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THE INDIAN TRUSTS ACT,1882
SECTION 3,4,5,6,8,10,7,11,12,23,24,25,26
SEC 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”: “trustee”: “beneficiary”: “trust-property”: “beneficial interest”:
“instrument of trust”:—the person who reposes or declares the confidence is called the
“author of the trust”: the person who accepts the confidence is called the “trustee”: the person
for whose benefit the confidence is accepted is called the “beneficiary”: the subject-matter of
the trust is called “trust-property” or “trust-money”: the “beneficial interest” or “interest” of
the beneficiary is his right against the trustee as owner of the trust-property; and the
instrument, if any, by which the trust is declared is called the “instrument of trust”:
“breach of trust”:—a breach of any duty imposed on a trustee, as such, by any law for the
time being in force, is called a “breach of trust”:
SEC 4. Lawful purpose.—A trust may be created for any lawful purpose. The purpose of a
trust is lawful unless it is (a) forbidden by law, or (b) is of such a nature that, if permitted, it
would defeat the provisions of any law, or (c) is fraudulent, or (d) involves or implies injury
to the person or property of another, or (e) the Court regards it as immoral or opposed to
public policy. Every trust of which the purpose is unlawful is void. And where a trust is
created for two purposes, of which one is lawful and the other unlawful, and the two purposes
cannot be separated, the whole trust is void.
Explanation.—In this section the expression “law” includes, where the trust-property is
immoveable and situate in a foreign country, the law of such country. Illustrations (a) A
conveys property to B in trust to apply the profits to the nurture of female foundlings to be
trained up as prostitutes. The trust is void. (b) A bequeaths property to B in trust to employ it
in carrying on a smuggling business, and out of the profits thereof to support A’s children.
The trust is void. (c) A, while in insolvent circumstances, transfers property to B in trust for A
during his life, and after his death for B. A is declared an insolvent. The trust for A is invalid
as against his creditors.
SEC 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.
SEC 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
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(a) A bequeaths certain property to B, “having the fullest confidence that he will dispose of it
for the benefit of C”. This creates a trust so far as regards A and C.
(b) A bequeaths certain property to B “hoping he will continue it in the family”. This does not
create a trust, as the beneficiary is not indicated with reasonable certainty.
(c) A bequeaths certain property to B, requesting him to distribute it amongst such members
of C’s family as B should think most deserving. This does not create a trust, for the
beneficiaries are not indicated with reasonable certainty.
(d) A bequeaths certain property to B, desiring him to divide the bulk of it among C’s
children. This does not create a trust, for the trust-property is not indicated with sufficient
certainty.
(e) A bequeaths a shop and stock-in-trade to B, on condition that he pays A’s debts and a
legacy to C. This is a condition, not a trust for A’s creditors and C.
SEC 8. Subject of trust.—The subject-matter of a trust must be property transferable to the
beneficiary. It must not be a merely beneficial interest under a subsisting trust.
SEC 10. Who may be trustee.—Every person capable of holding property may be a trustee;
but, where the trust involves the exercise of discretion, he cannot execute it unless he is
competent to contract. No one bound to accept trust.—
No one is bound to accept a trust.
Acceptance of trust.—A trust is accepted by any words or acts of the trustee indicating with
reasonable certainty such acceptance.
Disclaimer of trust.—Instead of accepting a trust, the intended trustee may, within a
reasonable period, disclaim it, and such disclaimer shall prevent the trust-property from
vesting in him. A disclaimer by one of two or more co-trustees vests the trust-property in the
other or others, and makes him or them sole trustee or trustees from the date of the creation of
the trust.
Illustrations
(a) A bequeaths certain property to B and C, his executors, as trustees for D. B and C prove
A’s will. This is in itself an acceptance of the trust, and B and C hold the property in trust for
D.
(b) A transfers certain property to B in trust to sell it and to pay out of the proceeds A’s debts.
B accepts the trust and sells the property. So far as regards B, a trust of the proceeds is
created for A’s creditors.
(c) A bequeaths a lakh of rupees to B upon certain trusts and appoints him his executor. B
severs the lakh from the general assets and appropriates it to the specific purpose. This is an
acceptance of the trust.
SEC 7. Who may create trusts.—A trust may be created— (a) by every person competent to
contract1, and, (b) with the permission of a principal Civil Court of original jurisdiction, by
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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.
SEC 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 authorised 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 authorised 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.
SEC 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.
SEC 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;
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(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 net 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 of 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 he 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
devidends.
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(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 authorised 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.
SEC 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.
SEC 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.
SEC 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.
