India has had a Prime Minister’s National Relief Fund (PMNRF) since 1948. In recent years, that fund has emerged as the primary focal point for the mobilisation of public donations in the wake of natural disasters like floods and earthquakes. On March 24, when Prime Minister Narendra Modi announced a national lockdown, the Union home ministry issued a notification declaring the COVID-19 epidemic in India to be a ‘natural disaster’ and invoking the provisions of the National Disaster Management Act to give the government coercive powers.
When heart-rending scenes of migrant workers and their families walking home on foot led to an outpouring of public anger and also public support for these lockdown victims, the PMNRF would have been the logical place to encourage citizens to donate to. Yet, on March 28 evening, Prime Minister Narendra Modi took to Twitter to announce the creation of a brand new fund:
People from all walks of life expressed their desire to donate to India’s war against COVID-19.
Respecting that spirit, the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund has been constituted. This will go a long way in creating a healthier India.
— Narendra Modi (@narendramodi) March 28, 2020
The PM-CARES Fund accepts micro-donations too. It will strengthen disaster management capacities and encourage research on protecting citizens.
Let us leave no stone unturned to make India healthier and more prosperous for our future generations. pic.twitter.com/BVm7q19R52
— Narendra Modi (@narendramodi) March 28, 2020
The third tweet provided a bank account number and other details for contributions. The link to the Press Information Bureau statement in the second tweet is economical with information about the new fund. One could broadly gather that PM-CARES is a public charitable trust. The prime minister is the chairman and members include the defence minister, home minister and finance minister.
The stated objective of the fund is, and I quote,
“Distress situations, whether natural or otherwise, demand expeditious and collective action for alleviating the suffering of those affected, mitigation/control of damage to infrastructure and capacities etc. Therefore, building capacities for quick emergency response and effective community resilience has to be done in tandem with infrastructure and institutional capacity reconstruction/enhancement. Use of new technology and advance research findings also become an inseparable element of such concerted action.
“Keeping in mind the need for having a dedicated national fund with the primary objective of dealing with any kind of emergency or distress situation, like posed by the COVID-19 pandemic, and to provide relief to the affected, a public charitable trust under the name of ‘Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund’ (PM CARES Fund)’ has been set up. Prime Minister is the Chairman of this trust and its Members include Defence Minister, Home Minister and Finance Minister.”
Why not the existing the PM National Relief Fund?
One would have expected the government to be more forthcoming about the objectives and reasons for creating a public charitable trust to basically carry out a government function. Especially when the Prime Minister’s National Relief Fund (PMNRF) has been in existence since January 1948, for meeting exigencies posed by disasters/calamities like COVID-19.
As per figures available on official website, the PMNRF has a balance of Rs 3,800.44 crore. Since the PMNRF has been around as long as this nation, its acceptability is well entrenched. From the information available in the public domain, there does not appear to be any hurdle or legal impediment to use the PMNRF for seeking donations and taking urgent measures for containing the spread of COVID-19. Though spending from the PMNRF is at the discretion of the prime minister, decades of existence must have evolved a practice, firmly rooted in convention.
In this backdrop, the news about PM-CARES took a lot of people by surprise. The antipathy of the current government towards NGOs needs no reiteration. The government has consistently placed policy and regulatory hurdles to cripple the functioning of NGOs. Therefore, it is fascinating to see the government take the NGO route to face its hardest challenge. The sketchy details are intriguing. The public charitable trust route for PM-CARES appears to be novel yet deeply problematic, broadly on three grounds.
Trust deed, rationale not in public domain
Firstly, a trust is a property arrangement that assigns legal title of the trust property to the trust manager or trustee, while establishing the right to benefit from the trust property to another person, group or entity. Historically, a trust, as a legal entity, is used by ‘private actors’ to benefit the public. And a trustee is duty-bound to manage the trust properties in accordance with the trust deed.
Not surprisingly, the trust deed of PM-CARES remains out of the public domain. Public scrutiny isn’t one of the things that Modi likes, values or cares about. The nation has witnessed this on many an occasion, when drafts of important laws have been provided on the day of debate to the parliamentarians.
The common law of public charitable trusts, developed by early American courts, established that a charity, fundamentally, was an entity that helped the general public by serving a public interest to lessen the burden on the government. It is manifest that the formation of PM-CARES militates against the very founding principle of a public charitable trust. The tax exemption for charitable organisations is granted based on the theory that the government is compensated for the loss of revenue by its relief from financial burdens which would otherwise have to be met by appropriations from other public funds.
In common law jurisdictions, it is considered unacceptable for charitable trusts to campaign for political or legal changes because charitable trusts are administered by trustees but there is no relationship between the trustee and beneficiaries. The trustees of PM-CARES have a fiduciary duty towards the trust, the objects of which are charitable. But the same trustees also have a fiduciary duty towards the beneficiaries i.e. the populace – as their elected representatives. Thus, the dichotomy is stark and unsustainable.
Also, the current jurisprudence lacks cogency with respect to the formulation of a political objects doctrine. Political objects have a negative role in the law of charitable trusts. A trust is generally charitable if it fulfils two positive requirements – that it be (i) for a charitable purpose and (ii) for the benefit of the public. But political objects cancel those matters out.
A trust which fulfils both the positive requirements will not be charitable if the main purpose is to attain political goals. As a result, what we have is a manifest political-public-charitable trust. The assertion is founded upon the fact that the object of PM-CARES can easily be fulfilled by the existing PMNRF, and that the acronym of the new fund has been cleverly chosen to reinforce a political message – that the PM cares.
To further substantiate these points, Modi or the government has not put out the ‘compelling reasons’ that necessitated the formation of a new entity for the purpose of collecting donations from the general public for dealing with the COVID-19 pandemic.
At least in the public domain, there is no report indicating that the proposal for PM-CARES was either put before the Union cabinet or approved in a cabinet meeting. Consequently, expecting the prime minister to have taken the opposition leaders on board would be a wasteful and futile expectancy. And the acronym is telling.
Rules for public trusts
Secondly, except for a few states like Maharashtra, Gujarat, Madhya Pradesh and Rajasthan – where public charitable trusts are regulated under the provisions of state laws like the Bombay Public Trusts Act, 1950 – the field governing public charitable trusts operates without a specific statute. Though the Indian Trusts Act, 1882 regulates and administers private trusts in India, its application to public charitable trusts has been negated by the Supreme Court.
Different states have different rules and regulations pertaining to public charitable trusts. In fact, there is a big void with respect to regulatory statutes governing public charitable trusts. Lawmakers need to take measures to fill this void.
Nevertheless, broadly, public charitable trusts are required to be registered in terms of provisions under The Registration Act, 1908. Therefore, it is just and necessary for the government to have put out details like the objects and reasons behind the decision to set up a public charitable trust to achieve the very same objective as was being achieved by PMNRF – therefore leading to avoidable and unwarranted duplication of duties and responsibilities.
It is trite to state that opposition parties have a vital role to play in a functional democracy. The constitution provides for it. The leader of the opposition in parliament has a say in appointments of heads of constitutional institutions. By the same principle, it is perplexing that the opposition was neither consulted nor given a place on the board of trustees of a public charitable institution set up by the government – assuming, of course, that it has been set up by the government. Only a perusal of the trust deed can clarify the issue. The government must put it out in the public domain without any further delay – it is duty-bound to do so.
Has due process been followed?
Thirdly, assuming that the PM-CARES public charitable fund cannot be examined on the principles of a political objects doctrine – and further assuming that the government will put the trust deed in the public domain – one cannot lose sight of the due process of law. The formation of a public charitable trust involves compliance with due procedure.
A trust is created when the author of the trust indicates with reasonable certainty, by words or acts, an intention to create a trust, the purpose of the trust, the beneficiary, the property of the trust, etc. A trust deed stating objects, rules and regulations for operation of the trust is the foundational document. It is required to be registered, both as per the Registration Act, 1908 as well as Income Tax Act, 1961.
The trust deed, executed by the author/settler and the trustees, is required to be presented to the jurisdictional sub-registrar for registration. The prevalent procedure requires the personal presence of the trustee at the registration. Section 31, however, provides for execution at a private residence, in special circumstances.
At every stage, a resolution of the trust is required to be passed – for obtaining a PAN card to opening a bank account, appointing members, defining their roles, etc. Citizens have a right to know whether due process was followed for creating PM-CARES. The trustees, being the highest elected functionaries of this constitutional democracy, have a heavier burden to abide by the due process of law. All the trustees have sworn to uphold the rule of law, which is rootless without due process.
There should be no problem in the government answering the following questions:
1. When was it decided to form a public charitable trust for inviting donations for the prevention of COVID-19 spread?
2. Under which Act is the trust registered?
3. Are the chairman and three trustees working in their personal capacity or in the capacity of their constitutional offices? If the former, it would be a non-government public charitable trust, while in the latter case, it would be on a very weak and shaky legal foundation.
Then, there is due process in obtaining registration under 12A and 80G of the Income Tax Act, 1961. Income of an organisation is exempted from tax if a public charitable trust has 12A registration. Section 12 AA provides the procedure for registration. Though this is a one-time registration, documents like a trust deed, registration certificate, trust PAN card, ID proof, books of accounts, etc. are required. Similarly, if an organisation has obtained certification under 80G of the Income Tax Act, 1961, then the donors of such an organisation can claim exemption from income tax.
It is necessary to know whether the due process of law was followed by PM-CARES. A failure to abide by the due process of law would make it susceptible to a legal challenge. Such a development would be unfortunate and unsavoury.
Given the provisions of the Foreign Contribution Regulation Act, the PM–CARES Public Charitable Fund will need FCRA registration in order to receive foreign funds and donations from foreign citizens. One of the criteria for getting FCRA registration is submission of copies of the relevant audited statement of accounts for the past three years. It would be worthwhile to see if this condition has been relaxed for PM –CARES. On the other hand, foreign contributions are accepted under PMNRF. Prime Minister Modi has a considerable following amongst the rich and wealthy NRIs. Surely it would have made more sense if the appeal was for donations into the PMNRF rather than the new fund. The domestic contributions from corporate houses, celebrity actors, civil society would have come anyway. This aspect further colours the motive behind floating an NGO by a government led by a ruling party whose roots lie in an NGO but is yet extremely hostile towards a score of internationally acclaimed NGOs.
Finally, an independent observer would not be wrong to view the rollout of the fund with scepticism. The antipathy to transparency and accountability of the regime needs no iteration. The chronology is telling: The first tweet by Modi was at 4:51 pm on March 28. Within 15 minutes, through a tweet sent out at 5:09 pm, the IAS Association committed Rs 21 lakh (it is anyone’s guess when the association held a meeting and passed a resolution). Within 25 minutes, actor Akshay Kumar committed to donating Rs 25 crore by posting a tweet at 5:18 pm. By 5:34 pm, PhonePe put out a tweet providing a link to make donations to PM-CARES. The synchronisation of the rollout cannot be a coincidence, especially given the well-known obsessive media management and expertise of the regime.
“The liberties of a people never were, nor ever will be, secure, when the transactions of their rulers may be concealed from them,” said Patrick Henry. Will Modi care enough to tell us about his transactions?
Manoj Harit is an advocate based in Mumbai.