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KINDS OF TRUST UNDER THE TRUST LAWS

There are certain known categories of trust under the trust laws in India, though they
may be over-lapping and it may not be possible to tell the boundaries of one from
the other. Some classifications are according to the way in which a trust is created
and others according to the functioning of the trustee.
Express Trust under the trust laws
The following words of Lord Esher M.R. enshrine the concept of an express trust:
If it is created in expressed terms, whether written or verbal, a trust, and a person is
in terms nominated to be the trustee of that trust, such a trust is in equity called an
express trust declared trust of this kind may be embodied in an instrument to be
known as the instrument of trust. It may even be oral. But if it involves immovable
property ti would have to be registered and if it involves movables they would have
to be physically transferred to the trustee.
Implied Trust under the trust laws
Like an express trust, an implied trust is also created by an act of the parties. The
difference is only this that the intention of the parties to create a trust, instead of
being expressed in words, appears from their conduct. The conduct of the parties
creates a presumption about their intention. An inference of trust is drawn only when
the conduct of the parties is not explainable in any other terms than an intention to
create a trust. The circumstances must give rise to a presumption of a compelling
nature. As observed by Lord NOTTINGHAM L.C.:The law never implies, the court
never presumes a trust, but in case of absolute necessity. The decision of the
Supreme Court in M.C. Chacko v. State Bank of Travancore seems to be based
upon this principle. The court emphasised that a trust may be actual or constructive
but in general the courts are very slow to infer a constructive trust. The facts of the
case were as follows:
The Highland Bank was indebted to the State Bank of Travancore under an
overdraft. One M was the manager of the Highland Bank and his father K had
guaranteed the repayment of the overdraft. K gifted his properties to the members of
his family. The gift deed provided that the liability, if any, under the guarantee should
be met by M either from the bank or from the share of property gifted to him. The
State Bank attempted to hold M liable under this provision of the deed.
But he was held not liable. The State Bank not being a party to the deed was not
bound by the covenants in the deed, nor could it enforce the covenants. It is settled
law that a person not a party to a contract cannot enforce the terms of the contract.
Constructive trust is created in favour of an addressee of insured articles and he can
claim compensation from the Central Government on non-delivery of such articles.
Constructive Trust under the trust laws
The word constructive is used in equity in reference to anything so as to distinguish
it from the actual. Examples are constructive fraud and constructive notice . When
a person commits a breach of duty and there by gains and advantage over the other
party to the bargain, that is a constructive fraud in equity. Constructive notice
refers to something which a person is taken to know though in fact he does not
know. A person contracting with a company is taken to know the companys
memorandum and articles though in fact he does not know. Similarly, when a person

ought in equity to hold something in trust for another, a constructive trust arises to
take care of the situation. Not to do so would amount to abuse of confidence. LEWIN
ON TRUST states: Constructive trust which the court elicits by a construction put
upon certain acts of parties, as when a tenant for life of lease-holds renews the
lease on his account, in which the law gives the benefit of the renewed lease to
those who were interested in the old lease. All kinds of fiduciary relationship fall in
the category of constructive trust. This device has been used in many cases to
prevent unjust enrichment of one at the cost of another. For example, an agent is
directed to sell his principals property at a stated price. He, in fact, obtains a higher
price and hands over the stated price to the principal. A constructive trust will arise in
favour of the principal for the balance of the sale price. A finder of an article holds it
in trust for the real owner. A bailee recovering the value of the bailors goods which
have been destroyed by a third person (a carrier in this case) holds the amount in
trust for the bailor. The directors of a company transferring their shares along with
the power of control would hold the money received by them for transfer of
controlling power in trust for the company.
Public and Private Trusts under the trust laws
A public trust under the trust laws in India is one which is created for the benefit of
public in general. Public in general does not mean public as a whole. The trust may
be created for a part or a section of the public and it will be a valid trust so long s
every member of the particular class is permitted to enjoy the benefits of the trust.
The general public purpose may be of any kind medical, health relief and
rehabilitation, social service of any kind, education, training, etc.
A private trust is confined in its beneficial bounty to some private persons so that
nobody beyond them can draw the benefit. Such a trust is enforceable at the private
action of intended beneficiaries. A public trust is enforceable at the instance of the
Attorney-General under the trust laws in India.
Resulting Trust under the trust laws
Whenever a trust fails in its object or its purpose is accomplished without the trust
property being exhausted what remains reverts back to the author of the trust under
the concept of resulting trust. The principle is incorporated in Section 83 and the
illustrations appended to it bring the concept to a clear relief.
It is true that the provisions of the Act are not applicable to private or public religious
and charitable trusts, but nevertheless the general principles underlying Section 83
are attracted in analogous circumstances.
Precatory Trust under the trust laws
Precatory trust lacks one of the certainties of a valid trust; namely, the intention of
the author. Where the author fails to express his intention in clear terms, the trust
which arises is in a precarious (precatory) state because it may fail to materialize.
Since the language is ambiguous and uncertain, if a precatory trust is inferred it may
as well happen that the settler never intended a trust and yet a trust comes into
being. That is why warnings have always been expressed against such a precarious
practice. JAMES LJ observed in Lamb v. Evans: I could not help feeling that it was
the officious kindness of the court of chancery in interpreting terms where in many

cases the father of the family never meant to create trusts, must have been a very
cruel kindness indeed.
Secret Trust undet the trust laws
Where neither the existence of a trust nor its terms are disclosed, it is called a secret
trust. Where the existence of the trust is disclosed, but its terms are not, it is a half
secret trust. This is a misuse of the concept of trust. It is used as a device for
retaining property under ones own control under the guise of a trust. The
consequences will depend upon the intentions of the parties and the circumstances
surrounding the transaction.
Illusory Trust under the trust laws
Where a trust is created with uncertain beneficiaries so that nobody seems to be
entitled to hold the trustee to his task, or where the object is so uncertain that it
leaves the trustees in a state of dilemma or give them a discretion as to the objects,
what comes into existence is the illusion of a trust and not its reality.
Certainties of a Trust under the trust laws
Section 6 of the trust laws in India which deals with creation of trusts emphasises
the need for things to be sure and certain about a trust. They are popularly known as
the three certainties of an effective trust. They are: certainty of words, certainty of
subject-matter and certainty of object under the trust laws in India.
The intention of the author of the trust to create a trust is the first thing. Where his
words are not clear, the matter becomes precarious. The Court may have to resort
to the concept of precarious trust to save the situation. Where there is certainty of
subject-matter and of object, the Court may hold that a precatory trust has arisen if it
considers that the precatory expressions used studied in relation to the will as a
whole, impose an obligations.
As for the certainty of the subject-matter, Section 8 requires that the subject-matter
must be properly transferable to the beneficiary. The same section adds that the
subject-matter must not be merely a beneficial interest under a subsisting trust. This
marks a departure from the English law for the simple reason that the Indian Legal
system does not separately recognize any such things as equitable interest. All
equitable interests have become a part of the framework of legal interests. Thus a
person cannot create a trust of something which he is expecting to get or of which
he is mere heirapparent or which are confined to strict personal enjoyment, like
pension, pay, reversionary interest, official benefits, etc.
Certainty as to trust property also includes the certainty as to the benefits which
have to be drawn by different beneficiaries. Any uncertainty as to either would
render the trust void. A trust of the bulk of my said residuary estate would fail to
create a trust. Where the trust property is certain and is meant for two beneficiaries
whose respective shares are not indicated, the trust would be valid; the court would
apply the principle of equity that equality is equity and divide the property equally
between them. There is no uncertainty where the author, instead of quantifying the
respective shares of beneficiaries, gives a discretion to the trustees of to allocate the
shares at their own judgment. Where the directions of the settler are partly certain
and partly uncertain, the latter part fails and the whole estate goes to the person in
whose favour there is a certain direction. Involved facts of this kind.

The testator appointed this wife as the guardian of his children. He gave the whole
of his property to her with this trust that she would in fear of God and love to children
made such use of it as should be for her own and their spiritual and temporal good.
It was held that the wife was absolutely entitled to the property because the
declaration failed to indicate any ascertained part for the children.
Where certain property is left in the hands of a trustee for the benefit of a certain
person with a rider that so much of it as he would not require would go to a third
person, the latter would take nothing.
In reference to the certainty of object, the principle is that if the objects are uncertain,
the trust will fail. A trust for my old friends is uncertain because the words old and
friends make the choice as to beneficiary difficult. If the trust had been for any
person answering a particular description the result would be different. The courts,
however, do not want a trust to fail a trust in favour of the testators wife and
whatever may remain at her death to be distributed among his daughters, failed in
respect of the daughters because it was uncertain, whether anything would be left
for them. Where a bank founded a trust fund for payment of pension to staff but
retained a total control with it as to the persons and amount to be paid by the
trustees, the trust failed, because there was no obligation to pay at all. There can be
no trust over the exercise of which this court will not assume a control: for an
unanswerable power of disposition would be ownership and not trust.
Public or Charitable Trust under the trust laws
The concept of a public or charitable trust is thus explained in Snell:
Equity has also long enforced trusts for the benefit of large and changing groups of
people, or to carry out certain purposes which are beneficial to the community at
large. These trusts are known as public or charitable trusts, or more shortly
charities.
Public and Private Trusts compared under the trust laws
All kinds of trusts whether pubic or private are subject to more or less the same
governing principles. Duties and disabilities of trustees are the same. There are,
however, certain pints of difference between public and private trusts. Rules against
perpetuity, which are applicable to all private trusts, are considerably modified in
reference to public trusts. Secondly, where the object of a public trusts becomes
obsolete because people are no longer in need of that kind of charity, the objects of
the trust may be varied so as so include things which are currently of public utility.
Thirdly, the enforcement of public trusts is in the hands of public bodies, like the
Attorney-General. Fourthly, for the encouragement of public welfare and charitable
services by private organisations, benefits of tax concessions have been extended
to such organizations. Lastly, a private trust may fail for uncertainty of object, but a
public trust need not be the victim of such uncertainty. In such cases the author of
the trust is only interested in public service. The type of service does not matter
much to him. He can leave that even at the discretion of trustees. So long as charity
of one kind or the other can be carried on, the trust can go on. The court or other
relevant authority can order a scheme of dedication.

CREATION OF TRUST UNDER THE TRUST LAWS


According to Section 4A trust may be created for any lawful purpose. The purpose of a 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 [A, while in insolvent circumstances, transfers property to B
in trust for A during his life, and after his death to B. A is declared an insolvent. The
trust for A is invalid as against his creditors- Har prasad v. Mohammad Usman
Husain]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.
In Boulter; Capital and Counties Bank v.Boulter (1922) 1. Ch. 75 - Any condition
to a gift under a Will which tends to separate a child from its parent is void as being
against public policy
Re Lovell, Sparks v. Southhall (1920) 1 Ch. 122 - where an object of the bequest
was not to induce a person to continue to live apart from her husband and not to
remarry but to maintain her until she returned to her husband or remarried, held not
void
Re, Sand Brook, Noel v. Sandbrook (1912) 2 Ch. 212 - detering the parent from
performing his parental duties, held contrary to public policy;
Every trust of which the purpose is unlawful is void. And 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
immovable and situated in a foreign country, the law of such country.
A trust can be created inter vivos or through a will. When a trust is
created by a will, it is necessary that the testamentary instrument complies with the
formal requirements of the Will laid down in the Indian Succession Act, 1925. These
essential formalities are: the instrument should be made in writing[Section 63 :
Execution of Unprivileged Wills], signed or marked by the testator; [Section
63(a),(b)] attested by two or more persons; When a trust is created by a living
persons, the requirements provided under section 6 are to be complied with. [These
requirements are commonly known as the "three certainties" required in a
trust have been laid down by Lord Langolale MR in Knight v. Knight (1840) 3
Beav 148 at p.173. These reuqirements are covered in Section 6 of the Indian
Trusts Act, 1882. The three certainties are :-(l) The words used must be so
couched that, taken as a whole, they may be deemed to be imperative]
The definition of trust under the trust laws shows that it requires certain features for
its validity. The elements of a valid trust are enumerated in Section 6.
Creation of trust: Subject to the provisions of Section 5, under the Trust laws a
trust is created when the author of the trust indicates with reasonable certainty by
any words of 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 under the trust laws in India.
The first requirement of the trust laws is that the author of the trust should indicate
by words or conduct with reasonable certainty his intention to create a trust.

Secondly, the purpose for which the trust is sought to be created should also appear
with reasonable certainty. Thirdly, the persons for whose benefit the trust it means
should be reasonably certain. Lastly, the property, which is to constitute trust
property, should be designated with certainty. The effect of the provisions is that a
valid trust requires the following four certainties:

Certainty of authors intention;

Certainty of object;

Certainty of beneficiary, and

Certainty of trust property.


(1) Certainty of words
Since Equity looks at the interest rather than at the form, no special form of words is
necessary for the creation of a valid trust[Radhasoami Satsang v.CIT (1992) 193
ITR 321 (SC)];, and if an intention to create a trust may unmistakably be construed
from the expressions which the settlor has used, the Court will give effect to that
intention. 37 The use of the word "trust" is not essential, though, of course, highly
desirable. 38 Under English Law, in earlier decisions the tendency of the Court of
Chancery was to raise a trust in cases where the testator employed words precatory
or recommendatory or expressing a belief. Thus the employment of the words
"hope", "desire", "recommend", "in full confidence" and similar expressions have
been held to constitute a trust. The Court, in short, was ready to imply a trust from
expressions not ordinarily regarded as imperative.40 During the nineteenth century
the change took place.41 Words such as desire [CIT v. Manilal Dhanji], wish , Will ,
hope , direct[Ram Ran Vijay Prasad Singh v. Province of Bihar] ,in confidence, in
full confidence [Re Williams], feeling confident[Mussoorie Bank v. Raynor],
specially desire [Re Connolly], request ,on behalf of, for the purpose of, heartily
beseech, well know, appoint, give and bequeath, for the benefit of and so on
received fresh consideration. The courts, in many cases [Hill v. Hill] held that the
use of precatory words are imperative to raise a binding trust, but the intention to
create the trust has to be established upon a construction of the instrument which
made for an artificial certainty where no certainty existed.
Therefore, the term precatory only has reference to forms of expressions. Not only in
Wills but in daily life an expression may be imperative in its real meaning although
couched in language which is not imperative in form. Thus, to take one of many
cases in The Mussoorie Bank Ltd. v. Albert Charles Raynor the Privy Council
held that where the testator gave all his real and personal property to his widow
"feeling confident that she will act justly to our children in dividing the same when no
longer required by her", it was held that the widow took an absolute interest and
there
was no trust for children[Re Williams (1897) 2 Ch.12; Re Hanbury (1904) 1
Ch.415; Re Conolly].In considering whether a precatory trust is attached to any
legacy, the Court will be guided by the intention of the testator apparent in the will,
and not by any particular words in which the wishes of the testator are expressed.
The modern rule in English law is that no technical words are required to

constitute one, if the intention is clearly expressed . The testators intention is,
therefore, the paramount consideration, and the court must discover it. It will not
presume that he intended to create a trust. That must be proved. If any element of
discretion is left to the donee, there is no trust.
Re Keyford Ltd. is a good illustration of some interest, where money in advance is
being paid to a company in return for the further supply of goods or services. Oral
arrangement made by the company to pay the money in a trust account namely
"Customers Trust Deposit Account". The whole purpose of what had been done had
been to ensure that the money sent remained in the beneficial ownership of those
who had sent them. Although payment into a separate banking account was useful
indication of an intention to create a trust, there was nothing to prevent the Company
from binding itself by a trust. Held, the Company had manifested a clear intention to
create a trust.
The courts in India are following the English decisions[Chambers v. Chambers AIR
1944 P.C. 78]. According to the Courts, the intention to create a trust must be
indicated by words, or acts with reasonable certainty. The purpose of the trust, the
trust property and the beneficiaries must be indicated in such a way that the trust
could be administered by the courts if the occasion arose[Patel Chhotabhai v. Juan
Chandra Basak AIR 1935 P.C. 97].where the intention clearly appears that a trust is
to be created, the law does not require that the words used should be identical with
those occurring in the statute[Krishnamurthy v. Anjayya AIR 1936 Mad. 635]. A
trust deed, barely creating a trust for charities without specifying any charities at all,
is valid[CIT, West Bengal v. Sardar Bahadur Sardar Indra Singh Trust]. But a
clear intention of owner to dedicate definitely and permanently must be
established[Zafar Hussain v. Mian Mohammad Ghias-Ud-Din]. If by mistake an
instrument creating trust does not express the intention of the disposer, it can be
cancelled or rectified according to the true intention of the disposer . Where there
was merely a pious wish of the testator that those following him should carry on the
charitable and religious work which he had been and was actually doing. No trust
property was indicated with reasonable certainty at all and that being so it could not
be said that the will created a binding trust[Smt. Krishana Kumari v. Board of
Revalue M.P. AIR 1971 MP 201]. If the property is left to a person in confidence that
he will dispose of it in a particular way as to which there is no ambiguity, such words
are amply sufficient to impose an obligation[Re Williams].
Gifts to parents with a direction as to the maintenance, etc. of children
In CIT v. Martilal Dhanji, the testator created a trust for the benefit of his four sons.
The assessee, being one of the trustees were to hold the trust funds upon trust to
pay the net interest and income thereof "for the maintenance of himself and his wife
and for the maintenance of education and benefit of all his children till his death".
The Supreme Court held that trust was not indicative of a mere desire or hope but to
impose a binding and obligatory trust.
Where, for example, a property is transferred in the hope that the transferee
will continue the same in the family, no valid trust will arise because the beneficiary
of the trust is not indicated with certainty. Similarly, if the transferee has been told to
distribute the property among such members of a family as he should think most

deserving, here also thee would have been no valid trust, because there could be no
certainty about beneficiaries. If the transferee had been directed to divide the bulk of
the property among the members of a certain family, it would not have been a valid
trust because the expression bulk of the property introduces the element of
vagueness into trust property. Where a person transfers his shop and stock-in-trade
to another for payment of his creditors, this is not trust, but a transfer on a condition
under the trust laws in India.
(2)Certainty of subject matter
To create a trust, the subject matter on which the trust is to operate must be
certain[Bhaidas Shivdas v. Bhai Gulab AIR 1922 PC 193.] Where there is no
ascertained and appropriated trust property [Chambers v. Chambers]or no trust
property is indicated with reasonable certainty at all,[ Ram Ran Vijay Prasad Singh
v. Province of Bihar],it could not be said that there is any certainty about the
subject matter. If a trust deed providing for another property of the same quality and
profit, in case of failure to give certain property, then on there is no uncertainty
regarding subject matter of trust[Jang Bahadur v. Rana Uma Nath Bakhsh Singh
AIR 1937 Oudh 99].
In a case where the author of the trust appoints someone else as trustee, it
is necessary that he should transfer the trust property to the trustee before a trust in
respect of that property could come into existence, and he should divest himself
from its ownership. Trust of an immovable property should be declared by a nontestamentary instrument in writing, 8signed by the author or by will and registered in
the name of trustee 84 for a complete transfer of ownership. In a trust-deed, the
executant had effective control over the affairs of his estate and there was no real
transfer of ownership to the trustee who was under the deed put in charge of the
property, it was held, the executant really intended not to appoint trustees but to
appoint managers and deed was not a trust-deed[Ram HuzurAra Begam v.
Deputy Commissioner; Gonda AIR 1941]. But where the author, after effecting the
registered deed, renounced the world by taking sanyas but remained in
management of the trust property not as owner but as a manager, it was held, there
was sufficient divesting of the property. What the law requires is an unmistakable
intention to dedicate and an overt act carrying that intention into execution.Only real
dedication whereby the owner divests himself of ownership and not mere
unexpressed intention to dedicate, can invalidate subsequent transfer of property to
third person[Keslieo v. Shri Laxminarayana SausthanAIR 1926 Nag.86]
If the declarer of the trust is himself the trustee also, there is no need that he
must transfer the property to himself as trustee; but the law implies that such a
transfer has been made by him, and no overt act except a declaration of trust is
necessary[Tulsidas Kilachand v. CIT (1961) 42ITR]
Where the trust property is movable, transfer of its possession to the trustee is
sufficient to create a trust.[Mere transfer of possession coupled with the
intention of the parties that such delivery of possession should vest the
property in the trustee is sufficient to create trust: Panchaiyappa Chetti v.
Sivakami Animal].

A clause in a trust-deed authorising the author to alter regulations and to add


new regulations in relation to trust-property is retention of power over the trust
property which may be against the divestiture which is required : The Allahabad
Bank Ltd. v. CIT West Bengal. Trust is not complete unless trust property is vested
in trustee for benefit of Ceshii que trust; Re Sabins Goregaonkar & Senjit AIR
1937 Bom. 374.
Thus Section 8 of the trust laws requires that the subject-matter of a trust must
be property which is capable of being transferred to the beneficiary. It must not be
merely beneficial interest under a subsisting trust. Section 5 of the trust laws
provides that if the trust is that of immovable property, it would be valid if it is
declared by a non-testamentary instrument signed by he author of the trust or the
trustee and is also registered or by the will of the author of the trust or the trustee. If
the trust is that of movable property it should follow the same pattern as stated
above or the goods should be transferred to the trustee. Where an absolute interest
in property is transferred, the donee is not constituted as a trustee but as an owner
under the trust laws in India.
(3)Certainty of objects or Cestui que trust
Certainty of objects implies two things : (i) that the recipients should be identifiable
with certainty; (ii) that the interests they take should be discoverable. The test of
certainty is that the objects should be certain or capable of being rendered certain.
This test propounded by the Court of Appeal in Inland Revenue
Commissioners v. Broadway Cottages Trust where the court held that a trust for
such members of a given class of objects as the trustees shall select, is void for
uncertainty unless the whole range of objects eligible for selection is ascertained or
capable of ascertainment. A trust to distribute a fund can be valid only if it is possible
to ascertain the members of the class with sufficient certainty. If the members of the
class are not ascertainable, then the trust is invalid and void. The House of Lords in
McPhail v. Dou It on overruled this test in regard to trust-power. The Court
observed that the test to be applied in determining the validity of trust powers[A
trust power, or a power in the nature of a trust, although prima facie a power
only and, therefore, not imperative, will sometimes be construed by the court
as a trust, if from the trust instrument as a whole as intention can be gathered
that the objects of the power are to benefit in any case]was that propounded in
Re Gulbenkians Settlement for powers, namely, that the trust was valid if it could
be said with certainty that any given individual was or was not a member of the
class.
The same position is under Indian Law. If the beneficiaries are not indicated
with reasonable certainty[Allahabad Bank v. CIT] or there is some vagueness as to
the persons who are intended to be benefited[Khursaidi Begum v. Secretary of
State for India] and no obligation imposed on the trustees, no trust was created
even though property had been transferred to the trustees. According to a deed the
pension was to be transferred to the "heirs" of the original pensioners. The question
before the Court was, whether "heirs means "descendants"? .It was contended that

the terms "heirs" and "descendants" were used as convertible terms in describing
the descent of certain trusteeship of the pension. The court held that it could not be
assumed that donor intended the descent of the trusteeship and the descent of
beneficial interest to be governed by the same rules. The court further held, the
ambiguity of the language used on the one subject cannot control the clear and
unambiguous words employed with regard to the other.Where an interest of an
employee in Employees Death Benefit Fund, vested in the trustees of the Fund, is
payable to children of an employee on death and the employee has no disposing
power over it, is a valid trust. There is nothing illegal in a settlor authorising by the
instrument of trust the trustee to invest the trust money in a business, whether the
trustees own business, or some other business and providing that interest shall be
paid for the use of the money so invested. The arrangement creates a valid trust.
The validity of a trust cannot be ignored merely because the beneficiary is not in
existence at the time of creation of trust.
Following the English law of Equity, the Allahabad High Court observed in
Mirza Hidayat Beg v. Seth Bihari Lai. To determine uncertainty or indefinitness in
relation to trusts, one of the rules of the English Court of equity is that the court must
be in a position to supervise the trust and administer it in case of a breach of trust or
in case of any other circumstance arising in connection with it in which such a
course becomes necessary of the object of trust, the trust is void."' But in the case of
a trust power, if the trustees do not exercise it, the court will do so in the manner
best calculated to give effect to the settlors or testators intentions.
No trust which the court can control and execute, or, in other words, no
valid trust at all, is created for there can be no trust in favour of the unascertainable
classes as a whole; no beneficial interest is conferred on any particular member or
members of the class unless and until the trustees think fit to make some distribution
to him or them, and the making or withholding of any such distribution rests on the
uncontrolled discretion of the trustees, which the court can neither exercise nor
compel to be exercised[Me Phail v. Doulton]
It is now well settled that there is no valid trust unless the objects thereof are
specified, charitable trusts are an exception. With regard to charitable trusts, a great
deal of latitude is permitted and the rule is that provided there is a clear intention to
make a gift for charity, the trust is not allowed to fail for uncertainty. Indefiniteness as
regards the specification of the objects is, therefore, regarded only as an
indefiniteness in regard to the manner in which the trust will be administered and so
if a clear is intention to create a trust in favour of chairty .discernible, defects in the
mode prescribed or absence of any such prescription does not invalidate the trust.
The defect is taken ag attaching to a matter which is not essential. A trust for
charitable purposes does not become invalid, if the choice of the specific charitable
objects to be benefited is left to the trustees[CIT v. Sardar Bahadur Sardar Indra
Singh Tmst]
Where there is uncertainty about the persons to whom the charity is to be
benefited, the donor is the best person to know the beneficiaries he had in his mind,
moreover the same is identified by the document, therefore, trust is not void for
uncertainty[Garib Das v. Munshi Abdul Hamid].

A trust for feeding the poor[Muthusami Naidu v. Rayalu Naidu ], for


charity or benevolence of amelioration of human suffering or advancement of
knowledge[Re Bawdens Settlement], for relief of poverty,for promotion of religious,
social and physical well being of the persons,for national education, establishment of
a school to impart such education, a boarding house, founding of scholarships for
foreign education [Mina Hidayat Beg v. Seth Behari Lai], for attainment of
salvation[Jainambukanni Animal v. Ruthrapathy Pillai]were held valid for an
object which was certain.
In Grimond v. Grimond, a testator directed his trustees to divide a portion of the
residue of his estate to and among such "charitable or religious institutions and
societies" as they might select, the trust was held void for uncertainty. Where the
trusts were not for the benefit of individuals but for a number of noncharitable
purposes, held void for uncertainty.
In Khursaidi Begum v. Secretary of State, the property of a heirless Shia was
devoted to the poor and indigent, according to the Shia Law. The court held, no trust
was created as there is some vagueness about the persons who are intended to be
benefited. It is submitted that Khursaidi Begams case does not hold liberal view
because with regard to charitable trusts, the courts have shown liberal approach.
The courts will not hold a charitable trust void for uncertainty of the object if there is
clear intention to make a gift for charity.
These provisions of the trust laws in India cannot be used for the purpose of
effectuating a fraud.
About the object of the trust, Section 4 of the trust laws in India requires that the
purpose should be lawful. It says that a trust may be created for any lawful purpose.
The purpose of a trust is lawful unless It is forbidden by law; or It is of such a nature
that, if permitted, it would defeat the provisions of any law; or It is fraudulent; or
1.
It involves or implies injury to the person or property of another; or
2.
The court regards it as immoral or opposed to public policy.
Where the object of the trust is unlawful, the trust is void. 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 becomes void. Where the trust property is
situate in a foreign country, the law of that country would apply. A trust for training
female fondlings into prostitution, a trust for smuggling activities and for supporting a
family out of its income and a trust for fraudulent preference of creditors are all void
because the objects are unlawful under the trust laws in India.
AUTHOR OF THE TRUST
About the author of the trust, Section 7 of the trust laws in India says that a
trust may be created by every person competent to contract. Where the trust is to be
created on behalf of a minor, permission of the principal Civil Court of original
jurisdiction should be obtained.
The person who reposes or declares the confidence is called the author of
the trust. Under the law of trusts, a trust can be created by every person who is
competent to contract[Section 11 of the Indian Contract Act], A trust, by or on behalf
of a minor, can be created with the permission of a principal civil court of original

jurisdiction[Section 3 of the Indian Majority Act, 1875] .A lunatic can not create a
trust either testamentary or intervivos. If a trust is validly created under the Law of
Trusts, its existence cannot be assailed merely because of the absence of
permission from the civil court[CIT v. V.S. Kumaraswamy Reddiar].A group of
individuals, an artificial person, an association of persons, institution or a
Corporation can create a trust[General Auction Estate Co. v. Smith]. The subject
matter of a trust must be transferable property, it precludes mere beneficial interest
under a subsisting trust.
One or more trusts can be created by a single instrument.[ CIT v. Manilal
Dhanji (1962) 44 ITR 876 (SC)].If any part of the deed of a charitable trust is for a
private purpose, the whole trust is vitiated, forgetting that there are two distinct and
separate trusts with two different endowments, though under the same deed[CWT v.
H.E.H. The Nizam's Supplemental and Religious Endowment Trust].
BENEFICIARY
About the beneficiary, Section 9 of the trust laws in India says that 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 with it under the trust laws in
India.
Every person capable of holding property may be beneficiary. There must be at
least one beneficiary living at the time of creation of a trust.[sec5 .TOP : Sopherw.
The Administrator General of Bengal].The validity of a trust cannot be ignored
merely because the beneficiary is not in existence on the date of creation of
trust[SEC 13 TOP]. A trust is not void if some or all of the beneficiaries of the trust
have not been specified in the trust with indication in regard to the share of each
one, or the terms of the trust deed confer power on the trustees to determine the
beneficiaries thereof and it cannot be said in such a case that the beneficiaries are
unknown or uncertain. [Official Receiver of South Arcot v. Kulandaivelan
Chettiar] .
A corporation,minor,alien and a married woman can be beneficiaries. A trust
to pay the income after the husabnds death to the wife "if she shall survive the
husband or until she shall marry again" is not determined by the re-marriage of the
wife during the lifetime, of the husband after the dissolution of marriage, but where
upon the construction of the instrument it is clear that the power or trust is for the
benefit of a surviving husband or wife who fulfils that status at the date at which the
trust or power takes effect, a divorced person is not entitled to benefit.[ Re Monros
Settlement, Re Williams Settlement] .It is settled law that an unborn person could
be a beneficiary under a trust,[ CTT v. P. Bhandari]provided it satisfies the
conditions laid down under section 13 of the
Transfer of Property Act, even though the coming into existence of such a
beneficiary is uncertain. Where under a bequest[Section 113 of the Indian
Succession Act, 1925 :113. Bequest to person not in existence at testators
death, subject to prior bequest], there is a possibility of the interest given to a

beneficiary under the later bequest being defeated either by a contingency or by a


clause of defeasance, such a beneficiary does not receive the interest bequeathed
in the same unfettered form as that in which the testator held it, and the bequest to
him does not, therefore, comprise the whole of the remaining interest of the testator
in the thing bequeathed. When such a beneficiary is not in existence at the time of
the testators death, the bequest to him is void.[Sopher v. Administrative General
of Bengal ].But a trust would not be void if the immediate limited interest is given to
the existing beneficiary and an absolute interest is created for the unborn or nonexisting beneficiary[Addl. CIT v. Ram Krishna Gupta].
A transfer of property by way of gift as also by creation of trust, settlement,
etc., in favour of prospective spouse, would be daughter-in-law/ son-in-law,151
grandchildren 152 etc., of the settlor cannot be said to be invalid on the grounds of
uncertainty or vagueness in regard to the object of the trust and/or the beneficiaries
thereof nor can such a trust be regarded as being against the rule against perpetuity.
[Trustees ofPutlibai R.F. Mulla Trust v. CWT].
Since the beneficiary is not a party to contract with the author of the trust,
therefore, he can renounce his interest under the trust by a disclaimer addressed to
the trustee or by setting up an inconsistent claim.154 If there are two trusts with the
same beneficiaries on identical terms and same trustees, there coalescence is not
barred[Re Holt's Settlement], but the after-acquired legacies formed an accretion to
the original funds and that the appointees of those funds could not share in the
legacies without bringing the share appointed to them into hotchpot.[ Re
Fraser].The right of the beneficiary is the right to call upon the trust to administer the
property so as to give the beneficiary his dues according to the provisions of the
trust ofin a proper case to convey the property to the beneficiary.
TRUSTEE
Every person capable of holding property may be a trustee, but if the trust involves
the exercise of discretion, a person not competent to contract cannot be a trustee.
Therefore a government,
corporation, bank, company, married woman, alien,can also be a trustee.
A trust deed is not unlawful simple because the trustees are of alien race and
religion :
Diwan Shiv Nath v. Vie Alliance Bank of Simla Ltd., Lahore (1914) 25 TC 480.
A minor can be a trustee, if he is bare trustee, but not if he is required to exercise
discretion[Mohammad Nasim v. Muhammad Ahmed AIR 1914 Oudh
408].Executors are often appointed as trustees[Re Birehall] but a solicitor or legal
adviser to a trust should not be appointed as trustee[Re Earl of Stamford]. Under
English Law, a bankrupt may be appointed a trustee, and if a trustee becomes
bankrupt, the trust estate does not vest in his trustee in bankruptcy. The bankruptcy
of a trustee, however, may be ground for removing a trustee, and appointing another
trustee in his place. Under Indian Law, when a trustee is declared insolvent, a new
trustee may [T. Krishnajee Bhatt v. Sadasiva Tawker] be appointed, because he is
not fit to be a trustee. An insolvent being a necessitous man is more likely to be
tempted to misappropriate trust funds than one who is wealthy; and besides a man

who has not shown prudence in managing his own affairs is not likely to be
successful in managing those of other people.[ A. Ramanathan Chettiar v.
Kanagasabapathy Chettiar].
The author of the trust can be a trustee and a trustee may also be a beneficiary in
the trust[Burguss v. Lamb].But a person cannot at one end at the same time be
sole trustee and sole beneficiary of commensurate legal and equitable estates in
proper- There is nothing in the Indian Trusts Act, which provides that a beneficiary
shall not be appointed a trustee. He is not, as such, incapacitated from being trustee
for himself and for others; but, as a general rule, he is not altogether fit person for
the office, in consequence of the probability of a conflict between his interest and his
duty. 178
A trustee who has accepted the trust cannot renounce it except with the
permission of the court or by obtaining the consent and with the unanimous
concurrence of all the beneficiaries. A trustee is free to disclaim a trust,but disclaim
must be made within reasonable time. However, it cannot be partial. A trustee can
disclaim orally or by conduct.
Donor can constitute himself trustee, and though remaining in actual
possession can transfer legal possession by declaring his possession as donees :
Mahomed Bi Bi v. iV.P. Sulaiman Ahmed.
man cannot be a trustee for himself: Goodright v. Wells.
Ashidbai v. Abdulla Haji Mohomed ILR (1907) 31 Bom. 271 : Section 3
to the Indian Trusts Act emob .. dies a well known rule of the courts of Equity in
England which is that "a person in a fiduciary position... is not, unless otherwise
expressly provided, entitled to make a profit; he is not
allowed to put himself in a position where his interest and duty conflict
Section 46 of the Indian Trusts Act, 1882; A person who has once undertaken
an office of a co-trustee cannot escape liability by a mere subsequent renunciation,
not in accordance with the conditions laid down in Section 46 : Vrandavan
Bhaichand Shah v. Parshottam Mod Chand Shah.
DUTIES AND LIABILITIES OF TRUSTEES UNDER THE TRUST LAWS
Duties of Trustees under the trust laws
Duty to Execute Trust
Section 11 of the trust laws in India requires the trustee to fulfill the purpose of the
trust. In carrying out the purpose of the trust the trustee has to follow the directions
of the author given at the time of the creation of the trust. Such directions may be
modified from time to time by the consent of all the beneficiaries who are competent
to contract. Where a beneficiary is incompetent, consent of the civil court of original
jurisdiction will be necessary under the trust laws in India. The section exempts the
trustee from having to obey any directions which would be impracticable, illegal or
manifestly injurious to the beneficiaries. The explanation to the section says that a
trust for payment of debts would include payment only of the debts of the author of
the trust existing and recoverable at the date of the instrument of trust, or where
such instrument is a will, at the date of his death, and in case of interest-free debt, to
pay only the principal. The illustrations to the section make it clear that a trustee

appointed to sell the trust land by public auction cannot do so by private contract; a
trustee appointed to sell the trust land to a specified person for a specified sum ,
may sell it to another and for less rice, if all the trustees, being competent to
contract, so authorize; a trustee for a woman and her children, who is directed by
the author to lend money to the womans husband may refuse to do so if the
husband has become insolvent. Lending money to an insolvent would be manifestly
injurious to the beneficiaries of the trust.
Acquaintance with trust property
This section requires the trustee to inform himself of the state of trust property. As
soon as possible, after accepting his office, the trustee is bound to acquaint himself
with the nature and circumstances of trust property. Where necessary, he should
obtain transfer of the trust property to himself. If he finds that the trust money has
been invested in insufficient or hazardous security, he should recover the
investment.
The section of the trust laws in India carries two illustrations also. According to one
of them: 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 trustees duty is to recover the debt without unnecessary delay.
The second illustration is something like this: 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.
Protection of Title to Trust Property under the trust laws
Preservation of trust property is one of the essential functions of trustees under the
trust laws in India. The trustee has to assert his right to the property and to protect
the title to the property. For this purposes the trustee has the power to maintain and
defend suits and all other authorities under the trust laws in India. Subject to the
provisions of the instrument of trust and keeping in mind the nature and kind of trust
property, the trustee may do anything which is necessary for the preservation of the
trust property. The only illustration to the section is like this: The trust property is
immovable property which has come to the hands of the author of the trust under an
unregistered deed. Subject to the provisions of the Indian Registration Act, 1877, the
trustees duty is to cause the instrument of trust to be registered.
Under the provisions of the Bombay Trusts Act, 1950, a right has been conferred for
preservation of trust property among others upon persons having interests in the
trust. The Supreme Court held on the basis of this provision that two or more
trustees of a registered public trust were entitled to file a suit for a decree for
recovery of the possession of trust property against a person holding it adversely to
the trust. That expression, the court said, was wide enough to include not merely the
beneficiaries of a temple, math, wakf etc., but also the trustees. Therefore, plaintiffs
2 and 3, who were members of the founders family i.e., beneficiaries, were entitled
to attend at performance of worship or service in the temple and also entitled to
partake in the distribution of offerings to the deity and thus answer the description
person having interest as defined in the Act.

The trustees have to take proper care in realizing the value of the property. The
Supreme Court observed on the facts of a case:
The property of charitable and religious endowments or institutions must be
jealously protected because a large segment of the community has beneficial
interest therein. Sale by private negotiations which is not visible to the public eye
and may even give rise to public suspicion should not, therefore, be permitted
unless there are special reasons to justify the same. Care must be taken to fix the
reserve price after ascertaining the market value for safeguarding the interest of the
endowment.
Duty not to set up adverse title
Every fiduciary is under a duty not to set up jus tertii against his own beneficiary. An
agent, for example, cannot attempt to retain the property of his principal claiming
that it is his property. No bailee can claim as against his bailor that the property
under bailment belongs to him. Such persons also cannot claim that the property
belongs to a third person. So Section 14 makes it a duty of the trustee not to set up
any claim to the property either for himself or in favour of third person.
Duty of care as imposed under the trust laws
The standard of care in reference to trust property expected of a trustee is stated in
Section 15.
Care required from trustee: A trustee 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.
Under the rule stated in the section a trustee has to take as much care of the trust
property as a person of ordinary prudence would have taken of his own property. If
his dealing of the trust property shows the standard of care of a reasonable man, he
would not be liable for nay loss, destruction or deterioration of the trust property. It
can, however, be provided in a contract with him that he would be liable at all
events. In such a case he would be liable for loss etc. whether any negligence on his
part is involved or not.
Conversion of Perishable Property under the trust laws
Where a trust has been created for the benefit or several persons in succession and
the trust property is of wasting nature of a future or reversionary interest it is the duty
of the trustee to convert the property into a property of permanent and immediately
profitable character under the trust laws in India. He may not have to do so if there is
a provision in the instrument of trust against any such conversion. The duty stated in
the section is illustrated by two examples given in the section of the trust laws in
India. According to one of them the trust property consists of three leasehold
houses. The trust is for the benefit of one and, after his death, for another. There is
nothing in the trust-deed to show that the houses are meant to be enjoyed by the
beneficiaries in specie. The trustee should sell the houses and invest the proceeds
in the securities listed in Section 20 and known as trust securities. According to the
second illustration the trust-deed, in addition to trusting the houses also says that all
the furniture in the houses shall also be for the enjoyment of beneficiaries in

succession. This fact shows that the houses and furniture are meant to be enjoyed
in specie. The trustee is under no obligation to sell them under the trust laws in
India.
Trustee to be Impartial under the trust laws
Where there are more beneficiaries than one, the trustee is bound to be impartial
under the trust laws in India. He has to see that the trust power is exercised for the
benefit of all alike and not in favor of one at the cost of the other. Where, however,
the trustee has the discretion to apportion benefits among the beneficiaries, he may
in a fair and bona fide exercise of his discretion proceed as he likes. The court will
not be able to interfere in his discretion unless there is proof of mala fide
discrimination under the trust laws in India. According to the illustration appended to
the section a person is a trustee for the benefit of three persons. He has been given
the discretion to make a choice between several specified modes of investing the
trust property. The trustee in good faith chooses one of those modes. The court will
not interfere, although the result of the choice may be to very the relative rights of
the three beneficiaries.
Trustees to prevent waste of the trust property under the trust laws
Where a trust has been created for the benefit of several persons in succession and
one of them being in possession of the trust property, is doing or threatening to do
any act which is destructive or permanently injurious to trust property, it becomes the
duty of the trustee to take steps to prevent the property from being wasted.
Accounts and Information under the trust laws
A trustee is under a duty, (a) to keep clear and accurate accounts of the trust
property, and, (b) at all reasonable times, at the request of beneficiaries, to furnish
them with full and accurate information as to the amount and sate of trust property
under the trust laws in India.
10. Investment of Trust Property under the trust laws in India
Section 20 of the trust laws in India introduces the concept of trust securities. The
securities listed in the section are known as trust securities. Trustees are required to
invest only in those securities and in no others. The section restricts the freedom of
trustees in this respect. The restriction is necessary in the interest of trust property.
The restriction can, however, be ruled out be a direction contained in the instrument
of trust. But in the absence of any such direction the requirements of the section are
mandatory.
Liabilities of Trustees under the trust laws
Liabilities of trustees are stated in Sections 23 to 30 of the trust laws in India. They
are as follows:
Liability for breach of trust:Where the trustee commits a breach of trust, he is
liable to made 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 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:
1. Where he has actually received interest;
2. Where the breach consists in unreasonable delay in paying trust-money to the
beneficiary;
3. Where the trustee ought to have received interest, but has not done so;
4. Where he may be fairly presumed to have received interest.
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 halfyearly rests) at the same rate;
Where the breach consists in the employment of trust-property or the proceeds there
of 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.
2. No set-off against Liability under the trust laws in India
Where breach of trust is in two distinct respects, one causing loss and the other
bringing a gain, the trustee cannot say that his liability for the loss should be reduced
by set-off against it the gain caused by the other breach. It follows that if breach of
trust causes loss, the trustee has to bear it. If it brings about a gain it will go to the
benefit of trust property. The trustee cannot claim any reduction in his liability for the
loss as against the gain.
3. The Position of co-trustees under the trust laws
Where there are more than one trustees the principles as to their respective liability
are to be founding Section 26-27 of the trust laws in India.
The general principle is that a trustee is not liable for the breach of trust committed
by any one of his co-trustees under the trust laws in India. Co-trustees can trust
each other under the trust laws in India. Life in society is based upon trust, not
distrust. People have a right to trust those who are put in a position of trust. But then
there cannot be blind trust. One has to trust with care and caution. That is why the
declaration of non-liability in Section 26 is subject to the provisions of Section 13 and
15. Section 13 requires trustees to protect the title to trust property under the trust
laws in India. A trustee cannot leave this essential function to the exclusive care of
one of his co-trustee cannot leave this essential function to the exclusive care of one
of his co-trustees and then shelter himself behind the defence that he did not know
what the co-trustee was doing. Section 15 of the trust laws in India requires trustees
to execute the trust with due care and caution. A trustee may become liable for the
breach of trust committed by another trustee if his inability to know about it amounts
in circumstances to an evidence of negligence.
Section 26 of the trust laws in India also gives three specific situations in which a
trustee becomes liable for the fault of his co-trustees, though this kind of liability is
permitted by the section to be excluded by a contract to the contrary.
1. Where he has delivered the trust property to his co-trustee without seeing to
its proper application;
2. Where he has allowed his co-trustee to receive the trust property and does
not make due enquiries about his co-trustees dealings with it, or allows him to

remain in exclusive possession for a period longer than is reasonably


necessary under the circumstances;
3. Where he comes to know of a breach of trust committed by his co-trustee or
intended to be committed, and either actively conceals it or does not take
proper steps to protect the interest of the beneficiary.
Where a trustee joins in signing papers for receiving trust property and he has a
proof that he did not actually receive it, he will not be liable by virtue of such
signature only for any misapplication of the trust property by the co-trustee who
actually received the property.
4. Several Liability and Contribution under the trust laws
Where the co-trustees jointly commit a breach of trust, or where one of them by his
negligence enables the other to commit a breach, each will be severally or
personally liable to the beneficiary for the whole of the loss occasioned by the
breach. Thus so far as the beneficiary is concerned he has aright to proceed against
each and every trustee who is liable in the circumstances. But as between cotrustees justice demand that they must suffer according to their respective faults. If
one of them is only as fault and the other has been held liable for his fault, the
defaulting trustee must give indemnity to his fellow trustee for the amount which as
been recovered form him. Where all of them are equally guilty and one of them has
paid the loss, he may recover equal contribution form his co-trustees. The only
exception is that the trustee who has been guilty of fraud, is to entitled to sue for
contribution.
Liability for breach of trust or for contribution devolves upon the legal representatives
of the trustee to the extent to which he has received the assets.
Where a beneficiarys interest becomes vested in another person, and the trustee,
being not aware of it, transfers the trust-property to the beneficiary, he will not be
liable for the property so delivered.
Where the beneficiarys interest is forfeited or awarded to the Government by legal
adjudication, the trustee is bound to hold the trust property to the extent for such
interest for the benefit of any person and in the manner in which the State
Government may direct.
5. Indemnity of Trustee under the trust laws
In the ordinary circumstances trustees are respectively chargeable only for such
money, stocks, funds and securities as they respectively actually receive and shall
not be answerable for others, nor for any banker, broker or other person in whose
hands any trust property may be placed, nor for the insufficiency or deficiency of any
stocks, funds or securities, nor otherwise for involuntary losses. This is, however,
subject to the provisions of Sections 23 and 26.
RIGHT AND POWERS OF TRUSTEES UNDER THE TRUST LAWS
Rights of Trustees under the trust laws in India
The Act confers the following rights upon trustees under the trust laws in India:
1. Right to Title-deed
A trustee is entitled to have in his possession the instrument of trust and all the
documents of title relating solely to the trust property.
2. Reimbursement of Expenses

A trustee may have to spend money for the execution of the trust, or for the
realisation, preservation or benefit of trust property. He can meet such expenses out
of the trust account. If he has defrayed such expenses out of his own pocket, he will
have first charge upon the trust property for his expenses and interest on it. Such
charge can only be enforced by prohibiting the sale of trust property without
payment of such expenses and interest. The charge can also be enforced otherwise
if the expenses were incurred with the sanction of a principal civil court of original
jurisdiction.
If the trust property fails, the trustee can recover from such beneficiary personally on
whose behalf he acted and at whose express or implied request he made the
payment.
If the trustee has by some mistake made an over-payment to a beneficiary, he can
recover the excess amount from the trust property and, if the trust property fails,
from the beneficiary personally.
3. Indemnity from Gainer of Breach under the trust laws
Where a breach of trust has occurred and a person, other than a trustee, has drawn
some benefit from such breach, he will be bound to indemnify the trustee will have a
charge on his interest for his indemnity. Such indemnity is not available to a trustee
who has been guilty of fraud in the breach of trust.
4. Opinion of Court in management of Trust Property under the trust laws
A trustee may have to face many problems in the course of the execution of the
trust. If there is any problem regarding the management of administration of the trust
property, he may seek the opinion of the court on that matter. He has not to file a
civil suit for this purpose. Ye can proceed just by a petition. The appropriate court is
the principal civil court of original Jurisdiction. The court may express its opinion
over the matter or give advice or directions to the trustee in the matter. The question
should not be advice or directions to the trustee in the matter. The question should
not be of such detail, difficulty or importance as is not capable of summary disposal.
A copy of such petition would have to be served upon persons whom the court
thinks may be interested so as to afford them an opportunity of participating in the
proceedings.
If the facts alleged in the petition are stated by the trustee in good faith and he has
followed the opinion, advice or directions of the court, he shall be deemed to have
discharged his duty in reference to the subject-matter of the petition.
The question of costs of application under the section have been left in the
discretion of the court.
5. Settlement of Accounts under the trust laws
When the duties of a trustee have been completed, he is entitled to have the
accounts of his administration of the trust property examined and settled. If nothing
remains due to the beneficiary under the trust the trustee is entitled to have an
acknowledgment in writing to that effect.
6. General Authority of Trustee under the trust laws
A trustee has the right to do all such acts as are reasonable and proper for the
realization, protection or benefit of the trust property and also for the protection and
support of a beneficiary who is not competent to contract. This is known as the

general authority of a trustee. This authority is in addition to the powers expressly


conferred by the Act and by the instrument of trust. The authority is subject to the
statutory restrictions particularly those in Section 17, and restrictions in the trustdeed. Further Section 36 itself says that a trustee shall not have the power to lease
the trust property for a term exceeding 21 years, nor without reserving the best
yearly rent that can be reasonably obtained.
POWERS OF TRUSTEES UNDER THE TRUST LAWS
Following powers are conferred by the Act upon trustees:
1. Power to sell
Where a trustee has the authority to sell the trust property, the section gives him a
lot of discretion in the matter. He may sell the property subject to the charges or free
of them. He may sell the whole property in one lot or in instalments, either by public
auction or by private negotiation and either at one time or at different times. This
authority is, however, subject to any contrary directions in the trust-deed.
Section 38 of the trust laws in India gives the trustee the power to sell under special
circumstances and also the power to buy-in or resell. The section gives a lot of
latitude to the trustee in the transaction of sale. The trustee may insert into the
contract of sale any reasonable stipulations, for example, about title or evidence of
title. He may also buy-in the property either wholly or partly at any sale by auction.
He may vary or rescind the contract of sale. He may resell the property after buying
it back or after rescinding the contract and taking back the property. All this will not
by itself involve him into any liability toward the beneficiary.
Where a trustee is directed to sell the trust property or to invest trust money in the
purchase or property, he may exercise a reasonable discretion as to the time of
effecting the sale or purchase. In one of the illustrations to the section certain
property is bequeathed to a person to sell it with all convenient speed and to pay the
proceeds to the beneficiary. This does not render an immediate sale imperative. In
the second illustration a property is bequeathed to a trustee to sell it at such times
and in such manner as he shall think fit and to invest the proceeds for the benefit of
the beneficiary. This does not permit as between the trustee and the beneficiary that
the sale can be postponed to an indefinite period.
2. Power to convey
The completion of a sale may require certain formalities, for example, the formality
of conveyance. That is why Section 39 gives the trustee the power of conveyance.
The section says that 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.
3. Power to vary investments under the trust laws
A trustee has the power, at his discretion, to recover investments and to invest the
proceeds in trust securities as listed in Section 20. He also has the power to vary
such investment from time to time for the benefit of the trust. Where, however, the
beneficiary is competent to contract and is entitled at the time to receive the income
of the trust property for his life, any change in investment would require his consent
in writing.
4. Maintenance of minors under the trust laws

Where the beneficiary is a minor, the trustee may, at his discretion, apply or pay to
the guardian the whole or any portion of the income of the trust property for the
maintenance of the minor, or his education, or advancement in life, or the
reasonable expenses of his religious worship, marriage or funeral. The rest of the
income should be accumulated into interest earning securities as listed in Section 20
to the benefit of which the beneficiary shall become ultimately entitled. In cases it
becomes necessary to do so the accumulations can also be applied for the benefit
of the beneficiaries. Where the income of the trust property is not sufficient for the
purposes stated above, the trustee may, with the permission of the principal civil
court of original jurisdiction, apply the trust property itself for those purposes. The
section saves the provisions of local law applicable to minors or their property.
5. Power to give receipts under the trust laws
A trustee may have to receive from time to time in the execution of the trust money,
securities or other property and may have to sign papers in acknowledgment of the
receipt. This section gives him the power to sign such receipts. In the absence of
any fraud, such receipt will discharge the person delivering the property from any
liability in that connection.
6. Power to compound under the trust laws
The section gives discretionary power to two or more trustees acting together in the
following respects:
Acceptance of any composition or any security for any debt or for any
property claimed;
Allowance of any time for payment of any debt;
Compromise, compound, abandon, submit to arbitration or otherwise settle
any debt, account or thing whatever relating to the trust;
For any of those purposes, enter into, give execute and do such agreements
instruments of composition or arrangement, releases or other things as to
them seem expedient, without being responsible for any loss occasioned by
any act or thing as done by them in good faith.
The powers conferred by this section upon two or more trustees may be exercised
by a sole acting trustee if the instrument of trust so authorises. The provisions of the
section are also subject to any contrary provisions in the trust-deed.
7. Authority to deal with Trust Property under the trust laws
Where the authority to deal with trust property is given to several trustees and one of
them disclaim or dies, the authority may be exercised by the continuing trustees.
This will not apply where the instrument of trust is specific on the point that the trust
will be executed only by the specified number of trustees.
8. Suspension of Trustees powers
Where a court has passed a decree in the matter of the trust, the powers of the
trustee become suspended. The result is that the trustee can exercise his power
only in conformity with the decree or with the sanction of the court which passed the
decree or with the sanction of the appellate court if the matter is under appeal.
Disabilities of Trustees under the trust laws

Chapter 5 of the Act gives a list of the disabilities of trustees. Having accepted the
office of a trust, the trustee has to sacrifice his normal rights or liberty in many
respects. He cannot, for example, purchase the trust property. This is his disability.
1. Trustee cannot renounce after acceptance under the trust laws in India
A trustee, who has accepted his office, suffers from this disability that he cannot
thereafter of his own accord renounce his office. The law permits him to get rid of his
office in the three ways stated in the section:
(a) with the permission of a principal civil court of original jurisdiction;
(b) with the consent of the beneficiary where he is competent to contract;
(c) by virtue of special power in the instrument of trust.
2. Trustee cannot Delegate
The selection of a trustee is an expression of the authors trust and confidence in his
competence and integrity. Every trustee is, therefore, expected to perform his
functions personally, and not to leave them to others. He suffers from this disability
that he cannot delegate his essential functions to others. Hence, the maxim of law
that a trustee cannot delegate. The rule is, however, subject to the following
exceptions:
(a) where it is permitted by the instrument of trust;
(b) where the delegation is in the regular course of business;
(c) where the delegation is necessary;
(d) where the beneficiary, being competent to contract, permits it.
An explanation to the section clarifies that the appointment of an attorney or proxy to
do an act of merely ministerial nature and involving no independent discretion is not
a delegation of functions. Where, for example, a trustee has to sell the trust property,
he may employ an auctioneer for the purpose. Where a trustee has to collect rents
of several houses, he may employ a person for the job.
3. Co-trustees cannot act singly
Where there are more than one trustees, all have to join in the execution of the trust.
A single trustee out of the several cannot build the trust by his acts, unless there is a
provision to that effect in the instrument of trust.
4. Control of discretionary power under the trust laws in India
Where a discretionary power conferred on a trustee is not exercised reasonably and
in good faith, the exercise of the power may be controlled by the principal civil court
of original jurisdiction.
5. Trustee not to charge for services
Ordinarily a trustee has no right to remuneration for his trouble, skill and loss of time
in executing the trust. Thus a trustee suffers from this important disability that he
cannot charge for his services. He may, however, charge for his services in the
following cases:
(a) where there is a direction to that effect in the instrument of trust;
(b) where there is a contract to that effect between the trustee and beneficiary;
(c) where at the time of accepting the trust, the trustee secures an order of the court
to that effect.
This disability does not apply in the case of official trustee, administrator-general,
public curator or a person holding a certificate of administration.

7. Trustee cannot buy trust property under the trust laws in India
A trustee who has been appointed to sell the trust property cannot buy it himself.
Whether he buys the property directly or indirectly or in the name of another person,
it will be no sale and he will hold the property in trust for the beneficiary. This
disability also extends to any agent appointed by the trustee for the sale of the
property. For, otherwise the trustee could have manipulated the purchase through
such agent.
The effect of the provision in Section 53 is to extend the disability further still. A
trustee, including a trustee who has recently ceased to be so, cannot buy, or
become mortgagee or lessee of the trust property or of any portion of it. He can do
any one of these things only with the permission of the principal civil court of original
jurisdiction. The court will give such permission only if the proposed transaction is for
the advantage of the beneficiary.
Similarly, where the office of the trustee is to buy or to obtain mortgage or lease of
particular property for the beneficiary, he cannot obtain the same for himself.
8. Co-trustees cannot mutually lend
Where the duty of a trustee or co-trustee is to invest trust money on mortgage or
personal security, he cannot invest the money on the mortgage or personal security
of himself or of one of his co-trustees.
RIGHTS AND LIABILITIES OF BENEFICIARY UNDER THE TRUST LAWS IN
INDIA
The Act confers following rights upon the beneficiary:
1. Right to Rents and Profit
A beneficiary is entitled to receive the rents and profits of the trust property. This
right is subject to the provisions of the instrument of trust.
2. Right to specific execution
The beneficiary has the right to have the intention of the author of the trust
specifically executed to the extent of his interest. Thus he can compel the trustee by
means of a court order to carry out the purpose of the trust.
This right also includes the right to have the trust property transferred to the
beneficiary. If the beneficiary is competent to contract he can direct the trustee to
transfer the property to him or to any other person at his choice. If there are more
than one beneficiaries, all of them can jointly demand the property to be transferred
to them.
Where the trust is for the benefit of a married woman, so that she shall not have the
power to deprive herself of her beneficial interest, the right of the beneficiary to have
the property transferred will not be available to her during marriage.
Where, for example, securities are transferred to a trustee to accumulate the interest
until the beneficiary attains the age of 24, the beneficiary on attaining that age can
have the securities transferred to him. Where Rs. 10,000 have been put in trust to
enable the trustee to purchase an annuity for the benefit of the beneficiary. The
beneficiary has attained the age of majority and is also otherwise competent to
contract. He may claim the money from the trustee. Where a property is transferred
to a trustee to sell or invest for the benefit of the beneficiary, the latter, if he is
competent to contract, may elect to have the property in its original character.

3. Right to inspect Accounts


The beneficiary has the right to inspect and to 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 etc., by which they are supported, and the cases
submitted and opinions taken by the trustee for his guidance in the discharge of his
duty.
4. Right to transfer beneficial interest
A beneficiary who is competent to contract has a right to transfer his beneficial
interest. This right is, however, subject to the law for the time being in force relating
to the circumstances in and extent to which such rights may be transferred. Where
the trust is for the benefit of a married woman without giving her the right of transfer,
she cannot do so during the period of her married life.
5. Right to sue for Execution of Trust
The section states the circumstances n which the execution f the trust can be
demanded from the court. A situation may arise in which no trustees have been
appointed, or all the trustees disclaim or have died or have been discharged, or the
execution of the trust, for any other reason, has become impracticable. The
beneficiary may apply to the court. The court is bound to carry further the trust under
its own supervision at least up to the time that trustees are appointed.
6. Right to proper Trustees
Subject to the provisions of the instrument of trust, the beneficiary has a right to say
that the trust property shall be properly protected and that it should be held and
administered by proper person and proper number of trustees. The first explanation
to the section gives the list of persons who are not proper for this purpose:
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 or the beneficiary allows otherwise, a married woman and a minor.
7. Right to compel act of duty
The beneficiary has a right to assure that the trustee shall perform a particular act of
duty and also to restrain him from committing any contemplated or probable breach
of trust. Of the two illustrations appended to the section one is like this: A contracts
to pay Rs. 100 to B every month so that B would hold the amount in trust for C. B
agrees to it. But A does not pay. The beneficiary, C, has a right to compel the trustee
B, on a proper indemnity to allow the beneficiary to sue A in the trustees name.
according to the other illustration a land is in the hands of a trustee for sale and
distribution of the proceeds equally between the two beneficiaries. The trustee is
about to make an improvident sale of the land. Any beneficiary may sue on behalf of
himself and the other to restrain the trustee from proceeding with the sale.
8. Wrongful purchase by Trustee
The beneficiary has the right to restrain the trustee from committing breach of trust.
One aspect of this right is that if the trustee has wrongfully purchased the trust
property for himself, the beneficiary can recover it back from him and also compel
him to hold the property in trust for the beneficiary. Where the property has been
sold to a third person, the beneficiary can recover from that third person if he has
bought the property with notice that it was trust property. This is known as the

beneficiarys right to follow trust property. The beneficiary recovering back the
property has, of course, to refund the purchase-money with interest and also other
expenses properly incurred in the preservation of the property. The trustee or the
purchaser from him are also under the obligation:
(a) to account for the net profits of the property during the period;
(b) to pay the occupation rent if he was in actual possession of the property;
(c) to allow the beneficiary to deduct a proportionate art of the purchase-money if the
property has been deteriorated by the acts or omissions of the trustee or the
purchaser.
These right of the beneficiary cannot prejudice the following transactions:
(1) The right of lessees and others who contracted in good faith with the trustee or
the purchaser before the beneficiary instituted his suit to have the property
transferred or declared subject to the trust.
(2) The beneficiary will lose the right to have the property retransferred where he
has ratified the purchase by the trustee. It is necessary for this
principle to apply that ratification should have been the expression of a free choice
on the part of the beneficiary. There should have been no coercion or undue
influence. He should have been competent to contract. He should have ratified the
transaction with full knowledge of the facts and of his rights.
9. Right to follow trust property
Where a trust property comes into the hands of a third person either under breach of
trust or otherwise inconsistently with the trust, the beneficiary may require him to
admit formally that it is a trust property. He may institute a suit for the declaration
that the property is comprised in the trust.
Where the trustee has disposed of the trust property and has received for it some
money or property and the same is traceable in his hands or in the hands of his legal
representatives or legatee, the beneficiary has the right that the same should be
regarded as in trust for him to the extent to which the nature of the property and
other circumstances permit it. Where, for example, the trust money is wrongfully
invested by the trustee n purchasing some and, the beneficiary is entitled to the
land. Where the land is purchased by the trustee partly with his own money and
partly with trust-money, the beneficiary will be entitled to a charge on the land to the
extent of the trust-money.
Section 64 restricts the right of the beneficiary to trace trust property as against
those who have acquired interest n the property in good faith. Thus the beneficiary is
not entitled to challenge the title 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 transferee.
The essence of the provision is that a bona fide transferee for value gets a good title
and also any transferee from him for consideration, as against the beneficiary.
For the purposes of this principle a personal creditor of the trustee attaching trust
property is not a transferee for consideration.

Where the trust property comprises of money, currency notes and negotiable
instruments, and they have passed to the hands of a bona fide holder, his rights will
depend upon law applicable to currency notes and negotiable instruments and not
according to the beneficiarys right to trace the trust property.
Section 65 extends the right of the beneficiary to a certain extent. It says that where
a trustee has wrongfully purchased the trust property and subsequently himself
becomes the owner of the property, the property shall again become subject to the
trust. This will be so notwithstanding that the intervening transferees acted in good
faith and had no notice of the wrongful transfer.
10. Right against Blended Property
Where the trustee wrongfully mingles his own property with the trust property, the
beneficiary is entitled to a charge on the blended property for the amount due to him.
11. Wrongful employment by partner
Where the trust property is in the hands of a partner and he has employed the
property in the business or on account of the firm, the other partners will not be
liable for such breach of trust unless anyone of them had knowledge of the breach of
trust.
Such of the partners as have notice of the breach of trust would be jointly and
severally liable for the breach. The section carries two illustrations: A partner dies
and leaves him share in the partnership in the hands of the other partner in trust for
his wife and children. The other partner continues the business with all the assets.
The beneficiary may compel him to account for the profits as are derived from the
late partners share in the capital. The other illustration is that a trader transfers his
property in the trade and also takes in two partners whom he gives an indemnity
against any possible claims by beneficiaries. All the three are liable to the
beneficiaries for the breach of trust.
Liability of beneficiary for Breach of Trust
The section imposes liability upon a beneficiary in the following cases:
(1) Where he joins in committing the breach of trust;
(2) Where he knowingly obtains an advantage from the breach without the consent
of the other beneficiaries;
(3) Where he 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;
(4) Where he deceives the trustee and induces him to commit breach of trust.
In such cases the other beneficiaries are entitled to have his beneficial interest
impounded until the loss caused be the breach has been compensated. Such right is
available even against one who claims under the guilty trustee, but not against bona
fid purchasers of him interest.
Beneficiarys Transferee
A person who purchases a beneficiarys interest gets the same rights which the
beneficiary had at the date of transfer. His interest will also remain subject to the
same liabilities s it was n the hands of the beneficiary.
Vacating the Office of Trustee

The office of a trustee may be vacated either by his death or by his discharge from
his office.
Discharge of Trustee
A trustee may be discharged from his office in the following ways:
(1) by the extinction of the trust;
(2) by the completion of his duties under the trust;
(3) by such means as may be prescribed by the instrument of trust;
(4) by appointment of a new trustee in his place under the provisions of the Act;
(5) with his own consent and that of the beneficiary or all the beneficiaries who are
competent;
(6) by the order of a court where a petition for his discharge is submitted.
A trustee may submit a petition for his discharge in a principal civil court of original
jurisdiction. If the court finds that there is sufficient reason for such discharge, the
court may discharge him accordingly. The court may direct that the costs may be
paid out of the trust property. Bu where there is no such reason, the court will not
discharge him, unless a proper person can be found to take his place.
Appointment of new Trustee
A new trustee can be appointed in any of the following cases:
Whenever any person appointed a trustee disclaims, or any trustee dies, or is for a
continuous period of six months absent from India, or leaves India for the purposes
of residing abroad, or is declared an insolvent; or desires to be discharged from the
trust, or refuses, or, in the opinion of the court, has become unfit, or personally
incapable to act in the trust, or accepts an inconsistent trust.
The new trustee can be appointed by a person nominated for that purpose in the
instrument of trust. If there is no such person or no such person able and willing to
act, then the appointment can be made by the author of the trust if he is still alive
and competent to contract, or by the continuing or surviving trustees of trustee, or by
the legal representative of the last surviving and continuing trustee, or, with the
consent of the court, by the retiring trustee or the last retiring trustee.
The appointment has to be by writing and under the signature of the person making
it. On the appointment of a new trustee the number of trustees may be increased.
The court can appoint the official trustee in any case in which only one trustee may
be appointed and such trustee is to be the sole trustee.
Appointment by Court
When any of the types of vacancy mentioned in Section 73 occurs, but it is
impracticable to appoint a trustee under that section, the court may, at the
application of the beneficiary, appoint a trustee or new trustee. The beneficiary has
only to make an application to the court. He has not to file a suit. The court is the
principal Civil Court of original jurisdiction.
In making its choice of a new trustee, the court should have regard to (a) the wishes
of the author of the trust as they appear from the instrument of trust; (b) the wishes
of the person who was empowered to appoint a new trustee; (c) the question
whether the appointment will promote or impede the execution of thee trust; and (d)
the interest of all beneficiaries if there are more than one beneficiaries.
Vesting of property in new Trustees

On the appointment of a new trustee, the trust property for the time being vested in
the surviving or continuing trustee, shall become vested in the new trustee either
solely or jointly with the continuing or surviving trustee. The powers of the such
trustees will be the same as if they were the original trustees.
Survival of Trust
The maxim of law is that a trust shall never fail for want of a trustee. In recognition of
this principle Section 76 provides that on the death or discharge of one of several
co-trustees, the trust survives and the trust property passes to the others. This will
however, be subject to any contrary provisions in the trust-deed.
Extinction of Trusts under the trust laws in India
According to Section 77 a trust is extinguished
(a) when its purpose is completely fulfilled; or
(b) when its purpose becomes unlawful ; or
(c) when the fulfillment of its purpose becomes impossible by destruction of the trust
property or otherwise; or
(d) when the trust, being revocable, is expressly revoked.
Section 78 explains the circumstances in which a trust can be revoked. It says that a
trust created by will may be revoked at the pleasure of the testator.
A trust created otherwise can be revoked only
(a) Where all the beneficiaries are competent to contract, by their consent;
(b) Where the trust has been declared by a non-testamentary instrument or orally,
the author may revoke if the has expressly reserved a power for himself to that
effect;
(c) Where the trust is for the payment of the debts of the author and it has not been
communicated to the creditors, it can be revoked at the pleasure of author of the
trust. The only illustration to the section supposes the case of a debtor who has
transferred his property to a trustee to enable him to pay his creditors. He reserves
for himself the power of revoking the trust. If the matter has not been communicated
to the creditors, the debtor may revoke the trust. But where the creditors have also
become a party to the arrangement, revocation will be possible only with the consent
of the creditors.
Effect of revocation
A trust cannot be revoked by the author of the trust so as to defeat or prejudice what
the trustee may have done in the due execution of the trust.
Obligations in the Nature of Trust under the trust laws in India
There are certain relations in which there is no formal trust, but the law has to
subject those relations to the same sanctity as if they were relations of trust.
Persons in those relations will be considered as occupying the position of a trustee.
Obligations in the nature of trust are imposed upon them. Section 80 contains a
general declaration that such obligations are supposed to exist in the cases
mentioned in Section 81-94. They are as follows:
1. No intention to dispose of Beneficial Interest
Where the owner of a property transfers it to another but it does not appear form the
attending circumstances that he intended also to dispose of the beneficial interest,
the transferee in such cases will hold the property in trust for the transferor or his

legal representative. Where, for example, a person transfers his land to another
without consideration and it does not appear from the circumstances that he
intended to make the transferee the full owner of the property, the transferee will
hold the property for the benefit of the transferor. A person transfers his two fields to
another and declares in reference to one that it would be in trust, but says nothing
about the other. That other property will be held by the transferee in trust for the
transferor. A person is the owner of certain stock. He transfers it into the joint names
of himself and one more. There is nothing to show that he intended to transfer it for
the benefit of the other. They will jointly hold it for the benefit of the owner. A person
makes the gift of certain land to his wife. The fact of gift indicates that he intended to
confer a benefit upon his wife. So she takes the beneficial interest also.
2. Transfer for consideration by another
Where transfer of a property is made to one person and consideration for it has
been paid by another and it appears from the circumstances that the party paying
the consideration did not intend to confer a benefit on the transferee, the transferee
has to hold the property for the benefit of the party providing the consideration.
3. Trust incapable of execution or which do not exhaust Trust property
The section incorporates the rule of what is known as resulting trust in favour of the
author of the trust. Where the trust becomes impracticable or where the object of the
trust has been fulfilled without the trust property being exhausted, a resulting trust
arises in favour of the author of the trust. The trustee will hold the property for the
benefit of the author.
4. Transfer for illegal purpose
Where the owner of the 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 has to hold the property for the
benefit of the transferor. Similarly, where a person bequeaths his property upon trust
and the purpose of the trust appears on the face of the will to be unlawful, or during
the testators 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 testators
legal representatives.
Where the revocation of a bequest has been prevented by coercion, the legatee
must hold the property for the benefit of the testators legal representatives.
5. Transfer pursuant to voidable contract
Where a property has been transferred under a contract which is liable to be
avoided by reason of fraud or mistake the transferee, on receiving notice to that
effect, must hold the property for the benefit of the transferor. The latter would have
to refund the consideration that he might have received.
6. Debtor becoming creditors representative
Where the debtor becomes the executor or other legal representative of the creditor,
he must hold the debt for the benefit of the persons interested in it.
7. Advantage gained by Fiduciary
The section deals with the person occupying a fiduciary position. It enumerates
trustee, executor, partner, agent, director or a company, legal adviser, or other

persons who are bound in a fiduciary character to protect the interest of another
person. If any of them by availing himself of his character, gains for himself any
pecuniary advantage or enters into a dealing in which his own interest is adverse to
that of the other person and thereby gains a monetary advantage, he has to hold
such advantages for the benefit of the other.
8. Advantage under undue influence
Where a person practices undue influence over another and thereby gains an
advantage without consideration, or gains an advantage with notice that undue
influence has been practiced, he must hold the advantage for the benefit of the
person who was the victim of undue influence.
9. Advantage gained by qualified owner
Where a person has a limited interest in a property and gains an advantage out of
such property, he has to hold such advantage for the benefit of all others, who have
interests in that property. Section 90 accordingly provides that a person who is a
tenant for life, co-owner, mortgagee or other qualified owner of any property and he
gains an advantage out of the property in derogation of the interests of others
interested in the property, he has to hold such advantage for the benefit of all. The
others will, however, be bound to made proportionate contribution towards the
expenses properly incurred in securing the advantage.
Property acquired with notice of existing interest
Where a person purchases property with notice that another person has already
entered into a contract affecting that property and that contract is specifically
enforceable, the subsequent purchaser will hold the property for the benefit of the
first to the extent to which it is necessary to give effect to the interest acquired by
him.
Advantage gained by compounding creditor
Where all the creditors of a debtor enter into an arrangement with the debtor for
compromising their claims, and one of them gains a special favour from the debtor
by secret parlays, he must hold such advantage for the benefit of all the creditors.
Purchase of property under Trust
Where a person contracts to buy certain property to be held under trust for the
benefit of certain beneficiaries and he buys the property accordingly, he must hold
the property for their benefit to the extent to which it is necessary to give effect to
that contract.
Constructive Trust
The principle of constructive trust finds statutory expression in Section 94. Where a
person does not become a trustee under any of the provisions of the Act, but is in
possession of a property in which he does not have the whole beneficial interest, he
must hold the property for the benefit of the person who is beneficially interested in
the property.
Position of Trustee under the trust laws
Persons who are enumerated in Chapter IX which deals with relations in the nature
of trust are declared by Section 95 to be occupying the position of a trustee.
Therefore, they will be bound to perform the same duties and will be subject to the
same liabilities and disabilities as if they were the trustees of the property in the full

sense of the word. If he properly employs the properly in cultivation, or trade or


business, he will be entitled to reasonable remuneration for his trouble, skill and loss
of time. Where the property is held by hi under a contract with the beneficiary
himself, he may, without the permission of the court, become lessee or mortgagee of
the property.
Section 96, which is the last section of the Act and of the chapter on relations in the
nature of trust, provides that the provisions of the chapter will not affect the rights
acquired by a person in good faith and for consideration. The provisions of the
chapter cannot also be used to create obligations in evasion of any law for the time
being in force.