for the registration of the trust, it is important to note the definition of what is a trust, who is the trustee, and the beneficiary? Indian Trusts act of 1882 is the governing law that takes care of the laws and rules relating to trusts in India.
Section 3 of the Indian Trusts Act, 1882 defines the term trust. It states as follows,
‘It is an obligation which is accompanied to the ownership of property and arising out of a confidence reposed in and accepted by the owner or shall be declared and accepted by him, for the benefit of another or of another and the owner.’
Who is an author of trust? An author of the trust is the one who provides the assets to the trustee for the benefit of a third party. He/she is also called a settlor. As per section 3, he/she is the person who reposes or declares the confidence is called the “author of the trust”.
On the other hand, the trustee is the one who manages the trust that is created by the author of the trust/settlor. The third-party who gains the benefits out of these creations of trusts is called a beneficiary. Often we confuse with two main terms, and they are trustee and settler. The trustee is not the person who creates the trust. It is the settlor who creates the trusts. A Trustee is the one who manages the trust and not anything else. Subject-matter of the trust is the trust property created in favor of the beneficiary.
What is the purpose of the creation of trust?
As per section 4 of the Indian Trusts Act, 1882, a trust shall be created for any of the lawful purposes. But, when shall we say that the purpose is lawful in nature? Clauses (a) to (e) of section 4 deal with what would amount to lawful purpose. It is lawful if the same is not opposed and contrary or forbidden by law or it is in such nature and if allowed to function then might defeat the provisions of the law, or if the trust is fraudulent in nature. or if it involves or implies injury to any person or even the property of another. Lastly, if any court of law finds such activity of the trust as immoral or opposed to public policy, then that would not come under the lawful purpose.
In case any trust has an unlawful purpose, and then it would amount to void. Section 4 also states that if any trust has been created for two main purposes and if any one of such purpose is lawful and if the other is unlawful, then one shall not be severed from the other; rather, the trust will wholly be considered as void.
Types of Trusts:
In India, there are two main types of trusts. It is divided into public and private trusts. Privates trusts are created as per the provisions of the Indian Trusts Act, 1882, whereas the public trusts are further divided into charitable and religious trusts. Public trusts are created under the Charitable and religious trust act, 1920, charitable endowments act, 1890, and Religious endowments act, 1863.
Another major difference between the two main trusts is that public trusts are created for the purpose of the public at large, whereas private trusts are created for the benefit of a single person or single group of members.
Registration of Trusts:
Let us look into the procedure for the registration of Trust in India. Firstly, in order to register the trusts, the first step is to have a name for the trust. It is important to note that the name for the trust should never be contrary to what has been mentioned in the provisions of the Emblems and Names act of 1950. It should not be contrary to what has been mentioned in the act. Secondly, there should be a trust deed that ought to be drafted and should also contain all the required information of the trust. Once this has been made, the deed should be submitted before the registrar while the said trust is being registered. It is followed by the selection of settlors and the trustees for that trust. It has been noted that there is no specified number of trustees and the settlors for the trust, but it is clear that there should be a minimum of two trustees in order for the creation of trusts.
Along with the trust deed, the memorandum of association of the trust should also be prepared. This is the document that will reflect what the trust has to do by its creation. Once these documents are made available, then the registration shall be initiated by paying the required fees for the registration of a trust. A certified copy of the trust deed shall be collected from the registrar, who has been constituted for this purpose. Later, this copy should be provided for the reference of the local registrar along with the required documents of the trust and attestations. Lastly, within seven working days from the submission and issuance of the certified copy of submitted documents, the registrar shall give the registration certificate of the respective trusts. Thereupon, the trustees or the settler shall collect the registration certificate. Thus, the trust is deemed to be registered as per provisions of the Indian Trusts Act, 1882.
Conclusion:
Having seen the above provisions and the procedure, it is clear that the procedure and the requirements as per the provisions of the act should be properly complied with in order to make it lawful and beneficial.
