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Internship Project Presentation
Topic of Presentation
Societies and the Trust
Made by: Pramod Kumar Dwivedi
College: Lloyd Law College
Year: 3rd
Year (BALLB)

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TRUST AND SOCIETY
Formation of Charitable Trust
Introduction:
A public charitable or religious institution can be formed either as a Trust or as a
Society or as a Company registered u/s 25 of the Companies Act.
It generally takes the form of a trust when it is formed primarily
by one or more persons.
To form a Society at least seven persons are required.
Institutions engaged in promotion of art, culture, commerce
etc. are often registered as non-profit companies.
These forms are enumerated as under :
1. Charitable Trust settled by a settlor by a Trust Deed or under a Will.
2. Charitable or religious institution / association can be formed as a society.
3. Charitable institution can be formed by registering as a company u/s. 25 of the
Companies Act, 1956, as non profit company (without addition to their name, the
word "Limited" or "Private Limited").
Trust:
In common law legal systems, a trust is a relationship
whereby property is held by one party for the benefit of another. A trust is created
by a settlor, who transfers some or all of his or her property to a trustee. The trustee
holds that property for the trust's beneficiaries. Trusts have existed
since Roman times and have become one of the most important innovations
in property law.

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An owner placing property into trust turns over part of his or
her bundle of rights to the trustee, separating the property's legal ownership and
control from its equitable ownership and benefits. This may be done for tax
reasons or to control the property and its benefits if the settlor is
absent, incapacitated, or dead. Trusts are frequently created in wills, defining how
money and property will be handled for children or other beneficiaries.
The trustee is given legal title to the trust property, but is obligated to
act for the good of the beneficiaries. The trustee may be compensated and have
expenses reimbursed, but otherwise must turn over all profits from the trust
properties. Trustees who violate this fiduciary duty are self dealing. Courts can
reverse self dealing actions, order profits returned, and impose other sanctions.
The trustee may be either an individual, a company, or a public body.
There may be a single trustee or multiple co-trustees.
The trust is governed by the terms under which it was created. In
most jurisdictions, this requires a contractual trust agreement ordered.
Types of Trusts:
1. Bare Trust:
A trust where the beneficiary is absolutely entitled to the assets, and the
trustee is obliged simply to pay them over to the beneficiary. ‘Resulting’ and
‘Constructive’ trusts are usually bare trusts. Bare trusts generally do not continue
for any length of time, unless they arise out of protracted litigation, or the
beneficiaries are minors (in which case the bare trust must continue till they reach
majority)
2. Constructive Trust:
It is imposed by law as an equitable remedy. It generally occurs due to some
wrong doing, where the wrong doer has acquired legal title to some property and
cannot in good conscience be allowed to benefit from it.
3. Resulting Trust:
It is a form of implied trust which occurs where a trust fails, wholly or in
part, as a result of which the settlor becomes entitled to the assets.

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4. Discretionary Trust:
It is an arrangement where the trustee may choose, from time to time, who
(if anyone) among the beneficiaries is to benefit from the trust, and to what extent,
so long as the decision is made based on the beneficiaries best interests. The
purpose of such a trust is that no individual can claim to be entitled to any specific
interest in the trustee’s assets, which often has tax advantages or asset protection
advantages.
5. Fixed Trust:
the entitlement of the beneficiaries is fixed by the settlor. The trustee has
little or no discretion. E.g.
 a trust for a minor (to X if she attains 21)
 a life interest (to pay the income to X for her lifetime)
6. Hybrid Trust:
It combines elements of both fixed and discretionary trusts. The trustee must
pay a certain amount of the trust property to each beneficiary fixed by the settlor.
But the trustee has the discretion as to how any remaining trust property, once
these fixed amounts have been paid out, is to be paid to the beneficiaries.
7. Express Trust:
It arises where a settlor deliberately and consciously decides to create a trust,
over his or her assets, either now or upon his death. In these case this will be
achieved by signing a trust instrument which will either be a will or a trust deed.
8. Implied Trust:
It is created where some of the legal requirements for an express trust are not
met, but an intention on behalf of the parties to create a trust can be presumed to
exist.
9. Intervivos Trust:
A settlor who is living at the time the trust is established creates an
intervivos trust.
10. Testamentary Trust:
A trust created in an individual’s will.

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11. Irrevocable Trust
It is the one that will not come to an end until the terms of the trust have
been fulfilled.
12. Revocable Trust
A trust of this kind can be revoked (cancelled) by its settlor at any time.
Who can form a Charitable or Religious Trust:
As per section 7 of the Indian Trusts Act, a trust can be formed –
1. by every person competent to contract, and
2. by or on behalf of a minor, with the permission of a principal civil court of
original jurisdiction.
But subject in each case to the law for the time being in force as to the
circumstances and extent in and to which the Author of the Trust may dispose of
the Trust property.
A person competent to contract is defined in section 11 of the Indian Contract Act
as a person who is of the age of majority according to the law to which he is
subject and who is of sound mind and is not disqualified from contracting by any
law to which he is subject. Thus, generally speaking, any person competent to
contract and competent to deal with property can form a trust.
Besides individuals, a body of individuals or an artificial person such as an
association of persons, an institution, a limited company, a Hindu undivided family
through it's Karta, can also form a trust.
It may, however, be noted that the Indian Trusts Act does not apply to public trusts
which can be formed by any person under general law. Under the Hindu Law, any
Hindu can create a Hindu endowment and under the Muslim law, any Muslim can
create a public wakf. Public Trusts are essentially of charitable or religious nature,
and can be constituted by any person.

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Capacity to create a Trust:
As a general rule, any person, who has power of disposition over a
property, has capacity to create a trust of such property. According to section 7 of
the Transfer of Property Act, 1882, a person who is competent to contract and
entitled to transfer the property or authorized to dispose of transferable property
not his own, either wholly or in part and either absolutely or conditionally, has
'power of disposition of property'.
Thus, two basic things are required for being capable of forming a trust –
1. Power of disposition over property; and
2. Competence to contract.

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Who can be a Trustee:
Every person capable of holding property can become a
trustee. However, where the trust involves the exercise of discretion, he can accept
or act as a trustee only if he is competent to contract. No one is bound to accept
trusteeship. Any number of persons may be appointed as trustees. However, no
trust is defeated for want of a trustee. Where there is no trustee in existence, an
official trustee may be appointed by the court and the trust can be administered. An
executor of a Will may become a trustee by his dealing with the assets under the
provisions of the Will. When an executor is functus officio to any of the assets and
yet retains them, he becomes a trustee in respect of those assets.
Who can be a Beneficiary:
In a private trust the beneficiaries are one or more
ascertainable individuals. In a public trust the beneficiaries are a body of uncertain
or fluctuating individuals and may consist of a class of the public or the whole
public. Generally, a private trust is not a permanent one. But a public trust is of a
permanent nature. If properties are dedicated to temples and mosques or gifts are
made to religious or charitable institutions they create a trust.
Subject matter of Trust:
Any property capable of being transferred can be a subject matter of a
trust. Section 8 of the Indian Trust Act, however, provides that mere beneficial
interest under a subsisting trust cannot be made the subject matter of another trust.
In the case of J.K. Trust vs. CIT (1957) 32 ITR 535 (S.C.), the Supreme
Court had held that the word " property" under the Trusts Act is of the widest
import and a business undertaking will undoubtedly be a property so that a running
business can be made a subject matter of trust. This view has been followed in the
case of in CIT vs. P. Krishna Warriar (1964) 53 ITR 176 (SC).

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Business may be a taboo for charitable institution from the point of view of
exemption for income tax purposes. From time to time, the law has undergone a
change as to what business is permitted and under what circumstances. The present
law permits only such business which is incidental to attainment of the objects of
the trust or the institution, subject to the condition that separate account books are
maintained for such business as prescribed under sub-section 4A of section 11 of
I.T. Act.

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Requisites of a Trust:
1. The existence of the author/settlor of the trust or someone at whose instance
the trust comes into existence.
2. Clear intention of the author/settlor to create a trust.
3. Purpose of the Trust.
4. The Trust property
5. Beneficiaries of the Trust.
6. There must be divesting of the ownership by the author / settlor of the trust
in favour of the beneficiary or the trustee.
Unless all these requisites are fulfilled a trust cannot be
said to have come into existence.

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Essentials of a valid Charitable or Religious Trust:
There are four essential elements of a valid charitable or religious trust –
1. Charitable or Religious Object: The object or purpose of the trust must be a
valid religious or charitable purpose according to law ;
2. Capacity to create Trust : The founder or settlor should be capable of
creating a trust and dedicating his property to that trust;
3. Certainty of Object and Dedication thereto : The settlor should indicate
precisely the object of the trust and the property in respect of which it is
made. The property should be dedicated to the trust and the owner must
divest himself of the ownership of that property.
4. Concurrence with the law : The trust or its objects must not be opposed to
the provisions of any law for the time being in force.
Instrument of Trust – i.e., Trust Deed :
The instrument by which the trust is declared is called instrument of Trust, and is
generally known as Trust Deed.
It is well settled that no formal document is
necessary to create a Trust as held in Radha Soami Satsung vs. CIT- (1992) 193
ITR 321 (SC). But for many practical purposes a written instrument becomes
necessary under following cases –
1. When the trust is created by a will irrespective of whether the trust is public
or private or it relates to movable or immovable property. This is because as
per Indian Succession Act, a will has to be in writing
2. When the trust is created in relation to an immovable property of the value
of Rs.100 and upwards, in case of a private trust. In case of public trusts, a
written trust deed is not mandatory, even in respect of immovable property,
but is optional.

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3. Where the trust/association is being formed as a society or company, the
instrument of trust; i.e., the memorandum of association, and Rules and
Regulations has to be in writing.
A written trust-deed is always desirable, even if not required statutorily, due to
following benefits :
1. a written trust deed is a prima facie evidence of existence of a trust ;
2. it facilitates devolution of trust property to the trust;
3. it clearly specifies the trust-objectives which enables one to ascertain whether
the trust is charitable or otherwise;
4. it is essential for registration of conveyance of immovable property in name of
the Trust;
5. it is essential for obtaining registration under the Income-tax Act and claiming
exemption from tax;
6. it helps to control, regulate and manage the working and operations of the trust;
7. it lays down the procedure for appointment and removal of the trustee(s),
his/their powers, rights and duties; and
8. it prescribes the course of action to be followed under any eventuality including
dissolution of the trust.

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Types of Instrument of Trust:
1. Trust deed, where a trust is declared intervivos; i.e., by settling property under
Trust.
2. A will, where a trust is declared under a will;
3. A memorandum of association along with rules and regulations, when the
association/institution is being formed as a society under the Societies Registration
Act, 1860.
4. A memorandum and articles of association where the association /institution is
desired to be formed as a Company.
Trust Deed-Clauses:
A person drafting the deed of a public charitable trust has to bear in mind
several enactments, particularly the Indian Trusts Act, any local enactment relating
to trusts, like the Bombay Public Trusts Act for the State of Maharashtra and the
Income tax Act. Such a person has also to keep in mind the relevant judicial
pronouncements dealing with the scope of "charitable purpose" and accordingly
decide whether a particular purpose is charitable or not. An instrument of Trust
or association/institution created or established should contain inter alia the
following clauses:
1. Nothing contained in this deed shall be deemed to authorise the trustees to
do any act which may in any way be construed as statutory modifications
thereof and all activities of the trust shall be carried out with a view to
benefit the public at large, without any profit motive and in accordance with
the provisions of the Income-tax Act, 1961 or any statutory modification
thereof.
2. The trust is hereby expressly declared to be a public charitable trust and all
the provisions of this deed are to be construed accordingly.

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The Trust Deed, generally contains the following clauses:
1. Preamble
2. Trust name by which Trust shall be known
3. Place were its office shall be situated
4. Author or settlor of the trust
5. Names of the Trustees
6. Beneficiaries
7. The property settled, for Trust – In case of immovable property, it should
contain full description of the property sufficient to identify it
8. An express intention to direct the trust property from the trustees
9. The objects of the Trust
10. Minimum and maximum number of Trustees
11. The procedure for appointment, removal, replacement of trustees
12. Trustees rights, duties and powers
13. Administration of trust
14. Provision for maintenance of accounts, auditing etc.
15. Clause enabling, spending and utilization of the Trust funds or corpus.

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16. Bank Account operations
17. Borrowing money on security for the purpose of the Trust
18. Investment of the Trust funds and dealing with Trust properties
19. Alienation of immovable property of the Trust
20. Amalgamation clause
21. Dissolution of Trust
22. Irrevocable nature of the trust.
Registration of Charitable Trust:
Registration of Public Trust (Sec. 18 of Bombay Public Trust Act):
1. It shall be the duty of the trustee of a public trust to which this Act has been
applied to make an application for the registration of the public trust.
2. Such application shall be made to the Deputy or Assistant Charity
Commissioner of the region or sub-region within the limits of which the
trust has an office for the administration of the trust or the trust property or
substantial portion of the trust property is situated, as the case may be.
3. Such application shall be in writing, shall be in such form and accompanied
by such fee as may be prescribed.
4. The application shall be made within 3 months of creation of the Public
Trust.
5. The application shall inter alia contain the full detail as prescribed in the
form of Schedule II – (under Rule-6).
6. Every application made under sub-section (1) shall be signed and verified in
the prescribed manner by the trustee or his agent specially authorized by him
in this behalf. It shall be accompanied by a copy of an instrument of trust, if
such instrument has been executed and is in existence.
7. Where on receipt of such application, it is noticed that the application is
incomplete in respect of any particulars, or does not disclose full particulars
of the public trust, the Deputy or Assistant Charity Commissioner may
return the application to the trustee, and direct the trustee to complete the

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application in all respects or disclose therein the full particulars of the trust,
and resubmit it within the period specified in such direction; and it shall be
the duty of the trustee to comply with the direction.
8. It shall also be the duty of the trustee of the public trust to send
memorandum in the prescribed form containing the particulars, including the
name and description of the public trust, relating to the immovable property
of such public trust, to the Sub-Registrar of the sub-district appointed under
the Indian Registration Act, 1908, in which such immoveable property is
situated for the purpose of filing in Book No.I under section 89 of that Act.

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Such memorandum shall be sent within three months from the date of
creation of the public trust and shall be signed and verified in the prescribed
manner by the trustee or his agent specially authorized by him in this behalf.
When the Registering Officer is satisfied that the provisions of the Act as
applicable to the document presented for registration have been complied with, he
shall endorse thereon a certificate containing the word "registered", together with
the number and page of the book in which the document has been copied. Such
certificate shall be signed, sealed and dated by the Registering Officer, and shall
then be the conclusive evidence that the Trust has been duly registered. A
registered trust deed shall become operative (retrospectively) from the date of its
execution.
Procedure for registration:
The following documents are required to be filed for registration of a Charitable
Trust:
1. Covering Letter
2. Application Form in Form –Schedule II under rule 6 duly notarised
3. Court fee stamp of Rs. 2/- to be affixed on application form
4. Certified copy of the Trust Deed
5. Consent letter of Trustees. (Blank Form enclosed)
The office of the Charity Commissioner maintains a register
containing all details of the Trust; viz., Reg.No., name and address of the Trust,
names of all the Trustees (Past & Present), mode of succession of Trusteeship
objects of the Trust, particulars of documents creating a Trust, description of
movable and immovable properties, particulars of encumbrances on trust property
etc. This register is known as P.T.Register. A certified copy of the P.T. Registrar in
Schedule-I (vide Rule 5) can be obtained by applying in simple application with
Rs.10/- Court fee stamp by paying prescribed fees for the same. It is advisable for
all the trusts to have a certified copy of P.T. Register entry.

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FORMATION A SOCIETY

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Society: A society may
be defined as a company or an association of persons (generally unincorporated)
united together by mutual consent to deliberate, determine and act jointly for same
common purpose. As per the Societies Registration Act, 1860, (see Annexure 2,
VI), a society can be formed by minimum seven (or more) persons, eligible to
enter into a contract, for any of the following purposes:
1. Grant of Charitable assistance;
2. Creation of military orphan funds;
3. Promotion of science, literature or the fine arts; instruction and diffusion of
useful knowledge, diffusion of political education, foundation or
maintenance of libraries or reading rooms for general use of the members or
the public, public museums and galleries of paintings and other work of art,
collections of natural history, mechanical and philosophical inventions,
instruments or designs Besides, the State Governments are empowered to
add more objects to the above list.
The chief advantage of forming a society are that it gives a corporate appearance to
the organization, and provides greater flexibility as it is easier to amend the
memorandum and bye-laws of the society that in case of a trust, terms of which are
strictly manifested in the trust deed. However, formation of a society requires more
procedural formalities than in case of a trust.
Documents Required:
A society for its inception requires –
• Memorandum of association, an
• Rules and regulations.

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Memorandum of Association:
It is the charter of a society. Memorandum of
association depicts and describes the objects of a society’s existence and its
operation. This document should be drafted carefully and meticulously as to confer
all powers on the society which will be reasonably required for total attainment of
the objects. A specimen format of Memorandum of Association of a Society is
given in Annexure 2.
The memorandum of association contains the following clauses:
1. The name of the society
2. The registered/principal office of the society.
3. The objects of the society

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4. The names, addresses and occupations of the members of the governing body
whether called as Governors, Councilors, Directors, etc., to whom, by the
rules of the society, management of its affairs is entrusted, and
5. The names and addresses of the persons (at least seven) subscribing to the
memorandum. The signatures of the subscribers should be duly witnessed
and attested by the Oath Commissioner/Notary Public/Gazetted
Officer/Advocate/Chartered Accountant/Ist Class magistrate.
Rules and Regulations:
The rules and regulations of a society are framed to guide the members of
the governing body and to regulate the functions of the society and its internal
management.. The rules and regulations generally provide for:-
1. The conditions of admission of members,
2. The liability of members for fines, forfeitures under certain circumstances;
3. The termination of membership by resignation or expulsion or upon death;
4. The appointment and removal of trustees and their powers;
5. The appointment and removal of the members on the governing body;
6. The requirement as to notice, quorum etc. for holding meetings and passing
resolutions;
7. The investment of funds, keeping of accounts and for audit of accounts;
8. The manner of altering the objects and rules;
9. The matters to be provided in bye-laws;
10. The dissolution of society and the manner of utilizing the property upon
dissolution;
11. Such other matters as may be thought expedient with reference to the nature
and objects of the society.

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The bye-laws of the society are subsidiary to the rules and
regulations and usually provide for:
1. The business hours of the society;
2. The activities of the society in furtherance of its objects;
3. The matters relating to enrolment of members, their removal, rights,
applications and privileges,
4. The manner in which the society shall transact its business;

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5. The mode of custody, application and investment of the funds of the society
and the extent and conditions of such investment;
6. The arrangements for day-do-day transactions, the expenditure to be incurred
therefore, the staff to be employed and condition of services of such
employees;
7. The conduct of the general meetings and the procedure therefore;
8. Such other matters incidental to the organisation and working of the society
and the management of its business, as may be deemed necessary.
Registration Procedure:
When a NGO is constituted as a society, it is required to be
registered under the Societies Registration act, 1860. After the Memorandum and
Rules and Regulations of the society have been drafted, signed and witnessed in
the prescribed manner, the members should obtain the registration of the society.
Process of registering an NGO under Society Registration Act, 1860:
Registration of Society/NGO
Place of Registration:
The registration of a society is to be done under the Act wherever obtaining the
registration and not in the State where the project is being implemented. Once the
group of persons proposing to form a society have decided upon the name of the
society and have prepared drafts of Memorandum and Rules and Regulations of
the society, procedure adopted in following paragraphs may be adopted for getting
the society registered.
Signing of Memorandum of Association:
All the subscribers (minimum seven) should sign each page of the memorandum
and the signatures should be witnessed by either an Oath Commissioner, Notary
Public (Rs. 3/- Notarial stamp duty affixed), Gazetted Officer, Advocate, Chartered
Accountant or 1st Class Magistrate with their rubber / official stamp and complete
address.

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Persons desirous of forming a society should also become members of the first
governing body. An outsider cannot become member of the governing body in the
first instance.
Signature on Rules and Regulations:
The Rules should be signed by at least three members of the governing body.
Following certificate should be given at the end of the rules and regulations:
""Certified that this is the correct copy of rules and regulations of the Society"".

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File the required documents with the Registrar of Societies Following papers
should be filed with the Registrar of Societies for registration of a society under the
principal Act or corresponding Acts enacted by various State Governments:
• Covering letter requesting for registration stating in the body of letter various
documents annexed to it. It should be signed by all the subscribers to the
memorandum or by a person authorised by all of them to sign on their behalf
• Memorandum of Association in duplicate along with a certified copy (as per
Sec. 3 of the Principal Act). It should be neatly typed and pages serially
numbered
• Rules and Regulations / Bye-laws in duplicate duly signed
• Affidavit on non-judicial stamp paper of appropriate value sworn by the
President or Secretary of the Society stating relationship between the
subscribers. The affidavit should be attested by an Oath Commissioner,
Notary Public (Rs 3 Notarial Stamp affixed) or Ist Class Magistrate.
• Documentary proof such as House Tax receipt, rent receipt in respect of
premises shown as Registered Office of the society or no objection
certificate from the owner of the premises
Registration Fee:
Normally fee of Rs 50/- is payable as registration fee of a
society and it should accompany the request for registration payable in cash or by
Demand Draft. In Union Territory of Delhi the Registrar intimates the applicant
society by a letter stating that all the formalities have been completed and the
documents filed are acceptable. The applicant society is required to deposit the
registration fee after receipt of this letter. Formalities of registration and
requirement of documents etc. may differ slightly from State to State. The
applicants may, therefore, contact in advance the Registrar of Societies having
jurisdiction.

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Registration Certificate:
On receiving the documents mentioned above the
Registrar shall satisfy himself about the compliance of the provisions of the Act
and correctness in his hand that the society is registered under the Principal Act
1860 or other corresponding Acts.
Presumption of Registration:
Presumption that the society was duly registered under the Act
arises not on the Certificate of Registration granted by the Registrar but on the
copies of the Rules and Regulations and Memorandum certified under Sec. 19
which constitutes them prima facie evidence of the matters therein contained.

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Foreign Contribution:
The Foreign Contribution (Regulation) Act, 1976
(FCRA) requires all Indian NGOs that receive foreign contributions to receive
clearance from the Ministry of Home Affairs, in the form of either permanent
FCRA registration or prior permission on a case-to-case basis.
REGISTRATION PROCEDURE UNDER FCRA:
The statutory provision
1.1 Under Section 6 of FCRA, it is clearly provided that any organisation having a
definite cultural/ social/ educational/ religious/ economic object shall only accept
foreign contribution after satisfying two conditions :
(i) It must register itself with the Central Government.
(ii) It must agree to receive foreign contribution only through one specific bank
account.
1.1-1 The statutory provision
Provisions under section 6(1) and 6(1-A) are as under :
“Certain associations and persons receiving foreign contribution to give intimation
to the Central Government : (1) No association [other than an organisation referred
to in sub-section (1) of section 5] having a definite cultural, economic, educational,
religious or social programme shall accept foreign contribution unless such
association—
(a) registers itself with the Central Government in accordance with the rules made
under this Act ; and
(b) agrees to receive such foreign contributions only through such one of the
branches of a bank as it may specify in its application for such registration,
and every association so registered shall give, within such time and in such manner
as may be prescribed, an intimation to the Central Government as to the amount of
each foreign contribution received by it, the source from which and the manner in
which such foreign contribution was received and the purposes for which and the
manner in which such foreign contribution was utilised by it :
Provided that where such association obtains any foreign contribution through any
branch other than the branch of the bank through which it has agreed to receive
foreign contribution or fails to give such intimation within the prescribed time or in
the prescribed manner, or gives any intimation which is false, the Central
Government may,

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by notification in the Official Gazette, direct that such association shall not, after
the date of issue of such notification, accept any foreign contribution without the
prior permission of the Central Government. (I-A) Every association referred to in
sub-section (1) may, if it is not registered with the Central Government under that
sub-section, accept any foreign contribution only after obtaining the prior
permission of the Central Government and shall also give, within such time and in
such manner as may be prescribed, an intimation to the Central Government as to
the amount of foreign contribution received by it, the source from which and the
manner in which such foreign contribution was received and the purposes for
which and the manner in which such foreign contribution was utilised by it.”
As per the provisions of Section 6 no association is entitled to receive foreign
contribution unless it has either registered itself or has obtained prior permission.
1.1-2 Organisation must already be registered - Only those organisations are
eligible for registration under FCRA, which are registered under Society
Registration Act, 1860, the companies Act, 1956, the Bombay Public Trust Act,
1950 or as a public trust under general law. Though FCRA does not distinguish
between registered and unregistered organisations, but the implications of section
6(1) virtually ensures that only register organisations would be able to get
themselves registered as a legal entity under FCRA. Section 6(1) categorically
specifies that organisation having a definite cultural, economic, educational,
religious or social programme shall only accept foreign contribution. In the
absence of registration and written documentation, it may not be possible for an
organisation to prove definiteness of its aims and objectives.
1.1-3 Specification of bank branch - Sub-section (1)(b) of section 6 of FCRA
further specifies that the foreign contribution should only be received from one of
the branches of a bank as specified in the application. It is necessary to open a bank
account designated for receipt of foreign contribution. The account can be opened
with Indian funds before applying for registration. It may be noted that,
subsequently, this account should exclusively remain for crediting foreign
contribution only. Under no circumstance domestic contribution should be mixed
in this account. This foreign contribution does not necessarily mean foreign
currency or exchange, and therefore an organisation may receive foreign
contribution in Indian currency as subsequently receivable or otherwise, within the
scope of FCRA
1.1-4 Preventing acceptance of contributions - The proviso to section 6(1) states
the circumstances under which the Central Government may prevent the
organisation from accepting foreign contribution without prior permission. The
circumstances are :

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(i) the organisation receives foreign funds from an account other that the branch of
the bank through which it had agreed to receive at the time of registration.
(ii) the organisation fails to give intimation within the prescribed time or in the
prescribed manner.

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(iii) the organisation gives any intimation which is false.
If the organisation commits any of the above-mentioned violations, then the
Central Government may by notification, direct such organisation to receive
foreign funds only after taking prior permission. It may be noted that the proviso to
section 6(1) uses the word “may” thereby implying it to be a discretionary power
in the lands of the Central Government which it has to exercise in a just and fair
manner, keeping in view the facts and circumstances of each case.
1.1-5 Form for registration - Organisations desirous of registering themselves with
the FCRA department are required to apply in Form FC-8 along with various
documents.
Checklist of documents to be filed:
The following documents must be filed for obtaining registration : i)
Form FC-8 duly filled up in triplicate.
ii) Audited statement of accounts of past three years.
iii) Annual Report specifying activities of past 5 years.
iv) Detail of the beneficiaries and detail of the socio-economic factors of the region
in which the NGO is working.
v) List and geographical detail of the state, and districts proposed for work.
vi) Certified copy of the Registration Certificate.
vii) Certified copy of the Bye-laws and Memorandum and Article of Association
whichever is applicable.
viii) Copy of certificates of exemption or registration issued by the Income Tax
Department u/s. 80G and 12A.
ix) Copy of any prior permission granted to the organisation.
x) Copy of resolution of Governing Body of the organisation, authorising the
registration under FCRA.
xi) Copy of Power of Attorney or the resolution of Governing Body by which the
Chief Functionary is authorised to submit FC-8.
xii) List of present members of the Governing Body of the organisation and the
office bearers.

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xiii) Copy of any Journal or other publication of the organisation.
xiv) If the association is having any parent or sister or subsidiary organisation,
which is registered under the FCRA then the registration number along with
Ministry of Home Affairs file number should be mentioned.
xv) If the association has submitted any application earlier then its reference
number should be mentioned.
xvi) If the association has received any foreign contribution with or without the
prior approval of the Central Government, then the detail should be given. It may
be noted that the onus of getting registered under FCRA lies on the association and
therefore before accepting foreign contribution, it is the responsibility of
association to ensure all the requisite formalities are complied with and registration
is granted before accepting any foreign exchange.
Time limit for making application for registration:
No specific time limit has been provided under FCRA for
making an application, unlike Income Tax Act, which requires an organisation to
apply within one year from its creation or registration under section 12A. Normally
FCRA is granted after 3 years of active existence, therefore, the application should
be made after three years though nothing in the Act prevents from making such
application earlier.
Application can be filed at any time - Consequently, in our opinion,
application for registration under FCRA can be filed any time after the registration
of the organisation. But, the organisation with a considerable past history of
activities have a greater chance of convincing the FCRA authorities with regard to
the genuiness and the relevance of their purpose.
Field Enquiry:
The FCRA department may ask the intelligence bureau for a report. Some
authorities from the intelligence bureau may visit the office and the project area of
the organisation and inspect the books of account and other records available. On
the basis of the reports submitted by the intelligence bureau the FCRA department
decides whether to accept or reject the application.
The FCRA department issues a registration certificate and provides a permanent
registration number. This registration number is required to be quoted in all future

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correspondences and filling of returns and forms. Time limit for granting
registration

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There is no time limit mentioned under the FCRA either for
granting or rejecting the application. Normally, the application is expected to be
processed within a period of six months but it is found that applications for
registration are delayed for even two to three years. The FCRA guidelines
available on the website of the Ministry of Home Affairs, provide that the
certificates from recommending activities (District Collector, etc.) are very
important and help in expending the process of registration. In the absence of a
prescribed time limit, it is expected that the authority should dispose of the
application within a reasonable time. The duration of such reasonable time will
depend upon the prevailing facts and circumstances.

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Undertaking by the Chief Functionary:
The application form which is FC-8, was amended vide Foreign
Contribution (Regulation) (Amendment) Rules, 1996[GSR 592(E), dt.
27.12.1996]. After the amendment an undertaking has to be given by the Chief
Functionary, affirming that the informations are correct and the organisations
would undertake to abide by the following :
(i) Inform within 30days regarding change of name, address, objects, etc. with
evidence.
(ii) Not to accept any foreign contribution without prior permission, if more that
50% of the office bearers as were mentioned in the application for registration are
changed or replaced.
(iii) Not to change the bank account or branch of the bank without prior
permission.
(iv) Not to accept foreign contribution before the registration is granted or with
prior permission only.
Text of the undertaking:
The text of the undertaking is a follows : “ The Association named
hereinabove affirms that the information furnished above is correct and undertakes
:
i) to inform the Central Government (Ministry of Home Affairs) within thirty days,
if any, change takes place in regard to the name of the Association, its address, its
registration, its nature, its aims and objects with documentary evidence effecting
the change ;
ii) to obtain prior permission for change of office bearer(s), if at any point of time
such change causes replacement of 50% or more of the office bearers as were
mentioned in the application for registration under the Foreign Contribution
(Regulation) Act, 1976 and undertakes further not to accept any foreign
contribution except with prior permission till the permission to replace the office
bearer(s) has been granted.

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iii) not to change the bank or branch of the bank without prior permission of the
Central Government. The reasons for change of bank or branch of the bank shall
have to be relevant and justifiable ; and
iv) not to accept any foreign contribution unless it has obtained either the
registration number, as applied for hereinabove, or prior permission of the Central
Government under sub-section (1-A) of Sec. 6 of the Foreign Contribution
(Regulation) Act, 1976.”
Nature and implication of the undertaking :
It is important that the nature and implication of this undertaking is
properly understood by the functionaries of the applicant organisation. The
following analysis is made in brief :
i) If there is any change in the name, address, the nature of registration, aims and
objectives at any time after the submission of the application, then the FCRA
authorities are required to be intimated within a period of 30 days.
ii) The office bearers of the association are required to continue in the office and
any change which causes more than 50% of the office bearers as were mentioned
in the application for registration, automatically debars the organisation from
accepting foreign contribution. So in case where more than 50% of the office
bearers are changed then it is required that the FCRA authorities are informed and
due approval is taken. During the period between the date of change and the
approval from FCRA authorities, the FCRA registration will remain suspended and
the association cannot receive any foreign contribution. If it wants to receive
foreign contribution it can do with prior permission only. This provision has been
introduced to prevent the misuse and sale of FCRA registered associations.
iii) Under FCRA only one bank account is permissible for the purpose of receiving
foreign contribution. Therefore, for the change in bank account, due information
should be given to the FCRA authorities and the change should be effected only
after receiving the permission for same.

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NGOs bringing out newspapers/newsletters:
NGOs engaged in publishing newspaper registered under the Press
Registration of Books Act, 1867 are required to furnish details regarding such
newspaper and also give a declaration in Form X (enclosed in Annex. 3.1). The
Government Of India issued a notification in 1987 allowing NGOs which have
publications other than newspaper as defined in section 1(1) of Press and
Registration of Books Act, 1867. Further, a certificate is also required to be
obtained from the Registrar of Newspapers of India, that the publication of the
NGOs does not form in the category of newspaper as per section 1(1) and falls in
the category B, which is permissible. The text of the notification is as under :

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“S.O.760(E), Dated August 3, 1987 [F.No.II/21022/14(5)/87-FCRA-I], published
in the Gazette of India.
In exercise of the powers conferred by Section 31 of the Foreign
Contribution(Regulation) Act,1976(49 of 1976), the Central Government hereby
exempts from the operation of the provisions of section 4(1)(b) any association(not
being a political party), organisation or individual (not being a candidate for
election) whoso printed work is –
(i) not a newspaper as defined in section 1(1) of the Press and Registration of
Books Act, 1867 (25 of 1867); or
(ii) not required to be registered under Party V-A of the said Act, though it may, in
fact, be registered by the Registrar of Newspapers of India under the Part : subject
to the condition that such Association (not being a political party), organisation or
individual (not being a candidate for election) whosoever claim exemption under
this order shall furnish a declaration in the Form annexed here to the Central
Government and such declaration shall subsequently be furnished in each calendar
year by 31st January.”
Certificate of Recommendation:
Foreign Contribution Amendment Rules, 2000, inserted clause 10A
in Form FC-1A, requiring the insertion of a certificate from a competent authority.
This certificate can be given by any one of the following :
(1) Collector of District
(2) Department of the Statement Government
(3) Ministry or Department of the Government of India
In this certificate the competent authority certifies the address and the field of
activities in which the organization is working. It also states that there are no
adverse antecedents of the organization, the proposed activities will be beneficial
to the people living in that area and the detail of prior permission if taken earlier.
Refusal to grant registration:
As far as the rejection or refusal of an application for registration is
concerned, section 6 does not state anything clearly. Section 6(1) is completely

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silent about the grounds or the reasons on the basis of which an application can be
rejected.

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Any authority possessing the power to register has an implicit power to reject or
refuse to register, as well, but the power of refusal should not be arbitrary,
ambiguous and unreasonable and should be in consonance with the purpose and
intent of section10 of the Act. If the application of an association is refused, then
the authorities have to communicate the reasons for refusal to the applicant. It is
necessary that the order of rejection must contain the reason on the basis of which
the refusal has been made, so that in case of an appeal the court could study the
tenability of such reasons. The principles of “audi alteram partem” are very much
applicable during the rejection of an application as basic principle of natural
justice.

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Section-25 Company
According to section 25(1)(a) and (b) of the Indian Companies Act,
1956, a section-25 company can be established ‘for promoting commerce, art,
science, religion, charity or any other useful object’, provided the profits, if any, or
other income is applied for promoting only the objects of the company and no
dividend is paid to its members.
Legislation:
Section-25 companies are registered under section-25 of the Indian Companies
Act. 1956.
Main Instrument:
For a section-25 company, the main instrument is a Memorandum and articles of
association (no stamp paper required).
Trustees:
A section-25 Company needs a minimum of three trustees;
there is no upper limit to the number of trustees. The Board of Management is in
the form of a Board of directors or managing committee.
Application for Registration:
1. An application has to be made for availability of name to the registrar of
companies, which must be made in the prescribed form no. 1A, together with a fee
of Rs.500/-. It is advisable to suggest a choice of three other names by which the
company will be called, in case the first name which is proposed is not found
acceptable by the registrar.
2. Once the availability of name is confirmed, an application should be made in
writing to the regional director of the company law board. The application should
be accompanied by the following documents:

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 Three printed or typewritten copies of the memorandum and articles of
association of the proposed company, duly signed by all the promoters with
full name, address and occupation.
 A declaration by an advocate or a chartered accountant (Or practicing
company secretary or cost accountant) that the memorandum and articles of
association have been drawn up in conformity with the provisions of the Act
and that all the requirements of the Act and the rules made thereunder have
been duly complied with, in respect of registration or matters incidental or
supplementary thereto.
 Three copies of a list of the names, addresses and occupations of the
promoters (and where a firm is a promoter, of each partner in the firm), as
well as of the members of the proposed board of directors, together with the
names of companies, associations and other institutions in which such
promoters, partners and members of the proposed board of directors are
directors or hold responsible positions, if any, with description of the
positions so held.
 A statement showing in detail the assets (with the estimated values thereof)
and the liabilities of the association, as on the date of the application or
within seven days of that date.
 An estimate of the future annual income and expenditure of the proposed
company, specifying the sources of the income and the objects of the
expenditure.
 A statement giving a brief description of the work, if any, already done by
the association and of the work proposed to be done by it after registration,
in pursuance of section-25.

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 A statement specifying briefly the grounds on which the application is made.
 A declaration by each of the persons making the application that he/she is of
sound mind, not an undischarged insolvent, not convicted by a court for any
offence and does not stand disqualified under section 203 of the Companies
Act 1956, for appointment as a director.
3. The applicants should also, within a week from the date of making the
application to the registrar of the companies, publish a notice in the
prescribed manner at least once in a newspaper in a principal language of the
district in which the registered office of the proposed company is to be
situated or is situated and circulating in that district, and at least once in an
English newspaper circulating in that district.
4. The registrar of companies may, after considering the objections, if any,
received within 30 days from the date of publication of the notice in the
newspapers, and after consulting any authority, department or ministry, as he
may, in his discretion, decide, determine whether the license should or
should not be granted.
5. The registrar of companies may also direct the company to insert in its
memorandum, or in its articles, or in both, such conditions of the license as
may be specified by him in this behalf.
The End