Explain the rights and liabilities of a beneficiary in trust.

A trust beneficiary is the individual or group of individuals

designated to receive the benefits of a trust. The trust creator
(settlor) names the beneficiary, and the trustee manages the trust
assets for their benefit, according to the trust agreement.
Beneficiaries can be natural persons, companies, or even unborn
children, as long as the trust vests within the applicable perpetuity
period.Under the provisions of Trusts Act 1882, every person is
legally capable of holding a beneficiary in a trust, in India.
Beneficiary means the person for whose benefit the repose is
originally accepted. The beneficiary is entitled to all the benefits that
an author of the trust mentions in the Trust deed/ Instrument of
Trust.

RIGHTS OF TRUST BENEFICIARY:

The Indian Trust Act, 1882 confers certain rights on the part of the
beneficiary to obtain the interests-

1)Right to rents and profits [S.55]-

The trust beneficiary has the right to receive all the rents and profits
incurred by the trust property. This provision makes an obligation on
the part of the author or the trustee to make sure that the interest is
received by the beneficiary.

2)Right to Specific Execution [S.56]-

The beneficiary has the right to receive all the information regarding
the intention of the author and to what extent their interest lies in the
trust specifically executed for them. Therefore, it makes mandatory
on the part of the trustee to provide the beneficiary with all the
information.

3)Right to Transfer of Possession [S.56]-

 The provision also makes an obligation on the part of the trustees
to transfer the trust property to the beneficiary(s) or to such person
as directed by the beneficiary(s).In case a trust is created for the
benefit of a married woman so that she does not deny the right of
her beneficial interest, during her marriage the right of the
beneficiary to have the property transferred will not be available to
her.

3)Right to inspect and take copies of instrument of trust,

accounts,etc.[S.57]-

The beneficiary is entitled to inquire about any documents related

to the trust property be it the trust deed, accounting of trust
property, or vouchers if any, and take copies of any such document.
It makes an obligation on the part of the trustee to maintain an
accounting record and submit it by the end of each year.
Beneficiaries are also entitled to waive off any records.

4)Right to transfer beneficial interest [S.58]-

The beneficiary who is competent to the contract has the right to

transfer the beneficial interest but should be in accordance with the
law prevailing at that time. However, the transfer must be under the
circumstances and to an extent to which the right can be
transferred.In case the trust is bequeathed for the benefit of a
married woman so that she does not deny the beneficial interest
she is not conferred with the right to transfer such trust property
during the period of her married life.

5)Right to sue for Execution of Trust [S.59]-

This provision deals with the situation where trustees are not
appointed or have died, disclaimed or discharged, or for any other
reason where the execution of the trust by the trustees becomes
impracticable, the beneficiary can file for a suit for the execution of
the trust. In such cases, the court is bound to carry out the
execution of the trust under its own supervision until a new trustee
is appointed.

6)Right to proper trustee [S.60]-

This provision confers the beneficiary the right to demand protection

and administration of the trust property by a proper person or a
proper number of any such person. The provision also lists down
persons who cannot be defined as a proper person with the ambit
of this section:

• A person having domicile of abroad;

• An alien enemy;

• A person having interest that is inconsistent with that of the

beneficiary;

• A person in insolvent circumstances and unless otherwise

provided by the personal laws of the beneficiary,

• A married woman,

• A minor child.

In cases where the administration of trust requires the receipt and

custody of money, then the number of trustees for the job should be
at least two.

7)Right to compel to any act of duty [S.61]-

The provision confers a right to the beneficiary that he can compel

the trustee to perform a particular act of his duty or as such. He can
also restrict the trustee from performing any contemplated or
probable breach of trust.

8) Wrongful purchase by trustee [S.62]-

This provision provides the beneficiary with the right to restrain the
trustee from committing any breach of trust. If the beneficiary has
wrongfully bought the trust property with the intention to use it for
himself, the beneficiary has the right to recover it back from him and
can also compel him to hold the trust property for the beneficiary. If
the property has been sold to a third party knowing that it was trust
property, the beneficiary has the right to recover it from the third
party.

However, in such a case, the beneficiary needs to repay the

purchase amount along with the interest, and any such expenses
which have been incurred while preserving the property will be paid
by the trustee.The provision puts certain obligations on the part of
the trustee or the purchaser. He must:

1. Account for the net profits of the property,

2. Pay the occupation rent if he was in actual possession of the

property, and

3. Allow the beneficiary to deduct a part of the purchase money if

the property has been deteriorated by certain acts or omissions of
the trustee or purchaser.

LIABILITIES OF TRUST BENEFICIARY:

1)Duty to compensate the Trustee-

In case the beneficiary causes any damage to the trustee or the

trust property, the beneficiary is legally bound to compensate or
reimburse for the damages caused by him.

2)Liability in breach of trust-

If in case the beneficiary breaches the trust agreement in any way,

he will be held liable for the damage or losses incurred by the
breach of trust.

3)Liability in harming others’ Interests-

 The beneficiary will be held liable if in any way he/his behavior
causes any harm to another party’s interest.

4)Liability not to take advantage-

If the beneficiary needs to take any kind of advantage from the

trust property, it is compulsory on the part of the beneficiary to take
consent from all the other beneficiaries related to the trust. It will be
considered as a breach of trust if not done so.

5) Liability to receive interest(s)-

The beneficiary is liable to receive only his part of the interest from
the trust and not more than that.

6)Liability to be aware of the breach of trust-

It is the responsibility of the beneficiary to proceed with a suit

against any party in case a breach of trust is found. It is his liability
to become aware of all kinds of breach of trust either by the author
or by the trustee.

7)Liability to deceive the trustee-

The court may proceed with a suit against the beneficiary if in case
it is found that the beneficiary has deceived the trustee or
persuaded him to perform a breach of trust.

8)Liability to take reasonable steps-

It is the responsibility of the beneficiary to comply with the

reasonable steps as mentioned in the instrument of trust within the
limitations and boundaries set keeping in mind the rights and
liabilities of other beneficiaries. If not done so, the person will be
held liable.

CONCLUSION:

Although a trust is created for the benefit of the beneficiary and

possesses certain rights on the trust property, there are also certain
liabilities and responsibilities imposed on him. The Indian Trust Act,
1882 ensures that the beneficiary not only enjoys the rights and
benefits on the trust property but also complies with the provisions
of the trust deed in order to avoid any damages which may be
caused to other beneficiaries, hence balancing the scale.

2) Trustee

Introduction-

The word ‘Trust’ is used in common parlance as a word by which

confidence is denoted in one person by another person.

When it is said that A ‘Trusts’ B with something, it generally means

that A has confidence in B that B would honestly and diligently
perform the responsibility entrusted upon him.According to the
Indian Trust Act, trust means an obligation annexed to the
ownership of property, & arising out of a confidence reposed in &
accepted by the owner for the benefit of another or another and
owner.

In other words, a trust is an acceptance of an obligation by a person

against some property or funds to use it or hold it for the benefit of
the person whom the trust is created for.

Meaning -

A Trustee is a person appointed under a Trust to administer the

Trust property. A trustee should be a person who is capable of
holding property and who is competent to contract. A company,
being an artificial person created by law, can be a trustee as well. A
Trustee is specifically required to accept or disclaim the trust
entrusted to him, either expressly or by way of his actions. There
can be more than one trustee in a single Trust. A trustee is a firm or
a person who holds and administers the assets or properties for the
benefit of a third party. A trustee is appointed for several different
reasons which may include cases related to bankruptcy, charitable
purposes, a trust fund, or retirement or pension plans.

Appointment of trustee-

Under the Indian Trusts Act, 1882, the appointment of a trustee is

governed by the provisions mainly found in Section 10 and Section
73 of the Act.

●​ Section 10 states that a trust cannot be enforced unless there

is at least one trustee to execute it. The author of the trust
usually appoints the trustee at the time of creating the trust.
●​ If no trustee is appointed, or if the appointed trustee refuses to
act, dies, is removed, or becomes incapable of acting, the
beneficiaries or any person interested in the trust property
can apply to the civil court for the appointment of a new
trustee.
●​ Section 73 empowers the court to appoint a new trustee in
various situations, such as:
1.​When a trustee is not appointed,
2.​When a trustee is absent from India for an extended
period,
3.​When a trustee wishes to be discharged,
4.​When a trustee dies, is insolvent, or becomes unfit or
incapable to act.

The court-appointed trustee has the same powers and duties as

originally conferred under the trust deed or the Act. The court takes
into consideration the intention of the author of the trust, the
interest of the beneficiaries, and the fitness of the person to be
appointed.

RIGHTS OF A TRUSTEE
· Right to title deed [S.31]- The trustee has the right to have
possession over the instrument of trust and other documents which
are related to the trust property. Although if the beneficiary
demands copies of such documents, the trustee needs to provide it
to them.

· Right to reimbursement of expenses [S.32]- For the purpose of

the execution, preservation, or benefit of the trust property or for the
protection and support of the trust beneficiary, the trustee has the
right to reimburse or pay himself all the expenses out of the trust
property which has incurred to him while carrying out these
purposes.

The trustee has the right to first charge upon the trust property for
such expenses along with interest, provided that such expenses
have incurred with the sanction of a principal Civil Court of original
jurisdiction.

Right to recollect over- payment [S.32]- The trustee has the right
to reimburse the trust property of the beneficiary’s interest in case if
any over-payment is made mistakenly by the trustee to the
beneficiary. The trust property on failing to provide for such excess
payment, the trustee is entitled to recover the amount personally
from the trust beneficiary.

· Right to indemnity from gainer by breach of trust [S.33]- If a

person has gained an advantage by committing a breach of trust,
then such person must indemnify the trustee with the amount which
was received to him by committing the breach. In case if the
beneficiary commits the breach, the trustee has the right to charge
upon the trust property for such amount.

· Right to opinion from Court for trust property management

[S.34]- The trustee has the right to seek opinion, advice, or
direction on any matters related to the management or
administration of the trust property by filing a petition to a principal
Civil Court of original jurisdiction.

· Right to settlement of Accounts [S.35]- The trustee is entitled to

have accounts of his administration of the trust property examined
and settled and also an acknowledgment in writing that no benefit is
due to any beneficiary under the trust after the successful
completion of his duties as a trustee.

POWERS OF A TRUSTEE

§ General Authority of Trustee [S.36]- The trustee has the power

to perform any acts which may seem reasonable and proper to him
of the realization, protection, or benefit of the trust property and to
provide protection and support to the trust beneficiary competent to
the contract. However, these powers including the powers conferred
by the act and the trust deed are subject to: [7]

· any restrictions provided in the trust deed, and

· to the provisions of section 17 of this act.

In addition to these, the trustee cannot lease a trust property

exceedingly more than twenty-one years or without reserving the
yearly rent that can be obtained provided he has taken proper
permission from a principal Civil Court of original jurisdiction.

§ Power to sell [S.37]- Subject to prior charges or not, the

provision confers the power to the trustee to sell any trust property
together in lots by public auction or by private contracts and either
at one time or several times unless otherwise provided by the trust
deed.
§ Power to sell under special conditions [S.38]-

1.​Power to buy-in and re-sell- The trustee has the power to

make any reasonable changes in any conditions of sale or
contract for sale. He also has the power to buy-in the property
or any part of it at any auction sale and re-sale it by making
necessary changes in the contract as he deems fit, provided
such changes does not bring any kind of loss on the part of
the trust beneficiary.
2.​Time allowed to sell trust property- the trustee is conferred
with the power to exercise reasonable discretion regarding the
time for effecting the sale or purchase
§ Power to Convey [S.39]- The trustee is granted the power to
convey or dispose of the property for the purpose of completion of
any sale as he may deem fit to be.

§ Power to vary Investments [S.40]- The trustee is entitled to call

in for any of the trust property which is invested in any security and
invest that property in securities that are mention under Section 20
of the Act. He may also differ in any such investments anytime
subject to the condition that no such change of investment shall be
made without the consent of the person competent to contract and
entitled to receive the income of the trust property for life or for any
greater estate at that time.

§ Power to apply for minor’s trust property for their

maintenance [S.41]- In case the trustee is holding trust property for
a minor, he may pay to the guardians at his own discretion or with
the permission of the Principal Civil Court of original jurisdiction
apply for or towards the minor’s benefit such as:

●​ Maintenance, or
●​ Education or advancement in life, or
●​ Religious worship, or
 ●​ Marriage, or
●​ Funeral
§ Power to give receipts [S.42]- The provision confers the power
to the trustee(s) to give a receipt, without committing any kind of
fraud, to the person who is paying, transferring, or delivering any
money, securities, or movable properties. After receiving such
receipt, the person paying, transferring, or delivering shall be
discharged from being accountable for any loss or misapplication.

§ Power to compound [S.43]- The provision confers the power to

settle disputes to the trustee. The trustee or the sole trustee (in
case of two trustees) is entitled to settle any dispute or matter
related to the trust property in the manner they think fit to be unless
otherwise provided by the trust deed. The trustee has the power to:

1.​Accept any security or composition for any debt or property

claimed.
2.​Allow payment of debt anytime.
3.​Compromise, compound, abandon or even submit to the
arbitration or settle any debt, account, claim related to the
trust.
4.​Execute, give or enter into such agreements, instruments, or
arrangements which they deem fit to, subject to the condition
that such arrangements being done in good faith shall not
bring any kind of loss.
§ Power to several trustees of whom one disclaims or dies
[S.44]- In case there are several trustees and any one of them
disclaims the trust or dies, the remaining trustees have the power to
continue with the authority. However, if the trust deed requires a
specific number or more of trustees then the authority cannot be
exercised by the remaining trustees.

§ Suspension of trustee’s powers by decree [S.45]- The trustee

is not entitled to exercise any of his powers if in case a decree has
been passed by the Court for the execution of a trust unless
conformity has been provided by such decree, or by the Court’s
sanction, or a pending appeal against the decree in the Appellate
Court.

Duties/Liabilities of a Trustee

The Indian Trusts Act, 1882 provides for certain duties/liabilities of a

Trustee, we shall see each one of them in brief detail.

· Execution of Trust: The trustee is required to actually carry out

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

However, the trustee is not required to follow such directions if they

are impractical or illegal.

· Acquaintance of Trust Property: The trustee is required to know

about the details, whereabouts and current condition of the trust
property and also to take appropriate measures to secure the trust
property.

· Protection of Title of Trust Property: The trustee is required to

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

· Not to set up Title adverse to the beneficiary: As the trustee is

entrusted with the trust property to maintain it for the benefit of the
beneficiaries, it is expected and required of the trustee to not set up
any title adverse to the beneficiary.
A good example explaining this point would be, suppose the trustee
is entrusted with an immovable property and is required to apply the
rents and profits of such property for the benefit of the beneficiaries.
The trustee is also given the rights to sell such property.

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

· Take care of the Trust Property: The trustee is required to

provide adequate safeguard and required to apply such prudence to
the trust property, as that of an ordinary man would apply to his own
property.

However, the Act provides that the Trustee would not be

responsible for any loss caused to the trust property or the benefits
arising thereof, if he had applied such prudence as would an
ordinary man would apply to his own property.

Convert perishable property: If the trust property is of such

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

· Be impartial among the beneficiaries: When the trust is created

for the benefit of several beneficiaries, the trustee is required to
apply the benefits received from the trust property equally among
the beneficiaries, without being partial to anyone or any group
among the beneficiaries.
· Protect the trust property from adverse beneficiary: When
there are several beneficiaries of a trust, and one or more of such
beneficiaries commit, or threaten to commit an act, which would be
averse to the interest of other beneficiaries and the trust in general,
the trustee is required to take measures to stop such act of such
beneficiary/beneficiaries.

· To maintain and keep books and accounts: The trustee is

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

· Investment of Trust money: The Act specifically provides that

when the trust property consists of money, and such money is not
required to be immediately applied for the benefit of the
beneficiaries, the trustee is required to invest such money in such
instruments as provided for in the Act. The Act provides for
instruments such as promissory notes and other securities of the
Central Government; in stock or debentures of the Railways or
other government companies; in Units issued by the Unit Trust of
India, etc.

Disabilities of Trustees –

No Renunciation:

Once a trustee accepts the trust, they cannot renounce it except

with:

●​ Permission of the Court,

●​ Consent of the beneficiary (if competent), or
●​ As provided in the trust instrument.

No Delegation:
Trustees cannot delegate their duties or office to others.

Exceptions: If delegation is allowed by the trust instrument, is

necessary, is in the regular course of business, or if the beneficiary
consents.

No Remuneration:

Trustees cannot claim payment for their services unless:

●​ Allowed by the trust instrument,

●​ By contract with the beneficiary, or
●​ With the Court’s permission.

No Self-Dealing:

Trustees cannot buy or become interested in the trust property

(directly or indirectly) for themselves.

No Use for Own Benefit:

Trustees cannot use trust property for their own benefit or for any
purpose other than the trust.

No Set-off:

Trustees cannot use trust property to set off their own debts.

No Mixing:

Trustees must not mix trust property with their own property.

Vacation of Office :
Under the Indian Trusts Act, 1882, a trustee may vacate office in
the following situations:

1.​ By Death – The office of the trustee is vacated upon their

death.
2.​ By Resignation – A trustee may resign:
○​ With the consent of all beneficiaries who are competent
to contract, or
○​ With the permission of a civil court, or
○​ As provided in the trust instrument.
3.​ By Discharge – A trustee may be discharged:
○​ If the trust is extinguished,
○​ If all beneficiaries (being competent to contract) agree to
discharge the trustee, or
○​ By court order for sufficient cause (e.g., incapacity,
misconduct, or unfitness).
4.​ Removal by Court – The court may remove a trustee for
breach of trust, incapacity, or acting against the interest of the
trust.

Conclusion

In conclusion, trustees play a vital role in managing trust property

and acting in the best interests of the beneficiaries. Their duties
include loyalty, prudence, impartiality, and accountability, while their
powers must be exercised within the bounds of the trust instrument
and the law. Trustees have rights such as indemnity for expenses
and access to trust information, but they also bear significant
liabilities if they breach their duties or act negligently. A clear
understanding of their responsibilities and legal boundaries is
essential to ensure proper trust administration and avoid personal
liability.

:
TRUST

As per the Indian Trust Act 1882, “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.”

A trust is an arrangement where the owner (trustor) transfers the

property to someone else (trustee) for the benefit of a third person
(beneficiary). Such a property is transferred by the trustor to the
trustee along with a proclamation that the trustee should hold the
property for the beneficiaries of the Trust.

Property here not only refers to immovable property but it includes

all the valuable assets such as jewellery, cash, movable assets like
cars, etc as well.

KINDS OF TRUST:

I. Based on the purpose of trust, it is classified into private trust,

public or

charitable trust

a) Private trust:

A private trust is established for the benefit of one or more specific

individuals who are clearly identified or can be identified within a
given time frame. The Indian Trusts Act of 1882 governs private
trusts in India. These trusts can be created during the lifetime of the
settlor (inter vivos) or through a will.
The beneficiary under this trust is either one person or a class of
definite persons`

b) Public Trust:

Public trusts are established primarily for the benefit of the general
public or a significant portion of it. The beneficiaries of a public trust
are usually an indeterminate group of people. These trusts are
typically charitable or religious in nature and are governed by
general law, rather than the Indian Trusts Act. Public trusts can also
be created inter vivos or by will.

The beneficiary is the whole society at large or the members of an

uncertain and changing body. E.g. trust for the advancement of
education

irrespective of caste or creed.

II. Classification according to mode of creation of trust:

a) Express Trust: An express trust is created by the settlor of the

trust by words or will or by a Deed of trust.

b) Executed Trust: A trust is executed when no further instrument

is necessary and the trust Is finally declared. This trust cannot be
revoked

c) Executory Trust: Here there is a requirement of a further

instrument; or additional instrument to carry into effect the general
instruction of the first instrument of trust .This Trust can be revoked.

d) Constructive trust: arise in case of persons under producing

relationship that is Trustee and beneficiary Guardian and ward. it
arises when the person becomes possessed of property through
such can abuse of confidence reposed in himself as will induce the
court to hold that in conscience he is bound to hold it for the benefit
of the person injured by the breach of trust .

E.g : Vendor’s Lien for unpaid purchase money .

e) Implied Trust: Implied or presumed trust arises out of a

presumed intention of the parties gathered from the intention. The
circumstances are such that one can presume that the person
intended to make a trust.

III. Classification based on the nature of the duties of the

trustee;

a) A simple trust: if the trustee has no active duties to perform under

the trust and the trucking simply holds it for the beneficiary. Such a
trust is called as a simple trust.

b) A special Trust: in which trust the Trustee has to exercise his free
will or discretion in carrying out the trust.

IV. Classification based consideration for creation of the trust:

a) Trust for value: A Trust for consideration or value is created when

consideration moves from the beneficiary .the relation between the
settlor of the trust and beneficiary is contractual for example a trust t
created in favour of A if he marries Z.

b) Voluntary trust: voluntary trust is created when no consideration

proceeds from the beneficiary.
V. Completely and Incompletely constituted trust: the trust
which do not fall under the above 4 categories are classed as in this
section .

a) Illusory trust: This is not a real trust as the form of the

instrument only shows that some persons are apparently
beneficiaries but the object of the settlor as we gather from the
instrument shows an intention to create a trust.

b) Trust of Imperfect Obligation: Trust incapable of being enforced

by the trustee and yet the court will give liberty to the trustees to
carry out the trust if they want to do so.

Trust in favour of creditors: trust created by a letter for payment of

creditors however becomes irrevocable; if it create the relationship
of trustee and beneficiary .it is not necessary that the settlor of the
trust or debtor should communicate the creation of the trust to the
creditors.

d) Discretionary trust :It is a trust which does not afford to a

beneficiary the right to any part of the income of the trust property
but gives the trustees a discretionary power to pay him such part of
the income as they think fit. The beneficiary only has a hope that
the discretion shall be exercise in his favour.

CREATION OF TRUST

Section 4 to Section10 of the Indian Trust Act, 1882

1. Creation of trust by an express way

2. Creation of trust arising by operation of law.

a) Implied trust.

b) Resulting trust.

c) Constructive trust

d) Trustee de son tort

(Points 3 to 5 are common to both types of trust under 1 &2)

3. Competency or Eligibility of Parties intending to create a trust.

a) creator of trust

i)Competency

b) Trustee.

i) Competency

c) Beneficiary

4. Essentials of trust according to s.6 of the Indian Trust Act.

a) Certainty of Intention.

b) Certainty of object of trust

c) The beneficiaries.
d) Certainty of the trust property

e) Transfer of such property

f) Lawful purpose

5. Trust of Immovable property /Movable property

1.In Express trust, the general intention to create a trust must be

clear.

There is no prescribed way of expression to make it a valid trust.

The words used must convey the intention clearly in all certainty the
intention of the maker or settlor of trust, if they fail, then no trust can
be constituted. The property to be marked as trust property and the
object of the trust must be certain, otherwise the trust would be void
and the beneficial interest shall revert to the settlor respectively.

2. In Trust created by operation of law: The trust in this

category are of 4 types

In certain circumstances, the court shall declare the existence of a

trust, so it by created by the operation of the law.

a) Implied Trust: Where the words of the maker /settlor are not
clear, the court shall presume that a trust was intended to be
created, by the circumstances of the case, conduct of the parties,
words in the instrument

(Interpretation) For e.g purchase A purchases land and conveys it

to B instead. Looking at it we can say that B holds the land for A
.Thus B is the trustee for A. (until there is a contrary reason to hold
otherwise)
b) Resulting trust : A resulting trust is a trust implied in favour of the
maker/settlor himself or his legal representatives . It is one of the
species of implied trust The beneficial interest comes back to the
settlor who had transferred it to the trustee. We can say that if there
is a surplus of the trust money after the trust has been performed,
there is a resulting trust of that surplus for the benefit of the settlor.
In other where there is unexhausted residue of the trust money, it
cannot be taken by the trustee as he cannot be the beneficiary but it
is reconveyed to the settlor.

c) Constructive trust :

According to Snell ,”A constructive trust arises when the a person

becomes possessed of property through such an abuse of
confidence reposed in himselfso as to induce the court to hold that
in conscience he is bound to hold it for the benefit of the person
injured by the breach of confidence”`

A constructive trust may arise in the following ways:

1) Vendor’s lien: Where there is sale of property, the purchaser or

buyer has yet to pay part of the price money. The transaction
passes the beneficial ownership in the property; however the buyer
becomes a constructive trustee for the vendor as regards the
unpaid price money.

2) Person in fiduciary position gaining personal advantage: Section

88 of the trust act provides that If the person in fiduciary relationship
like a partner, trustee, agent, director of company who is bound to
protect the interest of the other. If such a person makes personal
gain in that capacity, then s.88 says that he holds the gain for the
benefit of the other.

3) Receipt of trust property by stranger:

 If a stranger acquires a trust property even for value having notice
of the trust. He knows that this action shall lead to the breach of
trust. Then in such case there is a constructive trust where such
stranger becomes the constructive trustee.

4) Other instances: The instance where constructive trust is

created is in case of a mortgagee exercising the power of sale etc

d. Trustee de son tort: The stranger to a trust who assumes the

character of a trustee by mistake or intentionally is liable for the
breach of the trust. If he acquires the property of the trust in such
capacity then he is accountable for his actions as regards the trust
property .He is called as the Trustee de son tort

3. Parties to a trust

Section 7 of Indian trust act, a trust may be created by every person

competent to contract with the permission of the Principal Civil
Court of original jurisdiction by or on behalf of a minor but subject in
such 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
made dispose of the trust property

a) Creator of the trust :The creator of the trust must possess the
competency as mentioned in s.11 of Indian Contract Act. Thus he
must be a major (i.e.18 years) and of sound mind, should not be
disqualified by any law for the time being in force. If in case of a
minor whose guardian has been appointed by the court and in case
of a minor whose property is under the superintendence of the
Court of Wards shall be considered a major on the attainment of 21
years.

1. Sound mind: A person is said be of sound mind if he is capable

of understanding the nature of the transaction and the effect it has
on his interests. He should be capable of forming a rational
judgment.

2. Trustee: Any person can be appointed trustee, if he is capable of

holding property but if the trust involves the exercise of discretion
which he cannot execute unless he is competent to contract
according to Section 10.

The above eligibility for the settlor also applies to the trustee. The
capacity to hold property is co-extensive to be a trustee.

3. Beneficiary: Under Section 9 of Indian Trust Act, every person

capable of holding property may be a beneficiary.

4. Essentials of trust according to s.6 of the Indian Trust Act.

a) Certainty as to Intention: The creator of the trust must express

his intention to create the trust clearly. There is no special form of
words to be used for creating the trust. The intention to create a
trust may be construed from the expressions which the settlor has
used. Such intention may be indicated by words or acts with
reasonable certainty. if the settlor of the trust does not
communicate is intention who are the Trustee for the beneficiaries
of the trust, it shall not effect the trust .

b) Certainty has to the purpose or object of the trust: it is the rule of

law that in order to make it trust valid the object of the trust must be
so identified that the court may be in a position to administer the
trust .If the object of the trust is not ascertained then the trust is
void.
c) The Beneficiaries: The person/s who is the beneficiaries under a
trust must be indicated with reasonable certainty. Further, the
interest they take must be certain.

d) Certainty about trust property: for a trust to be valid there must

be reasonable certainty about the subject matter of the trust. There
cannot be a trust if the property is not specifically identified in
respect of which the trust.

In Ram Ran Vijay Prasad Singh v. Province of Bihar, it has been

held in the given case that a mere wish or direction given to the
executor who may be in the enjoyment of any property either as a
legatee to preserve and maintain such institutions in the manner of
the settlor had been doing does not amount to valid trust for the
trust property is not indicated with reasonable certainty.

e) Transfer of Property: For a trust to be valid the trust property

must be transferred to the trustee by the settlor of the trust.
According to s.6 of the Indian Trust Act, 1882 the property must be
transferred in favor of the trustee.

In Ganesh Lal Sharma v. Snehalata Dassi, the court held that the
word”Arpan”used in the deed to give the property indicates fairly
transfer in favor of the trustee asperS.6 of the Indian Trust Act,
1882.

f) Lawful Purpose: Section 4 of the Indian trust act that the trust
must be created for a lawful purpose. The purpose of the trust is
lawful unless it is forbidden by law or is of such nature that if
permitted it would defeat the provisions of any law; the court
regards it as immoral or opposed to public policy. Where trust is
created for two purposes of which one is lawful and the other
unlawful and the both cannot be separated then the whole Trust is
void. But if the unlawful part can be separated from the lawful part
of the purpose, then the trust is valid as regards the lawful portion
and the unlawful part is rejected.

5) Trust of Immovable property & Movable Property: Section 5

of the act Lays down that a valid trust of immovable property can
be created only if it is declared by a non-testamentary instrument in
writing, signed by the author of trust or the Trustee and
registered.Trust may also be created by a testamentary document
i.e. will.

It shall be written and 8signed by the testator (Author of the trust),

along with two attesting witnesses. A will need not be registered.
This is according to s.63 of the Indian Succession Act, 1925.

A valid trust may be created by a will under Mohammedan law .It

may be oral or written and may be or may not be signed by the
testator and not attested.

Trust of movable property: A valid trust of movable property can be

created either as in the case of immovable property or by
transferring the ownership of the trust property to the trustee.

Extinction of a trust

The extinction of a trust is the termination or complete dissolution of

a trust arrangement, effectively ending its existence and operations.
This can occur under several circumstances as stipulated by law.

According to Section 77 of the Indian Trusts Act, 1882, a trust can

be extinguished when its purpose is fully achieved, if the purpose
becomes unlawful, if fulfilling the purpose becomes impossible due
to reasons such as the destruction of the trust property or if the trust
is explicitly revoked.Once extinguished, the responsibilities of the
trustees end and the trust property may need to be distributed or
handled according to the terms of the trust or legal requirements.

Circumstances for Extinction of Trust

The extinction of a trust marks the cessation of its legal existence,

typically when its predetermined conditions are met or altered by
circumstances outlined in the governing legal framework, such as
the Indian Trusts Act, 1882. This discussion explores the four
primary circumstances under which a trust can be extinguished
according to Section 77 of the Act.

1. Fulfillment of Purpose

The primary and most straightforward circumstance for the

extinction of a trust occurs when its defined purpose has been
completely fulfilled. This means that the objectives for which the
trust was established have been achieved, rendering the trust’s
continuation unnecessary.

Case Example: In the case of Amrit Lal Kohli and ors. vs Harbansh
Lal Kohli and ors, the trust was set up in 1966 for the benefit of the
settlor’s minor sons until they reached maturity and were
well-established. The court ruled that the trust’s objectives had
been met as the beneficiaries had grown up and settled, leading to
the trust’s lawful termination.
2. Unlawful Purpose

A trust must be extinguished if its purpose becomes unlawful.

According to Section 4 of the Indian Trusts Act, the illegality of a
trust’s purpose can arise under various conditions:

It is explicitly forbidden by law.

It would defeat the provisions of any existing law if allowed to

continue.

It involves or implies fraudulent activities.

It results in injury to the person or property of another.

It is regarded as immoral or opposed to public policy.

When a trust’s purpose is declared illegal, it must be terminated to

prevent the continuation of an unlawful activity.

Legal Framework: If a trust has mixed purposes, where some are

lawful and others unlawful and these purposes are inseparable, the
trust must be terminated entirely. However, if the lawful purposes
can be distinctly separated from the unlawful ones, the trust can
continue for those lawful purposes.

3. Impossibility of Fulfillment

A trust is also terminated when it becomes impossible to fulfil its

purpose, whether due to the destruction of the trust property or
other reasons that prevent the continuation of its activities.
Case Example: In Gela Ram vs District Board Muzaffarnagar
(1923), a trust was extinguished when the land designated to
connect a main road with a public garden was sold and the garden
ceased to exist. The purpose of the trust became impossible to
fulfil, leading to its lawful termination.

4. Revocation of Trust

Trusts can be revoked in specific situations, leading to their

extinction:

By Consent: If all beneficiaries are competent to contract, they can

agree to revoke the trust.

By Reservation: Trusts can be revoked if there is an express power

of revocation reserved by the author of the trust, which can be
exercised under the conditions specified at the creation of the trust.

For Payment of Debts: A trust created for the payment of the

author’s debts can be revoked at the author’s discretion, provided it
has not been communicated to the creditors.

Legal Note: The burden of proof to demonstrate the irrevocability of

a trust typically falls on the creditors, who must prove their assent
and reliance on the trust’s provisions.

Extinction of Religious or Charitable Trusts

Religious and charitable trusts, once established, generally hold a

permanent and irrevocable status. The creation of such trusts often
involves dedicating property for the service and worship of a deity, a
family or a public temple, making such dedications steadfast and
unalterable.
This immutability is anchored in the principle that once a religious or
charitable trust has been effectively set up, it becomes immune to
revocation—even if the trustees fail to fulfil the intended objectives
of the trust. This ensures that the trust’s assets remain perpetually
dedicated to the designated religious or charitable purposes.

Moreover, Halsbury’s Laws of England notes that although

charitable trusts can be declared with express powers of revocation,
there is a lack of judicial decisions regarding the validity of such
powers, specifically in relation to the rule against perpetuities.

This underscores the complex nature of revoking such trusts,

further emphasising their generally permanent character.
Consequently, the provisions for the extinction of trusts under
Section 77 of the Indian Trusts Act, 1882, do not typically apply to
religious or charitable trusts, reinforcing their enduring nature.

The Role of Trustees and Beneficiaries

Upon the extinction of a trust, trustees are required to settle any

remaining obligations, distribute the assets according to the terms
of the trust or legal directives and ensure a clear and documented
end to the trust’s operations. Beneficiaries must be informed and
involved, as appropriate, especially in cases where their consent is
necessary for revocation.