Where there is a trust, there is a breach

trustSince, being the part of the legal profession, I take it as my responsibility to ensure that Justice should not only be done, but seem to have been done. In today’s world where most of the financial transactions are done in the name of “friendly loans” without any precautions being taken because of the long lasting friendship and trust factor involved in it. In most of the cases as a matter of precaution a blank cheque is being taken for security purposes, but now the question arises is whether the cheque taken is sufficient to recover the money if the friendly terms do not remain the same as they were when the loan was given. The answer to it is long lasting litigation U/S 138 NIA without any other proof or if the person is lucky enough then settlement. But if the nothing positive happens the money as well as the friendship is gone forever.

Dealing with so many genuine friendly loan cases wherein the hard earned money was given and in token of the same cheques were taken, but still the fate of the cases are same, long pending litigations with no proof to prove the transaction and finally settling the matter with even half the amount to get the money back. In order to ensure the fairness in transaction and having an upper hand it is my humble advice to take the necessary precautions in order to save time, money and friendship for future.

Precautions to be taken while giving friendly loans:-

1. Always pay the money through cheque or make an account transfer to keep a record of the transaction.

2. Pay the money which you can justify in the court of law, because in most of the cases the amount paid is so much high that one could not justify as per as his Income Tax Returns.

3. Make a written agreement; take a pronote and a cheque everything in his handwriting so that he cannot take the defense that his signatures are taken by fraud or forgery.

4. Keep sending him emails or text messages through whatsapp in such a way so that he admits his liability to keep a record as an evidentiary proof in the court of law, because after the amendment of the Information Technology Amendment Act, even the audio and video recordings are admissible in the court of law.

5. Last but not the least always makes some witness to the loan agreement, who could not be win over by the other party in the court of law.

Hope you liked the suggestions put herein and they will help you to save your money and friendship as well.

What are the Popular Non Government Organisation (NGO) Entities in India?

If you are thinking for starting a new Non Government Organisation (NGO) in India then first you have to know, what is an NGO? and which popular NGO entity is best for your goal which you want to achieve;

 

ngo-entityWhat is an Non Government Organisation (NGO)?

Any organisation working for a social, cultural, economic, educational or religious cause is termed as an NGO or Non Government Organisation. NGOs have made favourable indents to needy sections of Indian society at par with a constantly changing socio-economic climate. NGOs have reached out to all sections of society including women, children, pavement dwellers, unorganised workers, youth, slum-dwellers and landless labourers.

Documents requirements for an NGO
  • Income & Expenditure Statement
  • Receipt & Payments Statement
  • Balance Sheet
  • Auditors Report
  • Activity/Annual Report of The Organisation for the previous year.
  • Budget Estimates for the project for current year
  • Details of Beneficiaries
  • Details Managing Committee
  • Details of Employees on Form
  • Copy of Registration Certificate
  • Memorandum of Association / bye-laws/ Articles.
  • Utilisation Certificate in respect of grants released in the previous year
  • List of Assets acquired wholly or substantially out of government grants under GFR 19

An NGO can also be formed under various legal identities:

(i)  Society registered under Societies Registration Act, 1860.

(ii)  Trust (Formed under the Trust deed and registered with Income Tax Authority.)

(iii) Limited company incorporated under section 25 of the Companies Act, 1956

(iv) Co-operative Society

(v)  Multi-State Co-operative Society

(vi) Trade Unions

(vii) Political Party in India

 

What is Trust?

A Charitable trust or Trust is a legal entity which can be set up by anyone who has decided to commit themselves in principle to setting aside some of their assets or income for Charitable causes. The main obligation is to work within the charitable purposes and the powers set out in the Trust Deed

To Know more about Firm CLICK HERE:

 

What is Society? 

A Society is formed when people come together to do something with some common purpose which is legal and useful for others. A society should generally not get into profit making activities. Societies are governed by the Societies Registration Act 1860.

To Know more about Society CLICK HERE:

 

What is Sec. 25 Company? 

NON PROFIT COMPANY or Company under sec. 25 – is identical to an ordinary company in all respects except that it is not established for profit and commercial gain.  It is also called a Section 25 Company and is a voluntary association of people, registered under the Indian Companies Act, 1956. It is a company with limited liability that may be formed for “promoting commerce, art, science, religion, charity or any other useful object,” provided that no profits, if any or other income derived through promoting the company’s objects may be distributed in any form to its members.

To Know more about Company under sec. 25 CLICK HERE:

The main differences between a trust, a society and a section 25 company

Public Trust

Society

Section 25 Company

Statute/ Legislation Public Trust Act like Bombay Public Trusts Act of 1950 Societies Registration Act of 1860 Companies Act of 1956
Jurisdiction of the Act Concerned State where registered Concerned State where registered Concerned State where registered
Authority Charity Commissioner Registrar of Societies Registrar of Companies
Registration As Trust As society (and by default also as  Trust in Maharashtra & Gujarat) As Section – 25 company
Main Document Trust deed Memorandum of Associations and Rules & Regulations Memorandum and Articles of Association
Stamp Duty Trust deed to be executed on non-judicial stamp paper of prescribed value No stamp paper required for Memorandum of Associations and Rules & Regulations No stamp paper required for Memorandum and Articles of Association
Number of persons needed to register Minimum two trustees; no upper limit Minimum seven; no upper limit Minimum seven; no upper limit
Board of Management Trustees Governing body or council/managing or executive committee Board of Directors/Managing Committee
Mode of succession on board of management Usually by appointment Usually election by members of the general body Usually election by members of the general body

Co-operative Societies:

In India, cooperative societies were regarded as ideal instruments to motivate the people to come together and help themselves in the process of eliminating the unscrupulous middlemen making huge profit at the expense of the society.

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Multi-State Co-operative Societies:

Those co-operative societies, whose objects are not limited to one state and serving the interests of members in more than one state for social and economic betterment of its members are considered Multi State Co-operative Society.

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Trade Unions:

Trade Union means any combination, whether temporary or permanent, formed primarily for the purpose of regulating the relations between workmen and employers or between workmen and workmen or between employers and employers, or for imposing restrictive conditions on the conduct of any trade or business, and includes any federation of two or more Trade Unions

To Know more about Trade Unions CLICK HERE:

 

Political Party:

Political Party is also a type of an NGO because it has many advantages which a NGO have. If you are thinking to make a new Political Party in India then first you have to know, what is a Political Party?

A political party is a group of citizens who come together to contest elections and hold power in the government. They agree on some policies and programmes for the society with a view to promote the collective good. Since there can be different views on what is good for all, parties try to persuade people why their policies are better than others. They seek to implement these policies by winning popular support through elections.

Three components are needed for a political party:

  • The leaders,
  • The active members and
  • The followers

The Indian political parties are categorized into two main types:

  • National level parties:

National parties are political parties which, participate in different elections all over India.

  • State level parties:

The state level political parties are those, which are recognized in less than four states and they work in the states.

To Know more about Political Party CLICK HERE:

Formation of Trust : How to form a Trust in India?

Formation-of-Trust
Formation of Trust

Public Trusts, at times synonymous with foundations, can be created for public charitable purposes. There is no allIndialevel Act for setting up public charitable trusts. Some of the states inIndiahave enacted Public Charitable Trust Act, while most states inIndiado not have a trust act. An NGO can be created only under a public trust act. Madhya Pradesh and Rajasthan have independent state level public trust acts. Some states, likeWest BengalandBihar, do not have any act to register a public trust. A trust can be registered in one State, but the same may have a scope to operate in any number of States. In the state ofMaharashtraandGujarat, all organizations that are registered as ‘Society’ are by default also registered as Public Trust. The trustees are required to manage the trust and they are also liable for breach of the trust. Trustees are individually as well as collectively responsible for every action carried out on behalf of the trust.

A private trust, created under and governed by the Indian Trusts Act of 1882, aims at managing assigned trust property for private or religious purpose. A private trust does not enjoy the privileges and tax benefits that are available to public trusts or NGOs.

The basic concept of setting up a Public Charitable Trusts relies on the settler (creator or owner) of the trust setting aside some moveable and/or immovable asset to be used by the trustee (eg, administrator of the trust) for achieving the objects (must be legal purpose) of the trust as laid down by the settler. Benefits of such trusts shall be open to people irrespective of caste, creed or faith.)

InIndia, there are thousands of trusts created by the owner of industrial houses and rich individuals and their families. Public Charitable Trusts, under Indian laws are treated as organisations with charitable purpose entitling all the tax benefits applicable. Examples of Public Charitable Trusts promoted by business families are Sir Dorabji Tata Trust, Paragon Charitable Trust, etc.

Under Indian Trust Act, a settler can create a trust with his or her own personal property, designate one or more trustees and lay down the terms and conditions benefiting the identified beneficiary(ies) including one’s own child, relative or any other individual or group of individuals. Private trust or family trust is not a Public Charitable Trusts and hence does not enjoy the privileges entitled to a trust with charitable purpose.

 

What are the Advantages of Trust?

  • Simple process of registration.
  • Simple record-keeping and even simpler regulations.
  • Low possibility of interference by the regulator.
  • Exemption from tax due to charitable nature of operations.

 

What are the Disadvantages of Trust?

  • Tax exemption extended to societies may apply to public trusts only to the extent the Income Tax department accepts their activities as being charitable.
  • As a charitable institutional form, in essence inappropriate for the for-profit, financially sustainable strategic goal of finance operations;
  • No system of equity investment or ownership, thereby, making it less attractive for commercial investors interested in microfinance;
  • Commercial investors generally regard the investments in such entities risky primarily on account of their lack of professionalism and managerial practices and are, therefore, reluctant to commit large volumes of funds to such NGOs;
  • In accordance with Section 45S of the RBI Act, 1934, no unincorporated bodies are allowed to accept deposits from the public. Organisations registered under the Societies Registration Act and the Trust Act are considered unincorporated bodies. Therefore, according to the law, they are not even allowed to collect savings from their clients; and
  • Also vulnerable to the implication under the money lenders (prevention of usurious interest rates) acts of various state governments.

Documents required for trust

  • Detail of all members or trustees of the trust with their address and PAN no.
  • Certified true copies of the Institution’s Registration Certificate
  • Certified true copies of Laws & by-laws of the Institute
  • Copy of income tax registration certificate.
  • Audited Balance Sheet and Income & Expenditure account with Audit Report of last 3 years
  • The original copy of Trust Deed evidencing the creation of the Trust.

 

To form a Trust in India just fill this form: