UNIT-V

Trust-creation and kinds

• Definition of a Trust:
• As per section 3 of Indian Trust Act 1882: “A Trust is an obligation annexed to
the ownership of the property, and arising out of a confidence reposed in
and accepted by the owner, or declared and accepted by him, for the benefit
of another, or of another and the owner.”
• From a legal point of view, a trust can be said to be a kind of arrangement
including three parties, namely,

• The Author of the Trust – The person who creates the Trust.
• The Trustee – The person who accepts the responsibilities of the Trust.
• The Beneficiary – The person/persons for whose benefit the Trust is created.
• Purpose of creating a Trust:
• Trusts are generally formed or created to fulfill any or more of the following
objectives:
• For discharge of the charitable and/or religious sentiments of the author of settlor
of the trust, in a way that ensures public benefit;
• For claiming exemption from Income tax U/s 10 or 11, as the case may be, in
respect of incomes applied to charitable or religious purposes;
• For the welfare of the members of the family and/or other relatives, who are
dependent on the settlor of the trust;
• For the proper management and preservation of a property;
• For regulating the affairs of a provident fund, superannuation fund or gratuity
fund or any other fund constituted by a person for the welfare of its employees.
• Who can create a Trust:
• As per Section 7 of the Indian Trusts Act, a trust may be created by every
person competent to contract and by or on behalf a minor, with the
permission of a principal court of original jurisdiction. Following are eligible
to create a Trust.
• Trust by an Hindu Undivided Family;
• Trust by a Minor;
• Trust by a Woman;
• Association of Persons;
• Company.
• two types of trusts in India:
1.Private trusts and
2.Public trusts.
• Private Trust:
• A trust is called a Private Trust when it is constituted for the benefit of one or more individuals who are, or
within a given time may be, definitely ascertained. Private Trusts are governed by the Indian Trusts Act 1882. A
Private Trust may be created inter vivos or by will.

• Pre-requisites for creation of a Private Trust :

• Following are essential conditions to bring into being a valid Private Trust :
• The person who creates a trust (settlor) should make an unequivocal declaration binding on him.
• The objects of the trust must be defined and specified.
• The beneficiaries are specified.
• He must transfer an identifiable property under irrevocable arrangement and totally divest himself of the
ownership and the beneficial enjoyment of the income from the property.

• Unless all the above requisites are fulfilled, a trust cannot be said to have come into existence.
•
• Public Trust
• A trust is called as Public Trust when it is constituted wholly or mainly for the benefit
of Public at large, in other words beneficiaries in the Public trust constitute a body
which is incapable of ascertainment. The Public trusts are essentially charitable or
religious trusts and are governed by the general Law. The provisions of Indian Trusts
Act do not apply on Public Trusts. Like the private trusts, public trusts may be created
inter vivos or by will. The Indian Trusts Act does not apply to public trusts which can
be created by general law.

• Pre-requisites for creation of a Public Trust:

• There are three certainties required to create a charitable trust are as follows:
• a declaration of trust which is binding on settlor,
• setting apart definite property and the settlor depriving himself of the ownership
thereof, and
• a statement of the objects for which the property is thereafter to be held, i.e. the
beneficiaries.
• Registration of Trusts:
• As per section 5 of the Indian Trusts Act, a private Trust in relation to an immovable
property must be created by a non-testamentary instrument in writing, signed by the
author of the trust or the trustee and registered (under Section 17 of Indian
Registration Act). Thus, registration of a trust is necessary when it is declared by a non-
testamentary instrument.

• This registration would still be required, even if the instrument declaring the trust is
exempt from registration under the Indian Registration Act. In case of a Private Trust
declared by a will, registration will not be necessary, even if it involves an immovable
property. Registration will not be required, of a trust in relation to movable property. In
case of Public Trust, whether in relation to movable property or an immovable property
and whether created under a will or inter vivos, registration is optional but desirable.
• In case of Charitable or religious Trust in relation to an
immovable property, for claiming exemption u/s. 11 of the
I.T. Act 1961 it is essential that the instrument of trust is duly
registered.

Registration is always desirable even if it is not statutorily required.

Following are the advantages of a registered trust:
• It becomes an official document with support and law;
• Effectuates Transmutation of possession;
• Easy conveyance of trust-property to the Trustee;
• Advantages of a Trust:
• · A trust can be formed for Charitable/Religious purposes which enables
the settlor to discharge his sentiments for public benevolence,
amelioration of human suffering, advancement of knowledge etc., in a
regulated and proper way. From taxation point of view, a charitable or
religious trust enjoys several tax exemptions and benefits
• Donations to eligible charitable institutions are also deductible from
taxable income of the donor.
• A trust can also be formed for the welfare of family members and
relatives dependent upon the settlor. Besides, there is an ample scope of
tax planning through private /family trusts.
• The Institution of a trust enables the settlor to preserve his property
from division and transfer to outsiders.
• Number Of Trustee
• There is generally no requirement as to the number of trustees.
However, the Trustee Laws and Administration of Estates Law,
Western Nigeria provides in s. 22 that there shall be a maximum of 4
trustees in cases of trust for sale of land. This would not apply though
where the land is held for charitable, ecclesiastical or other public
purposes.
Alien can act as a trustee
An alien may be a trustee under English law. But in India the English law as to
aliens is not applicable. Alien enemies residing in (British) India with the
permission of the Governor General in Council and alien friends may sue in
courts of British India, as if they were subjects of Her Majesty. But it is not
competent to an alien enemy residing in British India , without such
permission or residing in a foreign country to sue in any of such courts.

Married Women can act as a trustee

A married women may be a trustee.

Infant can act as a trustee

As a life convict is capable of holding property ,it follows that does not require
the exercise of discretion and prudence. Thus an infant cannot exercise a
discretionary trust for sale for he is not competent to contract. It has also
been held that a minor is incompetent to be a trustee of a public trust.
• Convict can act as a trustee
As a life convict is capable of holding property ,it follows that he may
either be a trustee or a beneficiary.

Illegitimate can act as a trustee

In a decision of the Oudh Chief Court ,it was held that mere fact of the
illegitimacy of a person is not necessarily a disqualification for his being
appointed as a trustee ,when he is otherwise found to be fit.

Insolvent can act as a trustee

An insolvent is incapable of acting as a trustee. Firms who have been
adjudicated insolvents are no longer under the Act fit to be trustee. They
are liable to be removed from the office of trustee and fresh trustee
should be appointed.
 Appointment
Appointment of Trustees
As per Section 10 of the Indian Trusts Act, any person who is capable of holding
property can be appointed as a trustee. A person is deemed to have the capacity to
hold property, if such a person is capable of administering the property effectively
and efficiently with ordinary prudence.
Depending upon the nature of the trust, if trustee is required to play a passive role
without any scope of discretion, a minor may as well be appointed as trustee.
• Appointment by the settlor.
• Appointment under s 36 of the Trustee Act 1925.
• Appointment by the beneficiaries.
• Appointment by the court.
• By the settlor/testator
• The testator or settlor may appoint the trustees either expressly, by
naming the particular persons to be trustees or impliedly, by delivering
trust property to a person, on the understanding that they will hold the
property for the benefit of another. He may also appoint one person as
a trustee, with power to appoint additional trustees. If he intends to be
a trustee, he can also appoint himself by declaring a trust.
• Duties of Trustees:
• Trustee is not bound to accept the trust. 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. 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.
• Following are duties of trustee:

• Inform himself of state of trust property

• Protect title to trust property
• Not to set up title adverse to beneficiary
• Take care of property as a man of ordinary prudence would deal with such property
as own property
• Conversion of perishable property to permanent and immediately profitable
character
• To be impartial
• To prevent waste
• Keep proper accounts and information; and
• Invest trust-money in prescribed securities and not others
• Duties/Liabilities of a Trustee
• The Indian Trusts Act, 1882 provides for certain
duties/liabilities of a Trustee, we shall see each one of them in
brief detail.
• Execution of Trust
• The trustee is required to actually carry out the purpose of the
trust as laid out in the Trust deed. The trustee is also required
to follow the directions of the Author of the Trust at the time
of creation of the trust.
• However, the trustee is not required to follow such directions
if they are impractical or illegal.
• Acquaintance of Trust Property
• The trustee is required to know about the details,
whereabouts and current condition of the trust property
and also to take appropriate measures to secure the
trust property.
• Protection of Title of Trust Property
• The trustee is required to defend all the claims against
the title of the Trust property and to take adequate
measures to assert and protect the title of the property.
• Not to set up Title adverse to the beneficiary
• As the trustee is entrusted with the trust property to
maintain it for the benefit of the beneficiaries, it is expected
and required of the trustee to not set up any title adverse
to the beneficiary.
• A good example explaining this point would be, suppose the
trustee is entrusted with an immovable property and is
required to apply the rents and profits of such property for
the benefit of the beneficiaries. The trustee is also given the
rights to sell such property.
• Take care of the Trust Property
• The trustee is required to provide adequate safeguard and
required to apply such prudence to the trust property, as
that of an ordinary man would apply to his own property.
• However, the Act provides that the Trustee would not be
responsible for any loss caused to the trust property or the
benefits arising thereof, if he had applied such prudence as
would an ordinary man would apply to his own property.
• Convert perishable property
• If the trust property is of such nature, that with time, it
would keep on deteriorating and keep losing value, the
trustee is required to convert, i.e. sell and convert such
property into cash proceeds and apply such proceeds for the
benefits of the beneficiaries. This duty is especially required
of a trustee when the trust is created for the benefit of
several persons in succession.
• Be impartial among the beneficiaries
• When the trust is created for the benefit of several
beneficiaries, the trustee is required to apply the benefits
received from the trust property equally among the
beneficiaries, without being partial to anyone or any group
among the beneficiaries.
• Protect the trust property from adverse beneficiary
• When there are several beneficiaries of a trust, and one or
more of such beneficiaries commit, or threaten to commit an
act, which would be adverse to the interest of other
beneficiaries and the trust in general, the trustee is required
to take measures to stop such act of such
beneficiary/beneficiaries.
• To maintain and keep books and accounts
• The trustee is required to keep a clear and accurate account of
the trust property and at all times, provide the same to the
beneficiary upon the request of the beneficiary.
• Investment of Trust money
• The Act specifically provides that when the trust property
consists of money, and such money is not required to be
immediately applied for the benefit of the beneficiaries, the
trustee is required to invest such money in such instruments as
provided for in the Act. The Act provides for instruments such
as promissory notes and other securities of the Central
Government; in stock or debentures of the Railways or other
government companies; in Units issued by the Unit Trust of
India, etc.
a.Before registering a trust following steps are required to be
followed:
a. Name of the trust
b.Address of the trust
c.Objects of the trust (charitable or Religious)
d.One settler of the trust
e.Two trustees of the trust
f.Property of the trust-movable or immovable property (normally
a small amount of cash/cheque is given to be the initial property
of the trust, in order to save on the stamp duty).
• Powers/Rights of a Trustee
• Certain rights/powers are conferred upon the Trustee under the
Indian Trusts Act, 1882. They are discussed in detail in the
following paragraphs.
• Right to Title deed
• The trustee is entitled to possess the trust deed or any other
instrument by which the trust is created, and the title documents
of the trust property.
• Right to reimburse expenses incurred for trust purposes
• The trustee has the right to be reimbursed for the expenses
incurred by him for the purpose of the trust, like expenses
incurred for the execution of the trust, for the preservation of the
trust property, for the protection or support of the beneficiary,
etc.
• Right to re-collect overpayment
• If a trustee has mistakenly made a payment over and above
the required amount to a beneficiary, the trustee has the
right to collect such excess amount from the beneficiary.
Such collection might be made from the interest of the
beneficiary in the trust property, and if not possible, then
even from the beneficiary personally.
• Right to indemnity from breach of trust, by a gainer
• If a person has committed a breach of trust and has gained
from such breach, the trustee has the right to indemnify
himself against such gain by the person who has committed
such a breach.
• Right to seek Court’s opinion in managing trust
property
• The trustee has the right to apply to the Court, by way of a
petition, to seek the Court’s opinion, advice, opinion or
direction with regards to the management of the trust
property.
• Right to Settle accounts
• When the duties of a trustee are complete, the trustee is
entitled to have the accounts of the administration of the
trust property examined and settled, and when no benefit is
due to any beneficiary under the trust after the completion
of the trustee’s duties, the trustee is also entitled to receive
an acknowledgement to that effect.
• Right to sell trust property, along with power to
convey
• The trustee has the power to sell the trust property as per
the instructions laid out in the trust deed, and if no such
instructions are laid out, then by way of public auction or
private contract, in any way the trustee deems fit.
• Right to vary or rescind the sale of trust property, and
re-sell the same
• The trustee has the power to vary the conditions of the sale
of trust property or even rescind such sale. He also has the
power to re-sell the same property. If in such recession and
re-sale, if any loss occurs, the trustee is not liable for the
same.
• Power to manage investments
• The Trustee has the power to sell any existing investment of
the Trust property and invest the same into any other
instrument, as he deems fit.
• However, if there is a beneficiary who is competent to
contract, then such power cannot be exercised by the
trustee without such beneficiary’s consent in writing.
• Power to apply property of Trust for maintenance of
minor beneficiaries
• In case the beneficiary is a minor, the Trustee has the power
to apply, i.e. use the income for the Trust property for the
maintenance of the minor. Maintenance of the minor may
include functions such as food and clothing, Education,
Religious worship, marriage, funeral, etc.
• Power to compound
• This power may also be called as power to settle
disputes. When there is any dispute related to any of the
trust property, the trustees, when there are two or more
trustees appointed, or the sole trustee, may settle the
dispute in the manner they think fit. For example, they
may compromise, compound, abandon the dispute or
may even submit the dispute to arbitration. In the doing
of such settlement, the sole trustee or the trustees may
enter into any agreement, or instruments, as they deem
fit.
• Trustees to continue with trust if one of several
trustees dies or disclaims
• When there are two or more than two trustees appointed,
and one of them disclaims the trust or dies, the remaining
trustees shall have the power to deal with the trust
property, as provided in the Trust deed.
• However, such power would not be exercisable, if the Trust
deed specifically requires a specific number or more of
trustees to execute the authority provided for in the trust,
and after the death or disclaimer, such specific number is
not satisfied.
a.Requirement for registration of Trust Deed with the Local
Registrar under the Indian Trusts Act, 1882:
a. Trust Deed on stamp paper of requisite value
b.One passport size photograph & copy of the proof of identity of
the settler
c.One passport size photograph & copy of the proof of identity of
each of the two trustees.
d.One passport size photograph & copy of the proof of identity of
each of the two witnesses.
e.Signature of settler on all the pages of the Trust Deed
f.Witness by two persons on the Trust Deed.
• Beneficiaries-
• In trust law according to Section-9 of Indian Trust Act 1882 “Every person capable
of holding property may be a beneficiary. A proposed beneficiary may renounce his
interest under the trust by disclaimer addressed to the trustee, or by setting up,
with notice of the trust, a claim inconsistent therewith.
• A beneficiary is the person or persons who are entitled to the benefit of any trust
arrangement. A beneficiary will normally be a natural person, but it is perfectly
possible to have a company as the beneficiary of a trust, and this often happens in
sophisticated commercial transaction structures.
• With the exception of charitable trusts, and some specific anomalous non-
charitable purpose trusts, all trusts are required to have ascertainable beneficiaries.
• Generally speaking, there are no strictures as to who may be a beneficiary of a
trust; a beneficiary can be a minor, or under a mental disability (in fact many trusts
are created specifically for persons with those legal disadvantages). It is also
possible to have trusts for unborn children, although the trusts must vest within
the applicable perpetuity period
Categories of the Beneficiary of a Trust
• There are two basic Trusts with regards to the exercises of the Beneficiaries'
rights:

• 1. Beneficiaries of a Bare Trust (as known as a Simple Trust) is where the

Beneficiary is entitled to take actual ownership and control of the Trust and has
the right to the income and capital. The Trustees, in this case, act in accordance
with the Beneficiaries' wishes.
• 2. Beneficiaries of an Express Trust are Trusts where by the Trustee is given
additional duties and powers assigned in the Trust Deed. The Express Trust can
be either an Inter Vivos Trust, which is a Trust created during the life of the
Grantor, or the Express Trust can be a Testamentary Trust, which is a Trust
enacted after the death of the Grantor (as known as the Will Trust).
• As far as Trust is concerned, there are two main types of Beneficiaries:
• 1. Fixed Beneficiaries who simply have a fixed entitlement to the income and capital from the Grantor.
• 2. Discretionary Beneficiaries to whom the Trustees have discretionary and decision-making powers to the entitlements.

• The Crown
• According to the law of England the sovereign may be a cestui que trust, and similarly in India the Government may be a
beneficiary.

• Unborn Child
• An unborn child cannot be said to be a “a person capable of holding property” within the meaning of this section and is therefore
incapable of being a beneficiary.

• Corporation
• In England a trust of lands cannot be limited to a corporation without a “license from the crown”. But since the Mortmain Acts do
not apply to India , a corporation in India may be a censui que trust.

• Alien
• An alien also may be a cestui que trust.

• Settler and His wife

• A trust was created for the benefit of the settler and his wife. Subsequent to the trust the marriage was dissolved and the wife
remarried. It was held in that the wife forfeited the benefits under the trust.
• RIGHTS OF TRUST BENEFICIARY:
• The Indian Trust Act, 1882 confers certain rights on the part of the
beneficiary to obtain the interests-
• Right to rents and profits [S.55]- The trust beneficiary has the right to
receive all the rents and profits incurred by the trust property. This
provision makes an obligation on the part of the author or the trustee to
make sure that the interest is received by the beneficiary.
• Right to Specific Execution [S.56]- The beneficiary has the right to
receive all the information regarding the intention of the author and to what
extent their interest lies in the trust specifically executed for them.
Therefore, it makes mandatory on the part of the trustee to provide the
beneficiary with all the information.
• Right to Transfer of Possession [S.56]- The provision also makes an
obligation on the part of the trustees to transfer the trust property to the
beneficiary(s) or to such person as directed by the beneficiary(s).
• In case a trust is created for the benefit of a married woman so that she does
not deny the right of her beneficial interest, during her marriage the right of
the beneficiary to have the property transferred will not be available to her.
• Right to inspect and take copies of instrument of trust, accounts,
etc.[S.57]- The beneficiary is entitled to inquire about any documents
related to the trust property be it the trust deed, accounting of trust
property, or vouchers if any, and take copies of any such document. It
makes an obligation on the part of the trustee to maintain an
accounting record and submit it by the end of each year. Beneficiaries
are also entitled to waive off any records.
• Right to transfer beneficial interest [S.58]- The beneficiary who is
competent to the contract has the right to transfer the beneficial interest but
should be in accordance with the law prevailing at that time. However, the
transfer must be under the circumstances and to an extent to which the right
can be transferred.
• In case the trust is bequeathed for the benefit of a married woman so that
she does not deny the beneficial interest she is not conferred with the right
to transfer such trust property during the period of her married life.
• Right to sue for Execution of Trust [S.59]- This provision deals with
the situation where trustees are not appointed or have died, disclaimed
or discharged, or for any other reason where the execution of the trust
by the trustees becomes impracticable, the beneficiary can file for a
suit for the execution of the trust. In such cases, the court is bound to
carry out the execution of the trust under its own supervision until a
new trustee is appointed.
• Right to proper trustee [S.60]- This provision confers the beneficiary the right to
demand protection and administration of the trust property by a proper person
or a proper number of any such person. The provision also lists down persons
who cannot be defined as a proper person with the ambit of this section:

• A person having domicile of abroad;

• An alien enemy;
• A person having interest that is inconsistent with that of the beneficiary;
• A person in insolvent circumstances and unless otherwise provided by the
personal laws of the beneficiary,
• A married woman,
• A minor child.
• In cases where the administration of trust requires the receipt and custody of
money, then the number of trustees or the job should be at least two.
• Right to compel to any act of duty [S.61]- The provision confers a right
to the beneficiary that he can compel the trustee to perform a particular act
of his duty or as such. He can also restrict the trustee from performing any
contemplated or probable breach of trust.
• Wrongful purchase by trustee [S.62]- This provision provides the
beneficiary with the right to restrain the trustee from committing any
breach of trust. If the beneficiary has wrongfully bought the trust property
with the intention to use it for himself, the beneficiary has the right to
recover it back from him and can also compel him to hold the trust property
for the beneficiary.
• If the property has been sold to a third party knowing that it was trust
property, the beneficiary has the right to recover it from the third party.
However, in such a case, the beneficiary needs to repay the purchase amount
along with the interest, and any such expenses which have incurred while
preserving the property will be paid by the trustee.
• The provision puts certain obligations on the part of the trustee or the
purchaser. He must:
1.Account for the net profits of the property,
2.Pay the occupation rent if he was in actual possession of the property, and
3.Allow the beneficiary to deduct a part of the purchase money if the property
has been deteriorated by certain acts or omissions of the trustee or purchaser.
• LIABILITIES OF TRUST BENEFICIARY:
• Duty to compensate the Trustee- In case the beneficiary causes any
damage to the trustee or the trust property, the beneficiary is legally
bound to compensate or reimburse for the damages caused by him.
• Liability in breach of trust- If in case the beneficiary breaches the
trust agreement in any way, he will be held liable for the damage or
losses incurred by the breach of trust.
• Liability in harming others’ Interests- The beneficiary will be held
liable if in any way he/his behavior causes any harm to another party’s
interest.
• Liability not to take advantage- If the beneficiary needs to take any
kind of advantage from the trust property, it is compulsory on the part
of the beneficiary to take consent from all the other beneficiaries
related to the trust. It will be considered as a breach of trust if not done
so.
• Liability to receive interest(s)- The beneficiary is liable to receive
only his part of the interest from the trust and not more than that.
• Liability to be aware of the breach of trust- It is the responsibility
of the beneficiary to proceed with a suit against any party in case a
breach of trust is found. It is his liability to become aware of all kinds
of breach of trust either by the author or by the trustee.
• Liability to deceive the trustee- The court may proceed with a suit
against the beneficiary if in case it is found that the beneficiary has
deceived the trustee or persuaded him to perform a breach of trust.
• Liability to take reasonable steps- It is the responsibility of the
beneficiary to comply with the reasonable steps as mentioned in the
instrument of trust within the limitations and boundaries set keeping in
mind the rights and liabilities of other beneficiaries. If not done so, the
person will be held liable.
Liabilities of trustee
• Liability for breach of trust-sec-23
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 on him, concurred in the
breach, or subsequently acquiesced therein, with full knowledge
of the facts of the case and of his rights as against the trustee.
Example
• (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.
• No set-off allowed to trustee-sec-24
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 a gain which has accrued to another portion of the trust-
property through another and distinct breach of trust.
• Non-liability for predecessor’s default-sec-25
• Where a trustee succeeds another, he is not, as such, liable for the
acts or defaults of his predecessor.
• Non-liability for co-trustee’s default-sec-26
• Subject to the provisions of sections 13 and 15, one trustee is
not, as such, liable for a breach of trust committed by his co -
trustee
• Several liability of co-trustees-sec-27
• 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 authorise a trustee who has
been guilty of fraud to institute a suit to compel contribution.
• Non-liability of trustee paying without notice of transfer by
beneficiary-sec-28
• 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.
• Liability of trustee where beneficiary’s interest is forfeited
to the Government-sec-29
• 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.
• DISABILITIES OF TRUSTEE:
• The Trust Act,1882 provides the following disabilities:

1-TRUSTEE CANNOT RENOUNCE AFTER ACCEPTANCE:

• Sec:46, has been so designed that a trustee who after acceptance of the trust
and after acting for some time as trustee may not opt to renounce the trust
because he is liable to the beneficiaries as well as his co-trustees. This is the
general rule given by the section but at the same time it has its exception as
well.
• EXCEPTION TO GENERAL RULE:
A- With the permission of civil court

B- With the consent of beneficiaries

C- By virtue of special powers in the instrument

• 2.TRUSTEE CANNOT DELEGATE:
• A person entrusted with a duty does not fulfil it if he simply lays it on
the shoulders of someone else he remains liable for the other persons
default so the original principle “delegatus non protest delegare”.
• 3-CO-TRUSTEES CANNOT ACT SINGLY U/S 48:
•
The office of trustee is a joint one and duties of the office must be
done by the co-trustees in joint capacity. The act of one trustee done
with the sanction of a co-trustee may be regarded as the act of both but
such sanction or approval must be strictly proved. (AIR 1945 PC 23)
But again its subject to the agreement between the trust parties.
• 4-CONTROL OF DISCRETIONARY POWER:
• Sec:49, if the trustee do not exercise their discretionary power
reasonably and in good faith it can be controlled and guided by the
court on suitable occasions. (Sec-15)read.
• 5-NO RIGHT OF REMUNERATION:
• Sec:50, a trustee has no right to charge remuneration for his services i.e trouble,
skill and loss of time in executing the trust.Sec:50, provides and also explains
the exceptions to this provision wherein a trustee can get remuneration.

• 6-TRUSTEE CANNOT USE TRUST PROPERTY FOR HIS OWN

PROFIT:

U/S: 51, All the acts of trustee must directed towards the benefit of the trust and
beneficiary.If he makes a profit out of it he will be accountable for it.
• -NOT TO USE TRUST PROPERTY FOR PURPOSE
UNCONNECTED WITH THE TRUST:
A trustee should not make use of the property for any purpose unconnected
with the trust.When he does so, he has to account for the benefit he obtain.

8-TRUSTEE CANNOT BE PURCHASER:

• U/S:52, Trustee is absolutely and entirely disabled from purchasing the
trust property. Especially whose basic duty is to sell trust property. He
cannot become buyer of the same property at the same time.
• 9-TRUSTEE MAY NOT BUY BENEFICIARY’S INTEREST:
Sec:53, lays down a situation that the trustee may not buy or become lessee or
mortgagee unless the court permits it for the benefit of beneficiary specifically.

• 10-CO-TRUSTEES CANNOT LEND TO ONE OF THEMSELVES:

• Sec:54, is again a prohibitive in nature and lays down that a trustee or co-trustee
whose duty is to invest trust money on mortgage or personal security must not
invest it on a mortgage or on the personal security of himself or one of his co-
trustees.
termination
extinction
• The Indian Trust Act, 1882 makes provision for the extinction
of trusts under Sections 77, 78 and 79. Section 77 lays down
four situations when a trust is extinguished. Accordingly, a
trust is extinguished-
• (i) when its purpose is completely fulfilled; or
• (ii) when its purpose become unlawful; or
• (iii) when the fulfilment of its purpose becomes impossible
by destruction of the trust property or otherwise; or
• (iv) when the trust, being revocable, is expressly revoked.
• To be legal, a trust must have a lawful object or purpose. A purpose
lawful at the initial stage may become unlawful afterwards due to
some new legislation coming into force.
• The purpose, therefore, cannot be accomplished, being unlawful .
In such cases a trust is extinguished from a trust came into
existence, a supervening unlawfulness turns a lawful purpose into
an unlawful one whereby a trust is extinguished under Section 77(b).
• Similarly, under Section 77(c) when the fulfilment of the purpose
becomes impossible by destruction of the trust property or
otherwise, a trust is extinguished.
• Revocation [Ss. 78 and 79]

• Section 78 enumerates the circumstances when a trust may be revoked. A

trust created by a will may be revoked at any time at the pleasure of the
testator, for a will is inherently ambulatory. But a trust which is created
otherwise than by will may be revoked-

• (i) by consent of all the beneficiaries where all of them are competent to
contract;

• (ii) by expressly providing in the instrument of trust for a power of

revocation: by exercising such a power a trust may be revoked;

• (iii) when its purpose is the payment of author’s debts, it can be revoked at
any time prior to communication of the arrangement to the creditors.