THE
Trusts Act, 1882
act No.
II of 1882
[13th January, 1882 ]
An Act to define and amend the law relating
to Private Trusts and Trustees.
Preamble.
whereas it
is expedient to define and amend the law relating to private trusts and
trustees; It is hereby enacted as follows :—
CHAPTER I
preliminary
1.
Short title Commencement. This Act may be called the Trusts Act, 1882:
and it shall come into force on the first day of March, 1882.
Local extent;
it extends to [the whole of Pakistan
Savings But nothing herein. contained
affects the rules of Muhammadan law as to waqf, or the mutual relations of the
members of an undivided family as determined by any customary or personal law,
or applies to public or private religious or charitable endowments, or to
trusts to distribute prizes taken in war among the captors; and nothing in the
second Chapter of this Act applies to trusts created before the said day.
2. Repeal
of Enactments. The Statute and Acts mentioned in the Schedule hereto
annexed shall, to the extent mentioned in the said Schedule, be repealed, in
the territories to which this Act for the time being extends.
3.
Interpretation clause –
“trust”.
A "trust" is an obligation
annexed to the ownership of property, and arising out of a confidence reposed
in and accepted by the owner, or declared and accepted by him, for the benefit
of another, or of another and the owner:
“author of
the trust. the person who reposes or declares
the confidence is called the "author of the trust":
“trustee”:
. the person who accepts the
confidence is called the "trustee":
“beneficiary”:
the person for whose benefit the
confidence is accepted is called the "beneficiary ":
“trust-property”.
the
subject-matter of the trust is called "trust-property" or
"trust-money":
“beneficial
interest”: the "beneficial interest"
or "interest" of the beneficiary is his right against the trustee as
owner of the trust-property;
“instrument
of trust”: and the instrument, if any, by which
the trust is declared is called the "instrument of trust":
“breach of
trust”: a
breach of any duty imposed on a trustee, as such, by any law for the time being
in force, is called a "breach of trust":
“Registered”:
and in this Act, unless there be something repugnant in the subject or context,
"registered" means registered under the law for the registration of
documents for the time being in force: 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 Contract Act, 1872, section 229; and all
expressions used herein and defined in the Contract Act, 1872, shall be deemed
to have the meanings respectively attributed to them by that Act.
CHAPTER
II
of THE creation OF
trusts
4.
Lawful purpose. A trust may be created for any lawful purpose. The
purpose of a trust is lawful unless it is
(a)
forbidden by law, or
(b)
is of such a nature that, if permitted, it would
defeat the provisions of any law, or
(c)
is fraudulent, or
(d)
involves or implies injury to the person or property of another, or
(e)
the Court regards it as immoral or opposed to public
policy.
Every trust
of which the purpose is unlawful is void. And where a trust is created for two
purposes, of which one is lawful and the other unlawful, and the two purposes
cannot be separated, the whole trust is void.
Explanation.—In this section the expression
"law" includes, where the trust-property is immovable and situate in
a foreign country, the law of such country.
Illustrations
(a)
A conveys property to B in trust to apply the profits
to the nurture of female foundlings to be trained up as prostitutes. The trust
is void.
(b)
A bequeaths property to B in trust to employ it in
carrying on a smuggling business, and out of the profits thereof to support
A’s children. The trust is void.
(c)
A, while in insolvent circumstances, transfers
property to B in trust for A during his life, and after his death for B. A is
declared an insolvent. The trust for A is invalid as against his creditors.
5.
Trust of immoveable 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.
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 lie 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 a legacy to C. This is a condition, not a
trust for A’s creditors and C.
7. Who
may create trusts. A trust may be created—
(a)
by every person competent to contract, and,
(b)
with the permission of a principal Civil Court of
original jurisdiction, by or on behalf of a minor; but subject in each case to the
law for the time being in force as to the circumstances and extent in and to
which the author of the trust may dispose of the trust-property.
8. Subject
of trust. The subject-matter of a trust must be property transferable to
the beneficiary. It must not be merely beneficial interest under a subsisting
trust.
9.
Who may be beneficiary. Who may trustee Every person capable of holding
property may be a beneficiary.
Disclaimer by
be neficiary.- A
proposed beneficiary may renounce his interest under the trust by disclaimer
addressed to the trustee, or by setting up, with notice of the trust, a claim
inconsistent therewith.
10. How 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 is
bound to accept a trust.
Acceptance
trust. A trust is
accepted by any words or acts of the trustee indicating with reasonable
certainty such acceptance.
Disclaimer of
trust. Instead of
accepting a trust, the intended trustee may, within a reasonable period,
disclaim it, and such disclaimer shall prevent the trust-property from vesting
in him.
A disclaimer
by one of two or more co-trustees vests the trust-property in the other or
others, and makes him or them sole trustee or trustees from the date of the
creation of the trust.
Illustrations
(a)
A bequeaths certain property to B and C, his
executors, as trustees for D. B and C prove A’s will. This is in itself an
acceptance of the trust, and B and C hold the property in trust for D.
(b)
A transfers certain property to B in trust to sell it
and to pay out of the proceeds A’s debts. B accepts the trust and sells the
property. So far as regards B, a trust of the proceeds is created for A’s
creditors.
(c)
A bequeaths a lakh of rupees to B upon certain trusts
and appoints him his executor. B severs the lakh from the general assets and
appropriates it to the specific purpose. This is an acceptance of the trust.
CHAPTER
III
of THE duties AND
liabilities OF trustees
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.
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.
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.
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.
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 [Chittagong ],
is a trustee for B, living in Karachi ]. 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 Karachi], The bills are dis-honoured.
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 hi 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.
(i)
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 this co-trustee, C. C misapplies the trust-property. A is personally
answerable for the loss resulting to B.
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 (? 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 [Chittagong ] 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.
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.
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.
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.
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:—
(a)
in promissory notes, debentures, stock or other securities [of any [Provincial
Government] or] of the Central Government], or of the United Kingdom of Great
Britain and Ireland
[Provided
that securities, both the principal whereof and the interest whereon shall have
been fully and unconditionally guaranteed by any such Government, shall be
deemed, for the purposes of this clause, to be securities of such Government;]
(b)
in bonds, debentures and annuities charged
or secured [before the 15th
August, 1947 ] by the Parliament of the United Kingdom India
[Provided
that, after the fifteenth day of February, 1916, no money shall be invested in
any such annuity being a terminable annuity unless a sinking fund has been
established in connection with such annuity; but nothing in this proviso shall
apply to investments made before the date aforesaid;]
(bb)
in India India India
(c)
in stock or debentures of, or shares in, Railway or
other Companies the interest whereon shall have been guaranteed by the
Secretary of State for India in Council or by the "[Central Government]
"[or in debentures of the Bombay [Provincial] Co-operative Bank, Limited,
the interest whereon shall have been guaranteed, by the Secretary of State for
India in Council] or the Provincial Government of Bombay]: provided that after
the 31st day of March, 1949 no trustee shall invest the money in debentures of
the Bombay Provincial Co-operative Bank, Limited;]
(d)
in debentures or other securities for money issued,
under the authority of any [Central Act or Act] of a Legislature established in
[a Province] by or on behalf of any municipal body, port trust or city improvement
trust in any Presidency-town, or in Rangoon Town, or by or on behalf of the
trustees of the port of Karachi:]
Provided that
after the 31st day of March, 1949 no trustee shall invest the money in any securities
issued by or on behalf of a municipal body, port trust or city improvement
trust in any Presidency-town, or in Rangoon Town;]
(e)
on a first mortgage of immoveable property situate in
[a Province]: Provided that the property is not a leasehold for a term of years
and that the value of the property exceeds by one-third, or, if consisting of
buildings, exceeds by one-half, the mortgage-money; or
(f)
on any other security expressly authorized by the
instrument of trust, or by any rule which the High Court may from time to time
prescribe in this behalf:
provided that
, where there is a person competent to contract and entitled in possession to
receive the income f the trust-property for his life, or for any greater
estate, no investment on any security mentioned or referred to in clauses
(d), (e), and (f) shall be made without his consent in writing.
20A Power to
purchase redeemable stock at a premium. .—(1) A trustee may invest in any
of the securities mentioned or referred to in section 20, notwithstanding that
the same may be redeemable and that the price exceeds the redemption value:
Provided that
a trustee may not purchase at a price exceeding its redemption value any
security mentioned or referred to in clauses (c) and (d) of section 20 which is
liable to be redeemed within fifteen years of the date of purchase at par or at
some other fixed rate, or purchase any such security as is mentioned or
referred to in the said clauses which is liable to be redeemed at par or at
some other fixed rate at a price exceeding fifteen per centum above par or such
other fixed rate.
(2)
A trustee may retain until redemption any redeemable
stock, fund or security which may have been purchased in accordance with this
section.]
21. Mortgage of
land pledged to Government under Act XXVI of 1871. Deposit in Government
savings Bank. Nothing in section 20 shall apply to investments made before
this Act comes into force, or shall be deemed to preclude an investment on a
mortgage of immoveable property already pledged as security for an advance
under the Land Improvement Act, 1871. or, in case the trust-money does not
exceed three thousand rupees, a deposit thereof in a Government Savings Bank.
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. Tn 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.
23. Liability for
breach of trust. Where the trustee commits a breach of trust, he is liable
to make good the loss which the trust-property or the beneficiary has thereby
sustained, unless the beneficiary has by fraud induced the trustee to commit
the breach, or the beneficiary, being competent to contract, has himself,
without coercion or undue influence having been brought to bear on him,
concurred in the breach, or subsequently acquiesced therein, with full knowledge
of the facts of the case and of his rights as against the trustee.
A trustee
committing a breach of trust is not liable to pay interest except in the
following cases:—
(a)
where he has actually received interest:
(b)
where the breach consists in unreasonable delay in
paying trust-money to the beneficiary:
(c)
where the trustee ought to have received interest, but
has not done so:
(d)
where he may be fairly presumed to have received
interest.
He is liable,
in case (a), to account for the interest actually received, and, in cases (b),
(c) and (d), to account for simple interest at the rate of six per cent. per
annum, unless the Court otherwise directs.
(e)
where the breach consists in failure to invest
trust-money and to accumulate the interest or dividends thereon, he is liable
to account for compound interest (with half-yearly rests) at the same rate.
(f)
where the breach consists in the employment of
trust-property or the proceeds thereof in trade or business, he is liable to
account, at the option of the beneficiary, either for compound interest (with
half-yearly rests) at the same rate, or for the nett profits made by such
employment.
Illustrations
(a)
A trustee improperly leaves trust-property
outstanding, and it is consequently lost: he is liable to make good the
property lost, but he is not liable to pay interest thereon.
(b)
A bequeaths a house to B in trust to sell it and pay
the proceeds to C. B neglects to sell the house for a great length of time,
whereby the house is deteriorated and its market price falls. B is answerable
to C for the loss.
(c)
A trustee is guilty of unreasonable delay in investing
trust-money in accordance with section 20, or in paying it to the beneficiary.
The trustee is liable to pay interest thereon for the period of the
delay.
(d)
The duty of the trustee is to invest trust-money in
any of the securities mentioned in section 20, clause (a), (b), (c) or (d).
Instead of so doing, he retains the money in his hands. He is liable, at the option
of the beneficiary, to be charged either with the amount of the principal money
and interest, or with the amount of such securities as he might have purchased
with the trust-money when the investment should have been made, and the
intermediate dividends and interest thereon.
(e)
The instrument of trust directs the trustee to invest
trust-money either in any such securities or on mortgage of immoveable
property- The trustee does neither. He is liable for the principal money and
interest.
(f)
The instrument of trust directs the trustee to invest
trust-money in any of such securities and to accumulate the dividends thereon.
The trustee disregards the direction. He is liable, at the option of the
beneficiary, to be charged either with the amount of the principal money and
compound interest, or with the amount of such securities as lie might have
purchased with the trust-money when the investment should have been made
together with the amount of the accumulation which would have arisen from a proper
investment of the intermediate dividends.
(g)
Trust-property is invested in one of the securities
mentioned in section 20, clause (a), (b), (c) or (d). The trustee sells such
security for some purpose not authorized by the terms of the instrument of
trust. He is liable, at the option of the beneficiary, either to replace the
security with the intermediate dividends and interest thereon, or to account
for the proceeds of the sale with interest thereon.
(h)
The trust-property consists of land. The trustee sells
the land to a purchaser for a consideration without notice of the trust. The
trustee is liable, at the option of the beneficiary, to purchase other land of
equal value to be settled upon the like trust, or to be charged with the
proceeds of the sale with interest.
24. No set off
allowed to trustee. A trustee who is liable for a loss occasioned by a
breach of trust in respect of one portion of the trust-property cannot set-off
against his liability a gain which has accrued to another portion of the
trust-property through another and distinct breach of trust.
25. Non-liability
for predecessor’s default. Where a trustee succeeds another, he is not, as
such, liable for the acts or defaults of his predecessor.
26. Non-liability
for co-trustee’s default. Subject to the provisions of sections 13 and 15,
one trustee is not, as such, liable for a breach of trust committed by his
co-trustee:
Provided
that, in the absence of an express declaration to the contrary in the
instrument of trust, a trustee is so liable—
(a)
where he has delivered trust-property to his co-trustee without seeing to its
proper application:
(b)
where he allows his co-trustee to receive
trust-property and fails to make due enquiry as to the co-trustee’s dealings
therewith or allows him to retain it longer than the circumstances of the case
reasonably require:
(c)
where he becomes aware of a breach of trust committed
or intended by his co-trustee, and either actively conceals it or does not
within a reasonable time take proper steps to protect the beneficiary’s
interest.
Joining in
receipt for conformity.
A co-trustee who joins in signing a receipt for trust-property and proves that
he has not received the same is not answerable, by reason of such signature
only, for loss or misapplication of the property by his co-trustee.
Illustration
A bequeaths
certain property to B and C, and directs them to sell it and invest the
proceeds for the benefit of D. B and C accordingly sell the property, and the
purchase-money is received by B and retained in his hands. C pays no attention
to the matter for two years, and then calls on B to make the investment. B is
unable to do so, becomes insolvent, and the purchase-money is lost. C may be
compelled to make good the amount.
27. Several
liability of Co-trustees. Where co-trustees jointly commit a breach of
trust, or where one of them by his neglect enables the other to commit a breach
of trust, each is liable to the beneficiary for the whole of the loss occasioned
by such breach.
Contribution
as between co-trustees. But
as between the trustees themselves, if one be less guilty than another and has
had to refund the loss, the former may compel the latter, or his legal
representative to the extent of the assets he has received, to make good such
loss; and, if all be equally guilty, any one or more of the trustees who has
had to refund the loss may compel the others to contribute.
Nothing in
this section shall be deemed to authorize a trustee who has been guilty of
fraud to institute a suit to compel contribution.
28. Non-
liability of trustee paying without notice of transfer; by beneficiary. When
any beneficiary’s interest becomes vested in another person, and the trustee,
not having notice of the vesting, pays or delivers trust-property to the person
who would have been entitled thereto in the absence of such vesting, the
trustee is not liable for the property so paid or delivered.
29. Liability of
trustee where beneficiary’s interest is forfeited to the government. When
the beneficiary’s interest is forfeited or awarded by legal adjudication [to
the Government], the trustee is bound to hold the trust-property to the extent
of such interest for the benefit of such person in such manner as [the Provincial
Government] may direct in this behalf.
30. indemnity of
trustees. Subject to the provisions of the instrument of trust and of
sections 23 and 26, trustees shall be respectively chargeable only for such
moneys, stocks, funds and securities as they respectively actually receive and
shall not be answerable the one for the other of them, nor for any banker,
broker or other person in whose hands any trust-property may be placed, nor for
the insufficiency or deficiency of any stocks, funds or securities, nor
otherwise for involuntary losses.
CHAPTER
IV
of THE rights AND
powers OF trustees
31. Right to
title – deed. A trustee is entitled to have in his possession the instrument
of trust and all the documents of title (if any) relating solely to the
trust-property.
32. Right to
reimbursement of expenses. Every trustee may reimburse himself, or pay or
discharge out of the trust-property, all expenses properly incurred in or about
the execution of the trust, or the realization, preservation or benefit of the
trust-property, or the protection or support of the beneficiary.
If he pays
such expenses out of his own pocket, he has a first charge upon the
trust-property for such expenses and interest thereon; but such charge (unless
the expenses have been incurred with the sanction of a principal Civil Court of
original jurisdiction) shall be enforced only by prohibiting any disposition
of the trust-property without previous payment of such expenses and interest.
If the
trust-property fail, the trustee is entitled to recover from the beneficiary
personally on whose behalf he acted, and at whose request, expressed or
implied, he made the payment, the amount of such expenses.
Where a
trustee has by mistake made an over-payment to the beneficiary, he may
reimburse the trust-property out of the beneficiary’s interest. If such
interest fail, the trustee is entitled to recover from the beneficiary
personally the amount of such overpayment.
33. Right to
indemnity from gainer by breach of trust. A person other than a trustee who
has gained an advantage from a breach of trust must indemnify the trustee to
the extent of the amount actually received by such person under the breach; and
where he is a beneficiary the trustee has a charge on his interest for such
amount.
Nothing in
this section shall be deemed to entitle a trustee to be indemnified who has, in
committing the breach of trust, been guilty of fraud.
34. Right to
apply to court for opinion in management of trust – property. Any trustee
may, without instituting a suit, apply by petition to a principal Civil Court
of original jurisdiction for its opinion, advice or direction on any present
questions respecting the management or administration of the trust-property
other than questions of detail, difficulty or importance, not proper in the
opinion of the Court for summary disposal.
A copy of
such petition shall be served upon, and the hearing thereof may be attended by,
such of the persons interested in the application as the Court thinks fit.
The trustee
stating in good faith the facts in such petition and acting upon the opinion,
advice or direction given by the Court shall be deemed, so far as regards his
own responsibility, to have discharged his duty as such trustee in the
subject-matter of the application.
The costs of
every application under this section shall be in the discretion of the Court to
which it is made.
35. Right to
settlement of accounts. When the duties of a trustee, as such, are
completed, he is entitled to have the accounts of his administration of the
trust-property examined and settled;. and, where nothing is due to the
beneficiary under the trust, to an acknowledgment in writing to that effect.
36. General
authority of trustee. In addition to the powers expressly conferred by this
Act and by the instrument of trust, and subject to the restrictions, if any,
contained in such instrument, and to the provisions of section 17, a trustee
may do all acts which are reasonable and proper for the realization, protection
or benefit of the trust-property, and for the protection or support of a
beneficiary who is not competent to contract.
Except with
the permission of a principal Civil Court of original jurisdiction, no trustee
shall lease trust-property for a term exceeding twenty-one years from the date
of executing the lease, nor without reserving the best yearly rent that can be
reasonably obtained.
37. Power to
sell in lots, and either by public auction or private contract. Where the
trustee is empowered to sell any trust-property, he may sell the same subject
to prior charges or not, and either together or in lots, by public auction or
private contract, and either at one time or at several times, unless the
instrument of trust otherwise directs.
38. Power to
sell under special conditions. Power to by in and re – sell. The trustee
making any such sale may insert such reasonable stipulations either as to
title or evidence of title, or otherwise, in any conditions of sale or contract
for sale, as he thinks fit; and may also buy in the property or any part
thereof at any sale by auction, and rescind or vary any contract for sale, and
re-sell the property so bought in, or as to which the contract is so rescinded,
without being responsible to the beneficiary for any loss occasioned thereby.
Where a
trustee is directed to sell trust-property or to invest trust-money in the
purchase of property, he may exercise a reasonable discretion as to the time
of effecting the sale or purchase.
Illustrations
(a)
A bequeaths property to B, directing him to sell it
with all convenient spied and pay the proceeds to C. This does not render an
immediate sale imperative.
(b)
A bequeaths property to B, directing him to sell it at
such time and in such manner as he shall think fit and invest the proceeds for
the benefit of C. This does not authorize B, as between him and C, to postpone
the sale to an indefinite period.
39. Power to
convey. For the purpose of completing any such sale, the trustee shall have
power to convey or otherwise dispose of the property sold in such manner as may
be necessary.
40. Power to
vary investments. A trustee may, at his discretion, call in any
trust-property invested in any security and invest the same on any of the
securities mentioned or referred to in section 20, and from time to time vary
any such investments for others of the same nature:
Provided
that, where there is a person competent to contract and entitled at the time to
receive the income of the trust-property for his life, or for any greater
estate, no such change of investment shall be made without his consent in
writing.
41. Power to
apply property of minors, etc., for their maintenance, etc. Where any
property is held by a trustee in trust for a minor, such trustee may, at his
discretion, pay to the guardians (if any) of such minor, or otherwise apply for
or towards his maintenance or education or advancement in life, or the reasonable
expenses of his religious worship, marriage or funeral, the whole or any part
of the income to which he may be entitled in respect of such properly; and such
trustee shall accumulate all the residue of such income by way of compound
interest by investing the same and the resulting income thereof from time to
time in any of the securities mentioned or referred to in section 20, for the
benefit of the person who shall ultimately become entitled to the property from
which such accumulations have arisen:
Provided that
such trustee may, at any time, if he thinks fit, apply the whole or any part of
such accumulations as if the same were part of the income arising in the then
current year.
Where the
income of the trust-property is insufficient for the minor’s maintenance or
education or advancement in life, or the reasonable expenses of his religious
worship, marriage or funeral, the trustee may, with the permission of a
principal Civil Court of original jurisdiction, but not otherwise, apply the
whole or any part of such property for or towards such maintenance, education,
advancement or expenses.
Nothing in
tills section shall be deemed to affect the provisions of any local law for the
time being in force relating to the persons and property of minors.
42. Power to
give receipts. Any trustees or trustee may give a receipt in writing for any
money, securities or other moveable property payable, transferable or
deliverable to them or him by reason, or in the exercise, of any trust or
power; and, in the absence of fraud, such receipt shall discharge the person
paying, transferring or delivering the same therefrom, and from seeing to the
application thereof, or being accountable for any loss or misapplication
thereof.
43. Power to
compound, etc. Two or more trustees acting together may, if and as they
think fit,—
(a)
accept any composition or any security for any debt or
for any property claimed;
(b)
allow any time for payment of any debt;
(c)
compromise, compound, abandon, submit to arbitration
or otherwise settle any debt, account, claim or thing whatever relating to the trust;
and,
(d)
for any of those purposes, enter into, give, execute
and do such agreements, instruments of composition or arrangement, releases
and other things as to them seem expedient, without being responsible for any
loss occasioned by any act or thing so done by them in good faith.
The powers
conferred by this section on two or more trustees acting together may be
exercised by a sole acting trustee when by the instrument of trust, if any, a
sole trustee is authorized to execute the trusts and powers thereof.
This section
applies only if and as far as a contrary intention is not expressed in the
instrument of trust, if any, and shall have effect subject to the terms of that
instrument and to the provisions therein contained. This section applies only
to trusts created after this Act comes into force.
44. Power to
several trustees of whom one disclaims or dies. When an authority to deal
with the trust-property is given to several trustees and one of them disclaims
or dies, the authority may be exercised by the continuing trustees, unless from
the terms of the instrument of trust it is apparent that the authority is to be
exercised by a number in excess of the number of the remaining trustees.
45. Suspension
of trustee’s powers by decree. Where a decree has been made in a suit for
the execution of a trust, the trustee must not exercise any of his powers
except in conformity with such decree, or with the sanction of the Court by
which the decree has been made, or, where an appeal against the decree is
pending, of the Appellate Court.
CHAPTER
V
of THE disabilities OF
trustees
46. Trustee
cannot renounce after acceptance. A trustee who has accepted the trust
cannot afterwards renounce it except (a) with the permission of a principal Civil
Court of original jurisdiction, or (6) if the beneficiary is competent to
contract, with his consent, or (c) by virtue of a special power in the
instrument of trust.
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 (lie rents and pay them to C. B may employ a proper person to
collect these rents.
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.
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.
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.
51. Trustee may
not use trust – property for his own profit. A trustee may not use or deal
with the trust-property for his own profit or for any other purpose unconnected
with the trust.
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.
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.
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 mortgage by, or on the personal security of, himself or one of his
co-trustees.
CHAPTER
VI
of THE rights AND
liabilities OF THE beneficiary
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.
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; and, where there is only one beneficiary and he is competent to
contract, or where there are several beneficiaries and they are competent to
contract and all of one mind, he or they may require the trustee to transfer
the trust-property to him or them, or to such person as he or they may direct.
When property
has been transferred or bequeathed for the benefit of a married woman, so that
she shall not have power to deprive herself of her beneficial interest, nothing
in the second clause of this section applies to such property during her
marriage.
Illustrations
(a)
Certain Government securities are given to trustees
upon trust to accumulate the interest until A attains the age of 24, and then
to transfer the gross amount to him. A on attaining majority may, as the person
exclusively interested in the trust-property, require the trustees to transfer
it immediately to him.
(b)
A bequeaths Rs. 10,000 to trustees upon trust to
purchase an annuity for B, who has attained his majority and is otherwise
competent to contract. B may claim the Rs. 10,000.
(c)
A transfers certain property to B and directs him to
sell or invest it for the benefit of C, who is competent to contract. C may
elect to take the property in its original character.
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.
58. Right to
transfer beneficial interest. The beneficiary, if competent to contract,
may transfer his interest, but subject to the law for the time being in force
as to the circumstances and extent in and to which he may dispose of such
interest:
Provided that
when property is transferred or bequeathed for the benefit of a married woman,
so that she shall not have power to deprive herself of her beneficial interest,
nothing in this section shall authorize her to transfer such interest during
her marriage.
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.
60. Right top
roper 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.
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 [Pakistan] 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.
61. Right to
compel to any act of duty. The beneficiary has a right that his trustee
shall be compelled to perform any particular act of his duty as such, and restrained
from committing any contemplated or probable breach of trust.
Illustrations
(a)
A contracts with B to pay him monthly Rs. 100 for the
benefit of C. B writes and signs a letter declaring that he will hold in trust
for C the money so to be paid. A fails to pay the money in accordance with his
contract. C may compel B on a proper indemnity to allow C to sue on the
contract in B’s name.
(b)
A is trustee of certain land, with a power to sell the
same and pay the proceeds to B and C equally. A is about to make an improvident
sale of the land. B may sue on behalf of himself and C for an injunction to
restrain A from making the sale.
62. Wrongful
purchase by trustee. Where a trustee has wrongfully bought trust-property,
the beneficiary has a right to have the property declared subject to the trust
or retransferred by the trustee, if it remains in his hands unsold, or, if it
has been bought from him by any person with notice of the trust, by such
person. But in such case the beneficiary must repay the purchase-money paid by
the trustee, with interest, and such other expenses (if any) as lie has
properly incurred in the preservation of the property; and the trustee or
purchaser must (a) account for the nett 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.
63. Following
trust – property. Into the hands of third per sons- Where trust-property
comes into the hands of a third e 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 merely 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.
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 bonafide holder to whom they have passed in circulation, or shall be
deemed to affect the Contract Act, 1872, section 108, or the liability of a
person to whom a debt or charge is transferred.
65. Acquisition
by trustee of trust-property wrong fully 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.
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.
67. Wrongful
employment by partner-trustee of trust property for partnership purposes. If
a partner, being a trustee, wrongfully employs trust-property in the business,
or on the account of the partnership, no other partner is liable therefor in
his personal capacity to the beneficiaries, unless he had notice of the breach
of trust.
The partners
having such notice are jointly and severally liable for the breach of trust.
Illustrations
(a)
A. and B are partners. A dies, having bequeathed all
his property to B in trust for Z, and appointed B his sole executor. B, instead
of winding up the affairs of the partnership, retains all the assets in the
business. Z may compel him, as partner, to account for so much of the profits
as are derived from A’s share of the capital. B is also answerable to Z for the
improper employment of A’s assets.
(b)
A, a trader, bequeaths his property to B in trust for
C, appoints B his sole executor, and dies. B enters into partnership with X and
Y in the same trade, and employs A’s assets in the partnership-business. B
gives an indemnity to X and Y against the claims of C. Here X and Y are jointly
liable with B to C as having knowingly become parties to the breach of trust
committed by B.
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.
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.
CHAPTER VII
of vacating THE office OF trustee
70. Office how
vacated. The office of a trustee is vacated by his death or by his
discharge from his office.
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.
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.
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 [Pakistan], or leaves [Pakistan]
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.
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.
Rules 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.
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
discretion’s, and shall in all respects act, as if he had been originally
nominated a trustee by the author of the trust.
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.
CHAPTER
VIII
of THE extinction OF
trusts
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 fulfillment of its purpose becomes impossible by destruction of the
trust-property or otherwise; or
(d)
when the trust, being revocable, is expressly revoked.
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 ore
parties to the arrangement, the trust cannot be revoked without their consent.
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.
CHAPTER
IX
of CERTAIN obligations IN
THE nature OF trusts
80. Where
obligation in nature of trust is created. An obligation in the nature of a
trust is created in the following cases.
81. Where it
does not appear that transferor intended to dispose of beneficial interest. Where
the owner of property transfers or bequeaths it and it cannot be inferred
consistently with the attendant circumstances that he intended to dispose of
the beneficial interest therein, the transferee or legatee must hold such
property for the benefit of the owner or his legal representative.
Illustrations
(a)
A. conveys land to B without consideration and
declares no trust of any part. It cannot, consistently with the circumstances
under which the transfer is made, be inferred that A intended to transfer the
beneficial interest in the land. B holds the land for the benefit of A.
(b)
A conveys to B two fields, Y and Z, and declares a
trust of Y, but says nothing about Z. It cannot, consistently with the
circumstances under which the transfer is made, be inferred that A intended to
transfer the beneficial interest in Z. B holds Z for the benefit of A.
(c)
A transfers certain stock belonging to him into the
joint names of himself and B. It cannot, consistently with the circumstances
under which the transfer is made, be inferred that A intended to transfer the
beneficial interest in the stock during his life. A and B hold the stock for
the benefit of A during his life.
(d)
A makes a gift of certain land to his wife B. She
takes the beneficial interest in the land free from any trust in favour of A,
for it may be inferred from the circumstances that the gift was for B’s
benefit.
82. Transfer to
one for consideration paid by another. Where property is transferred to one
person for a consideration paid or provided by another person, and it appears
that such other person did not intend to pay or provide such consideration for
the benefit of the transferee, the transferee must hold the property for the
benefit of the person paying or providing the consideration.
Nothing in
this section shall be deemed to affect the Code of Civil Procedure, section
317, or Act No. XI of 1859 (to improve the law relating to sales of land for
arrears of revenue in the Lower Provinces under the Bengal Presidency), section
36.
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
trusts 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 land 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 un-disposed of
interest in the money or land if purchased.
84. Transfer for
illegal purpose. Where the owner of properly 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.
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.
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.
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.
88. Advantage
gained by fiduciary. Where a trustee, executor, partner, agent, director of
a company, legal adviser, 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 in 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.
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.
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 arrears 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.
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.
92. Purchase by
person contracting to by 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, lie must hold the property for their benefit to
the extent necessary to give effect to the contract.
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 suh creditors the advantage so gained.
94. Constructive
trusts in cases not expressly provided for. In any case not coming
within the scope of any of the preceding sections, where there is no trust, but
the person having possession of property has not the whole beneficial interest
therein, he must hold the property for the benefit of the persons having such
interest, or the residue thereof (as the case may be), to the extent necessary
to satisfy their just demands.
Illustrations
(a)
A, an executor, distributes the assets of his testator
B to the legatees without having paid the whole of B’s debts. The legatees hold
for the benefit of B’s creditors, to the extent necessary to satisfy their just
demands, the assets so distributed.
(b)
A by mistake assumes the character of a trustee for B,
and under colour of the trust receives certain money. B may compel him to
account for such moneys.
(c)
A makes a gift of a lakh of rupees to B, reserving to
himself, with B’s assent, power to revoke at pleasure the gift as to Rs.
10,000. The gift is void as to Rs. 10,000, and B holds that sum for the benefit
of A.
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 lie 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 a person for whose benefit he holds it,
or with any one through whom such person claims, lie may, without the
permission of the Court, buy or become lessee or mortgagee of the property or
any part thereof.
96. Saving of
rights of bonafide 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.
THE
SCHEDULE
(SEE SECTION
2)
STATUTE
|
Year and Chapter.
|
Short title.
|
Extent of repeal.
|
|
29 Car. II, c. 3
|
The Statute of Frauds.
|
Sections 7, 8,9,10 and 11.
|
acts OF THE governor
general IN council
|
Number and year.
|
Short title.
|
Extent of repeal.
|
|
XXVIII of l866
I of 1877
|
The Trustees and Mortgagees Powers
Act,
1866.
The Specific Relief Act,
1877.
|
Sections 2, 3, 4, 5, 32, 33,
34,35, 36 and 37. In sections and 43 the word "trustee"
wherever it occurs; and in section 43 the words "management or" and
"the trust-property or".
In section 12 the first
illustration.
|
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