Indian Trusts Act, 1882 Bare Act

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Indian Trusts Act, 1882

Content
Sections Particulars
Chapter 1 Preliminary
1 Short title and commencement

This Act may be called the Indian Trusts Act, 1882; and it shall come into force on the first day of March, 1882.

Local extent, Saving: It extends to the whole of India except the State of Jammu and Kashmir and the Andaman and Nicobar Islands; but the Central Government may, from time to time, by notification in the Official Gazette, extend it to the Andaman and Nicobar Islands or to any part thereof. But nothing herein contained affects the rules of Mohammedan law as to waqf, or the mutual relations of the members of an undivided family as determined by any customary, or personal law, or applies to public or private religious or charitable endowments or to trusts to distribute prizes taken in war among the captors; and nothing in the Second Chapter of this Act applies to trusts created before the said day.

2 Repeal of enactments

The statutes and Acts mentioned in the Schedule hereto annexed shall, to the extent mentioned in the said Schedule, be repealed, in the territories to which this Act for the time being extends.

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”: “trustee”: “beneficiary”: “trust property”: “beneficial interest”: “instrument of trust”: 

the person who reposes or declares the confidence is called the “author of the trust”: the person who accepts the confidence is called the “trustee”: the person for whose benefit the confidence is accepted is called the “beneficiary”: the subject-matter of the trust is called “trust-property” or “trust-money”: the “beneficial interest” or “interest” of the beneficiary is his right against the trustee as owner of the trust-property; and the instrument, if any, by which the trust is declared is called the “instrument of trust”;

“breach of trust”: a breach of any duty imposed on a trustee, as such, by any law for the time being in force, is called a “breach of trust”.

“registered”: and in this Act, unless there be something repugnant in the subject or context, “registered” means registered under the law for the registration of documents for the time being in force.

“notice”: a person is said to have “notice” of a fact either when he actually knows that fact or when, but for willful abstention from inquiry or gross negligence, he would have known it, or when information of the fact is given to or obtained by his agent, under the circumstances mentioned in the Indian Contract Act, 1872 (9 of 1872), section 229.

Expressions used herein and defined in the Indian Contract Act, 1872 (expressions defined in Act 9 of 1872), shall be deemed to have the meanings respectively attributed to them by that Act.

Chapter 2  The Creation Of Trusts
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 immovable 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.

CommentIt is well settled that it is open to the settlers to create a trust for discharging the debts of their creditors. Such an object cannot be said to be unlawful. Chogmal Bhandari v. Deputy Commercial Tax Officer II Division, Kurnool AIR 1976 SUPREME COURT 656

5 Trust of immovable property

No trust in relation to immovable property is valid unless declared by a non-testamentary instrument in writing signed by the author of the trust or the trustee and registered or by the will of the author of the trust or of the trustee.

Trust, of movable property: No trust in relation to movable property is valid unless declared as aforesaid, or unless the ownership of the property is transferred to the trustee.

These rules do not apply where they would operate so as to effectuate a fraud.

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) transferred 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 amongst 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 ship 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.

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.

8 Subject matter 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.

9 Who may be beneficiary

Every person capable of holding property may be a beneficiary.

Disclaimer by 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.

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.

Chapter 3  The Duties And Liabilities Of Trustees
11 Trustee to execute trust
12 Trustee to inform himself of state of trust-property
13 Trustee to protect title to trust-property
14 Trustee not to set up title adverse to beneficiary
15 Care required from trustee
16 Conversion of perishable property
17 Trustee to be impartial
18 Trustee to prevent waste
19 Accounts and information
20 Investment of trust-money
20A Power to purchase redeemable stock at a premium
21 Mortgage of land Pledged to government under Act 26 of 1871-Deposit in government savings bank
22 Sale by trustee directed to sell within specified time
23 Liability for breach of trust
24 No set-off allowed to trustee
25 Non-liability for predecessor’s default
26 Non-liability for co-trustee’s default
27 Several liability of co-trustees
28 Non-liability of trustee paying without notice of transfer by beneficiary
29 Liability of trustee where beneficiary’s interest is forfeited to the government
30 Indemnity of trustees
Chapter 4  The Rights And Powers Of Trustees
31 Right to title deed
32 Right to reimbursement of expenses
33 Right to indemnity from gainer by breach of trust
34 Right to apply to court for opinion in management of trust-property
35 Right to settlement of accounts
36 General authority of trustee
37 Power to sell in lots and either by public auction or private contract
38 Power to sell under special conditions-Power to buy-in and re-sell
39 Power to convey
40 Power to vary investments
41 Power to apply property of minors, etc. for their maintenance, etc.
42 Power to give receipts
43 Power to compound, etc.
44 Power to several trustees of whom one disclaims or dies
45 Suspension of trustee’s powers by decree
Chapter 5  The Disabilities Of Trustees
46 Trustee cannot renounce after acceptance
47 Trustee cannot delegate
48 Co-trustees cannot act singly
49 Control of discretionary power
50 Trustee may not charge for services
51 Trustee may not use trust property for his own profit
52 Trustee for sale or his agent may not buy
53 Trustee may not buy beneficiary’s interest without permission
54 Co-trustees may not lend to one of themselves
Chapter 6  The Rights And Liabilities Of The Beneficiary
55 Rights to rents and profits
56 Right to specific execution
57 Right to inspect and take copies of instrument of trust, accounts, etc.
58 Right to transfer beneficial interest
59 Right to sue for execution of trust
60 Right to proper trustees
61 Right to compel to any act of duty
62 Wrongful purchase by trustee
63 Following trust property-into the hands of third persons; into that into which it has been converted
64 Saving of rights of certain transferees
65 Acquisition by trustee of trust-property wrongfully converted
66 Right in case of blended property
67 Wrongful employment by partner-trustee of trust-property for partnership purposes
68 Liability of beneficiary joining in breach of trust
69 Rights and liabilities of beneficiary’s transferee
Chapter 7 Vacating The Office Of Trustee
70 Office how vacated
71 Discharge of trustee
72 Petition to be discharged from trust
73 Appointment of new trustees on death, etc.
74 Appointment by court
75 Vesting of trust-property in new trustees
76 Survival of trust
Chapter 8  The Extinction Of Trusts
77 Trust how extinguished
78 Revocation of trust
79 Revocation not to defeat what trustees have duly done
Chapter 9  Certain Obligations In The Nature Of Trusts
80 Where obligation in nature of trust is created
81 Where it does not appear that transferor intended to dispose of beneficial interest
82 Transfer to one for consideration paid by another
83 Trust incapable of execution or executed without exhausting trust-property
84 Transfer for illegal purpose
85 Bequest for illegal purpose
86 Transfer pursuant to rescindable contract
87 Debtor becoming creditor’s representative
88 Advantage gained by fiduciary
89 Advantage gained by exercise of undue influence
90 Advantage gained by qualified owner
91 Property acquired with notice of existing contract
92 Purchase by person contracting to buy property to be held on trust
93 Advantage secretly gained by one of several compounding creditors
94 Constructive trusts in cases not expressly provided for
95 Obligor’s duties, liabilities and disabilities
96 Saving of rights of bona fide purchasers
The Schedule
Footnotes