INDIAN TRUSTS ACT, 1882

An Act to define and amend the law relating to Private Trusts and Trustees.
SECTION 3 – INTERPRETATION-CLAUSE
Trust – A trust is an obligation annexed to the ownership of property, and arising out of a
confidence reposed in and accepted by the owner, or declared and accepted by him, for the
benefit of another, or of another and the owner.
Author of the Trust – The person who reposes or declares the confidence.
Trustee – The person for whose benefit the confidence is accepted.
Trust-property or Trust-money – The subject-matter of the trust.
Beneficial interest or Interest of the Beneficiary – The right of the beneficiary against the
trustee as owner of the trust-property.
Instrument of Trust – Instrument, if any, by which the trust is declared.
Breach of Trust – A breach of any duty imposed on a trustee, as such, by any law for the
time being in force.
 Section 3 acts more like an interpretation section than a definitional section. It is
explanatory and descriptive in nature.
 The instrument of trust refers to either a Trust Deed or a Testamentary Document.
 A Trust deed can be a Deed Pole (only one Party, the Author, signs the document) or an
Indenture Deed (Both the Parties sign the document).
 In most situations, both the author and the trustees sign on the deed.
 In a deed pole, there must be clarity (within a clause in the deed) as to who the trustees
are.

CREATION OF TRUSTS
SECTION 4 – LAWFUL PURPOSE
A trust may be created for any lawful purpose.
The purpose of a trust is lawful unless it is:
(a) forbidden by law, or
(b) is of such a nature that, if permitted, it would defeat the provisions of any law, 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.
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 immoveable and
situate in a foreign country, the law of such country.
Illustrations
(a) A conveys property to B in trust to apply the profits to the nurture of female foundlings to
be trained up as prostitutes. The trust is void.
(b) A bequeaths property to B in trust to employ it in carrying on a smuggling business, and
out of the profits thereof to support A's children. The trust is void.
(c) A, while in insolvent circumstances, transfers property to B in trust for A during his life,
and after his death for B. A is declared an insolvent. The trust for A is invalid as against his
creditors.
 This Section is pari materia to Section 23 of the Indian Contract Act, 1872.
 Section 4 is a general provision of Trust Law. This means that even though the ITA is
applicable only to Private Trusts, and not to Public Trusts, such general principles are
applicable in those States which do not have a specific enactment to govern Public Trusts.
 A trust must not be created such that it violates the Rule Against Perpetuity.

SECTION 5 –
TRUST OF IMMOVABLE PROPERTY – No trust in relation to immoveable 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 MOVEABLE PROPERTY – No trust in relation to moveable property is valid unless
declared as aforesaid, or unless the ownership of the property is transferred to the trustee.
These rules do not apply where they would operate so as to effectuate a fraud.
 This Section pertains to the formalities relating to the creation of Trust with
Immovable and Moveable properties.
 The first part of the provision relates to Immoveable property being the subject-matter of
the Trust. It states that a non-testamentary trust is not created if it is not created by a non-
testamentary document that is written, signed by the author of the trust, and registered.
 Registration is thus mandatory for a non-testamentary trust floated for an immovable
property.
 In case of a private trust that is floated by way of a will (testamentary document), the
Indian Succession Act of 1925 says that although a will may not be mandatorily
registered, it must be probated. Probation of will is compulsory.
 Furthermore, the Transfer of Property Act clarifies that any transfer of moveable
property exceeding Rupees 100 must be mandatorily registered. However, the Indian
Trusts Act does not make any such requirement in context of amount.
 The second part of the provision deals with Moveable property. A trust with subject
matter of trust being a moveable property may be floated as indicated in the first part.
 A simple transfer of ownership of the moveable properties in favour of the trustees is
sufficient to create a trust.
 However, it is always advised that the document is registered as there is involvement of
third parties.

SECTION 6 – 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:
(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.
Illustrations
(a) A bequeaths certain property to B, “having the fullest confidence that he will dispose of it
for the benefit of” C. This creates a trust so far as regards A and C.
(b) A bequeaths certain property to B “hoping he will continue it in the family”. This does not
create a trust, as the beneficiary is not indicated with reasonable certainty.
(c) A bequeaths certain property to B, requesting him to distribute it among such members of
C's family as B should think most deserving. This does not create a trust, for the beneficiaries
are not indicated with reasonable certainty.
(d) A bequeaths certain property to B, desiring him to divide the bulk of it among C’s
children. This does not create a trust, for the trust-property is not indicated with sufficient
certainty.
(e) A bequeaths a shop and stock-in-trade to B, on condition that he pays A’s debts and
legacy to C. This is a condition, not a trust for A’s creditors and C.
 Section 6 has incorporated the rules propounded by the Court of Equity in Knight v.
Knight. The three certainties which were evolved by Lord Langdale were – Intention,
Subject-matter and Objects (Beneficiaries).
 Three indispensable aspects of a trust are –
1. Intention of author to form the trust.
2. Certainty with respect to subject-matter of the trust.
3. Beneficiaries
The ITA has added one more aspect in this regard –
4. The purpose of the trust.
 It also imposes one important condition with respect to creation of trust – it is essential
that the author transfers the trust property in favour of the trustee.
 The only exception to this is when the author himself acts as trustee – since Section 6
permits the author/settlor to be a trustee in a trust.
Sprange v. Bernard (1789)
The testatrix provided in her will – “for my husband, Thomas Sprange, to be will to him
the sum of 300 Pounds…for his sole use; and at his death, the remaining part of what is
left, that he does not want for his own want and use, to be divided between…” her brothers
and sisters.
In this case, the subject-matter of the trust is not certain, neither is the intention clear. Thus,
this was considered to be a gift, not a trust.

Morice v. Bishop of Durham (1805)

Sir William Grant MR said – “There must be somebody in whose favour the Court can
decree performance.”

Mussorie Bank Ltd. v. Raynor (1882)

The testator gave all his property to his widow, “feeling confident that she will act justly
and to our children in dividing the same when no longer required by her.”
 There exists no certainty with respect to the subject-matter. Thus, this cannot be considered
as a trust.

Palmer v. Simmonds (1854)

The testatrix, by way of a will, left residue of her estate to her friend, subject to the proviso
that, if he died childless, then “he will… leave the bulk of my said residuary estate unto”
four named persons. Since the will contains the word “bulk”, there is uncertainty with
respect to the subject matter. Thus, this does not constitute a trust.

SECTION 7 – WHO MAY CREATE TRUSTS

A trust may be created –
(a) by every person competent to contract, and,
(b) with the permission of a principal Civil Court of original jurisdiction, by or on behalf of a
minor;
but subject in each case to the law for the time being in force as to the circumstances and
extent in and to which the author of the trust may dispose of the trust-property.
 Two fundamental things are required for being capable of forming a trust –
1. Power of disposition over property (Section 7 of the Transfer of Property Act).
2. Competence to contract (Section 11 of the Indian Contract Act).
 In case of a private trust involving a minor, the role of the principal Civil Court is very
important. The Court will identify if the person acting on behalf of the minor is
appropriately determined or not.

SECTION 8 – SUBJECT OF TRUST

The subject-matter of a trust must be property transferable to the beneficiary. It must not be
merely beneficial interest under a subsisting trust.
 This restriction indicates that creation of a trust of trust is not allowed (this is different
from the English position, where a trust upon trust or use over use is valid).
 This means that a beneficiary cannot make his or her beneficial interest the subject-matter
of another trust.

SECTION 9 – WHO MAY BE BENEFICIARY

Every person capable of holding property may be a beneficiary.
A proposed beneficiary may renounce his interest under the trust by disclaimer addressed to
the trustee, or by setting up, with notice of the trust, a claim inconsistent therewith.
 Every person who is capable of holding property can be a beneficiary. Capability, in this
regard, must not be equated with competency. Incompetent persons can be beneficiaries
(minor, unborn child, etc.).
 Section 9 clarifies that it is not necessary (i.e., there is no compulsion) for the beneficiary
to accept the benefits of the trust.
 A beneficiary may disclaim the trust.
 Such disclaimer must be in an express form and notice must be given to the Trustee.
 Section 9 must be read with Section 56 of the ITA, which empowers a beneficiary to
transfer the beneficial interest to another.

SECTION 10 –
WHO MAY BE TRUSTEE – Every person capable of holding property may be a trustee; but,
where the trust involves the exercise of discretion, he cannot execute it unless he is competent
to contract.
NO ONE BOUND TO ACCEPT TRUST – No one is bound to accept a trust.
ACCEPTANCE OF TRUST – A trust is accepted by any words or acts of the trustee indicating
with reasonable certainty such acceptance.
DISCLAIMER OF TRUST – Instead of accepting a trust, the intended trustee may, within a
reasonable period, disclaim it, and such disclaimer shall prevent the trust-property from
vesting in him.
A disclaimer by one of two or more co-trustees vests the trust property in the other or others,
and makes him or them sole trustee or trustees from the date of the creation of the trust.
Illustrations
(a) A bequeaths certain property to B and C, his executors, as trustees for D. B and C prove
A’s will. This is in itself an acceptance of the trust, and B and C hold the property in trust for
D.
(b) A transfers certain property to B in trust to sell it and to pay out of the proceeds A’s debts.
B accepts the trust and sells the property. So far as regards B, a trust of the proceeds is
created for A’s creditors.
(c) A bequeaths a lakh of rupees to B upon certain trusts and appoints him his executor. B
severs the lakh from the general assets and appropriates it to the specific purpose. This is an
acceptance of the trust.
 Every person who is capable of holding property can be a trustee, but where the trust
involves the exercise of discretion, he cannot execute it unless he is competent to
contract.
 Further, no person is bound to accept trust. But, keeping in mind Section 46 of the ITA,
once a person accepts the trust and becomes trustee, he cannot renounce after such
acceptance.
 However, this is not an absolute disability. Renunciation is allowed if the deed allows for
it (disclaimer by a trustee), if the trustee gets sick, or if the beneficiaries deem him to be
not proper.
 No trust is defeated for the want of a Trustee. Certainty of a trustee is not essential for
a trust.
 An interpretation of Section 10 makes it clear that while a minor can be a trustee, he
cannot exercise discretion in a trust.
 Section 60 of the ITA says that a beneficiary has the right that a trustee executing a trust
be a Proper Trustee (Section 60 indicates as to who is a proper trustee and who is not).
 A trust is accepted by a person either by any words or acts with reasonable certainty that
trust is accepted.

DUTIES AND LIABILITIES OF TRUSTEES

SECTION 11 – 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.
Nothing in this section shall be deemed to require a trustee to obey any direction when to do
so would be impracticable, illegal or manifestly injurious to the beneficiaries.
Explanation
Unless a contrary intention be expressed, the purpose of a trust for the payment of debts shall
be deemed to be (a) to pay only the debts of the author of the trust existing and recoverable at
the date of the instrument of trust, or, when such instrument is a will, at the date of his death,
and (b) in the case of debts not bearing interest, to make such payment without interest.

Illustrations
(a) A, a trustee, is simply authorized to sell certain land by public auction. He cannot sell the
land by private contract.
(b) A, a trustee of certain land for X, Y and Z, is authorized to sell the land to B for a
specified sum. X, Y and Z, being competent to contract, consent that A may sell the land to C
for a less sum. A may sell the land accordingly.
(c) A, a trustee for B and her children, is directed by the author of the trust to lend, on B’s
request, trust-property to B’s husband, C, on the security of his bond. C becomes insolvent
and B requests A to make the loan. A may refuse to make it.
 Under Section 11, the trustee is mandated to –
1. Fulfill the purpose of the trust.
2. Obey the directions of the author of the trust given at the time of creation of trust.
 Exceptions –
1. When all parties interested as sui juris and are of common mind and willing to put an
end or to amend the trust.
2. When execution of the trust is impracticable (object/subject-matter of the trust is
frustrated or extinguished).
3. When execution becomes illegal.
4. When execution is injurious to the beneficiaries.
 The beneficiaries of a private trust who are competent to contract have the right to modify
the intention of the author (common mind in case of multiple beneficiaries).

Saunders v. Vautier (1841)

The author created trust and gave property to the trustee (Express Trust). Once the
beneficiary turned 25, then the trustee had to put an end to the trust and give the property to
the beneficiary. Upon attaining the age of 21, the beneficiary sought the trust property from
the trustee, asking him to put an end to the trust. The trustee refused, stating that he had an
obligation under the trust deed. The issue before the Court was whether a beneficiary who
is competent to contract could ask the trustee to put an end to the trust. The Court said yes,
the Beneficiary can do so.

Muffakham Jan Bahadur & Ors. v. H.E.H. Nawab Mir Barkat Ali Khan (1989)
The author, a Nawab, created a trust for the family and became a trustee along with two
other trustees. The author wanted the trust to last for 50 years. As time passed, the author
died and the two trustees took retirement. Two trustees were newly appointed. After the
exhaustion of some period, the beneficiaries were getting entitlements worth Rupees 50 –
450. The beneficiaries stated that this amount was too low and requested the trustees to put
an end to the trust and distribute the trust in the specified proportion (Tax liability was too
high to be borne by the beneficiaries). The trustees did not agree to do so as it was against
the intention of the author.
In this regard, four provisions were attracted –
1. Section 11 of the ITA
2. Section 34 of the ITA
3. Section 56 of the ITA
4. Section 78 of the ITA
Section 34 gives right to a trustee to apply to Court for management of trust property. A
trustee can seek advice from the principal Civil Court (District Court) and seek
consultation or opinion regarding trust property.
The trustees thus filed an application to the Court seeking advice. The District Court solely
relied on Section 11 and rejected the arguments of the beneficiaries and the request of the
trustees was denied.
A civil revision petition was filed by the trustees before the Andhra Pradesh High Court.
The High Court said that the opinion of the District Court was very restrictive in nature.
Section 11 gives exceptions to following the intention of the author. Merely relying on one
part of the provision and ignoring another was done by the District Court.
The AP HC said that Sections 11 and 56 must be read together. Section 11 gives the duty
of the trustee to execute the trust and Section 56 gives the right of beneficiary to get the
trust executed by the trustees. It further allows the beneficiaries to put an end to the transfer
or even transfer beneficial interest.
Section 78 talks about situations in which a private trust can be revoked. One such situation
 is where the beneficiaries are competent to contract and sui juris then they can put an end
to the trust. Thus, the AP HC categorically held that in this situation, the trustees can
deviate from the intention of the author.

SECTION 12 – TRUSTEE TO INFORM HIMSELF OF STATE OF TRUST-PROPERTY

A trustee is bound to acquaint himself, as soon as possible, with the nature and circumstances
of the trust-property; to obtain, where necessary, a transfer of the trust-property to himself;
and (subject to the provisions of the instrument of trust) to get in trust-moneys invested on
insufficient or hazardous security.
Illustrations
(a) The trust-property is a debt outstanding on personal security. The instrument of trust gives
the trustee no discretionary power to leave the debt so outstanding. The trustee’s duty is to
recover the debt without unnecessary delay.
(b) The trust-property is money in the hands of one of two co-trustees. No discretionary
power is given by the instrument of trust. The other co-trustee must not allow the former to
retain the money for a longer period than the circumstances of the case required.
 Let us suppose that X creates a trust with Y as trustee. It is expected from Y that once he
accepts confidence, he must be very clear with not only of the existence of property of
trust, but also its nature and condition. If the trust property is a flat and there are tenants,
for instance, then a duty is cast upon Y to ensure that the lease deed is proper and rent is
collected properly.
 The provision also imposes a duty on the trustee to get in trust money invested on
insufficient or hazardous security. Money must be taken back and reinvested if it is not
yielding benefits.
 In case the duty imposed involves the exercise of discretion, then the trustee is bound to
exercise discretion reasonably.

Mardsen v. Kent (1877)

A trustee came to be aware of the fact that trust money was invested in insufficient funds.
It was not getting any money. In such circumstances, he has a duty to withdraw the money
and reinvest in other funds.
In this case, however, the trustee received information that soon the securities would start
 yielding a lot of money. However, this did not happen. The beneficiaries filed a suit against
the trust for breach of trust. The Court held that the trust had exercised discretion by not
reinvesting in a reasonable manner, keeping the interests of the beneficiaries in his mind.
Thus, he cold not be held liable for breach of trust.

SECTION 13 – 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 requisite for the preservation of the trust-
property and the assertion or protection of the title thereto.
Illustration The trust-property is immoveable property which has been given to the author of
the trust by an unregistered instrument. Subject to the provisions of the Indian Registration
Act, 1877, the trustee’s duty is to cause the instrument to be registered.
 A legal obligation is imposed on a trustee as the legal owner of the trust property, to
protect the title of such property.
 He has the duty to maintain and defend suits.
 For example, if someone encroaches upon the trust property, then it is the burden of the
trustee to file and defend the suit in Court.
 He has a further duty to take reasonable steps for the preservation of trust property
and title thereto.
 For example, if the trust property is a car that is bought on installments, then he has a duty
to pay such installments. In case of default, he will be held liable.
 Summum Bonum – For the utmost good.
 Section 13 is one of the most important provisions because if the trust property and title
are not protected, then there is no value or relevance of other duties and rights.

SECTION 14 – 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.
 In contrast to Sections 11, 12 and 13, Section 14 imposes a negative duty on the trustee.
 Jus tertii – Establishing title for third party.
 This negative duty entails a duty not to do anything that is adverse to the right of the
beneficiary.
 A trustee must not aid a third person in obtaining a right on the trust property that would
be prejudicial to the interest of the beneficiary (for example, selling the trust property to a
third party).

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.
Illustrations
(a) A, living in Calcutta, is a trustee for B, living in Bombay. A remits trust-funds to B by
bills drawn by a person of undoubted credit in favour of the trustee as such, and payable at
Bombay. The bills are dishonored. A is not bound to make good the loss.
(b) A, a trustee of leasehold property, directs the tenant to pay the rents on account of the
trust to a banker. B, then in credit. The rents are accordingly paid to B, and A leaves the
money with B only till wanted. Before the money is drawn out, B becomes insolvent. A,
having had no reason to believe that B was in insolvent circumstances, is not bound to make
good the loss.
(c) A, a trustee of two debts for B, releases one and compounds the other, in good faith, and
reasonably believing that it is for B’s interest to do so. A is not bound to make good any loss
caused thereby to B.
(d) A, a trustee directed to sell the trust-property by auction, sells the same, but does not
advertise the sale and otherwise fails in reasonable diligence in inviting competition. A is
bound to make good the loss caused thereby to the beneficiary.
(e) A, a trustee for B, in execution of his trust, sells the trust-property, but from want of due
diligence on his part fails to receive part of the purchase-money. A is bound to make good the
loss thereby caused to B.
(f) A, a trustee for B of a policy of insurance, has funds in hand for payment of the premiums.
A neglects to pay the premiums, and the policy is consequently forfeited. A is bound to make
good the loss to B.
(g) A bequeaths certain moneys to B and C as trustees, and authorizes them to continue trust-
moneys upon the personal security of a certain firm in which A had himself invested them. A
dies, and a change takes place in the firm. B and C must not permit the moneys to remain
upon the personal security of the new firm.
(h) A, a trustee for B, allows the trust to be executed solely by his co-trustee, C. C misapplies
the trust-property. A is personally answerable for the loss resulting to B.
 A trustee must be treated as an ordinary person. A trustee is thus bound to deal with the
property as carefully as a man with ordinary prudence.
 A trustee must take care of the trust property in a manner as he would take care of it as if
it were his own.
 If reasonable care is taken by the trustee, then the trustee so dealing is not responsible for
the loss, destruction or deterioration of the trust property.

Morley v. Morley (1678)

A trust was formed. Along with immovable properties, expensive jewelry was also part of
the trust property. The trustee kept the trust jewelry in the same locker as he kept his own
jewelry (expensive articles). Unfortunately, it got stolen. The beneficiaries brought him
before the Court alleging breach. However, the Court held that the trustee is not liable
since he was reasonable and took care of the trust property in the same manner as he took
care of his own.

Speight v. Gaunt (1883)

This case deals with two important duties of a trustee –
1. Duty to take reasonable care
2. Duty to invest
It also deals with whether a trustee can delegate his rights, powers and duties and
obligations to another person. Consequently, it discusses the extent of discretionary power
of the trustee.
In this case, a trust was created and the author identified a person to be trustee and some
beneficiaries with reasonable certainty. Trust property was transferred to the trustee. The
author imposed a condition on the trustee – a specific amount from the trust fund should be
used for making investment in securities of a reputed company.
The trustee himself had no knowledge of making investments. But it was important for him
to discharge this duty immediately. The trustee thus contacted a reputed broker, John Cook.
Cook gave him assurance that the investment would be made in some reputed institutions
 so that it benefits the trust.

Buxton v. Buxton (1853)

The trustee decided to continue trust in securities which were not yielding benefits.
Although there was no return, he did not invest in another place. The beneficiaries brought
him before the Court, contending that he did not exercise reasonable care and as a result,
the trust had suffered loss. The trustee was not held to be liable as he exercised discretion
for the benefit of the beneficiaries.

Subramaia Aiyer v. Prayag Dossjee (1917)

In exercising the standard of care and prudence, the trustee must protect the interest of all
beneficiaries impartially and he must prove that he has acted honestly and with utmost
good faith.

SECTION 16 – CONVERSION OF PERISHABLE PROPERTY

Where the trust is created for the benefit of several persons in succession, and the trust-
property is of a wasting nature or a future or reversionary interest, the trustee is bound, unless
an intention to the contrary may be inferred from the instrument of trust, to convert the
property of a in to property permanent and immediately profitable character.
Illustrations
(a) A bequeaths to B, all his property in trust for C during his life, and on his death for D, and
on D’s death for E. A’s property consists of three leasehold houses, and there is nothing in
A’s will to show that he intended the houses to be enjoyed in specie. B should sell the houses,
and invest the proceeds in accordance with Section 20.
(b) A bequeaths to B his three leasehold houses in Calcutta and all the furniture therein in
trust for C during his life, and on his death for D, and on D’s death for E. Here an intention
that the houses and furniture should be enjoyed in specie appears clearly, and B should not
sell them.

Howe v. Earl of Dartmouth (1802)

In a situation where the nature of trust property is such that it cannot forever last or yield
benefit and the beneficiaries are such that they are yet to receive and enjoy the benefits, it
is the duty of the trustee to see to it, by exercising reasonable discretion, that the subject
 matter is converted into an income-generating property.

SECTION 17 – 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. Where the trustee has
a discretionary power, nothing in this section shall be deemed to authorize the Court to
control the exercise reasonably and in good faith of such discretion.
Illustration
A, a trustee for B, C and D, is empowered to choose between several specified modes of
investing the trust-property. A in good faith chooses one of these modes. The Court will not
interfere, although the result of the choice may be to vary the relative rights of B, C and D.
 This is a duty that is applicable only in case of trusts with more than one beneficiary.
 The trustee is bound to be impartial.
 While discharging duties in a trust with many beneficiaries, a trust may be given the
power of discretion. Then, he must exercise such discretion in a reasonable fashion.

SECTION 18 – 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 is bound to take measures to prevent
such act.
 Section 18 must be read with Section 16.
 This provision is applicable in cases of trust created for the benefit of several persons in
succession.
 Waste refers to destruction, depreciation or loss.
 In case the one in possession of trust property commits or threatens to commit waste, then
the trustee has an obligation to prevent such waste.
 For example, let us suppose that A is a beneficiary in possession of the trust property and
he is destroying it. This threatens the use of trust property for the future and subsequent
trustees. Thus, the trustee has an obligation to ensure that the value of the trust property
does not depreciate. The trustee may go to the Court to seek injunction or may take any
other action that an ordinary person would.
SECTION 19 – ACCOUNTS AND INFORMATION
A trustee is bound (a) to keep clear and accurate accounts of the trust-property, and (b), at all
reasonable times, at the request of the beneficiary, to furnish him with full and accurate
information as to the amount and state of the trust-property.
 Section 19 imposes a two-fold duty upon the trustee.
 The duties of a trustee are –
(1) To keep clear and accurate accounts.
(2) To furnish full and accurate information to the beneficiaries at their request (this must
be read with Section 57).
(3) To keep information as to the amount and state of the trust property.
 Section 57 gives right to the beneficiaries to seek information from trust regarding
accounts and financial statements of the trust property.
 Status, nature and condition of the trust may be the subject of information sought by the
beneficiaries.
 Trustee has no obligation towards strangers to disclose information about the trust
property (Exception – Authorities such as the Income Tax Department).

Skinner Cooper v. Skinner (1904)

The beneficiary had doubt with respect to the way in which the trustee was performing his
duties. Even under English law, it has been recognized that the beneficiary has the right to
seek information so as to protect his beneficial interest. In this case, the trustee did not pay
heed to the repeated requests of the beneficiary. When he was brought to Court, it was
found that there was irregularity on part of the trustee. The Court concluded that the trustee
had committed breach of trust and ordered him to do good the loss suffered.

SECTION 20 – 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.
 This provision was one of the bulkiest provisions in the Act prior to the 2016 Indian
Trusts (Amendment) Act.
 This provision was created to ensure that the income-generating capacity of a trust is not
stopped.
 Situation 1 – Author directs the trustee to invest the sale proceeds from the trust property
sale.
 Situation 2 – Author gives no direction in the instrument, but if he gives money to the
trustee, then he is bound to invest.
 Situation 3 – Author directs the trustee to invest partly and other part to be reserved for
activities. The trustee must invest and accordingly and as much that is beneficial for the
trust.
 Exception 1 – Section 20 is subject to the contrary intention of the author (as given in the
trust instrument).
 Exception 2 – In situations where the beneficiaries are competent to contract, any
decision with respect to investment of trust money by trustee must be made after
receiving consent from the beneficiaries.
 Exception 3 – Section 20 expects from a trustee that in a situation where trust money
cannot be used to derive benefits, but upon the exercise of discretion and reasonable care,
he believes that investing at this juncture would lead to losses, then he cannot be made
liable for breach of trust.
 The purpose of the 2016 Amendment, which specifically amended Section 20, was to
make the bulky provision rather straightforward. It was to make it in tune with the
Securities Contract (Regulation) Act, 1956. Now, investments have to be made in the
securities provided under Section 2(h) of the SCRA, 1956. These are authorized
investments that have been recognized by the SEBI.

SECTION 22 – SALE BY TRUSTEE DIRECTED TO SELL WITHIN SPECIFIED TIME

Where a trustee directed to sell within a specified time extends such time, the burden of
proving, as between himself and the beneficiary, that the latter is not prejudiced by the
extension lies upon the trustee, unless the extension has been authorized by a principal Civil
Court of original jurisdiction.
Illustration
A bequeaths property to B, directing him with all convenient speed and within five years to
sell it, and apply the proceeds for the benefit of C. In the exercise of reasonable discretion, B
postpones the sale for six years. The sale is not thereby rendered invalid, but C, alleging that
he has been injured by the postponement, institutes a suit against B to obtain compensation.
In such suit the burden of proving that C has not been injured lies on B.
 Where trust has been created and the trustee has been directed (intention of the author) to
sell the property of the trust within a specified time, it is expected from the trustee to
dispose of the property within such a time period.
 However, if the trustee extends such time period prescribed by exercising discretion, then
the burden lies on such trustee to prove that he exercised discretion reasonably.
 The first portion of Section 22 must be read with Section 11 (duty to execute trust).
 Example – If a highway is being constructed next to the trust property and the value of
trust property would increase in some time, then this is a valid ground for the trustee to
extend the time period.
 By such extension in time, the beneficiary must not be prejudiced.
 Reasonableness and ordinary prudence are expected on part of the trustee.
 In situations where extension is authorized by the principal Civil Court of original
jurisdiction or the trust property is subject matter of a suit before a Court, then the trustee
cannot be held liable for the extension in time.
LIABILITIES OF A TRUSTEE
Discharge of duties of a trustee is a matter of satisfying himself. Monetary benefits to a
trustee are not above the satisfaction of the trustee. Thus, a trustee cannot ask for
remuneration as a matter of right. It is thus expected for the trustee to be careful and take care
of the trust property in the same manner as he would take care of his own property. The law
provides several safeguards to the trustee. For example, a mistake on part of a beneficiary or
the act of beneficiary leads to loss in trust, then a trustee is not held liable.
A trustee’s negligence leading to loss in trust will make him liable. Liability vanishes when
the trustee can successfully substantiate that such loss is directly linked to the act of the
beneficiary.

BREACH OF TRUST
Section 3 states that a breach of any duty on a trustee, as such, by any law for the time being
in force, is called Breach of Trust.
Keeton said – Breach of trust is the result of the unreasonable act, omission, negligence,
irregularity of the trustee in relation to the trust property or interest of the beneficiary.
By any law for the time being in force refers to all those regulations which come under the
statutory duties of a trustee (for example, the SCRA).
The duties imposed on a trustee are not limited to those contained in the ITA. The author of
the trust may, by way of the trust instrument, impose additional duties on the trustee.

SECTION 23 – 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, or the beneficiary, being competent to contract, has
himself, without coercion or undue influence having been brought to bear on him, concurred
in the breach, or subsequently acquiesced therein, with full knowledge of the facts of the case
and of his rights as against the trustee.
A trustee committing a breach of trust is not liable to pay interest except in the following
cases: (a) where he has actually received interest,
(b) where the breach consists in unreasonable delay in paying trust-money to the beneficiary,
(c) where the trustee ought to have received interest, but has not done so,
(d) where he may be fairly presumed to have received interest.
He is liable, in case (a), to account for the interest actually received, and, in cases (b), (c) and
(d), to account for simple interest at the rate of six per cent. per annum, unless the Court
otherwise directs.
(e) where the breach consists in failure to invest trust-money and to accumulate the interest or
dividends thereon, he is liable to account for compound interest (with half-yearly rests) at the
same rate: (f) where the breach consists in the employment of trust-property or the proceeds
thereof in trade or business, he is liable to account, at the 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.
Illustrations
(a) A trustee improperly leaves trust-property outstanding, and it is consequently lost: he is
liable to make good the property lost, but he is not liable to pay interest thereon.
(b) A bequeaths a house to B in trust to sell it and pay the proceeds to C. B neglects to sell the
house for a great length of time, whereby the house is deteriorated and its market price falls.
B is answerable to C for the loss.
(c) A trustee is guilty of unreasonable delay in investing trust-money in accordance with
Section 20, or in paying it to the beneficiary. The trustee is liable to pay interest thereon for
the period of the delay.
(d) The duty of the trustee is to invest trust-money in any of the securities mentioned in
Section 20, clause (a), (b), (c) or (d). Instead of so doing, he retains the money in his hands.
He is liable, at the option of the beneficiary, to be charged either with the amount of the
principal money and interest, or with the amount of such securities as he might have
purchased with the trust-money when the investment should have been made, and the
intermediate dividends and interest thereon.
(e) The instrument of trust directs the trustee to invest trust-money either in any of such
securities or on mortgage of immoveable property. The trustee does neither. He is liable for
the principal money and interest.
(f) The instrument of trust directs the trustee to invest trust-money in any of such securities
and to accumulate the dividends thereon. The trustee disregards the direction. He is liable, at
the option of the beneficiary, to be charged either with the amount of the principal money and
compound interest, or with the amount of such securities as he might have purchased with the
trust-money when the investment should have been made, together with the amount of the
accumulation which would have arisen from a proper investment of the intermediate
dividends.
(g) Trust-property is invested in one of the securities mentioned in Section 20, clause (a), (b),
(c) or (d). The trustee sells such security for some purpose not authorized by the terms of the
instrument of trust. He is liable, at the option of the beneficiary, either to replace the security
with the intermediate dividends and interest thereon, or to account for the proceeds of the sale
with interest thereon.
(h) The trust-property consists of land. The trustee sells the land to a purchaser for a
consideration without notice of the trust. The trustee is liable, at the option of the beneficiary,
to purchase other land of equal value to be settled upon the like trust, or to be charged with
the proceeds of the sale with interest.
 If there is a breach of trust owing to omission, negligence or unreasonable act of the
trustee, then the trustee is liable to make good the loss which the trust property or the
beneficiary has sustained.
 Section 23 deals with only civil breach of trust. Such a civil liability attracts only
monetary compensation. While this can be a good ground to remove the trustee, such an
effect is not automatic.
 Limitations/Exceptions
In the following circumstances, the trustee is not held liable to do good the loss suffered –
(1) Fraud on part of the beneficiary
(2) Concurrence with the beneficiary
(3) Subsequent consent of the beneficiary or beneficiaries (acquiescence)
 However, such acquiescence or concurrence must not be a result of coercion or undue
influence and will not be operative unless the beneficiary is fully aware of the facts and
rights.
 Section 23 must be read with Section 68 (Liability of Beneficiaries).

Walker v. Symonds (1818)

It is established by all the cases, that if the cesti que trust joins with the trustee in that
which is a breach of trust, knowing the circumstances, such a cesti que trust can never
complain of such a breach of trust. I go further, and agree that either concurrence in the act,
or acquiescence without original concurrence, will release the trustees – but that is only a
general rule, and the Court must inquire into the circumstances which induced concurrence
or acquiescence; recollecting in the conduct of that inquiry, how important it is on the one
hand, to secure the property of the cesti que trust; and on the other, not to deter men from
undertaking trusts, from the performance of which they seldom obtain either satisfaction or
 gratitude.

 This extract of the judgement indicates that the burden of proof and liability shifts
constantly between the trustee and beneficiary.
 A trustee is generally expected to do good the actual amount of loss. A trust cannot be
considered a means of earning profits.
 A trustee may be compelled to pay the loss and additional simple/compound interest by
Court, depending on the nature of loss and the nature of activity.

Overton v. Bannister (1844)

In case concerning misrepresentation on part of the beneficiary, the trustee was not held to
be liable for breach.

M.V. Rama Subbiah v. M. Narasimha Chari (1979)

The trustee sold the trust property to is son. There was no compulsion (urgency or
necessity) to dispose of the trust property. There was no direction in the trust instrument to
sell.
Sections 51 and 52 of the ITA state that a trustee must not use the trust property for his
own benefit. The Court held that the sale to his own son constituted a breach of trust.
(This does not imply that trust property cannot be sold to the son/relative of a trustee – but,
circumstances of emergency or necessity must justify the sale. A trustee will not be held
liable for breach if he was compelled by such reasons to go ahead with sale).

Caffrey v. Darby (1801)

Trustees, owing to their negligence, failed to recover possession of a part of trust assets and
later the assets were lost. The trustees contended that the loss was not attributable to their
neglect. The Court rejected their argument and decided that once the trustee had committed
breach of trust, they were responsible for compensating the estate in respect of any loss,
whether consequential on the breach or not.
The Court said –
“If they have already been guilty of negligence, they must be responsible for any loss in
any way to that property, for whatever may be the immediate cause, the property would not
have been in a situation to sustain that loss if it has not been for their negligence”.
Thus, the trustees were held to be liable for breach of trust.

McDonnell v. White (1865)

Trustees gave trust property on lease on a monthly rent. The rent accepted from the lessee
by the trustees was much lesser than the rent offered by other lessees (much lesser than the
prevalent market rate). The beneficiary was fully aware of these facts. The Court held that
the beneficiary could not subsequently contend that there was a breach of trust (reasonable
care not taken), since the beneficiary had consented (there was concurrence).

Fletcher v. Collis (1905)

Beneficiaries asked the trustee to dispose of certain properties of trust. Trustee gave such
sale proceeds to the beneficiaries. Subsequently, the beneficiaries took the trustee to Court,
contending that the trustee did not act according to the intention of the author and did not
take reasonable care. The Court considered two things:
(1) Beneficiaries can modify the intention of the author; and
(2) The trustee is not liable if he acts in accordance with such modified intention.
Where the beneficiaries have specifically directed a certain act to the trustee, the trustee
cannot be held liable for deviating from the intention of the author.

Re Chapman (1896)
The Court held that a trustee will only be liable for a loss to the trust fund or to a
beneficiary if the loss has been caused by his breaching a duty of some kind.

Target Holdings v. Redfern

Lord Browne-Wilkinson said –
“The basic right of a beneficiary is to have the trust duly administered in accordance with
the provisions of the trust instrument, if any, and the general law. Thus, in relation to a
traditional trust, where the fund is held in trust for a number of beneficiaries having
different, usually successive, equitable interests (for example, A for life, with the
remainder to B), the right of each beneficiary is to have the whole fund vested in the
trustees so as to be available to satisfy his equitable interest when, and if, it falls into
possession. Accordingly, in case of breach of trust involving the wrongful paying away of
trust property, then the trustee is to be made liable for the loss of trust property, often
 referred to as the trust estate”.

This can be elucidated with an example – A trustee cannot be held liable if the trust fund
loses value just because there is a general decline in the market value of assets.
Section 23 must be read with Section 30 of the ITA.

SECTION 30 – INDEMNITY OF TRUSTEES

Subject to the provisions of the instrument of trust and of Sections 23 and 26, trustees shall be
respectively chargeable only for such moneys, stocks, funds and securities as they
respectively actually receive, and shall not be answerable the one for the other of them, 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.
 A trustee is liable to indemnify only for the loss caused due to his voluntary and
intentional acts.
 Trustees shall be respectively chargeable for indemnification only for such moneys,
stocks, funds and securities as they actually receive.
 A trustee shall not be answerable the one for the other of them, nor for any banker, broker
or other person in whose hands any trust-property may be placed.
 Trustees cannot be asked to indemnify for the insufficiency, or deficiency of any stocks,
funds or securities. A trustee cannot be asked to indemnify for involuntary losses.
 This provision seeks to protect trustees when the trust property is the subject matter of
nay form of transaction (lease, mortgage, pledge, bailment, etc.) and there is involvement
of third parties such as brokers, bankers, etc.
 Safeguard is extended to the trustees in the ordinary course of business.

SECTION 24 – NO SETOFF 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 a gain which has accrued to another
portion of the trust-property through another and distinct breach of trust.
 Example – Let us suppose that a trustee had to collect rent from a lessee for occupying
trust property. The trustee failed to do so and the lessee disappeared. As a result, the trust
suffered a loss of Rupees 5,000. This constitutes breach of trust.
 Further, let us suppose that the trustee is mandated to make investment in authorized
securities. The same trustee invested trust money in unauthorized securities. This earned a
profit of Rupees 3,000. This also constitutes a breach since investment was made in
unauthorized securities.
 In these situations, where the same trustee has committed two breaches of trust, the
trustee cannot setoff the profit received from one breach with the loss suffered from other
breach. Thus, the loss of Rupees 5,000 will have to be indemnified by the trustee, and
Rupees 3,000 gained from the unauthorized securities will become a part of the trust
property.

SECTION 25 – NON-LIABILITY FOR PREDECESSOR’S FAULT

Where a trustee succeeds another, he is not, as such, liable for the acts or defaults of his
predecessor.

SECTION 26 – NON-LIABILITY FOR CO-TRUSTEES 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 so liable –
(a) where he has delivered trust-property to his co-trustee without seeing to its proper
application;
(b) where he allows his co-trustee to receive trust-property and fails to make due enquiry as
to the co-trustee's dealings therewith, or allows him to retain it longer than the circumstances
of the case reasonably require;
(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.
JOINING IN RECEIPT FOR CONFORMITY
A co-trustee who joins in signing a receipt for trust-property and proves that he has not
received the same is not answerable, by reason of such signature only, for loss or
misapplication of the property by his co-trustee.
Illustration
A bequeaths certain property to B and C, and directs them to sell it and invest the proceeds
for the benefit of D. B and C accordingly sell the property, and the purchase-money is
received by B and retained in his hands. C pays no attention to the matter for two years and
then calls on B to make the investment. B is unable to do so, becomes insolvent, and the
purchase-money is lost. C may be compelled to make good the amount.
 One trustee is not, as such, liable for breach of trust committed by his co-trustees.
 This section must be read with Section 48 (Trustees must act jointly).
 Section 26 is subject to the contrary intention of the author.
 Provisos (a), (b) and (c) are exceptions to the rule.
 Examples –
(1) Trustees were supposed to male payment of Rupees 50,000 to Z. Trustee A asked
trustee B to make such a payment and gave the money to B. By merely giving the
money to B, it does not mean that the responsibility of A comes to an end. A has to
enquire and ensure that such an amount is paid to Z.
In case A fails to enquire and B misappropriates such money, then A and B will be
jointly held liable – Exception (a).
(2) Trust property is leased to C. Co-trustees A and B are bound to collect rent from C. A
tells B to collect the rent from C. B receives the rent but misuses it. In this case, A
will be held liable if he fails to enquire about the trust money or property, or if he
allows the trust money to be retained with B for longer than 5-6 months – Exception
(b).
(3) If Trustee A does not take any action when he is aware of the fact that his co-trustee B
is acting unreasonably, or prejudicial to the interest of the beneficiaries, he will be
made liable along with B – Exception (c).
 It cannot be presumed that just by virtue of one being a trustee, he is liable for breach.
Each trustee is afforded opportunity to prove that he acted reasonably.

Townley v. Sherborne (Justice Bridgman)

In this case, it was held that one trustee or executor cannot be held liable for the
misappropriation of money by a co-executor for property in the latter’s hands unless he has
been guilty of fraud or evil-doing.

Joint in receipt for conformity

 For example, let us suppose that trust property has been leased. The rent is Rupees
20,000. Each time that rent is paid, both trustees “A” and “B” have to sign on the receipt.
Merely by putting a signature and acknowledging that money was paid, a trustee cannot
be held liable. If “A” can successfully prove that he has taken reasonable care (enquired
with “B” if he deposited the money, etc.), then he will not be held liable.
 This portion of the provision provides a safeguard to those trustees who have acted
reasonably despite having acknowledged (signed) the receipt of some thing
(money/property).

SECTION 27 – SEVERAL LIABILITY OF CO-TRUSTEES

Where co-trustees jointly commit a breach of trust, or where one of them by his neglect
enables the other to commit a breach of trust, each is liable to the beneficiary for the whole of
the loss occasioned by such breach.
CONTRIBUTION AS BETWEEN CO-TRUSTEES
But as between the trustees themselves, if one be less guilty than another and has had to
refund the loss, the former may compel the latter, or his legal representative to the extent of
the assets he has received, to make good such loss; and if all be equally guilty, any one or
more of the trustees who has had to refund the loss may compel the others to contribute.
Nothing in this section shall be deemed to authorize a trustee who has been guilty of fraud to
institute a suit to compel contribution.
 The beneficiary can compel one or all trustees to contribute or indemnify the trust state.
 If the beneficiary compels only one trustee to indemnify, then he may ask the other
trustees to contribute. If no proportion can be determined, then all trustees must
contribute equally (Equality is equity).

RIGHTS, POWERS AND DISABILITIES OF TRUSTEES
SECTION 31 – RIGHT TO TITLE DEED
A trustee is entitled to have in his possession the instrument of trust and all the documents of
title (if any) relating solely to the trust-property.
 Trustee has the right to possess the instrument of trust.
 Trustee also has right to all documents of the title relating to the trust property.
 This right must be read along with Sections 11, 12 and 13.
 As the legal owner of the trust property, a trustee must possess these documents since he
has duties to execute the trust, protect the title and to acquaint himself with the trust
property.
 Moreover, in case of a suit concerning the trust property, a trustee is obligated to defend
the trust property.
 In case a trustee does not have these documents, the exercise of these duties is impossible
and becomes futile.

SECTION 32 – RIGHT TO REIMBURSEMENT OF EXPENSES

Every trustee may reimburse himself, or pay or discharge out of the trust-property, all
expenses properly incurred in or about the execution of the trust, or the realization,
preservation, or benefit of the trust-property, or the protection or support of the beneficiary.
If he pays such expenses out of his own pocket he has a first charge upon the trust-property
for such expenses and interest thereon; but such charge (unless the expenses have been
incurred with the sanction of a principal Civil Court of original jurisdiction) shall be enforced
only by prohibiting any disposition of the trust-property without previous payment of such
expenses and interest.
If the trust-property fail, the trustee is entitled to recover from the beneficiary personally on
whose behalf he acted, and at whose request, expressed or implied, he made the payment, the
amount of such expenses.
RIGHT TO BE RECOUPED FOR ERRONEOUS OVER-PAYMENT
Where a trustee has by mistake made an over-payment to the beneficiary, he may reimburse
the trust-property out of the beneficiary's interest. If such interest fails, the trustee is entitled
to recover from the beneficiary personally the amount of such overpayment.
 For example, in case of a legal suit, the trustee pays money out of his own pocket for the
fees of the counsel, then he is entitled to reimbursement.
 In case the trustee provided for the education of the minor beneficiary out of his own
money, he is entitled to reimbursement.
 Since the abovementioned cases were all expenses for lawful purposes, the trustee in
entitled to reimbursement.
 Trustees’ three rights to reimbursement of expenses –
(1) Reimbursement for all proper expenses.
(2) Lien on state as security.
(3) At the proper time, to recover from the beneficiary personally on whose behalf or
request he acted.
 Firstly, the trustee entitled to reimbursement can take money from the trust fund or trust
money. Secondly, if the subject matter of the trust is property, then a charge is created in
favour of the trustee (a lien/priority is created in his favour). This means that the trustee’s
right on that property, to the extent of the reimbursement due, will precede the rights of
the beneficiary or any other third person. Lastly, if both these mechanisms fail, then he
can claim from the beneficiary personally (personal capacity).
 Right to be recouped for erroneous payments
Example – X and Y are beneficiaries who are entitled to Rupees 10,000 every month. The
trustee, without any evil or wrongful intention, gave more money to X (Rupees 15,000)
and Rupees 10,000 to Y. Since this was a genuine mistake on the part of the trustee, and
he was impartial, in this provision, the trustee is given the right to recover the extra
payment of X. This is not considered as breach of trust.

SECTION 34 – RIGHT TO APPLY TO COURT FOR OPINION IN MANAGEMENT OF TRUST

PROPERTY
Any trustee may, without instituting a suit, apply by petition to a principal Civil Court of
original jurisdiction for its opinion, advice or direction on any present questions respecting
the management or administration of the trust-property other than questions of detail,
difficulty or importance, not proper in the opinion of the Court for summary disposal.
A copy of such petition shall be served upon, and the hearing thereof may be attended by,
such of the persons interested in the application as the Court thinks fit.
The trustee stating in good faith the facts in such petition and acting upon the opinion, advice
or direction given by the Court shall be deemed, so far as regards his own responsibility, to
have discharged his duty as such trustee in the subject-matter of the application.
The costs of every application under this section shall be in the discretion of the Court to
which it is made.
 Although trustees must act jointly, this provision clarifies that any trustee may approach
the Court.
 This is merely a consultative provision (no order of Court).
 Trustee is not mandated or bound by the opinion of the Court. However, if his action is in
the contract, then the burden of proof rests on him to prove why he did so.
 The trustee acting upon the opinion and advice of the Court to have discharged his duty as
such trustee in the subject matter of the application. This acts as an additional safeguard
to the trustee (he is not liable for breach if he acted as the Court said).

In re D.V. Gundappa & Ors. (1951) – Karnataka High Court

The property of trust was a shop located in a posh locality. It could have possibly earnt
more rent. It was yielding only about Rupees 45 a month in rent. The tenant (shopkeeper)
kept demanding for maintenance and repair works of the shop from the trustee. But there
was no trust money for this. The concern of the shopkeeper tenant was genuine since any
part of the shop could fall and collapse at any time. Another problem was that the trust
instrument did not give any power to the trustee to dispose of the trust property.
The trustee was confused as to whether, in the absence of such a clause empowering him to
dispose, he could go ahead and dispose the property. But if repair was not made, then the
value would depreciate to a large extent. A buyer had approached the trustee and had
quoted a very reasonable price, considering the state of the trust property. The trustee’s
idea was to dispose of the property and use the sale proceeds to invest it in securities.
Trustee approached the District Court (Principal Civil Court) for opinion. The Court said
that upon a plain reading of trust instrument, the property must not be disposed of. The
trustee further approached the Karnataka High Court. The High Court said that while there
is no right given in the trust instrument, there is no restriction on this right either. The High
Court thus opined that it would be in the best interest of the trust and beneficiaries if the
trust property was disposed of.

Sahed Zadi v. Syed (1981)

The following question came before the Andhra Pradesh High Court –
In the case where the trust instrument specifically prohibits the disposal of trust property, a
 question arises as to whether a Court, under Section 34 of the ITA or Article 227
(Revision Petition), can order or opine for disposal?
The Nawab, as in the case of Muffakham Jan Bahadur & Ors. v. H.E.H. Nawab Mir
Barkat Ali Khan (1989), had formed a trust for his two granddaughters. Other than
immovable properties, other trust properties were jewelry and ornaments which had been
in use in the family for generations. The instrument contained a very pertinent clause
which mentioned that the trustee must not dispose of the trust properties. The trust had to
take reasonable care and the jewelry could be given to the granddaughters during festivities
(otherwise must be kept in lockers). The charge for hiring lockers, etc. was received by
trustees by returns of money invested in securities by trustees initially. The trust property
was subject to high tax liabilities. But there was no money in the trust to pay off or
discharge liabilities (jewelry was the only way).
The District Court said that the trustees did not have power to dispose of property (it was
clear from the trust instrument). The Andhra Pradesh High Court noted the unusual
situation of the trustees and the trust property, where there was no other way. Thus, they
opined that there was nothing wrong if a certain part of the trust property being disposed of
in order to maintain the trust.

SECTION 35 – RIGHT TO SETTLEMENT OF ACCOUNTS

When the duties of a trustee, as such, are completed, he is entitled to have the accounts of his
administration of the trust-property examined and settled; and, where nothing is due to the
beneficiary under the trust, to an acknowledgment in writing to that effect.

SECTION 36 – GENERAL AUTHORITY OF TRUSTEE

In addition to the powers expressly 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 realization,
protection or benefit of the trust-property, and for the protection or support of a beneficiary
who is not competent to contract.
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 with-out reserving the best yearly rent that can be reasonably obtained.
 A trustee may do all acts which are reasonable and proper.
 A trustee may do any act for the realization, protection or benefit of trust property
(reasonably).
 He may act reasonably for the protection or support of a beneficiary who is not competent
to contract.
 This provision also imposes a restriction – No trustee shall lease the trust-property for a
term exceeding twenty-one years from the date of executing the lease, nor with-out
reserving the best yearly rent that can be reasonably obtained.
 The reason for such a restriction is that a private trust must not be perpetual, i.e., a trustee
must not tie up the trust property for eternity.
 Discretion exists only till the completion of 21 years. After that, exceeding time is only
upon the permission of the Court.
 This gives protection to both the beneficiaries and lessees. Beneficiaries will not be
hindered from exercising absolute ownership after a point in time.

SECTION 37 – 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.
 This provision is an extension of Section 22.
 A trustee, when empowered to dispose of trust property, may sell in lots or by private
treaty, etc.
 Section 37 is subject to the contrary intention of the author (in case the author has
specified the mode of disposal of the trust property). If trustee acts in a different way,
then he must prove to the Court that he acted reasonably and for the benefit of the
beneficiaries (that he did not prejudicially affect the interest of the beneficiaries).
 In case of public auction, advertisement and notice must be done so as to ensure
maximum public participation and best sale price.

SECTION 38 – POWER TO SELL UNDER SPECIAL CONDITIONS. POWER TO BUY-IN AND RE-

SELL

The trustee making any such sale may insert such reasonable stipulations either as to title or
evidence of title, or otherwise, in any conditions of sale or contract for sale, as he thinks fit;
and may also buy-in the property or any part thereof at any sale by auction, and rescind or
vary any contract for sale, and re-sell the property so bought in, or as to which the contract is
so rescinded, without being responsible to the beneficiary for any loss occasioned thereby.
TIME ALLOWED FOR SELLING TRUST-PROPERTY
Where a trustee is directed to sell trust-property or to invest trust-money in the purchase of
property, he may exercise a reasonable discretion as to the time of effecting the sale or
purchase. [This elucidates the difference between Sections 22 and 38]
Illustrations
(a) A bequeaths property to B, directing him to sell it with all convenient speed and pay the
proceeds to C. This does not render an immediate sale imperative.
(b) A bequeaths property to B, directing him to sell it at such time and in such manner as he
shall think fit and invest the proceeds for the benefit of C. This does not authorize B, as
between him and C, to postpone the sale to an indefinite period.
 As the legal owner, trustee has power to impose conditions upon the buyer in sale of trust
property.
 Further, a trustee has power to participate in a public auction to buy-in property for the
trust, so that the trust benefits. Subsequently, the beneficiaries can exercise absolute
ownership.
 This provision is also an extension Section 22.

SECTION 39 – 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.
 This must be read as an extension of Section 22.
 Since a trustee is empowered under Sections 37 and 38, he has further power to convey
the trust property.

SECTION 40 – POWER TO VARY INVESTMENTS

A trustee may, at his discretion, call in any trust-property invested in any security and invest
the same 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 person competent to contract and entitled at the time to receive
the income of the trust-property for his life, or for any greater estate, no such change of
investment shall be made without his consent in writing.
 This must be read with Section 20 (which imposes an obligation on the trustee to make
investment).
 The trust may vary investment made under Section 20 if the yields are low, etc.
 For variation, consent of the beneficiaries must be sought in writing.

SECTION 41 – POWER TO APPLY PROPERTY OF MINORS, ETC., FOR THEIR MAINTENANCE,

ETC.

Where any property is held by a trustee in trust for a minor, such trustee may, at his
discretion, pay to the guardians (if any) of such minor, or otherwise apply for or towards his
maintenance or education or advancement in life, or the reasonable expenses of his religious
worship, marriage or funeral, the whole or any part of the income to which he may be entitled
in respect of such property; and such trustee shall accumulate all the residue of such income
by way of compound interest by investing the same and the resulting income thereof from
time to time in any of the securities mentioned or referred to in Section 20, for the benefit of
the person who shall ultimately become entitled to the property from which such
accumulations have arisen.
Provided that such trustee may, at any time, if he thinks fit, apply the whole or any part of
such accumulations as if the same were part of the income arising in the then current year.
Where the income of the trust-property is insufficient for the minor's maintenance or
education or advancement in life, or the reasonable expenses of his religious worship,
marriage or funeral, the trustee may, with the permission of a principal Civil Court of original
jurisdiction, but not otherwise, apply the whole or any part of such property for or towards
such maintenance, education, advancement or expenses.
Nothing in this section shall be deemed to affect the provisions of any local law for the time
being in force relating to the persons and property of minors.
 Natural guardian (mother/father) or guardians appointed by the Court are included in this
provision.
 It states specifically that the trustee may apply for or towards his maintenance or
education or advancement in life, or the reasonable expenses of his religious worship,
 marriage or funeral, the whole or any part of the income that he may be entitled to in
respect of such property.
 The trustee shall accumulate all the residue of such income by way of compound interest
by investing the same and the resulting income thereof in from time to time in any of the
securities mentioned or referred to in Section 20 for the benefit of the person entitled
(beneficiary).
 If the income of the trust property is insufficient for minor’s maintenance, etc., the trustee
with the permission of the principal Civil Court of original jurisdiction apply the whole of
any part of such property for maintenance, education, advancement or expenses of such
minor.
 In essence,
Trust Money (Liquid Funds) – Discretion of the trustee
If insufficient,
Trust Property to be disposed of after the permission of the principal Civil Court.

SECTION 42 – POWER TO GIVE RECEIPTS

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

SECTION 43 – POWER TO COMPOUND, ETC.

Two or more trustees acting together may, if and as they think fit –
(a) accept any composition or any security for any debt or for any property claimed;
(b) allow any time for payment of any debt;
(c) compromise, compound, abandon, submit to arbitration or otherwise settle any debt,
account, claim or thing whatever relating to the trust; and,
(d) for any of those purposes, enter into, give, execute and do such agreements, instruments
of composition or arrangement, releases and other things as to them seem expedient, without
being responsible for any loss occasioned by any act or thing so done by them in good faith.
The powers conferred by this section on two or more trustees acting together may be
exercised by a sole acting trustee when by the instrument of trust, if any, a sole trustee is
authorized to execute the trusts and powers thereof.
This section applies only if and as far as a contrary intention is not expressed in the
instrument of trust, if any, and shall have effect subject to the terms of that instrument and to
the provisions therein contained. This section applies only to trusts created after this Act
comes into force.
 So long as the abovementioned acts are done in good faith and the trustees have taken
reasonable care, there is no liability.

SECTION 44 – POWER TO SEVERAL TRUSTEES OF WHOM ONE DISCLAIMS OR DIES

When an authority to deal with the trust-property is given to several trustees and 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.
 If a trust has three trustees and one of them dies or he renounces trust, the remaining
trustees will carry out the administration of the trust.
 Exception – If the trust instrument fixes a certain number of trustees to be there all the
time.

SECTION 45 – 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 made, or, where an appeal against the decree is pending,
of the Appellate Court.
 If the trustee is not supposed to carry out execution by order of the Court, the trust must
act accordingly.
DISABILITIES OF TRUSTEES
 Section 10 makes it clear that once a trustee accepts a trust, he cannot renounce it.
 Section 15 makes it clear that a trustee cannot claim remuneration.

SECTION 46 – TRUSTEE CANNOT RENOUNCE AFTER ACCEPTANCE

A trustee who has accepted the trust cannot afterwards renounce it except (a) with the
permission of a principal Civil Court of original jurisdiction, or (b) if the beneficiary is
competent to contract, with his consent, or (c) by virtue of a special power in the instrument
of trust.
 This provision provides for a general disability (it applies to Public/Charitable trusts as
well).
 Exceptions to this rule are –
(1) Instrument of trust
(2) Permission of the principal Civil Court
(3) Sui juris beneficiary (competent) – They agree to the renunciation of trustee

SECTION 47 – TRUSTEE CANNOT DELEGATE

A trustee cannot delegate his office or any of his duties either to a co-trustee or to a stranger,
unless (a) the instrument of trust so provides, or (b) the delegation is in the regular course of
business, or (c) the delegation is necessary, or (d) the beneficiary, being competent to
contract, consents to the delegation.
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.
Illustrations
(a) A bequeaths certain property to B and C on certain trusts to be executed by them or the
survivor of them or the assigns of such survivor. B dies. C may bequeath the trust-property to
D and E upon the trusts of A's will.
(b) A is a trustee of certain property with power to sell the same. A may employ an
auctioneer to effect the sale.
(c) A bequeaths to B fifty houses let at monthly rents in trust to collect the rents and pay them
to C. B may employ a proper person to collect these rents.
 This provision indicates to the principle of delegatus non potest delegare.
 This is a general disability. It applies to Public/Charitable trusts as well.
 Exceptions –
(1) Instrument of trust
(2) Beneficiaries competent to contract (and they ask the trustee to delegate)
(3) Where delegation is necessary (e.g. Investment)
(4) Where delegation is in the regular course of business (e.g. Auctioneer)

Turner v. Corney (1841)

The Court said –
“The trustees who take on themselves the management of property for the benefit of others
have no right to shift their duty on other persons.”

Sheikh Abdul Kayum v. Mulla Alibhai (1962)

A public trust was created for imparting education to children of a certain community.
There was no restriction in the instrument that education could not be imparted to other
children. To meet this objective, a school was established. Initially, 18 trustees were
appointed to execute the trust. They became the owners of the property of trust (movable
and the property of the school). The management and administration of the school was the
responsibility of the trustees. However, later on, the 18 trustees formed a society and
inducted 12 members into the society (new members). They further transferred all the trust
properties (to which the 18 were legal owners) to the society. Now, the society started
looking after the school. They said that clause 5 of the instrument of trust allowed for
delegation. It said that the trustees had power to appoint more trustees for the
administration of trust. Further, it said that the trustees could make rules and regulations
pertaining to the administration of trust properties and the school.
Two beneficiaries of the trust moved to the Court under Section 92 of the Code of Civil
Procedure and contended that the transfer of properties to the society and the
administration of the new members was incorrect. The issue before the Court was not with
respect to breach, but the appointment of new members and them administrating the trust
properties. The trustees contended that clause 5 of the instrument allowed them to do so.
Sections 46 and 47 of the ITA were attracted. The Court said that a plain reading of clause
5 does not lead to the interpretation that a society could be formed and 12 new members
could be inducted. Clause 5 indicates the author’s intention in a situation where the trustee
 dies or he renounces the trust – i.e., when a new trustee can be appointed.
Clause 5 of the trust instrument did not empower the trustees to create a society.
The trustees contended that Sections 46 and 47 do not apply to public trusts. The Court
specifically said that Sections 46 and 47 postulate general disabilities, which are general
principles applicable to all kinds of trusts.

Speight v. Gaunt (1883)

Refer to previous discussion of the case.

In re: Dent v. De Pothonier (1900)

Trustees gave instructions to the Bank to collect profits on the investments that the trustees
had made in certain securities (Bank in which the trustees had an account). The Court said
that such delegation is permissible since it is ordinary in the course of business for banks to
collect such profits.

Field v. Field (1894)

Trustees delegated certain functions to a lawyer. Such a delegation was justified since it
was ordinary in the course of business.

SECTION 48 – CO-TRUSTEES 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.
 Trustees must act collectively and jointly (unless the trust instrument provides otherwise).
 This is a general rule applicable to Public Trusts as well.

L. Janakirama Iyer & Ors. v. P.M. Nilakanta Iyer & Ors. (1962)
Three trustees had to sell trust property according to the instrument. Only two trustees sold
it. The Court invalidated the sale as the third trustee was not involved in the sale. In case
the instrument does not specifically give otherwise, the trustees must act together.

Abdul Rahman v. Angur Bala (1974)

 The trust instrument specifically said that execution must be collective. In this case,
tenancy created was not with the sanction and approval of all. Thus, the Court said that
tenancy created was invalid.

 It must be strictly proved by the third trustee (or remaining trustees) in order to get the
benefit that he did not give consent to or was not aware of the execution. Otherwise,
Section 26 will apply and he will be held liable for the act.

SECTION 49 – CONTROL OF DISCRETIONARY POWER

Where a discretionary power conferred on a trustee is not exercised reasonably and in good
faith, such power may be controlled by a principal Civil Court of original jurisdiction.
 A trustee cannot act arbitrarily.
 In circumstances where the trustee fails to exercise his discretionary power in a
reasonable manner and in good faith, the Court may interfere.
 The Court may order for undoing of the trustee’s act and take any other appropriate action
for the benefit of the trust.

SECTION 50 – 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. Nothing in this section applies to any Official Trustee, Administrator
General, Public Curator, or person holding a certificate of administration.
 Exceptions –
(1) Instrument of trust provides for remuneration
(2) Taking into account the nature of obligations of trustees, with consent of
beneficiaries, they may enter into a contract for remuneration.
(3) If the instrument of trust and beneficiaries are silent as to the remuneration, the trustee
may approach the Court. He is entitled to remuneration by way of a Court order.
 As a matter of right, a trustee cannot claim remuneration, except in the cases
abovementioned.

SECTION 51 – 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.
 A trustee must not use the trust property for his own benefit (this is a generally applicable
rule to persons holding fiduciary positions in fiduciary relationships – Doctor, lawyer,
Director of a Company, etc. – A constructive trust is created as a result of fiduciary
relationship).
 The trustee must not use it for the purpose which are not connected with the trust.

Keech v. Sandford (1726)

A trustee leased trust property and used the lease for his own benefit. The Chancery Court
very categorically said that a trustee, by virtue of being a Fundamental Right, must refrain
from using trust benefits to his own personal use.

SECTION 52 – 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.
 A trustee must not dispose of the property or give it away to agent for his personal gain.
 This must be read with Section 51.

SECTION 53 – 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.
TRUSTEE FOR PURCHASE
And no trustee whose duty it is to buy or to obtain a mortgage or lease of particular property
for the beneficiary may buy it, or any part thereof, or obtain a mortgage or lease of it, or any
part thereof, for himself.
 This provision must be read with Sections 51 and 52.
 A trustee must not try to bring the benefit of disposal of trust property to himself or his
relatives, at the cost of the beneficiaries.
 Trustee must not try to buy the interest of the beneficiary.
 Trustee cannot become a purchaser, mortgagee or lessee. This provision is wide enough
to cover the relatives of the trustee.
 Exception – With the permission of the principal Civil Court (for the advantage of the
beneficiary).
 Departure from English Law – In English law, if trustee obtains permission of
beneficiaries and he acts reasonably while exercising discretion (best interest of the trust),
no permission from the Court is needed [this is owing to the simple reason that
beneficiaries are viewed differently in England and in India – In England, Beneficiaries
are considered as Equitable Owners, thus lesser emphasis is given to Courts. In India,
Beneficiaries are considered as Holders of Beneficial Interest, thus the role of Courts is
important).
 A trustee who recently ceased to be the trustee also cannot purchase. However, recently
has not been defined. It is thus upon the Court to determine the definition.

SECTION 54 – CO-TRUSTEES MAY NOT LEND TO ONE OF THEMSELVES

A trustee or co-trustee 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.
 The trustees must not lend the trust property to another trustee.
 Deviation is allowed only if it is in the best interest of the trust (burden of proof lies on
the trustees to prove that they acted reasonably).
RIGHTS AND LIABILITIES OF THE BENEFICIARY
SECTION 55 – 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.
 This right is subject to the provisions of the instrument of trust (Author – Fixed, Trustee –
Discretionary).

SECTION 56 – RIGHT TO SPECIFIC EXECUTION

The beneficiary is entitled to have the intention of the author of the trust specifically executed
to the extent of the beneficiary's interest;
RIGHT TO TRANSFER OF POSSESSION
And, where there is only one beneficiary and he is competent to contract, or where there are
several beneficiaries and they are competent to contract and all of one mind, 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 bequeathed 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
(a) Certain Government securities are given to trustees upon trust to accumulate the interest
until A attains the age of 24, and then to transfer the gross amount to him. A on attaining
majority may, as the person exclusively interested in the trust-property, require the trustees to
transfer it immediately to him.
(b) A bequeaths Rs. 10,000 to trustees upon trust to purchase an annuity for B, who has
attained his majority and is otherwise competent to contract. B may claim the Rs. 10,000.
(c) A transfers certain property to B and directs him to sell or invest it for the benefit of C,
who is competent to contract. C may elect to take the property in its original character.
 The beneficiary is entitled to have the intention of the author of the trust specifically
executed to the extent of the interest or entitlement of the beneficiary.
 This must be read with Section 11.
 A beneficiary who is competent to contract (or such permission is obtained from the
Court in case he is not competent), can transfer the possession of property over which he
has beneficial interest.
 All beneficiaries must agree (even if it is only to the extent of one beneficiary’s interest).
 Exception – (to the right to transfer)
Married women (who is beneficiary) – When property has been transferred or
bequeathed for the benefit of a married woman, so that she shall not have power to
deprive herself or her beneficial interest, nothing in the second clause of this section
applies to such property during her marriage. Essentially, a married woman does not have
the right to transfer if the trust instrument deprives her of such a right (there must be a
clause in the trust instrument).

Saunders v. Vautier (1841)

Once something has been given to a person, the Court will not enforce any attempt to keep
it out of his grasp until a later date.

SECTION 57 – RIGHT TO INSPECT AND TAKE COPIES OF INSTRUMENT OF TRUST,

ACCOUNTS, ETC.

The beneficiary has a right, as against the trustee and all persons claiming under him with
notice of the trust, to inspect and 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 (if
any) by which they are supported, and the cases submitted and opinions taken by the trustee
for his guidance in the discharge of his duty.
 This must be read with Section 19.
 This provision gives rights to beneficiaries to ask the trustees for the books of account
pertaining to the trust, state of trust property, etc.

SECTION 58 – 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.
 This must be read with Section 56.
 The beneficiary, being competent to contract (and sui juris), may transfer beneficial
interest.
 Such transfer will be subject to law for the time being in force (Transfer of Property Act
and Registration Act, for instance).
 Exception – Married Women: If there is a clause in the trust instrument prohibiting a
married woman from transferring her beneficial interest, then she does not have this right.

Section 56 Section 58
Talks of revocation (can be read with This provision does not refer to revocation –
Section 78 of the ITA). it talks only of the transfer of the beneficial
interest).

SECTION 59 – 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, and the trust shall, so far as may
be possible, be executed by the Court until the appointment of a trustee or new trustee.
 Trust shall not fail for the want of a trustee.
 Before the beneficiary can invoke this right, he must establish that execution of the trust
has become impracticable.
 Impracticability may also occur when trustees are alive but are not willing to execute the
trust. In such cases, the trustees can be made defendant to the suit of execution.
 Example – Commercial lease of trust property has to be renewed. If trustees are not
willing to execute, then the beneficiaries may go to Court and make the trustees
defendants.
 This right must be used sparingly.

SECTION 60 – 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
person in insolvent circumstances, and, unless the personal law of the beneficiary 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
(a) A, one of several beneficiaries, proves that B, the trustee, has improperly disposed of part
of the trust-property, or that the property is in danger from B's being in insolvent
circumstances, or that he is incapacitated from acting as trustee. A may obtain a receiver of
the trust-property.
(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.
(c) A conveys certain property to four trustees in trust for B. Three of the trustees die. B may
institute a suit to have three new trustees appointed in the place of the deceased trustees.
(d) A conveys certain property to three trustees in trust for B. All the trustees disclaim. B may
institute a suit to have three trustees appointed in place of the trustees so disclaiming.
(e) A, a trustee for B, refuses to act, or goes to reside permanently out of India or is declared
an insolvent, or compounds with his creditors, or suffers a co-trustee to commit a breach of
trust. B may institute a suit to have A removed and a new trustee appointed in his room.
 It is the right of every beneficiary to get trust executed by proper trustees.
 This can be described as –
(1) Right to have proper person as trustee.
(2) Right to have a proper number of such persons.
 In cases where trust property is money, then there must be a minimum of two trustees
who execute it (in no other case is the number of trustees prescribed).
 The following persons are not proper trustees within the meaning of this provision –
(1) A person domiciled abroad
(2) An alien enemy
(3) A person having an interest inconsistent with that of the beneficiary
(4) A person in insolvent circumstances
 The provision also states that married women cannot be proper trustees if the trust
instrument prescribes so (this provision needs amendment).
 Persons who have been convicted of offences of moral turpitude, insane persons, etc.
have not been included to be improper trustees in this provision.

SECTION 61 – RIGHT TO COMPEL TO 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
(a) A contracts with B to pay him monthly Rs. 100 for the benefit of C. B writes and signs a
letter declaring that he will hold in trust for C the money so to be paid. A fails to pay the
money in accordance with his contract. C may compel B on a proper indemnity to allow C to
sue on the contract in B's name.
(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. B may sue on behalf of himself
and C for an injunction to restrain A from making the sale.
 A 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 (two aspects – compel and restrain).

SECTION 62 – 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 retransferred 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 (a) account for the net profits of the
property, (b) be charged with an occupation-rent, if he has been in actual possession of the
property, and (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 –
(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 retransferred, have contracted in good faith with the
trustee or purchaser; or
(b) entitles the beneficiary to have the property declared subject to the trust or retransferred
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 of the case and of his rights as against the trustee.
 This provision gives a right to the beneficiary based on the maxim – he who seeks equity
must do equity.
 In case a trustee makes a wrongful purchase, a beneficiary can ratify such a purchase and
make it the subject matter of trust.
 The beneficiary may have it reconveyed to him either by the trustee or by the person who
has purchased it from the trustee with notice of trust (not a bona fide transferee).
 Property will be reconveyed to him in consideration of the payment by him of the price at
which the trustee bought and with interest.
 Other expenses incurred in the preservation of the property must be paid.
 Exceptions – The beneficiary cannot exercise rights under this provision if –
(1) Beneficiary was involved in transfer (either was silent or gave active consent)
(2) Transferee was a bona fide transferee.

SECTION 63 – FOLLOWING TRUST PROPERTY--INTO THE HANDS OF THIRD PERSONS; INTO

THAT INTO WHICH IT HAS BEEN CONVERTED

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
(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 the land.
(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. B is entitled to a charge on the land for the amount
of the trust-money so misemployed.
 Where trust property comes into the hands of a third person, 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 trust property has been disposed of by the trustee and the money or other
property which he has received therefore can be traced in his hands, or the hand of his
legal representative or legatee, the beneficiary has, in respect of the original trust property
– Doctrine of Tracing.
 The exception to this is a bona fide transferee.
 Especially in case the trustee misuses the trust property, so long as it is traceable,
beneficiary will have a right (even if a third party right has been created).

SECTION 65 – ACQUISITION BY TRUSTEE OF TRUST-PROPERTY WRONGFULLY CONVERTED

Where a trustee wrongfully sells or otherwise transfers trust-property and afterwards himself
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.
 Trustee A sells property X wrongfully (without power or authorization) to B. Later, A
buys it back from B. Then, X becomes trust property again.

SECTION 66 – 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.
 If separable, then the beneficiary must separate and use.
 The Indian position differs from the English position, in the charge is created. This
charge does not mean beneficiary has entitlement to the entire mixed property.
 In England, if such separation is difficult, a right over the entire mixed property is given
to the beneficiary (Right – England, Interest – India).

SECTION 67 – WRONGFUL EMPLOYMENT BY PARTNER-TRUSTEE OF TRUST-PROPERTY

FOR PARTNERSHIP PURPOSES

If a partner, being a trustee, wrongfully employs trust-property in the business or on the
account of the partnership, no other partner is liable therefor in his personal capacity to the
beneficiaries unless he had notice of the breach of trust.
The partners having such notice are jointly and severally liable for the breach of trust.
Illustrations
(a) A and B are partners. A dies, having bequeathed all his property to B in trust for Z, and
appointed B his sole executor. B, instead of winding up the affairs of the partnership, retains
all the assets in the business. Z may compel him, as partner, to account for so much of the
profits as are derived from A's share of the capital. B is also answerable to Z for the improper
employment of A's assets.
(b) A, a trader, bequeaths his property to B in trust for C, appoints B his sole executor, and
dies. B enters into partnership with X and Y in the same trade, and employs A's assets in the
partnership business. B gives an indemnity to X and Y against the claims of C. Here, X and Y
are jointly liable with B to C as having knowingly become parties to the breach of trust
committed by B.
 If a partner, being a trustee, wrongfully employs trust property in the business or on the
account of the partnership, no other partner is liable therefore in his personal capacity to
the beneficiaries unless he had notice of the breach of trust.
 The partners, having such notice, are jointly and severally liable for the breach of trust
(Proved Reasonably – Without preponderance of doubt).

SECTION 68 – LIABILITY OF BENEFICIARY JOINING IN BREACH OF TRUST

Where one of several beneficiaries –
(a) joins in committing breach of trust, or
(b) knowingly obtains any advantage therefrom, without the consent of the other
beneficiaries, or
(c) 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, or
(d) has deceived the trustee and thereby induced him to commit a breach of trust, the other
beneficiaries are entitled to have all his beneficial interest impounded as against him and all
who claim under him (otherwise than as transferees for consideration without notice of the
breach) until the loss caused by the breach has been compensated.
When property has been 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
applies to such property during her marriage.
 This provision must be read with Section 23.
 In a trust, where there are more than one beneficiaries and some of them (or one), are
involved in the breach of trust with a trustee, Section 68 gives right to other beneficiaries
(who were not involved) to impound the interests of the beneficiaries involved in breach
of trust along with trustee, until the entire amount of trust (loss) is not recovered.
PROTECTION OF RIGHTS OF TRANSFEREES
SECTION 64 – SAVING OF RIGHTS OF CERTAIN TRANSFEREES
Nothing in section 63 entitles the beneficiary to any right in respect of property in the
hands 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 a transferee.
A judgement-creditor of the trustee attaching and purchasing trust-property is not a transferee
for consideration within the meaning of this section.
Nothing 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, or shall be deemed to
affect the Indian Contract Act, 1872, section 108, or the liability of a person to whom a debt
or charge is transferred.

SECTION 69 – 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.
 Sui juris beneficiaries –
Section 56 – Transfer the possession
Section 58 – Transfer of beneficial interest
 A bona fide transferee will be subject to rights and liabilities of a beneficiary in these
cases.
DISCHARGE, APPOINTMENT AND EXTINGUSIHMENT OF TRUSTEE
SECTION 70 – OFFICE HOW VACATED
The office of a trustee is vacated by his death or by his discharge from his office.

SECTION 71 – DISCHARGE OF TRUSTEE

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

SECTION 72 – PETITION TO BE DISCHARGED FROM TRUST

Notwithstanding the provisions of section 11, every trustee may apply by petition to a
principal Civil Court of original jurisdiction to be discharged from his office; and if the Court
finds that there is sufficient reason for such discharge, it may discharge him accordingly, and
direct his costs to be paid out of the trust-property. But where there is no such reason, the
Court shall not discharge him, unless a proper person can be found to take his place.

SECTION 73 – APPOINTMENT OF NEW TRUSTEES ON DEATH, ETC.

Whenever any person appointed a trustee disclaims, or any trustee, either original or
substituted, dies, or is for a continuous period of six months absent from India, or leaves
India for the purpose of residing abroad, or is declared an insolvent, or desires to be
discharged from the trust, or refuses or becomes, in the opinion of a principal Civil Court of
original jurisdiction, unfit or personally incapable to act in the trust, or accepts an inconsistent
trust, a new trustee may be appointed in his place by –
(a) the person nominated for that purpose by the instrument or trust (if any), or
(b) if there be no such person, or no such person able and willing to act, the author of the trust
if he be alive and competent to contract, or the surviving or continuing trustees or trustee for
the time being, or legal representative of the last surviving and continuing trustee, or (with
the consent of the Court) the retiring trustees, if they all retire simultaneously, or (with the
like consent) the last retiring trustee.
Every such appointment shall be by writing under the hand of the person making it. On an
appointment of a new trustee the number of trustees may be increased. The Official Trustee
may, with his consent and by the order of the Court, be appointed under this section, in any
case in which only one trustee is to be appointed and such trustee is to be the sole trustee.
The provisions of this section relative to a trustee who is dead include the case of a person
nominated trustee in a will but dying before the testator, and those relative to a continuing
trustee include a refusing or retiring trustee if willing to act in the execution of the power.

SECTION 74 – APPOINTMENT BY COURT

Whenever any such vacancy or disqualification occurs and it is found impracticable to
appoint a new trustee under section 73, the beneficiary may, without instituting a suit, apply
by petition to a principal Civil Court of original jurisdiction for the appointment of a trustee
or a new trustee, and the Court may appoint a trustee or a new trustee accordingly.
RULE FOR SELECTING NEW TRUSTEES
In appointing new trustees, the Court shall have regard –
(a) to the wishes of the author of the trust as expressed in or to be inferred from the
instrument of trust;
(b) to the wishes of the person, if any, empowered to appoint new trustees;
(c) to the question whether the appointment will promote or impede the execution of the trust;
and
(d) where there are more beneficiaries than one, to the interests of all such beneficiaries.

SECTION 75 – VESTING OF TRUST-PROPERTY IN NEW TRUSTEES

Whenever any new trustee is appointed under Section 73 or Section 74, all the trust property
for the time being vested in the surviving or continuing trustees or trustee, 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.
POWERS OF NEW TRUSTEES
Every new trustee so appointed, and every trustee appointed by a Court either before or after
the passing of this Act, shall have the same powers, authorities and discretions, and shall in
all respects act, as if he had been originally nominated a trustee by the author of the trust.
SECTION 76 – SURVIVAL OF TRUST
On the death or discharge of one of several co-trustees, the trust survives and the trust-
property passes to the others, unless the instrument of trust expressly declares otherwise.

EXTINCTION OF TRUSTS
SECTION 77 – TRUST HOW EXTINGUISHED
A trust is extinguished –
(a) when its purpose is completely fulfilled; or
(b) when its purpose becomes unlawful; or
(c) when the fulfilment 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 – REVOCATION OF TRUST

A trust created by will may be revoked at the pleasure of the testator.
A trust otherwise created 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 by word of mouth
in exercise of a power of revocation expressly reserved to the author of the trust; or
(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.
Illustration
A conveys property to B in trust to sell the same and pay out of the proceeds the claims of A's
creditors. A reserves no power of revocation. If no communication has been made to the
creditors, A may revoke the trust. But if the creditors are parties to the arrangement, the trust
cannot be revoked without their consent.

SECTION 79 – REVOCATION NOT TO DEFEAT WHAT TRUSTEES HAVE 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.