MERGER/AMALGAMATION OF TWO PUBLIC TRUSTS

1. INTRODUCTION

1.1 This research note deals with legal framework (including the procedure) governing the merger of two public trusts, specifically educational
trusts, in the absence of a specific state/centre law on the subject.

1.2 Herien, our focus is on the Odisha state specifically and other states also which do not have laws governing public charitable and religious trusts.

2. PUBLIC CHARITABLE TRUST: LEGAL FRAMEWORK

2.1 Public trusts set up in India are categorised into charitable and religious trusts and are governed by the following acts 1 but not limited to-:
a. Charitable and Religious Trusts Act 1920,
b. The Religious Endowments Act 1863,
c. The Charitable Endowments Act 1890,
d. Registration Act 1908,
e. Civil Procedure Code 19082 and
f. State Acts - additionally regulated by specific state legislations in the respective states such as the Maharashtra Public Trusts Act 1950
and the Gujarat Public Trusts Act 1950 etc.3

2.2 Charities and charitable institutions, charitable and religious endowments and religious institutions is a subject of the Concurrent list of the
Seventh Schedule to the Constitution of India, where both the Centre and the States are competent to legislate and regulate charitable
organisations. Under Schedule VII of the Indian Constitution, the subject ‘Trust and Trustees’ finds mention at Entry No. 10 in the Concurrent
List and ‘Charities & Charitable Institutions, Charitable and religious endowments and religious institutions’ find place at Entry No. 28 of this list.

1
https://www.khaitanco.com/sites/default/files/2020-12/Global%20Guide%20to%20Trust%202020%20-%20chapitre%20India.pdf – Page 4
2
https://www.caaa.in/Image/Laws%20relating%20to%20Charitable%20Organisations%20in%20India.pdf – Page 9
3
Entry 28, List III of Schedule VII to the Constitution of India empowers the Union and State Legislatures to regulate charities and charitable institutions, charitable and religious endowments
and religious institutions. However, not more than 8 (eight) State Legislatures have passed laws governing charitable and religious institutions. In more than 19 (nineteen) States, there are no
focused legislations regulating charitable activities. Being the State subject, the laws passed by the States do not follow any uniform model and may vary substantially from each other in terms
of administration, governance, control and State intervention or participation in charitable or religious institutions.
 2.3 If the charitable institution is formed as a Public Trust, it will be governed by the Public Trust Act applicable in the relevant State. However, if no
Public Trust Act exists in that state, then the applicable legislation will be the Central Acts like the Indian Trusts Act 1882.4

2.4 The object of these trusts is one of charity, promoting education, art, culture, spreading religious and spiritual awareness and other objects of
public good for the benefit of the public at large or a large section of the public. 5Moreover, the term ‘charitable purpose’ has been defined
under Section 2(15) of the Income Tax Act 1961 and under Section 2 of the Charitable Endowments Act 1890, to include relief of the poor,
education, medical relief, and the advancement of any other object of general public utility.

3. CHARITABLE AND RELIGIOUS TRUSTS ACT 1920

3.1 This Act was enacted to provide judicial oversight and facilitate the proper administration of trusts created for public charitable and religious
purposes. The preamble6 of this Act establishes that the Act applies broadly to all public trusts (including educational public trust) created for
charitable or religious purposes.

3.2 Section 7 talks about the powers of trustee to apply for directions. It says that “ Save as hereinafter provided in this Act, any trustee of an
express or constructive trust created or existing for public purpose of a charitable or religious nature may apply by petition to the Court, within
the local limits of whose jurisdiction any substantial part of the subject-matter of the trust is situate, for the opinion, advice or direction of the
Court on any question affecting the management or administration of the trust property, and the Court shall give its opinion, advice or
direction, as the case may be, thereon: Provided that the Court shall not be bound to give such opinion, advice or direction on any question
which it considers to be a question not proper for summary disposal.”

3.3 The case In Re Swami Smaranananda and Ors., 7serves as an important judicial precedent in determining the proper legal approach for merging
two public trusts. In this case, the trustees of Ramakrishna Math, Belur (Belur Math) and Sri Sri Ramkrishna Kathamrita Trust jointly petitioned
the Calcutta High Court under Section 7 of the Act for permission to merge the Kathamrita Trust with Belur Math. The court allowed the merger
by considered the following:
4
https://www.caaa.in/Image/Laws%20relating%20to%20Charitable%20Organisations%20in%20India.pdf – Page 7
5
https://www.khaitanco.com/sites/default/files/2020-12/Global%20Guide%20to%20Trust%202020%20-%20chapitre%20India.pdf – Page 4
6
An Act to provide more effectual control over the administration of Charitable and Religious Trusts. WHEREAS it is expedient to provide facilities for obtaining information regarding trusts
created for public purposes of a charitable or religious nature, and to enable the trustees of such trusts to obtain the directions of a Court on certain matters
7
In Re Swami Smaranananda and Ors 2024 Cal HC
 a. Commonality of objectives between the two trusts,
b. The absence of statutory prohibitions against the merger,
c. The practical necessity of the merger to ensure effective functioning

3.4 In line with this case, the following legal principles seem to emerge for merging two educational public trusts where no specific law governs the
process:

a. Trustees May Apply to the Court for Directions : Since the merger of public trusts is not explicitly addressed under any central or state
law, the trustees of the merging trusts may file a joint petition under Section 7 in the jurisdictional court.
b. Court's Role in Reviewing the Merger : The court will assess whether the objects of both trusts are aligned, the court will determine if
the merger is in the public interest and if the merger is permitted, the court will issue appropriate directions to ensure an orderly
transition of assets and obligations.
c. Effect of the Court’s Order:
i) The assets and liabilities of the transferor trust will vest in the transferee trust.
ii) The separate legal identity of the transferor trust will cease to exist.
iii) The transferee trust will take over all obligations, including those related to administration, taxation, and compliance with
statutory authorities.

3.5 Stepwise Procedure for Merger

4. THE CODE OF CIVIL PROCEDURE 1908

4.2 Accordingly, a merger of two public trusts can be sought under Section 92 CPC, if the merger/amalgamation/restructuring deemed necessary
for efficient administration. So, Section 92 CPC is a special provision designed for public charitable and religious trusts. It allows interested
persons to institute a suit after obtaining leave from the court, seeking orders for:
a. The proper administration of a trust
b. Settling a scheme for the trust
c. Directions for the administration or management of the trust property

4.3 Thus, if the merger of two educational charitable trusts is required to ensure better administration, trustees can invoke Section 92 CPC for a
court decree facilitating the merger.

4.4 In Gun Mala Kapur vs. State 2022, the Delhi High Court considered a petition under Section 92 CPC, seeking court approval for the
amalgamation of seven public charitable trusts. The trustees argued that consolidation would enable more efficient administration. The Court
observed the following:

a. Granted leave under Section 92, permitting the trustees to file a suit for the scheme of amalgamation
b. Held that the restructuring was justified as it served the interests of the public charitable purpose and the restructuring would improve
efficiency by eliminating duplicative administrative work
c. Approved the scheme of amalgamation proposed by the trustees
d. Ordered that the assets, liabilities, and financial obligations be consolidated under the surviving trust, simplifying regulatory compliance

5. CONCLUSION
5.1 In the absence of a specific statutory framework governing the merger of public charitable trusts, including educational trusts, trustees must
seek judicial intervention to facilitate such restructuring. The Charitable and Religious Trusts Act 1920 provides a mechanism under Section 7,
 allowing trustees to apply to the court for directions on trust administration, including mergers. The case of In Re: Swami Smaranananda & Ors.
establishes that courts may approve mergers if the trusts share common objectives and if no statutory prohibition exists.

5.2 Additionally, Section 92 of the Code of Civil Procedure 1908 serves as an alternative judicial remedy, particularly when the court’s direction is
necessary for trust administration. The Delhi High Court's decision in Gun Mala Kapur vs. State, reaffirms that courts may approve trust mergers
when they enhance administrative efficiency and serve the public interest. This legal precedent strengthens the argument that trustees may file
a suit under Section 92 CPC for a court decree approving the merger.