Law of Trusts
Frequently Asked Questions on Law of Trusts
Ans. Before tracing out the origin and development of trust, it is necessary to point out the importance of trust.
Importance of Trust - MAITLAND says 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. This perhaps forms the most distinctive achievement of English Lawyers. It seems to us almost essential to citilization, and yet there is nothing quite like it in Foreign Law."
According to Dr. Hanbury, "Trust is the very centre and kernal of equity."
According to STORY, "Trusts constitute a very important and comprehensive branch of equity jurisprudence. They have been applied to a great variety of cases, which never could have been in the contemplation of those who originally introduced them; but which nevertheless, are the natural attendants upon a refined and cultivated state of society, where wealth is widely diffused, and the necessities and conveniences of families, of commerce, and even of the ordinary business of human life, require that trusts should be established to exigencies of times to come."
Origin of Trust : - STORY in "Story's Equity Jurisprudence" has observed : - "It is in the highest degree probable that those trusts which are exclusively cognizable in courts of Equity, were in their origin derived from the Roman Law being very similar, in their nature to the "fidei-commissa of that law"
Pemeory has observed : -
The elementary notice of trusts like so many other doctrines of Equity, was harrowed from the Roman Law. Although it is plain that the conception of a "use" was borrowed from this "fidei Commission of the Roman Law and the English Chancellor followed on the footstep of Roman Magistrate yet beyond this mere elementory notion there is little resemblance between the two species of ownership."
In India - In India, "trust" in the strict sense in which it was used under English Law was unknown to Hindu as well as Mohammedan Law. But trusts in the wider sense of the word, where property is vested in some person or persons for the benefit of other persons were known to both Hindus and Mohammedan. STOCK in his speech on Trusts Bill in the Legislative Council in 1881 observed : "Trust created by an old man for his own maintenance and ulterior purposes, for a widow, for a daughter, step-daughter or daughter-in-law and her children, are of pretty frequent occurrence amongst the natives whether Hindus or Mohammedans."
In due course of time, the law on trusts became codified in India. The enactment on the subject was The Religious Endowments Act (XX of 1863), The Indian Trust Act (II of 1882), The Charitable Endowments Act (VI of 1890) and The Charitable and Religious Trusts Act (XIV of 1920). Here we will deal with Indian Trust Act (II of 1882).
Ans. What is a trust. - 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 a great elasticity and generally; as elastic, as general as contract. This perhaps forms the most distinctive achievement of English lawyers. It seems to us almost essential to civilization, and yet there is nothing quite like it in foreign law. (Maitland's Equity, 1949 Ed.p. 23).
Dr. Hanbury calls trust as the very centre and kernel of equity. (Modern Equity : H.G. Hanbury, 2nd Ed. p. 13). Story observes that trusts constitute a very important comprehensive branch of equity jurisprudence. They have been applied to a great variety of cases, which never could have been in the contemplation of those who originally introduced them, and yet which are the natural attendants upon a refined and cultivated state of society, where wealth is widely diffused and the necessities and conveniences of families of commerce and even of the ordinary business of human life, require that trusts should be established to exigencies of times to come. (Story's Equity Jurisprudence, 3rd Ed. pp. 394, 396).
The modern trust has been developed from the ancient English `use'. According to Maitland, the term is derived from the Latin Opus. Ad opus means `on his behalf'. In old French this became al oes, uses. In English mouths this becomes confused with `use'.
In the 13th century we find land being permanently held by one man to the use (ad opus) of another man. The community of monks, whose religious order prescribed the most perfect poverty, adopted the device of having land conveyed to borough community to the use of the friars.
In the 14th century the landowner conveyed his land to his friends ad opus sum. This was done with a view to make a will, or to convey land by a man to himself or to his wife, the profits to be utilised by him for his life, and after death to be utilised by his friends, wife or persons according to his direction. According to Prof. Keeton "A Trust is the relationship which arises wherever a person called the `trustee' is compelled in Equity to hold property whether real or personal, whether by legal or equitable title, for the benefit of some persons or for some object permitted by law, in such a way that the real benefit of the property accrues, not to trustee but to the beneficiaries or other objects of trust."
As per Halsbury "A Trust in the modern and confined sense of the word is a confidence reposed in a person with respect to property of which he has possession or over which he can exercise a power to the intent that he may hold the property or exercise the power for the benefit of some other person or object."
Section 3 of Indian Trusts Act, defines it as -
"Trust is an obligation annexed to the ownership of property and arising out of 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."
Requisites of a valid trust - Lord Coke. - A trust may be said to be a confidence reposed in some other, not issuing out of the land, but as a thing collateral annexed in privity to the estate of the land, and to the person touching the land for which cestui que trust has no remedy but by subpoena in the Chancery." Hibert. - A trust may be seen from three points of view :1. From the point of view of the settlor it is a confidence reposed by the settlor in another, viz., trustee ;
2. From the point of view of the trustee it is an equitable obligation on the trustee to use his ownership for the benefit of another, viz., the beneficiary;
3. From the point of view of the beneficiary or the cestui que trust, it is the equitable beneficial ownership of property of which another (viz., the trustee) has the bare ownership.
Section 3 of the Indian Trust Act further defines the following expressions :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 is the person for whose benefit the confidence is accepted by the trustee. Snell calls the trustee nominal and the cestui que trust the beneficial owner of the property.
Ans. Classification of Trusts : - There are various kinds of trusts. Hanbury divides trusts into -
(i) Simple and special;
(ii) Express and constructive;
(iii) Private and Charitable; and
(iv) Executed and executory;
Snell divides trusts as under :(i) Express, implied and constructive;
(ii) Private and public;
(iii) Perfect and imperfect obligation;
(iv) Simple and special;
(v) Executed and executory; and
(vi) Completely and incompletely constituted.
Trusts may also be classified from the following different points of view: (1) Classifications of trusts according to the nature of duties of trustees - According to the nature of duties of the trustees, trusts may be classified as under :(a) Simple trust
(b) Special trust
(a) Simple trust - A simple trust is a trust where the trustee is only a custodian of the trust property with no active duties to perform. In such kind of trust the Cestui que trust has a right to be put into possession of the property and to call upon the trustee to execute the conveyance of the legal estate as he directs. In the words of Lewin "A simple trust is where property is vested in one person upon trust for another, and the nature of trust, not being prescribed by the settler is left to the construction of law. The Cestui que trust has the right to be put into actual possession of the property and the right to call the trustee to execute conveyance of the legal estate as Cestui que trust directs." (b) Special trust - A special trust can be defined as one where the trustee has to execute some purpose particularly pointed out by the settlor and the trustee is not, as in case simple trust, mere depository of trust property. According to Snell, "Such trusts may be either ministerial or discretionary, the former merely requiring the application of ordinary intelligence and business aptitude by the trustee, the latter calling for a greater element of judgment and discretion as where it lies with the trustee to determine how much of the income of the trust property is to be repaid to each beneficiary." In short, in case of special trust, the duties of the trustees are not left to be determined by the beneficiary but are specifically laid down by the settlor. (2) Classification of trusts according to their objects - According to the objects of trusts may be divided as under :(a) Private trust,
(b) Public or Charitable trust.
(a) Private trust - A trust which is for the benefit of an individual or class of individuals is known as private trust. For example a trust for the benefit of X or for the benefit of the sons and grand sons of X alive on a particular date, is a "Private trust". (b) Public or Charitable trust - A Public or Charitable trust may be defined as one which is for the benefit of public at large or some considerable portion of the public answering a particular description. As held in Verge v. Somerville, (1924) AC 496 it is a trust for the benefit of the community or of an appreciably important class of community. For example a trust for the advancement of education irrespective of caste or creed is a public trust. (3) Classification of trusts according to the mode of their creation - According to the mode of creation of trusts, trusts may be classified as under :(a) Express or declared trust;
(b) Implied or presumed trust;
(c) Constructive trust;
(d) Resulting trust;
(e) Precatory trust; and
(f) Secret trust.
(a) Express Trust. - An express trust is a trust created expressly by the settlor by words or by deed or will, i.e. 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 my be sub-divided into (a) executed trust and (b) an executory trust.(i) Executed Trust. - A trust is executed when no further instrument is necessary and the trust is finally declared in the first instance, i.e. money is vested in trustees on trust for A for life and after his death for B absolutely.
(ii) Executory 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, e.g. A promise in writing to settle certain property upon trust for the benefit of B.
(b) Implied Trust. - An implied, presumed or presumptive trust is a trust arising from the presumed intention of the parties. The words of the settlor are not expressed but his presumed intention can be inferred. In other words, there is no expression of wish to create a trust, but the circumstances are such that court presumes that the settlor intended to create a trust. A purchases land and gets it conveyed not to himself but B. B would prima facie hold the land as a trustee for A. A purchase or conveyance in the name of a third person creates an implied trust. (c) Constructive Trust. - 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 own name of a lease held by him as trustee. (Snell). (d) Resulting trust. - 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 trusts are implied trusts, but all implied trusts are not necessarily resulting trusts. Thus when there is a surplus trust money after the trust has been performed, there is, if the trust is a private trust, a resulting trust of that surplus for the benefit of the donor. It is settled law that if there is a total or partial failure of the object of the trust there is a resulting trust to that extent in favour of the settlor or his representatives. (e) Precatory Trust. - A precatory trust arises when words of wish, hope, desire or entreaty accompany a gift to the effect that the donee may dispose of the property in some particular way, which shows that a trust was intended. (f) Secret Trust. - A secret trust is a trust which, though intended to be created by the testatory, 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 and his death or his intention may only be made clear by a letter left for the legatee, after his death. It will therefore appear that a secret trust does not necessarily mean a trust of a clandestine nature or one suppressed from the world, but it merely signifies a trust which has not been disclosed on the face of the will. (4) Classification of Trusts according to consideration for the creation of Trust. - According to consideration the trusts may be classified as under :(a) Trust for value
(b) Voluntary trust.
(a) Trust for Value - A trust for value is one which is created in lieu of consideration moving from the beneficiary. In trust for value, the relations between the settlor and cestui que trust are contractual. For example A creates a trust in favour of Z if he marries Y, it is trust for value. (b) Voluntary Trust - A voluntary trust is one where no consideration proceeds from the beneficiary. They are just opposite of "trust for value". For example A creates a trust in favour of B because B has been a close friend of A. A creates a voluntary trust. (5) Trusts not covered by the above classification - There are few kinds of trusts also which are not covered by the classification given above, e.g. :(a) Trust of imperfect obligation or illusory trust;
(b) Completely and incompletely constituted trust; and
(c) Discretionary trust.
Ans. Essential Elements of Trust - According to Section 3 of the Indian Trusts Act, 1882, the following are regarded as essential elements of Trusts -
(i) The person creating the trust reposes confidence in the person in whom the ownership of the property is vested by him, with intent, that it is to be held for the benefit of a third person.
(ii) The relationship arises out of confidence reposed in the owner of the property and is with reference to the property that is vested.
(iii) The property so vested, may be utilised for the benefit of a third person or a third person and the owner e.g., beneficiary or Cestui quo trust.
Creation of valid trust - Section 6 of the Indian Trusts Act, provides that no valid trust is created unless 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.
According to Section 5 of the Indian Trusts Act, 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 of the trustee. Further, no trust in relation to immovable property is valid unless declared as aforesaid or unless the ownership of the property is transferred to the trustee. Section 7 of the Indian Trusts Act lays down that "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.
Section 8 of the Indian trusts Act provides that "the subject matter of a trust must be properly transferable to the beneficiary. It must not be merely beneficial interest under a subsisting trust." Section 4 of the Indian Trusts Act provides that "A trust may be created for any lawful purpose". The purpose of a trust is lawful unless it is -(a) forbidden by law; or
(b) fraudulent; or
(c) of such a nature that, if permitted, it would defeat the provisions of any law; 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.
Ans. Duties of Trustees - Duties of trustees have been nerated in Sections 11 to 22 of the Indian Trusts Act, which are as under:
(1) Trustees to execute trust - The trustee is bound to fulfil purpose of the trust, and to obey the directions of the trust given at the time of its creation except as modified by the consent of all the beneficiaries being competent to contract.
Where the beneficiary is incompetent to contract, his consent be given by a Principal Civil Court of Original Jurisdiction.
A trustees need not obey any direction when to do so would be impracticable, illegal, manifestly injurious to the beneficiaries.
Unless a contrary intention be expressed, for the purpose of a trust the payment of debts shall be deemed to be -
(a) to pay only the debts of the author of the trust existing and reasonable at the date of 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.
(2) To inform himself of state of Trust Property - A trustee is bound to acquaint himself, as soon as possible with the state and circumstances of the trust property; to obtain, where necessary a transfer of the trust-property to himself; and (subject the to provisions of the instrument of trust) to get in trust-moneys invested on insufficient or hazardous security. (a) The trust property is a debt outstanding on personal security. The instrument of trust gives the trustee no discretionary power to leave the debt so outstanding. The Trustee's duty is to recover the debt without unnecessary delay. (b) The trust property is money in the hands of one of two co-trustees. No discretionary power is given by the instrument of trust. The other co-trustee must not allow the former to retain the money for a longer period than the circumstances of the case required. (Section 12) (3) 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 and the assertion or protection of the title therein. The trust property is immovable property which has been given to the author of the trust by an unregistered instrument. Subject to the provisions of the Indian Registration Act 1877, the trustee's duty is to cause the instrument to be registered. (Section 13) (4) Trustee not to set up title adverse to beneficiary - There is a negative duty cast 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 beneficiaries. (Section 14) (5) To Exercise Reasonable Care : A trustee is bound to exercise reasonable care in regard to the trust property. He 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 trust property. (Section 15) (6) To convert 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 must convert the trust property into property of a permanent and immediate profitable character, unless a contrary intention is inferred from the instrument of trust. (Section 16) The principle was explained in Hinves v. Hinves, (3 Ha. 609), as under:".......Where personal estate given in terms amounting to a general residuary bequest to be enjoyed by persons in succession, the interpretation which the Court puts upon the bequest is that the persons indicated are to enjoy the same thing in succession; and in order to effectuate that intention, the Court as a general rule converts into permanent investments as much of the property as is of a wasting or perishable nature at the death of the testator, and also reversionary interests.
(7) Trustee to be impartial - Where there are more beneficiaries than one, the trustee is bound to be impartial, and must not execute the trust for the advantage of one at the expenses of another. A trustee is bound to be impartial in executing the trust and must not benefit one Cestui que trust at the expense of another. A, a trustee for B, C and D, is empowered to choose between several specified modes of investing the trust property. A in good faith chooses one of these modes. The Court will not interfere although the result of choice may be to vary the relative rights of B. (Section 17) (8) 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 acts. (Section 18) (9) To keep account and information - A trustee is bound to keep clear and accurate accounts to the trust-property and at all reasonable times, at the request of the beneficiary, to furnish him with full and accurate information as to the amount and state of the trust property.(Section 19) Therefore in Paugh v. Vanghan, it was held that it is the duty of the trustee to afford to their cestui que trust an accurate information of the disposition of the trust fund - all the information of which they are, or ought to be in possession, and to keep clear and distinct accounts of the property. A trustee is bound to give proper information as to the investment of the trust estate to his beneficiary or beneficiaries. (10) Investment of Trust Property-Money : - Where the trust money cannot be applied immediately or at any early date to the purpose 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; viz. in -(a) promisory 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;
(b) bonds, debentures;
(c) shares in Railways or other companies guaranteed by Government;
(d) on a first mortgage of immovable property situated in any part of India;
(e) on any other security expressly authorised by the instrument of trust, or by any rule which the High Court may from time to time prescribe in this behalf.
A trustee may invest in any of these securities, even if the same is redeemable and the price exceeds the redemption value. He may retain until redemption any redeemable stock, fund or security which he may have purchased as above. (Section 20)
Ans. Liabilities of Trustees under Indian Trust Act - The liabilities of a trustee have been enumerated from Sections 23 to 29 of Indian Trust Act, which are as follows -
(1) Liabilities 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 hear on him, concurred in breach or subsequently acquiesced therein, with full knowledge of the facts of the case and of his rights as against the trustee.
But Trustee committing breach of trust is not liable to pay interest except in following cases : -
(a) Where he has actually received interest;
(b) where the breach consists in unresonable 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 percent 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-year 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 opinion of the beneficiary, either for compound interest (with half-yearly rests) at the same rate, or for the net profits made by such employment. (Section 23)
(2) No Set off Allowed To Trustee : - A Trustee who is liable for a loss occasioned by breach of trust in respect of one portion of trust property cannot set off against his liability again which has occurred to another portion of trust property through another and distinct breach of trust. (3) Liability of trustee for breach of trust by co-trustees - (a) Liability for wrongful acts - A trustee is not liable for the wrongful acts of a co-trustee except - (1) where he hands over the trust property to his co-trustee without seeing to its proper application, (2) where he allows his co-trustee to receive trust property without making due enquiry as to his dealings with it, and (3) where he becomes aware of a breach of trust but abstains from taking the heedful steps to obtain restitution. (Section 26) (b) Several liability of co-trustee - 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. (Section 27) 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 to refund the loss may compel the others to contribute. Nothing, however, authorized a trustee who has been guilty of fraud to institute a suit to compel contribution. (4) Liability of trustee where beneficiary's interest is forfeited to Government - When the beneficiary's interest is forfeited or awarded by legal adjudication to 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 Government may direct in this behalf. (Section 29) (5) Liability for breach of duty - A trustee is liable for the loss if there is clear breach of duty in the employment and supervision of the agency. But if he invests in a security authorised by the instrument of trust, which ultimately fails, then he is not liable.
Ans. (a) Liability of trustee for breach committed by prior or subsequent Trustees - According to Section 25 of the Indian Trusts Act, a new trustee is not liable in respect of breaches of trust committed by his predecessors. Similarly a retiring trustee remains liable for breaches of trust committed by him before his retirement, unless duly released, but he is not liable for breaches committed by his successors unless he retired for the purpose of enabling a breach of trust to be committed.
(b) Is a trustee liable for the payment made by him, without notice of transfer by beneficiary ? - According to Section 28 of the Act, 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.
Ans. Rights of Trustees. - The following are the rights of a trustee as set out in the various Indian Trusts 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 (if any) relating solely to the trust property. (Section 31). This right is in continuation of the provision 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 trust, (ii) or the realisation, preservation or benefit of trust property, (iii) or 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 the 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 sanction of such expenses and interest.
(c) If the trust property fails, the trustee is entitled to recover from the beneficiary personally on whose behalf he acted, and 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 beneficiary's interest. If such interest fails, the trustee is entitled to recover from the beneficiary personally the amount of such over-payment.
A trustee who has, in committing the breach of trust, been himself guilty of fraud is disentitled from claiming indemnity.
Reimbursement for fees paid to counsel. - Section 32 of the Indian Trusts Act provides that a trustee may reimburse himself, or pay or discharge out of the trust property all expenses properly incurred in the management of the trust property. Accordingly he may be reimbursed for (1) fees paid to counsel and (2) travelling expenses, if properly incurred i.e., incurred in or about the execution of the trust, or the realisation, preservation or benefit of the trust property, or the protection or support of the beneficiary. It is not necessary that the instrument of trust should contain an express provision allowing the trustee to charge.
A trustee is not entitled to charge for legal work when he does himself. He can only get it if the instrument creating the trust expressly provides for it.
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).
A trustee has a right to indemnity from a person who has gained an advantage from a breach of trust to the extent of the amount actually received by such person under the breach, and where he is beneficiary the trustee has a charge on his interest for such amount. A trustee is disentitled from claiming indemnity in case he is guilty of fraud in committing the breach of trust.
4. Right to apply to court for opinion in management of trust-property. - Any trustee may, without instituting a suit, apply to by petition to the principal Civil Court of original jurisdiction for its opinion, advice or direction of any present questions respecting the management or administration of the trust property, other than questions of details, 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 regard 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. (Section 34).
Powers of Trustee
Besides the rights of the trustee which have been enumerated above, the Indian Trusts Act expressly lays down various powers of trustee to enable him to perform his duties such powers may be classified into -
(A) General Powers &
(B) Statutory Powers
(A) General Power of Trustee - Subject to restrictions (if any) contained in trust instrument and the provisions of Section 17, a trustee may do all acts which are reasonable and proper for realization, protection or benefit of trust property and for protection and support of beneficiary who is not competent to contract. (B) Statutory Powers of Trustees 1. Power To Sell Trust Property - Section 37 of Act say if the trustee is empowered to sell any trust property he has power to sell the same either together or in lots, by public auction or private contract. 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. A Trustee may also buy any property or any part thereof or rescind or vary any contract for sale and re-sell the property so bought (Section 38) 2. Power to Apply Property of Minors for their Maintenance : - Where any property is held by trustee in trust for 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 for expenses of worship, marriage or funeral, the whole or any part of the income to which he may be entitled in respect of such property. 3. Power to Give Receipts for Trust Property : - Any trustee or trustees may give a receipt in writting 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 in the transferring or delivering the same therefrom and from seeing to the application thereof or being accountable for any loss or misapplication thereof. (Section 42) 4. Power to Compound : - Two or more trustees acting together and (when instrument so allow single trustee have power-(a) to accept any composition or security for any debt or for any property claimed.
(b) to allow any time for payment of any debt.
5. Vesting of Power : - When an authority or power to deal with the trust property is given to several trustees and one of them disclaims or dies, authority may be exercised by continuing trustees unless from terms of instrument of trust it is apparent that it is to be exercised by particular number of trustees. (Section 44)
Ans. Disabilities of a Trustee - The disabilities of a trustee have been enumerated under Sections 46 to 54 of the Indian Trusts Act which are as under :
(1) Trustee cannot renounce after acceptance - A trustee who has accepted the trust by words or acts, cannot afterwards renounce it except -
(a) with the permission of the principle Civil Court of Original Jurisdiction; or
(b) if the beneficiary is competent to contract, with his consent; or
(c) by virtue of special power in the instrument of trust. [Section 16]
It has been held in Doyle v. Bloke, that it is a rule, without any exception, that a person who has once undertaken the office, either by actual or constructive acceptance cannot discharge himself from liability by subsequent renunciation. The only way in which a trustee can obtain a release from the office is - (a) by obtaining the discharge from the Court, (b) if all the cestui que trustment are competent to contract by obtaining their consent to his renunciation; or (c) by virtue of a special power in the instrument of trust. (2) Trustee cannot delegate his office - 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]
(3) Co-trustee 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) No right to remuneration - A trustee has no right to charge of services rendered or loss of time in executing the trust except -(a) where there is express direction in the instrument of the trust ; or
(b) there is a contract entered into with the beneficiary or
(c) where the Court at the time of accepting the trust has sanctioned it.
Therefore, as a general rule, a trustee is not entitled to any remuneration or charge for his trouble, skill and loss of time executing the trust. But this general rule has three exceptions where a trustee may ask for remuneration for his time and labour spent in execution of the trust, which are as under -(a) where there is express direction in the instrument of the trust; or
(b) There is a contract entered into with the beneficiary - Where beneficiary is competent to contract and the beneficiary has freely and without pressure or under influence assented to such stipulation; or
(c) where the Court at the time of accepting the trust has sanctioned it. (Section 50)
(6) Trustee may not use trust-property for his own profit - A trustee has no right to 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. And no trustee whose duty it is to buy or to obtain mortgage or lease of particular property for the beneficiary may buy it, or any part thereof, or obtain a mortgage or lease of it, or any part thereof, for himself. Therefore a general rule is that a trustee cannot in his private capacity purchase trust property or take lease or a mortgage of it from himself or his co-trustee even at a public auction. But this general rule has the following exceptions or in the following exceptional circumstances, a trustee may purchase the Trust property : -(a) If the trustee gives a fancy price; or
(b) When the offer of sale proceeds from the Cestui que trust and the trustee gives market price; keeping him at arm's length; or
(c) When the sale is by public auction and the trustee has leave of the Court; or
(d) When the trustee is only a leave trustee or has retired from the trust for a considerable time.
(9) Co-trustee may not lend to one of themselves - A trustee or Co-trustee, whose duty it is to invest trust money of mortgage personal security must not invest it on a mortgage by, or on the personal security of himself or one of his co-trustee. (Section 54)
Ans. Office of trustee how vacated - According to Section 70 of the Indian Trusts Act, the office of a trustee is vacated -
(i) by his death; or
(ii) by his discharge from his office.
Discharge of Trustee - According to Section 71 of the Indian Trusts Act, a trustee may be discharged from his office only as follows -(a) by the extinction of the trust;
(b) by the completion of his duties under the trust;
(c) by such means as may be prescribed by the instrument of trust;
(d) by appointment under the 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 the Act.
Petition to be discharged from Trustee - Notwithstanding the provisions of Section 11 (whereby the trustee is required to execute the trust), 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 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) It should be noted that Section 72 of the Indian Trusts Act enables a trustee to get himself relieved of his duties during the subsistence of the trust by making a petition to the principal Civil Court of Original Jurisdiction for his discharge from the office of the trustee. The District Judge cannot under Sections 71 and 72 of the Indian Trusts Act give a discharge to the trustee in the sense of a release from his liability to render account. When a trustee has ceased to be a trustee, by the fulfilment of the object of the trust, he is under a liability to render account to the beneficiaries and the District Judge has no jurisdiction to give him a discharge or release from such liability. Sections 71 and 72, therefore, when they authorise the District Judge to discharge a trustees to refer to a case in which a trustee wishes to go out of his office during the subsistence of the trusts when another person may be appointed in his place. This can only be done if there is a sufficient reason to do so. (Darshan Lal v. Dr. R.E.S. Dalliwall, 1952 A.L.J. 259). Appointment of new trustees on death etc. - Whenever any person appointed a trustee disclaims, or any trustee, either original or substituted, dies, 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 of trust (if any), or
(b) if there be no such person, or no such person able and willing to act, the author of the trust if he 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 consent of the Court) the retiring trustees, if they all retire simultaneously or (with like consent) the last retiring trustee.
Every such appointment shall deny 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 the order of the court, be appointed under this section, in any case in which only one trustee is to be appointed and such trustee is to be sole trustee. The provisions of this section relating to a trustee who is dead include the case of a person nominated trustee in a will but dying before the testator, and those relating to a continuing trustee include a refusing or retiring trustee if willing to act in the execution of the power (Section 73). New trustees can be appointed whenever any person appointed a trustee (i) disclaims, or (ii) any trustee, either original or substituted, dies, or (iii) is for a continuous period of six months, absent from India, or (iv) leaves India for the purpose of residing abroad, or, (v) is declared an insolvent, or (vi) desires to be discharged from the trust or (vii) refuses or (viii) 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. The power to appoint a new trustee vests in -(a) the person nominated for that purpose by the instrument of trust (if any), or
(b) if there be no such person, or no such person able and willing to act, the author of the trust, if he be alive and competent to contract, or
(c) the surviving or continuing trustees or trustee for the time being, or legal representative of the last surviving and 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.