TRUSTS ACT, 1882
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.—1[It extends to 2[the whole of India 3[except the State of Jammu and Kashmir] and] the Andaman and Nicobar Islands, 4[***]; but the Central Government may, from time to time, by notification in the Official Gazette, extend it to 5[the Andaman and Nicobar Islands] or to any part thereof.]
Savings.—But nothing herein contained affects the rules of Mohammedan 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.
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The Statute and Acts mentioned in the Schedule hereto annexed shall, to the extent mentioned in the said Schedule, be repealed, in the territories to which this Act for the time being extends.
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”;
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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
(
No trust relating 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.
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) transfers 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.
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A trust may be created—
(a) by every person competent to contract,1 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.
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1. See section 11 of the Indian Contract Act, 1872 (9 of 1872).
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The subject-matter of a trust must be property transferable to the beneficiary.
It must not be merely beneficial interest under a subsisting trust.
A proposed beneficiary may renounce his interest under the trust by disclaimer addressed to the trustee, or by the setting up, with notice of the trust, a claim inconsistent therewith.
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 of 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.
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 instru
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 cir
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 immoveable 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)1 the trustee’s duty is to cause the instrument to be registered.
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1. See now the Indian Registration Act, 1908 (16 o
Section 13 of the Indian Trusts Act, 1882, articulates the fundamental duties of trustees concerning the preservation and protection of trust property. It underscores the trustees' obligation to maintain the trust property, defend its title, and take necessary legal steps to safeguard the trust's interests. This section forms a core aspect of fiduciary responsibilities, ensuring trust assets are properly managed and protected.
Section 13 states that:- A trustee is bound to maintain and defend all suits related to the trust property.- The trustee must take such steps as are reasonably requisite for the preservation of the trust property.- The trustee must take steps to assert or protect the title to the trust property.- The trustee must act in accordance with the provisions of the trust instrument and the law to safeguard the trust assets.
Section 13 itself does not prescribe specific punishments for breach. However:- Breach of fiduciary duty may lead to legal consequences, including liability for damages.- Trustees may be held accountable for mismanagement or neglect, resulting in civil liabilities.- Courts may impose directions to rectify breaches or remove trustees for misconduct.
In summary, Section 13 of the Indian Trusts Act, 1882, establishes the fiduciary duty of trustees to actively defend and preserve trust property through reasonable legal steps, ensuring the trust's integrity and ownership rights are maintained. Its scope covers all legal actions necessary for the protection of trust assets, with breach leading to civil liabilities and potential removal of trustees.
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.
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 lease-hold 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 th
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 D’s death for E. A’s property consists of three lease-hold 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 lease hold houses in Calcutta and all the furniture therein in t
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 authorise 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.
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.
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.
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 1[of any 2[State Government] or] of the 3[Central Government], or of the United Kingdom of Great Britain and Ireland:
4[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 5[charged or secured by the 6[Parliament of the Unite
(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 and 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 cent. 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.]
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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, 18715, or, in case the trust-money does not exceed three thousand rupees, a deposit thereof in a Government Savings Bank. "
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1. See now the Land Improvement Loans Act, 1883 (19 of 1883).
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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.
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
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.
When a trustee succeeds another, he is not, as such, liable for the acts or defaults of his predecessor.
Subject to the provisions of sections 13 and 15, a 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
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 authorise a trustee who has been guilty of fraud to institute a suit to compel contribution.
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.
When the beneficiary’s interest is forfeited or awarded by legal adjudication 1[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 2[the State Government] may direct in this behalf.
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1. The words “to Government” successively amended by the A.O. 1937 and the A.O. 1950 to read as above.
2. Subs. by the A.O. 1937 for “the Government”.
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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.
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.
Every trustee may re-imburse himself, or pay or discharge out of the trust property, all expenses properly incurred in or about the execution of the trust, or the realisation, 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 fails, 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 paym
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.
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.
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.
In addition to the powers expressly conferred by this Act and by the instrument of trust, and subject to the restrictions, 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 realisation, protection or benefit of the trust property, and for the protection or support of a beneficiary who is not competent to contract."
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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 that can be reasonably obtained.
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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.
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 for 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 to effecting the sale or purchase.
Illustrations
(a) A bequeaths property to B, directing him to sell it with all convenien
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.
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.
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
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.
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 togethe
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.
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.
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.
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 tru
When there are more trustees than one, all must join in the execution of the trust, except where the instrument of trust, otherwise provides
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.
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.
A trustee may not use or deal with the trust property for his own profit or for any other purpose unconnected with the trust.
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, put the same or any interest therein, on his own account or as agent for a third person.
No 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.
A trustee or co-trustee whose duty it is to invest trust-money or 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.
The beneficiary has, subject to the provisions of the instrument of trust, a right to the rents and profits of the trust property.
The beneficiary is entitled to have the intention of the author of the trust specifically executed to the extent of the beneficiary’s interests. "
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
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.
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 authorise her to transfer such interest during her marriage.
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.
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
(
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.
Where a trustee has wrongfully bought trust property, the beneficiary has a right to have the property declared subject to the trust or re-transferred 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 nett 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 section—
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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. "
Into that into which it has been converted.—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
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 judgment-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
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.
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.
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.
(
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
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.
The office of a trustee is vacated by his death or by his discharge from his office.
A 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.
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.
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 1[India] or leaves 1[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 wiling 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 o
Wherever 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.
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 trustee.—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.
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.
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.
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
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.
An obligation in the nature of a trust is created in the following cases.
[Rep. by the Benami Transactions (Prohibition) Act, 1988 (45 of 1988), sec. 7 (w.e.f 19-5-1988)].
Section 81 of the Indian Trusts Act, 1882, deals with the presumption regarding the transfer of property where the transferor's intention to dispose of the beneficial interest is not clear. It is part of the legal framework that governs the creation and operation of trusts, especially in cases where the intent of the owner is ambiguous or silent.
Section 81 states that when it does not appear that the owner of property intended to dispose of the beneficial interest, the transferee or legatee must hold the property for the benefit of the owner or his legal representative. Essentially, it creates a presumption that if the owner did not clearly intend to relinquish the beneficial interest, the property is held in trust for the owner.
Section 81 applies primarily in cases where:- The owner of property transfers or bequeaths it.- It is not evident from the circumstances that the owner intended to dispose of the beneficial interest.- The transfer is silent or ambiguous about the beneficial rights.It does not apply where the owner explicitly intends to transfer or relinquish the beneficial interest, or where the transaction clearly indicates a gift or sale with the intention to dispose of such interest.
Section 81 itself does not prescribe any punishment. It is a rule of evidence or presumption used by courts to determine the nature of the transfer and the rights of parties involved. Penalties or remedies arise from the subsequent legal proceedings based on the court's findings.
Presumption - Section 81 creates a legal presumption that, in absence of clear evidence of intention to dispose of beneficial interest, the property is held in trust for the owner or his legal heirs. [Source: "Trusts Act, 1882 - Section 81"]
Scope - It applies to transfers or bequests where the owner’s intention is ambiguous or silent regarding beneficial interest. It does not apply where the owner explicitly disclaims such interest. [Source: "Indian Trusts Act, 1882 - Section 81"]
Trust Formation - The section aids in establishing a resulting trust in cases where the transferor's intent is not clearly expressed, thus preventing unjust enrichment of transferees. [Source: "Introduction to Indian Trusts Act, 1882"]
Rebuttable Presumption - The presumption under Section 81 is rebuttable; the transferee can prove that the owner intended to dispose of the beneficial interest. [Source: "Trusts Act, 1882 - Section 81"]
Legal Inference - Courts rely on surrounding circumstances and evidence to determine whether the presumption applies or whether the owner intended to transfer beneficial interest. [Source: "Trusts Act, 1882 - Section 81"]
Relation to Section 82 - While Section 81 deals with transfers where the owner’s intention is unclear, Section 82 pertains to transfers where consideration is paid by a third party, and the transferee holds for that third party’s benefit. [Source: "Trusts Act, 1882 - Section 81 & 82"]
Resulting Trust - If Section 81 applies, a resulting trust is presumed, meaning the legal owner holds the property for the benefit of the original owner or his heirs. [Source: "Trusts Act, 1882 - Section 81"]
Relevance in Modern Law - The section remains relevant in cases of ambiguous transfers, especially in property disputes, to prevent unjust enrichment and to uphold the original owner’s rights. [Source: "Introduction to Indian Trusts Act, 1882"]
Limitations - The presumption does not override explicit evidence of gift or sale where the owner clearly intends to transfer or relinquish beneficial rights. [Source: "Trusts Act, 1882 - Section 81"]
Legal Doctrine - It embodies the doctrine that, absent clear intention, the transferor retains the beneficial interest, and the property is held in trust for him. [Source: "Trusts Act, 1882 - Section 81"]
Application in Court - Courts apply this presumption as a rule of evidence, shifting the burden to the transferee to establish that the transfer was intended as a gift or sale, not a trust. [Source: "Trusts Act, 1882 - Section 81"]
Comparison with Section 82 - Section 81 applies when intent to dispose is not apparent, whereas Section 82 applies when consideration is paid by a third party, and the transferor's intent is to benefit that third party. [Source: "Trusts Act, 1882 - Sections 81 & 82"]
Impact on Beneficiaries - Protects the rights of the original owner or his heirs by establishing a presumption of trust unless rebutted by evidence of an outright transfer. [Source: "Trusts Act, 1882 - Section 81"]
Legal Strategy - When property is transferred ambiguously, claimants can invoke Section 81 to establish a trust, whereas transferees may seek to rebut this presumption by evidence of clear intention to transfer beneficial interest. [Source: "Indian Trusts Act, 1882"]
Historical Significance - Section 81 reflects the classical principle of equity that property should not be unjustly transferred or retained in a manner contrary to the owner’s presumed intention. [Source: "Introduction to Indian Trusts Act, 1882"]
Judicial Interpretation - Courts have consistently held that the section is a rule of presumption, and the burden of proof lies on the transferee to prove that the owner intended to transfer the beneficial interest. [Source: "Trusts Act, 1882 - Case Law and Judicial Precedents"]
Note: The above commentary synthesizes the core legal principles of Section 81, referencing the provided sources and legal doctrines. It emphasizes the presumption's role in establishing or rebutting the beneficial ownership in property transfers under the Indian Trusts Act, 1882.
[Rep. by the Benami Transactions (Prohibition) Act, 1988 (45 of 1988), sec. 7 (w.e.f. 19-5-1988).]
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 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
&
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.
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, the 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.
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.
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.
Where a trustee, executor, partner, agent, director of a company, legal adviser, 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 under-value 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 f
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.
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 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, 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.
&n
Where a person acquires property with notice that another person has entered into an existing contract affecting that property, of which specific performance could be enforced, the former must hold that property for the benefit of the latter to the extent necessary to give effect to the contract.
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.
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.
[Rep. by the Benami Transactions (Prohibition) Act, 1988 (45 of 1988), sec. 7 (w.e.f. 19-5-1988).]
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 any one through whom such person claims, he may, without the permission of the Court, buy or become lessee or mortgagee of the property or any part thereof.
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.
THE SCHEDULE
(See section 2)
Year and Chapter Short title Extent of repeal
29 Car. II, c. 3 The Statute of Frauds1 Sections 2, 8, 9, 10 and 11
ACTS OF THE GOVERNOR-GENERAL IN COUNCIL
Number and Year Short Title Extent of Repeal
XXVIII of 1866 2[The Trustees and Mortgagees Section 2, 3, 4, 5, 32, 33, 34, 35, 36
Powers Act, 1866
The Schedule (Sch) of the Indian Trusts Act, 1882, primarily contains the form of the trust deed, provisions related to the registration of trusts, and the penalties for non-compliance. It complements the substantive provisions of the Act by prescribing procedural and formal requirements necessary for the creation and registration of trusts.
Section "Sch" (Schedule) details the prescribed format for trust deeds, including essential clauses, and specifies the process for registration of trusts. It also outlines penalties for failure to register a trust as mandated by law, ensuring formal validation and legal recognition of the trust.
The Schedule applies specifically to the procedural aspects of trust creation and registration under the Indian Trusts Act, 1882. It governs private trusts and ensures that they are created and maintained in a manner that is legally enforceable. It does not extend to public or charitable trusts, which are governed by separate laws.
Failure to adhere to the provisions of the Schedule, such as non-registration, can lead to penalties including fines or other legal sanctions. The exact punishment is prescribed within the Schedule itself or under related legal provisions.
Note: The references are based on the provided sources, primarily emphasizing procedural and formal aspects of the Schedule under the Trusts Act, 1882.
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