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TRUSTS ACT, 1882
2 of 1882
An Act to define and amend the law relating to Private Trusts and Trustees. Whereas it is expedient to define and amend the law relating lo private trusts and trustees it is hereby enacted as follows:-
SECTION 01: 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. 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 lo 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 Muhamadan law as to waqf, or the mutual relations of the member's 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.
SECTION 02: REPEAL OF ENACMENTS.
The Statute and Acts mentioned in the Schedule hereto annexed shall, to the extent mentioned in the said Schedule, be repealed, in the territories lo which this Act or the time being extends.
SECTION 03: 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": "notice": 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 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 section 229 Indian Contract Act, 1872 (9 of 1872)-, ; and all 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.
SECTION 04: 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.
SECTION 05: 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 p to the trustee.
These rules do apply where they would operate so as to effectuate a fraud.
SECTION 06: 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 bequeath 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 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 07: WHO MAY CREATE TRUST?
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.
SECTION 08: 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.
SECTION 09: WHO MAY BE BENIFICIARY?
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.
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..:, 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.
SECTION 11: TRUSTEE TO EXECUTE TRUST.
The trustees are bound to fulfill 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.
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
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 immovable 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 (3 of 1877), the trustee's duty is to cause the instrument to be registered.
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.
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.
(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 favor of the trustee as such, and payable at Bombay. The bills are dishonored. A is not bound to make good the loss.
(b) 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 cause to B.
(f) A, a trustee for B of a policy of insurance, has funds in hand for payment of the premiums. A neglect 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.
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 into property of a 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
(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.
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.
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 19: ACCOUNTS AND INFORMATION
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