EQUITY AND TRUST

MODULE 4
INDIAN TRUST ACT, 1882

CREATION OF TRUSTS:
Meaning of a Trust

Under Section 3 of India Trusts Act, 1882 definition of trust has been mentioned. As per this
section, trust is an obligation attached to the ownership of property that can be movable or
immovable. Trust arises out of a confidence accepted by the owner of the property, or declared and
accepted by him, for the benefit of another, who is known as the beneficiary. In a trust there are a
total of three parties, the author of the trust, the trustee, and the beneficiary. The author with respect
to the trust is the person who declares or reposes the confidence. On the other hand, one who
accepts the confidence is called the “trustee” of the trust. An individual for whose benefit the
confidence is accepted by the trustee is called the “beneficiary”. There are certain technical words
described under the Trust Act that are given below:

• “Trust-property” or “trust-money” which means subject matter of the trust

• “Beneficial interest” or “interest” is the right of the beneficiary against the trustee

• “Instrument of trust” is that document by which the trust is declared to be a trust

Section 6- Creation of Trust

Subject to the provision of Section 5, a trust is created when the author of the trust indicates with
reasonable certainty by any words or acts:
• an intention on his part to create thereby a trust.
• Purpose of Trust
• beneficiary
• trust-property
• unless the trust is declared by will or the author of the trust is himself to be a trustee and
transfers the trust property to the trustee. As laid down by the section, the following are
necessary for the creation of a trust:
• intention,
 • trust-property
• beneficiaries
• purpose of the trust, and
• transfer of trust property to the trustee which may be transferred inter vivos or under
a will.

Illustration
• A bequeaths certain property to B, "having the fullest confidence that he will dispose of it
for the benefit of C. This creates trust so far as regards A and C.
• A bequeaths a shop and stock-in-trade to B, on condition that he pays A's debts and a legacy
to C. This is a condition, not a trust for A's creditors to C.

Under the Indian Trusts Act, a trust can be created through a written document, an oral declaration,
or even by the operation of law. However, it is suggested to register a trust through a written
instrument for clarity and evidentiary purposes. The key elements necessary for the creation of a
trust include clear intention, transfer of ownership of property, one trustee, and beneficiary.
As per section 6 of the Indian Trust Act, a trust is created when the author of the trust firmly
indicates by any words or action an intention to create a trust. Also, the purpose of the trust, the
beneficiary, and the trust property transfers the trust property to the trustee. For example, N
bequeaths certain property to D, “having the confidence that he will dispose of it for the benefit of
E”. This creates trust so far as regards N and E.

As per section 7 of the Indian Trust Act, a trust may be created by every person competent to
contract 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 the author of the trust who may dispose of the trust-property.

DUTIES AND LIABILITIES OF TRUSTEES: The Indian Trusts Act, 1882 provides for certain
duties/liabilities of a Trustee, we shall see each one of them in brief detail.

• Execution of Trust
The trustee is required to actually carry out the purpose of the trust as laid out in the Trust deed. The
trustee is also required to follow the directions of the Author of the Trust at the time of creation of
the trust.

However, the trustee is not required to follow such directions if they are impractical or illegal.

• Acquaintance of Trust Property

The trustee is required to know about the details, whereabouts and current condition of the trust
property and also to take appropriate measures to secure the trust property.

• Protection of Title of Trust Property

The trustee is required to defend all the claims against the title of the Trust property and to take
adequate measures to assert and protect the title of the property.

• Not to set up Title adverse to the beneficiary

As the trustee is entrusted with the trust property to maintain it for the benefit of the beneficiaries, it
is expected and required of the trustee to not set up any title adverse to the beneficiary.

A good example explaining this point would be, suppose the trustee is entrusted with an immovable
property and is required to apply the rents and profits of such property for the benefit of the
beneficiaries. The trustee is also given the rights to sell such property.

It is expected of the trustee that the trustee would not sell such property to himself or anyone of his
relatives or friends or a person of like nature, as such an action on the Trustee’s part would be
adverse to the beneficiaries, and the trust factor upon which the foundation of the trust is built,
would cease to exist.

• Take care of the Trust Property

The trustee is required to provide adequate safeguard and required to apply such prudence to the
trust property, as that of an ordinary man would apply to his own property.
However, the Act provides that the Trustee would not be responsible for any loss caused to the trust
property or the benefits arising thereof, if he had applied such prudence as would an ordinary man
would apply to his own property.

• Convert perishable property

If the trust property is of such nature, that with time, it would keep on deteriorating and keep losing
value, the trustee is required to convert, i.e. sell and convert such property into cash proceeds and
apply such proceeds for the benefits of the beneficiaries. This duty is especially required of a trustee
when the trust is created for the benefit of several persons in succession.

• Be impartial among the beneficiaries

When the trust is created for the benefit of several beneficiaries, the trustee is required to apply the
benefits received from the trust property equally among the beneficiaries, without being partial to
anyone or any group among the beneficiaries.

• Protect the trust property from adverse beneficiary

When there are several beneficiaries of a trust, and one or more of such beneficiaries commit, or
threaten to commit an act, which would be adverse to the interest of other beneficiaries and the trust
in general, the trustee is required to take measures to stop such act of such beneficiary/beneficiaries.

• To maintain and keep books and accounts

The trustee is required to keep a clear and accurate account of the trust property and at all times,
provide the same to the beneficiary upon the request of the beneficiary.

• Investment of Trust money

The Act specifically provides that when the trust property consists of money, and such money is not
required to be immediately applied for the benefit of the beneficiaries, the trustee is required to
invest such money in such instruments as provided for in the Act. The Act provides for instruments
such as promissory notes and other securities of the Central Government; in stock or debentures of
the Railways or other government companies; in Units issued by the Unit Trust of India, etc.
RIGHTS AND POWERS OF TRUSTEES: Certain rights/powers are conferred upon the Trustee
under the Indian Trusts Act, 1882. They are discussed in detail in the following paragraphs.

• Right to Title deed

The trustee is entitled to possess the trust deed or any other instrument by which the trust is created,
and the title documents of the trust property.

• Right to reimburse expenses incurred for trust purposes

The trustee has the right to be reimbursed for the expenses incurred by him for the purpose of the
trust, like expenses incurred for the execution of the trust, for the preservation of the trust property,
for the protection or support of the beneficiary, etc.

• Right to re-collect overpayment

If a trustee has mistakenly made a payment over and above the required amount to a beneficiary, the
trustee has the right to collect such excess amount from the beneficiary. Such collection might be
made from the interest of the beneficiary in the trust property, and if not possible, then even from
the beneficiary personally.

• Right to indemnity from breach of trust, by a gainer

If a person has committed a breach of trust and has gained from such breach, the trustee has the
right to indemnify himself against such gain by the person who has committed such a breach.

However, if the trustee himself is also guilty of fraud in committing such a breach, then he loses the
right to indemnify himself in such a situation.

• Right to seek Court’s opinion in managing trust property

The trustee has the right to apply to the Court, by way of a petition, to seek the Court’s opinion,
advice, opinion or direction with regards to the management of the trust property.

• Right to Settle accounts

When the duties of a trustee are complete, the trustee is entitled to have the accounts of the
administration of the trust property examined and settled, and when no benefit is due to any
beneficiary under the trust after the completion of the trustee’s duties, the trustee is also entitled to
receive an acknowledgement to that effect.

• Right to sell trust property, along with power to convey

The trustee has the power to sell the trust property as per the instructions laid out in the trust deed,
and if no such instructions are laid out, then by way of public auction or private contract, in any
way the trustee deems fit.

• Right to vary or rescind the sale of trust property, and re-sell the same
The trustee has the power to vary the conditions of the sale of trust property or even rescind such
sale. He also has the power to re-sell the same property. If in such recession and re-sale, if any loss
occurs, the trustee is not liable for the same.

• Power to manage investments

The Trustee has the power to sell any existing investment of the Trust property and invest the same
into any other instrument, as he deems fit.

However, if there is a beneficiary who is competent to contract, then such power cannot be
exercised by the trustee without such beneficiary’s consent in writing.

• Power to apply property of Trust for maintenance of minor beneficiaries

In case the beneficiary is a minor, the Trustee has the power to apply, i.e. use the income for the
Trust property for the maintenance of the minor. Maintenance of the minor may include functions
such as food and clothing, Education, Religious worship, marriage, funeral, etc.

• Power to compound
This power may also be called as power to settle disputes. When there is any dispute related to any
of the trust property, the trustees, when there are two or more trustees appointed, or the sole trustee,
may settle the dispute in the manner they think fit. For example, they may compromise, compound,
abandon the dispute or may even submit the dispute to arbitration. In the doing of such settlement,
the sole trustee or the trustees may enter into any agreement, or instruments, as they deem fit.

• Trustees to continue with trust if one of several trustees dies or disclaims

When there are two or more than two trustees appointed, and one of them disclaims the trust or dies,
the remaining trustees shall have the power to deal with the trust property, as provided in the Trust
deed.

However, such power would not be exercisable, if the Trust deed specifically requires a specific
number or more of trustees to execute the authority provided for in the trust, and after the death or
disclaimer, such specific number is not satisfied.

DISABILITIES OF TRUSTEES: 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.

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.

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.

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.

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.

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 pu rpose unconnected with the trust.

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.
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.

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.

RIGHTS AND LIABILITIES OF 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.

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:
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.

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.

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.

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.

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 authorise her to transfer such interest during her marriage.

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.
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 1[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.
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 res train A from making62. 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.

Section 63. Following trust-property—into the hands of third persons;—Where trust-property

comes into the hands of a third person inconsistently with the trust, the beneficiary may require him
to admit formally, or may institute a suit for a declaration, that the property is comprised in the trust.
into that into which it has been converted.—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.

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 judgment-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 (9 of 1872), section 108, or the liability of a person to whom a debt or charge is
transferred.

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.

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.

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 ofthe
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.
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.

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.

VACATING THE OFFICES OF TRUSTEES:

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. Butwhere
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 of 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 acCourt
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.

OBLIGATIONS IN THE NATURE OF TRUSTS:

Section 80. Where obligation in nature of trust is created.—An obligation in the nature of a trust is
created in the following cases.

Section 81. [Where it does not appear that transferor intended to dispose of beneficial interest.] Rep.
by the Benami Transactions (Prohibition) Act, 1988 (45 of 1988), s. 7 (w.e.f. 19-5-1988).

Section 82. [Transfer to one for consideration paid by another.] Rep. by s. 7, ibid. (w.e.f.
19-5-1988).

Section 83. Trust incapable of execution or executed without exhausting trust-property.—Where a

trust is incapable of being executed, or where the trust is completely executed without exhausting
the trust-property, the trustee, in the absence of a direction to the contrary, must hold the trust-
property, or so much thereof as is unexhausted, for the benefit of the author of the trust or his legal
representative.

Illustrations:
(a) A conveys certain land to B— “upon trust,” and no trust is declared; or “upon trust to be
thereafter declared”, and no such declaration is ever made; or upon trusts that are too vague to be
executed; or upon trusts that become incapable of taking effect; or “in trust for C.” and C renounces
his interest under the trust. In each of these cases B holds the land for the benefit of A.

(b) A transfers Rs. 10,000 in the four per cents. to B, in trust to pay the interest annually accruing
due to C for her life. A dies. Then C dies. B holds the fund for the benefit of A’s legal representative.

(c) A conveys land to B upon trust to sell it and apply one moiety of the proceeds for certain
charitable purposes, and the other for the maintenance of the worship of an idol. B sells the land,
but the charitable purposes wholly fail, and the maintenance of the worship does not exhaust the
second moiety of the proceeds. B holds the first moiety and the part unapplied of the second moiety
for the benefit of A or his legal representative.(d) A bequeaths Rs. 10,000 to B, to be laid out in
buying land to be conveyed for purposes which either wholly or partially fail to take effect. B holds
for the benefit of A’s legal representative the undisposed of interest in the money or land if
purchased.

Section 84. Transfer for illegal purpose.—Where the owner of property transfers it to another for an
illegal purpose and such purpose is not carried into execution, or the transferor is not as guilty as the
transferee, or the effect of permitting the transferee to retain the property might be to defeat the
provisions of any law, the transferee must hold the property for the benefit of the transferor.

Section 85. Bequest for illegal purpose.—Where a testator bequeaths certain property upon trust
and the purpose of the trust appears on the face of the will to be unlawful, or during the testator’s
lifetime the legatee agrees with him to apply the property for an unlawful purpose, the legatee must
hold the property for the benefit of the testator’s legal representative. Bequest of which revocation
is prevented by coercion.—Where property is bequeathed and the revocation of the bequest is
prevented by coercion, the legatee must hold the property for the benefit of the testator’s legal
representative.

Section 86. Transfer pursuant to rescindable contract.—Where property is transferred in pursuance

of a contract which is liable to rescission or induced by fraud or mistake, the transferee must, on
receiving notice to that effect, hold the property for the benefit of the transferor, subject to
repayment by the latter of the consideration actually paid.

Section 87. Debtor becoming creditor’s representative.—Where a debtor becomes the executor or
other legal representative of his creditor, he must hold the debt for the benefit of the persons
interested therein.

Section 88. Advantage gained by fiduciary.—Where a trustee, executor, partner, agent, director of a
company, legal advisor, or other person bound in a fiduciary character to protect the interests of
another person, by availing himself of his character, gains for himself any pecuniary advantage, or
where any person so bound enters into any dealings under circumstances in which his own interests
are, or may be, adverse to those of such other person and thereby gains for himself a pecuniary
advantage, he must hold for the benefit of such other person the advantage so gained.

Illustrations:

(a) A, an executor, buys at an undervalue from B, a legatee, his claim under the will. B is ignorant
of the value of the bequest. A must hold for the benefit of B the difference between the price and
value.

(b) A, a trustee, uses the trust-property for the purpose of his own business. A holds for the benefit
of his beneficiary the profits arising from such user.

(c) A, a trustee, retires from his trust in consideration of his successor paying him a sum of money.
A holds such money for the benefit of his beneficiary.

(d) A, a partner, buys land in his own name with funds belonging to the partnership. A holds such
land for the benefit of the partnership.
(e) A, a partner, employed on behalf of himself and his co-partners is negotiating the terms of a
lease, clandestinely stipulates with the lessor for payment to himself of a lakh of rupees. A holds the
lakh for the benefit of the partnership.

(f) A and B are partners. A dies. B, instead of winding up the affairs of the partnership, retains all
the assets in the business. B must account to A’s legal representative for the profits arising from A’s
share of the capital.

(g) A, an agent employed to obtain a lease for B, obtains the lease for himself. A holds the lease for
the benefit of B.

(h) A, a guardian, buys up for himself incumbrances on his ward B’s estate at an undervalue. A
holds for the benefit of B the incumbrances so bought, and can only charge him with what he has
actually paid.

Section 89. Advantage gained by exercise of undue influence.—Where, by the exercise of undue
influence, any advantage is gained in derogation of the interests of another, the person gaining such
advantage without consideration, or with notice that such influence has been exercised, must hold
the advantage for the benefit of the person whose interests have been so prejudiced.

Section 90. Advantage gained by qualified owner.—Where a tenant for life, co-owner, mortgagee or
other qualified owner of any property, by availing himself of his position as such, gains an
advantage in derogation of the rights of the other persons interested in the property, or where any
such owner, as representing all persons interested in such property, gains any advantage, he must
hold, for the benefit of all persons so interested, the advantage so gained, but subject to repayment
by such persons of their due share of the expenses properly incurred, and to an indemnity by the
same persons against liabilities properly contracted, in gaining such advantage.

Illustrations:
(a) A, the tenant for life of leasehold property, renews the lease in his own name and for his own
benefit. A holds the renewed lease for the benefit of all those interested in the old lease.

(b) A village belongs to a Hindu family. A, one of its members, pays nazrana to Government and
thereby procures his name to be entered as the inamdar of the village. A holds the village for the
benefit of himself and the other members.

(c) A mortgages land to B, who enters into possession. B allows the Government revenue to fall into
arrear with a view to the land being put up for sale and his becoming himself the purchaser of it.
The land is accordingly sold to B. Subject to the repayment of the amount due on the mortgage and
of his expenses properly incurred as mortgagee, B holds the land for the benefit of A.

Section 91. Property acquired with notice of existing contract.—Where a person acquires property
with notice that another person has entered into an existing contract affecting that property, of
which specific performance could be enforced, the former must hold the property for the benefit of
the latter to the extent necessary to give effect to the contract.

Section 92. Purchase by person contracting to buy property to be held on trust.—Where a person
contracts to buy property to be held on trust for certain beneficiaries and buys the property
accordingly, he must hold the property for their benefit to the extent necessary to give effect to the
contract.

Section 93. Advantage secretly gained by one of several compounding creditors.—Where creditors
compound the debts due to them, and one of such creditors, by a secret arrangement with the debtor,
gains an undue advantage over his co-creditors, he must hold for the benefit of such creditors the
advantage so gained.

Section 94. [Constructive trusts in cases not expressly provided for].—Rep. by the Benami
Transactions (Prohibition) Act, 1988 (45 of 1988), s. 7 (w.e.f. 19-5-1988).
Section 95. Obligor’s duties, liabilities and disabilities.—The person holding property in accordance
with any of the preceding sections of this Chapter must, so far as may be, perform the same duties,
and is subject, so far as may be, to the same liabilities and disabilities, as if he were a trustee of the
property for the person for whose benefit he holds it: Provided that (a) where he rightfully cultivates
the property or employs it in trade or business, he is entitled to reasonable remuneration for his
trouble, skill and loss of time in such cultivation or employment; and (b) where he holds the
property by virtue of a contract with the person for whose benefit he holds it, or with any one
through whom such person claims, he may, without the permission of the Court, buy or become
lessee or mortgagee of the property or any part thereof.

Section 96. Saving of rights of bona fide purchasers.—Nothing contained in this Chapter shall
impair the rights of transferees in good faith for consideration, or create an obligation in evasion of
any law for the time being in force.