loan on trust property
nilesh kothekar
(Querist) 03 August 2011
This query is : Resolved
hellow sir ,
we are running trust and we want to take loan on the property of the trust,now we have 80 rooms and we want to build the shopping complex over there in 4000sq feet,so income will rise,want sugession can we get loan,and if yes then what doccuments are required?
Advocate Rajkumarlaxman
(Expert) 03 August 2011
you can get loan. catch hold of local bank officials for loan documents but on the face you need is 3 years it returns. source of income and loan repayment mode and collateral security i.e papers of the land in the name of the trust and resolution f the members and acceptnce of all members for loan
M/s. Y-not legal services
(Expert) 04 August 2011
Since you want your load for build a commercial complex.. So surely the bank will sanctioned loan to you. Usually bank will be stand q for your loan..
M/s. Y-not legal services
(Expert) 04 August 2011
Even if the bank not entitled your application mean, you can file a writ petition also for your remedy.
malipeddi jaggarao
(Expert) 04 August 2011
Mr.Tom, writ petition against whom? Bankers? what remedy the author is seking? Whether writ can be entertained for that remedy?
In this contest I beg to differ with both the experts. Banks are very stringent to extending loans against trust properties. Even for opening of a deposit account, banks follow strict rules as they are dealing with money which belongs to the beneficiaries of the trust, but not the trustees, who are requesting for opening the bank account. Though banks do not give clear-cut guidelines for considering sanction of advances to the trust, they are very clear about even opening of deposit accounts. Some of them I quote herebelow:
The original Trust Deed (instrument / Document creating the Trust) must be obtained for examination. Such instrument may be a Trust Deed or scheme framed by a competent authority such as a Charity Commissioner or by an order of court. There are some charitable institutions which are for promotion of education or for providing medical aid or for furtherance of religious activities etc., which have in addition to the Trust Deeds their own rules and bye-laws or constitutions for the administration of the trust and the powers of the trustees, in these cases such rules and bye-laws or constitutions should be treated as part of the Instrument of Trust. In what follows the word "instrument" is used as a general term meaning any document creating the trust and defining the powers of trustees. It should be examined as to:
(a) Whether the trust is a public charitable trust or a private trust.
(b) What is the minimum number of trustees. Provided in the instrument.
(c) Whether the Instrument contains any provision authorising the trustees to open a bank account of the type desired to be opened.
(d) Whether the Instrument contains any provision authorising the operation of such account by a number of trustees which is smaller than their full or maximum number.
(e) Whether the Instrument contains any provision authorising the trustees to delegate their powers to some of them.
(f) Whether there are any provisions in the Trust Deed which place onerous responsibilities on the Bank regarding the operation of the account.
Further opening of deposit account/initiating dealings with the Bank depends on:
(a) If the trust is a public charitable trust, enquiries must be made whether it is registered with the Charity Commissioner or such other competent authority. In most (though not all) of the States, there are Public Trusts Acts under which any public charitable trust is compulsorily required to be registered with the Charity Commissioner or such other authority appointed under the Act, and a certificate of registration is issued to the trustees. The original of such certificate of registration should be called for, examined and a copy taken on record. There can be no certificate of registration in respect of a wholly private trust i.e. a trust with no charitable objects, but made solely for the benefit of private individuals, mostly family members of the settler.
(b) The trust should have the prescribed minimum number of trustees as provided in the Instrument.
(c) If the Instrument contains any provision authorising the trustees to open a bank account, any restriction or condition implied by such provision regarding the operation of the account must be strictly complied with by the trustees.
(d) If the instrument authorises the operation of a bank account by a number of trustees less than their full number, the operation must be allowed by the specific number mentioned in the Instrumen
(e) If there is a provision in the Instrument regarding the operation of a bank account by some only out of all the trustees, it is NOT necessary to see whether there is a general provision authorising the trustees to delegate their functions and powers to some of them. If, however, there is nothing in the Instrument regarding the operation of bank accounts, the provision authorising delegation to some of the trustees becomes relevant. If, for instance, it is provided that there shall be five trustees and that they can delegate their powers to any two of them, the operation of the account can be permitted by any two of them.
(f) The operation of the account by only one of several trustees can be permitted only if the Instrument specifically and in clear terms authorises; such operation.
(g) If the Instrument places any restrictions on the operation of the bank account, these restrictions should be strictly complied with. For instance, the Instrument may provide that the account should be operated by one particular trustee (sometimes called the "Managing Trustee") jointly with any two of the rest of them, or it may provide that the account should be operated upon by any one of a particular group of the trustees jointly with any one of the remaining trustees. The latter type of provision is sometimes found in Provident Fund Trusts. The operation must be allowed accordingly.
With regard to trust accounts of any nature, the principle of treatment by a banker is that he must not be knowingly a party to a breach of trust, otherwise he would be liable or accountable to the beneficiaries or any person interested in the trust. In other words, if an account holder places money that a banker knows is trust money in his charge, the banker must not allow the account holder to draw out the money for a purpose which the banker knows or has sufficient reasons to believe, to be inconsistent with the account holders duties as a trustee. On the one hand, the banker must not act upon mere suspicion, on the other hand, he must not ignore a circumstance which shows that the moneys are being drawn for a purpose not consistent with the duties of a trustee. It is because of such onerous nature of the banker's liability regarding a trust account that elaborate procedure is required to be followed.
The following are some of the precautions which arise from the abovementioned general, principles:
(a) A cheque payable to a trust account should not be collected for the private account of a trustee. In no case should a trust account cheque be credited into the overdrawn private account of a trustee himself.
(b) Banks should exercise caution in paying cheques drawn on trust accounts and ensure that such payment does not contravene the provisions of the trust deed.
(c) Proceeds of the investments of the trust or Term Deposits should not be allowed to be collected or paid into private account of a trustee.
(d) Trust account's should not normally be allowed to be overdrawn. Any request by trustees or loan or overdraft arrangements should be referred to Head Office of a particular BANK for instructions.
(e) The trustees cannot appoint attorneys where, by so doing, they delegate the exercise of their discretion except in terms of the clearest authority to do so under the Instrument.
(f) Any one of the trustees may stop payment of a cheque whether he is the signatory of the cheque concerned or not. If the trustees desire to remove the stop payment instructions it is advisable to have them issued a new cheque, alternatively, instructions cancelling stop payment may be accepted, if the letter is signed in the same manner as
By looking into the above, even to open a deposit account, it is not so easy. Hence to obtain loan is not a routine matter. I advise my colleagues to be careful while replying on the subject which is sensitive so that the author will not be misguided.
n.k.sarin
(Expert) 04 August 2011
In addition to all that you must have permission from the distt judge.
bhagwat patil
(Expert) 04 August 2011
You will get loan after proper due diligence of proerty and project report and projected fund flow statement and noc from diff.govt autharities .may contact.
nilesh kothekar
(Querist) 04 August 2011
the trust is regd under section A, of charity commissionar, and we dont pay IT.
Nagesh Rudrakanthwar
(Expert) 06 August 2011
you needs to submit past 3 years return also needs to submit project report on the conceived business idea with envisioned benefits sought from the project.
