A fund or asset donated to a philanthropic or non-profit organisation is a charity endowment. The primary objective of a charity endowment is to provide reliable and long-term assistance to fund the charitable goals of an organisation. A charitable endowment is created by individuals, families, or institutions who want to affect a charity or organisation permanently.
The Charitable Endowments Act of 1890 is a significant Act in India’s legal structure. The Act was intended to manage and control charitable trusts and endowments. The accountability and transparency of the Act continue to impact current charitable trust rules. The Act was an essential piece of legislation adopted in the British colonial era, with the primary objective of ensuring that charitable funds and assets were used for their original objectives, with no mismanagement or misuse.
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Charitable Endowment Act
The Charitable Endowment Act of 1890 got assent on 7 March 1890 and came into force on 1 October 1890. This Act aims to regulate the ownership and management of assets for charitable objectives. Furthermore, the Act ensures the proper administration of such assets held in trust for charitable causes, emphasising transparency and accountability in their utilisation.
As per Section 2 of The Charitable Endowment Act of 1890, a ‘charitable purpose’ refers to activities such as aiding people experiencing poverty, supporting education, providing medical assistance, and promoting any other beneficial cause for the good of the public. The Act does not detail a purpose, religious instruction, or worship.
Appointment and Incorporation of Treasurer of Charitable Endowments
Section 3 states that the Central Government can appoint an official to serve as the Treasurer for Charitable Endowments in India. State Governments can do the same for their respective states.
- The Treasurer appointed by the Central Government and state government will be a legal entity known as the ‘Treasurer of Charitable Endowments for India’ and ‘Treasurer of Charitable Endowments for State’, respectively.
- For acquiring, holding, and transferring assets under this Act, the Treasurer will have perpetual succession and an official seal and can engage in legal actions using its corporate identity.
Definition of Appropriate Government
Section 3A details ‘the appropriate Government’, which states that for a charitable endowment limited to a single State and not coming under the authority of the Central Government, the appropriate Government will be the State Government. For other charitable endowments, the appropriate Government will be the Central Government.
Orders Vesting Property in Treasurer
Section 4 of the Act states that if the property is designated for charitable purposes, the appropriate Government can transfer the property to the Treasurer of Charitable Endowments through an official notice in the Official Gazette.
- This transfer is based on mutually agreed terms between the Government and the applicant.
- Once transferred, the Treasurer is granted all associated ownership documents. This transfer does not obligate the Treasurer to manage the property like a trustee nor does it impose trustee duties.
Schemes for the Administration of a Property Vested with the Treasurer
Section 5 states that if a person applies to the appropriate Government under this Act, the said Government can make a scheme for managing property entrusted to the Treasurer of Charitable Endowments. This Scheme can also designate individuals who are not the Treasurer to administer the property.
- On application by the applicant, the Government can make alterations to an existing plan or replace it with a new one. Whenever such a plan becomes effective, then it will remain in force as long as the property is with the Treasurer or until it is changed.
- When such a scheme becomes operational, it presides over any conflicting court orders, and its validity cannot be questioned in court. However, the court can still determine if the Government responsible for the plan was correct.
- The plan must honour the intentions of the trust’s creator. If a plan is created for property but not yet transferred to the Treasurer, then it will only take effect once the transfer is complete.
Mode of Applying for Vesting Orders and Schemes
Section 7 states that the application must be made by the person or persons responsible for managing the trust when the property is held for charitable purposes. If multiple individuals are involved, then the application can be made by those individuals or most of them.
The executor or administrator of a deceased trustee’s estate, who was responsible for property held in trust for charitable purposes, is considered to be managing the trust.
Bare Trusteeship of Treasurer
Section 8 states that a treasurer of Charitable Endowments cannot participate in managing any trust in which a portion of the property is currently vested under this Act.
- The Treasurer must maintain an account for each property currently entrusted to them, especially transactions involving monetary assets.
- The property or its generated income are to be used as per the directions given in the vesting order as per Section 4, or as per the applicable Scheme mentioned in Section 5, or adhere to both of these documents.
The Annual Publication of a List of Properties Vested in the Treasurer
Section 9 states that a treasurer of Charitable Endowments is required to annually publish in the Official Gazette a list of all the properties currently entrusted to them under this Act. This should be done at a time determined by the appropriate Government. They must also summarise all their accounts, as specified in Section 8 (2).
Limitation of the Functions and Powers of the Treasurer
Section 10 states that a treasurer of Charitable Endowments will always be the sole trustee. However, they cannot, as Treasurer, acquire or retain any property unless stated by the Act.
- Furthermore, they cannot transfer any property under their control unless compelled by a court decree that removes them from the property or by a direction from the authority that has initially vested the property in them.
- Such a direction may instruct the Treasurer to either sell or handle the disposition of any property under their control. They can also invest the earnings from the sale or other disposal of the property in monetary securities.
- If a treasurer of Charitable Endowments is removed from control of any property through a direction issued by the appropriate Government, then the property will be transferred to the individual or individuals responsible for managing it. They will then hold the property under the same terms and conditions applicable when the Treasurer had control over it.
Provision for Continuance of Office of Treasurer in Certain Contingencies
Section 11 states that if the government office held by an official appointed as Treasurer of Charitable Endowments is abolished or renamed, the appropriate Government can appoint the same individual or another government official from the new office with the same title to serve as the Treasurer. In such a case, the person from the new office is regarded as the successor to the previous office holder.
Transfer of Property from one Treasurer to Another
Section 12 states that if a new treasurer is appointed due to changes in areas, the Central Government can transfer property from one Treasurer of Charitable Endowments to another, legally validating the transfer.
Power to Make Rules
Section 13 states that the appropriate Government can make rules that should be consistent with this Act for various purposes, including setting fees for properties managed by treasurers of Charitable Endowments, regulating the publication of schemes or changes to them, defining accounting practices and audits, and ensuring the objectives of the Act are satisfied.
State government rules must be presented to the State Legislature. By contrast, Central Government rules must be presented to Parliament, which can be modified or annulled within 30 days of the presentation.
Indemnity to Government and Treasurer
Section 14 of the Act states that no legal action can be initiated against the Government for any actions taken under this Act, including alleged negligence or failure to perform its duties.
Similarly, no legal action can be initiated against a treasurer of Charitable Endowments. However, in present cases, the treasurer can be held accountable for divesting property not intended for charitable purposes or responsible for the loss of property due to their willful negligence.
Saving With Respect to the Advocate General and Official Trustee
Section 15 states that this Act does not affect existing laws that empower an Advocate General to act in charity matters or under the Official Trustees Act, 1913, which governs property vested for charitable purposes with Official Trustees.
The Charitable Endowment Act of 1890 has influenced present charitable trust rules and has given the power to administer charity trusts and endowments in India. The Government can increase regulatory monitoring in the upcoming year to ensure that charitable assets are managed and used correctly. These measures could include stricter reporting requirements, more frequent audits, and fines for noncompliance.
The Act could be modernised and amended to reflect current practices and address developing issues to include provisions for digital record-keeping, online reporting, and ensuring transparency. Efforts can be made to broaden the scope of the Act to include a broader range of charitable activities and organisations, particularly activities addressing new and growing societal needs.
FAQs on the Charitable Endowments Act of 1890
What is the objective of the Act?
The objective of the Act is to ensure the proper management and utilisation of assets for charitable causes and prevent mismanagement or misuse of these assets.
What is the role of the Treasurer under the Act?
The Treasurer, in his official capacity, manages and utilises the charitable assets and ensures that the Act's provisions use them.
What does 'charitable purpose' mean under the Act?
As per Section 2 of The Charitable Endowment Act of 1890, ‘charitable purpose’ denotes activities such as aiding people experiencing poverty, supporting education, providing medical assistance, and promoting any other beneficial cause for the public good. However, this does not include religious instruction or worship.
What role does the Act play in scheme settlements?
Section 5 of the Act allows the relevant Government to settle schemes for the administration of properties held by treasurers of Charitable Endowments. These schemes can be modified or substituted with the agreement of the concerned parties.
Does the Act interact with other laws related to charities and trusteeship?
Section 15 of the Act does not affect other existing laws that empower officials such as Advocate Generals to act in charity matters or laws like the Official Trustees Act of 1913 that governs property vesting in Official Trustees for charitable purposes.