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. The trustee asked him to research and get back to him. Cook did
so and gave him the list of companies which has given good dividends and returns. The
trustee was satisfied and gave the money to Cook to make investment in such top firms.
After a while, the trustee sought information about the investment. The broker kept making
excuses and later on vanished with the trust money.
The beneficiaries brought the trustee to Court. They contended that the delegation to the
broker was against the intention of the author. On the other hand, the trustee contended that
he had exercised reasonable care (since delegation was necessary and because he had
previously employed Cook).
The Court held –
1. Trustee had taken all reasonable care (even if it were his won money, he would
have invested it in this way).
2. The act of appointing broker was not unreasonable or arbitrary and he had acted in
light of benefit of the beneficiaries.
3. Delegation was permissible in this case as it falls under the exception of ordinary in
the course of business and necessity.
Thus, the trustee could not be held liable for the loss.
Sir George Jessel MR said –
It seems to me that on general principles a trustee ought to conduct the business of the trust
in the same manner that an ordinary prudent man of business would conduct his own, and
that beyond that there is no liability or obligation on the trustee. In other words, a trustee is
not bound because he is a trustee to conduct business in other than the ordinary and usual
way in which similar business is conducted by mankind in transactions of their own. It
never could be reasonable to make a trustee adopt further and better precautions than an
ordinary prudent man of business would adopt, or to conduct the business in any other
way. If it were otherwise, no one would be a trustee at all.

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.
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.