Trustees generally understand that they cannot sell trust property without permission. Fewer realise that the Maharashtra Public Trusts Act, 1950 also restricts where a trust may simply keep its money. Section 35 is short, it is easy to breach without meaning to, and a breach tends to surface during audit or in a dispute rather than at the time.
Key facts
- Law
- Section 35, Maharashtra Public Trusts Act
- Permitted
- Scheduled banks, the Post Office savings bank, State-approved co-operative banks, or a first mortgage of qualifying property
- Since 21 July 2025
- Circular No. 619: up to 50% of trust money may go into specified securities without a separate order each time
- Anything else
- Needs the Charity Commissioner’s order before the money is moved
- Common breaches
- Unapproved co-operative banks, loans to trustees, funds in personal accounts
What Section 35 requires
The section obliges a trustee to deposit or invest public trust money in the forms it permits — broadly, a Scheduled Bank, a Postal Savings Bank, or a Co-operative Bank approved by the State Government for the purpose. There is a further permitted form: a first mortgage of immovable property that is not leasehold, where the value of the property exceeds the amount of the mortgage by a sufficient margin.
The section also gives the Charity Commissioner power to permit a trustee to invest in some other manner. That is the escape valve, and it matters: it means an investment outside the permitted forms is not simply impossible, but it does require an application and an order before the money is moved, not afterwards.
Circular No. 619 of 2025: up to 50% in specified securities
By Circular No. 619 dated 21 July 2025, the Charity Commissioner, Maharashtra, granted general permission under Section 35 for trustees to invest up to fifty per cent of trust money in specified categories of securities, such as certain mutual funds, index-tracking ETFs, and government and rated corporate debt, without a separate order for each investment. Investments outside the specified categories, or above the limit, still need prior permission. Read the circular’s exact list and conditions before investing, and record the board’s decision in a resolution.
Why the restriction exists
Trust money is not the trustees’ money. It has been dedicated to a charitable purpose, and the trustees hold it for that purpose. The statute therefore prefers capital preservation over return. A trustee who loses trust funds in an investment the Act did not permit is in a considerably weaker position than one who earned a modest return in a scheduled bank, however sound the reasoning at the time looked.
Where trusts commonly go wrong
- Money left in a co-operative bank that is not an approved one. This is the most frequent problem, and it is often historical — the account was opened decades ago, the bank was convenient, and nobody checked.
- Mutual funds, shares, bonds and market-linked products bought without a prior order permitting them, usually on advice that treated the trust like an ordinary investor.
- Loans to trustees, to persons connected with them, or to a related organisation. Quite apart from Section 35, this raises questions about conflict of interest that are difficult to answer.
- Funds parked in a personal account “temporarily”, which is how a great many otherwise well-run trusts create a serious problem for themselves.
- Idle balances. The opposite failing: large sums sitting in a current account earning nothing for years, which can equally be questioned as a failure to manage the corpus prudently.
How it shows up
Usually at audit. The auditor examines where the funds are held and reports on it, and the audited statements go to the Deputy or Assistant Charity Commissioner’s office along with the other annual filings. It can also surface when a new board takes over and looks properly at the balance sheet for the first time, or in the course of a dispute, where one group of trustees questions what another has done with the funds.
If a trust is already outside the permitted forms
The instinct to do nothing and hope is a poor one, because the exposure is personal to the trustees and it grows with time. The realistic options are to move the funds into a permitted form, or to apply for permission to hold them as they are held, with a full and frank account of how the position arose. Which is appropriate depends on the amounts, how long the position has existed, whether the trust has lost anything, and what the deed says about investment. A trust with a specific investment power in its deed is in a different position from one with none.
A related point on property
Section 35 governs money. Immovable property is governed separately: a sale, exchange or gift, and a lease beyond the permitted period, need the prior sanction of the Charity Commissioner under Section 36. Trustees sometimes assume that a general investment power in the deed covers both. It does not. The statute overrides the deed, and the two provisions have to be considered separately whenever a trust is deciding what to do with its assets.
This note sets out general information about procedure under the Maharashtra Public Trusts Act, 1950. It is not legal advice, and the position in any particular matter depends on its own facts and on the law as it stands at the time. Statutory references should be checked against the current text of the Act and Rules.