TABLE OF CONTENTS:

1. INTRODUCTION ……………………………...………………………………. Pg 4

2. OBJECTIVE OF THE STUDY…….………………………………….…………Pg 5

3. HYPOTHESIS……………………………………………………………………Pg 5

4. RESEARCH METHODOLOGY…………………………………………………Pg 5

5. SOURCES OF DATA……………………………………………………...……. Pg 5

6. LIMITATIONS OF THE STUDY………………………………………………. Pg 5

7. CHAPTERIZATION

I. CONCEPT OF TRUST………………………………………………………...Pg 6

II. RIGHTS AND POSITION OF BENEFICIARY – ANALYTICAL STUDY…Pg 8

III. CASE LAWS………………….…………………………………….………...Pg 14

IV. CONCLUSION AND SUGGESTIONS…………………………...…….……Pg 16

8. BIBLIOGRAPHY………………………………………………………………...Pg 16

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 1. INTRODUCTION

According to Indian Trust Act, trust means an obligation annexed to the ownership of property,
& arising out of a confidence reposed in & accepted by the owner for the benefit of another or
for another and owner.
A trust is an acceptance of an obligation by a person in against of some property or funds to
use it or hold it for the benefit for the person whom the trust is created.
There are different kinds of trusts and the rights and liabilities of the beneficiary, to some
extent, also depend on that.
Express trust – If the trust was created verbally, in written or in expressed term and a person is
being nominated to be the trustee of the trust it would amount to express trust. If the property
is moveable then firstly it should be registered & have to physically transferred to the trustee.
Implied trust – An implied trust is also created by an act of the parties. It appears from the
conduct of the parties. The conduct of the party creates presumption & also shows the intention
of the parties.
Public trust – A public trust under the trust law in India is one which is created for the benefit
of the public. In general Public doesn’t mean public as whole. The trust may be created for a
part of public & it will be valid trust so long as every member of particular class is permitted
to enjoy the benefit of the trust. Examples of general public purpose are- medical, health, social
service, education, training etc.
Private trust is basically is made for a specified person so that no one left the one can draw the
benefit. Such a trust is enforceable at the private action of intended beneficiary.
Secret Trust – Where neither the existence of trust nor its terms are disclosed, it is called secret
trust. In case the existence of trust is disclosed but its terms are not disclosed it is a half secret.
This is a misuse of concept trust.

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 2. OBJECTIVES OF STUDY

 To critically analyse the provisions regarding the rights and liabilities of beneficiary as
provided in the Trusts Act, 1882.

3. HYPOTHESIS
 The researcher presumes that the beneficiary of a trust is entitles to certain rights and
it is the duty of the trustee to ensure that the rights are duly provided to the beneficiary.

4. RESEARCH METHODOLOGY
In this project doctrinal method will be used. Doctrinal methods refer to library
research, research or processes done upon some texts writings or documents, legal propositions
and doctrines, articles, books as well as online research and journals relating to the subject.

5. SOURCES OF DATA
 Primary sources: Case Laws, Indian Trust Act 1882.
 Secondary Sources: Books, journals, periodicals, etc.

6. LIMITATIONS OF THE STUDY

 The researcher is restricted due to time, financial and locational constraints.

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 7. CHAPTERIZATION

I. CONCEPT OF TRUST

A trust is a three-party fiduciary relationship in which the first party, (author of the trust),
transfers a property (often but not necessarily a sum of money) upon the second party (the
trustee) for the benefit of the third party, the beneficiary. 1

The trustee is the legal owner of the property in trust, as fiduciary for the beneficiary or
beneficiaries who is/are the equitable owner(s) of the trust property. Trustees thus have a
fiduciary duty to manage the trust to the benefit of the equitable owners. They must provide a
regular accounting of trust income and expenditures. Trustees may be compensated and be
reimbursed their expenses. A court of competent jurisdiction can remove a trustee who
breaches his/her fiduciary duty. Some breaches of fiduciary duty can be charged and tried as
criminal offences in a court of law.

A trustee can be a natural person, a business entity or a public body. A trust in the United States
may be subject to federal and state taxation.

A trust is created by a author of the trust, who transfers title to some or all of his or her property
to a trustee, who then holds title to that property in trust for the benefit of the beneficiaries.2
The trust is governed by the terms under which it was created. In most jurisdictions, this
requires a contractual trust agreement or deed. It is possible for a single individual to assume
the role of more than one of these parties, and for multiple individuals to share a single role.
For example, in a living trust it is common for the grantor to be both a trustee and a lifetime
beneficiary while naming other contingent beneficiaries.

An owner placing property into trust turns over part of his or her bundle of rights to the trustee,
separating the property's legal ownership and control from its equitable ownership and benefits.
This may be done for tax reasons or to control the property and its benefits if the author of the
trust is absent, incapacitated, or deceased. Testamentary trusts may be created in wills, defining
how money and property will be handled for children or other beneficiaries.

1
"Trust". BusinessDictionary. WebFinance, Inc. Retrieved 10 August 2017.
2
"Section 2". Restatment of Trusts (Third ed.). St. Paul, Minn.: American Law Institute. 1992. p. 17.

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While the trustee is given legal title to the trust property, in accepting the property title, the
trustee owes a number of fiduciary duties to the beneficiaries. The primary duties owed include
the duty of loyalty, the duty of prudence, the duty of impartiality.3 A trustee may be held to a
very high standard of care in their dealings, in order to enforce their behavior. To ensure
beneficiaries receive their due, trustees are subject to a number of ancillary duties in support of
the primary duties, including a duties of openness and transparency; duties of recordkeeping,
accounting, and disclosure. In addition, a trustee has a duty to know, understand, and abide by
the terms of the trust and relevant law. The trustee may be compensated and have expenses
reimbursed, but otherwise must turn over all profits from the trust properties.

There are strong restrictions regarding a trustee with conflict of interests. Courts can reverse a
trustee's actions, order profits returned, and impose other sanctions if they finds a trustee has
failed in any of their duties. Such a failure is termed a breach of trust and can leave a neglectful
or dishonest trustee with severe liabilities for their failures. It is highly advisable for both author
of the trusts and trustees to seek qualified legal counsel prior to entering into a trust agreement.

Indian Trusts Act, 1882 is an Act in India related to private trusts and trustees. The act defines
what would lawfully be called as a trust and who can be legally its trustees and provides
definition for them. The Indian trusts amendment bill of 2015 amended the act and removed
some restrictions on investment of the monetary assets by the trust in certain investments. But
at the same time enabled the government to scrutinize the trusts investments at will. 45

The act defines how the author of the trust could create a trust and assign trustees and assign
his monetary assets to be controlled by the trust. This trust should have a clear definition of 67

 Intention by the author to create the trust

 Purpose of the trust
 The beneficiary of the monetary assets controlled by the trust
 The monetary assets assigned to the trust for the purpose defined above

3
"Chapter 15". Restatment of Trusts (Third ed.). St. Paul, Minn.: American Law Institute. 1992. p. 67..
4
http://www.prsindia.org/uploads/media/Indian%20Trust/Indian%20Trusts%20Bill,%202015.pdf
5
http://www.bu.edu/bucflp/files/2012/01/Indian-Trusts-Act-No.-2.pdf
6
http://www.prsindia.org/uploads/media/Indian%20Trust/Indian%20Trusts%20Bill,%202015.pdf
7
http://articles.economictimes.indiatimes.com/2011-07-18/news/29787429_1_private-trusts-estate-
planning-indian-trusts-act

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  Grants control of the monetary assets to the trustee which can include the author of the
trust

In addition the act also explains trustees 8

 have to be impartial
 can not convert property and monetary assets to profitable property outside the limits
of the purpose for which the trust was created
 have to understand completely the statutes of the trust
 can benefit from being the trustee by claiming expenses and salary from the trust for
his work
 can sometimes act singly if required
 cannot breach the trust of the author or the purpose of the trust

II.RIGHTS AND POSITION OF BENEFICIARY – ANALYTICAL STUDY

(1) RIGHT TO RENTS AND PROFITS

Right to rents and profits: The legal ownership of the trustee is destitute of beneficial
enjoyment. On the other hand, the cestui que trust, although he is not the legal owner, has the
right to receive the profits or, as Lewin puts it, "the pernancy of the profits", Sec. 55 of the
Trusts Act provides:

Sec. 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."

(2) JUS HABENDI AND JUS DISPONENDI

Right to Possession, etc.: In the case of a simple or bare trust the ccstui que trust has the jus
habendi or the right to be put into actual possession of the property. He has jus disponendi or
the right to have a conveyance of the legal estate executed. The trustee in such a case is only a
passive depository of the estate and has to transfer the property to the beneficiary when
required. When the estate is thus transferred the trust comes to end.

8
http://www.prsindia.org/uploads/media/Indian%20Trust/Indian%20Trusts%20Bill,%202015.pdf

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In a special trust involving active exertions on the part of the trustee, the right of the beneficiary
is to enforce the specific execution of the settlor 's intentions to the extent of the particular
interest of the beneficiary. The trustee can be compelled to adhere to the instructions contained
in the trust instrument without any deviation. A special trust may be converted into a simple
trust. This happens when all the beneficiaries are competent to contract and are all of one mind.
In such a case they may stay, specific execution and have the trust estate transferred to
themselves.
These principles are set forth in Sec. 56 of the Trusts Act. The section runs thus:

Sec. 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 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 hin1 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.9

(3) RIGHT TO INSPECTION OF ACCOUNTS

Right to inspection of accounts of trustee: The trustee, as we have already observed, is under
a duty to afford information to the cestui que trust concerning all matters relating to the trust.
The corresponding right of the beneficiary is set forth in Sec. 57 of the Trusts Act. That section
provides as follows:
Sec. 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.”

9
Teranath vs. Lakshmi ILR 6 Mad. 270; Smt. Juthika Slrcar vs. OTW Bengal AIR 1973 Cal. 382; Union Bank
Ltd. vs. DN Rajaram AIR 1953 All. 637; Kalidas vs. Rukshamani AIR 1932 Bom. 108; Vajay Ramraj vs. Dr.
Sri Vijaya AIR 1952 All. 564; MR Patel vs. Contoller Estates Duty AIR 1965 Guj. 9.

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 (4) RIGHT OF ALIENATION
Alienability of the beneficial Interest: The beneficial interest of the cestui que trust is
transferable. Sections 58 and 69 of the Trusts Act provide thus:
Sec. 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. 10

Sec. 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." The legal capacity of persons in regard to
the transfer of property is discussed in another part of this work.11

REMEDIES OF THE CESTUI QUE TRUST

(A) Remedies for Prevention of a Breach of Trust

(1) Suit for execution of the trust: It is a fundamental maxim of the equity Courts that "A
trust shall not fail for want of a trustee." This is embodied in Sec. 59 of the Trusts Act as
follows:

Sec. 59. "Right to sue for execution of Trust: When 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 inherent jurisdiction of the Court in aiding the
enforcement of trusts by appointing new trustees when such a course becomes necessary has
already been discussed. Sometimes Courts have themselves to take up the administration of a
trust. This is provided for by the section quoted above.

10
C.I.T., Hyderabd vs. Nawab mir Barkat Alikhan AIR 1975 SC 838=1975 (2) SCR 453=1975 (4) SCC 360=1974
(97) ITR 246
11
See Part VI.

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Execution of Trust by Court: A trust is never allowed to fail for want of a trustee and
whenever there is no trustee, the Court will itself take up the execution of the trust. It is when
persons to whom imperative powers are confined happen to die without exercising them that
questions frequently arise as to how far Courts can exercise those powers. An imperative power
is in the nature of a trust. Wilmot, C.J., observed in Attorney-General vs. Lady Downing. 12
“As to the objection that these powers are personal to the trustees and by their deaths
become unexecutable, they are not powers but trusts and there is a very essential difference
between them."

Lord Eldon said in the leading case Brown vs Higgs.13

"If the power be one which it is the duty of the party to execute, he is trustee for
the exercise of the power and the Court adopting the Principle as to trusts, will not permit his
negligence, accident or other circumstances to disappoint the interests of those for whose
benefit he is called upon to exercise it.”

Even where the power is discretionary, if it is subject to a rule prescribed by the donor of the
power, the Court itself would substitute its judgment for that of the trustee who has disclaimed
or refused to act. In Gower vs. Mainwaring14, the trustees were to divide real and personal
estate among the settlor’s relations "where they should see most necessity". Lord Hardwicke
held:
"Where trustees have power to distribute……according to a rule laid
down……. a judgment has to be made on facts existing, so that the Court can make the
judgment as well as the trustee."

If no rule is laid down by the donor of the power, the Court acts on the maxim that Equality is
equity or Equity delighteth in equality. As Sir J. Jekyill observed in Doyle vs. Attorney-
General15.
"When the fund has to be divided among different individual objects, in the
absence of any intention that can be gathered from the instrument of trust, the Court would
prefer an equal division to any other mode of division."

12
97 E.R. 1.
13
(1803) 8 Ves. 861=32 E.R. 473.
14
28 E.R. 57.
15
22 E.R. 167.

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Even where the above equitable maxim becomes inappropriate, the Court will execute the
power if it can reasonably be done.16 In Richardson vs. Chapman17, the presentation of a
benefice was left to the discretion of the trustee requiring that regard be paid to the claims of
certain persons. When the trustee showed an intention not to exercise the power the House of
Lords held that the power could be executed by the Court. Referring to this case Sir Richard
Peppes, M.R., observes in Brown vs. Higgs18.
“When one reads the nature of his trust. how difficult it was to make a selection,
this case is decisive to show that the Court must do it, though the trust is in its nature so
discretionary.”

(2) Right to proper trustees and proper number of trustees: The beneficiary is entitled to
have the custody and administration of the estate confided to the care of proper persons and a
proper number of such persons. Section 60 of the Trusts Act runs as follows:

Sec. 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.

(3) Compelling the trustee to perform his duties: Section 61 of the Trusts Act runs as
follows:

16
Mosley vs. Mosley, 23 E.R. 28.
17
E.R. 206.
18
31 E. R. 700 at 704; Lakshmi Ammal vs. Sun Life Assurance of Canada AIR 1934 Mad. 264; Thangachi vs.
Ahemad AIR 1957 Mad. 194.

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Sec. 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.

(4) Injunction: For the preservation of the trust property, the beneficiary is entitled to the
remedy of injunction by which he can prevent the trustee from committing a breach of his duty.
Lord Dunedin observes in Dundee Harbour Trustees vs. Nicol19.
"If any persons are in such a relation as to constitute them trustees, or if, without
being technically trustees. they have a fiduciary duty to others, those persons to whom they
owe a fiduciary duty will have a title to sue to prevent the infringement of that duty."

(5) Appointment of Receiver: In a proper case the Court appoints a receiver for the proper
administration of the trust. Where the trustees have disagreed a receiver may be appointed20.
In Tidd vs. Lister21 a receiver was appointed, where four trustees had been named in a will and
one died, one went abroad, the third did not interfere in the trust, and the fourth did not object
to the appointment of a receiver.

(6) Suit for Accounts - Since the primary duty of a trustee is to render accounts. the beneficiary
has the remedy of compelling him to perform that duty. Such a suit does not lie against the
legal representatives of a deceased trustee22•

(7) Compelling trustees to take legal proceedings : A beneficiary cannot except under special
circumstances, sue in his own name for the assertion of the legal rights of the trustee 23. He may,
however, compell the trustee to institute the requisite legal proceedings.

In Sharp vs. San Paulo24,James, L.J., holding that the beneficiary could not, on the allegation
that the trustees refused to take legal proceedings, maintain a suit against the debtor to the trust
estate, observed thus :

19
{1915) AC. 550.
20
Swale vs. Swale, (1856) 22 Beav. 584=52 E.R. 1233.
21
(1820) 5 Mad. 429=56 E. R. 959.
22
Amiya Krishna vs. Debendra, 46 C.W.N. 865; Allahabad Bank Ltd. vs. CIT AIR 1953 SC 476; F. Sharafally vs. MA
Sasson AIR 1943 BOM. 366
23
Howden vs. Yorkshire Miner's Association (1903) 1 H.B. 308 On appeal. sub nom Yorkshire
Miner’s Association vs. Howden. (1905) A.C. 256.
24
(1873) 8 Ch. 597 at 609.

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 "If a trustee would not take proper steps to enforce the claim, the remedy of the
cestui que trust was to file his bill against the trustee for the execution of the trust, or for the
realisation of the trust fund, and then to obtain the proper order for using the trustee's name, or
for obtaining a receiver to use the trustee's name, who would, on behalf of the whole estate,
institute the proper action or proper suit, in equity."
A trustee cannot be compelled to prefer an appeal, for he does so at his own risk
as to costs and may insist upon an indemnity from the beneficiary before doing so 25

III. CASE LAWS

1. Commissioner of Income Tax vs. Surajba Patel Trust (1995 216 ITR 857 Bom)

Under s. 58 of the Indian Trusts Act, 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
and to which he may dispose of such interest. In the present case, all the three beneficiaries,
who are competent to contract, were in a position to transfer their interest or any part of it in
the trust properties or income from the trust properties. The beneficiaries have, by a deed of
assignment assigned their interest and shares in a portion of the income in favour of another
charitable trust. Once the beneficiaries have given up their right, title and interest in a portion
of the income in favour of the said trust it cannot be said that in fact they are entitled to receive
the entire income and it is the beneficiaries who thereafter diverted a part of the income in
favour of the said charitable trust. The beneficiaries have divested themselves of this part of
the income at source. Hence the income so given up and assigned to the said charitable trust
cannot be taxed in the hands of the beneficiaries as this income has not accrued to them.
Therefore, the Tribunal was right in holding that this is a case of diversion of income at source
and not application of income.

25
Westminster Corporation vs. St. George’s Hanover Square, (1909) 1 Ch. 643

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 2. Ashok Kumar Kapur and Ors. vs. Ashok Khanna and Ors. (2008(1)CHN807)

On an intra-court appeal, a Division Bench of the said Court by reason of the impugned
judgment although opining that a Letters Patent appeal was not maintainable, went into the
merit of the matter and dismissed the same, holding:

After analysing those clauses in our opinion, the trust shall be irrevocable one and no moneys
belonging to the funds in the hands of the trustees shall be recoverable by the company nor
shall the company have any lien or charge of any description to the same. Therefore, we are
sure that the purpose of the trust exists and/or remains valid until the last surviving employees
receive its benefit out of the trust fund and furthermore, under Clause 3 of the said Trust Deed
funds lying in the hands of the said trustees are not coverable by the company nor the company
shall have any lien or charge of any description on the said trust fund. Therefore, we do not
have any hesitation to hold that no opinion can be expressed by the Court that the amount so
lying in the hands of the trustees can be recoverable by the company or may be transferred in
any manner to the company. Therefore, we are not in a position to accept the contention of Mr.
Sarkar that during the financial stringency they shall have the right to utilize the said fund and
the amount lying in the said trust fund can be transferred to the company for meeting its
liabilities. After scrutinizing the Clauses of the said Trust Deed we have come to the conclusion
that the purpose of the trust exists and remains valid until the last surviving employees receive
its benefits out of the said trust fund. We do not have any hesitation also to express our opinion
as His Lordship expressed in His Lordship's decision that the trust exists and we also have to
accept the contention of Learned Counsel appearing on behalf of the respondent in the instant
case that the instance case is squarely covered under the Illustration (b) of Section 56 of the
Indian Trust Act and the trustees are bound to fulfil the purpose of the trust and to obey the
directors of the author of the trust, except if any modification is made by consent of all the
beneficiaries, being competent to contact. It appears to us that in the guise of getting an opinion
from the court, the company thought it fit to extinguish the trust in question and the amount
lying in the hands of the trustees in respect of the said fund to have a lien over the same to
utilize the same which is totally barred under Clause 3 of the said Trust Deed....

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 IV. CONCLUSION AND SUGGESTIONS

From the above discussions on the doctrine and various case laws, it is evident that the state is
not the owner of the natural resources in the country but a trustee who holds fiduciary
relationship with the people. By accepting this task the government is expected to be loyal to
the interests of its citizens and to discharge its duty with the interest of the citizens at heart and
involve them in decision-making process concerning the management of natural resources in
the country. The Indian Trusts Act 1882 deals with all the matters related to trusts, trustee and
beneficiaries. According to section 10 of Indian Trusts Act 1882 states that “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.” Thus trustee holds a
fiduciary position.

And according to Section-9 of Indian Trust Act 1886“Every person capable of holding property
may be a beneficiary.” Thus a beneficiary can be a minor, or under a mental disability (in fact
many trusts are created specifically for persons with those legal disadvantages). It is also
possible to have trusts for unborn children, although the trusts must vest within the applicable
perpetuity period. Thus after studying the concept in depth it has been clear the anyone capable
of taking physical possession of or legal title of the property can be a trustee. And there is no
limit to the number of trustees to hold the position in one trust

IX. BIBLIOGRAPHY

 BOOKS

 1 Subba Rao, G.C.V. , Law of Transfer of Property : Easement, Trust and Wills, (Vepa
P. Sararthi, 7th ed. ALT Pub., 2017)

 STATUTES
 Indian Trust Act, 1882

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