Sections 38 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
This article explains the Maharashtra Public Trusts Act, 1950 as it applies in the State of Maharashtra, formerly the Bombay Public Trusts Act, 1950. Section 38 requires the Deputy or Assistant Charity Commissioner who receives an auditor's report, an inspection report or a complaint to call on the trustee or other person concerned for an explanation. Section 39 then requires him to hold an inquiry, record findings on loss to the trust and report to the Charity Commissioner.
This article explains sections 38 and 39 as amended up to Maharashtra Act No. XXXVI of 2018 (in force 21 May 2018), per the official text of the Law and Judiciary Department modified up to 19 December 2018. Maharashtra amended the Act again in 2019, 2020, 2024 and 2025; the amending texts consulted do not change these sections, but the current text should be checked on the Charity Commissioner's website before relying on them.
On receiving an auditor's report under section 34, a report of an officer authorised under section 37, or a complaint about a trust, the Deputy or Assistant Charity Commissioner must require the trustee or other person concerned to submit an explanation within such period as he thinks fit (s.38). After considering the report, accounts and explanation, and holding an inquiry in the prescribed manner, he records findings on whether a trustee or connected person is guilty of gross negligence, breach of trust, misappropriation or misconduct that resulted in loss to the trust, and reports to the Charity Commissioner (s.39).
Section 38: the explanation
Section 38 has three triggers, added in stages, as the footnotes show:
| Trigger | Words of the section | Added by |
|---|---|---|
| Auditor's report | "a report of the auditor under section 34" | Original text |
| Inspection report | "a report, if any, made by an officer authorized under section 37" | Bom. 28 of 1953, s. 5 |
| Complaint | "a complaint in respect of any trust" (and "or complaint is made" and the heading words "or on complaint") | Mah. 20 of 1971, s. 25 |
On any of these, "the Deputy or Assistant Charity Commissioner to whom the report is submitted or complaint is made shall require the trustee or any other person concerned to submit an explanation thereon within such period as he thinks fit."
Trustees who have received such a call can use reply to legal notice support to prepare the answer. Four features matter to a trustee:
- It is mandatory. The officer "shall require" an explanation; the section does not leave it to his choice.
- The period is the officer's to fix. "Within such period as he thinks fit." The Act sets no minimum. If the period given is too short, ask in writing for time and give the reason.
- "Any other person concerned" can be called, not only a trustee, for example a manager or secretary.
- Complaint. Any complaint "in respect of any trust" can trigger it. The text does not require the complaint to be in a form, to be sworn or to come from a person interested.
The auditor's report is described in Section 34, and the inspection route in Section 37. Complaint-driven inquiries are also covered in Section 41B.
Section 39: inquiry, findings and report
Section 39 was substituted by Mah. 20 of 1971, s. 26. It reads: "On considering the report referred to in section 38, the accounts or explanation, if any, furnished by the trustees or any other person connected with the public trust and after holding an inquiry in the prescribed manner, the Deputy or Assistant Charity Commissioner shall record his findings on the question whether or not a trustee or the person connected with the trust has been guilty of gross negligence, breach of trust, misappropriation or misconduct which resulted in loss to the trust, and make a report thereof to the Charity Commissioner."
Step by step:
- Consider the report, the accounts and the explanation, "if any". The words "if any" mean the officer can proceed even if the person does not reply.
- Hold an inquiry in the prescribed manner. The manner is in the rules, which are not set out in this article.
- Record findings on one question: whether or not a trustee or connected person has been guilty of gross negligence, breach of trust, misappropriation or misconduct which resulted in loss to the trust. Loss is part of the question; the finding is not about conduct alone.
- Report to the Charity Commissioner.
The findings go to the Charity Commissioner, who acts under Section 40, and the amount of loss can lead to a surcharge under Section 41.
Drafting a good explanation
An explanation under section 38 is the trustee's first real chance to put his case on record. Practical points:
- Respond within the time given, or ask for an extension in writing before it expires.
- Answer each point in the auditor's report or complaint, with documents.
- Attach vouchers and minutes that show approval and purpose.
- Keep copies and proof of delivery.
- Distinguish between irregularity and loss: if the item is irregular but no loss resulted, say so and show it.
Illustration. The auditor of a school trust in Pune reports that building-fund money was lent to a society linked to a trustee and not recovered. The Deputy Charity Commissioner calls for an explanation within a period he fixes. The trustees reply with the board resolution, the loan agreement and proof of part recovery. The officer holds an inquiry, records findings that there was no misappropriation but that the loan, unsecured and unrecovered, amounts to breach of trust causing loss, and reports to the Charity Commissioner.
Need help replying to a call for explanation?
If your trust or a trustee has received a notice calling for an explanation on an audit report or complaint, our team can review the papers, assemble the supporting documents and draft the reply. Contact us for reply to legal notice support.
Key takeaways
- The Deputy or Assistant Charity Commissioner must call for an explanation on an auditor's report, an inspection report or a complaint (s.38).
- The period for the explanation is whatever he thinks fit.
- After considering the report, accounts and explanation and holding the prescribed inquiry, he records findings on gross negligence, breach of trust, misappropriation or misconduct resulting in loss, and reports to the Charity Commissioner (s.39).
- Section 39 was substituted by Mah. 20 of 1971; the inspection-report and complaint triggers were added in 1953 and 1971.
- The Charity Commissioner's orders follow under section 40.
Read next
- Section 34: the auditor's duty and report
- Section 40: the Charity Commissioner's orders on the report
- Section 41: order of surcharge against trustees
- Section 37: inspection and supervision
Disclaimer: Based on the Maharashtra Public Trusts Act, 1950 as modified up to 19 December 2018 in the official text of the Law and Judiciary Department, Government of Maharashtra, as consulted on 3 October 2026. Maharashtra amended the Act again in 2019, 2020, 2024 and 2025; the current text, the Maharashtra Public Trusts Rules and the Charity Commissioner's circulars should be checked. This article is general information, not legal advice; check the official text before acting.