Introduction to The Indian Trusts Act
Chapter I – PRELIMINARY
1. Short title and commencement –
This Act may be called the Indian Trusts Act, 1882?, and it shall come into force on the first day of March, 1882.
Local extent, savings. -It extends to the whole of India 1[except the State of Jammu and Kashmir and the Andaman and Nicobar Islands] but the Central Government may, form time to time, by notification in the Official Gazette, extend it to the Andaman and Nicobar Islands or to any part thereof. But nothing herein contained affects the rules of Mohammdan law as to Waqf or the mutual relations of the members of an undivided family as determined by any customary or personal law, or applies to public or private religious or charitable endowments, or to trusts to distribute prizes taken in war among the captors; and nothing in the Second Chapter of this Act applies to trusts created before the said day.
1. Subs by Act No.3 of 1951, for “except part B states”.
2. Repeal of enactments –
The Statute and Acts mentioned in the Schedule hereto annexed shall, to the extent mentioned in the said Schedule, be repealed in the territories to which this Act for the time being extends.
3. Interpreation-clause.Trust
A “trust” is an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner;
The person who reposes or declares the confidence is called the “author of the trust”; the person who accepts the confidence is called the “trustee”; the person for whose benefit the confidence is accepted is called the “beneficiary”; the subject-matter of the trust is called “trust-property” or “trust-money”; the “beneficial interest” or “interest” of the beneficiary is his right against the trustee as owner of the trust-property; and the instrument, if any, by which the trust is declared is called the “instrument of trust”;
A breach of any duty imposed on a trustee, as such, by any law for the time being in force is called a “breach of trust”;
And in this Act, unless there be something repugnant in the subject or context, registered” means registered under the law for the registration of documents for the time being in force; a person is said to have notice” of a fact either when he actually knows that fact, or when, but for wilful abstention from inquiry or gross negligence, lie would have known it, or when information of the fact is given to or obtained by his agent, under the circumstances mentioned in the Indian Contract Act, 1872, Section 229; and all expressions used herein and defined in the Indian Contract Act, 1872, shall be deemed to have the meanings respectively attributed to them by that Act.
Chapter II – OF THE CREATION OF TRUSTS
4. Lawful purpose
A trust may be created for any lawful purpose. The purpose of trust is lawful unless it is (a) forbidden by law, or (b) is of such a nature that, if permitted, it would defeat the provisions of any law, or (c) is fraudulent, or (d) involves or implies injury to the person or property of another, or (e) the Court regards it as immoral or opposed to public policy. Every trust of which the purpose is unlawful is void. In addition, where a. trust is created for two purposes, of which one is lawful and the other unlawful, and the two purposes cannot be separated, the whole trust is void.
Explanation
In this section, the expression “law” includes, where the trust-property is immoveable and situate in a foreign country, the law of such country.
Illustrations
(a) A conveys property to B in trust to apply the profits to tile nurture of female fondings to be trained up as prostitutes. The trust is void.
(b) A bequeaths property to B, in trust to employ it in carrying on a smuggling business, and out of the profits thereof to support A’s children. The trust is void:
(c) A, while in insolvent circumstances transfers’ property to B in trust for A during his life, and after his death for B. A is declared an insolvent. The trust for A is invalid as against his creditors.
5. Trust of immovable property
No trust in relation to immovable property is valid unless declared by a non-testamentary instrument in writing signed by the author of the trust or the trustee and registered, or by the will of the author of the trust or of the trustee.
Trust of movable property. -No trust in relation to movable property is valid unless declared as aforesaid, or unless the ownership of the property is transferred to the trustee.
These rules do not apply where they would operate to make a fraud.
6. Creation of trust
Subject to the provisions of Section 5, a trust is created when the author of the, trust indicates with reasonable certainty by any words or acts (a) an intention on his part to create thereby a trust, (b) the purpose of the trust, (c) the beneficiary, and (d) the trust-property, and (unless the trust is declared by will or the author of the trust is himself to be the trustee) transfers the trust-property to the trustee.
Illustrations
(a) A bequeaths certain property to B, “having the fullest confidence that he will dispose of it for the benefit of’ C. This creates a trust so far as regards A and C.
(b) A bequeaths certain property to B “hoping he will continue it in the family”. This does not create a trust, as the beneficiary is not indicated with reasonable certainty.
(c) A bequeaths certain property to B, requesting him to distribute it among such members of C s family as B should think most deserving. This does not create a trust, for the beneficiaries are not indicated with reasonable certainty.
(d) A bequeaths certain property to B, desiring him to divide the bulk of it among among C’s children. This does not create a trust, for the trust-property is not indicated with sufficient certainty.
(e) A bequeaths a shop and stock-in-trade to B, on condition that he pays A’s debts and a legacy to C. This is a condition, not a trust for A’s creditors and C.
7. Who may create trusts
A trust may be created-
(a) By every person competent to contract, and
(b) With the permission of a principal Civil Court of original jurisdiction, by or on behalf of a minor;
But subject in each case to the law for the time being in force as to the circumstances and extent in and to which the author of the trust may dispose of the trust-property.
8. Subject of trust
The subject matter of a trust must be property transferable to the beneficiary.
It must not be merely beneficial interest under a subsisting trust.
9. Who may be beneficiary
Every Person capable of holding property may he a beneficiary.
Disclaimer by beneficiary. -A proposed beneficiary may renounce his interest under the trust by disclaimer addressed to the trustee, or by setting up, with notice of the trust, a claim inconsistent therewith.
10. Who may be trustee
Every Person capable of holding property may be a trustee; but, where the trust involves the exercise of discretion, he cannot execute it unless he is competent to contract.
No one bound to accept trust. -No one is bound to accept a trust.
Acceptance of trust. -A trust is accepted by ally words or acts of the trustee indicating with reasonable certainly such acceptance.
Disclaimer of trust. -Instead of accepting a trust, the intended trustee may, within a reasonable period, disclaim it and such disclaimer shall prevent the trust-property from vesting in him.
A disclaimer by one of two or others, and makes him or them sole trustee or trustees from the date of the creation of the trust.
Illustration
(a) A bequeaths certain property to B and C, his executors, as trustees for D, B and C prove A’s will. Ibis is in itself an acceptance of the trust, B and C hold the property in trust for D.
(b) A transfers certain Property to B in trust to sell it and to pay out of the Proceeds A’s debts. B accepts the trust and sells the property. So far as regards B, a trust of the proceeds is created for A’s creditors.
(c) A bequeaths a lakh of rupees to B upon certain trusts and appoints him his executor. B severs the lakh from the general assets and appropriates it to the specific purpose. This is an acceptance of the trust.
Chapter III – OF THE DUTIES AND LIABILITIES OF TRUSTEES
11. Trustee to execute trust
The trustee is bound to fulfil the purpose of the turst, and to obey the directions of the author of the given at the time of its creation, except as modified by the consent of all the beneficiaries being competent to contract.
Where the beneficiary is incompetent to contract, his consent may, for the purposes of this section, begen by a principal Civil Court of original jurisdiction. Nothing in this section shall be deemed to require a trustee to obey any direction when to do so would be impracticable, illegal or maifastly injurious to the beneficiaries.
Explanation-Unless a contrary intention be expressed, the purpose of a trust for the payment of debts shall be deemed to be (a) to pay only the debts of the author of the trust existing and recoverable at the date of the instrument of trust, or, when such instrument is a will, at the date of his death, and (b) in the case of debts not bearing interest, to make such payment without interest.
Illustration
(a) A, a trustee, is simply authorized to sell certain land by Public auction. He cannot sell the land by private contract. (b) A, a trustee of certain land for X, Y and Z, is authorized to sell the land to B for a specified sum. X, Y and Z, being competent to contract, consent that A may sell the land to C for a less sum. A may sell the land accordingly.
(c) A, a trustee for B and her children, is directed by the author of the trust to lend, on B’s request, trust property to B’s husband, C, on the security of his bond. C becomes insolvent and B requests A to make the loan. A may refuse to make it.
12. Trustee to inform himself of state of trust-property
A trustee is bound to acquaint himself, as soon as possible, with the nature and circumstances of the trust property; to obtain, where necessary, a transfer of the trust-property to himself; and subject to the provisions of the instrument of trust) to get in trust-moneys invested oil insufficient or hazardous security.
Illustrations
(a) The trust-property is a debt outstanding on personal security. The instrument of trust gives the trustee no discretionary power to leave the debt so outstanding. The trustee’s duty is to recover the debt without unneccessary delay.
(b) The trust-property is money in the hands of one of two co-trustees. No discretionary power is given by the instrument of trust. The other co-trustee must not allow the former to retain the money for a longer period than the circumstances of the case required.
13. Trustee to protect title to trust-property
A trustee is bound to maintain and defend all such suits, and (subject to the provisions of the instrument of trust) to take such other steps as, regard being had to the nature and amount or value of the trust-property, may be reasonably requisite for the preservation of the trust-property and the assertion or protection of the tide thereto.
Illustration
The trust-property is immovable property which has been I given to the author of the trust by an unregistered instrument. Subject to the provisions of the 1[Indian Registration Act, 1877] the trustee’s duty is to cause the instrument to be registered.
1. See now the Indian Registration Act, 1908.
14. Trustee not to set up title adverse to beneficiary
The trustee must not for himself or another set up or aids any title to the trust-property adverse to the interest of the beneficiary.
15. Care required from trustee
A truste is bound to deal with the trust-property as carefully as a man of ordinary prudence would deal with such property if it were his own; and, in the absence of a contract to the contrary, a trustee so dealing is not responsible-for the loss, destruction or deterioration of the trust-property.
Illustrations
(a) A, living in Calcutta, is a trustee for B, living in Bombay. A remits trust-funds to B by bills drawn by a person of undoubted credit in favour of die trustee as such, and payable at Bombay. The bills are dishonoured. A is not bound to make good the loss.
(b) A, a trustee of leasehold property, directs the tenant to pay the rents on account of the trust to a banker B, then in credit. The rents are accordingly paid to B, and A leaves the money with B, and A leaves the money with B, only till wanted. Before the money is drawn out. B becomes insolvent. A, having had not reason to believe that B was in insolvent circumstances, is not bound to make good the loss.
(c) A, a trustee of two debts for B, releases one and compounds the other, in good faith and reasonably believing that it is for B’s interest to do so. A is not bound to make good any loss caused thereby to B.
(d) A, a trustee directed to sell the trust-property by auction, sells the same but does not advertise the sale and otherwise fail in reasonable dilligence in inviting competition. A is bound to make good the loss caused thereby to the beneficiary.
(e) A, a trustee for B, in execution of his trust, sells the trust-property, but for want of the due diligence on his part fails to receive part of the purchase-money. A is bound to make good the loss thereby caused to B.
(f) A, a trustee for B of a policy of insurance, has funds in hand for payment of the premiums. A neglects to pay the premiums, and the policy is consequently forfeiled. A is bound to make good the loss to B.
(g) A bequeaths certain moneys to B and C as trustees, and authorizes them to continue trust-moneys upon the personal security of a certain firm in which A had himself invested them. A dies, and a change takes place in the firm. B and C must not permit the moneys to remain upon tile personal security of tile new firm.
(h) A, a trustee for B, allows tile trust to be executed soley by his co-trustee, C. C misapplies the trust-property. A is personally answerable to the loss resulting to B.
16. Conversion of perishable property
Where the trust is created for the benefit of several persons in succession, and the trust-property is of a wasting nature or a future or reversionary interest, the trustee is bound unless all intention to the contrary may be inferred from the instrument of trust, to convert the property into property of a permanent and immediately profitable character. –
Illustration
(a) A bequeaths to B all his property in trust for C during his life, and on his death for D, and oil D’s death for E. A’s property consists of three leasehold houses and there is nothing in A’s will to show that he intended the houses to be enjoyed in specie. B should sell the houses, and invest the proceeds in accordance with Section 20.
(b) A bequeaths to B his three leasehold houses in Calcutta and all the furniture therein in trust for C during his life, and on his death for D, and on D’s death for E. Here anlintention that the houses and furniture should be enjoyed in specie appears clearly, and B should not sell them.
17. Trustee to be impartial
Where there ire more beneficiaries than one, die trustee is bound to be impartial, and trust not execute the trust for the advantage of one at the expense of another.
Where the trustee has a discretionary power, nothing in this section shall be deemed to authorize the Court to control the exercise reasonably and in good faith of such discretion.
Illustration
A, a trustee for B, C and D is empowered to choose between several specified anodes of investing the trust-property A in good faith chooses one of these modes. The Court will not interfere, although the result of tile choice may be to vary the relative rights of B. C and D.
18. Trustee to prevent waste
Where the trust is created for the benefit of several persons in succession and one of them is in possession of the trust-property, if he commits, or threatens to commit, any act, which is destructive, or permanently injurious thereto, the trustee is bound to take measures to prevent such act.
19. Accounts and information
A trustee is bound (a) to keep clear and accurate accounts of the trust-property, and (b) at all reasonable times, at the request of the beneficiary, to furnish him with fill and accurate information as to the amount and state of the trust-property.
20. Investment of trust-money
Where the trust-property consists of money and cannot by applied immediately or at all early date to the purposes of the trust, the trustee is bound (subject to any direction contained in the instrument of trust) to invest the money on the following securities, and on no others:
(a) In promissory notes, debentures, stock or other securities of any State Government or of the Central Government or of the United Kingdom of Great Britain and Ireland:
Provided that securities, both the principal whereof and the interest whereon shall have been fully and unconditionally guaranteed by any such Government shall be deemed, for the purposes of this clause, to be securities of such Government.
(b) In bonds, debentures and annuities charged or secured by the Parliament of the United Kingdom before the fifteenth day of August, 1947 on the revenues of India or of the Governor General in Council or of any Province:
Provided that, after the fifteenth day of February, 1916, no money shall be invested in any such annuity being a terminable annuity unless a sinking fund has been established in connection with such annuity; but nothing in this proviso shall apply to investments made before the date aforesaid:
(bb) In India three and a half percent stock, India three per cent stock, India two and a half per cent stock or any other capital stock, which before the 15th day of August, 1947, was issued by the Secretary of State for India in Council under the authority of an Act of Parliament of the United Kingdom and charged on the revenues of India or which was issued by the Secretary of State on behalf of the Governor-General in Council under the provisions of Part XIII of the Government of India Act, 1935;
(c) In stock or debentures of, or shares in, Railway or other Companies the interest whereon shall have been guaranteed by the Secretary of State for India in Council or by the Central Government or in debentures of the Bombay Provincial Co-operative Bank Limited, the interest whereon shall have been guaranteed, by the Secretary of State for India in Council or the State Government of Bombay;
(d) In debentures or other securities for money issued under the authority of any Central Act or Provincial Act or State Act, by or on behalf of any municipal body, port trust or city improvement trust in any Presidency-town, or in Rangoon Town, or by or on behalf of the trustees of the port of Karachi:
Provided that after the 31st day of March, 1948, no money shall he invested in any securities issued by or on behalf of a municipal body, port trust or city improvement trust in Rangoon Town, or by or on behalf of the trustees of the port of Karachi;
(e) On a first mortgage of immovable property situate in any part of the territories to which this Act extends: provided that the property is not a leasehold for a term of years and that the value of the property exceeds by one-third, or, if consisting of buildings, exceeds by one-half, the mortgage money 1[* * * *] 2[(ee) in units issued by the Unit Trust of India under any unit scheme made under Section 21 of the Unit Trust of India Act, 1963; or]
(f) On any other security expressly authorized by the instrument of trust, [or by the Central Government by notification in the official gazette,] or by any rule which the High Court may from time to time prescribed in this behalf:
Provided that, where there is a person competent to contract and entitled in possession to receive the income of the trust-property for his life, or for any greater estate, no investment on any security mentioned or referred to in clauses (d), (e) and (f) shall be made without his consent in writing.
1. Certain words omitted by Act No. 16 of 1975.
2. Inserted by Act No. 16 of 1975.
20-A. Power to purchase redeemable stock at a premium
(1) A trustee may invest in any of the securities mentioned or referred to in Section 20, notwithstanding that -the same may be redeemable and that the price exceeds the redemption value:
Provided that a trustee may not purchase at a price exceeding its redemption value any security mentioned or referred to in clauses (c) and (d) of Section 20 which is liable to be redeemed within fifteen years of the date of purchase at par or at some other fixed rate, or purchase any such security as it mentioned or referred to in the said clause which is liable to be redeemed at par or at some other fixed rate at a price exceeding fifteen per centum above par or such other fixed rate.
(2) A trustee may retain until redemption any redeemable stock, fund or security which may have been purchased in accordance with this section.
21. Mortgage of land pledged to Government under Act 26 of 1871
Deposit in Government Savings Bank. -Nothing in Section 20 shall apply to investments made before this Act comes into force, or shall be deemed to preclude an investment on a mortgage of immovable property already pledged as security for an advance under the Land Improvement Act, 1871 or, in case the trust-money does not exceed three thousand rupees, a deposit thereof in a Government Savings Bank.
22. Sale by trustee directed to sell within specified time
Where a trustee directed to sell within a specified time extends such time, the burden of proving, as between himself and the beneficiary, that the latter is not prejudiced by the extension lies upon the trustee, unless the extension has been authorized by a, principal Civil Court of original jurisdiction.
Illustration
A bequeaths property to B, directing him with all convenient speed and within five years to sell it, and apply the proceeds for the benefit of C. In the exercise of reasonable discretion, B postpones the sale for six years. The sale is not thereby rendered invalid, but C, alleging that he has been injured by the postponement, institutes a suit against B to obtain compensation. In such suit the burden of proving that C has not been injured lies on B.
23. Liability for breach of trust
Where the trustee commits a breach of trust, he is liable to make good the loss which the trust-property or the beneficiary has thereby sustained, unless the beneficiary has by fraud induced the trustee to commit the breach, or the beneficiary, being competent to contract, has himself, without coercion or undue influence having been brought to bear to him, concurred in the breach, or subsequently acquiesced therein, with full knowledge of facts of the case and of his rights as against the trustee.
A trustee committing a breach of trust is not liable to pay interest except in the following cases:
(a) Where he has actually received interest;
(b) Where the breach consists in unreasonable delay in paying trust-money to the beneficiary;
(c) Where the trustee ought to have received interest, but has not done so;
(d) Where he may be fairly presumed to have received interest.
He is liable, in case (a), to account for the interest actually received, and, in cases (b), (c) and (d), to account for simple interest at the rate of six per cent per annum, unless the Court otherwise directs.
(e) Where the breach consists in failure to invest trust-money and to accumulate the interest or dividends thereon, he is liable to account for Compound interest (with half-yearly rests) at the same rate;
(f) Where the breach consists in the employment of trust- property or the proceeds thereof in trade or business, he is liable to account, at the option of the beneficiary, either for compound interest (with half-yearly rests) at the same rate, or for the net profits made by such employment.
Illustrations
(a) A trustee improperly leaves trust-property outstanding, and it is consequently lost: he is liable to make good the property lost, but he is not liable to pay interest thereon.
(b) A bequeaths a house to B in trust to sell it and pay the proceeds to C. B neglects to sell the house for a great length of time, whereby the house is deteriorated and its market price falls. B is answerable to C for the loss.
(c) A trustee is guilty of unreasonable delay in investing trust-money in accordance with Section 20, or in paying it to the beneficiary. The trustee is liable to pay interest thereon for the period of the delay.
(d) The duty of the trustee is to invest trust-money in any of the securities mentioned in Section 20, clause (a), (b), (c) or (d). Instead of so doing, he retains the money in his hands. He is liable, at the option of the beneficiary, to be charged either with the amount of the principal money and interest, or with the amount of such securities as lie might have purchased with the trust-money when the investment should have been made, and the intermediate dividends and interest thereon.
(e) The instrument of trust directs the trustee to invest trust-money either in any of such securities or on mortgage of immovable property. The trustee does neither. He is liable for the principal money and interest.
(f) The instrument of trust directs the trustee to invest trust-money in any of such.
24. No set-off allowed to trustee
A trustee who is liable for a loss occasioned by a breach of trust in respect of one portion of the trust property cannot set off against his liability again which has accrued to another portion of the trust-property through another and distinct breach of trust.
25. Non-liability for predecessor’s default
Where a trustee succeeds another, he is not, as such, liable for the acts or defaults of his predecessor.
26. Non-liability for co-trustee’s default
Subject to the provisions of Section 13, and 15, one trustee is not, as such, liable for a breach of trust committed by his co-trustee;
Provided that, in the absence of an express declaration to the contrary in the instrument of trust, a trustee is so liable –
(a) Where he has delivered trust-property to his co-trustee without seeing to its proper application;
(b) Where he allows his co-trustee to receive trust-property and fails to make due inquiry as to the co-trustee’s dealings therewith, or allows him to retain it longer then the circumstances of the case reasonably require;
(c) Where he becomes aware of a breach of trust committed or intended by his co-trustee, and either actively conceals it or does not within a reasonable time take proper steps to protect the beneficiary’s interest.
Joining in receipt for conformity – A co-trustee who joins in signing a receipt for trust-property and proves that he has not received the same is not answerable, by reason of such signature only, for loss or misapplication of the property by his co-trustee.
Illustration
A bequeaths certain property to B and C, and directs them to sell it and invest the proceeds for the benefit of D.B. and C accordingly sell the property, and the purchase money is received by B and retained in his hands. C pays no attention to the matter for two years and then calls on B to make the investment. B is unable to do so, becomes insolvent, and the purchase-money is lost. C may be compelled to make good the amount.
27. Several liabilities of co-trustees
Where Co-trustees jointly commit a breach of trust, or where one of them by his neglect enables the other to commit a breach of trust, each is liable to the beneficiary for the whole of the loss -occasioned by such breach.
Contribution as between co trustees. -But as between the trustees themselves, if one be less guilty than another and has had to refund the loss, the former may compel the latter, or his legal representative to the extent of the assets he has received, to make good such loss; and if all be equally guilty, any one or more of the trustees who has had to refund the loss may compel the others to contribute.
Nothing in this section shall be deemed to authorize a trustee who has been guilty of fraud to institute a suit to compel contribution.
28. Non-liability of trustee paying without notice of transfer by beneficiary
When any beneficiary’s interest becomes vested in another person, and the trustee, not having notice of the vesting, pays or delivers trust-property to the person who would have been entitled thereto in the absence of such vesting, the trustee is not liable for the property so paid or delivered.
29. Liability of trustee where beneficiary’s interest is forfeited to the Government
When the beneficiary’s interest is forfeited or awarded by legal adjudication to the Government, the trustee is bound to hold the trust-property to the extent of such interest for the benefit of such person in such manner as the State Government may direct in this behalf.
30. Indemnity of trustees
Subject to the provisions of the instrument of trust and of Sections 23 and 26, trustees shall be respectively chargeable only for such moneys, stocks, funds and securities as they respectively actually receive, and shall not be answerable the one for the other of them, nor for any banker or other person in whose hands any trust-property may be placed, nor for the insufficiency or deficiency of ally stocks, funds or securities, nor otherwise for involuntary losses.
Chapter IV – OF THE RIGHTS AND POWERS OF TRUSTEES
31.Right to title deed
Right to title deedA trustee is entitled to have in his possession the instrument of trust and all the documents of title (if any) relating solely to the trust-property.
32. Right to reimbursement of expenses
Every trustee may reimburse himself, or pay or discharge out of the trust-property, all expenses properly incurred in or about the execution of the trust, or the realization, preservation or benefit of the trust-property, or the protection or support of the beneficiary.
If he pays such expenses out of his own pocket he has a first charge upon the trust-property for such expenses and interest thereon; but such charge (unless the expenses have been incurred with the sanction of a principal Civil Court of original Jurisdiction) shall be enforced only by prohibiting any disposition of the trust-property without previous payment of such expenses and interest.
If the trust-property fail, the trustee is entitled to recover from the beneficiary personally on whose behalf he acted, and at whose request, expressed or implied, he made the payment, the amount of such expenses.
Right to be recouped for erroneous over-payment. -Where a trustee has by mistake made an over-payment to the beneficiary, he may reimburse the trust-property out of the beneficiary’s interest. If such interest fails, the trustee is entitled to recover from the beneficiary personally the amount of such over-payment.
33. Right to indemnity from gainer by breach of trust
A person other than a trustee who has gained an advantage from a breach of trust must indemnify the trustee to the extent of the amount actually received by such person under the breach; and where he is a beneficiary the trustee has a charge on his interest for such amount.
Nothing in this section shall be deemed to entitle a trustee to be indemnified who has in committing the breach of trust, been guilty of fraud.
34. Right to apply to Court for opinion in management of trust-property
Any trustee may, without instituting a suit, apply by petition to a principal Civil Court of original jurisdiction for its opinion, advice or direction on any present questions respecting the management or administration of the trust-property other than questions of detail, difficulty or importance, not proper in the opinion of the Court for summary disposal.
A copy of such petition shall be served upon, and the hearing thereof may be attended by, such of the persons interested in the application as the Court thinks fit.
The trustee stating in good faith the facts in such petition and acting upon the opinion, advice or direction given by the Court shall be deemed, so far as regards his own responsibility, to have discharged his duty as such trustee in the subject matter of the application.
The costs of every application under this section shall be in the discretion of the Court to which it is made.
35. Right to settlement of accounts
When the duties of a trustee, as such, are completed, he is entitled to have the accounts of his administration of the trust-property examined and settled; and, where nothing is due to the beneficiary under the trust, to an acknowledgement in writing to that effect.
36. General authority of trustee
In addition to the powers expressly conferred by this Act and by the instrument of trust, and subject to the restrictions, if any, contained in such instrument, an to the provisions of Section 17, a trustee may do all acts which are reasonable and proper for the realization, protection or benefit of the trust-property, and for the protection or support of a beneficiary who is not competent to contract.
Except with the permission of a principal Civil Court of original jurisdiction, no trustee shall lease trust-property for a term exceeding twenty-one years from the date of executing the lease, nor without reserving the best yearly rent that can be reasonably obtained.
37. Power to sell in lots, an either by public auction or private contract
Where the trustee is empowered to sell any trust-property, he may sell the same subject to prior charges or not, and either together or in losts, by public auction or private contract, and either at one time or at several times, unless the instrument of trust otherwise directs.
38. Power to sell under special conditions
Power to buy in and resell. -The trustee making any such sale may insert such reasonable stipulations either as to title or evidence of title, or otherwise, in any conditions of sale or contract for sale, as he thinks fit; and may also buy-in the property or any part thereof at any sale by auction, and rescind or vary any contract for sale, and resell the property so bought in, or as to which the contract is so rescinded, without being responsible to the beneficiary for any loss occasioned thereby. –
Time allowed for selling trust-property. -Where a trustee is directed to sell trust property or to invest trust-money in the purchase of property, he may exercise a reasonable discretion as to the time of effecting the sale or purchase
Illustration
(a) A bequeaths property to B, directing him to sell it with all convenient speed and pay the proceeds to C. This does not tender an immediate sale imperative.
(b) A bequeaths property to B, directing him to sell it at such time and in such manner as he shall think fit and invest the proceeds for the benefit of C. This does not authorize B, as between him and C, to postpone the sale to an indefinite period.
39. Power to convey
For the purpose of completing any such sale, the trustee shall have power to convey or otherwise dispose of the property sold in such manner as may be necessary.
40. Power to vary investments
A trustee may, at his discretion, call in any trust property invested in any security and invest the same on any of the securities mentioned or referred to in Section 20, and from time to time vary any such investments for others of the same nature: Provided that, where there is a person competent to contract and entitled at the time to receive the income of the trust-property for his life, or for any greater estate, no such change of investment shall be made without his consent in writing.
41. Power to apply property of minors, etc., for their maintenance, etc
Where any property is held by a trustee in trust for a minor, such trustee may, at his discretion, hay to the guardians (if any) of such minor, or otherwise apply for or towards his maintenance or education or advancement in life, or the reasonable expenses of his religious worship, marriage or funeral, the whole or any part of the income to which he may be entitled in respect of such property; and such trustee shall accumulate all the residue of such income by way of compound interest by investing the same and the resulting income thereof from time to time in any of the securities mentioned or referred to in Section 20, for the benefit of the person who shall ultimately become entitled to the property from which such accumulations have arisen:
Provided that such trustee may, at any time, if he thinks fit, apply the whole or any part of such accumulations as if the same were part of the income arising in the then current year. Where the income of the trust-property is insufficient for the minor’s maintenance or education or advancement in life, or the reasonable expenses of his religious worship, marriage or funeral, the trustee may, with the permission of a principal Civil Court of original jurisdiction, but not otherwise, apply the whole or any part of such property for or towards such maintenance, education, advancement or expenses.
Nothing in this section shall be deemed to affect the provisions of any local law for the time being in force relating to the persons and property minors.
42. Power to give receipts
Any trustee or trustees may give a receipt in writing for any money, securities or other movable property payable, transferable or deliverable to them or him by reason, or in exercise, of any trust or power; and, in the absence of fraud, such receipt shall discharge the person paying, transferring or delivering, the same therefrom, and from seeing to the application thereof, or being accountable for any loss or misapplication thereof.
43. Power to compound, etc
Two or more trustees acting together may, if and as they think fit, –
(a) Accept any composition or any security for any debt or for any property claimed;
(b) Allow any time for payment of any debt;
(c) Compromise, compound, abandon, submit to arbitration or otherwise settle any debt, account, claim or thing whatever relating to the trust; and
(d) For any of those purposes, enter into, give, execute and do such agreements, instruments of composition or arrangement, releases and other things as to them seem expedient, without being responsible for any loss occasioned by any act or thing so done by them in good faith.
The powers conferred by this section on two or more trustees acting together may be exercised by a sole acting trustee when by the instrument of trust, if any, a sole trustee is authorised to execute the trusts and powers thereof. This section applies only if and as far as a contrary intention is not expressed in the instrument of trust, if any, and shall have effect subject to the terms of that instrument and to the provisions therein contained.
This section applies only to trusts created after this Act comes into force.
44. Power to several trustees of whom one disclaims or dies
When an authority to deal with the trust-property is given to several trustees and one of them disclaims or dies, the authority may be exercised by the continuing trustees, unless from the terms of the instrument of trust it is apparent that the authority is to be exercised by a number in excess of the number of the remaining trustees.
45. Suspension of trustee’s powers by decree
Where a decree has been made in a suit for the execution of a trust. the trustee must not exercise any of his powers except in conformity with such decree, or with the sanction of the Court by which the decree has been made, or, where an appeal against the decree is pending, of the Appellate Court.
Chapter V – OF THE DISABILITIES OF TRUSTEES
46. Trustees cannot renounce after acceptance
A trustee who has accepted the trust cannot afterwards renounce it except (a) with the permission of a principal Civil Court of original jurisdiction, or (b) if the beneficiary is competent to contract, with his consent, or (c) by virtue of a special power in the instrument of trust.
47. Trustee cannot delegate
A trustee cannot delegate his office or any of his dudes either to a co-trustee or to a stranger, unless (a) the instrument of trust so provides, or (b) the delegation is in the regular course of business, or (c) the delegation is necessary, or (d) the beneficiary, being competent to contract, consents to the delegation.
Explanation
The appointment of an attorney or proxy to do an act merely ministerial and involving no independent discretion is not a delegation within the meaning of this section.
Illustrations
(a) A bequeaths certain property to B and C on certain trusts to be executed by them or the survior of them or the assigns of such survivor, B dies, C may bequeath the trust-property to D and E upon the trusts of A’s will.
(b) A is a trustee of certain property with power to sell the same A may employ an auctioneer to effect the sale.
(c) A bequeaths to B fifty houses let at monthly rents in trust to collect the rents and pay them to C. B may employ a proper person to collect these rents.
48. Co-trustees cannot act singly
When there are more trustees than one, all must join in the execution of the trust, except where the instrument of trust otherwise provides.
49. Control of discretionary power
Where a discretionary power conferred on a trustee is not exercised reasonably and in good faith, such power may be controlled by a principal Civil Court of original jurisdiction.
50. Trustee may not charge for services
In the absence of express directions to the contrary contained in the instrument of trust or of a contract to the contrary entered into with the beneficiary or the Court at the time of accepting the trust, a trustee has no right to remuneration for his trouble, skill and loss of time in executing the trust. Nothing in this section applies to any Official Trustee, Administrator General, Public Curator, or person holding a certificate of administration.
51. Trustee may not use trust-property for his own profit
A trustee may not use or deal with the trust-property for his own profit or for any other purpose unconnected with the trust.
52. Trustee for sale or his agent may not buy
No trust whose duty it is to sell trust-property, and no agent employed by such trustee for the purpose of the sale, may, directly or indirectly, buy the same or any interest therein, on his own account or as agent for a third person.
53. Trustee may not buy beneficiary’s interest without permission
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 mortgage or lessee of the trust-property or any party thereof; any such permission shall not be given unless the proposed purchase, mortgage or lease is manifestly for the advantage of the beneficiary.
Trustee for purchase – And no trustee whose duty it is to buy or to obtain a mortgage of lease of particular property for the beneficiary may buy it, or any part thereof, or obtain a mortgage or lease of it, or any part thereof, for himself.
54. Co-trustees may not lend to one of themselves
A trustee or co-trustee whose duty it is to invest trust-money on mortgage or personal security must not invest it on a mortgage by, or on the personal security of, himself or one of his co-trustees.
Chapter VI – OF THE RIGHTS AND LIABILITIES OF THE BENEFICIARY
55. Rights to rents and profits
The beneficiary has subject to the provisions of the instrument of trust, a right to the ‘rents and profits of the trust-property.
56. Right to specific execution
The beneficiary is entitled to have the intention of the author of the trust specifically executed to the extent of the beneficiary’s interest.
Right to transfer of possession. -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 bequeathed for the benefit of a married woman, so that she shall not have power to deprive herself of her beneficial interest, nothing in the second clause of this section applies to such property during her marriage.
Illustrations
(a) Certain Government securities are given to trustees upon trust to accumulate the interest until A attains the age of 24, and then to transfer the gross amount to him. A on attaining majority may, as the person exclusively interested in the trust-property, require the trustees to transfer it immediately to him.
(b) A bequeaths Rs. 10,000 to trustees upon trust to purchase an annuity for B, who has attained his majority and is otherwise competent to contract. B may claim the Rs. 10,000.
(c) A transfers certain property to B and directs him to sell or invest it for the benefit of C, who is competent to contract. C may elect to take the property in its original character.
57. Right to inspect and take copies of instrument of trust accounts, etc
The beneficiary has a right, as against the trustee and all persons claiming under him with notice of the trust, to inspect and take copies of the instrument of trust, the documents of title relating solely to the trust-property, the accounts of the trust-property and the vouchers (if any) by which they are supported, and the cases submitted and opinions taken by the trustee for his guidance in the discharge of his duty.
58. Right to transfer beneficial interest
The beneficiary, if competent to contract, may transfer his interest, but subject to the law for the time being in force as to the circumstances and extent in an to which he may dispose of such interest;
Provided that when property is transferred or bequeathed for the benefit of a married woman, so that she shall not have power to deprive herself of her beneficial interest, nothing in this section shall authorize her to transfer such interest during her marriage.
59. Right to sue for execution of trust
Where no trustees are appointed or all the trustees dies disclaim, or are discharged, or where for any other reason the execution of a trust by the trustee is or becomes impracticable, the beneficiary may institute a suit for the execution of the trust, and the trust shall, so far as may be possible, be executed by the Court until the appointment of a trustee or new trustee.
60. Right to proper trustees
The beneficiary has a right (subject to the provisions of the instrument of trust) that the trust-property shall be properly protected, held, and administered by proper persons and by a proper number of such persons.
Explanation I
The following are not proper persons within the meaning of this section:
A person domiciled abroad; an alien enemy; a person having an interest inconsistent with that of the beneficiary; a person in insolvent circumstances; and, unless the personal law of the beneficiary allows otherwise, a married woman and a minor.
Explanation II
When the administration of the trust involves the receipt and custody of money, the number of trustees should be two at least.
Illustrations
(a) A, one of several beneficiaries, proves that B, the trustee, has improperly disposed of part of 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.
(b) A bequeaths certain jewels to B in trust for C. B die- during A’s life-time; then A dies. C is entitled to have the property conveyed to a trustee for him.
(c) A conveys certain property to four trustees in trust for B. Three of the trustees die, B may institute a suit to have three new trustees appointed in the place of the deceased trustees.
(d) A conveys certain property to three trustees in trust for B. All the trustees disclaim B may institute a suit to have three trustees appointed in place of the trustees so disclaiming.
(e) A, a trustee for B, refuses to act, or goes to reside permanently out of India or is declared an insolvent, or compounds with his creditors, or suffers a co-trustee to commit a breach of trust. B may institute a suit to have A removed and a new trustee appointed in his room.
61. Right to compel to any act of duty
The beneficiary has a right that his trustee shall be compelled to perform any particular act of his duty as such, and restrained from committing any contemplated or probable breach of trust.
Illustration
(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 money in accordance with his contract. C may compel B on a proper indemnity to allow C to sue on the contract in B’s name.
(b) A is trustee of certain land, with a power to sell the same and pay the proceeds to B and C equally. A is about to make an improvident sale of the land. B may sue (in behalf of himself and C for an injunction to restrain A from making the sale.
62. Wrongful purchase by trustee
Where a trustee has wrongfully bought trust-property, the beneficiary has a right to have the property declared subject to the trust or retransferred by the trustee, if it remains in his hands unsold, or , if it has been bought from him by any person with notice of the trust, by such person. But in such case the beneficiary must repay the purchase-money paid by the trustee, with interest, and such other expenses (if any) as he has properly incurred in the preservation of the property; and the trustee or purchaser must (a) account for the net profits of the property, (b) be charged with an occupation-rent, if he has been in actual possession of the property, and (c) allow the beneficiary to deduct a proportionate part of the purchase-money if the property has been deteriorated by the acts or omission of the trustee or purchaser.
Noting in this section –
(a) Impairs the rights of lessees and others who, before the institution of a suit to have the property declared subject to the trust or retransferred, have contracted in good faith with the trustee or purchaser; or
(b) Entitles the beneficiary to have the property declared subject to the trust or retransferred where he, being competent to contract, has himself, without coercion or undue influence having been brought to bear on him, ratified the sale to the trustee with full knowledge of the facts of the case and of his rights as against the trustee.
63. Following trust-property-into the hands of third persons; into that into which it has been converted
Where trust-property comes into the hands of a third person inconsistently with the trust, the beneficiary may require him to admit formally, or may institute a suit for a declaration, that the property is comprised in the trust.
Where the trustee has disposed of trust-property and the money or other property which he has received therefor can be traced in his hands, or the hands of his legal representative or legatee, the beneficiary has, in respect thereof, rights as nearly as may be the same as his rights in respect of the original trust-property.
Illustrations
(a) A, a trustee for B of Rs. 10,000, wrongfully invests Rs. 10, 000 in the purchase of certain land. B is entitles 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 tile land for the amount of the trust money so misemployed.
64. Saving of rights of certain transferees
Nothing in Section 63 entities the beneficiary to any right in respect of property in the hands of-
(a) A transferee in good faith for consideration without having notice of the trust, either when the purchase-money was paid, or when the conveyance was executed; or
(b) A transferee for consideration from such a transferee.
A judgment-creditor of the trustee attaching and purchasing trust-property as not a transferee for consideration within the meaning of this section.
Nothing in Section 63 applies to money currency notes and negotiable instruments in the hands of a bona fide holder to whom they have passed in circulation, or shall be deemed to affect the Indian Contract Act, 1872, Section 108, or the liability of a person to whom a debt or charge is transferred.
65. Acquisition by trustee of trust-property wrongfully converted
Where a trustee wrongfully sells or otherwise transfers trust-property and afterwards himself becomes the owner of the property, the property again becomes subject to the trust, notwithstanding any want of notice on the part of intervening transferees it) good faith for consideration.
66. Right in case of blended property
Where the trustee wrongfully mingles tile trust-property with his own, the beneficiary is entitled to a charge on the whole fund for the amount due to him.
67. Wrongful employment by partner-trustee of trust-property for partnership purposes
If a partner, being a trustee, wrongfully employs trust-property in the business or on the account of the partnership, no other partner is liable therefor in his personal capacity to the beneficiaries, unless he had notice of the breach of trust.
The partners having such notice are jointly and severally liable for the breach of trust.
Illustrations
(a) A and B are partners. A dies, having bequeathed all his property to B in trust for Z, and appointed B his sole executor. B, instead of winding up the affairs of tile partnership, retains all the assets in the business. Z may compel him, as partner, to account for so much of tile profits as are derived from A’s share of the capital. B is also answerable to Z for the improper employments of A’s assents.
(b) A, a trader, bequeaths his property to B in trust for appoints B his sole executor and dies. B enters into partnership with X and Y in die same trade and employs A’s assents in the partnership business. B given an indemnity to X and Y against the claim,,; of C. Here X and I’ are jointly liable with B to C as having knowingly become parties to the breach of trust committed by B.
68. Liability of beneficiary joining in breach of trust
Where one of several beneficiaries. –
(a) Joins in committing breach of trust, or
(b) Knowingly obtains any advantage therefrom, without the consent of the other beneficiaries, or
(c) Becomes aware of a breach of trust committed or intended to be committed, and either actually conceals it, or does not within a reasonable time take proper steps to protect the interests of the other beneficiaries, or
(d) Has deceived the trustee and thereby induced him to commit a breach of trust, the other beneficiaries are entitled to have all his beneficial interest impounded as against him and all two claim under him (otherwise than as transferees for consideration without notice of the breach) until the loss caused by the breach has been compensated.
When property has been transferred or bequeathed for the benefit of a married woman, so that she shall not have power to deprive herself of her beneficial interest, nothing in this section applies to such property during her marriage.
69. Rights and liabilities of beneficiary’s transferee
Every person to whom a beneficiary transfers his interest has the rights, and is subject to the liabilities, of the beneficiary in respect of such interest at the date of the transfer.
Chapter VII – OF VACATING THE OFFICE OF TRUSTEE
70. Office how vacated
The office of a trustee is vacated by his death or by his discharge from his office.
71. Discharge of trustee
The trustee may be discharged from his office only as follows:
(a) By the extinction of the trust;
(b) By the completion of his duties under the trust;
(c) By such means as may be prescribed by the instrument of trust;
(d) By appointment under this Act of a new trustee in his place;
(e) By consent of himself and the beneficiary, or, where there are more beneficiaries than one, all the beneficiaries being competent to contract; or
(f) By the Court to which a petition for his discharge is presented under this Act.
72. Petition to be discharged from trust
Notwithstanding the provisions of Section 11, every trustee may apply by petition to a principal Civil Court of original jurisdiction to be discharged from his office; and if the Court finds that there is sufficient reason for such discharge, it may discharge him accordingly, and direct his costs to be paid out of the trust-property. But where there is no such reason, the Court shall not discharge him, unless a proper person can be found to take his place.
73. Appointment of new trustees on death, etc
Whenever any person appointed a trustee disclaims, or any trustee, either original or substituted, dies, or is for a continuous period of six months absent from 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 wid 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 legd representative of the last surviving and continuing trustee, or (with the consent of the Court) the retiring trustees, if they all retire simultaneously, or (with the like consent) the last retiring trustee.
Every such appointment shall be by writing under the hand of the person making it.
On an appointment of a new trustee the number of trustees may be increased. The Official Trustee may, with his consent and by die order of the Court, be appointed under this section, in any case, in which only one trustee is to be appointed and such trustee is to be the sole trustee.
The provisions of this section relative to a trustee who is dead include the case of person nominated trustee in a will but dying before the testator, and those relative to continuing trustee include a refusing or retiring trustee if willing to act in the execution of the power.
74. Appointment by Court
Whenever any such vacancy or disqualification occurs and it is found impracticable to appoint a new trustee under Section 73, the beneficiary may, without instituting a suit, apply by petition to a principal Civil Court of original jurisdiction for the appointment of a trustee or a new trustee, and the Court may appoint a trustee or a new trustee accordingly.
Rule for selecting new trustees – In appointing new trustee, the Court shall have regard (a) to the wishes of the author of the trust as expressed in or to be inferred from the instrument of trust; (b) to the wishes of the person, if any, empowered to appoint new trustees; (c) to the question whether the appointment will promote or impede the execution of the trust; and (d) where there are more beneficiaries than one, to the interests of all such beneficiaries.
75. Vesting of trust-property in new trustees
Whenever any new trustee is appointed under Section 73 or Section 74, all the trust-property for the time being vested in the surviving or continuing trustees or trustee, or in the legal representative of any trustee, shall become vested in such new trustee, either solely or jointly with the surviving or continuing trustees or trustee as the case may require.
Power of new trustees – Every new trustee so appointed, and every trustee appointed by a Court either before or after the passing of this Act, shall have the same powers, authorities and discretions, and shall in all respects act, as if he had been originally nominated a trustee by the author of the trust.
76. Survival of trust
In the death or discharge of one of’ several co-trustees, the trust survives and the trust-property passes to the others, unless the instrument of trust expressly declares otherwise.
Chapter VIII – OF THE EXTINCTION OF TRUSTS
77. Trust how extinguished
A trust is extinguished-
(a) When its purpose is completely fulfilled; or
(b) When its purpose becomes unlawful; or
(c) When the fulfilment of its purpose becomes impossible by destruction of the trust-property or otherwise; or
(d) When the trust, being revocable, is expressly revoked.
78. Revocation of trust
A trust created by will any 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 consents
(b) Where the trust has been declared by non-testamentary instrument or by word of mouth- in exercise of a power of revocation expressly reserved to the author of the trust; or
(c) Where the trust is for the payment of the debts of the author of the trust, and has not been communicated to the creditors at the pleasure of the author of the trust.
Illustration
A conveys property to B in trust to sell the same and pay out of the proceeds the claims of A’s creditors. A reserves no power of revocation. If no communication has been made to the creditors, A may revoke the trust. But if the creditors are parties to the arrangement, the trust cannot be revoked without their consent.
79. Revocation not to defeat what trustees have duly done
The author of the trust so as to defeat or prejudice what the trustees may have duly done in execution of the trust can revoke no trust.
Chapter IX – OF CERTAIN OBLIGATIONS IN THE NATURE OF TRUSTS
80. Where obligation in nature of trust is created
An obligation in the nature of a trust is created in the following cases.
81. Where it does not appear that transferor intended to dispose of beneficial interest
[Repealed by the Benami Transactions (Prohibition) Act, 1988 (45 of 1988)].
82. Transfer to one for consideration paid by another
[Repealed by the Benami Transactions (Prohibition) Act, 1988 (45 of 1988)].
83. Trust incapable of execution or executed without exhausting trust-property
Where a trust is incapable of being executed, or where the trust is completely executed without exhausting the trust-property, the trustee, in the absence of a direction to the contrary, must hold the trust property, or so much thereof as is unexhausted, for the benefit of the author of the trust or his legal representative.
Illustrations
(a) A conveys certain land to B. –
Upon trust”, and no trust declared; or
Upon trust to be thereafter declared”, and no such declaration is ever made; or upon trusts that are too vague to be executed; or
Upon trust that become incapable of taking effect; or
“In trust for C’, and C renounces his interest under the trust.
In each of these cases B holds the land for the benefit of A.
(b) A transfers Rs. 10,000 at the four per cent to B, in trusts to pay the interest annually accruing due to C for her life. A dies. Then C dies. B holds the fund for the benefit of A’s legal representative.
(c) A conveys land to B upon trust to sell it and apply one moiety of the proceeds for certain charitable purposes, and the other for the maintenance of the worship of an idol. B sells the land, but the charitable purposes wholly fail, and the maintenance of the worship does not exhaust the second moiety of the proceeds. B holds the first moiety and the part unapplied for the second moiety for the benefit of A or his legal representative.
(d) A bequest Rs. 10,000 to B, to be laid out, in buying land to be conveyed for purposes which either wholly or partially fail to take effect. B holds for the benefit of A’s legal representative the undisposed of interest in the money or land if purchased.
84. Transfer for illegal purpose
Where the owner of property transfers it to another for an illegal purpose and such purpose is not carried into execution, or the transferor is not as guilty as the transferee, or the effect of permitting the transferee to retain the property might be to defeat the provisions of any law, the transferee must hold the property for the benefit of the transferor.
85. Bequest for illegal purpose
Where a testator bequeaths certain property upon trust and the purpose of the trust appears on the face of the will to b unlawful, or during the testator’s lifetime the legatee agrees with him to apply the property for an unlawful purpose, the legatee must hold the property for the benefit of the testator’s legal representative.
Bequest of which revocation is prevented by coercion – Where property is bequeathed and the revocation of the bequest is prevented by coercion, the legatee must hold the property for the benefit of the testator’s legal representative.
86. Transfer pursuant to rescindable contract
Where property is transferred in pursuance of a contract which is liable to rescission or induced by fraud or mistake, the transferee must, on receiving notice to that effect, hold the property for the benefit of the transferor, subject to repayment by the latter of the consideration actually paid.
87. Debtor becoming creditor’s representative
Where a debtor becomes the executor or other legal representative of his creditor, he must hold the debt for the benefit of the persons interested therein.
88. Advantage gained by fiduciary
Where a trustee, executor, partner, agent, director of a company, legal advisor, or other person bound in a fiduciary character to protect the interests of another person, by availing himself of his character, gains for himself any pecuniary advantage, or where any person so bound enters into any dealings under circumstances in which his own interests are, or may be, adverse to those of such other person and thereby gains for himself a pecuniary advantage, he must hold for the benefit of such other person the advantage so gained.
Illustrations
(a) A, an executor, buys at an undervalue from B, a legatee, his claim under the will. B is ignorant of the value of the bequest. A must hold for the benefit of B the difference between the price and value.
(b) A, a trustee, uses the trust property for the purpose of his own business. A holds for tile benefit of his beneficiary the profits arising from such user.
(c) A, a trustee, retires from his trust in consideration of his successor paying a sum of money. A holds such money for the benefit of his beneficiary.
(d) A, a partner, buys land in his own name with funds belonging to the partnership. A holds such land for the benefit of the partnership.
(e) A, a partner, employed on behalf of himself and his co-partners is negotiating tile terms of a lease, clandestinely stipulates with the lessor for payment to himself of a lakh of rupees. A holds the lakh for the benefit of the partnership.
(f) A and B are partners. A dies. B, instead of winding up the affairs of the partnership, retains all the assets in the business. B must account to A’s legal representative for the profits arising from A’s share of the capital.
(g) A, an agent employed to obtain a lease for B, obtains the lease for himself. A holds the lease for the benefit of B.
(h) A, a guardian, buys up for himself encumbrances on his ward B’s estate at an undervalue. A holds for the benefit of B the encumbrances so bought, and can only charge him with what lie -has actually paid.
89. Advantage gained by exercise of undue influence
Where, by the exercise of undue influence, any advantage is gained in derogation of the interests of another, the person gaining such advantage without consideration, or with notice that such influence has been exercised, must hold the advantage for the benefit of the person, whose interests have been so prejudiced.
90. Advantage gained by qualified owner
Where a tenant for life, co-owner, mortgagee or other qualified owner of any property, by availing himself of his position as such, gains all advantage in derogation of the rights of the other persons interested in the property, or where any such owner, as representing all persons interested in such property, gains any advantage, he must hold, for the benefit of all persons so interested, the advantage so gained, but subject to repayment by such persons of their due share of the expenses properly incurred, and to all indemnity by the same persons against liabilities properly contracted, in gaining such advantage.
Illustrations
(a) A, the tenant for life of leasehold property, renews the lease in his own name and for his own benefit. A holds the renewed lease for the benefit of all those interested in the old lease.
(b) A village belongs to a Hindu family. A, one of its members, pays Nazrana to Government and thereby procures his name to be entered as the inamdar of the village. A holds the village for the benefit of himself and the other members.
(c) A mortgages land to B, who enters into possession. B allows the Government revenue to fall into arrear with a view to the land being put up for sale and his becoming himself the purchaser of it. The land is accordingly sold to B. Subject to the repayment of the amount clue on the mortgage and of his expenses properly incurred as mortgagee, B holds the land for the benefit of A.
91. Property acquired with notice of existing contract
Where a person acquires property with notice that another person has entered into all existing contract affecting that property, of which specific performance could be enforced, the former must hold the property for the benefit of the latter to the extent necessary to give effect to the contract.
92. Purchase by person contracting to buy property to be held on trust
Where a person contracts to buy property to be held on trust for certain beneficiaries and buys the property accordingly, he must hold the property for their benefit to the extent necessary to give effect to the contract.
93. Advantage secretly gained by one of several compounding creditors
Where creditors compound the debts due to them, and one of such creditors, by a secret arrangement with the debtor, gains an undue advantage over his co-creditors, he must hold for the benefit of such creditors the advantage so gained.
94. Constructive trusts in cases not expressly provided for
[Repealed by the Benami Transactions (Prohibition) Act, 1988 (45 of 1988)].
95. Obligator’s duties, liabilities and disabilities
The person holding property in accordance with any of the preceding sections of this Chapter must, so far as may be, perform the same duties, and is subject so far as may be, to the same liabilities and disabilities, as if he were a trustee of the property for the person for whose benefit he holds it:
Provided that (a) where he rightfully cultivates the property or employs it in trade or business, he is entitled to reasonable remuneration for his trouble, skill and loss of time in such cultivation or employment; and (b) where he holds the property by virtue of a contract with a person for whose benefit he holds it or with any one through whom such person claims, he may, without the permission of the Court, buy or become lessee or mortgage of the property or any part thereof.
96. Saving of rights of bona fide purchasers
Nothing contained in this Chapter shall impair the rights of transferees in good faith for consideration, or create all obligations in evasion of any law for the time being in force.
STATUTE
THE SCHEDULE
(See Section 2)
STATUTE
Year and Chapter Short title Extent of repeal
29 Car.II, c.3 The Statute of Frauds… Sections 7,8,9,10 and 11
ACTS OF THE GOVERNOR-GENERAL IN COUNCIL
Number and year Short title Extent of repeal
XXVIII of 1866 The Trustees and Mortgagees Powers Act, 1866. Sections 2, 3, 4, 5, 32, 33, 34, 35, 36 and 37.
In Section 1[***] 43 the word “trustee” wherever it occurs; and in Section 43 the words “management or” and “the trust-property or”.
1 of 1877 The Specific Relief Act, 1877 In Section 12, the first Illustration.
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1. The Figure “39” and by implication the word “and”’ were omtted by the Amendment Act, 1891 (12 of 1891 ), S. 2 and Sch. I.
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