1. Short title and commencement
This Act may be called the Indian Trusts Act, 1882; and it shall come
into force on the first day of March, 1882.
Local extent, Saving: It extends to the whole of India except the State
of Jammu and Kashmir and the Andaman and Nicobar Islands; but the Central
Government may, from time to time, by notification in the Official Gazette,
extend it to the Andaman and Nicobar Islands or to any part thereof.
But nothing herein contained affects the rules of Mohamedan law as to
waqf, or the mutual relations of the members of an undivided family
as determined by any customary, or personal law, or applies to public
or private religious or charitable endowments or to trusts to distribute
prizes taken in war among the captors; and nothing in the Second Chapter
of this Act applies to trusts created before the said day.
2. Repeal of enactments
The statutes and Acts mentioned in the Schedule hereto annexed shall,
to the extent mentioned in the said Schedule, be repealed, in the territories
to which this Act for the time being extends.
3. Interpretation clause- "trust"
A "trust" is an obligation annexed to the ownership of property,
and arising out of 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:
"author of the trust": "trustee": "beneficiary":
"trust property": "beneficial interest": "instrument
of trust":
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": the subject-matter
of the trust is called "trust-property" or "trust-money":
the "beneficial interest" or "interest" of the beneficiary
is his right against the trustee as owner of the trust-property; and
the instrument, if any, by which the trust is declared is called the
"instrument of trust";
"breach of trust": a breach of any duty imposed on a trustee,
as such, by any law for the time being in force, is called a "breach
of trust".
"registered": and in this Act, unless there be something repugnant
in the subject or context, "registered" means registered under
the law for the registration of documents for the time being in force.
"notice": a person is said to have "notice" of a
fact either when he actually knows that fact or when, but for wilful
abstention from inquiry or gross negligence, he would have known it,
or when information of the fact is given to or obtained by his agent,
under the circumstances mentioned in the Indian Contract Act, 1872 (9
of 1872), section 229.
Expressions used herein and defined in the Indian Contract Act, 1872
(expressions defined in Act 9 of 1872), shall be deemed to have the
meanings respectively attributed to them by that Act.
CHAPTER II : OF THE
CREATION OF TRUSTS
4. Lawful purpose
A trust may be created for any lawful purpose. The purpose of a trust
is lawful unless it is (a) forbidden by law, or (b) is of such a nature
that, if permitted, it would defeat the provisions of any law, or (c)
is fraudulent, or (d) involves or implies injury to the person or property
of another, or (e) the court regards it as immoral or opposed to public
policy.
Every trust of which the purpose is unlawful is void. And where a trust
is created for two purposes, of which one is lawful and the other unlawful,
and the two purposes, cannot be separated, the whole trust is void.
Explanation: In this section, the expression "law" includes,
where the trust property is immovable and situate in a foreign country,
the law of such country.
Illustrations
(a) A conveys property to B in trust to apply the
profits to the nurture of female foundlings to be trained up as prostitutes.
The trust is void.
(b) A bequeaths property to B in trust to employ
it in carrying on a smuggling business, and out of the profits thereof
to support A's children. The trust is void.
(c) A, while in insolvent circumstances, transfers
property to B in trust for A during his life, and after his death for
B. A is declared an insolvent. The trust for A is invalid as against
his creditors.
5. Trust of immovable property
No trust in relation to immovable property is valid unless declared
by a non-testamentary instrument in writing signed by the author of
the trust or the trustee and registered or by the will of the author
of the trust or of the trustee.
Trust, of movable property: No trust in relation to movable property
is valid unless declared as aforesaid, or unless the ownership of the
property is transferred to the trustee.
These rules do not apply where they would operate so as to effectuate
a fraud.
6. Creation of trust
Subject to the provisions of section 5, a trust is created when the
author of the trust indicates with reasonable certainty by any words
or acts (a) an intention on his part to create thereby a trust, (b)
the purpose of the trust, (c) the beneficiary, and (d) the trust-property,
and (unless the trust is declared by will or the author of the trust
is himself to be the trustee) transferred the trust-property to the
trustee.
Illustrations
(a) A bequeaths certain property to B, "having
the fullest confidence that he will dispose of it for the benefit of
C". This creates a trust so far as regards A and C.
(b) A bequeaths certain property to B, "hoping
he will continue it in the family". This does not create a trust,
as the beneficiary is not indicated with reasonable certainty.
(c) A bequeaths certain property to B, requesting
him to distribute it amongst such members of C's family as B should
think most deserving. This does not create a trust, for the beneficiaries
are not indicated with reasonable certainty.
(d) A bequeaths certain property to B, desiring him
to divide the bulk of it among C's children. This does not create a
trust, for the trust-property is not indicated with sufficient certainty.
(e) A bequeaths a ship and stock-in-trade to B, on
condition that he pays A's debts and legacy to C. This is a condition,
not a trust for A's creditors and C.
7. Who may create trusts
A trust may be created-
(a) by every person competent to contract, and
(b) with the permission of a principal civil court
of original jurisdiction, by or on behalf of a minor,
but subject in each case to the law for the time being in force as to
the circumstances and extent in and to which the author of the trust
may dispose of the trust property.
8. Subject matter of trust
The subject-matter of a trust must be property transferable to the beneficiary.
It must not be merely beneficial interest under a subsisting trust.
9. Who may be beneficiary
Every person capable of holding property may be a beneficiary.
Disclaimer by beneficiary : A proposed beneficiary may renounce his
interest under the trust by disclaimer addressed to the trustee, or
by setting up, with notice of the trust, a claim inconsistent therewith.
10. Who may be trustee
Every person capable of holding property may be a trustee; but, where
the trust involves the exercise of discretion, he cannot execute it
unless he is competent to contract.
No one bound to accept trust : No one is bound to accept a trust.
Acceptance of trust: A trust is accepted by any words or acts of the
trustee indicating with reasonable certainty such acceptance.
Disclaimer of trust : Instead of accepting a trust,
the intended trustee may, within a reasonable period, disclaim it, and
such disclaimer shall prevent the trust-property from vesting in him.
A disclaimer by one of two or more co-trustees vests the trust-property
in the other or others, and makes him or them sole trustee or trustees
from the date of the creation of the trust.
Illustrations
(a) A bequeaths certain property to B and C, his
executors, as trustees for D. B and C prove A's will. This is in itself
an acceptance of the trust, and B and C hold the property in trust for
D.
(b) A transfers certain property to B in trust to
sell it and to pay out of the proceeds A's debts. B accepts the trust
and sells the property. So far as regards B, a trust of the proceeds
is created for A's creditors.
(c) A bequeaths a lakh of rupees to B upon certain
trusts and appoints him his executor. B severs the lakh from the general
assets and appropriates it to the specific purpose. This is an acceptance
of the trust.
CHAPTER III : OF
THE DUTIES AND LIABILITIES OF TRUSTEES
11. Trustee to execute trust
The trustee is bound to fulfil the purpose of the trust, and to obey
the directions of the author of the trust given at the time of its creation,
except as modified by the consent of all the beneficiaries being competent
to contract.
Where the beneficiary is incompetent to contract, his consent may, for
the purposes of this section, be given by a principal civil court of
original jurisdiction.
Nothing in this section shall be deemed to require a trustee to obey
any direction when to do so would be impracticable, illegal or manifestly
injurious to the beneficiaries.
Explanation : Unless a contrary intention be expressed, the purpose
of a trust for the payment of debts shall be deemed to be (a) to pay
only the debts of the author of the trust existing and recoverable at
the date of the instrument of trust, or, when such instrument is a will,
at the date of his death, and (b) in the case of debts not bearing interest,
to make such payment without interest.
Illustrations
(a) A, a trustee, is simply authorised to sell certain
land by public auction. He cannot sell the land by private contract.
(b) A, a trustee of certain land for X, Y and Z,
is authorized to sell the land to B for a specified sum. X, Y and Z,
being competent to contract, consent that A may sell the land to C for
a less sum. A may sell the land accordingly.
(c) A, a trustee for B and her children, is directed
by the author of the trust to lend, on B's request, trust-property to
B's husband C, on the security of his bond. C becomes insolvent and
B requests A to make the loan. A may refuse to make it.
12. Trustee to inform himself of state of trust-property
A trustee is bound to acquaint himself, as soon as possible, with the
nature and circumstances of the trust-property; to obtain, where necessary,
a transfer of the trust property to himself; and (subject to the provisions
of the instrument of trust) to get in trust-moneys invested on insufficient
or hazardous security.
Illustrations
(a) The trust-property is a debt outstanding on personal
security. The instrument of trust gives the trustee no discretionary
power to leave the debt so outstanding. The trustee's duty is to recover
the debt without unnecessary delay.
(b) The trust-property is money in the hands of one
of two co-trustees. No discretionary power is given by the instrument
of trust. The other co-trustee must not allow the former to retain the
money for a longer period than the circumstances of the case required.
13. Trustee to protect title to trust-property
A trustee is bound to maintain and defend all such suits, and (subject
to the provisions of the instrument of trust) to take such other steps
as, regard being had to the nature and amount or value of the trust-property,
may be reasonably requisite for the preservation of the trust-property
and the assertion or protection of the title thereto.
Illustration
The trust-property is immovable property which has been given to the
author of the trust by an unregistered instrument. Subject to the provisions
of the Indian Registration Act, 1877 (3 of 1877), the trustee's duty
is to cause the instrument to be registered.
14. Trustee not to set up title adverse to beneficiary
The trustee must not for himself or another set up or aid any title
to the trust-property adverse to the interest of the beneficiary.
15. Care required from trustee
A trustee is bound to deal with the trust-property as carefully as a
man of ordinary prudence would deal with such property if it were his
own; and, in the absence of a contract to the contrary, a trustee so
dealing is not responsible for the loss, destruction or deterioration
of the trust-property.
Illustrations
(a) A, living in Calcutta, is a trustee for B, living
in Bombay. A remits trust funds to B by bills drawn by a person of undoubted
credit in favour of the trustee as such, and payable at Bombay. The
bills are dishonoured. A is not bound to make good the loss.
(b) A, trustee of leasehold property, directs the
tenant to pay the rents on account of the trust to a banker, B, then
in credit. The rents are accordingly paid to B, and A leaves the money
with B only till wanted. Before the money is drawn out, B becomes insolvent.
A, having had no reason to believe that B was in insolvent circumstances,
is not bound to make good the loss.
(c) A, a trustee of two debts for B, releases one
and compounds the other, in good faith, and reasonably believing that
it is for B's interest to do so. A is not bound to make good any loss
caused thereby to B.
(d) A, a trustee directed to sell the trust-property
by auction, sells the same, but does not advertise the sale and otherwise
fails in reasonable diligence in inviting competition. A is bound to
make good the loss caused thereby to the beneficiary.
(e) A, a trustee for B, in execution of his trust,
sells the trust-property, but from want of due diligence on his part
fails to receive part of the purchase money. A is bound to make good
the loss thereby caused to B.
(f) A, a trustee for B of a policy of insurance,
has funds in hand for payment of the premiums. A neglects to pay the
premiums, and the policy is consequently forfeited. A is bound to make
good the loss to B.
(g) A bequeaths certain moneys to B and C as trustees,
and authorizes them to continue trust-moneys upon the personal security
of a certain firm in which A had himself invested them. A dies, and
a change takes place in the firm. B and C must not permit the moneys
to remain upon the personal security of the new firm.
(h) A, a trustee for B, allows the trust to be executed
solely by his co-trustee C. C misapplies the trust-property. A is personally
answerable for the loss resulting to B.
16. Conversion of perishable property
Where the trust is created for the benefit of several persons in succession,
and the trust property is of a wasting nature or a future or reversionary
interest, the trustee is bound, unless an intention to the contrary
may be inferred from the instrument of trust, to convert the property
into property of a permanent and immediately profitable character.
Illustrations
(a) A bequeaths to B all his property in trust for
C during his life, and on his death for D, and on D's death for E. A's
property consists of three leasehold houses, and there is nothing in
A's will to show that he intended the houses to be enjoyed in specie.
B should sell the houses, and invest the proceeds in accordance with
section 20.
(b) A bequeaths to B his three leasehold houses in
Calcutta and all the furniture therein in trust for C during his life,
and on his death for D, and on D's death for E. Here an intention that
the houses and furniture should be enjoyed in specie appears clearly,
and B should not sell them.
17. Trustee to be impartial
Where there are more beneficiaries than one, the trustee is bound to
be impartial, and must not execute the trust for the advantage of one
at the expense of another.
Where the trustee has a discretionary power, nothing in this section
shall be deemed to authorize the court to control the exercise reasonably
and in good faith of such discretion.
Illustration
A, a trustee for B, C and D, is empowered to choose between several
specified modes of investing the trust-property. A in good faith chooses
one of these modes. The court will not interfere, although the result
of the choice may be to vary the relative rights of B, C and D.
18. Trustee to prevent waste
Where the trust is created for the benefit of several persons in succession
and one of them is in possession of the trust-property, if he commits,
or threatens to commit, any act which is destructive or permanently
injurious thereto, the trustee is bound to take measures to prevent
such act.
19. Accounts and information
A trustee is bound (a) to keep clear and accurate accounts of the trust-property,
and (b) at all reasonable times, at the request of the beneficiary,
to furnish him with full and accurate information as to the amount and
state of the trust-property.
20. Investment of trust-money
Where the trust-property consists of money and cannot be applied immediately
or at an early date to the purposes of the trust, the trustee is bound
(subject to any direction contained in the instrument of trust) to invest
the money on the following securities, and on no others:
(a) in promissory notes, debentures, stock or other
securities of any State Government or of the Central Government, or
of the United Kingdom of Great Britain and Ireland:
PROVIDED that securities, both the principal whereof
and the interest whereon shall have been fully and unconditionally guaranteed
by any such government, shall be deemed, for the purposes of this clause,
to be securities of such government;
(b) in bonds, debentures and annuities charged or
secured by the Parliament of the United Kingdom before the fifteenth
day of August, 1947 on the revenues of India or of the Governor General
in Council or of any province:
PROVIDED that, after the fifteenth day of February,
1916, no money shall be invested in any such annuity being a terminable
annuity unless a sinking fund has been established in connection with
such annuity; but nothing in this proviso shall apply to investments
made before the date aforesaid.
(bb) in India three and a half per cent stock, India
three per cent stock, India two and a half per cent stock or any other
capital stock which before the 15th day of August, 1947, was issued
by the Secretary of State for India in Council under the authority of
an Act of Parliament of the United kingdom and charged on the revenues
of India or which was issued by the Secretary of State on behalf of
the Governor-General in Council under the provisions of Part XIII of
the Government of India Act, 1935;
(c) in stock or debentures of, or shares in, Railway
or other companies the interest whereon shall have been guaranteed by
the Secretary of State for India in Council or by the Central Government
or in debentures of the Bombay Provincial Co-operative Bank Limited,
the interest whereon shall have been guaranteed, by the Secretary of
State for India in Council or the State Government of Bombay;
(d) in debentures or other securities for money issued,
under the authority of any Central Act or Provincial Act or State Act,
by or on behalf of any municipal body, port trust or city improvement
trust in any Presidency-town, or in Rangoon town, or by or on behalf
of the trustees of the port of Karachi:
PROVIDED that after the 31st day of March, 1948,
no money shall be invested in any securities issued by or on behalf
of a municipal body, port trust or city improvement trust in Rangoon
town, or by or on behalf of the trustees of the port of Karachi ;
(e) On a first mortgage of immovable property situate
in any part of the territories to which this Act extends 1[* * *]:
PROVIDED that the property is not a leasehold for
a term of years and that the value of the property exceeds by one-third,
or, if consisting of buildings, exceeds by one-half, the mortgage-money;
2[(ee) in units issued by the Unit Trust of India
under any unit scheme made under section 21 of the Unit Trust of India
Act, 1963 (52 of 1963); or]
(f) on any other security expressly authorized by
the instrument of trust, 2[or by the Central Government by the notification
in the Official Gazette] or by any rule which the High Court may from
time to time prescribe in this behalf:
PROVIDED that, where there is a person competent
to contract and entitled in possession to receive the income of the
trust-property for his life, or for any greater estate, no investment
on any security mentioned or referred to in clauses (d), (e) and (f)
shall be made without his consent in writing.
20A. Power to purchase redeemable stock at a premium
(1) A trustee may invest in any of the securities
mentioned or referred to in section 20, notwithstanding that the same
may be redeemable and that the price exceeds the redemption value:
PROVIDED that a trustee may not purchase at a price
exceeding its redemption value any security mentioned or referred to
in clauses (c) and (d) of section 20 which is liable to be redeemed
within fifteen years of the date of purchase at par or at some other
fixed rate, or purchase any such security as is mentioned or referred
to in the said clauses which is liable to be redeemed at par or at some
other fixed rate at a price exceeding fifteen per centum above par or
such other fixed rate.
(2) A trustee may retain until redemption any redeemable
stock, fund or security which may have been purchased in accordance
with this section.
21. Mortgage of land Pledged to government under Act 26 of 1871-
Deposit in government savings bank
Nothing in section 20 shall apply to investments made before this Act
comes into force, or shall be deemed to Preclude an investment on a
mortgage of immovable property already pledged as security for an advance
under the Land Improvement Act, 1871 (26 of 1871), or in case the trust-money
does not exceed three thousand rupees, a deposit thereof in a government
savings bank.
22. Sale by trustee directed to sell within specified time
Where a trustee directed to sell within a specified time extends such
time, the burden of proving, as between himself and the beneficiary,
that the latter is not prejudiced by the extension lies upon the trustee,
unless the extension has been authorised by a principal civil court
of original jurisdiction.
Illustration
A bequeaths property to B, directing him with all convenient speed and
within five years to sell it, and apply the proceeds for the benefit
of C. In the exercise of reasonable discretion, B postpones the sale
for six years. The sale is not thereby rendered invalid, but C, alleging
that he has been injured by the postponement, institutes a suit against
B to obtain compensation. In such suit the burden of proving that C
has not been injured lies on B.
23. Liability for breach of trust
Where the trustee commits a breach of trust, he is liable to make good
the loss which the trust-property or the beneficiary has thereby sustained,
unless the beneficiary has by fraud induced the trustee to commit the
breach, or the beneficiary, being competent to contract, has himself,
without coercion or undue influence having been brought to bear on him,
concurred in the breach, or subsequently acquiesced therein, with full
knowledge of the facts of the case and of his rights as against the
trustee.
A trustee committing a breach of trust is not liable to pay interest
except in the following cases :-
(a) where he has actually received interest;
(b) where the breach consists in unreasonable delay
in paying trust-money to the beneficiary;
(c) where the trustee ought to have received interest,
but has not done so;
(d) where he may be fairly presumed to have received
interest.
He is liable, in case (a), to account for the interest actually received,
and, in case (b), (c) and (d), to account for simple interest at the
rate of six per cent per annum, unless the court otherwise directs;
(e) where the breach consists in failure to invest
trust-money and to accumulate the interest or dividends thereon, he
is liable to account for compound interest (with half-yearly rests)
at the same rate;
(f) where the breach consists in the employment of
trust-property or the proceeds thereof in trade or business he is liable
to account, at the option of the beneficiary, either for compound interest
(with half-yearly rests) at the same rate, or for the net profits made
by such employment.
Illustrations
(a) A trustee improperly leaves trust-property outstanding,
and it is consequently lost; he is liable to make good the property
lost, but he is not liable to pay interest thereon.
(b) A bequeaths a house to B in trust to sell it
and pay the proceeds to C. B neglects to sell the house for a great
length of time, whereby the house is deteriorated and its market price
falls. B is answerable to C for the loss.
(c) A trustee is guilty of unreasonable delay in
investing trust money in accordance with section 20, or in paying it
to the beneficiary. The trustee is liable to pay interest thereon for
the period of the delay.
(d) The duty of the trustee is to invest trust-money
in any of the securities mentioned in section 20, clauses (a), (b),
(c) or (d). Instead of so doing, he retains the money in his hands.
He is liable, at the option of the beneficiary, to be charged either
with the amount of the principal money and interest, or with the amount
of such securities as he might have purchased with the trust-money when
the investment should have been made, and the intermediate dividends
and interest thereon.
(e) The instrument of trust directs the trustee to
invest trust-money either in any of such securities or on mortgage of
immovable property. The trustee does neither. He is liable for the principal
money and interest.
(f) The instrument of trust directs the trustee to
invest trust-money in any of such securities and to accumulate the dividends
thereon. The trustee disregards the direction. He is liable, at the
option of the beneficiary, to be charged either with the amount of the
principal money and compound interest, or with the amount of such securities
as he might have purchased with the trust-money when the investment
should have been made, together with the amount of the accumulation
which would have arisen from a proper investment of the intermediate
dividends.
(g) Trust-property is invested in one of the securities
mentioned in section 20, clauses (a), (b), (c) or (d). The trustee sells
such security for some purpose not authorized by the terms of the instrument
of trust. He is liable, at the option of the beneficiary, either to
replace the security with the intermediate dividends and interest thereon,
or to account for the proceeds of the sale with interest thereon.
(h) The trust-property consists of land. The trustee
sells the land to a purchaser for a consideration without notice of
the trust. The trustee is liable, at the option of the beneficiary,
to purchase other land of equal value to be settled upon the like trust,
or to be charged with the proceeds of the said with interest.
24. No set-off allowed to trustee
A trustee who is liable for a loss occasioned by a breach of trust in
respect of one portion of the trust-Property cannot set-off against
his liability a gain which has accrued to another portion of the trust
property through another and distinct breach of trust.
25. Non-liability for predecessor's default
Where a trustee succeeds another, he is not, as such, liable for the
acts or defaults of his predecessor.
26. Non-liability for co-trustee's default
Subject to the provisions of sections 13 and 15, one trustee is not,
as such, liable for a breach of trust committed by his co-trustee:
PROVIDED that, in, the absence of an express declaration to the contrary
in the instrument of trust, a trustee is so liable-
(a) where he has delivered trust-property to his
co-trustee without seeing to its proper application;
(b) where he allows his co-trustee to receive trust-property
and fails to make due enquiry as to the co-trustee's dealings therewith,
or allows him to retain it longer than the circumstances of the case
reasonably require;
(c) where he becomes aware of a breach of trust committed
or intended by his co-trustee, and either actively conceals it or does
not within a reasonable time take proper steps to protect the beneficiary's
interest.
Joining in receipt for conformity
A co-trustee who joins in signing a receipt for trust-property and proves
that he has not received the same is not answerable, by reason of such
signature only, for loss or mis-application of the property by his co-trustee.
Illustration
A bequeaths certain property to B and C, and directs
them to sell it and invest the proceeds for the benefit of D. B and
C accordingly sell the property, and the purchase money is received
by B and retained in his hands. C pays no attention to the matter for
two years and then calls on B to make the investment. B is unable to
do so, becomes insolvent, and the purchase-money is lost. C may be compelled
to make good the amount.
27. Several liability of co-trustees
Where co-trustees jointly commit a breach of trust, or where one of
them by his neglect enables the other to commit a breach of trust, each
is liable to the beneficiary for the whole of the loss occasioned by
such breach.
Contribution as between co-trustees
But as between the trustees themselves, if one be less guilty than another
and has had to refund the loss, the former may compel the latter, or
his legal representative to the extent of the assets he has received,
to make good such loss; and if all be equally guilty, any one or more
of the trustees who has had to refund the loss may compel the others
to contribute.
Nothing in this section shall be deemed to authorize a trustee who has
been guilty of fraud to institute a suit to compel contribution.
28. Non-liability of trustee paying without notice of transfer
by beneficiary
When any beneficiary's interest becomes vested in another person, and
the trustee, not having notice of the vesting, pays or delivers trust-property
to the person who would have been entitled thereto in the absence of
such vesting, the trustee is not liable for the property so paid or
delivered.
29. Liability of trustee where beneficiary's interest is forfeited
to the government
When the beneficiary's interest is forfeited or awarded by legal adjudication
to the government, the trustee is bound to hold the trust-property to
the extent of such interest for the benefit of such person in such manner
as the State Government may direct in this behalf.
30. Indemnity of trustees
Subject to the provisions of the instrument of trust and of sections
23 and 26, trustees shall be respectively chargeable only for such moneys,
stocks, funds and securities as they respectively actually receive,
and shall not be answerable the one for the other of them, nor for any
banker, broker or other person in whose hands any trust-property may
be placed, nor for the insufficiency or deficiency of any stocks, funds
or securities, nor otherwise for involuntary losses.
CHAPTER IV : OF THE
RIGHTS AND POWERS OF TRUSTEES
31. Right to title deed
A trustee is entitled to have in his possession the instrument of trust
and all the documents of title (if any) relating solely to the trust-property.
32. Right to reimbursement of expenses
Every trustee may reimburse himself, or pay or discharge out of the
trust-property, all expenses properly incurred in or about the execution
of the trust, or the realization, preservation or benefit of the trust-property,
or the protection or support of the beneficiary.
If he pays such expenses out of his own pocket he has a first charge
upon the trust-property for such expenses and interest thereon; but
such charge (unless the expenses have been incurred with the sanction
of a principal civil court of original jurisdiction) shall be enforced
only by prohibiting any disposition of the trust-property without previous
payment of such expenses and interest.
If the trust property fail, the trustee is entitled to recover from
the beneficiary personally on whose behalf he acted, and at whose request,
expressed or implied, he made the payment, the amount of such expenses.
Right to be recouped for erroneous over-payment
Where a trustee has by mistake made an over-payment to the beneficiary,
he may reimburse the trust-property out of the beneficiary's interest.
If such interest fail, the trustee is entitled to recover from the beneficiary
personally the amount of such over-payment.
33. Right to indemnity from gainer by breach of trust
A person other than a trustee who has gained an advantage from a breach
of trust must indemnify the trustee to the extent of the amount actually
received by such person under the breach; and where he is a beneficiary
the trustee has a charge on his interest for such amount.
Nothing in this section shall be deemed to entitle a trustee to be indemnified
who has, in committing the breach of trust, been guilty of fraud.
34. Right to apply to court for opinion in management of trust-property
Any trustee may, without instituting a suit, apply by petition to a
principal civil court of original jurisdiction for its opinion, advice
or direction on any present questions respecting the management or administration
of the trust-property other than questions of detail, difficulty or
importance, not proper in the opinion of the court for summary disposal.
A copy of such petition shall be served upon, and the hearing thereof
may be attended by, such of the persons interested in the application
as the court thinks fit.
The trustee stating in good faith the facts in such petition, and acting
upon the opinion, advice or direction given by the court shall be deemed,
so far as regards his own responsibility, to have discharged his duty
as such trustee in the subject-matter of the application.
The costs of every application under this section shall be in the discretion
of the court to which it is made.
35. Right to settlement of accounts
When the duties of a trustee, as such, are completed, he is entitled
to have the accounts of his administration of the trust-property examined
and settled; and, where nothing is due to the beneficiary under the
trust, to an acknowledgement in writing to that effect.
36. General authority of trustee
In addition to the powers expressly conferred by this Act and by the
instrument of trust, and subject to the restriction, if any, contained
in such instrument, and to the provisions of section 17, a trustee may
do all acts which are reasonable and proper for the realization, protection
or benefit of the trust-property, and for the protection or support
of a beneficiary who is not competent to contract.
Except with the permission of a principal civil court of original jurisdiction,
no trustee shall lease trust-property for a term exceeding twenty-one
years from the date of executing the lease, nor without reserving the
best yearly rent than can be reasonably obtained.
37. Power to sell in lots and either by public auction or private
contract
Where the trustee is empowered to sell any trust-property, he may sell
the same subject to prior charges or not, and either together or in
lots, by public auction or private contract, and either at one time
or at several times, unless the instrument of trust otherwise directs.
38. Power to sell under special conditions-Power to buy-in and
re-sell
The trustee making any such sale may insert such reasonable stipulations
either as to title or evidence of title, or otherwise, in any conditions
of sale or contract for sale, as he thinks fit; and may also buy-in
the property or any part thereof at any sale by auction, and rescind
or vary any contract for sale, and re-sell the property so bought in,
or as to which the contract is so rescinded, without being responsible
to the beneficiary for any loss occasioned thereby.
Time Allowed selling trust-property
Where a trustee is directed to sell trust-property or to invest trust-money
in the purchase of property, he may exercise a reasonable discretion
as to the time of effecting the sale or purchase.
Illustrations
(a) A bequeaths property to B, directing him to sell
it with all convenient speed and pay the proceeds to C. This does not
render an immediate sale imperative.
(b) A bequeaths property to B, directing him to sell
it at such time and in such manner as he shall think fit and invest
the proceeds for the benefit of C. This does not authorize B, as between
him and C, to postpone the sale to an indefinite period.
39. Power to convey
For the purpose of completing any such sale, the trustee shall have
power to convey or otherwise dispose of the property sold in such manner
as may be necessary.
40. Power to vary investments
A trustee may, at his discretion, call in any trust-property invested
in any security and invest the same on any of the securities mentioned
or referred to in section 20, and from time to time vary any such investments
for others of the same nature:
PROVIDED that, where there is a person competent to contract and entitled
at the time to receive the income of the trust property for his life,
or for any greater estate, no such change of investment shall be made
without his consent in writing.
41. Power to apply property of minors, etc. for their maintenance,
etc.
Where any property is held by a trustee in trust for a minor, such trustee
may, at his discretion, pay to the guardians (if any) of such minor,
or otherwise apply for or towards his maintenance or education or advancement
in life, or the reasonable expenses of his religious worship, marriage
or funeral, the whole or any part of the income to which he may be entitled
in respect of such property; and such trustee shall accumulate all the
residue of such income by way of compound interest, by investing the
same and the resulting income thereof from time to time in any of the
securities mentioned or referred to in section 20, for the benefit of
the person who shall ultimately become entitled to the property from
which such accumulations have arisen:
PROVIDED that such trustee may, at any time, if he thinks fit, apply
the whole or any part of such accumulations as if the same were part
of the income arising in the then current year.
Where the income of the trust-property is insufficient for the minor's
maintenance or education or advancement in life, or the reasonable expenses
of his religious worship, marriage or funeral, the trustee may, with
the permission of a principal civil court of original jurisdiction,
but not otherwise, apply the whole or any part of such property for
or towards such maintenance, education, advancement or expenses.
Nothing in this section shall be deemed to affect the provisions of
any local law for the time being in force relating to the persons and
property of minors.
42. Power to give receipts
Any trustees or trustee may give a receipt in writing for any money,
securities or other movable property payable, transferable or deliverable
to them or him by reason, or in the exercise of any trust or power;
and, in the absence of fraud, such receipt shall discharge the person
paying, transferring or delivering the same therefrom, and from seeing
to the application thereof, or being accountable for any loss or misapplication
thereof.
43. Power to compound, etc.
Two or more trustees acting together may; if and as they think fit,-
(a) accept any composition or any security for any
debt or for any property claimed;
(b) allow any time for payment of any debt;
(c) compromise, compound, abandon, submit to arbitration
or otherwise settle any debt, account, claim or thing whatever relating
to the trust; and
(d) for any of those purposes, enter into, give,
execute and do such agreements, instruments of composition or arrangement,
releases and other things as to them seem expedient, without being responsible
for any loss occasioned by any act or thing so done by them in good
faith.
The powers conferred by this section on two or more trustees acting
together may be exercised by a sole acting trustee when by the instrument
of trust, if any, a sole trustee is authorized to execute the trusts
and powers thereof.
This section applies only if and as far as a contrary intention is not
expressed in the instrument of trust, if any, and shall have effect
subject to the terms of that instrument and to the provisions therein
contained.
This section applies only to trusts created after this Act comes into
force.
44. Power to several trustees of whom one disclaims or dies
When an authority to deal with the trust-property is given to several
trustees and one of them disclaims or dies, the authority may be exercised
by the continuing trustees, unless from the terms of the instrument
of trust it is apparent that the authority is to be exercised by a number
in excess of the number of the remaining trustees.
45. Suspension of trustee's powers by decree
Where a decree has been made in a suit for the execution of a trust,
the trustee must not exercise any of his powers except in conformity
with such decree, or with the sanction of the court by which the decree
has been made, or, where an appeal against the decree is pending, of
the appellate court.
CHAPTER V : OF THE
DISABILITIES OF TRUSTEES
46. Trustee cannot renounce after acceptance
A trustee who has accepted the trust cannot afterwards renounce it except
(a) with the permission of a principal civil court of original jurisdiction,
or (b) if the beneficiary is competent to contract, with his consent,
or (c) by virtue of a special power in the instrument of trust.
47. Trustee cannot delegate
A trustee cannot delegate his office or any of his duties either to
a co-trustee or to a stranger, unless (a) the instrument of trust so
provides, or (b) the delegation is in the regular course of business,
or (c) the delegation is necessary, or (d) the beneficiary, being competent
to contract, consents to the delegation.
Explanation: The appointment of an attorney or proxy to do an act merely
ministerial and involving no independent discretion is not a delegation
within the meaning of this section.
Illustrations
(a) A bequeaths certain property to B and C on certain
trusts to be executed by them or the survivor of them or the assigns
of such survivor. B dies. C may bequeath the trust-property to D and
E upon the trusts of A's will.
(b) A is a trustee of certain property with power
to sell the same. A may employ an auctioneer to effect the sale.
(c) A bequeaths to B fifty houses let at monthly
rents in trust to collect the rents and pay them to C. B may employ
a proper person to collect these rents.
48. Co-trustees cannot act singly
When there are more trustees than one, all must join in the execution
of the trust, except where the instrument of trust otherwise provides.
49. Control of discretionary power
Where a discretionary power conferred on a trustee is not exercised
reasonably and in good faith, such power may be controlled by a principal
civil court of original jurisdiction.
50. Trustee may not charge for services
In the absence of express directions to the contrary contained in the
instrument of trust or of a contract to the contrary entered into with
the beneficiary or the court at the time of accepting the trust, a trustee
has no right to remuneration for his trouble, skill and loss of time
in executing the trust.
Nothing in this section applies to any Official Trustee, Administrator
General, Public Curator, or person holding a certificate of administration.
51. Trustee may not use trust property for his own profit
A trustee may not use or deal with the trust-property for his own profit
or for any other purpose unconnected with the trust.
52. Trustee for sale or his agent may not buy
No trustee whose duty it is to sell trust-property, and no agent employed
by such trustee for the purpose of the sale, may, directly or indirectly,
buy the same or any interest therein, on his own account or as agent
for a third person.
53. Trustee may not buy beneficiary's interest without permission
Not trustee, and no person who has recently ceased to be a trustee,
may, without the permission of a principal civil court of original jurisdiction,
buy or become mortgagee or lessee of the trust-property or any part
thereof; and such permission shall not be given unless the proposed
purchase, mortgage or lease is manifestly for the advantage of the beneficiary.
Trustee for purchase
And no trustee whose duty it is to buy or to obtain a mortgage or lease
of particular property for the beneficiary may buy it, or any part thereof,
or obtain a mortgage or lease of it, or any part thereof, for himself.
54. Co-trustees may not lend to one of themselves
A trustee or co-trustee whose duty it is to invest trust-money on mortgage
or personal security must not invest it on a mortgage by, or on the
personal security of, himself or one of his co-trustees.
CHAPTER VI : OF THE
RIGHTS AND LIABILITIES OF THE BENEFICIARY
55. Rights to rents and profits
The beneficiary has, subject to the provisions of the instrument of
trust, a right to the rents and profits of the trust property.
56. Right to specific execution
The beneficiary is entitled to have the intention of the author of the
trust specifically executed to the extent of the beneficiary's interest;
Right to transfer of possession
and, where there is only one beneficiary and he is competent to contract,
or where there are several beneficiaries and they are competent to contract
and all of one mind, he or they may require the trustee to transfer
the trust-property to him or them, or to such person as he or they may
direct.
When property has been transferred or bequeathed for the benefit of
a married woman, so that she shall not have power to deprive herself
of her beneficial interest, nothing in the second clause of this section
applies to such property during her marriage.
Illustrations
(a) Certain government securities are given to trustees
upon trust to accumulate the interest until A attains the age of 24,
and then to transfer the gross amount to him. A on attaining majority
may, as the person exclusively interested in the trust-property, require
the trustees to transfer it immediately to him.
(b) A bequeaths Rs. 10,000 to trustees upon trust
to purchase an annuity for B, who has attained his majority and is otherwise
competent to contract, B may claim the Rs. 10,000.
(c) A transfers certain property to B and directs
him to sell or invest it for the benefit of C, who is competent to contract.
C may elect to take the property in its original character.
57. Right to inspect and take copies of instrument of trust,
accounts, etc.
The beneficiary has a right, as against the trustee and all persons
claiming under him with notice of the trust, to inspect and take copies
of the instrument of trust, the documents of title relating solely to
the trust-property, the accounts of the trust-property and the vouchers
(if any) by which they are supported, and the cases submitted and opinions
taken by the trustee for his guidance in the discharge of his duty.
58. Right to transfer beneficial interest
The beneficiary, if competent to contract, may transfer his interest,
but subject to the law for the time being in force as to the circumstances
and extent in and to which he may dispose of such interest:
PROVIDED that when property is transferred or bequeathed for the benefit
of a married woman, so that she shall not have power to deprive herself
of her beneficial interest, nothing in this section shall authorize
her to transfer such interest during her marriage.
59. Right to sue for execution of trust
Where no trustees are appointed or all the trustees die, disclaim, or
are discharged, or where for any other reason, the execution of a trust
by the trustee is or becomes impracticable, the beneficiary may institute
a suit for the execution of the trust, and the trust shall, so far as
may be possible, be executed by the court until the appointment of a
trustee or new trustee.
60. Right to proper trustees
The beneficiary has a right (subject to the provisions of the instrument
of trust) that the trust-property shall be properly protected and held
and administered by proper persons and by a proper number of such persons.
Explanation I: The following are not proper persons
within the meaning of this section:
A person domiciled abroad: an alien enemy: a person having an interest
inconsistent with that of the beneficiary : a person in insolvent circumstances;
and, unless the personal law of the beneficiary allows otherwise, a
married woman and a minor.
Explanation II: When the administration of the trust
involves the receipt and custody of money, the number of trustees should
be two at least.
Illustrations
(a) A, one of several beneficiaries, proves that B, the trustee, has
improperly disposed of part of trust-property, or that the property
is in danger from B's being in insolvent circumstances, or that he is
incapacitated from acting as trustee. A may obtain a receiver of the
trust-property.
(b) A bequeaths certain jewels to B in trust for C. B dies during A's
lifetime; then A dies; C is entitled to have the property conveyed to
a trustee for him.
(c) A conveys certain property to four trustees in trust for B. Three
of the trustees die. B may institute a suit to have three new trustees
appointed in the place of the deceased trustees.
(d) A conveys certain property to three trustees in trust for B. All
the trustees disclaim. B may institute a suit to have three trustees
appointed in place of the trustees so disclaiming.
(e) A, a trustee for B, refuses to act, or goes to reside permanently
out of India or is declared an insolvent, or compounds with his creditors,
or suffers a co-trustee to commit a breach of trust. B may institute
a suit to have A removed and a new trustee appointed in his room.
61. Right to compel to any act of duty
The beneficiary has a right that his trustee shall be compelled to perform
any particular act of his duty as such, and restrained from committing
any contemplated or probable breach of trust.
Illustrations
(a) A contracts with B to pay him monthly Rs. 100
for the benefit of C. B writes and signs a letter declaring that he
will hold in trust for C the money so to be paid. A fails to pay the
money in accordance with his contract. C may compel B on a proper indemnity
to allow C to sue on the contract in B's name.
(b) A is trustee of certain land, with a power to
sell the same and pay the proceeds to B and C equally. A is about to
make an improvident sale of the land. B may sue on behalf of himself
and C for an injunction to restrain A from making the sale.
62. Wrongful purchase by trustee
Where a trustee has wrongfully bought trust-property, the beneficiary
has a right to have the property declared subject to the trust or retransferred
by the trustee, if it remains in his hands unsold, or, if it has been
bought from him by any person with notice of the trust, by such person.
But in such case the beneficiary must repay the purchase-money paid
by the trustee, with interest, and such other expenses (if any) as he
has properly incurred in the preservation of the property; and the trustee
or purchaser must (a) account for the net profits of the property, (b)
be charged with an occupation-rent, if he has been in actual possession
of the property, and (c) allow the beneficiary to deduct a proportionate
part of the purchase-money if the property has been deteriorated by
the acts or omissions of the trustee or purchaser.
Nothing in this sections-
(a) impairs the rights of lessees and others, who,
before the institution of a suit to have the property declared subject
to the trust or retransferred, have contracted in good faith with the
trustee or purchaser; or
(b) entitles the beneficiary to have the property
declared subject to the trust or retransferred where he, being competent
to contract, has himself, without coercion or undue influence having
been brought to bear on him, ratified the sale to the trustee with full
knowledge of the facts of the case and of his rights as against the
trustee.
63. Following trust property-into the hands of third persons;
into that into which it has been converted
Where trust-property comes into the hands of a third person inconsistently
with the trust, the beneficiary may require him to admit formally, or
may institute a suit for a declaration, that the property is comprised
in the trust.
Where the trustee has disposed of trust-property and the money or other
property which he has received therefor can be traced in his hands,
or the hands of his legal representative or legatee, the beneficiary
has, in respect thereof, rights as nearly as may be the same as his
rights in respect of the original trust-property.
Illustrations
(a) A, a trustee for B of Rs. 10,000, wrongfully
invests the Rs. 10,000 in the purchase of certain land. B is entitled
to the land.
(b) A, a trustee, wrongfully purchased land in his
own name, partly with his own money, partly with money subject to a
trust for B. B is entitled to a charge on the land for the amount of
the trust-money so misemployed.
64. Saving of rights of certain transferees
Nothing in section 63 entitles the beneficiary to any right in respect
of property in the hands of-
(a) a transferee in good faith for consideration
without having notice of the trust, either when the purchase-money was
paid, or when the conveyance was executed, or
(b) a transferee for consideration from such a transferee.
A judgement-creditor of the trustee attaching and purchasing trust-property
is not a transferee for consideration within the meaning of this section.
Nothing in section 63 applies to money, currency notes and negotiable
instruments in the hands of a bona fide holder to whom they have passed
in circulation, or shall be deemed to affect the Indian Contract Act,
1872 (9 of 1872), section 108, or the liability of a person to whom
a debt or charge is transferred.
65. Acquisition by trustee of trust-property wrongfully converted
Where a trustee wrongfully sells or otherwise transfers trust-property
and afterwards himself becomes the owner of the property, the property
again becomes subject to the trust, notwithstanding any want of notice
on the part of intervening transferees in good faith for consideration.
66. Right in case of blended property
Where the trustee wrongfully mingles the trust-property with his own,
the beneficiary is entitled to a charge on the whole fund for the amount
due to him.
67. Wrongful employment by partner-trustee of trust-property
for partnership purposes
If a partner, being a trustee, wrongfully employs trust-property in
the business or on the account of the partnership, no other partner
is liable therefor in his personal capacity to the beneficiaries, unless
he had notice of the breach of trust.
The partners having such notice are jointly and severally liable for
the breach of trust.
Illustrations
(a) A and B are partners. A dies, having bequeathed
all his property to B in trust for Z, and appointed B his sole executor.
B, instead of winding up the affairs of the partnership, retains all
the assets in the business. Z may compel him, as partner, to account
for so much of the profits as are derived from A's share of the capital.
B is also answerable to Z for the improper employment of A's assets.
(b) A, a trader, bequeaths his property to B in trust
for C. Appoints B his sole executor, and dies. B enters into partnership
with X and Y in the same trade, and employs A's assets in the partnership
business. B gives an indemnity to X and Y against the claims of C. Here
X and Y are jointly liable with B to C as having knowingly become parties
to the breach of trust committed by B.
68. Liability of beneficiary joining in breach of trust
Where one of several beneficiaries-
(a) joins in committing breach of trust, or
(b) knowingly obtains any advantage therefrom, without
the consent of the other beneficiaries, or
(c) becomes aware of a breach of trust committed
or intended to be committed, and either actually conceals it, or does
not within a reasonable time take proper steps to protect the interests
of the other beneficiaries, or
(d) has deceived the trustee and thereby induced
him to commit a breach of trust,
the other beneficiaries are entitled to have all his beneficial interest
impounded as against him and all who claim under him (otherwise than
as transferees for consideration without notice of the breach) until
the loss caused by the breach has been compensated.
When property has been transferred or bequeathed for the benefit of
a married woman, so that she shall not have power to deprive herself
of her beneficial interest, nothing in this section applies to such
property during her marriage.
69. Rights and liabilities of beneficiary's transferee
Every person to whom a beneficiary transfers his interest has the rights,
and is subject to the liabilities, of the beneficiary in respect of
such interest at the date of the transfer.
CHAPTER VII : OF
VACATING THE OFFICE OF TRUSTEE
70. Office how vacated
The office of a trustee is vacated by his death or by his discharge
from his office.
71. Discharge of trustee
The trustee may be discharged from his office only as follows:-
(a) by the extinction of the trust;
(b) by the completion of his duties under the trust;
(c) by such means as may be prescribed by the instrument
of trust;
(d) by appointment under this Act of a new trustee
in his place;
(e) by consent of himself and the beneficiary, or,
where there are more beneficiaries than one, all the beneficiaries being
competent to contract; or
(f) by the court to which a petition for his discharge
is presented under this Act.
72. Petition to be discharged from trust
Notwithstanding the provisions of section 11, every trustee
may apply by petition to a principal civil court of original jurisdiction
to be discharged from his office; and if the court finds that there
is sufficient reason for such discharge, it may discharge him accordingly,
and direct his costs to be paid out of the trust-property. But where
there is no such reason, the court shall not discharge him, unless a
proper person can be found to take his place.
73. Appointment of new trustees on death, etc.
Whenever any person appointed a trustee disclaims, or any trustee, either
original or substituted, dies, or is for a continuous period of six
months absent from 3[India], or leaves 3[India] for the purpose of residing
abroad, or is declared an insolvent, or desires to be discharged from
the trust, or refuses or becomes, in the opinion of a principal civil
court of original jurisdiction, unfit or personally incapable to act
in the trust, or accepts an inconsistent trust, a new trustee may be
appointed in his place by-
(a) the person nominated for that purpose by the
instrument of trust (if any), or
(b) if there be no such person, or no such person
able and willing to act, the author of the trust if he be alive and
competent to contract, or the surviving or continuing trustees or trustee
for the time being, or legal representative of the last surviving and
continuing trustee, or (with the consent of the court) the retiring
trustees, if they all retire simultaneously, or (with the like consent)
the last retiring trustee.
Every such appointment shall be by writing under the hands of the person
making it. On an appointment of a new trustee the number of trustees
may be increased.
The Official Trustee may, with his consent and by the order of the court,
be appointed under this section, in any case in which only one trustee
is to be appointed and such trustee is to be the sole trustee.
The provisions of this section relative to a trustee who is dead include
the case of a person nominated trustee in a will but dying before the
testator, and those relative to a continuing trustee include a refusing
or retiring trustee if willing to act in the execution of the power.
74. Appointment by court
Whenever any such vacancy or disqualification occurs and it is found
impracticable to appoint a new trustee under section 73, the beneficiary
may, without instituting a suit, apply by petition to a principal civil
court of original jurisdiction for the appointment of a trustee or a
new trustee, and the court may appoint a trustee or a new trustee accordingly.
Rule for selecting new trustees : In appointing new trustees, the court
shall have regard (a) to the wishes of the author of the trust as expressed
in or to be inferred from the instrument of trust; (b) to the wishes
of the person, if any, empowered to appoint new trustees; (c) to the
question whether the appointment will promote or impede the execution
of the trust; and (d) where there are more beneficiaries than one, to
the interests of all such beneficiaries.
75. Vesting of trust-property in new trustees
Whenever any new trustee is appointed under section 73 or section 74,
all the trust-property for the time being vested in the surviving or
continuing trustees or trustee, or in the legal representative of any
trustee, shall become vested in such new trustee, either solely or jointly
with the surviving or continuing trustees or trustee, as the case may
require.
Powers of new trustees: Every new trustee so appointed, and every trustee
appointed by a court either before or after the passing of this Act,
shall have the same powers, authorities and discretions, and shall in
all respects act, as if he had been originally nominated a trustee by
the author of the trust.
76. Survival of trust
On the death or discharge of one of several co-trustees, the trust survives
and the trust-property passes to the others, unless the instrument of
trust expressly declares otherwise.
CHAPTER VIII : OF
THE EXTINCTION OF TRUSTS
77. Trust how extinguished
A trust is extinguished-
(a) when its purpose is completely fulfilled; or
(b) when its purpose becomes unlawful; or
(c) when the fulfilment of its purpose becomes impossible
by destruction of the trust-property or otherwise; or
(d) when the trust, being revocable, is expressly
revoked.
78. Revocation of trust
A trust created by will may be revoked at the pleasure of the testator.
A trust otherwise created can be revoked only-
(a) where all the beneficiaries are competent to
contract-by their consent;
(b) where the trust has been declared by a non-testamentary
instrument or by word of mouth-in exercise of a power of revocation
expressly reserved to the author of the trust; or
(c) where the trust is for the payment of the debts
of the author of the trust, and has not been communicated to the creditors
at the pleasure of the author of the trust.
Illustration
A conveys property to B in trust to sell the same and pay out of the
proceeds the claims of A's creditors. A reserves no power of revocation.
If no communication has been made to the creditors, A may revoke the
trust. But if the creditors are parties to the arrangement, the trust
cannot be revoked without their consent.
79. Revocation not to defeat what trustees have duly done
No trust can be revoked by the author of the trust so as to defeat or
prejudice what the trustees may have duly done in execution of the trust.
CHAPTER IX : OF CERTAIN
OBLIGATIONS IN THE NATURE OF TRUSTS
80. Where obligation in nature of trust is created
An obligation in the nature of a trust is created in the following cases.
81. Where it does not appear that transferor intended to dispose
of beneficial interest
4[***]
82. Transfer to one for consideration paid by another]
4[***]
83. Trust incapable of execution or executed without exhausting
trust-property
Where a trust is incapable of being executed, or where the trust is
completely executed without exhausting the trust-property, the trustee,
in the absence of a direction to the contrary, must hold the trust-property,
or so much thereof as is unexhausted, for the benefit of the author
of the trust or his legal representative.
Illustrations
(a) A conveys certain land to B-
"upon trust", and no trust is declared; or
"upon trust to be thereafter declared", and no such declaration
is ever made; or
upon trusts that are too vague to be executed; or
upon trusts that become incapable of taking effect; or
"in trust for C", and C renounces his interest under the trust.
In each of these cases B holds the land for the benefit of A.
(b) A transfers Rs. 10,000 in the four per cents
to B, in trust to pay the interest annually accruing due to C for her
life. A dies. Then C dies. B holds the funds for the benefit of A's
legal representative.
(c) A conveys land to B upon trust to sell it and
apply one moiety of the proceeds for certain charitable purposes, and
the other for the maintenance of the worship of an idol. B sells the
land, but the charitable purposes wholly fail, and the maintenance of
the worship does not exhaust the second moiety of the proceeds. B holds
the first moiety and the part unapplied of the second moiety for the
benefit of A or his legal representative.
(d) A bequeaths Rs. 10,000 to B, to be laid out in
buying land to be conveyed for purposes with either wholly or partially
fail to take effect. B holds for the benefit of A's legal representative
the undisposed of interest in the money or land if purchased.
84. Transfer for illegal purpose
Where the owner of property transfers it to another for an illegal purpose
and such purpose is not carried into execution, or the transferor is
not as guilty as the transferee, or the effect of permitting the transferee
to retain the property might be to defeat the provisions of any law,
the transferee must hold the property for the benefit of the transferor.
85. Bequest for illegal purpose
Where a testator bequeaths certain property upon trust and the purpose
of the trust appears on the face of the will to be unlawful, or during
the testator's lifetime the legatee agrees with him to apply the property
for an unlawful purpose, legatee must hold the property for the benefit
of the testator's legal representative.
Bequest of which revocation is prevented by coercion: Where property
is bequeathed and the revocation of the bequest is prevented by coercion,
the legatee must hold the property for the benefit of the testator's
legal representative.
86. Transfer pursuant to rescindable contract
Where property is transferred in pursuance of contract which is liable
to rescission or induced by fraud or mistake, the transferee must, on
receiving notice to that effect, hold the property for the benefit of
the transferor, subject to repayment by the latter of the consideration
actually paid.
87. Debtor becoming creditor's representative
Where a debtor becomes the executor or other legal representative of
his creditor, he must hold the debt for the benefit of the persons interested
therein.
88. Advantage gained by fiduciary
Where a trustee, executor, partner, agent, director of a company, legal
advisor, or other person bound in a fiduciary character to protect the
interests of another person, by availing himself of his character, gains
for himself any pecuniary advantage, or where any person, so bound enters
into any dealings under circumstances in which his own interests are,
or may be, adverse to those of such other person and thereby gains for
himself a pecuniary advantage, he must hold for the benefit of such
other person the advantage so gained.
Illustrations
(a) A, an executor, buys at an undervalue from B,
a legatee, his claim under the will, B is ignorant of the value of the
bequest. A must hold for the benefit of B the difference between the
price and value.
(b) A, a trustee, uses the trust-property for the
purpose of his own business. A holds for the benefit of his beneficiary
the profits arising from such user.
(c) A, a trustee, retires from his trust in consideration
of his successor paying him a sum of money. A holds such money for the
benefit of his beneficiary.
(d) A, a partner, buys land in his own name with
funds belonging to the partnership. A holds such land for the benefit
of the partnership.
(e) A, a partner, employed on behalf of himself and
his co-partners is negotiating the terms of a lease, clandestinely stipulates
with the lessor for payment to himself of a lakh of rupees. A holds
the lakh for the benefit of the partnership.
(f) A and B are partners. A dies. B, instead of winding
up the affairs of the partnership, retain all the assets in the business.
B must account to A's legal representative for the profits arising from
A's share of the capital.
(g) A, an agent employed to obtain a lease for B,
obtains the lease for himself. A holds the lease for the benefit of
B.
(h) A, a guardian, buys up for himself incumbrances
on his ward B's estate at an undervalue. A holds for the benefit of
B the incumbrances so bought, and can only charge him with what he has
actually paid.
89. Advantage gained by exercise of undue influence
Where, by the exercise of undue influence, any advantage is gained in
derogation of the interests of another, the person gaining such advantage
without consideration, or with notice that such influence has been exercised,
must hold the advantage for the benefit of the person whose interests
have been so prejudiced.
90. Advantage gained by qualified owner
Where a tenant for life, co-owner, mortgagee or other qualified owner
of any property by availing himself of his position as such, gains an
advantage in derogation of the rights of the other persons interested
in the property, or where any such owner, as representing all persons
interested in such property, gains any advantage, he must hold, for
the benefit of all persons so interested, the advantage so gained, but
subject to repayment by such persons of their due share of the expenses
properly incurred, and to an indemnity by the same persons against liabilities
properly contracted, in gaining such advantage.
Illustrations
(a) A, the tenant for life of leasehold property,
renews the lease in his own name and for his own benefit. A holds the
renewed lease for the benefit of all those interested in the old lease.
(b) A village belongs to a Hindu family. A, one of
its members, pays nazrana to government and thereby procures his name
to be entered as the inamdar of the village. A holds the village for
the benefit of himself and the other members.
(c) A mortgages land to B, who enters into possession.
B allows the government revenue to fall into arrear with a view to the
land being put up for sale and his becoming himself the purchaser of
it. The land is accordingly sold to B. Subject to the repayment of the
amount due on the mortgage and of his expenses properly incurred as
mortgagee, B holds the land for the benefit of A.
91. Property acquired with notice of existing contract
Where a person acquires property with notice that another person has
entered into an existing contract affecting that property, of which
specified performance could be enforced, the former must hold the property
for the benefit of the latter to the extent necessary to give effect
to the contract.
92. Purchase by person contracting to buy property to be held
on trust
Where a person contracts to buy property to be held on trust for certain
beneficiaries and buys the property accordingly, he must hold the property
for their benefit to the extent necessary to give effect to the contract.
93. Advantage secretly gained by one of several compounding
creditors
Where creditors compound the debts due to them, and one of such creditors,
by a secret arrangement with the debtor, gains an undue advantage over
his co-creditors, he must hold for the benefit of such creditors the
advantage so gained.
94. Constructive trusts in cases not expressly provided for
4[* * *]
95. Obligor's duties, liabilities and disabilities
The person holding property in accordance with any of the preceding
sections of this chapter must, so far as may be, perform the same duties,
and is subject, so far as may be, to the same liabilities and disabilities,
as if he were a trustee of the property for the person for whose benefit
he holds it:
PROVIDED that, (a) where he rightfully cultivates the property or employs
it in trade or business, he is entitled to reasonable remuneration for
his trouble, skill and loss of time in such cultivation or employment;
and (b) where he holds the property by virtue of a contract with the
person for whose benefit he holds it, or with anyone through whom such
person claims, he may, without the permission of the court, by or become
lessee or mortgagee of the property or any part thereof.
96. Saving of rights of bona fide purchasers
Nothing contained in this Chapter shall impair the rights of transferees
in good faith for consideration, or create an obligation in evasion
of any law for the time being in force.
1 The word "or" omitted by the Trust Laws (Amendment) Act,
1975, w.e.f. 7th. January, 1975.
2 Inserted by the Trust Laws (Amendment) Act, 1975, w.e.f. 7th. January,
1975.
3 Substituted by the AO 1950 for the words "the Provinces".
4 Omitted by the Benami Transaction (Prohibition) Act, 1988, w.e.f.
19th. May, 1988.
5. Repealed in its application to India.
6. Repealed.
7. The figures "39", and by implication the word "and",
repealed by Act No. 12 of 1891.
