Chapter 2 Chapter 2

Of the Creation of Trust

Lawful purpose.—A trust may be created for any lawful purpose. The purpose of a trust is lawful unless it is

1. (a) forbidden by law, or
2. (b) is of such a nature that, if permitted, it would defeat the provisions of any law, or
3. (c) is fraudulent, or
4. (d) involves or implies injury to the person or property of another, or
5. (e) the Court regards it as immoral or opposed to public policy. Every trust of which the purpose is unlawful is void.

Trust of immovable property Trust of immovable property.—No trust in relation to immovable property is valid unless declared by a non-testamentary instrument in writing signed by the author of the trust or the trustee and registered, or by the will of the author of the trust or of the trustee. Trust of movable property.—No trust in relation to movable property is valid unless declared as aforesaid, or unless the ownership of the property is transferred to the trustee.

Creation of trust.—Subject to the provisions of section 5, a trust is created when the author of the trust indicates with reasonable certainty by any words or acts

1. (a) an intention on his part to create thereby a trust,
2. (b) the purpose of the trust,
3. (c) the beneficiary, and
4. (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 property to the trustee.

Subject of trust.—The subject of a trust must be property transferable to the beneficiary.

Who may be beneficiary Who may be beneficiary.—Every person capable of holding property may be a beneficiary.

Who may be trustee Who may be trustee.—Every person capable of holding property may be a trustee, but, where the trust involves the exercising of discretion, he cannot execute it unless he is competent to contract. No one bound to accept a trust.—No one is bound to accept a trust. Disclaimer of trust.—Instead of accepting a trust, the intended trustee may, within a reasonable period, disclaim it, and shall prevent the trust-property from vesting in him.

Trustee to execute trust Trustee to execute trust.—The trustee is bound to fulfil the purpose of the trust, and to obey the directions of the author of the trust given at the time of its creation, except as modified by the consent of all the beneficiaries being competent to contract. Where the beneficiary is incompetent to contract, his consent may, for the purposes of this section, be given by a principal Civil Court of original jurisdiction.

Trustee to manage trust-property Trustee to manage trust-property.

Trustee to protect title to trust-property.—A trustee is bound to maintain and defend all such suits, and (subject to the provisions of the instrument of trust) to take such other steps as, regard being had to the nature and amount or value of the trust-property, may be reasonably required for the preservation of the trust-property and the assertion or protection of the title thereto.

Trustee not to set up title adverse to beneficiary.—The trustee must not for himself or another set up or aid any title to the trust-property adverse to the interest of the beneficiary.

Care required from trustee.—A trustee is 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.

Trustee to be impartial.--Where there are more beneficiaries than one, the trustee is bound to be impartial, and must not execute the trust for the advantage of one at the expense of another.

Trustee to prevent waste Trustee to prevent waste.--Where the trust is created for the benefit of several persons in succession and one of them is in possession of the trust-property, if he commits, or threatens to commit, any act which is destructive or permanently injurious thereto the trustee may take measures to prevent such act.

Accounts and information.--A trustee is bound to maintain and keep accurate accounts of the trust-property, and to, at the request of the beneficiary, to furnish full and accurate information as to the amount and state of the trust-property.

Investment of trust-money.--Where the trust-property consists of money and cannot be applied immediately or at an early date to the purposes of the trust, the trustee is bound (subject to any direction contained in the instrument of trust) to invest the money on the following securities, and on no others :--

1. (a) in promissory notes, debentures, stock or other securities of the Government of India, or of the State, or of the United Kingdom of Great Britain and Ireland :
2. (b) in bonds, debentures and annuities charged by the parliament of the United Kingdom on the revenues of India :
3. (c) in stock or debentures of, or shares in, Railway or other companies the interest whereon shall have been guaranteed by the Secretary of State for India in Council :
4. (d) [Omitted].
5. (e) on a first mortgage of immovable property situate in the State : Provided that the property is not a leasehold for a term of years and that the value of the property exceeds by one-third, or, if consisting of buildings, exceeds by one-half, the mortgage-money :

1. (2) A trustee may retain until redemption any redeemable stock, fund or security which may have been purchased in accordance with this section.

Investments made before commencement.--Nothing in section 20 shall apply to investments made before the commencement of this Act.

Sale by trustee directed to sell within specified time.--Where a trustee directed to sell within a specified time extends, by way of postponement, the period of sale, he is liable to make good the loss to the beneficiary (if any) caused by the postponement, unless he satisfies the principal Civil Court of original jurisdiction that the postponement was necessary for the interest of the beneficiary.

Liability for breach of trust.--Where the trustee commits a breach of trust, he is liable to make good the loss which the trust-property or the beneficiary has thereby sustained, unless the beneficiary has by fraud induced the trustee to commit the breach. A trustee committing a breach of trust is not liable to pay interest except in the following cases :--

1. (a) where he has actually received interest ;
2. (b) where the breach consists in unreasonable delay in paying trust-money to the beneficiary;
3. (c) where the trustee ought to have received interest, but has neglected to do so;
4. (d) where he makes default in payment of any of the trust-property;
5. (e) where the breach consists in the omission to perform any act which he was bound to perform. He is liable in case (a), to account for the interest actually received, and, in cases (b),
6. (c) and (d), to account for such interest at the rate of six per cent. per annum, unless the Court otherwise directs.

No set-off allowed to trustee.--A trustee who is liable for a loss occasioned by a breach of trust in respect of one portion of the trust-property cannot set-off against his liability any gain to the trust-property resulting from his breach of trust in respect of another portion of the trust-property.

Non-liability for predecessor's default.--Where a trustee succeeds another, he is not, as such, liable for the acts or defaults of his predecessors.

Non-liability for co-trustee's default.--Subject to the provisions of sections 13 and 15, one trustee is not, as such, liable for a breach of trust committed by his co-trustee : Provided that, in the absence of an express declaration to the contrary in the instrument of trust, a trustee is liable for a breach of trust committed by his co-trustee :--

1. (a) where he has delivered trust-property to his co-trustee without seeing to its proper application :
2. (b) where he allows his co-trustee to receive trust-property and fails to make due enquiry as to the co-trustee's dealings with it, or allows him to retain it longer than the circumstances of the case reasonably require :
3. (c) where he becomes aware of a breach of trust committed or intended by his co-trustee, and either actively conceals it or does not within a reasonable time take proper steps to protect the beneficiary's interest.

Several liability of co-trustees.—Any one of several trustees, each of whom is liable for a breach of trust, or where one of them is liable to commit a breach of trust, each is liable to the beneficiary for the whole of the loss occasioned by such breach. But as between the trustees themselves, each is entitled to contribution from the others for the excess of the loss beyond his share, unless the co-trustees have been guilty of fraud to institute a suit to compel contribution.

Non-liability of trustee paying without notice of transfer by beneficiary Non-liability of trustee paying without notice of transfer by beneficiary

Liability of trustee where beneficiary's interest is forfeited to Government

Right to reimbursement of expenses.

Right to indemnity

Right to reimbursement of expenses

Right to settlement of accounts

General authority of trustee.—In addition to the powers conferred by this Act and by the instrument of trust, and subject to the restrictions, if any, contained in such instrument, and to the provisions of section 17, a trustee may do all acts which are reasonable and proper for the realisation, protection or benefit of the trust-property, and for the protection or support of a beneficiary who is not competent to contract.

1. (a) Except with the permission of a principal Civil Court of original jurisdiction, no trustee shall lease trust-property for a term exceeding twenty-one years from the date of executing the lease, nor without reserving the best yearly rent that can be reasonably obtained.

Power to sell in lots, and either by public auction or private contract.—Where the trustee is empowered to sell any trust-property, he may sell the same subject to prior charges or not, and either together or in lots, by public auction or private contract, and either at one time or at several times, unless the instrument of trust otherwise directs. The trustee may buy in any property at a sale by auction and resell the same, and any loss sustained by any such resale, and any expenses incurred by him in connection with such sale, shall be borne by the trust-property. Where a trustee is directed to sell, he may for that purpose authorise a valid contract for sale, and may insert such reasonable stipulations as to title or evidence of title, or otherwise, as he thinks fit.

Time allowed for selling trust-property.—Where a trustee is directed to sell within a specified time, and he fails to do so, the burden of proving, as between himself and the beneficiary, that the postponement was necessary for the interest of the beneficiary, lies upon the trustee, unless the extension has been authorised by a principal Civil Court of original jurisdiction. A bequeaths property to B, directing him to sell it within five years and apply the proceeds. B, in the exercise of reasonable discretion, postpones the sale for six years. The sale is not thereby rendered invalid, but B, if he cannot prove the postponement to be necessary, may be liable to pay to the beneficiary compensation.

Power to convey Power to convey.—For the purpose of completing any such sale, the trustee shall have power to convey or otherwise dispose of the property sold in such manner as may be necessary.

Power to vary investments.—A trustee may, at his discretion, call in any trust-property invested in any security and after on any of the securities mentioned or referred to in section 20, and from time to time vary any such investments for others of the same nature: Provided that, where there is a beneficiary competent to contract and entitled at the time to receive the income of the trust-property for his life, or for a greater estate, his consent in writing is necessary to effect such variation.

Power to give receipts.—Any trustees or trustee may give a receipt in writing for any money, securities or other movable property payable, transferable or deliverable to them or him by reason, or in the exercise, of any trust or power; and, in the absence of fraud, such receipt shall discharge the person paying, transferring or delivering the same therefrom, and from seeing to the application thereof, or from being accountable for any loss or misapplication thereof.

Power to several trustees of whom at least one is competent to contract.—When any authority to deal with the trust-property is given to several trustees and concurrently is given to all of them, if one of them disclaims or dies, the authority may be exercised by the continuing trustees, unless from the terms of the instrument of trust it is apparent that the authority is to be exercised by a number in excess of the number of the remaining trustees.

Suspension of trustee's powers by decree.—Where a decree has been made in a suit for the execution of a trust, the trustee must not exercise any of his powers except in conformity with such decree, or with the sanction of the Court by which the decree has been passed, or, where an appeal against the decree is pending, of the Appellate Court.

Trustee cannot renounce after acceptance (Wait, the previous section was labeled 44 in the document text, this seems to be a numbering error in the source, but I follow the user's specific request for the provision text starting "Trustee cannot...")

A trustee who has accepted the trust cannot afterwards renounce it except with the permission of a principal Civil Court of original jurisdiction, or with the consent of the beneficiary, provided he is competent to contract, or by virtue of a special power in the instrument of trust.

45. Trustee cannot delegate Trustee cannot delegate.—A trustee cannot delegate his office or any of his duties either to a co-trustee or to a stranger, unless

1. (a) the instrument of trust so provides, or
2. (b) the delegation is in the regular course of business, or
3. (c) the delegation is necessary, or
4. (d) the beneficiary, being competent to contract, consents to the delegation.
5. (a) A bequeaths certain property to B and C on trust to apply it to certain purposes, and directs them to execute the trust by them or the survivor of them or the trustees of them for the time being. C may bequeath the trust to D and E by his will. Explanation.—The appointment of an attorney or proxy to do an act merely ministerial and involving no independent discretion is not a delegation within the meaning of this section. 46. Co-trustee cannot act singly Co-trustee cannot act singly.—When there are more trustees than one, all must join in the execution of the trust, except where the instrument of trust otherwise provides.

Control of discretionary power.—Where a discretionary power conferred on a trustee is not exercised reasonably and in good faith, such power may be controlled by principal Civil Court of original jurisdiction.

Trustee may not charge for services.—In the absence of express directions to the contrary contained in the instrument of trust or of a contract to the contrary entered into with the beneficiary or the Court at the time of accepting the trust, a trustee has no right to remuneration for his trouble, skill and loss of time in executing the trust.

Trustee may not use trust-property for his own profit.—A trustee may not use or deal with the trust-property for his own profit or for any other purpose unconnected with the trust.

Trustee for sale or his agent may not buy.—No trustee whose duty it is to sell trust-property, and no agent employed by such trustee for the purpose of the sale, may, directly or indirectly, buy the same or any interest therein, on his own account or as agent for a third person.

Trustee may not buy beneficiary's interest without permission.—No trustee, and no person who has recently ceased to be a trustee, may, without the permission of a principal Civil Court of original jurisdiction, buy or become mortgagee or lessee of the trust-property or any part thereof; and such permission shall not be given unless the proposed purchase, mortgage or lease is manifestly for the advantage of the beneficiary.

Co-trustees may not lend to one of themselves Co-trustees may not lend to one of themselves.-A trustee or co-trustees whose duty it is to invest trust-money on mortgage or personal security must not invest it on a mortgage by, or on the personal security of, himself or one of his co-trustees.

Rights to rents and profits.-The beneficiary has, subject to the provisions of the instrument of trust, a right to the rents and profits of the trust property.

Right to specific execution.-The beneficiary has a right to have the intention of the author of the trust specifically executed to the extent of the beneficiary's interest; and, where there is only one beneficiary and he is competent to contract, or where there are several beneficiaries and they are all competent to contract and all join in the application, he or they may require the trustee to transfer the trust-property to him or them, or to such person as he or they may direct. When property has been transferred or bequeath for the benefit of a married woman, so that she shall not have power to deprive herself of her beneficial interest, nothing in the second clause of this section applies to such property during her marriage. Illustrations.

1. (a) Certain Government securities are given to trustees in trust for A, B and C, to accumulate the interest until A attains the age of 18, and then to pay the gross amount to them. A on attaining the age of 18, though he is not exclusively interested in the trust property, requires the trustee to pay his share immediately to him.
2. (b) A bequeaths Rs. 10,000 to trustees upon trust for B, who has attained his majority and is otherwise competent to contract. B may claim the Rs. 10,000.
3. (c) A transfers certain property to B and directs him to sell or dispose of it and pay the proceeds to C, who is competent to contract.

Right to inspect and take copies of instrument of trust Right to inspect and take copies of instrument of trust, etc.-The beneficiary has a right, as against the trustee and all claiming under him with notice of the trust, to inspect and take copies of the instrument of trust, the documents of title relating to the trust-property, the accounts of the trust-property and the vouchers by which they are supported, and the cases submitted and the opinion taken by the trustee for his guidance in the discharge of his duty.

Right to transfer beneficial interest.-The beneficiary, if competent to contract, may transfer his interest, but subject to the law for the time being in force as to the circumstances and extent in and to which he may dispose of such interest: Provided that when property is transferred or bequeathed for the benefit of a married woman, so that she shall not have power to deprive herself of her beneficial interest, nothing in this section shall authorize her to transfer such interest during her marriage.

Right to sue for execution of trust.-Where no trustees are appointed or all the trustees die, disclaim or are discharged, or where for any other reason the execution of a trust by the trustee is or becomes impracticable, the beneficiary may institute a suit for the execution of the trust, whether the trust may, so far as may be possible, be executed by the Court until the appointment of a trustee or new trustee.

Right to proper trustees.-The beneficiary has a right (subject to the provisions of the instrument of trust) that the trust-property shall be properly protected and held and administered by proper persons and by a proper number of such persons. Explanation I.-The following are not proper persons within the meaning of this section:- A person domiciled abroad; an alien enemy; a person having an interest inconsistent with that of the beneficiary; a convict; and, unless the personal law of the settlor allows otherwise, a married woman and a minor. Explanation II.-When the administration of the trust involves the receipt and custody of money, the number of trustees should be two at least. Illustrations.

1. (a) A, one of several trustees, is employed in the active business of the trust. B may require A to be removed.
2. (b) A bequeaths certain jewels to B in trust for C. B dies during A's lifetime; then A dies. C is entitled to have the property conveyed to a trustee for him.
3. (c) A conveys certain property to four trustees in trust for B. Two of the trustees die. B may institute a suit to have two new trustees appointed in the place of the deceased trustees.
4. (d) A conveys certain property to trustees in trust for B. All the trustees disclaim. B may institute a suit to have three trustees appointed.
5. (e) A, a trustee for B, refuses to act, is continuously absent from India, or is declared an insolvent, or desires to be discharged from the trust, or suffers a co-trustee to commit a breach of trust.

Right to compel any act of duty Right to compel any act of duty.-The beneficiary has a right that his trustee shall be compelled to perform any particular act of his duty as such, and restrained from committing any contemplated or probable breach of trust. Illustrations.

1. (a) A contracts with B to pay him money when received in respect of certain land to C. B writes and signs a letter declaring that he will hold the money so to be paid. A fails to pay the money. C may compel B on a proper suit to file the suit as trustee in B's name.
2. (b) A is trustee of certain land, with a power to sell the same and pay the proceeds to B and C equally. A is about to make an improvident sale of the land.

Wrongful purchase by trustee Wrongful purchase by trustee.-Where a trustee has wrongfully bought trust-property, the beneficiary has a right to have the property declared subject to the trust or re-transferred by the trustee, if it remains in his hands unsold, or, if it has been bought from him by any person with notice of the trust, by such person. But in such case the beneficiary must repay the purchase-money paid by the trustee, with interest, and such other expenses (if any) as he has properly incurred in the preservation of the property; and the trustee or purchaser must

1. (a) account for the net profits of the property,
2. (b) pay an occupation-rent, if he has been in actual possession of the property, and
3. (c) allow the beneficiary to deduct a proportionate part of the purchase-money if the property has been deteriorated by the acts or omissions of the trustee or purchaser. Nothing in this section--
4. (a) impairs the rights of lessees and others who, before the institution of a suit to have the property declared subject to the trust or re-transferred, have contracted in good faith with the trustee or purchaser; or
5. (b) entitles the beneficiary to have the property declared subject to the trust or re-transferred where he, being competent to contract, has himself, without coercion or undue influence having been brought to bear on him, ratified the sale to the trustee with full knowledge of the facts and of his rights as against the trustee.

Following trust-property into the hands of third persons.-Where trust-property comes into the hands of a third person inconsistently with the trust, the beneficiary may require him to admit formally, or may institute a suit for a declaration, that the property is comprised in the trust. Where the trustee has disposed of trust-property and the money or other property which he has received therefor can be traced in his hands, or the hands of his legal representative or legatee, the beneficiary has, in respect thereof, rights as nearly as may be the same as his rights in respect of the original trust-property. Illustrations.

1. (a) A, a trustee for B, of Rs. 10,000, wrongfully invests the Rs. 10,000 in the purchase of certain land. B is entitled to have the land treated as trust-property.
2. (b) A, a trustee, wrongfully purchases land in his own name, partly with his own money, partly with money subject to a trust for B.

Saving rights of certain transferees Saving of rights of certain transferees.-Nothing in section 63 entitles the beneficiary to any right in respect of property in the hands of--

1. (a) a transferee in good faith for consideration without notice of the trust, or
2. (b) a transferee for consideration from such a transferee. A judgment-creditor of the trustee attaching and purchasing trust-property is not a transferee for consideration within the meaning of this section. Proviso in section 63 applies to money, currency notes and negotiable instruments in the hands of a bona fide holder to whom they have passed in circulation, and shall not be deemed to affect the consideration or the liability of a person to whom a debt or charge is transferred.

Acquisition by trustee of trust-property wrongfully converted.-Where a trustee wrongfully sells or otherwise transfers trust-property and afterwards becomes the owner of the property, the property again becomes subject to the trust, notwithstanding any want of notice on the part of intervening purchasers in good faith for consideration.

Right in case of blended property.-Where the trustee wrongfully mingles the trust-property with his own, the beneficiary is entitled to a charge on the whole fund for the amount due to him.

Acquisition by trustee of trust-property wrongfully converted.—Where a trustee wrongfully sells or otherwise transfers trust-property and becomes the owner of the property, the property again becomes subject to the trust, notwithstanding any want of notice on the part of intervening transferees in good faith for consideration. Right of case of blended property.—Where the trustee wrongfully mingles the trust-property with his own, the beneficiary is entitled to a charge on the whole fund for the amount due to him.

Liability of beneficiary joining in breach of trust.—Where one of several beneficiaries—

1. (a) joins in committing breach of trust, or
2. (b) knowingly obtains any advantage therefrom without the consent of the other beneficiaries, or
3. (c) becomes aware of a breach of trust committed, and either actually conceals it, or does not within a reasonable time take proper steps to protect the interests of the other beneficiaries, shall be liable to make good the loss, unless such breach of trust has been compensated.

Rights and liabilities of beneficiary's transferee Rights and liabilities of beneficiary's transferee.—Every person to whom a beneficiary transfers his interest has the rights, and is subject to the liabilities, of the beneficiary in respect of such interest at the date of the transfer.

Office how vacated.—The office of a trustee is vacated by his death or by his discharge from his office.

Discharge of trustee.—The trustee may be discharged from his office only as follows :—

1. (a) by the extinction of the trust;
2. (b) by the completion of his duties under the trust;
3. (c) by such means as may be prescribed by the instrument of trust;
4. (d) by appointment under this Act of a new trustee in his place;
5. (e) by consent of himself and the beneficiary, or, where there are more beneficiaries than one, all the beneficiaries being competent to contract, or one of the beneficiaries, to the Court to which a petition for his discharge is presented under this Act.

Appointment by Court.—The Court may appoint a new trustee or new trustees, in the case of any trust which is incapable of execution or is being executed by a person personally incapable to act in the trust, or who is currently acting in a continuous absence, or lacks the law for the purpose of reappointment. [Note: The text of this section is fragmentary in source].

Vesting of trust-property in new trustees Vesting of trust-property in new trustees.—Whenever any new trustee is appointed under section 74, all the trust-property for the time being vested in a surviving or continuing trustee or trustees, or in the legal representative of any trustee, shall become vested in such new trustee, either solely or jointly with the surviving or continuing trustees or trustee as the case may require.

Trust how extinguished.—A trust is extinguished—

1. (a) when its purpose is completely fulfilled; or
2. (b) when its purpose becomes unlawful; or
3. (c) when the fulfilment of its purpose becomes impossible by destruction of the trust-property or otherwise; or
4. (d) when the trust, being revocable, is expressly revoked.

Revocation of trust.—A trust created by will may be revoked at the pleasure of the testator. A trust created otherwise than by will can be revoked only—

1. (a) where all the beneficiaries are in existence and competent to contract—by their consent;
2. (b) where the trust has been declared by non-testamentary instrument or by word of mouth—in exercise of a power of revocation expressly reserved to the author of the trust;
3. (c) where the trust is for the payment of the debts of the author of the trust, and has not been communicated to the creditors—at the pleasure of the author of the trust.

Revocation not to defeat what has been duly done.—No trust can be revoked by the author of the trust so as to defeat or prejudice what the trustees may have duly done in execution of the trust.