Study Materials on Trust Act, 1882

Chetankumar T.M.
Assistant Professor,
Raja Lakhamgouda Law College,
Belagavi – 590006.
Email: chetancheak@gmail.com
Mobile: 8095628987, 9242126593

INDIAN TRUST ACT, 1882

Synopsis

1. Introduction

2. Importance of Trust

3. Development of Trust

4. Need of Trust

5. How to Create Trust

6. Who can Create Trust

7. Requisites of Trust

8. Concluding Remarks

Introduction

The origin of ‘Trusts’ can be traced back to the ancient times when
human motivation to do charity and dedicate property for charitable and
religious purposes found its manifestation in the form of dharmashalas,
annachatras, sadavarts, educational and medical institutions,
construction of water tanks and wells, bathing ghats, implanting trees
etc. with the emergence of idol worship, endowments for temples and
idols came into existence. In addition to public endowments/wakfs,
private trusts can also be formed for looking after the welfare, age,
illness, disability or any other reason.

Trust, in law, arrangement whereby property legally owned by one

person is administered for the benefit of another. Three parties are
ordinarily needed for the relation to arise: the settlor, who bequeaths or
deeds the property for another's benefit; the trustee, in whose hands the
control of the property is vested and who receives a fee fixed by law; and
the beneficiary, for whose use the proceeds of the property are to be
applied.

In some cases the settlor may be the trustee or beneficiary, but it is

indispensable that the trustee (legal owner) and the beneficiary (equitable
owner) be different persons. The trustee's duty is to make the capital or
earnings available to the beneficiary in the manner prescribed by the
settlor and to manage the property prudently and honestly. The
beneficiary may bring suit if this duty is breached. In modern times
banks and trust companies, with their special facilities for handling
investments, are often named the trustees of substantial properties.

Importance of Trust

Trust is fundamental to life. If you cannot trust in anything, life

becomes intolerable, a constant battle against paranoia and looming
disaster. You can’t have relationships without trust, let alone good ones.
Intimacy depends on it. More marriages are wrecked by lack of trust than
by actual infidelity. The partner who can’t trust the other not to betray
him or her will either drive them away or force them into some real or
assumed act of faithlessness.

Maitland observes that of all the exploits of equity the largest and
the most important is the invention and development of the Trust. It is
an ‘institute’ of great elasticity and generality; as elastic, as general as
contract.

Dr. Hanbury calls trust as the very centre and kernel of equity.
Trust constitute a very important comprehensive branch of equity
jurisprudence.

Development of Trust
 The development of the trust as a basic concept began during the
time of the Crusades, which were a series of holy wars spanning two
centuries between 1095 and 1291. The wars were waged by much of
Christian Europe, including England, against the Muslim-occupied
countries of the near East including the city of Jerusalem, which the
Crusaders had the goal of recapturing and restoring to Christian rule.
The long series of protracted military campaigns overseas meant that
English households were frequently deprived of their male heads for
years, and in some cases even decades. In order to facilitate the
management of their land in their absence, knights going away to battle
would frequently transfer the ownership of their property into the hands
of a trusted relative or friend so that they could act in their place,
managing the estate until their return.

The modern trust has been developed from the ancient English
‘use’. According to Maitland, the term is derived from Latin word opus
which means on his behalf.

Need of Trust

Trust are generally formed or created to fulfill any or more of the

following objectives:-

 For discharge of the charitable and religious sentiments of the

author or settlor of the trust, in a way that ensures public benefit;

 For claiming exemption from Income Tax U/s 10 or 11, as the case
may be.

 For the welfare of the members of the family and other relatives,
who are dependent on the settlor.

 For the proper management and preservation of property.

For regulating the affairs of a provident fund, superannuation fund or

gratuity fund or any other fund constitute by a person for the welfare of
its employees.

How to Create Trust

 Trust are created when the settlor of the property transfers property
or provides benefit for the welfare of beneficiaries or for the usage of
public purposes. For essentials conditions are necessary to bring into
being a valid trust.

 The person who creates a trust should make an unequivocal

declaration binding on him.

 He must transfer an identifiable property under irrevocable

arrangement and totally divest himself of the ownership and the
beneficial enjoyment of the income from the property.

 The objects of the trust must be defined and specified.

 The beneficiaries are specified.

Who can Create Trust

As per Section 7 of the Indian Trust Act, a trust may be created by

every person competent to contract and by or on behalf a minor, with the
permission of a principal court of original jurisdiction. Following are
eligible to create a Trust.

 Trust by an Hindu Undivided Family.

 Trust by a Minor.

 Trust by a Woman.

 Association of Person.

 Company.

Requisites of Trust

Following are the requisites for creation of a Trust:

 The existence of the author/settlor of the Trust or someone at

whose instance the Trust comes into existence and the settlor to
make an unequivocal declaration which is binding on him.
  There must be a divesting of the ownership by the author of the
trust in favour of the trustee for the beneficial enjoyment by the
beneficiary.

 The objects of the trust must be precise and clearly specified.

 The beneficiary who may be particular person or persons.

unless all the above requisites are fulfilled, a trust cannot be said
to have come into existence.

Definition and Fiduciary Relations

Definition

As per section 3 of Indian Trust Act 1882

“A Trust is an obligation annexed to the ownership of the 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.”

According to MAITLAND : “When a person has rights which he is

bound to exercise on behalf of another or for the accomplishment of
some particular purpose, he is said to have those rights in trust for that
other or for that purpose, and he is called trustee”.

According to UNDERHILL : “A trust is an equitable obligation either

expressly undertaken or constructively imposed by the court, whereby
the obligor is bound to deal with property over which he has control for
the benefit of persons of whom he may or may not himself be one, and
any of whom may enforce the obligation”.

Interpretation Clause

The Indian Trust Act defines ‘trust’ and other analogous terms as
under:

Trust: “A ‘trust’ is an obligation annexed to the ownership of

property, and arising out of a confidence reposed in an 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 : 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 ‘beneficiary’.

Trust property : The subject matter of the trust is called ‘trust-

property’ or ‘trust money’.

Beneficial Interest : The ‘beneficial interest’ or ‘interests’ of the

beneficiary is his right against the trustee as owner of the trust property.

Instrument of Trust : The instrument, if any, by which the trust is

declared is called the ‘instrument of trust.

Fiduciary Relations

The term ‘fiduciary’ relates to a person to whom property or power

is entrusted for the benefit of another. It is the relationship of a person to
another, where the former is bound to exercise rights and powers in good
faith for the benefit of the latter, e.g., as between trustee and beneficiary.

The fiduciary relationship may arise in the context of a jural

relationship or it may not. Where the confidence is reposed by one in
another, that leads to a transaction in which there is a conflict of interest
and duty in the person in whom such confidence is reposed, fiduciary
relationship immediately springs into existence.

Moultan, L.J. said in In re. Coomber, (1911-1 C. 723, 728), “The

fiduciary relationships extend from the relation of myself to an errand
boy, who is bound to bring me back any change, up to the most intimate
and confidential relations which can possibly exist between one party
and another, where the one is wholly in the hands of the other, because
of his infinite trust in him”.

Sheridan has observed in his Fraud in Equity, “The fiduciary

character of a person may be the consequences of a commercial or
proprietary relation to another, or it may arise out of a personal or
domestic consideration”.

Kerr has said in his Fraud and Mistake, “The disability extends in
general to all persons who, being employed or concerned in the affairs of
another, acquire the knowledge of his property”.

Vishwanatha Shastri, J., observed in Eswara Gowd v.

Somasekhara Gowd, (1956 Andh. WR 911.) “A transaction of purchase
occupying a fiduciary position under circumstances in which his own
interests are or may be adverse to those of the person who owns the
property and whose interests he is bound to protect, is always regarded
by the courts with the utmost jealousy. If such a transaction is
impeached by the beneficiary whose interests have been adversely
affected, the purchaser must show that there has been no fraud, or
concealment of advantage taken by him of information acquired by him
by virtue of his position. He must also show that the beneficiary had
independent advice, and every kind of protection in connection with the
transaction of purchase”.

Trust may be express, implied or constructive.

An express trust is a trust created expressly by the settlor by words

or by deed or will.

An implied, presumed or presumptive trust is a trust arising from

the presumed intention of the parties.

A Constructive trust is a trust arising by construction of equity,

independently of the intention of the owner of the property, when it
would be an abuse of confidence for him to hold the property for his own
benefit, as where a trustee obtains a renewal in his name of lease held by
him as trustee.

Strahan says that a constructive trust arises where a person

becomes possessed of property through such an abuse of confidence
reposed in himself as will induce the Court to hold that in conscience he
is bound to hold it for the benefit of the person injured by the breach of
confidence. It arises in cases of persons under fiduciary relationship,
e.g., trustee and beneficiary, guardian and ward, directors and
Shareholders.

“A constructive trust is a creature of equity, it is defined as a

remedial device by which the holder of legal title is held to be a trustee
for the benefit of another who in good conscience is entitled to the
beneficial interest”.

Section 3

Section 3 of the Indian Trust Act further defines following expression:

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 “breach of trust”.

Registered : 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 willful abstention from inquiry
or gross negligence, he would have know 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, Section 229.

Expression defined in Act 9 of 1872 : All expression used herein

and defined in the Indian Contract Act, 1872, shall be deemed to have
the meaning respectively attributed to them by that Act.

Cestui Que Trust :

A cestui que trust and the beneficiary are synonymous terms. A

Cestui que trust is the person for whose benefit the trustee holds the
property in trust. He perform for whose benefit the confidence is
accepted by the trustee.

Snell calls the trustee is the nominal, and the cestui que trust the
beneficial owner of the property
 Trust Distinguished from other Relationship
Introduction

A trust is when one person assumes legal ownership of a property

but only for the benefit of another. This is achieved by the original owner
of a property (the settlor) giving legal title of the property to a person (the
trustee) and giving the equitable title to another (the beneficiary/object).

 The trustee, the trust property and the beneficiary are the
three essential elements of a trust.

 The trustee assumes a fiduciary obligation towards the

beneficiary.

 The trust ends when legal title is also transferred to the

beneficiary.

 Thus, the trustee cannot be the sole beneficiary, as equitable

and legal title would be in the same person and the trust
would come to an end.

 A 'person' means a legal person (i.e., companies etc).

Trust and Debt

A debtor is not a trustee for his creditors. A trustee bound to use

his rights in a certain way either for the benefit of cestui que trust or of
the accomplishment of a purpose.

The debtor does not owe any such obligation of using his rights in a
particular way for the benefit of his creditors. The creditors have merely
rights in personam.

We can see distinction between trustee and debtor with reference to

banker, who is debtor in relation to the depositor.

The only right of the depositor is that repayment of money.

This is not so in case of a trust.

 If the banker goes bankrupt, the depositor can only realise dividend
from him along with other creditors.

A cestui que trust, on the other hand, can trace the trust fund from
investment to investment. He has right to follow the trust property in the
hands of a third person.

Trust and Ownership

A trustee is bound to use his rights in a certain way for the benefit
of another or for the accomplishment of certain purpose.

Maitland observes that “One is not made a trustee by being bound

not to use one’s rights in some particular manner”.

The law of torts largely consists of rules which limit the general
rights of owners.

Eg. “I must not dig a quarry in my land so as to cause the

subsidence of my neighbour’s land. If I do this I commit a wrong and give
my neighbour’s a cause of action; but of course I am not a trustee of my
land for him”.

Trust and Bailment

A bailment arises when possession of a chattel is transferred by its

owner (the bailor) to another (the bailee). The terms of the bailment will
determine whether the bailee must use the chattel for the benefit of the
bailor (similarly to trustee using trust property for the benefit of
beneficiaries) or whether bailee can use it for his own purposes. A
bailment may be contractual or gratuitous.

Both the trustee and the bailee control property which is not
beneficially their own. Moreover, neither is an insurer of the property. A
trustee will not be liable to compensate for loss of trust without proof of
breach of trust and a bailee will not be liable for loss or damage unless
the bailment contract states otherwise. A bailee, like a beneficiary, can
trace the bailed property or its proceeds into the hands of third parties.
Main differences between trust and bailment

a) Trust is equitable, bailment is a common law concept (although

fiduciary principles may be applied).

b) A bailor retains ownership of chattel so that a purchaser of

bailed property from the bailee cannot obtain good title against the
bailor. However, a trustee is capable of transferring property to a third
party, even though the transfer may be in equity a breach of trust.

c) Only a chattel can be bailed, whereas the subject matter of a

trust can be any property, tangible or intangible, legal or equitable.

Trust and Agency

The only resemblance between a trustee and an agent is that both

of them administer property on behalf of another and none of them is the
beneficial owner of the property.

The main difference between Trust and Agent are:

a) An agency relationship can be created without vesting any

property in the agent, whereas title to property under a trust must be
vested in a trustee.

b) The agent himself does not have to be party to contracts. A

trustee who makes a contract in the administration of the trusts
contracts as principal, whereas an agent creates a contract on behalf of
the principal, he himself is not a party to the contract with another
party.

c) At common law the relationship of principal and agent

terminates on the death of either. If a trustee dies, however, the trust is
not terminated. Instead, a new trustee is appointed.

d) There need not necessarily be an agreement between trustee and

beneficiary, but the agency implies a contractual agreement between
Principal and agent.
 e) A trust is personally responsible for all contracts entered into by
him in relation to the trust, the agent is not personally liable for the
contracts entered into, for the acts on behalf of principal.

d) An agent, thus subject his principal for personal liabilities, a

trustee cannot subject the beneficiary to such liabilities.

Trust and Contract

All agreements are contracts if they are made by the free consent
of parties competent to contract, for lawful consideration and with a
lawful object. A trust, on the other hand, is a duty deemed in equity to
rest on the conscience of a legal owner. Obligations under a contract are
legal while those of a trustee are equitable.

A contract, unsupported by consideration except where it is in

writing and registered, is not enforceable at law, whereas a voluntary
trust, without consideration, if executed is fully enforceable.

A trust may be created by a unilateral or by a bilateral act. A

contract is complete by a bilateral act. Even, a trust is created by a
bilateral act, there need not be formal offer or acceptance between the
parties as in a contract.

The obligation under a contract can be enforced only by the parties

to it and not by strangers, a trust, on the other hand, can only be
enforced by a beneficiary.

A contract creates a mere right in personam, but the rights of

beneficiary are in nature of right in rem.
 Classification of Trust
Synopsis

1. Introduction

2. Classification on the basis of Nature of Duty

3. Classification on the basis of Purpose

4. Classification according to Mode of Creation

5. Classification according to Consideration

6. Conclusion

Introduction

Trusts can be confusing, if not down-right intimidating. That's

because there are so many different types of trusts, with so many
different purposes, and with so many different names. If we didn't know
better, you'd think there were a million different types of trusts, with
each one having its own rules and regulations.

But, that's not the case at all! As intimidating as trusts appear to

be, there is a relative simplicity that runs through them. That simplicity
gives order and meaning to the various types of trusts that exist today,
which, in turn, allows all of us to understand and appreciate the
seemingly endless array of trusts before us.

Every type of trust must have the same basic components i.e.:

 Someone must create the trust. We call this person the

"grantor." Other people call the creator of a trust the "donor," or the
"settlor," or the "trustor." All these terms are used interchangeably.

 Some other person or entity must agree to hold money

and/or property for the benefit of someone else. We call this
person the "trustee." There may be more than one trustee and the
trustee need not be a person. It may be a corporation with trust
powers, such as a bank.
  Some money and/or property must actually be held by the
trustee for the benefit of someone else. We call this money or
other property the "principal" of the trust. Some people also call
this money or other property the "corpus" of the trust. The
principal (or corpus) of the trust never stays the same; some is
spent by the trustee, some is invested - earning dividends and
interest, and some of the principal appreciates and/or depreciates
in value. Collectively, we call all of this money and property the
"trust fund.“

 Someone else must benefit from the trust. We call this

person the "beneficiary" of the trust. There may be more than one
beneficiary. In that case, they are collectively called the
"beneficiaries.”

Classification on the basis of Nature of Duty

Nature of Duties of the Trustee

1. Simple Trust

2. Special Trust

1. Simple Trust

A simple trust is one where the trustee is mere depository of the

trust property with no active duties to perform.

According to Lewin – “A simple trust is where property is vested in

one person upon trust for another”.

In Ironside v Smith, Justice Fruman of the Alberta Court of

Appeal used these words:

“An individual may hold property on behalf of another as bare

trustee without taking on all the onerous trappings of a fiduciary. A bare
trustee has no further duty to perform except to convey the property to
the beneficiary on demand and, so long as he holds it, to exercise
reasonable care over the property, by maintaining or investing it.”
 Eg. – A holds simply in trust for B; here A is simply the servant of B
and it is his duty to carry out B’s orders with regard to the trust
property, unless B is a lunatic or infant.

2. Special Trust

A special trust is one where the trustee has to exercise his

discretion in carrying out the trust. In this case the machinery of a
trustee is introduced for the execution of some purpose particularly
pointed out, and the trustee is not, as before, a mere passive depository
of the estate, but is called upon the exert himself actively in the
execution of the settlor’s intention; as, where a conveyance is made to
trustees upon trust to reconvey, or to sell for the payment of debts.

Classification on the basis of Purpose

In the second place, trusts may be divided according to their end

and purpose or from the point of view of the number and class of
beneficiaries and their interest in the trust property.

1. Public or Charitable Trust

2. Private Trust

1. Public or Charitable Trust

A public trust has for its object the carrying out of a purpose which
will benefit society at large, or the members of an uncertain and
fluctuating body.

Eg. – A trust for advancement of education irrespective of caste or

creed.

2. Private Trust

A private trust has for its object the benefit either of one person or
of certain definite persons.

Eg. – A trust for the benefit of X and his children.

 An express trust is created when the settlor expresses an intention
either orally or in writing to establish the trust and complies with the
required formalities. An express trust is what people usually mean when
they refer to a trust.

Every private trust consists of four distinct elements: an intention

of the settlor to create the trust, a res or subject matter, a trustee, and a
beneficiary. Unless these elements are present, a court cannot enforce an
arrangement as a trust.

Classification according to Mode of Creation

Trust may be divided according to the mode of their creation.

1. Express Trust

2. Implied or Presumed Trust

3. Constructive Trust

4. Resulting Trust

5. Precatory Trust

6. Secret Trust

1. Express Trust

An express trust is a trust created expressly by the settlor by words or by

deed or will.

Eg. – A conveys property to B with the direction to hold it for the

benefit of C for life and thereafter for C’s children.

An Express Trust further may be divided into following:

i. Executed or Fixed Trust

ii. Executory or Discretionary Trust

i. Executed or Fixed Trust

A trust is executed when no further instrument is necessary & the

trust is finally declared in the first instance.

Eg. – Money is vested in trustees on trust for A for life & after his
death for B absolutely.

Under a fixed trust, the trustee is obliged to distribute the trust

property without discretion as to how, as regards the beneficiaries. That
is, the trustee must distribute the property, and the beneficiaries must
receive their specified proportions.

The point at which property is distributed to beneficiaries is

commonly termed ‘vesting day’, since that is the point at which title in
the property finally vests in the beneficiaries under a trust.

ii. Executory or Discretionary Trust

A trust is executory when a further instrument is necessary to

carry into effect the general intention expressed in the first instrument. It
constitutes either an agreement for the subsequent execution of a trust
instrument or some sort of a sketch of a trust.

Eg. – A promises in writing to settle certain property upon trust for

the benefit of B.

The trust must distribute the trust property, but has discretion as
to how it is distributed amongst a group of beneficiaries (ie, to whom it
shall be delivered and in what proportions). Thus, for example, the
trustee might decide to give a greater share to those beneficiaries whom
in its view are more deserving.

2. Implied or Presumed trust

An implied trust, presumed or presumptive trust is a trust arising from

presumed intention of the parties. The words of the settlor are not
expressed but his presumed intention can be inferred. In other words,
though there is no expression of wish to create trust, but the
circumstances are such that the court presumes that the settlor
intended to create trust.
3. Constructive Trust

A constructive trust is not an actual trust by the traditional

definition. It is a legal fiction that is used as a remedy for unjust
enrichment. Hence, there is no trustee, but the constructive trust
orders the person who would otherwise be unjustly enriched to transfer
the property to the intended party.

A Constructive Trust may be further divided into two types:

i. Institutional Constructive Trust

ii. Remedial Constructive Trust

i. Institutional Constructive Trust

An institutional constructive trust is a trust which is brought into

being on the occurrence of specified events, without the need for the
intervention of the court. The trust comes into being if the facts which
are necessary to give rise to it are proved to have occurred. It exists from
the time that the relevant events occurred.

ii. Remedial Constructive Trust

In contrast to the ‘institutional’ constructive trust, other

jurisdictions have come to regard constructive trusts as one of a range of
remedies which may effect restitution where a defendant has been
unjustly enriched at the expense of a claimant. Having found that there
has been an unjust enrichment, the court can, in its discretion, impose a
constructive trust over assets representing any remaining enrichment in
the hands of the defendant if appropriate, or alternatively award a
monetary remedy.

4. Resulting Trust

A resulting trust (from the Latin 'resultare' meaning 'to jump

back') is the creation of an implied trust by operation of law, where
property is transferred to someone who pays nothing for it; and then is
implied to have held the property for benefit of another person.
The trust property is said to "result" back to the transferor (implied
settlor). In this instance, the word 'result' means “in the result, remains
with", or something similar to "revert" except that in the result the
beneficial interest is held on trust for the settlor.

Not all trusts whose beneficiary is also the settlor can be called
resulting trusts. In common law systems, the resulting trust refers to a
subset of trusts which have such outcome; express trusts which
stipulate that the settlor is to be the beneficiary are not normally
considered resulting trusts.

A resulting trust is a trust which is implied in favour of the person

creating it or his legal representative. It is a species of implied trust. All
resulting are implied trusts, but all implied trusts are not necessarily
resulting trusts.

Resulting trust further may be divided into two types:

i. Presumptive resulting trusts

ii. Automatic resulting trusts

i. Presumptive resulting trusts

These are transfers made by A to B, where the law creates a

rebuttable presumption of a resulting trust applying if the intention is
not made clear by A. (written evidence produced).

For example, when A transfers property to B, unless the transfer

was made by father to child or by husband to wife, in the absence of any
other evidence the law presumes that a resulting trust has been created
for A.

ii. Automatic resulting trusts

In these trusts " there is no mention of any expression of intention

in any instrument, or of any presumption of a resulting trust: the
resulting trust takes effect by operation of law.

Automatic resulting trusts can arise when the settlor tries to set up
a trust for a third party, but there is an initial failure for want of objects;
for example, by naming beneficiaries which cannot be defined, or when
the objectives of the trust no longer become possible or relevant by the
time of the transfer to the trustee.

5. Precatory Trust

A precatory trust arises when words of wish, hope, desire or entreaty

accompany a gift to the effect that the donee may in some particular way,
which shows that a trust was intended.

6. Secret Trust

A secret trust is a trust which, though intended to be created by

the testator, has been suppressed on the face of the will. The testator
may have communicated his intention to the legatee before making the
will, or may have communicated it some time between the making of the
will & his death or his intention may only be made clear by a letter left
for the legatee after his death.

Classification according to Consideration

Trust may be classified from the point of view of consideration. They are :

i. Trust of Value

ii. Voluntary Trust

i. Trust of Value

A trust for value or consideration is created when the consideration

moves from the beneficiary. Here the relation between the settlor & and
the beneficiary is contractual.

Eg. – A trust created in favour of X if he marries Y.

ii. Voluntary Trust

A voluntary trust is created when no consideration proceeds from

the beneficiary.

Creation of Trust
Synopsis

1. Introduction

2. Necessary Requisites or Certainties of Trust

3. Essentials of Valid Trust

4. Lawful Purpose

5. Subject of Trust

6. Parties to Trust

7. Conclusion
Introduction

The trust has been classified according to their mode of creation and
divided them into express, implied and constructive, besides other
divisions.

An express trust is one created expressly by the settlor by words or

by deed or will. It contemplates the vesting of the property in certain
person on trust either declared in explicit terms or otherwise stated in
language indicative of the fact that the legal and beneficial ownership is
held by different judicial entities.

An implied or constructive trust is a trust arising from the presumed

intention of the parties or by construction of trust arising from presumed
intention of parties or by construction of equity, independently of the
intention of the owner of the property.

Necessary Requisites or Certainties of Trust

It was laid down by Lord Landale in Knight v. Knight (3 Beav. 148,

173) that for the creation of trust three things are necessary, viz.,

1) The words must be so used that on the whole they ought to be

construed an imperative;

2) The subject-matter of the trust must be certain; and

3) The objects or persons intended to have the benefit of the trust

must be certain.

These are technically known as the three certainties essential for

the creation of trust, certainty of words, certainty of subject-matter and
certainty of objects.

Essentials of valid trust

Section 6 of the Indian Trust Act lays down that, 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 purposes of the trust;

c) The beneficiary;

d) The trust property; and

e) Transfers the trust property to the truste

Certainty as to Intention

The certainty with regard to the creation of a valid trust is the

impertive intention of the settlor to create a trust. No special form of
words is necessary for the creation of trust, but intention create such a
trust must be unmistakably construed from the expressions which the
settlor has used. Such intention may be indicated by words or acts with
reasonable certainty. Where there is no indication with reasonable
certainty by any words or acts of an intention to create a trust, there can
be no trust.

Certainty as to purpose or object of the trust

There must be definiteness and certainty as to the objects or

purposes of a trust to render the same valid. The object of the trust must
be capable of being ascertained, otherwise it is void and there follows a
resulting trust. It has been laid down as a rule of law that in order to
make a trust valid the objects of the trust must be defined that the court
may be a position to administer trust.

The objects of the trust must be definite and certain.

Beneficiaries

Certainty of objects implies two things, that the recipients

beneficiaries should be identifiable with certainty and that the interest
they take should be discoverable. There must be persons named who are
to benefit by the trust and they must be indicated with reasonable
certainty.

Certainty about Trust Property

In order to constitute a valid trust there must be reasonable

certainty about the subject-matter of the trust .
 There can be no trust if the property in respect of which a trust is
to be created cannot be specifically ascertained.

Transfer of Property

Section 6 of the Indian Trust Act lays down that, in addition to the
above requirements, a trust is created where the settlor transfers the
trust property to the trustee, unless the author of the trust declares the
trust by will or he is himself the trustee.

Lawful purpose

Section 4 of the Indian Trust Act lays down that the trust to be
valid must be created for a lawful purpose. The purpose of a trust is
lawful unless it is:

a) forbidden by law;

b) is of such a nature that, if permitted, it would defeat the

provisions of any law, or

c) the court regards it as immoral or opposed to public policy.

Every trust of which the purpose is unlawful is void.

Illustration

i) 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.

i) A conveys property to B in trust to apply the profits to the nature of

female foundings to be trained up as prostitutes. The trust is void.

Subject of trust

Section 8 of the Act lays down that the subject matter of a trust
must be property transferable to the beneficiary. It must not be merely
beneficial interest under a subsisting trust.

Under Transfer of Property Act, property of any kind may be

transferred, except the properties mentioned under Section 6.
 Besides the above, no transfer can be made in so far as it is
opposed to the nature of the interest affected thereby, or for an unlawful
object or consideration or to a person legally disqualified to be transferee.

Parties to trust

Three parties are necessary for the creation of a trust are:

a) The author of the trust;

b) The trustee; and

c) The beneficiary

a) Who may create Trust

Section 7 of the Indian Trust Act lays down that a trust may be
created by a person –

i) Competent to Contract

ii) Sound Mind

b) Trustee

A person can only be appointed a trustee if he is capable of holding

property, but where the trust involves the exercise of discretion be
cannot execute it unless he is competent to contract.

Illustrations

a) A transfers certain property to B in trust to sell it & to pay out of

the proceeds A’s debts. B accepts the trust & sells the property. So
far as regards, B, a trust of the proceeds is created for A’s creditors

c) Beneficiary

Under Section 9 every person capable of holding property may be a

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.
 Appointment and duties & liabilities of trustee
Synopsis

1. Appointment of Trustees

2. Who may be Trustee

3. Power to Appoint

4. Appointment by Courts

5. Duties of Trustees

6. Liabilities of Trustees

7. Conclusion

Appointment of Trustee

A trustee are generally appointed by the author of the trust in the

trust – deed. The deed lays down elaborate provisions for the
appointment as also discharge of trustees.

No trust shall fail for want of trustee – it is an established principle.

The Trust Act contemplates that a trust shall not be defeated for
want of trustee. The fact that the trustee under trust-deed fails to accept
office would not render the trust-deed inoperative, because trust does
not fail for want of a trustee.

Section 59 of the Act lays down that where no trustee 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, & the trust shall, be executed by the court until
the appointment of a trustee or new trustee.

Where a testator shows an intention to create a trust but does not

appoint a trustee, his personal representative is deemed to be a trustee.
Who may be Trustee

A person who may be a trustee must be capable of taking or

holding the property of which the trust is declared.

Thus trustee should be competent to deal with the estate as require

by trust, or as directed by the beneficiaries, whereas certain classes are,
by nature or by rules of law, under disability.

In general terms, therefore, a trustee should be a person capable of

taking & holding the legal estate, possessed of natural capacity & legal
ability to execute the trust.

Power to Appoint

It has been held in Re Power Settlement Trust (1951) Ch. 1074, the
donee has a power to appoint new trustee could appoint himself a
trustee in substitution for a person ceasing to be a trustee.

He could not appointed himself an additional trustee where no

vacancy had arisen in the number of trustee.

Appointment by Courts

Section 74 of the Indian Trust Act provides for the appointment of a

new trustee by the Courts.

Under this section the beneficiary may file a petition, instead of

instituting a suit in the court, for the appointment of a trustee or a new
trustee & when such petition is made the court may appoint a new
trustee.

Duties of Trustee
The duties of a trustee have, in general has been explained in Section
11 to 22, Chapter III of the Indian Trust Act.

1. To Execute the Trust :

The first & foremost duty of a trustee is to execute the trust. Trustee
is bound to fulfill the purpose of the trust, & to obey the direction of the
author given at the time of its creation.
2. To inform himself of state of Trust :

A trustee is bound to acquaint himself, as soon as possible, with the

nature & circumstance of the trust property, to obtain, where necessary,
a transfer of the trust property to himself; & to get in trust – money
invested on insufficient or hazardous security. (Section – 12)

3. To Protect the Title to Trust Property :

A trustee is bound to maintain & defend all such suits, & to take
such other steps as, regard being had to the nature & amount or value of
the trust property, may be reasonably requisite for the preservation of
the trust-property, & the assertion or protection of the title therein.
(Section – 13).

4. Not to set up title adverse to beneficiary :

There is the negative duty case on the trustee that he 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 must not connive at the conduct
of another person who want to establish title adverse to the interest of
the beneficiaries. (Section – 14)

5. To exercise reasonable care :

A trustee must exercise reasonable care to regard to the trust-

property. He must deal with the trust-property as carefully as a man of
ordinary prudence would deal with such property if it were his own & in
the contract to the contrary, a trustee so dealing is not responsible for
the loss, destruction or deterioration of the trust – property. (Section –
15).

6. To convert perishable property :

The trust is created for the benefit of several persons in succession

& the trust-property is of a wasting nature or a future or reversionary
interest, the trustee must convert the trust property into property of a
permanent & immediately profitable character, unless a contrary
intention is inferred from the instrument of trust. (Section – 16).
7. To be Impartial :

Where there are more beneficiaries than one the trustee is bound to
be impartial & must not execute the trust for the advantage of one at the
expenses of another.

He has a discretionary power, nothing in this section shall be

deemed to authorize the Court to control the exercise reasonably & in
good faith of such discretion. (Section – 17).

8. To prevent waste :

Trust is created for the benefit of several persons in succession & 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 measure to prevent such act. (Section – 18).

9. To keep accurate accounts :

A trustee is bound

a) to keep clear & accurate accounts of the trust-property

b) at all reasonable times, at the request of the beneficiary, furnish him

with full & accurate information as to the amount & state of the trust
property. (Section – 19).

10. To Invest Trust Funds :

The trust property consists of money & cannot be applied

immediately or at an early date to the purpose of the trust, the trustee
must invest trust-money on the securities mentioned in Section – 20 of
the Indian Trust Act. Like Promissory notes, debentures, stocks, bonds,
units, shares or any other securities expressly authorized by the
instrument of trust.

Liability of Trustee
Section – 3 of the Act lays down that a breach of any duty imposed on
trustee, by any law is called as “breach of trust”.
 The liability of trustee is absolute. Lord Rodesdale in Adair v.
Show, “to charge person in the character of trustee with the
consequences of breach of trust, & to charge their representative also,
whether they derive benefit from the breach of trust or not”.

The liabilities of trustee has been explained under Section 23 to 30

of the Indian Trust Act.

1. Liability for breach of trust

If a trustee commits a breach of trust he is liable to make good the

loss which the trust property or the beneficiary has thereby sustained
(Section – 23).

Measure of Liability

Where a trustee improperly leaves trust property outstanding and it

is subsequently lost, the trustee is liable to make good the property lost,
but he is not liable to pay the interest there.

Ex: A bequeaths a house to B in trust to sell it & pay the proceeds

to C. B neglects to sell the house for a great length of time, whereby the
house is deteriorated & its market price falls. B is answerable to C for the
loss.

Liability to pay interest

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;

 e) where the breach consists in failure to invest trust-money & to
accumulate the interest or dividends thereon, he is liable to account for
compound interest 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 the Compound interest or for the net
profits made by such employment.

2. No set off allowed to trustee

A trustee who is liable for a loss occasioned by a breach of trust in

respects 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 & distinct breach of trust. (Section – 24).

3. Liability for wrongful acts

A trustee is liable for the wrongful acts of a co-trustee

a) where he hands over the trust property to his co-trustee without

seeing to its proper application,

b) Where he allows his co-trustee to receive trust-property without

making due enquiry as to his dealings with it, and

c) Where he becomes aware of a breach of trust but abstains from taking

the needful steps on obtain restitution. (Section – 26).

4. Several liability of co-trustee

Where co-trustee 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. (Section – 27).

5. Liability of trustee where beneficiary’s interest is forfeited

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 persons the
State Government may direct. (Section- 29).
6. Liability for breach of duty

A trustee is liable for the loss if there is clear breach of duty in the
employment & supervision of the agency, but he is not liable if he invests
in a security authorized by the instrument of trust, which ultimately
fails.

Non – Liability of Trustee for breach of trust

i) where the beneficiary has by fraud induced the trustee to commit

the breach. (Section – 23).

ii) where 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 & of his rights as against the trustee.
(Section – 23).

iii) where a trustee succeeds another, he is not, as such, liable for

the acts or defaults of his predecessor. (Section – 25).

iv) subject to the duty of the trustee to protect title to trust property
& to his duty of dealing with the trust-property as carefully as a man of
ordinary prudence would deal with such property if it were his own, one
trustee is not, as such, liable for a breach of trust committed by his co-
trustee. (Section – 26).

Rights and Powers of Trustee

Chapter IV, Section 31 to 45 of the Indian Trust Act deals with the Rights
and Powers of the Trustee.

Rights of Trustee

The following are the rights of a trustee as set out in various

Sections of the Indian Trust Act:
1. Right to Title – Deed

A trustee is entitled to have in his possession the instrument of

trust and all the documents of title relating solely to the trust property.
(Section 31) The right is continuation of the provisions of Section 13
which places an obligation on the trustee to protect title to trust property
and to maintain and defend suits thereto.

2. Right to re-imbursement of expenses

a) A trustee is entitled to reimburse himself or pay or discharge out

of the trust property, all expenses properly incurred in or about -

i) the execution of the trust

ii) the realization, preservation or benefit of the trust – Property

iii) the protection or support of the beneficiary (Section 32)

b) if he pays such expenses out of his own pocket, he has a first

charge upon the trust property for such expenses & interest thereon, but
such charge shall be enforced only by prohibiting any disposition of the
trust-property without previous payment of such expenses & interest.

c) if the trust-property fails, the trustee is entitled to recover from

the beneficiary personally on whose behalf he acted, & to whose request,
expressed or implied, he made the payment, the amount of such
expenses

d) 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 fails, the trustee is entitled to recover from the
beneficiary personally the amount of such over payments.

A trustee who has, in committing the breach of trust, been himself

guilty of fraud is disentitled from claiming indemnity.

3. 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. (Section – 33).

4. 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.

5. 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 acknowledgment in writing to that effect.

Powers of Trustee
Besides the rights of the trustee, the Indian Trust Act expressly
lays down various powers of a trustee to enable him to perform his
duties. Such powers differ from duties in the sense that in the former a
trustee is bound to exercise his judgment or discretion as to whether it is
wise to do a thing or not, & act accordingly, while in the latter he is
bound to do the thing prescribed whether it wise in his judgment to do or
not.

As regards powers of trustees, they may either be found in the

instrument of trust or may consist of general powers, or be found in the
statute.

General Powers of Trustee

General Authority of Trustee

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 realization, protection or
benefit of the trust-property, and for the protection or support of a
beneficiary who is not competent to contract.

 Necessity of Mortgaging Trust Property

 Conditions of tender proper for development of property of

trust

 Development of property of Trust

 Repair of Trust Property

 Prerequisite for alienation of property belonging attached to

Statutory powers of Trustee

1.

a) Power to Sell Trust Property

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.(Section
37)
 b) Power to sell under special conditions.

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.

c) Power to buy-in and re-sell.

Trustee may also buy-in the property or any part thereof at a 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.

d) 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 of effecting the sale or purchase. (Section – 38)

Illustration

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.

e) 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. (Section – 39)

2. Power to Vary Investment

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. (Section – 40)

3. 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. (Section – 41)

4. Power to give receipts.

Any trustees or trustee may give a receipt in writing for any money,
securities or other moveable 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. (Section 42)

5, Power to Compound

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.
 This section applies only to trusts created after this Act comes into
force. (Section – 43)

6. 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. (Section 44)

7. 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. (Section 45)

Disabilities of trustees
Chapter V (Section 46 to 54) of the Indian Trust Act deals with the
disabilities of Trustees. Such disabilities are negative duties of trustees

1. Trustee cannot renounce after acceptance (Section 46)

A trustee who has accepted the trust cannot afterwards renounce it

except –

a) with the permission of the Court

b) if the beneficiary is competent to contract, with his consent

c) by virtue of a special power in the instrument of trust.

2. 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. (Section 47)
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.

3. 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. (Section 48)

4. 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. (Section 49)

5. 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. (Section 50)

6. 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. (Section 51)

7. 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. (Section 52)
8. Trustee may not buy beneficiary‘s interest without permission

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. (Section 53)

9. 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. (Section 54)

Rights and Liabilities of Beneficiary

Rights and Liabilities of Beneficiary

The cestui que trust or beneficiary has, as such, no estate or

interest in the subject-matter under the Indian Trust Act, but has certain
rights set out in Chapter VI of the Act, which are as under:

1. 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. (Section – 55)

2. 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

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. (Section – 56)

Illustration

(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.

3. 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 its guidance in the discharge of his duty. (Section – 57)

4. 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: (Section –
58)

5. 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. (Section – 59)
6. 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. (Section – 60)

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 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.

Illustration

(a) A, one of several beneficiaries, proves that B, the trustee, has

improperly disposed of part of the 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.

7. 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. (Section – 61)

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.
8. 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. (Section – 62)

9. Following trust property--into the hands of third persons; 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 therefore 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. (Section – 63)

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 purchases 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.

10. 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. (Section –

64)

11. 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. (Section – 65)

12. 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. (Section – 66)

13. 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. (Section – 67)

Liabilities of Beneficiary
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 there from, 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, (Section – 68)

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. (Section – 69)

Vacating the office of Trustee and Extinction of Trust

Vacating the Office of Trustee

Chapter VII, Section 70 to 76 discuss in detail about the vacating

the office of trustee.

1. Office how vacated.-

The office of a trustee is vacated by his death or by his discharge

from his office. (Section 70)

2. 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. (Section 71)

3. 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. (Section 72)

4. 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 India, or leaves 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 or

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.
(Section 73)

Every such appointment shall be by writing under the hand of the

person making it.

On an appointment of a new trustee the number of trustees may be

increased.

Power to appoint a new trustee vests in

a) The person nominated for that purpose by the instrument of

trust (if any),

b) If there be no such person, or no such person able & willing to

act, the author of the trust, if he be alive & competent to contract, or

c) The surviving or continuing trustees or trustee for the time

being, or legal representative of the last surviving & continuing trustee,
or

d) 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 hand of the

person making it.

Withdrawal of Petition

A trustee may at any time before final orders have been passed on
his resignation withdraw the same.

Removal of Trustee

A trustee may be removed from his office

i) When there is an express power vested in a person under the

trust instrument; or

ii) By the order of the court under its general jurisdiction over
execution of trusts.
5. 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. (Section 74)

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.

6. 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.

Power 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.
(Section 75)
7. 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. (Section 76)

Extinction of Trust
Extinction of Trust

Chapter VIII, Section 77 and 78 deals with extinction of trust

1. 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.

(Section 77)

2. 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. (Section 78)

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.

3. 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.
(Section 79)

Unit – Iv
Exchange and gift
Synopsis

1. Definition of Exchange

2. Essentials of Exchange

3. Distinction between Sale and Exchange

4. Mode of Exchange

5. Right of a Deprived Party

6. Rights and Liabilities of Parties

7. Conclusion
1. Definition

When two persons mutually transfer the ownership of one thing for
the ownership of another, neither thing or both things being money only,
the transaction is called an “Exchange – Section 118 of Transfer of
Property Act,1882.

A transfer of property in completion of an exchange can be made

only in manner provided for the transfer of such property by sale.

The definition of exchange is not limited to immovable property but

it extends also to barter of goods. A partition of family arrangements is
not an exchange. Transfer of cotton for cotton seeds is an exchange.

When A gives B one hundred rupees currency note and B gives one
hundred rupees in coins in return, it is exchange.

2. Essentials of Exchange

Exchange is mutual transfer of ownership of one thing for the

ownership of another, may it be money or not. Thus the following
essentials of exchange may be noted:

a) Transfer of Ownership.

b) Properties need not be immovable.

c) Exchange includes barter.

3. Distinction between Sale and Exchange

Provisions of Sec – 118, 119 and 120 shows that the

legislature has put exchange on the same footing with sale in almost
every respect.

An exchange is similar to sale in so far as it is also mutual transfer of

ownership of one thing for ownership of another but it differs from sale in
that neither of one things transferred is price of the other. The distinction
between transfer by way of sale and exchange lies in nature of
consideration for such transfer.
 An essential condition of exchange is that it must be transfer of a
thing for another thing and both or either of these things may be
movable or immovable.

Similarly, there can be an exchange of one form of money for

another form of it, e.g. , rupees for coins. There cannot be an exchange of
a house for rupees. This evidently is a sale because one of the items
transferred is money & as such will be governed by the principle
applicable to sale.

A sale may be distinguished from exchange in this sense that in the

former the price is paid in money, while in the latter, it is paid in another
property.

4. Mode of Exchange

The second paragraph of Section 118 prescribes the mode in which

a transfer of property in completion of an exchange can be effected, the
manner provided for the transfer of such property by sale.

Where the exchange is of movable things mere delivery is enough to

complete the transfer. Where it is immovable or where one of the item is
immovable, & the value of any of such properties is of Rs. 100 or more
the provisions of Section 54 will be applicable & the transfer will be
completed only by a registered instrument. Where both properties are
immovable, exchange is usually effected by mutual conveyances, but it is
not necessary that there should be two separate deeds.

Right of party deprived of thing received in exchange

If any party to an exchange or any person claiming through or

under such party is by reason of any defect in the title of the other party
deprived of the thing or any part of the thing received by him in
exchange, then, unless a contrary intention appears from the terms of
the exchange, such other party is liable to him or any person claiming
through or under him for loss caused thereby, or at the option of the
person so deprived, for the return of the thing transferred, if still in the
possession of such other party or his legal representative or a transferee
from him without consideration. (Section – 119)
5. Rights and Liabilities of Parties

Each party has the rights and is subject to the liabilities of a seller
as to that which he gives, and has the rights and is subject to the
liabilities of a buyer as to that which he takes. (Section – 120)

6. Exchange of money

On an exchange of money, each party thereby warrants the

genuineness of the money given by him. (Section – 121)

Gift
Synopsis

1. Definition

Acceptance When to be Made

Types of Gift

Essentials of Gift

2. Transfers how effected

Execution & Attestation

Oral Gift

Gift of Movable Property

Gift of Immovable Property

3. Gift of Existing & Future Property

4. Gift to Several of whom One does not Accept

5. When Gift may be Suspended

6.Onerous Gift

7. Universal Donee
8. Saving of donation mortis causa & Mohammedan Law

Chapter VII, Section 122 to 129 of Transfer of Property Act, 1882

deals with ‘Gift’.

1. Definition

“Gift” is the transfer of certain existing moveable or immoveable

property made voluntarily and without consideration, by one person,
called the donor, to another, called the donee, and accepted by or on
behalf of the donee. (Section – 122)

Acceptance when to be made

Acceptance must be made during the lifetime of the donor and

while he is still capable of giving.

If the donee dies before acceptance, the gift is void.

Types of Gift

Gift are fifth kind of transfer contemplated by the Act. There are
three types of Gift

1. Gift Inter Vivos;

2. Gift mortis Causa;

3. Gift by Will.

Gift mortis causa are excluded by Section 129 & gifts by will are
outside the scope of this act. The subject of this Chapter, is therefore gift
inter vivos only.

Essentials of Gift

1. The absence of consideration 5, The Transfer

2. The donors 6. The Acceptance

3. The Donee

4. The subject – matter

2. Transfers how effected

For the purpose of making a gift of immoveable property, the

transfer must be effected by a registered instrument signed by or on
behalf of the donor, and attested by at least two witnesses.

For the purpose of making a gift of moveable property, the transfer

may be effected either by a registered instrument signed as aforesaid or
by delivery.

Such delivery may be made in the same way as goods sold may be
delivered. (Section – 123)

Execution and Attestation

According to Sec – 123, a gift deed is required to be attested at least

by two witnesses. It has been held that the execution of a document is
one thing & the attesting of it is quite another thing, one following the
other in the order stated.

Attestation is meant to ensure that the executant was a free agent, & not
under pressure nor subject to fraud while executing the same.

Oral Gifts

It must be remembered that unlike the personal law of Hindus &

Muslims permits the making of a gift orally and the relevant provision of
the T.P. Act, relating to transfer of the immovable property of the value of
one hundred rupees & upwards are not attracted to the oral gift because
of the personal law. No special set of rules has been prescribed to
establish an oral gift but 3 essential ingredients must be satisfied;

1. There must a declaration of the gift,

2. There must be acceptance of the gift by the donee, and

3. The possession of the property which is the subject-matter of the gift

must have been delivered to the donee.
Gift of Movable Property

One important question that arises is whether physical delivery is

necessary in all cases irrespective of the circumstance. Maqbool Alam v.
Khadaija

Gift of Immovable Property

Unlike the gift of movable property an immovable property cannot

validly be gifted only by delivery of possession. The delivery of immovable
property must be supported by a registered document otherwise no valid
title can pass to the donee.

3. Gift of Existing and Future Property

A gift comprising both existing and future property is void as to the

latter. (Section – 124)

The gift of future property is prohibited even under Mohammedan

Law. In a case where the deed transferred the whole income of property
but the property was not transferred, it was a gift of future income &
would be void under Section 124.

4. Gift to Several of whom one does not accept

A gift of a thing to two or more donees, of whom one does not

accept it, is void as to the interest which he would have taken had he
accepted. (Section – 125)

5. When gift may be Suspended or Revoked

The donor and donee may agree that on the happening of any
specified event which does not depend on the will of the donor a gift shall
be suspended or revoked; but a gift which the parties agree shall be
revocable wholly or in part, at the mere will of the donor, is void wholly or
in part, as the case may be.

A gift may also be revoked in any of the cases (save want or failure
of consideration) in which, if it were a contract, it might be rescinded.

Save as aforesaid, a gift cannot be revoked.

 Nothing contained in this section shall be deemed to affect the
rights of transferees for consideration without notice. (Section – 126)

Illustrations

(a) A gives a field to B, reserving to himself, with B's assent, the right to
take back the field in case B and his descendants die before A. B dies
without descendants in A's lifetime. A may take back the field.

6. Onerous Gift

Where a gift is in the form of a single transfer to the same person of

several things of which one is, and the others are not, burden by an
obligation, the donee can take nothing by the gift unless he accepts it
fully.

Where a gift is in the form of two or more separate and independent

transfers to the same person of several things, the donee is at liberty to
accept one of them and refuse the others, although the former may be
beneficial and the latter onerous. (Section – 127)

Onerous gift to disqualified person

A donee not competent to contract and accepting property

burdened by any obligation is not bound by his acceptance. But if, after
becoming competent to contract and being aware of the obligation, he
retains the property given, he becomes so bound.

7. Universal Donee

Subject to the provisions of section 127, where a gift consists of the

donor's whole property, the donee is personally liable for all the debts
due by and liabilities of the donor at the time of the gift to the extent of
the property comprised therein. (Section – 128)

8. Saving of donations mortis causa and Mohammadan law

Nothing in this Chapter relates to gifts of movable property made in

contemplation of death, or shall be deemed to affect any rule of
Mohammedan law. (Section – 129)