Law Commission Report
191St Report On Regulation Of Funds Collected For Calamity Relief
LAW COMMISSION OF INDIA
191ST REPORT
ON
REGULATION OF FUNDS COLLECTED FOR
CALAMITY RELIEF
DECEMBER, 2004
2
Justice Law Commission of India
M. JAGANNADHA RAO Shastri Bhawan
Chairman New Delhi-110 001
Tel.: 23384475
Fax: (011) 23073864,23388870
E-mail: [email protected]
Residence
1,JANPATH, New Delhi
Tel.: 23019465
D.O.No.6(3)(80)/2002-LC(LS) December 15, 2004
Dear Shri Bharadwaj ji,
I have great pleasure in presenting the 191st Report of the Law Commission of
India on Regulating Funds for Calamity Relief. This is also the sixth report of the
present Seventeenth Law Commission which came to be constituted with effect from
September 1, 2003.
The genesis of the present report was an order dated August 30, 2001 passed by
the Nagpur Bench of the Bombay High Court in Anand Narain Poharkar v. Lokmat
Newspaper Charitable Trust. This was a PIL which highlighted the problem of
contributions collected from the public by a charitable trust floated by a newspaper for
relief to victims of the Kargil conflict. The PIL alleged that the funds collected had been
either misused or misappropriated. The High Court observed that a legislation was
necessary to regulate the contributions collected and monitor their utilization so that
"the funds so collected really reach the beneficiaries." The Ministry of Defence which
was a party to the proceedings then referred the matter to the Department of Legal
Affairs (DLA) which in its turn referred it to the Law Commission.
A Consultation Paper was initially prepared by the Law Commission and was
circulated widely. Responses were received from a wide cross-section of persons
including departments and ministries of Governments, State Law Commissions, legal
experts and non-governmental organisations. The present report has been prepared after
studying all these responses. It was decided to confine the report to recommending a
regulatory framework to monitor the collection of funds by individuals and
organizations towards calamity relief and that it will not extend to funds collected by the
Government. The Commission has noted that the collection of funds by the
Government has been dealt with by the High Powered Committee on Disaster
Management (HPC) set up by the Government of India to examine various aspects of
disaster management and that the provisions of the model legislations recommended by
the HPC contain provisions which will take care of misappropriation of funds collected
by the Government.
3
The report is divided into six chapters. After discussing the concept of legal
trusteeship, the report explains the need to enact a separate law, details the extent,
commencement and scope of the proposed law and concludes by highlighting the salient
features of the proposed enactment. The report recommends the establishment of a
Contribution Regulatory Authority (CRA) comprising a Chairperson and other part-time
Members. The Chairperson would be ex-officio a Secretary to the Government of India.
This structure, it is felt, would subserve the need to have a mechanism to deal with
situations as and when they occur rather than have a permanent body in place
exclusively for the purpose. The main task of the CRA would be to oversee the
collection and distribution of contributions and donations for calamity relief and to
ensure that proper accounts are maintained by the persons and agencies collecting funds
for calamity relief. The CRA itself will ensure that its accounts are audited by the
Comptroller and Auditor General of India. The proposed legislation makes mandatory
the pre-requisite of registration of any agency or person who desires to collect
contributions for calamity relief. Since there may be situations where emergency relief
measures may be required, it is proposed to empower the Collector to grant provisional
registration. Specific provisions have also been recommended for suspension or
cancellation of registration of those who either do not maintain proper accounts,
misappropriate funds. It is also proposed that where the funds remain unutilized by
such persons or agencies, such funds will be transferred to the CRA or to the Collector
for utilization for calamity relief and other similar purposes. While it is also proposed to
empower the Collector and the CRA to levy stringent penalties on the defaulting
agencies, the criminal proceedings would be before the regular criminal courts. Civil
disputes concerning the donations and contributions will go before civil courts
designated for that purpose and the said courts will be governed by principles of natural
justice and not by the Code of Civil Procedure or the Indian Evidence Act.
It is hoped that the recommendations contained in the report will help addressing
the recurrent problem of misuse by private actors collecting contributions from the
public for calamity relief.
With regards
Yours sincerely,
(M. Jagannadha Rao)
Shri H.R. Bharadwaj
Union Minister for Law and Justice
Government of India
Shastri Bhawan
NEW DELHI.
4
INDEX
Chapter No. Title Pages
1. Introduction 03 to 21
2. Collection of contribution - Is in Trust 22
to 35
3. Need to have a special law relating to
contributions made in the context of
calamities 36 to 42
4. Proposed enactment - Legislative Power,
Its Extent, Commencement and Scope 43 to 60
5. Salient features of the proposed enactment 61 to 115
6. Summary of Recommendations 116 to 137
5
CHAPTER - 1
INTRODUCTION
1.1 The Reference
The Law Commission took up the subject relating to 'misuse of
donations collected during disasters and calamities' on a reference
received from the Department of Legal Affairs, Ministry of Law and
Justice, Government of India. The Department of Legal Affairs, with the
approval of Hon'ble Minister of Law and Justice, on 18th March, 2002,
referred this subject to the Law Commission for recommending an
appropriate legislation to regulate and monitor the collection of funds from
public in the name of the welfare of victims of natural calamity or welfare
and rehabilitation of bereaved families of the soldiers killed in a war. The
reference was made by the Ministry as a consequence to the order passed
by the High Court of Bombay in W.P. No.216/2001, Anand Narain
Poharkar vs. Lokmat Newspaper Charitable Trust, which stated that a
legislation in this behalf is necessary. Ministry of Defence, which is a
party before the High Court, referred the matter to the Department of Legal
Affairs for advice. In turn, the Department of Legal Affairs referred the
matter to the Law Commission as mentioned above. A Consultation Paper
was prepared and published, responses were received and thereafter, this
report is prepared.
6
1.2 Assistance by the Individuals, Other organizations,
International bodies for providing relief and rehabilitation to
the victims of calamity/war or war like situation.
1.2.1 Whenever a calamity, natural or man-made occurs, a large number
of people, nay, thousands or lakhs can get affected. Many people lose
their lives or limbs. Their property also gets damaged. Calamity destroys
not only human beings but also other living creatures, the natural habitat
and the environment. Soon thereafter, rescue, relief and rehabilitation
work will have to start at a massive level. Apart from the government
machinery, other private organizations or individuals have also to step-in
to provide help in such operations. Again, whenever a war breaks or other
war-like situation occurs at the borders, hundreds or sometimes even
thousand of soldiers either lose their lives or become disabled. Relief has
to be provided to the dependants of the deceased as well as to those
injured.
1.2.2 In these situations, every section of the society, be it individuals, or
the corporate sector, or NGO's, media, professionals, or social
organizations should and , in fact, do come forward for providing relief
and rehabilitation to the persons affected by the calamity. International
Community, organizations and Government of foreign countries also try to
provide financial and other logistic support. The contribution that comes
through these entities or persons or organizations is extensive. In the
absence of support from these persons and organizations, no relief and
rehabilitation work can indeed be taken up effectively and speedily.
7
1.2.3 Views of S.L. Goel and Ramkumar in their book on 'Disaster
Management':
In respect of the people's participation in relief work, we may
reproduce a passage from the book 'Disaster Management' edited by S.L.
Goel and Ramkumar. It is stated in Chapter I at page 30 as follows:
"Whenever disasters strike, they do not discriminate or differentiate
between men and nations, poor or rich, young or old. They do not
negotiate or listen and they do not wait, they simply come, kill and
destroy, cause irreparable losses, which are irrecoverable. And
when these hazards strike, it is the communities who are first to
react, it is the communities irrespective of their profession, status,
caste or culture who need to react. Therefore, it is important that
capacities of communities are built to observe, understand and
prepare themselves for the worst impact."
1.2.4 D.M. Dharmadhikari C.J. (as he then was) of Gujarat High Court
in Bipin Chandra J. Diwan v. State of Gujarat, AIR 2002 Guj. 99, has
referred to the help provided by various persons and organizations, in the
aftermath of the massive earthquake that hit Gujarat in the year 2001. His
Lordship observed:
"In such calamity and adversity, the entire Nation has shown
compassion and co-operation by extending help and providing relief
material in kind and cash to the victims. It is a divine wrath, but
turned into blessing, in the sense that in facing the calamity the
helping hands extended by people all over the world in the shape of
8
help and support has united the people and brought to surface the
inherent virtues and qualities of human being. There has been an
exemplary display of fellowship, co-operation, mutual help and love
from all over the world regardless of class, caste, creed and cultural
differences. Not only from within the nation, but from all over the
world from different countries, Government, social service
organizations and individuals with relief material in the form of
tents, clothes, medicines, construction items for erecting homes,
rescue machines etc. have landed by ship, airplanes and other modes
of transport. All kinds of relief material is throughout pouring in
from different parts of the world." (Para 2)
His Lordship further observed:
"Calamity is a leveler of rich and poor, strong and weak, all are
suffering alike. The fall-out of the earthquake is the flow of
generosity for help to the victims from within the country and all
over the world. So much of relief material and money has been
received that its management and distribution pose an uphill task to
the Government. In the past few days, after the earthquake hit
Gujarat on the morning of 26.1.2001, everyone in the country has
witnessed the power of the people. Selfless service of several
religious and social organizations have shown what benevolent
effect religion can have on the lives of common men. The selfless
service, without desire for appreciation or publicity, by religious
groups and social activists have given great comfort to the victims
and satisfaction to all right thinking men." (Para 3)
9
1.2.5 Monetary contributions by these persons or organizations is one of
the most important facets of the relief operations Apart from money, the
following other items or services are also provided:-
(a) food; (b) clothes; (c) medicines and other medical
relief and first aid; (d) drinking water; (e) shelter;
(f) removing the persons from affected area and
relocating them elsewhere.
1.3 Categories of Donors and Collection Agencies.
1.3.1 Categories of Donors -
Persons and organisations, which donate for the relief and rescue
operations, may be classified into three sub-categories.
i) In the first sub-category of donors, there are persons, organizations
or agencies, who donate money or other items. But in this category, the
above-said entities do not personally go to the affected site or region, but
instead, they donate money or items to the Central or State Governments or
to any fund set up by the Central or State Government like the Prime
Minister's National Relief Fund, National Defence Fund, Chief Minister's
Relief Fund etc. These are donors who send their donations directly
without the intervention of any intermediary and they do not participate in
the actual work of disbursement of moneys or in the relief and
rehabilitation.
10
ii) In the second sub-category of donors are persons or organizations or
agencies who contribute in cash or kind to intermediaries such as non-
governmental bodies, like NGOs or individuals, trusts, etc. and in this
second sub-category too the donors are entities who do not undertake the
responsibility of distributing the monies or items amongst the victims of
the calamity.
iii) In the third sub-category of donors are non-governmental
intermediaries, being persons or organizations who, apart from giving their
contributions, also provide their services personally at the place of
calamity.
1.3.2 Categories of agencies which collect the items in cash or kind
from donors.
In the class of the intermediaries who take up a role of service, there
are various individuals, organizations, trusts, groups, NGOs etc. who start
collecting funds and donations from the public for the purpose of
providing relief and rehabilitation to the victims of the calamity. These
entities can be sub-categorized into two groups:
i) In the first group, there are persons or organizations, who only
collect the donations in cash or kind from the individuals or organizations
and after collecting them, they send the said items to the Government or
other agency which provide the actual relief. For example, newspaper
publishers and other agencies of electronic media start collections of funds
11
whenever a calamity occurs. The funds so collected are usually sent to a
relief fund set up by the Government or other agencies. Similarly, trusts,
educational institutions, public or private sector organizations, clubs etc.
also collect the donations in cash or kind from their students, staff, workers
or members of the public. Thereafter, they deposit them in one or other of
the funds mentioned above.
ii) In the second group of intermediaries are persons, NGOs, trusts or
other organizations or agencies, which not only collect the contributions
and donations from the public or other organizations, but also who, instead
of sending them to Governmental agencies, themselves provide service
personally at the place of calamity instead of sending the monies to
Governmental Funds or agencies. Some of these entities also get
donations or grants from the Government or from funds set up by the
Governments or from International Community and Organizations.
1.4 Contribution from Foreign Source: The Foreign Contribution
(Regulation) Act, 1976
Contribution for providing relief to the victims of calamity is not
only raised within the country but from foreign and International sources
also. The enactment which regulates the acceptance and utilization of
foreign contributions is the Foreign Contribution (Regulation) Act, 1976.
Section 6(1) of this Act provides that any association (other than an
organization of a political nature), which is having definite culture,
economic, educational, religious or social programme, shall not accept
12
contribution in cash or in kind from a foreign source unless (a) such
association is registered with Central Government, and (b) agrees to
receive such foreign contribution only through such of the branches of a
bank as specified in its application for registration. Apart from this, after
receiving the foreign contribution, every registered association is also
required to give an intimation to the Central Government as to the amount
of each foreign contribution received by it, source and manner in which
foreign contribution was received, and also the purpose for which and the
manner in which such foreign contribution was utilized. Moreover, where
such association (a) obtains any foreign contribution through any bank
branch other than through which it has agreed to receive foreign
contribution, (b) fails to give intimation or gives false intimation, the
Central Government may by notification direct that such association shall
not accept any foreign contribution without prior permission of the Central
Government. Even otherwise, the Central Government may in certain
circumstances, require any association to obtain prior permission. (sec. 10)
As per sub-section (1A) of section 6, every association of the nature
referred to above, if it is not registered with the Central Government may,
also accept foreign contribution, however, after obtaining prior permission
of the Central Government. Such association, after receiving the foreign
contribution shall also be required to give intimation referred to above, to
the Central Government.
'Foreign source', according to clause (e) of sub-section (1) of
section 2, includes, the Government of any foreign country and any agency
of such Government, any international agency, a foreign company, any
13
corporation incorporated in a foreign country, a multinational corporation,
any trust, society or other associations of individuals, formed or registered
in a foreign country, a trade union in any foreign country, a citizen of a
foreign country, but does not include United Nations or any of its
specialized agencies, the world Bank, International Monetary Fund or such
other agency as may be notified by the Central Government. It also does
not include any foreign institution which has been permitted by the Central
Government to carry on its activities in India.
In certain circumstances, the Central Government may require any
person or association to furnish the intimation mentioned above. (sec. 10)
As per section 13, every association referred to in section 6, shall
maintain (a) an account of any foreign contribution received by it; and (b)
a record as to the manner in which such contribution, as well as any record
may be inspected by an officer who has been authorized by the order of
the Central Government. Their accounts and records may be seized and
produced before the Court (sec. 14). If necessary, the Central Government
may by order, ask any officer to audit such accounts.
The Central Government, under section 31 has power to exempt any
association, organization or individual from the operation of all or any of
the provisions of the Act, if it is necessary or expedient in the interests of
justice.
1.5 Misuse, misappropriation, mismanagement and diversion of
donations and contributions
14
We shall next refer to misappropriation, mismanagement or
diversion of donations. As mentioned earlier, whenever there is a natural
or other calamity or war or war like situation some public and private
organizations, institutions, individuals etc. start collecting funds and other
items in cash and kind from the public, for the ostensible purpose of the
welfare and rehabilitation of the victims of such calamity though in fact,
they do not intend to do so. The funds or material collected do not reach
the actual victims either in whole or in part, and instead, are
misappropriated or misused. In some cases persons, NGOs, organizations,
groups start collecting the donations from the public or other institutions
for the purpose of sending them to the Government or any fund set up by
the Government like Prime Minister, National Relief Fund (PMNRF),
Chief Minister's Relief Fund, National Defence etc. but they do not send
them to the Government fund either wholly or in part, and instead, they
misuse or misappropriate such donations.
This conduct clearly amounts to breach of trust. People and
organizations who give contributions wholeheartedly and generously in the
belief that the contributions will be helpful for the welfare of the persons
affected by the calamity, have thereafter no idea as to whether the
contributions in cash or in kind has reached the affected party or whether
the contributions have been misappropriated or mismanaged by the
persons or agencies who have collected them.
1.6 Donations collected for victims of Kargil conflict and Gujarat
earthquake.
15
1.6.1 Lokmat Newspaper Trust case:
We shall refer to a few cases where serious allegations of
misappropriation have been made and are under investigation.
One of such recent cases of alleged misappropriation and
mismanagement of public contributions is the subject matter of a writ
petition in the Bombay High Court (at Nagpur Bench) No. 216 of 2001
(Anand Narayan Rao Poharkar v. Lokmat Newspaper Charitable
Trust, Nagpur). It has been stated in the petition that a trust called
'Lokmat Newspaper Charitable Trust, Nagpur' has collected donations
from the public approximately amounting to two crore rupees in the name
and style of 'Lokmat Kargil Shahid Nidhi' during the Kargil conflict in
1999 and even later, for taking care of victims of the Gujarat earthquake.
It is alleged in the writ petition that the funds collected from the public
have not been utilized for the purpose for which they were contributed but
have been misused or misappropriated. Petitioners in the said writ petition
had, in fact, also made donations to the said trust. In respect of the
allegation of misappropriation of funds, the Division Bench of the
Bombay High Court, in its order dated 30.8.2001, observed thus:
"but we fail to understand why the Government i.e. Central as well
as State Government has not regulated the collection of such funds
from the public at large. It has now become a common feature that
in case of any calamity man- made or natural, organizations spring
up like mushrooms and appeal to the public at large by invoking
16
their sentiments and emotions which facilitate them to collect huge
funds and appropriate in the manner they feel it proper. There is no
Government Agency to regulate the collection of such funds and to
monitor that the funds so collected really reach the beneficiaries".
1.6.2 Tema Sugar Factory Scam
It was reported in 'The Indian Express', New Delhi dated 1st June,
2004 that the Justice Sawant Commission of Enquiry is probing into the
charges levelled by a social activist Anna Hazare against a State Minister
from Maharashtra.. These charges include various irregularities in Tema
Sugar Cooperative Factory in Osmanabad (Maharashtra). It was alleged
that Rs. 51.97 lakhs were collected from the farmer shareholders of the
society in the name of 'Kargil' and 'Gujarat earthquake', but were diverted
for reviving a sinking sugar factory. As reported in the newspaper, Kargil
Funds of Rs. 1,505,153/- were not submitted to the authority concerned.
Similarly, Gujarat Flood Victim Relief Fund of Rs. 10,60,708/- and
Gujarat Earthquake Relief Fund of Rs. 10,36,336/- were also not
submitted.
1.6.3 Mismanagement of contribution during Gujarat Earthquake
(Bipinchandra case (2002)).
As observed by the Gujarat High Court in Bipin Chandra Diwan v.
State of Gujarat AIR 2002 Gujarat 99, after the earthquake in Gujarat, on
26.1.2001, a lot of relief material in cash and kind was provided by various
17
sections of society within the nation and relief came from outside the
country. There were certain reports in the newspapers and other media
that the Government had failed to meet the challenges posed by the
calamity and had not adequate infrastructure to satisfactorily discharge the
stupendous task of providing relief and rehabilitation to the quake victims.
On the basis of these reports, a Public Interest Petition was filed by five
prominent citizens representing different walks of life (a retired Chief
Justice of the Gujarat High Court, an eminent lawyer, an industrialist, an
artist and a social activist) seeking intervention of the Court to ensure
speedy and effective relief to quake victims. In the petition,
apprehensions were raised and doubts were also expressed as to how the
large quantities of relief material and money received or were likely to be
received in future would be dealt with. It was stated that the collections
were or are likely to be misappropriated, leaving the victims high and dry.
It was prayed in the petition that relief fund and material should be
entrusted to an independent committee or commission manned by experts
from different fields, to ensure proper utilization of the material and fund
for the benefit of the victims and to avoid their diversion, misappropriation
and loss.
1.7 Reference to the Law Commission.
1.7.1 The observations of the Bombay High Court in Writ Petition No.
216 of 2001, (Anand Narain Poharkar vs. Lokmat Newspaper
Charitable Trust) referred to above, and the absence of a Central
legislation or Authority to regulate and monitor the collection and
utilization of contribution and funds, prompted the Central Government to
18
refer this matter to the Law Commission for recommending appropriate
legislation to regulate and monitor the funds collected from the public in
the name of the welfare and rehabilitation of victims of calamities or
welfare and rehabilitation of the bereaved families of the soldiers
killed/injured in war.
1.7.2 The Law Commission has examined the issues relating to collection
and utilization of the funds as well as other items received in kind, in the
name of providing relief etc. to the victims of calamity and the welfare of
bereaved families of the soldiers killed or injured in war or other
operations. The Commission was of the tentative view that there was an
urgent need to bring into force a Central enactment specifically intended to
regulate the collection of contributions to compel the maintenance of
proper accounts and to monitor the distribution of contributions so
collected with a view to subserve the purpose for which the donations were
made and for their proper utilization and distribution.
1.8 Law Commission's Consultation paper
1.8.1 In order to obtain the views of the Government at the Centre and
States, and also of the media, NGO's, and all sections of the society, the
Law Commission prepared and circulated a Consultation Paper on the
subject, in May, 2003 suggesting various proposals for drafting a Central
enactment which would refer to the main features of the proposed
legislation. Copies of the Consultation Paper were sent to the concerned
Departments and Ministries of the Central Government, all State
Governments, Union Territories, Bar associations, NGOs and other
19
concerned persons and institutions. The consultation paper was also
placed on the Law Commission's website namely:
http://lawcommissionofindia.nic.in
1.8.2 Suggestions made in the Consultation Paper.
Following were the important suggestions made in the consultation paper:
i) A law may be made by the Parliament to regulate the collection and
utilization of contributions.
ii) All contributions and donations collected or received by any person,
organization or agency from any other person, organization or from any
Government including Government of a foreign country, for the purpose of
providing relief and rehabilitation to the victims of any natural or other
calamity or the welfare and rehabilitation of soldiers killed or injured in
war or war like situation, shall come under the purview of the proposed
enactment.
iii) In order to regulate the collection and distribution of the funds or
other items received in kind, a Regulatory Authority known as
'Contribution Regulatory Authority' (CRA) should be constituted by the
Central Government.
iv) The Regulatory Authority should consist of a Chairperson, Member
Secretary, 3 Members chosen amongst the officials of the Central
20
Government and one Member from the Indian Audit and Accounts
Service, and five Members from the general public.
v) There should be compulsory registration of those who receive the
contributions, under the name, 'authorized person or agency'. The District
Collector could be the Registering Authority. He could be authorized to
register such persons or agencies who are making the collections.. The
procedure of registration and the grounds for refusal of registration were
suggested in the Consultation Paper. It was also suggested that any order
of refusal of registration be appealable. Another suggestion was that in
case of urgency, provisional registration could also be granted.
vi) It was proposed that retrospective operation shall be given to the
proposed legislation to the extent practicable.
vii) The authorized persons and agencies should maintain proper
accounts of all contributions collected and about their utilization. Details
of such accounts should be furnished to the Collector and Regulatory
Authority.
viii) Funds and other items received in kind should be used only for the
purpose for which they were collected or received.
ix) Collections shall not be made without issuing proper receipts.
x) While providing relief or rehabilitation, there shall no discrimination
on the grounds of religion, race, caste, sex etc.
21
xi) The Regulatory Authority and the Collector shall be in-charge of the
overall supervision of distribution and management of the contributions.
In case of violation by any persons or agencies, the Regulatory Authority
and the Collector should take appropriate action, which action shall
include seizure of the contributions. He could initiate civil or criminal
proceedings against any person or agency.
xii) The District Judge of every district should be designated as the
Judicial Authority under the Act for the receipt or disposal of any
complaint filed against any authorized person or agency and to pass
appropriate orders on the complaint.
xiii) The Judicial Authority, after making such inquiry as it deems fit,
should pass appropriate orders. The Judicial Authority should have some
of the powers of a civil court.
xiv) Responses were to be given on the question whether contributions
made from Government's funds, like Prime Minister's National Relief
Fund, CM Relief Fund and other calamity funds set up by the Government,
should also be dealt with by the proposed enactment for the purpose of
introducing a measure of accountability.
1.8.3 Responses to the consultation paper.
The overall response to the Consultation Paper was positive. Most
of the State Governments (except the Government of Madhya Pradesh) had
22
welcomed the proposal for enacting a legislation on the subject. Detailed
response from the Maharashtra State Law Commission and the
Government of West Bengal have been received. These suggestions
would be discussed at the appropriate place in the Report. So far as
Central Government Ministries and Departments are concerned, the
Ministry of Defence and the Department of Personnel and Training and
the Department of Rural Development have responded on some particular
issues. The Governments of Uttar Pradesh, Orrisa, Himachal Pradesh,
Kerala and Pondicherry briefly responded and were in total agreement with
the Law Commission's proposals. The Government of Haryana forwarded
the responses of the various Deputy Commissioners of the Districts.
There were no responses from the NGOs except the Citizen Welfare
Council, Rup Nagar, Punjab which agreed with the proposals.
1.9 Present Report
The present Report is based on further study on the questions
involved, after taking into account the suggestions made in the responses
received to the Consultation Paper. Though, the management of a calamity
or disaster is a much wider subject, the present Report deals only with a
particular aspect i.e. regulation of collection and utilization of contribution
collected or received for the purposes of providing relief and rehabilitation
to the victims of any calamity or for the welfare and rehabilitation to the
soldiers killed or disabled in war or other similar operations. In the
subsequent Chapters of this Report the following issues are discussed:
23
i) Whether a person making the collection or receiving the funds is
in the position of the trustee?
ii) Whether a new law is really required to regulate such
contributions? Legislative competence of the Parliament to
enact such a law.
iii) Which are the kinds of contributions which should be subjected
to the proposed law?
iv) In what manner could the collection and utilization of such
contributions be regulated?
v) Constitution, powers, and functions of Regulatory Authority and
other officials.
vi) Duties of persons, bodies or agencies authorized to collect
contributions, including the manner of collection and utilization
thereof.
vii) Territorial extent, commencement and scope of the proposed law.
viii) Designated Court, its procedure and power.
24
CHAPTER-II
Collection of Contributions - is in trust.
2.1 Legal status of contributions
As stated earlier, whenever a calamity occurs or a war or war like
operation commences, large amounts of contributions and donations in the
form of cash and other items in kind are contributed or donated by various
individuals organizations, corporate sector etc. for the purpose of
providing relief and rehabilitation to the victims of such calamity or
welfare and rehabilitation of soldiers and their family members killed or
disabled. These contributions are made to the Government as well as to
other NGOs, trusts, other bodies and individuals. They may be in cash or
kind. In the hands of Government or NGOs, or other organization or
individuals, who receive them for the particular charitable purpose, the
collections are in the nature of a 'trust'. Those who donate to these
NGOs or individuals, do so out of faith, trust and confidence that the
amounts will reach the victims of the disaster. The recipient, in each case,
is a trustee and the victims of the disaster are the beneficiaries. There is
obviously a fiduciary relationship of 'trusteeship'.
2.2 Indian Trust Act, 1882: applies only to private trusts: hence,
general principles of English law apply here.
25
The Indian Trusts Act, 1882 applies only to private trusts and not to
public trusts. Sec. 1 of the Act states that the Act does not apply to public
or private charitable "endowments".
As per section 3 of the Act, "A trust is an obligation annexed to the
ownership of property, and arising out of the confidence reposed in and
accepted by the owner; or declared and accepted by him, for the benefit of
another, or of another and the owner."
The person who reposes or declares the confidence is called the
'author of the trust'; the person who accepts the confidence is called the
'trustee'; the person for whose benefit the confidence is accepted is called
the 'beneficiary'. Sec. 3 also defines a 'breach of trust': it says that 'a
breach of any duty imposed on a trustee, as such, by any law for the time
being in force is a 'breach of trust'. Sections 11 to 30 of the Act deal with
the 'Duties and Liabilities of Trustees' and sections 31 to 45 deal with the
'Rights and Powers of Trustees'. Sections 46 to 54 refer to the disabilities
of trustees while ss. 55 to 69 refer to the rights of the beneficiary. Sec. 23
of the Act refers to the 'Liability for breach of trust' and sec. 51 states that
a trustee may not use or deal with the trust property for his own benefit or
for any other purpose unconnected with the trust.
The Bombay High Court pointed out in Shivramdas v. Nerurkar
AIR 1937 Bom 374 that we should not also apply the provisions of the Act
as guidelines in the matter of private trusts. The correct position is that in
matters relating to public charitable trusts, Courts in India have to be
governed by the general principles and rules of English law and practice,
26
unless that law or practice is inconsistent with the rule or practice of the
Courts in India. It is true that many provisions of the Trust Act reproduce
the general law of trust as administered by the equity Courts in England,
but that does not mean that the provisions of the Act should be applied.
Thus, a trust is an obligation whereby the trustee is bound to
perform or forbear some act for the beneficiary. This obligation must
relate exclusively to property and the obligation must also arise out of
confidence which the author of the trust reposes in the trustee. It is a
fiduciary obligation voluntarily accepted by the trustee.
2.3 Trust - its meaning under the general law.
2.3.1 A trust, as per Salmond's jurispendence by Glanville Williams
(11th Edn. Page 297), "is an encumbrance in which the ownership of
property is limited by an equitable obligation to deal with it for the benefit
of some one else. The owner of the encumbered property is the trustee; the
owner of the encumbrance is the beneficiary."
2.3.2 Meaning of trust as given in Halsbury's Laws of England (Vol. 48,
reissue 4th Edn. para 501) is as follows:-
"Where a person has property or rights which he holds or is bound
to exercise for or on behalf of another or others, or for the
accomplishment of some particular purpose or particular purposes,
he is said to hold the property or rights in trust for that other or those
others or for that purpose or those purposes, and he is called a
27
trustee. A trust is a purely equitable obligation and is enforceable
only in a court in which equity is administered."
2.3.3 As per a leading jurist Underhill, 'A trust is an equitable obligation,
binding a person (who is called a trustee) to deal with property over which
he has control (which is called the trust property), for the benefit of
persons (who are called the beneficiaries or cestuisque trust), of whom he
may himself be one, and any of whom may enforce the obligation'. Any
act or neglect on the part of a trustee which is not authorized or excused by
the terms of the trust instrument, or by law is called a breach of trust.
(Underhill's Law of Trust and Trusteeship 10th Edn. at Page 3)
2.4 Purpose of Trusteeship.
As per 'Salmond' on Jurisprudence (11th Edn. By Glanvile William, at
page 308), the purpose of trusteeship is to protect the rights and interests
of persons who for any reason are unable effectively to protect them for
themselves. It is further stated that the chief classes of persons in whose
behalf the protection of trusteeship is called for are four in number.
According to the learned author, among these four classes of persons
which are as follows:-
"In the first place, property may belong to persons who are not yet
born; and in order that it may be adequately safeguarded and
administered."
28
"In the second place, similar protection is required for the property of
those who live under some incapacity in respect of the administration
of it, such as infinity, lunacy, or absence."
"Thirdly, it is expedient that property in which large numbers of
persons are interested in common should be vested in trustees."
"Fourthly, when persons have conflicting interests in the same
property it is often advisable that the property should be vested in
trustees."
Here we can say that collection for benefit of the victims of the
calamity fall under the third category.
2.5Concept of Trust in collection of contribution.
2.5.1 This concept of 'trust' can very well be found in the collection of
funds and other items for the purpose of providing relief to the victims of
calamities. Person who donates or contributes the funds can be said to be
'author of the trust'. The donor declares or reposes confidence in the
collector or receiver of such donations and such collector or receiver of the
fund is, therefore, in the position of a 'trustee'. The donor or in other
words, the author of the trust, donates the contribution in cash or in kind to
the NGOs or individual with the intention that such contribution shall be
used for the purposes of providing relief and rehabilitation to the victims
of the calamity. The NGOs or individual accept and undertake the
obligation and responsibility of distributing the money or item received,
29
amongst the victims of calamity. These 'victims' are the beneficiaries of
the trust. Contributions in cash and kind are trust property. Therefore,
whenever a contribution in cash or kind is given to any individual, NGO
or other organization or even to the Government, for the purpose of
providing relief and rehabilitation of victims of calamity or (say) for the
welfare and rehabilitation of the soldiers and their families, who are
victims of war or war like operations, a 'trust' is always created.
2.5.2 Judicial pronouncements
There are judicial pronouncements which suggest that collection of
contribution and donations for the purpose of providing relief to the
victims of calamity, comes under purview of 'trust'. In this regard, the
following observations of the Gujarat High Court in Bipinchandra J
Diwan case, already referred to, can be quoted:
"The donations and contributions in cash and kind have been
received by the Government wholeheartedly and spontaneously from
various sections of the society and people in India and abroad.
These donations and contributions in cash and kind are not parts of
the recognized Revenue or Fund of the State or the Centre as
envisaged in the Constitution. These contributions and donations
constitute a fund raised by people all over the world with specific
aim to extend help and support to the quake victims. Such donations
and contributions are in the hands of Government in the nature of a
trust" (Para 18).
30
Similarly it can be said that when such contributions or donations
are given to any private individual or NGO, they become trustees of the
money or items received.
There is an English case which we would like to refer. That is, Re
North Devon and West Somersat Relief Fund Trusts v. Wright 1953
(2) All. ER 1032. Facts of the case were as follows:-
On August 15, 1952, torrential rain fell over a wide area in north
Devonshire and West Somersetshire, causing disastrous floods and
great damage and devastation. On 18th August, 1952, an appeal by
the Lords lieutenant was issued in these terms, "We invite not only
the people of the west country, but everyone who has known and
loved Lynmouth and the quiet villages of north Devon and west
Somerst, which have suffered so grievously in this disaster, to
contribute to a fund for the relief of all who have suffered"... The
response to the appeal was very great. In addition to donations sent
direct to the treasurer, large sums were collected in streets from the
passers by, from collecting boxes placed in hotels and boarding
houses, and at stations and other public places, and by means of
collection in churches. Local authorities made collections, and
organizations such as the Red Cross contributed. The fund so
collected was in excess of the amount necessary to meet claims in
respect of distinct personal loss by persons mentioned in the appeal.
The question arose whether the 'trust' fund was charitable and whether the
surplus should be applied cy-press or be payable to donors to the fund in
31
proportion to their donation. Wynn Parry J. held that fund so collected
falls in the category of valid charitable trust and surplus funds must be
applied cy-pres.
2.6 Obligations and duties of persons and agencies who collect
contribution.
When contributions and donations are collected by NGOs or some
other people, they keep such contributions in the nature of trust and when
there is a trust, obviously there are obligations and duties on the trustees to
execute the wishes of the authors of the trust i.e. the donors. These
donations and contributions should reach the beneficiaries i.e. victims of
the calamity or war, as the case may be. Obligation of the trustee towards
the beneficiary, as per Salmond, is known as 'innominate obligation',
failure to perform duties or obligation will amount to breach of trust, civil
or criminal.
As stated above, the donors of contribution are authors of the trust and
as such they have the right to execute the trust. On the other hand, the
collectors of such contribution are trustees, and they have obligations
towards the author of the trust i.e. donors. In this regard, the observations
of the Gujarat High Court in Bipinchandra J. Diwan Case, already
referred to, can be quoted. It was observed:
"In our opinion, therefore, all those donors and contributors who
have extended help in cash and kind to the victims have enforceable
right, in a representative capacity to seek directions to the
32
Government to ensure that the relief and rehabilitation material
meant for quake victims reaches them in time and hour of need. For
the same purpose they have claimed a right to demand account of
receipt and expenditure of such relief and rehabilitation material in
cash and kind".
The beneficiaries have also a right to demand that the trustees implement
the purposes of the trust effectively.
2.7 Violation of obligations by trustee amounts to breach of trust:
civil action.
2.7.1 Whenever contributions or donations are collected by individuals,
bodies or other NGOs, necessarily a trust is created and the trustees who
violate the obligations cast on them by the authors of the trust, become
liable for the breach of trust. If the trustees have not utilized the money,
or misutilised the money, or diverted the money or misappropriated the
money, there is a clear breach of trust. A civil action can be in a Court of
law for taking over the moneys and vesting them in Court Receivers.
Section 92 of Code of Civil Procedure, 1908 can also be invoked.
2.7.2 Criminal breach of trust: sec. 405 Indian Penal Code -
technicalities of creation of trust do not apply:
The Supreme Court in Jaswantrai v. State of Bombay AIR 1956
SC 575, while considering a case of criminal breach of trust as defined in
Section 405 of the Indian Penal Code, 1860 has observed:
33
"But when S. 405 which defines 'criminal breach of trust' speaks of
a person being in any manner entrusted with property, it does not
contemplate the creation of a trust with all the technicalities of the
law of trust.
It contemplates the creation of a relationship whereby the owner of
property makes it over to another person to be retained by him until
a certain contingency arises or to be disposed of by him on the
happening a certain event". (Para 13)
From the above observations, it is clear that for the purpose of
'criminal breach of trust', it is not necessary that 'trust' has to be created
with all legal technicalities required under the law of trust. For the
purpose of 'trust', there should be entrustment of property and the owner
of the property should repose confidence in the person taking the property.
The Supreme Court in State of Gujarat v. Jaswant Lal, AIR 1968 SC
700, has held:
"Before there can be any entrustment there must be a trust, meaning
thereby, an obligation annexed to the ownership of property and a
confidence reposed in and accepted by the owner or declared and
accepted by him for the benefit of another or of another and the
owner. But that does not mean that such an entrustment need
conform to all the technicalities of the law of trust..... Further, the
person handing over the property must have confidence in the
34
person taking the property so as to create a judicial relationship
between them."
The rights of the persons to whom property is entrusted is explained
by the Supreme Court in Jaswant Rai vs. State of Bombay AIR 1956
SC575 in the following words:
"The person who transfers possession of the property to the second
party still remains the legal owner of the property and the person in
whose favour possession is so transferred has only the custody of
the property to be kept or disposed of by him for the benefit of the
other party, the person so put in possession only obtaining a special
interest by way of a claim for money advanced or spent upon the
safe keeping of the thing or such other incidental expenses as may
have been incurred by him". (Para 13)
2.8 Special legislations relating to trusts:
2.8.1 There are various special legislations, both Central and State, which
deal with the law relating to trusts, apart from the Indian Trusts Act, 1882.
That Act, as stated earlier, applies only to private trusts and it does not
apply to charitable endowments, public or private.
(1) The Charitable Endowments Act, 1890. It was enacted to provide
for the vesting and administration of property held in trust - for charitable
purpose. As per section 2 of the Act, 'Charitable purposes includes relief
of the poor, education, medical relief and the advancement of any other
35
object of general public utility, but does not include a purpose which relate
exclusively to religious teaching or worship.
(2) 'The Charitable and Religious Trusts Act, 1920'. The object of
this Act is to secure more effectual control over the administration of
Charitable and Religious Trusts.
As per sec. 3, any person having an interest in any express or
constructive trust, created for a public purpose of a charitable or religious
nature, can file a petition in a Court for obtaining an order for any of the
following directions, namely
(1) directing the trustee to furnish the petitions,
with particulars as to the nature and objects of
the trust, and of the value, condition,
management and application of the subject
matter of the trust, and of the income belonging
thereto;
(2) directing that the accounts of the trust shall be
examined and audited.
Any trustee of a trust of a kind mentioned above, under sec. 7 may
apply to the court for the opinion, advice or direction of the court on any
question affecting the management of the trust property and the court shall
give its opinion, advice or direction as the case may be.
(3) Section 92 of the Civil Procedure Code, 1908: It deals with the
Trusts. This section 92 authorizes the filing of suit in respect of breach of
36
any express or constructive trust created for the public purposes of a
charitable or religious nature by the Advocate General or by two or more
persons with the leave of court.
(4) Income Tax Act, 1961 grants exemptions in respect of any
contribution or donations given to a trust created for charitable or
religious purposes (section 80G). Again, income from such trusts is also
exempted in certain circumstances (section 11,12,12A and 13).
(5) Indian Penal Code 1860: It deals with offences relating to trusts
and punishment for such offence. Sections 405 to 409 deals with criminal
breach of trusts.
(6) State legislations: Apart from the Central legislations there are
certain legislation of State legislature regarding Charitable trusts.
2.9 Existing special legislations do not specifically cover the present
issue:
The Central legislation and a large number of State legislations that
at present govern the functioning of trusts, are premised on the legal
principle of trusteeship and of trusts having to expend the funds at their
disposal in a manner permitted by these laws. However, some of these
legislations apply only to express trusts and some to implied trusts but they
are too general in nature and cover all types of trusts. The present Report,
however, has a specific purpose in relation to funds collected during
Disasters and Calamities. It is felt that the principle of constructive
37
trusteeship must govern these other organizations and individuals who or
which may not be express trusts. It is proposed to make detailed
regulations to govern all agencies in relation to funds collected specifically
for Disaster or Calamity Relief. The need for a special detailed legislation
on the subject need not be overemphasized.
We have here to address two main issues (i) how to regulate the
collection of contribution and (ii) how to check the misappropriation and
diversion of funds so collected, so that funds reach the real victims of
calamity or victims of war, in time. In case of any violation of or breach
of trust a special and fast mechanism has to be provided so that the victims
as well as donors are able to make an immediate complaint before an
appropriate authority and such complaint is heard and disposed of quickly.
38
CHAPTER - III
Need to have a special law relating to contributions
made in the context of calamities
3.1 Need for comprehensive law on calamity collections and
prevention of misappropriation thereof.
As stated in the earlier Chapters, as of now there is no
comprehensive law either made by Parliament or the State legislatures to
regulate collections made by persons or organizations in times of calamity
or disaster. Hence, the need for a special comprehensive law.
3.2 The High Powered Committee Recommendation: Calamity
management law:
The High Powered Committee (HPC) on Disaster Management,
appointed by the Government of India felt that there is a need for having a
Disaster Management Legislation. Consequently, HPC prepared a
'National Calamity Management Act'. Draft of the said Act was circulated
to all the States as well as all the concerned Ministries of Government of
India for their comments. The suggested Act aimed at ensuring efficiency
and effective management of natural and other calamities, for achieving
greater coordination and responsiveness with respect to prevention and
mitigation of disasters, so as to provide better relief and rehabilitation of
victims of disasters. The HPC also constituted a committee to prepare a
'Model State Disaster Management Act.' The said committee finalized the
39
draft of the Model State Disaster Management Act. A copy of this draft
Act was also circulated to the State Chief Secretaries and Relief
Commissioners of all States and DGs of all State Administrative Training
Institute for their comments, suggestion and further follow up actions.
These drafts were submitted as a part of Interim Report I of the HPC, and
were accepted by the Central Government, and circulated to all Chief
Ministers. The drafts of the 'National Calamity Management Act' and
'Model State Disaster Management Act' are annexed in the final Report of
the HPC (October, 2001) as Annexure 5 and Annexure 8 respectively.
3.3Need for separate law on prevention of misappropriation of
collections and speedier remedies:
3.3.1 Although as mentioned above, various drafts have been
recommended and suggested by various committees and individuals, still
on the specific issue of collection and distribution of funds and other items
in the form of donations or contributions by various persons and bodies
and the prevention of misappropriation or remedies in case of
misappropriation, have not been addressed in any of these drafts. It is not
provided in any of these drafts as to how the collection of contributions
can be regulated and how the malpractices, and misappropriation of
monies or other items can be curbed, so that contributions may reach the
victims and also in time. The draft legislations referred above only deal
with the management of calamity.
3.3.2 Our present purpose is to deal not only with the contributions and
donations received for providing the relief and rehabilitation to the victims
40
of calamity but also in regard to the collections received for the welfare
and rehabilitation of the soldiers and their families who have been killed or
disabled in a war or other operations, such as the Kargil conflict, which
issue is pending before the Bombay High Court. Therefore, there is a need
of a separate law which deals with the issue of regulation and monitoring
the collection of funds and other items in the form of donation or
contribution by individuals, NGOs other organization or trust for the
purpose of providing relief and rehabilitation of the victims of natural or
other calamity and for welfare and rehabilitation of the soldiers and their
family killed or disabled in a war or war like other operation.
3.3.3 The Bombay High Court in Lokmat Trust case (supra) out of which
the present reference arises, has felt the need to have a law to regulate
collection of contributions. In that case, the Division bench of the High
Court in its order passed on 30.8.2001 observed thus:
"...but we fail to understand why the Government i.e. Central as
well as State Government has not regulated the collection of such
funds from the public at large. It has now become a common feature
that in case of any calamity man made or natural, organizations
spring up like mushrooms and appeal to the public at large by
involving their sentiments and emotions which facilitate them to
collect huge funds and appropriate in the manner they feel it proper.
There is no Government Agency to regulate the collection of such
funds and to monitor that fund so collected really reaches the
beneficiaries". (para 2)
41
The court further observed:
"..In our opinion, collection of funds for such causes by person,
Institutions, Trusts, Corporate houses and NGO's should not be
allowed without having control over it by the State, which is
necessary in public interest. Otherwise, its misappropriation would
go unchecked leaving the donor helpless as after one donates, it is
left to the sweet choice of the collector of such funds how to
appropriate it". (para 5)
3.4Law Commission's view in the Consultation Paper
The Law Commission in its consultation paper on this subject (at
para 3.1) had suggested that there is urgent need to bring into being a
Central enactment specifically intended to regulate the collection and
proper accounts of contribution and donations and to monitor
contributions so collected with a view to see that they are properly utilized
and distributed.
3.5Responses to the Consultation Paper
The suggestions of the Law Commission made in the Consultation
Paper have been widely accepted and welcomed in every response which
the Commission has received.
(i) The Ministry of Defence in its letter dated 30 September, 2004 has
agreed with most of the proposed provisions but suggested that so far as
42
the regulatory authority is concerned, a representative of the Defence
Forces of the level of Adjutant General or equivalent may be included, to
oversee the interests of the defence personnel and their families. It is also
for its view that a representative of the concerned State Government also
be co-opted. With regard to judicial authority, one Judge Adjutant General
from Army may also be included.
(ii) The Government of Orissa is of the view that the proposals of the
Law Commission are wholesome and indeed it will curb unauthorized
collection of contributions by non-government agencies under self-styled
Relief Fund or War Fund. It will also help in monitoring the distribution
of the contribution so that the fund/materials so collected would reach the
real beneficiaries.
(iii) The Government of Himachal Pradesh is of the view that the
proposed enactment has become need of the hour, keeping in view the
experience gained in dealing with disasters, both natural and men made,
over a considerable period of time.
(iv) Maharashtra State Law Commission has stated that there can be no
two opinions as to the dire necessity of the proposed Central legislation.
The background and necessity of such legislation make it obvious that
such legislation is in fact overdue.
(v) The Government of Uttar Pradesh is of the view that the proposed
legislation will definitely curb the malpractices. It also stated that the
43
legislation is in public interest and the State Government accords its
approval for enacting such a law.
(vi) The Government of Pondicherry has stated that the proposal of the
Law Commission for a enacting a law, is agreed to.
(vii) The Government of West Bengal has also agreed to the proposal of
enacting a law.
(viii) The Government of Haryana through its various Deputy
Commissioner, has also welcomes the suggestion of enacting law.
(ix) The Government of Kerala has welcomed the proposals. However,
it is suggested that instead of a Regulatory Authority, the same functions
can be performed by a Special Audit Team, in the Finance Department.
The discretion not being a regular feature, a permanent regulatory
authority may lead to waste of money. For some reasons there is no need
to have a separate judicial authority. The role of the Red Cross or Bharat
Sevak Samaj may be kept separate.
(x) NGOs, like Citizen Welfare Council (Regd.) Rup Nagar (Punjab),
are also of the view that inasmuch as there is no legislation to regulate and
monitor collections of these funds/assets by
persons/institutions/trusts/NGOs, legislation is absolutely necessary to
prevent misappropriation of these funds.
44
(xi) The Department of Rural Development, under the Ministry of Rural
Development, Government of India has stated that so far as the
Department of Rural Development is concerned, it agrees with the views
expressed in the consultation paper.
(xii) However, the Government of Madhya Pradesh has sent a short reply
stating that it has not accepted the suggestions for enacting a special law.
No reasons have been assigned for the view so expressed.
3.6Conclusions
In the light of the above responses, the Commission recommends
that a law should be enacted to regulate the collection of funds
including contributions and donations in cash and kind, collected or
raised for the purposes of providing relief and rehabilitation to the
victims of natural and man-made calamity or for welfare and
rehabilitation to soldiers or their family members who are killed or
have become disabled in war or war like operations and also to
monitor the proper utilization and distribution of such contribution so
collected. The details of the proposed law are mentioned in Chapter
V.
45
CHAPTER - IV
46
PROPOSED ENACTMENT - LEGISLATIVE POWER, ITS
EXTENT, COMMENCEMENT AND SCOPE
4.1 In Chapter III, we have recommended that a law should be enacted
to regulate the collection of contributions and donations in cash and kind,
which are collected or raised for the purposes of providing relief and
rehabilitation to the victims of natural or other man-made calamities or for
welfare and rehabilitation of the soldiers and their family who are killed or
disabled in war or war-like other operations and also to monitor the proper
utilization and distribution of contributions so collected.
In this chapter, we will discuss certain preliminary issues concerning
legislative competence of Parliament to enact law on this subject, its
territorial extent, commencement and scope of the enactment.
4.2 The evil of misappropriation of collections or contributions is not
confined to a particular State or locality. It pervades the whole nation.
Whenever any person or body starts collection of contributions, generally
he may collect them from every part of the country and even outside the
country. A calamity may, in fact, affect people in more than one State. It
is necessary to prevent misappropriation and therefore there is need to
have a uniform law to regulate the contributions and such a law must be
applicable to the whole nation. We are, therefore, of the view that there
should be a Central legislation to regulate the collection and utilization of
contributions covering collections or misappropriations thereof anywhere
in the country.
47
4.3 Legislative Power of Parliament to enact law on the subject.
4.3.1 It is necessary to go into the question whether Parliament has
legislative competence to enact a law on the subject matter now under
discussion.
4.3.2 Entries in the Concurrent List: Entry 10 and 28 of List III:
Object of the law is the main criterion to ascertain the legislative
power of any particular legislature.
The object sought to be achieved by the proposed law is to curb the
misappropriation, and misuse of the contributions and donations collected
or raised for the purposes of providing relief and rehabilitation to the
victims of any natural or other man-made calamity, as well as, for welfare
and rehabilitation of soldiers and their families who are killed or disabled
in war or war-like other operation. In order to achieve the above object it
is necessary:
i) To regulate the collection of contributions and donations in
cash and kind; and
ii) To monitor the utilization of contributions and donations so
collected.
The subject of Trusts and Trustees is contained in Entry 10 of List III of
the Seventh Schedule of the Constitution of India. In view of the
Commission, the present subject falls within this entry. As explained in
Chapter II, whenever any contribution or donation is given for such
48
charitable purpose, the person or body, to whom such contribution is
given, keeps such contribution in the nature of trust. In addition we may
state that the subject of Charities and Charitable Institutions, Charitable
and Religious Endowment falls under Entry 28 of the List III (Concurrent
List) of the Seventh schedule to the Constitution of India. The proposed
law incidentally also deals with aspect of relief and rehabilitation process
of the victims of calamity. Hence, it is clear that Parliament has the
legislative power on the subject under discussion.
In any event, apart from Entry 10 of List III, which is directly
relevant, the Parliament has residuary power to legislate as stated in Entry
97 of List I read with Art 248 of the Constitution of India.
In fact, there is a need to have a 'non-obstante' clause to override all
existing legislations relating to trusts, to the extent of inconsistency.
4.4 Territorial extent of the proposed law.
4.4.1 In the Consultation Paper (at para 3.2.1), it was suggested that the
proposed law should extend to the whole of India. As discussed in
preceding paragraphs, there is need for having a uniform law on the
subject which will be applicable to the whole of the territory of India.
4.4.2 Position in regard to Jammu and Kashmir
When we say whole of India, it certainly includes State of Jammu
and Kashmir also. But, we have to keep in mind the Constitutional
49
provisions relating to the State of Jammu and Kashmir. As per Article 370
(1)(b) of the Constitution, the power of the Parliament to make laws for the
State of Jammu and Kashmir is limited to those matters of Union list and
Concurrent list which are declared by the President of India as
corresponding to the Instrument of Accession. The President with the
concurrence of the State Government of Jammu and Kashmir can add and
declare other matters on which the Parliament can enact the law, which
may be applicable to Jammu and Kashmir.
4.4.3 As discussed above, the subject matter of the proposed law falls
under entry 10 and 28 of list III, and in any event, under residuary powers
of the Parliament under entry 97 of list I read with Article 248 of the
Constitution.
In exercise of the powers conferred by Article 370 (1) of the
Constitution, the President with the concurrence of the State Government
of Jammu and Kashmir, has made the 'Constitution (Applicability to
Jammu and Kashmir) Order 1954, (CO48). As per section 2 (22) (c ) of
this Order, entries 10 and 28 of the Concurrent List are not applicable to
Jammu and Kashmir. Provisions of Article 248 and entry 97 of the Union
list which deals with residuary of the Parliament, have been substituted for
the Jammu and Kashmir vide sections 2(6)(b) and 2(22) (a) (iv) of the
Constitution Order 1954. It means the provisions of Article 248 and entry
97 of the Union List, as applicable to the rest of the India, are not
applicable to the State of Jammu and Kashmir. Therefore, the law made by
Parliament under its residuary powers, are not applicable to Jammu and
Kashmir.
50
4.4.4 In view of the special provisions applicable to Jammu and Kashmir
and in order to avoid controversy it will be more appropriate if the
proposed Central enactment be not made applicable to the State of Jammu
and Kashmir. As this enactment relating to prevention of misappropriation
of funds collected during calamities and destruction is in the public
interest, it may be more appropriate that State Legislature of Jammu and
Kashmir itself enacts such a legislation in this behalf for that State.
4.4.5 On the basis of discussion above we recommend that the
proposed law shall be applicable to entire territory of India except the
State of Jammu and Kashmir.
4.5 Operation of the proposed law- prospective or retrospective.
4.5.1 Proposals in Consultation Paper. Parliament can make a law
with prospective or retrospective effect. On the question whether the
proposed law should be prospective or retrospective, in the light of the
complaint procedure proposed, it was suggested in the Consultation Paper
that the proposed law should necessarily have to come into force
prospectively. But in view of the present reference and with a view to
cover the contributions already collected between 1.5.1999 (the tentative
date when the Kargil conflict began) and the date from which the proposed
enactment would come into force, it was proposed in the Consultation
Paper that such persons or agencies shall be deemed to have been
provisionally registered. It was further proposed that a formal application
for registration has to be given within one month from the date of coming
51
into force of this proposed enactment. It was proposed that if the
registration is refused by the Collector, all the unutilized contributions
shall be taken over by the Regulatory Authority or by the Collector from
such person or body as stated above and thereafter the Authority and the
Collector will have a right to transfer it to some other authorized person or
agency. We shall discuss the responses to this proposal. But, at this stage,
we may state that our final view is that the proposed Act need not be
retrospective.
4.5.2 Response of Govt. of Pondicherry.
On this issue Government of Pondicherry through its Law
Department in its response to the Consultation Paper has stated that the
proposal to have retrospective operation for the enactment may not stand
the test of law and may not be acceptable to the courts. The Law
Department has expressed its reservations for such retrospective operation
of the proposal enactment.
4.5.3 Law permits retrospective legislation but in the present context,
it is felt that the proposed law by prospective only.
There are considerable authorities in support of a settled principle of
law that in India, because of plenary powers, the Parliament as well as
State Legislatures can enact legislations prospectively as well as
retrospectively, however, subject to Constitutional restrictions. (see M/s.
Nanumal Girdharilal v. State of UP AIR 1992 SC 2084, Govt. of AP v.
Hindustan Machine Tools, AIR 1975 SC 2037, JK Jute Mills Co. v. State
52
of UP, AIR 1961 SC 1534, Jadao Bahuji v. Municipal Committee
Khandwa, AIR 1961SC 1486, MPV Sundaramnier and Co. v. State of AP,
AIR 1958 SC 468). Competence to make a law for past period on a
subject depends upon present competence to legislate on that subject. (see.
A- Hajee Abdul Shukoor and Co. Vs. State of Madras AIR 1964 SC 1724).
The Courts have applied Art 14 to strike down certain laws which are
retrospective.
Now, we analyze the proposal made in the Consultation Paper.
Three major points were made in the consultation paper. These are: (i) in
general, the proposed law shall be prospective in nature;( ii) persons or
agencies who had collected contributions in past shall be deemed to have
provisionally registered under the new law, however, they will be required
to make a formal application for registration within a prescribed period,
and (iii) if registration is refused, all unutilized contribution shall be taken
over by the Regulatory Authority or Collector and the contribution so
recovered may be handed over to some other person or agency.
The net effect of the proposal made in the Consultation Paper was
that the persons or organizations who had collected contributions in past
are required to apply for registration. If their application is accepted, they
will be eligible to collect contribution in future also. And if their
application for registration is rejected, all unutilized contributions kept by
them shall be taken over by the Regulatory Authority or Collector. After
all, the collections are not their personal property, but belong to public.
53
These persons or organizations cannot claim that they are losing any
interest in the property.
The only question which now arises is that whether it can be
contended that the taking over of such unutilized contributions by
the Regulatory Authority or Collector amounts to punishment or
penalty falling within the prohibition of Article 20(1) of the
contribution? If so, such provision will, of course, be liable to be
held ultra vires. The answer to this question may be traced in the
judgment of the Five Judge Bench of the Supreme Court in State of
West Bengal v. S.K. Ghosh, AIR 1963 SC 255.
The Supreme Court held:
"We are, therefore, of opinion that forfeiture provided in section 13
(3) in case of offences which involve the embezzlement etc. of
Government money or property is really a speedier method of
realizing government money or property as compared to a suit which
it is not disputed the Government could bring for realizing the
money or property & is not punishment or penalty within the
meaning of Article 20(1)".(Para 14)
4.5.4 Final view of the Law Commission : Proposed Act to be
prospective:
When the Law Commission suggested in the Consultation Paper
about giving retrospective operation of the proposed enactments, it was
54
felt that there are allegations of misuse and misappropriation of
contributions which had been made during 'Kargil conflict' (May, 1999)
and 'Gujarat Earthquake 2001', and that the proposed law should be
retrospective. It was felt that large amounts of contributions could be
recovered if they were not utilized. It was in those circumstances that such
a provision was suggested. But since then (1999 and 2001), a lot of time
has already passed and it may take further time before any law is finally
enacted and is brought into existence. By that time the unutilized
contributions may not even be traceable. Moreover certain technical
difficulties may also arise, in searching for the unutilized contributions. In
regard to such past collections, the existing law can, if so desired, be
always resorted to, though the remedies are different from the special and
speedy remedies proposed in this Report.
In these circumstances, now the Law Commission is of the view that
the proposal relating to giving retrospective operation to the proposed
law need not be pursue. We recommend that the whole of the
proposed enactment should be made prospective only.
4.6 Scope of the proposed law - whether contributions received by
the Government to any fund should also be brought into purview of
the enactment.
4.6.1 Contributions and donations are collected or raised by the
Government or their agencies as well as by private individuals,
organizations, NGOs, trusts, etc. The issue is whether the proposed law
should be applicable to all contributions or donations or whether it should
55
be applicable only to those contributions or donations which have been
collected by private individuals, bodies or agencies.
4.6.2 Proposals in the Consultation Paper as to Government funds.
In the Consultation Paper, it was proposed that all contributions or
donations collected or received either in cash or in kind, by any person,
association, agency, body corporate or non corporate, institution, firm or
other organizations should come under the purview of the proposed
enactment (para 3.2.1). In the Consultation Paper, contributions collected
or raised by the Government or their agencies were kept out of the purview
of the proposed enactment, but suggestions were invited on the question.
4.6.3 Responses to the Consultation Paper.
4.6.3.1Some of the responses suggested that contributions made out of the
State funds, (like Prime Minister's Relief Fund, Chief Minister's Relief
Fund, and other calamity Relief Funds set up by the Government) should
also be dealt with by the proposed enactment for the purpose of
introducing a measure of accountability in the administration of the above
funds. Of course, some other responses suggested that such funds need not
be covered by the proposed law, as there were other safeguards.
4.6.3.2The Pondicherry Government in its response has stated that Chief
Minister's Welfare Fund of Pondicherry, need not be brought within the
purview of the proposed enactment. It also stated that adequate safeguards
have been provided for the proper administration of this fund by virtue of
56
rules and scheme framed under the Charitable and Endowments Act, 1890.
Provisions have also been made for proper accounting and auditing of
utilization of the funds under the said scheme.
4.6.3.3The Maharashtra State Law Commission is of the view that
Prime Minister's Fund and Chief Minister's fund should not be brought
within the purview of this Act.
4.6.3.4The Department of Rural Development, Ministry of Rural
Development, Government of India, has brought in the notice of the Law
Commission about a centrally sponsored scheme, namely "Sampoorna
Grameen Rozgar Yojana (SGRY) of that Ministry. Under the scheme, no
funds are released to any Institution, person or organization for the welfare
of victims of natural and other calamities or war like emergent situations.
However, in the wake of natural calamities, additional assistance is
provided to the affected State Governments in the form of food grains
under the special component of the SGRY. This assistance is provided
only on the basis of the decision of a Task Force headed by the Deputy
Prime Minister. In addition to this, 5 per cent of total allocation is kept
reserved for calamity affected areas under the SGRY and Indira Awas
Yojana.
4.6.3.5The Secretary, Rajya Sainik Board, Haryana in its response has
also stated about another fund namely 'Haryana Chief Minister War Relief
Fund' which was set up by the Haryana Government. It is stated that this
fund is meant for providing financial assistance to the next of kin of
martyrs or to the disabled, at once, without any delay. The fund got
57
registered under the Societies Registration Act with the Registrar of Firms
and Societies, Haryana as a Society. The fund was collected through the
Deputy Commissioners in the shape of cheques and Bank drafts and proper
receipts were give to the donors. To monitor the fund, a high level
committee in which Chief Minister, Chief Secretary, Financial
Commissioners of Finance and Home Departments, Director Resettlement,
Secretary, Rajya Sainik Board, are members, had been constituted. The
accounts of the Funds are audited by the Auditors of Local Fund and a
Chartered Accountant.
4.6.3.6On the other hand, the Government of West Bengal (Legislative
Department) has opined that contributions made out of the State Funds
should also be dealt with by the proposed enactment for the purpose of
introducing a measure of accountability in the above funds and ensure
transparency in the system, as also in view of the increasing recognition of
a citizen's right to information by the State.
4.6.3.7The Deputy Commissioner Panchkula (Haryana) is also of the view
that State Funds should be covered under the proposed enactment for the
purpose of avoiding misappropriation of funds collected in this regard.
4.6.4 Our Discussion. At the Government level, various kind of funds
are set up to provide help and assistance. Some of these funds are
permanent in nature and do not relate to a particular situation, calamity or
war - For example, Prime Minster's National Relief Funds, National
Defence Fund, Army Central Welfare Fund, Indian Naval Benevolent
Fund or National Calamity Contingency Fund, Chief Minster's Relief
58
Fund of different States. Apart from these, sometime a particular fund is
set up to deal with a particular calamity or other eventualities. For
example Chief Minister Earth Quake Relief Fund of Maharashtra, was set
up to deal Latur earthquake. We also have Andhra Pradesh Chief Minister
Cyclone Relief Fund, Prime Minister Armenia Earthquake Relief Fund,
Prime Minster Drought Relief Fund, Pondicherry Chief Minister Cyclone
Relief Fund, Gujarat Earthquake Rehabilitation and Construction Fund.
Donations and Contributions from general public are accepted in most of
these funds, however, in some funds, Government itself contributes to
these funds. Sometimes surcharge is also levied to cover the budgetary
provisions. Other government agencies also raise contributions and
donations. It is one of the functions of the Gujarat State Disaster
Management Authority, which is constituted by the Government of
Gujarat, to obtain funds in the form of grant, aid, assistance, from the
Government, Central as well as State, World Bank, ADB, USAID, DFID,
IFRC, and donors, NGOs and from financial institutions, Public and
Private Trust or any other organization. These funds are normally being
managed by a committee. Proper accounts are maintained, proper receipt
are given and these funds are subject to audit as well.
The Prime Minister's National Relief Funds depends entirely on
voluntary donations received from the public. The Fund renders assistance
to individuals facing distress situations. Its resources are utilized for the
provision of immediate relief to the families of those killed in natural
calamities. It also grants assistance to families affected by major
disturbances, riots and accidents. Besides, the Funds extend assistance to
indigent persons to defray the cost of expensive medical treatment.
59
Contributions to the fund can be deposited in select Bank branches through
cheques and bank draft. A formal receipt for the contribution is issued
from the Fund. The Fund does not accept any contributions in kind.
The National Defence Fund is intended to take charge of voluntary
donations in cash and kind received for the national Defence effort, and to
decide on their utilization. The Fund is being used for all purposes
connected with defences including welfare of the members of the Armed
Forces and Para Military Forces and their dependants. The fund is
administered by an Executive Committee consisting of the Prime Minister
as Chairman, and the Defence, Finance and Home Ministers as Members,
Joint Secretary to the Prime Minister is the Secretary of the Executive
Committee. Disbursement from the fund are made after obtaining approval
of all members. This is a Public Fund, and the account and balance are
kept with the Reserve Bank of India. Its accounts are audited by the
Comptroller and Auditor General of India. (http://pmindia.nic.in/funds
dated 1.8.2002).
Government of India has constituted a 'National Calamity
Contingency Fund (NCCF) for the purpose of dealing natural calamity of
severe nature. The Fund is classified in the public account of the
Government of India. The Central Government provided initial corpus of
Rs. 500 crores. A National Center for Calamity Management (NCCM) has
been constituted by the Ministry of Home Affairs, which will assess how
much of the fund be utilized for immediate relief and rehabilitation. The
above recommendation of NCCM is required to be considered by the High
Level Committee on Calamity Relief constituted by the Ministry of Home
60
Affairs. As per the decision of the High Level Committee, the Fund is
released to the State Government. The Ministry of Home Affairs shall
oversee that the money drawn from NCCF is applied by the State
Government for the purpose for which the Fund was set up. The account
of NCCF is maintained by the Chief Controller of Accounts, Ministry of
Finance, and audited annually by the Comptroller and Auditor General
As stated above, the Chief Minister's Welfare Fund of Pondicherry
is being administered under a scheme notified under the Charitable and
Endowments Acts, 1890. The said scheme contains provisions for proper
accounting and auditing of the utilization of the funds.
The above discussion makes it clear that so far as contributions and
donations collected by the Government or their agencies are concerned,
there are provisions for proper accounting and auditing of those collections
and utilization. Still, in the light of Freedom of Information Act, 2002,
(when it becomes effective on framing Rules), citizens may be able to
obtain necessary information regarding amount of collection and
utilization of these funds. It is also possible that even otherwise, a large
amount of information may be available on the internet in the official
website of the Government or their agencies. Some of the Funds set up by
the Government are general funds which can be used in case of any
eventuality.
However, there may still be cases of misappropriation of moneys by
officials or non-officials. But for that purpose, there are provisions in the
Penal Code and other anti corruption laws. The HPC in its Draft of
61
National Calamity Management Act (Clause 14) and Model State Disaster
Management Act (clause 21) has already suggested provisions for civil
liability for misuse of funds by the official functionaries who are entrusted
with or engage in any relief or rescue operation. Penalty can be imposed
equivalent to 150 per cent of the total loss of public money or damages to
public property caused by such officials. This penalty is apart from the
criminal prosecution that may be launched against him. Such a law, if
enacted, will, in our view, sufficiently take care of misappropriation of
funds, if any, by the government officials.
In Bipin Chandra Diwan Case (Supra), the Gujarat High Court has
observed that it should be ensured that funds raised by the Government
should be safe and subject to periodical audit to ensure proper utilization
of funds and materials. Further, in our view, an exhaustive audit cannot be
done hurriedly and especially when the relief and rescue operations are
going on. Therefore, if funds collected by Government or its agencies are
to be omitted from the applicability of the proposed law, it can be treated
as a reasonable basis of classification between two classes, namely,
collections and utilization of contributions and donations by the
Government and its agencies, and by the private individuals bodies,
NGOs, trusts etc. The apex court in various judgments has held that, in
certain circumstances, one law may apply to non-state entities and a
different law may be made for the State (see Sagir Ahmed v. State of UP,
AIR 1954 SC 728, Kondala Rao v. A.P.S.R.T.C., AIR 1961 SC 82, Nav
Rattamal v. State of Rajasthan, AIR 1961 SC 1704.
62
Final view of the Law Commission
4.6.5 In these circumstances, the Law Commission is of the view that the
proposed enactment should be made applicable only to those contributions
and donations which are received or collected by private individuals,
bodies, organizations, trust or NGOs or other private entities. The
contributions or donations collected or received by the Government or its
agencies or bodies establish by the Government or for any fund set up by
the Government should be kept out of the purview of the proposed
enactment.
Therefore, we recommend that the proposed enactment should
be made applicable to all those contributions or donations collected or
received, either in cash or kind, by any person, association, agency,
body, institution, firm, NGO, trust or other organization. The purpose
of the proposals is to regulate collections and provide relief and
rehabilitation to the victims of any natural or man made calamity or
for welfare and rehabilitation to the soldiers and their family who are
killed or disabled in a war or war like other operation, whenever such
collections and relief work is taken up by non-governmental
organizations. It is further recommended that contributions received
by the private parties referred to above from the Government or any
fund set up by the Government, shall be brought into the purview of
the enactment. However, any contribution received by the
Government, or any fund set up by any government, or by any
authority or agency established by any government shall not be
brought into the purview of the proposed enactment.
63
Discussion and final recommendation of the Commission made in
this chapter may be summarized as follows:
1) Parliament has legislative competence to enact law
on the subject.
2) The proposed law should be made applicable to the
whole of India except the State of Jammu and
Kashmir.
3) The proposed law should be prospective in
operation and there should be no retrospective
operation of the law.
4) Contribution and donations received by any
Government or its agencies for any fund set up by
any Government shall be kept out of the purview of
the proposed enactment. However, where such
contributions are received by non-governmental
bodies, the proposed law shall apply to them.
64
CHAPTER V
SALIENT FEATURES OF PROPOSED LAW
5.1 In this chapter, we shall discuss the manner in which collection of
contributions and donations can be regulated and also the manner in which
utilization of such contributions can be monitored and action taken. As
stated in the previous chapters, the main purpose of regulation is to ensure
that no contribution is misappropriated or misutilised and to ensure that it
reaches to the actual needy person or persons in time and provides speedy
and efficacious remedies.
5.2 Establishment of Regulatory Authority
5.2.1 In order to achieve the above object, it is desirable that there
should be a Regulatory Authority to regulate the collections and utilization
of the contributions. It has been suggested that the said Regulatory
Authority should be independent and impartial, and has to be established
by the Central Government, and should consist of persons of high
integrity, semi or government officials and non-governmental
representatives of good reputation also.
5.2.2 A question arises as to whether such non-governmental
representative must be included in the proposed Regulatory Authority.
Obviously, these NGOs should be of repute and other than those connected
with even remotely with the present subject. In our view, in such kind of
Authority there is always a need that it should also consist of non-
65
government members. For example, there was 'District level Natural
Calamities Committee' for the Districts of Kalahandi and Koraput in the
State of Orissa, consisting of the District Collector, other officials and
local MPs and MLAs of districts. The Committee was required to review
the progress of relief work and the measures taken to meet the drought
conditions from time to time. In Kishen Pattnayak v. State of Orissa,
A.I.R. 1989 SC p.677, the Supreme Court directed the Orissa Government
to nominate at least five persons belonging to the recognized voluntary
organisations as members of the said Natural Calamities Committees of
these districts. The Court also directed that the functions of the said
Committees be not confined only to the cases of starvation deaths, but it
shall also be responsible for looking after the welfare of the people to the
district. The Committee shall also keep watch over the working of the
social welfare measures which were being taken and may be taken in
future. It is on the basis of the above decision that the Commission had
recommended for inclusion of representatives of reputed NGOs to be
included in the Regulatory Authority in the Consultation Paper.
5.2.3 Proposals in the Consultation Paper: Regulatory Authority's
constitution: It was accordingly suggested in the Consultation Paper that
a Regulatory Authority be established by the Central Government, which
shall consist of representatives of NGOs and others also. The constitution
suggested was:
a) A Full time Chairperson, having special knowledge or practical
experience in respect of matters relating to rehabilitation with adequate
66
knowledge of accounting and management of funds or grants, to be
appointed by the Central Government.
b) A Full time Member Secretary, having special knowledge or
practical experience in respect of matters relating to rehabilitation with
adequate knowledge of accounting and management of funds or grants, to
be appointed by the Central Government from amongst the officials of its
Ministries, not below the rank of Joint Secretary.
c) Three members nominated by the Central Government from
amongst the officials of its ministries or departments, who have practical
experience in respect of matters relating to rehabilitation with adequate
knowledge of accounting and management not below the rank of Joint
Secretary.
d) One member from the Indian Audit and Accounts service not below
the rank of Accountant General.
e) Five members nominated by the Central Government to represent
the interests of the general public. These may belong to NGOs, media
(print and electronic), legal or medical profession, chartered accountants.
5.2.4 Responses to the Consultation Paper
5.2.4.1Department of Personnel & Training: In response to the
Consultation Paper, the Department of Personnel and Training (DoPT),
Government of India has drawn our attention on one O.M. No.3115/99-
Estt. dated 18.11.1999 of the said Department, which provides that any
Chairperson and Member(s) of Regulatory Authority, Statutory bodies and
Tribunals, who, on the date of his appointment to such Authority or body
was in the service of the Central/State Government shall be deemed to
67
have retired from such service with effect from the date of his respective
appointment as such Chairman/Member. However, this provision will not
apply to the cases where the provisions in the statutes under which the
body is constituted contain a provision contrary to the aforesaid OM. The
DoPT has stated that prerequisite and other terms and conditions of
Chairperson and other members should be strictly as per the above O.M.
The O.M. further provides that pay upon such appointment as
Chairman/Member, will be regulated in accordance with the prevailing
orders of Govt. of India applicable to the reemployed pensioners, i.e. pay
minus pension.
5.2.4.2Maharashtra State Law Commission has expressed its view that in
the proposed Regulatory Authority, majority of members are bureaucrats.
It is stated that though they may be in a better position to regulate and
monitor the functioning of the collections and distributions with necessary
integrity and ability, still they suffer from certain problems like delay,
technicality, lack of proper approach etc. The State Law Commission has
proposed and suggested that for maintaining balance and equilibrium, an
equal number of members both from the bureaucrats and others like social
workers etc. should be taken. State Law Commission has further
suggested that there should be one post of Joint Secretary, to be filled in
from those social workers or NGOs etc.
5.2.4.3The Ministry of Defence, Government of India has suggested that a
representative of the Defence Forces of the level of Adjutant General or
equivalent may be included in the proposed Regulatory Authority to
oversee the interests of the defence personnel and their families. It is
68
further suggested that a representative of the concerned State Government
may also be co-opted.
5.2.4.4Department of Power, Government of West Bengal has suggested
that apart from the Central Regulatory Authority, there should also be a
State Level Regulatory Authority.
5.2.4.5Deputy Commissioner, Sonepat, Haryana in his response has made
a suggestion that in the proposed Regulatory Authority, higher officials of
State level should also be included.
5.2.4.6Government of Kerala, however, has not agreed to the proposal of
having a Regulatory Authority. It is stated in their response that
calamities are not a continuous phenomenon. There are of sporadic
occurrence and for that purpose there is no need to set up a permanent
machinery.
5.2.5 Our Discussion
5.2.5.1Past Experience:
In the past various Regulatory Authorities have been established by
the Central Government under different statutes. For example, there is
Insurance Regulatory and Development Authority (IRDA) established
under the IRDA Act 1999, Telecom Regulatory Authority under the
Telecom Regulatory Authority of India Act 1997, Electricity Authority and
Electricity Regulatory Commission under the Electricity Act 2003,
69
Security and Exchange Board of India (SEBI) under the SEBI Act 1992,
Central Pollution Control Board under the Water (P&Co) Pollution Act
1974.
These Authorities generally consist of (a) Chairman (b) Full Time
Members (c) Part-Time Members, appointed or nominated by the Central
Government. These members may be officials of the Government or non-
officials also. Full time members and Chairman get salary and other
benefits while part-time members normally get allowances and fees.
5.2.5.2In view of the O.M. of DoPT, Govt. of India, it is now proposed that
the Regulatory Authorities should consist of (a) Chairman; (b) One Part-
time member who is expert in matters relating to rehabilitation who shall
be from the Central Government not below the rank of Joint Secretary; (c)
One Part-time member who must be from the Indian Audit and Accounts
Service not below the rank of Accountant General; (d) Three Part-time
non-official members to represent general public. This would make a
committee of six members of whom three are non-governmental members.
5.2.5.3In respect of suggestion made by the Ministry of Defence, that in
the Regulatory Authority a representative of the Defence Force should be
included, we are not proposing that when the calamity in regard to which
collections are made relates or concern to Defence Forces, a Part-time
Member from the Defence Force of the level of Adjutant General or
equivalent may be co-opted.
70
5.2.5.4The view of the Maharashtra State Law Commission that in the
proposed Regulatory Authority, majority of the members are from the
bureaucracy, has been taken into consideration, though the said statement
is not wholly correct. In the Consultation Paper, it was proposed that five
members including Member-Secretary, will come from the bureaucracy
and five members were proposed from the general public. In the final
recommendation, we are now proposing six members and at least three
will be non-officials as stated earlier.
5.2.5.5In respect of suggestions of the Department of Power, Govt. of
West Bengal that a State level Regulatory Authority should also be
established, we are of the view that if any State Government deems it fit, it
may establish a State level Regulatory Authority by issuing an executive
order. Even a State law can be enacted for that purpose. It is upto the
State Government to take appropriate decision in this regard.
5.2.5.6We do not agree with the view of the Kerala Government that a
Regulatory Authority is not necessary. It appears that they only meant
that there is no need for a permanent Regulatory Authority with a large
number of permanent members. We agree calamities occur only once in a
few years. But now, we are proposing one Chairman (ex officio) and the
rest will be Part-time Members. Hence, expenses can be saved.
5.2.6 Therefore, we recommend that the Central Government shall
establish a Regulatory Authority to be described as 'Contribution
Regulatory Authority' consisting of --
71
(a) A Chairperson, having special knowledge or practical experience
in respect of matters relating to relief and rehabilitation of
victims of calamities with adequate knowledge of law,
accounting and management of funds or grants, to be nominated
by the Central Government. The Chairperson will be a person
holding a post not below the rank of Secretary to the Government
of India. The Chairperson shall hold this office in addition to the
post he is holding.
(b) One part-time member having special knowledge or practical
experience in respect of matters relating to relief, welfare or
rehabilitation with adequate knowledge of accounting and
management of funds or grants to be nominated by the Central
Government. He shall be a person who is holding a post not
below the rank of Joint Secretary in the Central Government.
(c) One part-time member to be nominated by the Central
Government from the members of Indian Audit and Accounts
Service not below the rank of Accountant General.
(d) Three part-time members to be nominated by the Central
Government to represent the interest of general public. These
may be NGOs, media, legal or medical profession, Chartered
Accountants, social workers.
(e) If the calamity in regard to which collections are made, relates or
concerns Defence Forces, a part-time Member from the Defence
Forces not below the rank of Adjutant General or equivalent may
be co-opted by the Regulatory Authority.
5.2.7 Place of sitting:
72
The place of the head office of the Regulatory Authority may be
such as may be notified by the Central Government. However, under the
Act, the Regulatory Authority is to be empowered to hold its sittings in the
form of a camp or circuit at the place where the natural or other man made
calamity has occurred and also at such other place where substantial part
of contributions or donations are collected or are being distributed. The
Central Government shall also prescribe rules of procedure which will be
followed by the Regulatory Authority in regard to the transaction of
business at its meeting including quorum. But the time and place of
meeting shall be decided by the Chairman.
5.2.8 Finances:
It is obvious that the Regulatory Authority will require necessary
funds to meet various expenditure, which includes payment of allowances,
other administrative expenditure and miscellaneous expenses. Therefore,
it is recommended that the Central Government shall provide necessary
funds required, so that the Regulatory Authority may perform its functions
effectively.
The Regulatory Authority shall deposit all monies received by it
including those received from the Central Government or by way of any
fees or otherwise in an account in a nationalised bank. This account of the
Authority shall be applied for the purpose of meeting all its expenditure.
5.2.9 Maintenance of accounts by the Authority
73
5.2.9.1As mentioned earlier, the main task of the Regulatory Authority is
to work as watchdog over the collection and distribution of the
contributions and donations and to oversee that proper accounts are
maintained by the persons and agencies who have collected the funds.
It has also to see that there is no misuse of the contributions, and,
therefore it becomes imperative that the funds and accounts of the
Authority itself are maintained properly and in transparent manner.
Therefore, we recommend that the Regulatory Authority shall maintain
proper accounts and other relevant records of its funds and shall also
prepare an annual statement of accounts, in such form which may be
prescribed by the Central Government in consultation with the Comptroller
and Auditor General of India. The accounts of the Authority shall be
audited by the Comptroller and Auditor General of India.
5.2.9.2In subsequent paragraphs, we shall be referring to a proposal that
the Regulatory Authority shall have power to seize any contribution in
case it finds that any person or agency is found misusing or
misappropriating the contributions and donations.
5.2.9.3All these contributions and donations and amount recovered by the
Regulatory Authority should not be mixed with the other amounts of the
Regulatory Authority and should be kept separate by the Authority. It is
public money, it cannot be used by the Authority for the expenditure of the
Authority. In fact, if the collectors of the monies were trustees, the
moneys received from the collectors, will, in the hands of the Regulatory
74
Authority be of the same character and will be trust money. Therefore, we
recommend that the Regulatory Authority shall keep and maintain a
separate account of all the contributions or donations received, seized, or
recovered by it. The Regulatory Authority shall be empowered to
distribute this contribution to any other authorised person or agency, or to
victims of calamity in connection with the similar calamity or disaster,
natural or man-made. In case there is any surplus, it must deposit it in any
fund set up by the Central Government or handed over to some other
authorized person, body or agency. A statement of all the receipts and
distribution under this head has to be prepared by the Authority. Such
statements of accounts shall also have to be audited by the Comptroller
and Auditor General of India.
5.3 Registration as Authorised Person or Agency
5.3.1 In order to regulate the collection of contributions and donations, it
is necessary that they should be collected only by those who are authorised
to collect it. We find that under some State enactments, such as the one in
force in Maharashtra, every charity is required to be registered. No doubt,
some State Acts contain provisions for action if a person or organization
does not register and still indulges in collections and misappropriation.
But, it must be noted that the present effort is to make a special law to deal
speedily with collections and donations made to private individuals or
organisations during calamities and disasters. As of now, in the wake of
any calamity or disaster anybody can start collection of contributions
without any kind of authorization. There is no check which ensure that
only genuine persons or agency can collect. It is proposed that collections
75
made by any unauthorized agency or persons will be an offence. In order
to save delays, we are providing for provisional registration also. Absence
of any kind of mechanism to check may lead to allow misuse and
misappropriation of contributions so collected.
5.3.2 That was why, therefore, it was proposed in the Consultation Paper
that after the coming into force of the proposed enactment, no person or
agency shall be entitled to collect contributions unless it is get registered
itself as 'Authorised person or agency', either provisionally or finally.
5.3.3 As the office of the proposed Regulatory Authority shall be only at
one place, we felt that it will cause great inconvenience to the persons if
we require that all applications for registration have to be made to the
Regulatory Authority. It is more appropriate that place of registration as
Authorised person, body or agency must be easily accessible to the persons
in the local area, where the calamity or disaster occurred or to places near
about. It should also be accessible easily for any person or organization to
start collections, at places where there is likelihood of large donations or
contributions. Therefore, in the Consultation Paper it was proposed that
application for registration can be submitted to the 'District Collector' of
any District where the person applying actually resides or body or agency
applying has its place of work. Applications can also be made to the
District Collector of such District where the contribution is proposed to be
collected and where relief or rehabilitation is proposed to be provided.
5.3.4 The Collector after inquiry and verifying the facts narrated in the
application and seeing the documents filed in support of the application,
76
may either register the person or body or refuse to register. Procedure
required to be followed by the Collector for deciding the application, was
also mentioned in the Consultation Paper. It was also proposed that in
case the Collector rejects the application for registration, aggrieved party
can prefer an appeal to the Regulatory Authority. Provision for
provisional registration was also mentioned in the Consultation Paper.
5.3.5 It is necessary that only those persons or bodies should be allowed
to collect contributions who have some kind of experience in the field of
social service. Therefore, it was proposed that in respect of eligibility to
obtain registration, such person or body or agency should have at least
three years experience in social service.
At the same time it is also necessary that persons or bodies whose
track record is not sound, should not be allowed to raise the contributions.
To achieve this purpose, it was proposed that a person should not be
registered, (a) if he was adjudged as insolvent under the Insolvency law or
(b) if he is a person against whom either charges have been framed by the
court or (c) if he is a person who has been convicted by a court for an
offence involving moral turpitude or (d) if he is a person or body who is
already debarred or banned under any law or under order issued by the
government, such person or organization shall not be entitled for
registration.
5.3.6 Responses to Consultation Paper
77
In response to the Consultation Paper, there were only few
suggestions made in respect of provisions relating to registration of
authorised person or agency.
5.3.6.1Legislative Department, Govt. of West Bengal, is not in favour of
laying down the requirement of three years experience in social service for
registration because according to them it is likely to frustrate the object of
providing relief to disaster victims, as this requirement of experience will
exclude well-meaning organisations, bodies or persons who may otherwise
be ready and willing to generously contribute towards relief work.
5.3.6.2We would like to make it clear that we never intended that
registration is necessary for all persons doing all types of social work
during calamities. We only stated that for collecting contributions or
donations for providing relief to disaster victims, at least three years
experience in social work is necessary. If any person or organisation
wants to engage in relief work without any kind of collection of
contribution, it can certainly do it without any registration. But when such
person or organisation intends to collect contribution, it is in the interest of
the general public that such person or organisation should be screened and
for that purpose, he should have at least three years of experience in the
field of social service.
5.3.6.3In respect of the Commission's proposal in the Consultation Paper
that when a person is provisionally registered, he can collect contributions
but cannot disburse it till final decision is taken by the Collector, the
Legislative Department of Govt. of West Bengal has stated that this
78
proposal may prove to be self defeating in as much as this will unduly
delay the whole process of providing relief and distribution of relief
materials to the victims, which is opposed to the very object of raising
such relief fund. It was urged that such provision either may be omitted or
relaxed in some genuine cases.
5.3.6.4The main purpose for allowing provisional registration is to allow
the collection of contribution without awaiting final orders on the
application for registration, in case of urgency. The Collector is supposed
to take final decision expeditiously. Persons or bodies who are
provisionally registered, and accordingly have started collection of
contributions are supposed to wait only for a short period, for distribution
of such contributions so collected. Moreover, we have to maintain some
distinction between those who have been provisionally registered and
those who have got registration finally. A person or organization, once
registered need not apply again and again. If persons or organisations who
are provisionally registered, are allowed to distribute the contribution, and
ultimately if their application for registration is rejected, then the main
object of making a provision for mandatory registration for collection of
contributions would certainly be defeated and it may also encourage back
door entry of non-eligible persons or organisations. As stated above,
registration is required only at one time. It is not necessary that for every
calamity, fresh registration is needed. When once any person or
organisation is registered, and is maintaining proper accounts and is filing
the required returns regularly, he or it can collect contributions whenever
there is a calamity or disaster and distribute the contributions. The result is
that the views of the Govt. of West Bengal are, in our view, not tenable.
79
5.3.6.5The Maharashtra State Law Commission has suggested that
registration shall be for a period of three to five years. It is also suggested
that there should also be special registration for a short period for a
particular calamity.
5.3.6.6We have considered this suggestion closely, but we are of the view
that there is no need to prescribe a period during which the registration
shall be in force. Once a person or organisation is registered (unless the
registration is suspended or cancelled), it can collect the contributions and
distribute it, subject to the procedure followed by such person or
organisation, in regard to maintaining the proper accounts and filing of
required returns. Similarly, registration for a shorter period is also not
required because there cannot be two sets of duties required to be
performed, one by those who are registered for shorter period and one by
those who are registered for longer period. When the duties and
obligations are same, it will not serve any purpose for providing two kinds
of registration.
5.3.6.7It has also been urged by the Maharashtra Law Commission that
upon receiving the application for registration, the Collector should make
an enquiry to verify the correctness of facts stated in the application and
ascertain the eligibility and fitness of applicant for registration. These
measures have already been suggested in the Consultation Paper itself. An
application can be rejected on such enquiry and the provisional registration
shall automatically come to an end.
80
5.3.6.8In regard to Commission's proposal for appeal before the
Regulatory Authority against the order of refusal of registration or
cancellation of registration by the Collectors, it has been suggested by the
Maharashtra Law Commission that the said appeal should lie before the
proposed Judicial Authority and a revision may be provided to the
Regulatory Authority. Reason behind this suggestion, as stated, is the
office of the Regulatory Authority is likely to be at Delhi, and it would be
very difficult, expensive and time consuming specially for small and
sincere agencies to prefer appeal at Delhi.
5.3.6.9The function of the proposed Judicial Authority (as proposed in the
Consultation Paper) was to entertain and dispose off complaints against
any person or agency in relation to alleged misappropriation, misuse or not
utilisation of any contribution collected or received by such person or
agency. The Commission's view was that proposed Judicial Authority is
not to deal with the cases relating to the administrative functions of
Collector. Order of refusal or cancellation of registration is an
administrative function, however, subject to the principle of natural justice
being followed. Therefore, it is not desirable to suggest appeal before the
Judicial Authority against the order of Collector regarding registration and
cancellation of registration. Further, providing revision before the
Regulatory Authority against the order of Judicial Authority, as suggested
by the State Commission cannot be said to be appropriate. Therefore, we
propose to retain the proposal of an appeal to the Regulatory Authority
5.3.6.10The Department of Power, Govt. of West Bengal is of the view
that the procedure for registration is cumbersome and needs to be
81
simplified. We do not see how it can be made more simpler, without
sacrificing public interest. Procedure for registration suggested by us is a
simple one. In fact, the above Department has not come forward with a
simpler procedure.
5.3.6.11In another response, the Deputy Commissioner, Yamuna Nagar
(Haryana) has requested that some modalities may be worked out, such as
where once application of a person for registration is rejected by the
Collector, he should not be able to get himself registered in the office of
any other Collector in the country. This idea has already been suggested in
the Consultation Paper at para 3.3.1. We reiterate our proposal in the
Consultation Paper and recommend accordingly.
5.3.7 In view of the above discussion, final recommendations of the Law
Commission in regard to registration are as follows:
Final recommendations as to Registration: mandatory registration & other
procedures
i) From the date of commencement of the proposed legislation, no
person, or body or agency shall collect or receive contributions or
donations for the purpose of providing relief or rehabilitation to the
victims of any natural or other man-made calamity or for welfare and
rehabilitation of soldiers and their family members who are killed or
disabled in a war or other similar operation, unless such person or body or
agency is registered or provisionally registered as Authorised person or
agency under the proposed legislation. Any person, body or agency
82
making collections contrary to the prohibition shall be guilty of an offence
of collection without such registration punishable with imprisonment upto
3 years or fine upto Rs.50,000 but not less than Rs.25,000 and the
provisions of the Code of Criminal Procedure, 1973 will apply. In the
case of such offence by non-individuals, the punishment shall be inflicted
on the persons mentioned hereinbelow.
When an offence mentioned above is committed by any agency or
body, every person who at the time of commission of the offence, was in
charge of and was responsible for the conduct of business of such agency
or body, and the person who had collected the contribution as well as who
had made appeal for contribution, shall be deemed to be guilty of the
offence and shall be liable to be proceeded against and punished
accordingly. However, any of the persons mentioned above shall not be
liable to any punishment if he proves that the offence was committed
without his knowledge or that he exercised due diligence to prevent the
commission of such offence.
For the removal of doubts, it is made it clear that though an
organisation, body or agency might be registered or recognized under any
other law, like, the Companies Act, 1956, Society Registration Act, Trust
Act or any other law applicable to charitable institutions, still registration
under the proposed law, as Authorised person, body or agency is
necessary, if the collections are proposed in the context of a calamity or
disaster. Excepted categories are Government and Government agencies.
83
ii) Any person, body, organisation or agency may apply for
registration, to the Collector of any district in whose jurisdiction either,
(a) the person applying for registration actually resides or agency or
body applying has its principal office or place of work; or
(b) the contribution or donations is proposed to be collected; or
(c) the relief or rehabilitation work is to be done.
Provided that only one application shall be made and no second
application will be maintainable unless the first application has been
rejected on technical grounds.
iii) Application for registration has to be made in the form and manner
prescribed by the Central Government. However, it will be necessary for
every applicant to state the facts by way of an affidavit including details as
to whether any previous application for registration has been rejected by
any Collector, and if so, for what reasons.
iv) (a) A person or body or agency shall not be eligible for
registration unless he or it has three years experience in the field of
social service.
(b) A person or body or agency shall not be registered if such
person, body or agency has already been debarred or blacklisted or
banned under any law or instrument having force of law or under
any order issued by the Collector or the Government.
(c) A person shall not be registered if (a) he is adjudged as
insolvent under Insolvency laws; or (b) against whom either charges
have been framed by the court or if he has been convicted by any
court, for an offence involving moral turpitude.
84
v) (a) Upon receiving the application for registration, the Collector
shall enquire and verify the correctness of the facts mentioned in the
application along with documents filed in support of application and
the affidavit. On the basis of the findings of such inquiry, the
Collector shall either register such person, body, or agency; or
refuse to register as Authorised person or agency and reject the
application. However, before rejecting any application, the
Collector shall give opportunity of hearing to the applicant and also
give reasons for rejecting the application. Copy of the order of
rejection shall be given to the applicant.
(b) The Collector shall decide the application for registration
within 15 days unless there are sufficient reasons to be recorded in
writing for not deciding the application in that period.
vi) Whenever there is an urgent need of collection of contributions, the
Collector may provisionally register any person or agency, after due
verification of particulars and fitness of such person or agency as the case
may be. Provisional registration shall be valid till the final decision is
taken on the application, by the Collector.
vii) A person, body or agency who is provisionally registered, shall be
entitled to collect the contribution, but cannot distribute or utilize it till the
final decision on registration is taken and communicated. No contribution
in cash or kind shall be collected without granting stamped receipts to the
donors. All the monies collected shall be deposited in a nationalized bank
and proper account of all such collections has to be maintained. In case
85
registration of such person or agency is finally refused, all the
contributions collected by such person or agency shall vest in the Collector
and he may make appropriate orders for attachment of such contributions
and their seizure and their distribution.
Suspension or Cancellation of Registration
viii) I. Registration of any person or agency or organisation can be
cancelled by the Collector -
(a) If such person is adjudged as insolvent under Insolvency law
applicable to him; or
(b) If charges have been framed by any court against such person
for alleged involvement in an offence involving moral turpitude; or
(c) If such person is convicted by any court for committing an
offence involving moral turpitude; or
(d) If such person, body or agency does not comply with the
directions issued by the Regulatory Authority or Collector; or
(e) If such person, body or agency violates any provision of the
proposed enactment or any rules made thereunder.
Provided, no registration shall be cancelled, unless an
opportunity of being heard is given to such person or agency.
II. During the pendency of the inquiry proposing cancellation, the
Collector may suspend the registration or the provisional registration.
86
III. The Collector shall communicate his decision on registration,
provisional registration, suspension or cancellation of registration along
with reasons to such person, body or agency.
IV. The Collector shall make public announcement of every decision on
the question of registration, provisional registration, suspension or
cancellation of registration in the manner prescribed by the Central
Government. The Collector shall forthwith also communicate all these
decisions to the Regulatory Authority and the said Authority shall
immediately publish the information on website so that the applicant may
not apply before any Collector, by furnishing incorrect or misleading facts.
V. Whenever the registration of a person, body or agency is cancelled,
all unutilized contributions, possessed by such person, body or agency
shall stand vested in the Collector inasmuch as it is difficult to identify the
individual donors in relation to the unspent money. The Collector shall
use the said sum only for matters connected with disaster relief.
(ix) Any person or agency aggrieved by the order of the Collector
rejecting the application for registration, or cancelling the registration, may
prefer an appeal to the Regulatory Authority within 30 days of the receipt
of the order.
(x) The Regulatory Authority shall maintain and update the data of all
registered persons and agencies and details of those in respect of whom
applications of registration have been rejected by the Collector and in
respect of those whose registrations have been cancelled and put them on
87
its website so that all District Collectors may check the same to see if a
person or body whose application has been rejected is making application
elsewhere.
(xi) Once a person or agency is registered at any place, it shall be lawful
for it to collect or receive contribution from any part of the country or even
from outside the country and distribute the same but those who have
provisionally registered shall not be entitled to disburse the same.
However, collections from outside the country shall be in accordance with
the laws governing remittances of monies from abroad.
(xii) Any person, body or agency whose application for registration is
rejected by the Collector of any district, he or it shall not be eligible to get
it registered at any other district. However, this rule will not be applicable
where a registration is refused for want of some technical formalities or
want of sufficient experience in social work.
5.4 No collections to be made without passing receipts:
5.4.1 There is a need to maintain financial discipline, in collecting the
contributions. Apart from the mandatory registration for collection of
contributions, it is equally necessary that the authorised person or agency
while receiving any contribution in cash or kind, should give a proper
receipt to the donor. Such receipt shall be valid proof of donation, in the
hands of donors. The Authorised person, body or agency who or which
has collected such contribution can be held accountable for such
contribution on the basis of the above receipt.
88
5.4.2 In the Consultation Paper, it was proposed that every authorised
person or agency while collecting any contribution, shall issue a stamped
receipt of its collection to the donor.
5.4.3 The Commission has received few suggestions for making this
provision more stringent. Deputy Commissioner, Yamuna Nagar
(Haryana) has suggested that receipt books shall be submitted in the
office of Collector and authenticated by the Collector, so that authorised
person or agency may not misuse the receipt books. Similar kind of
suggestion has been made by the Maharashtra State Law Commission,
which states that these receipts should be used only from the authorised
book and which are to be distributed from the government office only.
Citizen Welfare Council, Rup Nagar (Punjab), which is a registered
body, has stated that there should be no printed receipts by any
individual, club or society without the permission of the government and
the printing press involved in the printing of such receipt books should
also be made answerable under the law. Some of these above suggestions
are certainly good and can be accepted.
5.4.4 We recommend that, every authorised person or agency, while
receiving any contribution in cash or kind, shall issue a stamped receipt
for receiving such contribution, and the receipt shall be given to the
donor of such contributions. Receipt shall be given from a receipt book,
authenticated by the Collector in the manner prescribed by the Central
Government under the Rules. Such receipt should clearly mention the
89
name and full address of authorised person or agency, name and full
address of donor, details in regard to the contributions, such as the total
amount of cash or cheque or demand draft and details of other items in
kind and the purpose for which such donations are given, date and place
of receiving the contributions, name, address and signature of the person
who has received such contributions. The receipt book must be a printed
one and the name and address of the printing press should also be
indicated in the receipt. A duplicate copy or counterfoil of receipt should
be kept by authorised person, body or agency. The receipt must be a
receipt duly stamped according to the law application for collection of
such stamp-duty in that locality. The person collecting can use a
rubber stamp to indicate his or its name, at the appropriate place in the
receipt.
No printing press shall print the receipts for the aforesaid purpose,
without the written authority of the Collector.
5.5 Maintenance of proper accounts.
5.5.1 A number of suggestions were made in the Consultation Paper
regarding maintenance of proper accounts by authorized person, body or
agency. Each agency must nominate a person to be called 'authorised
person' who will be in charge of maintenance of accounts. One of the
main objects of recommending suitable legislation is to curb malpractices
on the part of persons or body, who collect the donations. These persons
and agencies should therefore be obligated to maintain a fair and proper
account and record of collections.
90
5.5.2 The Maharashtra State Law Commission in its response has stated
that the contributions should be deposited in the name of the agency in
the Schedule Bank on a day to day basis. But its withdrawal and
disbursement should be under the direction of the Collector in the
manner stated and consistent with the special and general directions of
the Regulatory Authority.
5.5.3 The Govt. of West Bengal, Deptt. of Power has suggested that
Receipt Heads can be created in the District Treasuries, in which cheques
collected by authorised person or agency have to be compulsorily
deposited. The Treasury Officer may issue cheque against bills drawn
by the Collector on account of specific schemes. The scheme should be
vetted by the Regulatory Authority on the recommendations of a
committee formed by the District Magistrate from among the
representatives of the authorised persons or agencies and Govt. officials,
who will remain responsible for selection of beneficiaries and scheme. In
the Metropolitan cities, the branches of the Reserve Bank of India may
be involved.
5.5.4 We have considered these suggestions. As stated above, the
purpose of regulating the contribution is to curb the misuse of funds. At
the same time, if there are too many procedures prescribing restrictions
or controls, the very purpose of speedy aid to the victims of disaster, will
be frustrated. We do not want to take away the right of the person or
agency to provide speedy relief to the victims. All that is required is
regulation of the whole process of collection and distribution. Too much
91
of involvement of government and administrative machinery in the
process of providing relief will lead to red-tapism and delay.
5.5.5 For the purpose of maintaining proper accounts, we recommend
that the proposed legislation should contain provisions to the following
effect:
i) Every authorised person or body or agency should maintain an
account with a nationalized bank, where all monetary
contributions shall be deposited forthwith, i.e. to say immediately
after receiving the same.
ii) Every authorised person or body or agency should also maintain
proper accounts of all contributions collected and distributed or
spent by it, in accounts books maintained in the ordinary course.
iii) The legislation may permit rules in regard to the following: (a) A
register must be maintained as to the manner in which the
donations are distributed. The account book shall be maintained
on a day-to-day basis. (b) There should be correlation between
the accounts and the Register. (c) The details of the distribution
must be such that there can, if need be, proper verification of the
distributions. (d) Where the money is utilised for purchase of
clothes, utensils or food items or other articles or goods, the bills
must be preserved for verification. (e) Monthly returns of the
account have to be furnished to the Collector in-charge of the
area where the office of the authorized person, body, agency
which has collected the donation, is located.
92
iv) Every authorised person or body or agency should inform the
Collector immediately about the receipt of money or item in kind,
the name of the donors, and other details as may be prescribed.
v) Annual audit of the accounts has to be conducted by a qualified
chartered accountant and the audit report should also be sent to
the Collector as well as to the Regulatory Authority within such
time as may be prescribed.
vi) The concerned nationalized Bank where the deposits are made
shall also submit monthly statements of account of the authorised
person, body or agency to the Collector and the Regulatory
Authority. This is for the purpose of verifying the information
that may have been furnished by the authorized person or body or
agency to the Collector.
vii) The person, body or agency should submit a half-yearly report of
its activities and accounts to the Collector and Regulatory
Authority.
5.6 Other duties of authorised person or agency
Apart from the regulation of the collections of these contributions, it
is equally necessary that the utilisation of such contributions should also
be monitored and regulated. In this regard, certain duties of authorised
persons or bodies or agencies were proposed in the consultation paper.
5.6.1 These were as follows: (a) there should not be any kind of diversion
of the contributions to other purposes. The contribution should be utilized
by authorised person or agency only for the purpose for which it was
93
collected or received. Any kind of diversion of fund will amount to breach
of trust; (b) no authorised person or body or agency shall, in the matter of
distribution of the donations discriminate against any person on the ground
of caste, religion, rank, language or sex; (c) after providing relief, if any,
the contributions is left unutilized in the hands of any authorised person,
body or agency, such person or agency should hand over such unutilized
contribution to any fund set up by the Central or State Government or to
the Regulatory Authority or Collector; (d) every Authorised person, body
or agency shall co-oporate and give full assistance to the Regulatory
Authority and the Collector while discharging their duties prescribed under
the law.
5.6.2 On the question of prohibition of diversion of contributions, the
Govt. of West Bengal, Legislative Deptt. has opined that absolute and total
prohibition on diversion of contributions is not desirable in as much as
such total and absolute restriction will prevent the well meaning
organisation etc. from using or applying the unutilized funds toward the
welfare and relief of disaster victims. Therefore, it was suggested by the
Govt. of West Bengal that instead of imposing a total ban on diversion of
unutilized contribution, a relaxation may be provided by incorporating a
provision to the effect that such diversion may be allowed subject to prior
permission of the Regulatory Authority.
5.6.3 We may clarify that when we stated in the Consultation Paper that
diversion of funds must be prohibited, we meant that funds should be
utilized only for the purpose for which they were collected. It should not
be utilized for any other purposes. For example, if a fund was collected for
94
providing relief to the victims of a particular disaster such as an
earthquake, the donations should be spent and utilized for giving relief to
the victims of that particular earthquake. It should not be utilized for some
other relief operation, say for construction of a school building at another
place which is not affected by earthquake. Otherwise, it will be a violation
of the purpose of the collection and also of the wishes of the donors. It is
the paramount duty of the authorised person, body or agency which has
made the collection that it should honour the wishes of the donors. They
should utilise and distribute the collections in terms of the wishes of the
donors. After providing total relief and rehabilitation in terms of the
wishes of the donors, if any amount or other items in kind are left
unutilized, it will be necessary, in our view, that such funds and items be
handed over to the Collector or the Regulatory Authority for utilization for
relief in other calamities or disasters.
5.6.4 Cypres Doctrine
5.6.4.1In this connection we would like to refer to the 'Cypres Doctrine' as
applicable to trusts. It literally means 'as near to'. It is a rule in equity
which may be stated thus: 'when a definite function or duty is to be
performed, and it can not be done in exact conformity with the scheme of
the person or persons who have provided for it, the duty may be performed
with as close an approximation to that scheme as is reasonably
practicable.' (see The Law Lexicon by P.R. Aiyar).
In England, the law distinguishes between the charitable intention
and the mode of executing it. The particular mode of application indicated
95
by the donor is not considered to be of the essence of the gift and the law
make provision for charitable intention to be carried into effect. 'Cypres',
that is to say, by substituting for the mode indicated by the donor, by
another mode as similar as possible to the mode indicated. (see Tudor on
Charities - Published by Sweet & Maxwell (1967) page 215).
5.6.4.2 Cases in UK
Arden M. R. in Attorney Genl. Vs. Bourtbec (1876) 2vs 380 (387)
has held that in cases where the execution of a trust cannot be done
literally as intended by the author of the trust, another mode of execution
may be adopted, considered with the general intention of the author. If the
mode prescribed by the instrument of trust becomes, by subsequent
circumstances, impossible, the general object is not to be defeated if it can
be attained by other means consistent with the object of the trust.
In ReWelsh Hospital (Netley) Fund (1921) 1 Ch.655, there had been
a generous response by large and small subscribers to an appeal to the
public in Wales, launched in 1914, to give money to establish a hospital
for sick and wounded Welsh soldiers. The hospital was built, equipped
and maintained by voluntary subscription and donations until the year
1919. When it was closed, its staff was disbanded and its assets were sold
to the war office. The trustees of the fund had a large surplus in their
hands. P.O. Lawrence J. held that it must be applied cypress under a
scheme. The learned Judge held that subscribers had intended to part with
their money out and out and they had intention to benefit sick and
wounded Welshmen. Similarly, in Re North Devon and West Somerset
96
Relief Fund Trusts (1953) (2) ALLER 1032 (already referred to) the public
had responded generously to an appeal for funds for the relief of the
victims of a flood disaster. After all the victims had been relatively a large
surplus was left in the hands of the trustees of the fund. Wynn Parry J.
held that this surplus must be applied cypres for other charitable purposes.
He said that the main underlying object of the appeal was to benefit the
people of 'the district' in question.
5.6.4.3 Indian Cases
The Supreme Court of India in Ratilal vs. State of Bombay, AIR
1954 SC 388, considered the provisions of ss.55 and 56 of the Bombay
Public Trusts Act, 1950. These sections purport to lay down how the
doctrine of cypres is to be applied in regard to the administration of public
trust of a religious or charitable character. The Supreme Court held:
"The doctrine of 'Cypres' as developed by the Equity Courts in
England, has been adopted by our Indian Courts since a long time
past".
The Supreme Court also said:
"When the particular purpose for which a charitable trust is created,
fails or by reason of certain circumstances the trust cannot be carried
into effect either in whole or in part, or where there is a surplus left
after exhausting the purposes specified by the settler, the Court
97
would not, when there is a general charitable intention expressed by
the settler, allow the trust to fail but would execute it 'cypres' that is
to say, in some way as nearly as possible to that which the author of
thel trust intended." (page 19).
5.6.4.4Section 83 of the Indian Trusts Act, 1882, provides that if for
certain reasons the trust is incapable of being executed, or where the
purpose of the trust is fulfilled without exhausting the trust properly
completely, the trustees must hold the trust property as a whole or the
residuary as the case may be, for the benefit of the settler of the trust. In
State of U.P. vs. Bansi Dhar, AIR 1974 SC 1084, Kirhna Iyer J held that
though public charitable trusts are expressly excluded from the application
of the Indian Public Trusts Act, 1882, but certainly there is a common area
of legal principle which covers all trusts private and public. The Supreme
Court ordered refund of the donation money made by the father of the
respondent for the purpose of establishment of the hospital, which could
not be built up.
5.6.4.5We are of the view, therefore, that a provision should be made in the proposed law that if any amount or other items in kind are left unutilized in the hands of any authorized person, body or agency, it should be handed over to the collector or Regulatory Authority, who or which as per the 'cypres' doctrine shall transfer it to some other authorized person, body or agency or to any fund set up by the Central or State Government, to be used for the purpose of the calamities or disaster covered by the proposed Act.
98The first priority should thus be to utilize the collection only for the purpose for which it was collected. Any kind of relaxation to this rule as suggested by the Govt. of West Bengal cannot be accepted.
5.6.5 Therefore, we recommend that, apart from the maintaining proper accounts etc., every authorised person, body or agency should perform the following other duties:
i) Every authorised person, body or agency should utilize the contribution exclusively for the purpose for which it was collected. There should not be any kind of diversion of such contribution for a different purpose.
ii) Every authorised person, body or agency shall utilize the contribution in the manner best suitable for the purpose for which it was collected.
iii) Every authorised person, body or agency, shall not while providing relief and rehabilitation, discriminate against any victim of calamity on the ground of religion, race, caste, language sex, place of birth or residence.
iv) After providing total relief and rehabilitation to the victims of calamity or war, if any contribution is left unutilized in the hands of any authorised person, body or agency it shall hand over, such unutilized contribution either to the Collector or to the Regulatory Authority for being used for relief in any other calamity or disaster.
v) Every authorised person or agency shall provide full cooperation and assistance to the Regulatory Authority and the Collector in the discharge of their functions and duties under the law. Every 99 authorised person and agency shall also follow their directions and instructions.
5.7Other powers, functions and duties of the Regulatory Authority and the Collector Apart from the powers relating to registration and cancellation of registration and recovering the unutilized contributions from the person, body or agency, the Regulatory Authority and the Collector shall have all other powers to achieve the objects of the proposed law. In this regard, certain proposals were suggested in the Consultation Paper.
5.7.1 Earlier, we have recommended that the contributions can only be collected by those persons, bodies or agencies who are registered as authorised person, body or agency, either finally or provisionally. When registration is mandatory, it becomes necessary to see that no person or agency shall collect contributions without registration. And if collections are made without such registration, the contributions collected by them have to be recovered and appropriate action has also to be taken. Every person interested on the utilization of the collection, including a donor, should be entitled to make a complaint to the Regulatory Authority or the Collector in respect of collection of contribution by an unregistered person, body or agency. As the Regulatory Authority and the Collector are the main functionaries under the law, they should be authorised to deal with such cases.
100Therefore, it is recommended that any person interested, as stated above, who has any information that any other person or agency is collecting or receiving contributions without registration (final or provisional), he may complain to the Regulatory Authority or the Collector.
The Regulatory Authority and the Collector shall have power to inquire suo motu or upon receiving any complaint as to whether any person, body or agency which is not registered, is collecting or receiving contribution. If the Regulatory Authority or the Collector, as the case may be, finds that any person, body or agency is collecting contributions without registration, it shall have power to attach, seize and recover such contributions. The Regulatory Authority or the Collector shall also have power to attach, seize and recover other ancillary documents which are in possession of such unregistered persons or agency.
5.7.2 As mentioned in the earlier chapters, there can be allegations of misappropriation, diversion and misutilisation of contributions on the part of the persons, bodies or agencies collecting the donations. Such misappropriation, diversion or misutilisation of contribution may be done by person, body or agency who are registered and authorised to collect.
Therefore, it is also recommended that it will open to any person interested, as stated above, to make a complaint to the Regulatory Authority or the Collector in respect of any misappropriation, misutilisation or diversion by any person, body or agency. The Regulatory Authority or the Collector shall have power to inquire suo motu or upon 101 receiving any complaint, as to whether any authorised person, body or agency is misutilising, misappropriating or diverting; or has misappropriated, misutilised or diverted such contribution collected. If the information or complaint contains prima facie material or basis suggesting misutilisation or misappropriation, the Regulatory Authority or the Collector can suspend the registration before conducting a regular inquiry, and exercise powers of attachment of the monies or contribution.
If the contributions relate to perishable items (such as fruits, cooked food etc.) and the inquiry is likely to take time, the Collector or Regulatory Authority may give possession thereof to some other registered person, body or agency for distribution or sell them and keep the money in deposit.
If after enquiry, the Regulatory Authority or the Collector finds that any authorised person, body or agency is misutilising or misappropriating or diverting the contribution, any of these authorities shall have powers to do following:
a) to direct the bank in which such person, body or agency is maintaining his account to forthwith stop withdrawals of any amount therefrom and to further direct the bank to transfer such amount to the account of some other authorised person or agency, or to any fund of the Centre/State Government;
b) to attach and seize the contributions, books of account or other material from such persons, bodies or agencies and for that purpose, enter the premises of such person, body or agency with or without assistance of police;102
c) to direct such authorised person or body or agency that any contribution be handed over to the donor or to some other authorised person or body or agency;
d) to direct such authorised person, body or agency to stop further collection of contributions and to stop them for distribution or utilization.
5.7.3 In order to regulate the collection, distribution and utilisation of contribution, we recommend that the Regulatory Authority and the Collector shall also have following powers:
a) to take such measures as they deem fit and expedient for the purpose of regulating contributions by authorised persons, bodies or agencies;
b) to ensure that the distribution and the providing of relief and rehabilitation by any authorised person, body or agency is accomplished in an equitable and impartial manner without any discrimination on the ground of race, religion, caste, sex, language, residence, place of birth;
c) to call for any information about the collection and receipt of any contribution and also the management and utilisation of such contribution from any authorised person, body or agency;
d) to issue directions to any authorised person, body or agency, about the manner of collection, management and utilisation of contributions;103
e) to issue directions to officials of the Central or State Government engaged in relief and rehabilitation work related to natural and other calamities;
f) to collect or receive contributions and transfer them to any Fund or authorised person, body or agency in the manner prescribed;
g) to take appropriate proceedings, civil or criminal, in any court or Tribunal against the authorised person, body or agency or against any person or agency which is not registered or provisionally registered under the proposed legislation;
h) to do any other act for effectual discharge of the functions of the said Regulatory Authority and the Collector; and
i) to take the assistance from govt. officials in the discharge of their official functions.
5.8 Criminal and civil liability When any person, body or agency misappropriates or misuses any contribution, civil as well as criminal action can be taken against such person, body or agency under the existing laws, as stated below.
5.8.1 Remedy under criminal law 5.8.1.1 Misappropriation of contributions amounts to offence of criminal breach of trust, which is defined in sec. 405 of the Indian Penal Code, 104 1860 and is punishable under sec. 406 to 409 of the IPC. Sec. 405 of the IPC is as follows:
"405. Criminal breach of trust.- Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes that property in violation of any direction of law prescribing the mode in which is such trust is to be discharged, or of any legal contract, express or implied which he has made touching the discharge of such trust, or willfully suffers any other person so to do, commits "criminal breach of trust".
Explanation 1...........
Explanation 2..........."
As stated earlier, whenever contributions are collected, necessarily a trust is created and the trustees who violate the obligations cast upon them by the authors of the trust (donor) become liable for breach of trust. If the trustees have not utilized the money, or have misutilised or diverted the money or misappropriated the money, they are liable for criminal breach of trust. Offence of criminal breach of trust is punishable under sec. 406 of the IPC, therefore there is no need to create a separate offence under this proposed enactment.
Further, on the basis of the same or connected facts, there may be forgery or wrong information being sent to the Collector or Regulatory Authority, or other related offence - all in connection with the collection 105 and distribution of contributions, there is no need to create separate offences.
But, in all such cases, we are proposing a special procedure as stated below.
We have already recommended that the Regulatory Authority as well as the Collector can enquire into any allegation either suo motu or upon any complaint made to it by any interested person that a person, body or agency has misappropriated or misused the contributions. Any interested person can make a complaint to the Regulatory Authority or the Collector. After conducting inquiry, if the Regulatory Authority or the Collector finds that there are substances in the allegations, it can initiate criminal proceedings against such person, body or agency. 'Interested person' means any person interested in seeing that the contributions are not misused or misutilised and include donors.
5.8.1.2 The Regulatory Authority or the Collector can file a complaint before a Judicial Magistrate First Class or Metropolitan Magistrate. When a complaint is filed, it will have to be tried in accordance with the procedure prescribed under chapter XIX of Criminal Procedure Code, 1973. In this chapter, procedure for trial of warrant cases by magistrates is provided. This chapter is sub-divided into three parts - Part A (governing the cases instituted on a police report), Part B (governing the cases instituted otherwise than as police report and Part C (relating to conclusion of trial). The main difference between the procedure in Part A and Part B is that in cases governed by Part A, the magistrate can frame 106 charges straightaway after perusing the police report and accompanying documents. Whereas in cases governed by Part B (i.e. in cases instituted otherwise than as police report), the procedure is different and elaborate. In such cases, the magistrate has to first hear the prosecution and take all such evidence as may be produced in support of the prosecution and on consideration of such evidence, he may either discharge the accused or frame charges. Thereafter, the accused is asked whether he pleads guilty and if he denies the charge he will be asked to cross-examine the witnesses and then the trial proceeds. The reason behind the distinction is that, a police report is filed pursuant to and as a result of investigation done by the police or other independent agency, whereas in case of complaint, such an investigation is absent.
But when the Regulatory Authority or the Collector while acting under the proposed law, files complaint for criminal breach of trust or related offences, necessarily they will inquire prior to filing the complaint before the magistrate. We are of the view that such complaint should be proceeded with under Part A of chapter XIX of the CrPC 1973, as per our recommendation stated below.
5.8.1.3 In fact, the Law Commission in its 178th Report on 'Recommendations for Amending various Enactments, both Civil and Criminal' (2001) considered the issue of procedure followed in cases where the authorities under the various enactments like Income-tax Act, Central Excise Act, Customs Act, FERA/FEMA, ESI Act, 1948 and the Companies Act, 1956, file complaints before the Criminal Court. The Law Commission recommended that such cases should be proceeded with 107 under Part A of chapter XIX of the CrPC. The Law Commission observed in the Report:
"It must be provided that where a complaint is filed by the appropriate authority under any of the aforesaid enactments or similar enactment, it should be proceeded with Part A. This is for the reason that appropriate authorities under these enactments also file complaints after a good amount of investigation, inquiry and verification."
It is further stated in the Report:
"Treating the complaints filed after such elaborate enquiry ought not to be equated with the complaints filed by private individuals and should not be subjected to the procedure in Part B of chapter XIX. Applying Part B is resulting in inordinate delay in processing these complaints, which in fact relate to economic offences, which must be given priority over the ordinary law and order crimes. It is just and appropriate that the complaints filed by the appropriate authorities under taxing enactments and other enactments mentioned hereinabove, should be governed by the procedure contained in Part A of chapter XIX."
Consequently, the Commission recommended amendment in sections 190, 238, 239, 244, 249, 256 of the Code of Criminal Procedure, 1973. Further, substitution of heading of Part A and Part B under chapter XIX and insertion of new section 207A was also recommended. As 108 mentioned above, the purpose of recommending these amendments was that "complaint made by a public servant acting or purporting to act in discharge of his official duties", should be governed by Part A of chapter XIX of the CrPC, 1973.
5.8.1.4 Offence of criminal breach of trust and related offences like forgery, wrong information etc., all connected with collection and distribution of contributions, when committed by persons, bodies or agencies, relate to contribution, is certainly an economic offence. And when the Collector or the Regulatory Authority are public authorities acting in discharge of their official duties prescribed under the proposed law, and they file a complaint before a criminal court, it should, in our view, be governed by Part A of chapter XIX of the CrPC. Unfortunately, the above mentioned recommendations made in its 178th Report (2001) has not been implemented so far. We reiterate the recommendations made in its 178th Report.
For the purpose of the present proposed enactment, and without waiting for the implementation of the 178th Report, we are of the view that provision can be made in the proposed enactment that for complaint made by the Collector or the Regulatory Authority shall be governed and proceeded with under Part A, along with a non-obstante clause.
5.8.1.5 Section 4(1) of the Code of Criminal Procedure, 1973 provides that all offences under the IPC shall be investigated, inquired into and tried, according to the provisions of the Code. However, as per sec. 5 of the 109 Code, special form of procedure may be prescribed by any law. Sec. 5 reads as follows:
"5. Saving.- Nothing contained in this Code shall, in the absence of a specific provision to the contrary, affect any special or local law for the time being in force, or any special jurisdiction or power conferred, or any special form of procedure prescribed, by any other law for the time being in force."
A different procedure can therefore be prescribed under the proposed law, and such law prescribing different procedure can be saved under sec. 5 of the CrPC. When a different procedure is prescribed, under a special law, that procedure will prevail over the procedure prescribed by the CrPC.
In Bhagat Singh v. Foran Singh, 1988 Cr LJ 72 (All) there was a question before the Allahabad High Court, as to whether in a case governed by the provisions of the UP Dacoity Affected Areas Act, 1983, the provisions of sections 200 and 202 of the CrPC (which provides examination of complainant and his witnesses) would apply. That case was under sec. 395 of the IPC, which was a scheduled offence under the UP Act. Section 7 of the UP Act provided the procedure and powers of special Courts. The High Court held:
"Offence of dacoity under sec. 395 IPC being a scheduled offence, procedure for taking cognizance, issuing process would be governed by sec. 7 of the Act, consequently, the provisions of sec. 200 and 110 202 of the Code providing procedure in a complaint case to a Magistrate would not apply."
A Division Bench of the Calcutta High Court in Ram Gopal v. State 1977 Cr LJ 1048, has held that the special procedure laid down in sec. 5(1) of the West Bengal Criminal Law Amendment (Special Courts) Act, 1949, would prevail in view of sec. 5(2) of the CrPC, 1898. That case also related to offences under the IPC under sec. 467/471.
5.8.1.6 In view of ss. 5 and 4(2) of the CrPC, 1973, the special procedure prescribed under any law, would prevail over the procedure prescribed under the CrPC. Therefore, we recommend that a provision should be made in the proposed law that, when under the proposed law the Regulatory Authority or the Collector files any complaint in the criminal Court for an offence of criminal breach of trust or other related offences stated above, such a complaint shall be governed and proceeded with under Part A of chapter XIX of the CrPC, notwithstanding anything to the contrary contained in the Criminal Procedure Code, 1973.
Further, a provision should also be made that in such cases the Magistrate shall without delay furnish to the accused, free of cost, a copy of the complaint and other documents referred to therein.
5.8.2 Remedy under civil law 111 5.8.2.1 A breach of trust may lead to civil action also. CROSS & JONES (in their book Introduction to Criminal Law 9th Ed para 1.3 at page 2) have stated:
"A breach of trust occurs where someone who holds property as trustee for another fails to carry out the duties of his office, for example by making an important investment or wrongfully converting the trust property to his own use. He is than civilly liable to make good the loss occasioned to those on whose behalf the property was held."
The Supreme Court in Jaswant Rai v. State of Bombay, AIR 1956 SC 575 has stated that the same set of facts may give rise to both a civil liability and a criminal prosecution. But if there is no mens rea or if the other essential ingredients of an offence are lacking, the same facts may not sustain a criminal prosecution, though a civil action may lie (see also Madhavrao J. Scindia v. S.C. Angrey, AIR 1988 SC 709).
Every offence of criminal breach of trust involves a civil wrong in respect of which complainant may seek a civil redress for damages in civil Court. (see L. Dhanga Naik v. State, 1977 CrLJ 654) When any person, body or agency misappropriates or misuses any contribution collected by them, civil action may be taken for recovery of the sum misappropriated. There is a need that such civil action be disposed of expeditiously. The Civil Court may be specially designated.
1125.8.2.2 The Law Commission in its Consultation Paper has suggested that there should be 'judicial authority' in each district to entertain, enquire into allegations of misappropriation and misuse of contributions, by persons, bodies or agencies who or which have collected such contributions. Proposals regarding powers and the procedures of the judicial authority were referred to in the Consultation Paper. It was proposed in the Consultation Paper that the judicial authority after inquiry can pass orders directing the person, body or agency who is found guilty, deposit with the Regulatory Authority or the Collector, the amount misappropriated. The Judicial Authority may also direct the police to register a case against such person or agency under the penal law. Certain powers of the civil Court were also proposed to be given to the Judicial Authority.
5.8.2.3 But we find that the above procedure can be shortened. Hence, now we are of the view that so far as criminal cases are concerned, they can straightaway be dealt with by the regular Criminal Courts but according to the procedure indicated above. The Regulatory Authority and the Collector can make complaint before the Criminal Court and these complaints shall be governed and proceeded with under Part A of Chapter XIX of the CrPC, as recommended earlier. Likewise, instead of a separate Judicial Authority, a Civil Court of the rank of a Senior Civil Judge may be designated to deal with civil cases in respect of alleged breach of trust or related issues.
Since this type of work is not likely to come up frequently, we recommend that such Courts be designated in each district, to try civil cases of breach of trust and related issues arising out of the proposed law.
113There are many advantages in designating serving judicial officers in the designated Courts. They are under the disciplinary control of the High Court. There will be no need to provide a separate mode of appointment of members nor to provide fresh staff. This procedure will also save time. In Bipinchandra case (supra) the Gujarat High Court gave a direction to the District Judge of each District, that he shall act as an 'Ombudsman' for rectifying complaints made by individuals and organizations with regard to contributions received during calamities.
We, therefore, recommend that High Court shall designate a senior Civil Judge in the District to act as designated Courts for dealing with Civil disputes arising under the proposed law. These designated Courts shall have unlimited pecuniary jurisdiction.
5.8.2.4 Jurisdiction of the designated Courts The Designated Court shall have jurisdiction to try all cases of civil nature in respect of alleged misappropriation and misutilisation and diversions of contribution by any person, body or agency who or which have collected such contributions or other related issues.
All cases irrespective of pecuniary value can be tried by the designated Court. We recommend accordingly.
5.8.2.5 Procedure before the Designated Court 114 So far as procedure in the designated Court is concerned, we are of the view that it should be simple. Principles of natural justice, however, have to be followed. The Regulatory Authority or the Collector, either suo motu or upon receiving a complaint from any interested person may file a petition before the designated Court for any relief of a kind of civil nature. Any other interested person shall also be entitled to file a petition before the Designated Court. However, order for recovery of money or other item in kind shall be made in favour of the Collector or the Regulatory Authority. 'Interested person' shall be defined as mentioned earlier.
In respect of procedure, the Law Commission in its 186th Report on 'Proposal to Constitute Environment Courts' (2003) made certain recommendations regarding procedures of proposed Environment Courts. Recommendation No.6 is relevant, which is as follows:
"6(a) The proposed Court shall not be bound to follow the procedure prescribed under the Code of Civil Procedure, 1908, but will be guided by the principles of natural justice. The Court shall also not be bound by the rules of evidence contained in the Indian Evidence Act, 1872"
On the same analogy, we recommend that the proposed Designated Courts shall not be bound to follow the procedure prescribed under the Code of Civil Procedure, 1908, but will be guided by the principles of natural justice. Further, the said Court shall also not be bound by the rules of evidence contained in the Indian Evidence Act, 1872.
1155.8.2.6 Powers of the Designated Court It was proposed in the Consultation Paper that the Judicial Authority shall have certain powers of the Civil Court. But, now we are of the view that the Designated Court, as proposed, should have all the powers of a Civil Court. In 186th Report referred above, the Law Commission recommended that proposed Environment Court should have all the powers of a Civil Court. The Law Commission's recommendation was as follows:
"(b) The proposed Court shall have all powers of Civil Court including power to punish for contempt, as discussed in Chapter IX"
On the same analogy, we recommend that the Designated Courts shall have all powers of Civil Court including power to take steps to punish for contempt as provided by the law at present.
5.9 Penalties We have earlier recommended that no person, body or agency can start collection of contribution without registration or provisional registration and any such collection would be an offence. There are other aspects which must be taken care of. The authorized person or agency are required to open an account with nationalized bank, and further to deposit all the monies in that bank account. They are also required to maintain proper account books, registers, and also file periodical returns to the Collector and the Regulatory Authority. Accounts are also required to 116 be audited by a qualified chartered accountant. At the time of receiving the contribution, stamped receipt is also required to be given to the donors. A penalty provision is necessary in case if any of these conditions is violated. The Collector can impose penalty. Provisions for penalty can be found in many statutes like the Income-tax Act, 1961 (chapter XXI, sections 270 to 275), the SEBI Act, 1992 (chapter VIA sections 15A to 15J), the FEMA, 1999 (section 15).
Therefore, we recommend that When any person, body or agency -
i) does not give receipt of the contribution in the form and manner as prescribed in the enactment;
ii) makes any kind of discrimination on the ground of religion, race, language, sex, caste, place of birth or residence in distribution of contribution;
iii) does not deposit the monetary contribution in the nationalised bank, as prescribed in the enactment;
iv) does not maintain account books and register as prescribed in the rules;
v) fails to file returns to the Collector or the Regulatory Authority in time, as prescribed in the enactment and rules;
vi) fails to get audited the accounts from a qualified Chartered Accountant; or
vii) violates any other provision of the proposed Act (which is not an offence);
117such person, body or agency shall be liable to a penalty as stated below.
The Collector or the Regulatory Authority, after giving opportunity of hearing, may impose penalty on such person, body or agency, which shall not be less than Rs.10,000/- (rupees ten thousand) but may extend to Rs.25,000/- (rupees twentyfive thousand).
5.10 Rule making powers of the Central Government.
In the preceding paragraph of this chapter, we have recommended that certain things will be as "prescribed" i.e. as prescribed by the Central Government. Therefore, it is necessary that the Central Government should have rule making powers under the Act. We recommend that the Central Government shall by notification in the official Gazette make rules for carrying out the purposes of the Act.
These Rules may, in particular, provide for following matters:
A) Manner in which registers and account books shall be maintained by authorized person, body or agency. B) The procedure to be followed by the Regulatory Authority at meeting including the quorum necessary for transaction of business.
C) The manner in which the Regulatory Authority shall maintain proper account and other relevant records of its fund.118
D) The manner and form in which application for registration has to be submitted.
E) The manner in which the Collector shall impart information in respect of registration, provisional registration or suspension and cancellation of registration of any authorised person, body or agency.
F) Manner in which the Collector shall authenticate the receipt book.
Every rule made by the Central Government under the Act, shall be laid, as soon as after it is made, before each House of Parliament.
5.11 Overriding effect of the proposed enactment.
As the proposed enactment is a special law, we recommend that the proposed enactment shall have overriding effect over any other law or scheme, so far as such law or scheme is inconsistent with the proposed enactment.
We recommend accordingly.
119CHAPTER VI SUMMARY OF RECOMMENDATIONS Following is the summary of recommendations made in this Report:
1. The Commission recommends that a law should be enacted to regulate the collection of funds including contributions and donations in cash and kind, collected or raised for the purposes of providing relief and rehabilitation to the victims of natural and man-made calamity or for welfare and rehabilitation to soldiers or their family members who are killed or have become disabled in war or war like operations and also to monitor the proper utilization and distribution of such contribution so collected. The details of the proposed law are mentioned in Chapter V. (para 3.6)
2. We recommend that the proposed law shall be applicable to entire territory of India except the State of Jammu and Kashmir.
(para 4.4.5)
3. We recommend that the whole of the proposed enactment should be made prospective only.
(para 4.5.4)
4. We recommend that the proposed enactment should be made applicable to all those contributions or donations collected or received, either in cash or kind, by any person, association, agency, body, institution, 120 firm, NGO, trust or other organization. The purpose of the proposals is to regulate collections and provide relief and rehabilitation to the victims of any natural or man made calamity or for welfare and rehabilitation to the soldiers and their family who are killed or disabled in a war or war like other operation, whenever such collections and relief work is taken up by non-governmental organizations. It is further recommended that contributions received by the private parties referred to above from the Government or any fund set up by the Government, shall be brought into the purview of the enactment. However, any contribution received by the Government, or any fund set up by any government, or by any authority or agency established by any government shall not be brought into the purview of the proposed enactment.
(para 4.6.5)
5. We recommend that the Central Government shall establish a Regulatory Authority to be described as 'Contribution Regulatory Authority' consisting of --
(a) A Chairperson, having special knowledge or practical experience in respect of matters relating to relief and rehabilitation of victims of calamities with adequate knowledge of law, accounting and management of funds or grants, to be nominated by the Central Government. The Chairperson will be a person holding a post not below the rank of Secretary to the Government of India. The Chairperson shall hold this office in addition to the post he is holding.
121(b) One part-time member having special knowledge or practical experience in respect of matters relating to relief, welfare or rehabilitation with adequate knowledge of accounting and management of funds or grants to be nominated by the Central Government. He shall be a person who is holding a post not below the rank of Joint Secretary in the Central Government.
(c) One part-time member to be nominated by the Central Government from the members of Indian Audit and Accounts Service not below the rank of Accountant General.
(d) Three part-time members to be nominated by the Central Government to represent the interest of general public. These may be NGOs, media, legal or medical profession, Chartered Accountants, social workers.
(e) If the calamity in regard to which collections are made, relates or concerns Defence Forces, a part-time Member from the Defence Forces not below the rank of Adjutant General or equivalent may be co-opted by the Regulatory Authority.
(para 5.2.6)
6. The place of the head office of the Regulatory Authority may be such as may be notified by the Central Government. However, under the Act, the Regulatory Authority is to be empowered to hold its sittings in the form of a camp or circuit at the place where the natural or other man made calamity has occurred and also at such other place where substantial part of contributions or donations are collected or are being distributed. The Central Government shall also prescribe rules of procedure which will be followed by the Regulatory Authority in regard to the transaction of 122 business at its meeting including quorum. But the time and place of meeting shall be decided by the Chairman.
(para 5.2.7)
7. It is recommended that the Central Government shall provide necessary funds required, so that the Regulatory Authority may perform its functions effectively.
The Regulatory Authority shall deposit all monies received by it including those received from the Central Government or by way of any fees or otherwise in an account in a nationalised bank. This account of the Authority shall be applied for the purpose of meeting all its expenditure.
(para 5.2.8)
8. We recommend that the Regulatory Authority shall maintain proper accounts and other relevant records of its funds and shall also prepare an annual statement of accounts, in such form which may be prescribed by the Central Government in consultation with the Comptroller and Auditor General of India. The accounts of the Authority shall be audited by the Comptroller and Auditor General of India.
(para 5.2.9.1)
9. We recommend that the Regulatory Authority shall keep and maintain a separate account of all the contributions or donations received, seized, or recovered by it. The Regulatory Authority shall be empowered to distribute this contribution to any other authorised person or agency, or to victims of calamity in connection with the similar calamity or disaster, 123 natural or man-made. In case there is any surplus, it must deposit it in any fund set up by the Central Government or handed over to some other authorized person, body or agency. A statement of all the receipts and distribution under this head has to be prepared by the Authority. Such statements of accounts shall also have to be audited by the Comptroller and Auditor General of India.
(para 5.2.9.3)
10. Final recommendations as to Registration: mandatory registration & other procedures
i) From the date of commencement of the proposed legislation, no person, or body or agency shall collect or receive contributions or donations for the purpose of providing relief or rehabilitation to the victims of any natural or other man-made calamity or for welfare and rehabilitation of soldiers and their family members who are killed or disabled in a war or other similar operation, unless such person or body or agency is registered or provisionally registered as Authorised person or agency under the proposed legislation. Any person, body or agency making collections contrary to the prohibition shall be guilty of an offence of collection without such registration punishable with imprisonment upto 3 years or fine upto Rs.50,000 but not less than Rs.25,000 and the provisions of the Code of Criminal Procedure, 1973 will apply. In the case of such offence by non-individuals, the punishment shall be inflicted on the persons mentioned hereinbelow.
124When an offence mentioned above is committed by any agency or body, every person who at the time of commission of the offence, was in charge of and was responsible for the conduct of business of such agency or body, and the person who had collected the contribution as well as who had made appeal for contribution, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. However, any of the persons mentioned above shall not be liable to any punishment if he proves that the offence was committed without his knowledge or that he exercised due diligence to prevent the commission of such offence.
For the removal of doubts, it is made it clear that though an organisation, body or agency might be registered or recognized under any other law, like, the Companies Act, 1956, Society Registration Act, Trust Act or any other law applicable to charitable institutions, still registration under the proposed law, as Authorised person, body or agency is necessary, if the collections are proposed in the context of a calamity or disaster. Excepted categories are Government and Government agencies.
ii) Any person, body, organisation or agency may apply for registration, to the Collector of any district in whose jurisdiction either, a. the person applying for registration actually resides or agency or body applying has its principal office or place of work; or b. the contribution or donations is proposed to be collected; or c. the relief or rehabilitation work is to be done.
125Provided that only one application shall be made and no second application will be maintainable unless the first application has been rejected on technical grounds.
iii) Application for registration has to be made in the form and manner prescribed by the Central Government. However, it will be necessary for every applicant to state the facts by way of an affidavit including details as to whether any previous application for registration has been rejected by any Collector, and if so, for what reasons.
iv) (a) A person or body or agency shall not be eligible for registration unless he or it has three years experience in the field of social service.
(b) A person or body or agency shall not be registered if such person, body or agency has already been debarred or blacklisted or banned under any law or instrument having force of law or under any order issued by the Collector or the Government.
(c) A person shall not be registered if (a) he is adjudged as insolvent under Insolvency laws; or (b) against whom either charges have been framed by the court or if he has been convicted by any court, for an offence involving moral turpitude.
v) (a) Upon receiving the application for registration, the Collector shall enquire and verify the correctness of the facts mentioned in the application along with documents filed in support of application and the affidavit. On the basis of the findings of such inquiry, the Collector shall either register such person, body, or agency; or 126 refuse to register as Authorised person or agency and reject the application. However, before rejecting any application, the Collector shall give opportunity of hearing to the applicant and also give reasons for rejecting the application. Copy of the order of rejection shall be given to the applicant.
(b) The Collector shall decide the application for registration within 15 days unless there are sufficient reasons to be recorded in writing for not deciding the application in that period.
vi) Whenever there is an urgent need of collection of contributions, the Collector may provisionally register any person or agency, after due verification of particulars and fitness of such person or agency as the case may be. Provisional registration shall be valid till the final decision is taken on the application, by the Collector.
vii) A person, body or agency who is provisionally registered, shall be entitled to collect the contribution, but cannot distribute or utilize it till the final decision on registration is taken and communicated. No contribution in cash or kind shall be collected without granting stamped receipts to the donors. All the monies collected shall be deposited in a nationalized bank and proper account of all such collections has to be maintained. In case registration of such person or agency is finally refused, all the contributions collected by such person or agency shall vest in the Collector and he may make appropriate orders for attachment of such contributions and their seizure and their distribution.
127Suspension or Cancellation of Registration
viii) I. Registration of any person or agency or organisation can be cancelled by the Collector -
(a) If such person is adjudged as insolvent under Insolvency law applicable to him; or
(b) If charges have been framed by any court against such person for alleged involvement in an offence involving moral turpitude; or
(c) If such person is convicted by any court for committing an offence involving moral turpitude; or
(d) If such person, body or agency does not comply with the directions issued by the Regulatory Authority or Collector; or
(e) If such person, body or agency violates any provision of the proposed enactment or any rules made thereunder.
Provided, no registration shall be cancelled, unless an opportunity of being heard is given to such person or agency.
II. During the pendency of the inquiry proposing cancellation, the Collector may suspend the registration or the provisional registration.
III. The Collector shall communicate his decision on registration, provisional registration, suspension or cancellation of registration along with reasons to such person, body or agency.
IV. The Collector shall make public announcement of every decision on the question of registration, provisional registration, suspension or cancellation of registration in the manner prescribed by the Central 128 Government. The Collector shall forthwith also communicate all these decisions to the Regulatory Authority and the said Authority shall immediately publish the information on website so that the applicant may not apply before any Collector, by furnishing incorrect or misleading facts.
V. Whenever the registration of a person, body or agency is cancelled, all unutilized contributions, possessed by such person, body or agency shall stand vested in the Collector inasmuch as it is difficult to identify the individual donors in relation to the unspent money. The Collector shall use the said sum only for matters connected with disaster relief.
(ix) Any person or agency aggrieved by the order of the Collector rejecting the application for registration, or cancelling the registration, may prefer an appeal to the Regulatory Authority within 30 days of the receipt of the order.
(x) The Regulatory Authority shall maintain and update the data of all registered persons and agencies and details of those in respect of whom applications of registration have been rejected by the Collector and in respect of those whose registrations have been cancelled and put them on its website so that all District Collectors may check the same to see if a person or body whose application has been rejected is making application elsewhere.
(xi) Once a person or agency is registered at any place, it shall be lawful for it to collect or receive contribution from any part of the country or even from outside the country and distribute the same but those who have 129 provisionally registered shall not be entitled to disburse the same. However, collections from outside the country shall be in accordance with the laws governing remittances of monies from abroad.
(xii) Any person, body or agency whose application for registration is rejected by the Collector of any district, he or it shall not be eligible to get it registered at any other district. However, this rule will not be applicable where a registration is refused for want of some technical formalities or want of sufficient experience in social work.
(para 5.3.7)
11. We recommend that, every authorised person or agency, while receiving any contribution in cash or kind, shall issue a stamped receipt for receiving such contribution, and the receipt shall be given to the donor of such contributions. Receipt shall be given from a receipt book, authenticated by the Collector in the manner prescribed by the Central Government under the Rules. Such receipt should clearly mention the name and full address of authorised person or agency, name and full address of donor, details in regard to the contributions, such as the total amount of cash or cheque or demand draft and details of other items in kind and the purpose for which such donations are given, date and place of receiving the contributions, name, address and signature of the person who has received such contributions. The receipt book must be a printed one and the name and address of the printing press should also be indicated in the receipt. A duplicate copy or counterfoil of receipt should be kept by authorised person, body or agency. The receipt must be a receipt duly stamped according to the law applicable for collection of such stamp-duty 130 in that locality. The person collecting can use a rubber stamp to indicate his or its name, at the appropriate place in the receipt.
No printing press shall print the receipts for the aforesaid purpose, without the written authority of the Collector.
(para 5.4.4)
12. We recommend that the proposed legislation should contain provisions to the following effect:
i) Every authorised person or body or agency should maintain an account with a nationalized bank, where all monetary contributions shall be deposited forthwith, i.e. to say immediately after receiving the same.
ii) Every authorised person or body or agency should also maintain proper accounts of all contributions collected and distributed or spent by it, in accounts books maintained in the ordinary course.
iii) The legislation may permit rules in regard to the following:
(a) A register must be maintained as to the manner in which the donations are distributed. The account book shall be maintained on a day-to-day basis. (b) There should be correlation between the accounts and the Register. (c) The details of the distribution must be such that there can, if need be, proper verification of the distributions. (d) Where the money is utilised for purchase of clothes, utensils or food items or other articles or goods, the bills must be preserved for verification. (e) 131 Monthly returns of the account have to be furnished to the Collector in-charge of the area where the office of the authorized person, body, agency which has collected the donation, is located.
iv) Every authorised person or body or agency should inform the Collector immediately about the receipt of money or item in kind, the name of the donors, and other details as may be prescribed.
v) Annual audit of the accounts has to be conducted by a qualified chartered accountant and the audit report should also be sent to the Collector as well as to the Regulatory Authority within such time as may be prescribed.
vi) The concerned nationalized Bank where the deposits are made shall also submit monthly statements of account of the authorised person, body or agency to the Collector and the Regulatory Authority. This is for the purpose of verifying the information that may have been furnished by the authorized person or body or agency to the Collector.
vii) The person, body or agency should submit a half-yearly report of its activities and accounts to the Collector and Regulatory Authority.
(para 5.5.5)
13. We recommend that, apart from the maintaining proper accounts etc., every authorised person, body or agency should perform the following other duties:
132i) Every authorised person, body or agency should utilize the contribution exclusively for the purpose for which it was collected.
There should not be any kind of diversion of such contribution for a different purpose.
ii) Every authorised person, body or agency shall utilize the contribution in the manner best suitable for the purpose for which it was collected.
iii) Every authorised person, body or agency, shall not while providing relief and rehabilitation, discriminate against any victim of calamity on the ground of religion, race, caste, language sex, place of birth or residence.
iv) After providing total relief and rehabilitation to the victims of calamity or war, if any contribution is left unutilized in the hands of any authorised person, body or agency it shall hand over, such unutilized contribution either to the Collector or to the Regulatory Authority for being used for relief in any other calamity or disaster.
v) Every authorised person or agency shall provide full cooperation and assistance to the Regulatory Authority and the Collector in the discharge of their functions and duties under the law. Every authorised person and agency shall also follow their directions and instructions.
(para 5.6.5)
14. It is recommended that any person interested, as stated above, who has any information that any other person or agency is collecting or receiving contributions without registration (final or provisional), he may complain to the Regulatory Authority or the Collector.
133The Regulatory Authority and the Collector shall have power to inquire suo motu or upon receiving any complaint as to whether any person, body or agency which is not registered, is collecting or receiving contribution. If the Regulatory Authority or the Collector, as the case may be, finds that any person, body or agency is collecting contributions without registration, it shall have power to attach, seize and recover such contributions. The Regulatory Authority or the Collector shall also have power to attach, seize and recover other ancillary documents which are in possession of such unregistered persons or agency.
(para 5.7.1)
15. It is also recommended that it will open to any person interested, as stated above, to make a complaint to the Regulatory Authority or the Collector in respect of any misappropriation, misutilisation or diversion by any person, body or agency. The Regulatory Authority or the Collector shall have power to inquire suo motu or upon receiving any complaint, as to whether any authorised person, body or agency is misutilising, misappropriating or diverting; or has misappropriated, misutilised or diverted such contribution collected. If the information or complaint contains prima facie material or basis suggesting misutilisation or misappropriation, the Regulatory Authority or the Collector can suspend the registration before conducting a regular inquiry, and exercise powers of attachment of the monies or contribution.
If the contributions relate to perishable items (such as fruits, cooked food etc.) and the inquiry is likely to take time, the Collector or Regulatory 134 Authority may give possession thereof to some other registered person, body or agency for distribution or sell them and keep the money in deposit.
If after enquiry, the Regulatory Authority or the Collector finds that any authorised person, body or agency is misutilising or misappropriating or diverting the contribution, any of these authorities shall have powers to do following:
a) to direct the bank in which such person, body or agency is maintaining his account to forthwith stop withdrawals of any amount therefrom and to further direct the bank to transfer such amount to the account of some other authorised person or agency, or to any fund of the Centre/State Government;
b) to attach and seize the contributions, books of account or other material from such persons, bodies or agencies and for that purpose, enter the premises of such person, body or agency with or without assistance of police;
c) to direct such authorised person or body or agency that any contribution be handed over to the donor or to some other authorised person or body or agency;
d) to direct such authorised person, body or agency to stop further collection of contributions and to stop them for distribution or utilization.
(para 5.7.2)
16. In order to regulate the collection, distribution and utilisation of contribution, we recommend that the Regulatory Authority and the Collector shall also have following powers:
135a) to take such measures as they deem fit and expedient for the purpose of regulating contributions by authorised persons, bodies or agencies;
b) to ensure that the distribution and the providing of relief and rehabilitation by any authorised person, body or agency is accomplished in an equitable and impartial manner without any discrimination on the ground of race, religion, caste, sex, language, residence, place of birth;
c) to call for any information about the collection and receipt of any contribution and also the management and utilisation of such contribution from any authorised person, body or agency;
d) to issue directions to any authorised person, body or agency, about the manner of collection, management and utilisation of contributions;
e) to issue directions to officials of the Central or State Government engaged in relief and rehabilitation work related to natural and other calamities;
f) to collect or receive contributions and transfer them to any Fund or authorised person, body or agency in the manner prescribed;
g) to take appropriate proceedings, civil or criminal, in any court or Tribunal against the authorised person, body or agency or against any person or agency which is not registered or provisionally registered under the proposed legislation;
h) to do any other act for effectual discharge of the functions of the said Regulatory Authority and the Collector; and 136
i) to take the assistance from govt. officials in the discharge of their official functions.
(para 5.7.3)
17. We recommend that a provision should be made in the proposed law that, when under the proposed law the Regulatory Authority or the Collector files any complaint in the criminal Court for an offence of criminal breach of trust or other related offences stated above, such a complaint shall be governed and proceeded with under Part A of chapter XIX of the CrPC, notwithstanding anything to the contrary contained in the Criminal Procedure Code, 1973.
Further, a provision should also be made that in such cases the Magistrate shall without delay furnish to the accused, free of cost, a copy of the complaint and other documents referred to therein.
(para 5.8.1.6)
18. We are of the view that so far as criminal cases are concerned, they can straightaway be dealt with by the regular Criminal Courts but according to the procedure indicated above. The Regulatory Authority and the Collector can make complaint before the criminal Court and these complaints shall be governed and proceeded with under Part A of Chapter XIX of the CrPC, as recommended earlier. Likewise, instead of a separate Judicial Authority, a Civil Court of the rank of a Senior Civil Judge may be designated to deal with civil cases in respect of alleged breach of trust or related issues.
137Since this type of work is not likely to come up frequently, we recommend that such Courts be designated in each district, to try civil cases of breach of trust and related issues arising out of the proposed law.
We, therefore, recommend that High Court shall designate a senior Civil Judge in the District to act as designated Courts for dealing with Civil disputes arising under the proposed law. These designated Courts shall have unlimited pecuniary jurisdiction.
(para 5.8.2.3)
19. The Designated Court shall have jurisdiction to try all cases of civil nature in respect of alleged misappropriation and misutilisation and diversions of contribution by any person, body or agency who or which have collected such contributions or other related issues.
All cases irrespective of pecuniary value can be tried by the designated Court. We recommend accordingly.
(para 5.8.2.4)
20. We recommend that the proposed Designated Courts shall not be bound to follow the procedure prescribed under the Code of Civil Procedure, 1908, but will be guided by the principles of natural justice. Further, the said Court shall also not be bound by the rules of evidence contained in the Indian Evidence Act, 1872.
(para 5.8.2.5) 138
21. We recommend that the Designated Courts shall have all powers of Civil Court including power to take steps to punish for contempt as provided by the law at present.
(para 5.8.2.6)
22. We recommend that When any person, body or agency -
i) does not give receipt of the contribution in the form and manner as prescribed in the enactment;
ii) makes any kind of discrimination on the ground of religion, race, language, sex, caste, place of birth or residence in distribution of contribution;
iii) does not deposit the monetary contribution in the nationalised bank, as prescribed in the enactment;
iv) does not maintain account books and register as prescribed in the rules;
v) fails to file returns to the Collector or the Regulatory Authority in time, as prescribed in the enactment and rules;
vi) fails to get audited the accounts from a qualified Chartered Accountant; or
vii) violates any other provision of the proposed Act (which is not an offence);
such person, body or agency shall be liable to a penalty as stated below.
139The Collector or the Regulatory Authority, after giving opportunity of hearing, may impose penalty on such person, body or agency, which shall not be less than Rs.10,000/- (rupees ten thousand) but may extend to Rs.25,000/- (rupees twentyfive thousand).
(para 5.9)
23. We recommend that the Central Government shall by notification in the official Gazette make rules for carrying out the purposes of the Act.
These Rules may, in particular, provide for following matters:
A) Manner in which registers and account books shall be maintained by authorized person, body or agency. B) The procedure to be followed by the Regulatory Authority at meeting including the quorum necessary for transaction of business.
C) The manner in which the Regulatory Authority shall maintain proper account and other relevant records of its fund.
D) The manner and form in which application for
registration has to be submitted.
E) The manner in which the Collector shall impart
information in respect of registration, provisional registration or suspension and cancellation of registration of any authorised person, body or agency. F) Manner in which the Collector shall authenticate the receipt book.140
Every rule made by the Central Government under the Act, shall be laid, as soon as after it is made, before each House of Parliament.
(para 5.10)
24. We recommend that the proposed enactment shall have overriding effect over any other law or scheme, so far as such law or scheme is inconsistent with the proposed enactment.
(para 5.11) We recommend accordingly.
(Justice M. Jagannadha Rao) Chairman (Dr. K.N. Chaturvedi) Member-Secretary (Dr. S. Muralidhar) Part-time Member Dated: 15th December, 2004 141