The Indian Trusts Act of 1882, is law that governs the private trusts in India. The Indian Trusts Act (ITA) 1882 was a code that embraced a purportedly distinct model of trust, one that was ‘obligational’ in nature and had no division between legal and equitable ownership. British India had a rich tapestry of trusts and trust-like devices, the regulations of which produced a complex body of law. The Act is applicable to the whole of India excluding Jammu & Kashmir, and Andaman and Nicobar Islands. The Act is not applicable to the Waqf. The following article discussed the features of the Indian Trusts Act, 1882.
KINDS OF TRUSTS
Express Trust- It is a trust created in expressed terms, and usually in writing.
Implied Trust- It is a trust that has not been expressly created by the settlor. It appears from the conduct of parties.
Public Trust- It is a trust created under the Trust Law in India in public interest.
Private Trust- It is a trust made for a specified person, other than whom no one else can claim benefit.
Secret Trust- It is a trust where neither the existence of the trust nor its terms are disclosed.
Definition of Trust
Trust has been defined under Section 3 of the Indian Trust Act, 1882. Trust is a responsibility attached to the possession of the property and arising out of a trust reserved and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner.
Purpose of Creating a Trust
Section 4 highlights the purpose of creating a trust. According to this section, a trust may be created for any lawful purpose. Any trust with an unlawful purpose is void.
All the objectives, and missions of establishing a trust are said to be lawful unless:
(i) It is forbidden by law
(ii) It is of unlawful nature, if permitted, it would violate the provisions of any law
(iii) It is fraudulent
(iv) It implies or causes injury to another person or property
(v) It is regarded as immoral or opposes public policy as said by the court
Creating a Trust
In accordance with section 6 of the Indian Trust Act of 1882, a trust is created when the author of the trust with reasonable certainty shows:
(i) An intention on his part to create a trust
(ii) The purpose of the trust
(iii) The beneficiary
(iv) The trust- property
Persons who may create a Trust
Any person who is competent to hold a property can form a trust. Section 7 contains provisions with regards to persons who may create a trust:
(i) Every person competent to contract (in accordance with section 11 of Indian Contract Act, 1872)
(ii) By or on behalf of minor with permission of principal civil court of original jurisdiction
(iii) Trust of a Hindu Undivided Family
(iv) Persons of Association
As per Section 9, every person capable of holding property can be a beneficiary. A beneficiary is the third party for whose benefits the property is being transferred to the trustee.
Rights of Beneficiary
- Right to Rent and Profit- A beneficiary has the right to the rents and profits of the trust property, subject to the provisions of instrument of trust.
- Right to Specific Execution- A beneficiary is entitled to have the intention of the author of the trust specifically executed to the extent of beneficiary’s interest.
- Right to Inspect Documents related to Trust Property- A beneficiary has the right to inspect and take copies of the instrument of trust, documents of title, accounts of trust property.
- Right to Sue for Execution of Trust- In case, no trustees are appointed or all trustees die, disclaim or are discharged, a beneficiary may file a suit for execution of trust.
- Right to Proper Trustees- A beneficiary has the right to ensure that the trust property is properly protected and is held and administered by eligible persons in adequate number.
Section 10, states the provisions for a person to be a trustee. A trustee can be:
(i) any person who has been transferred the property by the settlor
(ii) person who is competent to contract
No person can be bound to accept a trust. The trustee has the right to accept or reject the trusteeship. Once the trusteeship is accepted, trustee shall assume all the rights, responsibilities, and liabilities of the transferred property.
Responsibilities of Trustees
- To Execute Trust- It is the duty of a trustee to fulfil the purpose of the trust. He is bound to the orders and directions given by the author of the trust.
- Au Fait with Trust Property- It is the duty of a trustee to au fait himself with nature and circumstances of the trust property.
- Protect title to Trust Property- It is the duty of a trustee to protect the title to the trust. He is bound to maintain and defend all such suits. He has the authority to take reasonable action, in order to preserve the title and property.
- To take Reasonable Care- It is the duty of a trustee to take reasonable care of the property as a man of ordinary prudence would deal with such property if it were his own.
- Conversion of Perishable Property- If a trust has been created for benefit of several persons in succession, and is of wasting nature or a future interest then, it is the duty of a trustee to convert such property into a permanent and profitable character.
- To be Impartial- When the trust has several beneficiaries, it is the duty of trustee to be impartial and fair under all circumstances.
- Accounts and Information- It is the duty of a trustee to keep accurate information regarding trust property at all times. Trustee must also furnish beneficiary with the required information.
Liabilities of Trustees
- Breach of Trust- When a trustee commits a breach a trust, he is liable to make for the loss faced by the trust property or beneficiary, unless; beneficiary by fraud has induced trustee to commit breach or beneficiary.
Trustee is not liable to pay interest except in the following cases:
(a.) where trustee has received interest
(b.) where breach consists unreasonable delay in paying trust funds to the beneficiary
(c.) where trustee was bound to receive interest but has not
(d.) where trustee has presumed to have received interest
(e.) where trustee has failed to invest trust money
2. Liability of Co- Trustees- When co- trustees have jointly committed a breach of trust, each is liable to the beneficiary for the whole loss incurred.
Rights of Trustees
- Right to title deed- A trustee has the right to have in possession the instrument of the trust and all related documents.
- Right to reimbursement of expenses- A trustee may repay himself, or pay or discharge out of trust property, all expenses incurred in or during execution, realization, preservation or benefit of trust property.
- Right to indemnity from gainer by breach of trust- Any third person who has gained advantage from breach of trust must indemnify trustee to the amount received by the breach.
- Right to apply to Court for opinion in management of trust property- A trustee may apply for a petition to a principal Civil Court of original jurisdiction for its advice, opinion, or direction with respect to management or administration of the trust property.
A trust involves three parties; the author, the trustee, and the beneficiary. Each one has been given its rights, responsibilities and liabilities by the trust deed in relation to the respective trust property. One of the primary benefits of establishing a trust is that it makes management of property easier. Trusts are also used for charitable purposes.
In 2015, an amendment was made to the act removing certain archaic provisions. The amendment has brought in more autonomy to the trustees.
Author: Arisia K,