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Indian Trusts Act, 1882

June 21st, 2017

Trust and trustees is a concurrent subject [Entry 10 of List III of Seventh Schedule to Constitution]. – – Thus, the Act will apply all over India except when specifically amended / altered by any State Government.

The Indian Trusts Act was passed in 1882 to define law relating to private trusts and trustees.

A trust is not a ‘legal person’. Property of trust is held in name of trustee for benefit of beneficiary.

What is a 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. [section 3 para 1]. The person who reposes the confidence is called ‘author of trust’ (testator), the person who accepts the confidence is called ‘trustee’ and the person for whose benefit the confidence is accepted is ‘beneficiary’. The subject matter of trust is called ‘trust property’ or ‘trust-money. The ‘beneficial interest’ or ‘interest of the beneficiary’ is his right against the trustee as the owner of trust-property. The instrument by which trust is declared is called as ‘instrument of trust’. [section 3 para 2].

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Thus, when a property is held by one person as trustee for the benefit of another, it can be regarded as a trust. Trusts are governed by Indian Trust Act, as may be modified by State Governments.

A trust can be created for any lawful purpose. [section 4]. A trust can be created by deed, will or even word of mouth. However, trust of immovable property can be created only by non-testamentary instrument signed by author of trust and is registered, or by will of author. [section 5].  Thus, ‘will’ is not required to be registered, even if it pertains to immovable property.

Duties of trustees – Trustee is not bound to accept the trust. [section 10].  However, once accepted, he cannot renounce it except permission of civil court or beneficiary (if he is major) or by virtue of special power in the instrument of trust. [section 46]. –  Once trustee accepts trust, he is bound to fulfil the purpose of trust and to obey directions given at the time of creation of the trust. It can be modified with consent of beneficiary. [section 11]. His duties are – * Inform himself of state of trust property (section12) * Protect title to trust property (section 13) * Not to set up title adverse to beneficiary (section 14) * Take care of property as a man of ordinary prudence would deal with such property as own property (section 15) Conversion of perishable property to permanent and immediately profitable character (section 16) * To be impartial (section 17) * To prevent waste (section 18) * Keep proper accounts and information (section 19) and * Invest trust-money in prescribed securities and not others (section 20). – – Trustee is liable for breach of trust. [section 23]. ‘Breach of trust’ means a breach of duty imposed on a trustee, as such, by any law for the time being in force. [section 3 para 3].

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Rights and Powers of trustee – Trustee has following powers – * Rights to title deed (section 31) * Right to reimbursement of expenses (section 32) * Right to indemnify from gainer by breach of trust (section 33) * Right to apply to court for opinion on management of trust property (section 34) * Right to settlement of accounts (section 35) * All acts necessary and reasonable and proper for trust property or protection of beneficiary (section 36). * Power to covey property when he is authorised to sell (section 39) * Power to vary investments (from one security to another (section 40) * Power to apply property of minors for their maintenance (section 41) * Power to give receipts (section 42) * Power to compound or compromise (section 43).

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Rights and liabilities of beneficiary – The beneficiary has * rights to rent and profits (section 55) * Right to specific execution of intention of author of trust (section 56) * Right to inspect and take copies of instrument of trust, accounts etc. (section 57) * Right to transfer beneficial interest (section 58) * Right to sue for execution of trust (section 59) * Right to proper trustees (section 60) * Right to compel trustee to perform an act of duty * Follow trust property into hands of third persson and into which it has been converted (section 63). – – A beneficiary is liable if he joins in breach of trust. [section 68].

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Revocation of trust – A trust created by will can be revoked at the pleasure of testator. A trust created otherwise by will can be revoked (a) by consent of all beneficiaries if they are competent to contract (b) In exercise of power of revocation expressly reserved by author of trust, if the trust has been declared by a non-testatory instrument or by word of mouth or (c) At pleasure of author of trust, if the trust is for payment of debts and the author of trust has not communicated to the creditors. [section 78].

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