CAN A TRUST BE DISSOLVED

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INTRODUCTION

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The provisions of the Indian Trust Act, 1882 as to ‘Discharge of Trustee’ (Sec. 71), ‘Trust how Extinguished’ (Sec. 77) and ‘Revocation of Trust’ (Sec. 78) do not apply to public or private religious or charitable endowments. Inasmuch as the beneficiaries as a whole alone have to consent to give effect to the acts given in the above list, it is clear that it is feasible only in private trusts; and not in public trusts.

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IN PRIVATE TRUSTS BENEFICIARIES CAN GIVE CONSENT ON CERTAIN VARIATIONS

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Indian Trusts Act, 1882 permits the beneficiaries who are competent to contract, to do, act or perform the following matters, as stated in those sections.

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(a)??????????? Sec.11[1] -?Modify the purpose of the trust and the directions for management.

(b)??????????? Sec 23[2] - Acquiesce a breach of trust of trustee

(c)??????????? Sec 46[3].? Allow the trustee to renounce

(d)??????????? Sec 47[4].? Allow the trustee to delegate his office or any of his duties.

(e)??????????? Sec 56[5].? Require trustee to transfer trust property to them, or to another.

(f)???????????? Sec 58[6].? Transfer the interest of beneficiary.

(g)??????????? Sec 62[7].? Ratify the sale to the trustee

(h)??????????? Sec 71[8].? Discharge the trustee.

(i)????????????? Sec 77[9].? Allow to extinguish trust.

(j)????????????? Sec 78[10].? Revoke the trust.

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Two important matters are worth noticeable in this regard. First, ‘once a public endowment/ trust is made, it is final and irrevocable’ is a fundamental principle of public trusts[11]. Second, by virtue of Sec. 1[12] of the Trusts Act, the applicability of the Trusts Act is expressly excluded from public or private religious or charitable endowments.

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CAN A PRIVATE (SECULAR) TRUST BE PUT TO AN END OR DISSOLVED?

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It is settled that in the case of (secular) private trusts, English principles are followed in India which lay down that if the beneficiaries are sui juris (of one mind), the trust can be put to an end or use the trust fund for any purpose[13]

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In Doorganath Roy Vs. Ram Chander Sen[14] the Privy Council observed that in the case of a family idol, ‘the consensus of the whole family might give the (Debutter) estate another direction’ and turn it into a secular estate; though in case of the dedication is to a public temple, the family of the founder could not put an end to it. But, in Pramatha Nath Mullick Vs. Pradymna Kumaar Mullick[15], the Judicial Committee clarified that the property cannot be taken away from the idol and diverted to other purposes without the consent of the idol through its earthly agents who, as guardians of the deity, cannot in law consent to anything which may amount to an extinction of the deity itself[16].

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FUNDAMENTAL PRINCIPLES CANNOT BE CHANGED

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A charitable foundation is the creature of the founder. And on this view, the founder provides for the mode of government and administration of trust[17]. The fundamental principles upon which a trust is founded cannot be varied. It applies heavily to public trusts. The courts cannot sanction any drastic amendment to the document of trust which would destroy the basic purpose for which the trust was created.

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In Free Church of England Vs. Overtoun[18]?House of Lords (by a majority of 5-2) found that the minority was entitled to the assets of the Free Church. It was observed that when men subscribe money for a particular object and leave it behind them for the promotion of that object, their?successors?have no right to change the object endowed.? In this case, the majority adopted new standards of doctrine and abandoned its commitment to ‘the establishment principle’, which was held to be fundamental to the Free Church. In these circumstances, it was found that the majority had violated the conditions on which the property of the Free Church was held. This principle is also found in Milligan Vs. Mitchel[19]?and Attorney General Vs. Anderson[20][9]?and Free Church of England Vs. Overtoun. All these decisions were considered by the Madras High Court in Prasanna Venkitesa Rao Vs. Srinivasa Rao (1931)[21].

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In Pragji Savji Vaja Vs. Chhotalal Narsidas Parmar[22]?it was held that no deviation from the object of the trust could be allowed; and the properties could not be allowed to be sold to the members of their community for whose benefit the trust is created, and the properties were acquired.

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PUBLIC TRUST: ‘ONCE A TRUST ALWAYS A TRUST’; NO DISSOLUTION; NO TERMINATION

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A public trust is perpetual. It cannot be terminated or dissolved. Rule against perpetuities does not apply to it. It can never be put to an end though its nature may be changed[23].?Once a public endowment is made (by dedication of properties) even the former owners or founders cannot revoke it[24]. Subsequent conduct of the founder or his descendants contrary to such dedication would amount to a breach of trust[25]. Tudor on Charities[26] explained this principle as under:

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QUOTE

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When a charity has been founded and trusts have been declared, the founder has no power to revoke, vary or add to the trusts. This is so irrespective of whether the trusts have been declared by an individual, or by a body of subscribers, or by the trustees[27].

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UNQUOTE

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In Halsbury’s Laws of England[28],?while dealing with creation of charitable trusts, it has been observed as under:

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QUOTE

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Charitable trusts have sometimes been declared subject to express powers of revocation, but there has apparently been no decision on the validity of such a power except as regards the rule against perpetuities[29].

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UNQUOTE

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Dedication of property for public trust is like a bullet fired.? If it is in private realm it retains the character of a private property[30].?Once dedication is complete, it cannot be revoked[31].?Once a public endowment/trust is made, it is final and irrevocable. ‘Once a trust always a trust[32]?is a trite principle of law[33].

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Underhill in ‘Law relating to Trusts and Trustees’ has explained it, with respect to associations, thus:

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QUOTE

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However, the crucial difference surely is that no absolutely entitled members exist if the gift is on trust for future and existing members, always being for the members of the Association for the time being. The members for the time being cannot under the Association rules Appropriate Trust property for themselves for there would then be no property held on trust as intended by the testator for those persons who some years later happened to be the members of the Association for the time being[34].

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UNQUOTE

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If the property is one stand dedicated to a Political Party, Association or a Church, and the beneficiaries thereof are unascertainable, the property vests with the entire members (of such Party, Association or Church), from time to time, subject to its objectives, as revealed from the document of foundation or byelaws, if any. Such vesting is permanent, whereby it cannot be put to an end even by a majority decision of the members of a particular time. In case such association or church becomes defunctive and it is impossible to carry forward the affairs of the trust as intended by the founders, and the matter is placed before a court, the court will apply the trust-property to a charitable purpose, ‘as nearly as possible’[35],?resembling the original Trust, invoking ‘cy pres’ doctrine.??

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SUBSEQUENT DEEDS: SCRAP OF PAPER

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In Agasthyar Trust Vs. Commr. IT, Madras[36] the Supreme Court approved the observation of the Madras High Court, dealing with the question whether the founder of a trust had power to revoke the same,in Thanthi Trust Vs. ITO[37],?as under:

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QUOTE

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It is well established that the subsequent acts and conduct of the founder of the trust cannot affect the trust if there has been already a complete dedication, (vide Krishnaswamy Pillai v. Kothandarama Naicken[38]: Sunder Singh Mallah Singh Sanathan Dharam High School Trust v. Managing Committee, Sunder Singh Mallah Singh Rajput High School[39], and Gokuldoss Jamnadoss and Co. v. Lakshminarasimhalu Chetti[40], If a valid and complete dedication had taken place, there would be no power left in the founder to revoke and no assertion on his part or the subsequent conduct of himself or his descendants contrary to such dedication would have the effect of nullifying it. If the trust had been really and validly created, any deviation by the founder of the trust or the trustees from the declared purposes would amount only to a breach of trust and would not detract from the declaration of trust. Therefore, the subsequent conduct of the founder in dealing with the funds of the trust long after the creation of the trust may not put an end to the trust itself[41].

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UNQUOTE

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Our Apex Court, approving the principle stated in the aforesaid passage, it is held that the trustee had no authority or jurisdiction to execute a fresh trust deed or document; and it was of no consequence, and was no more than a scrap of paper. The Trust as originally established by the deed remained unchanged or unaffected by the latter document.

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EFFECT OF OFFERING TRUST PROPERTY AS BANK SECURITY TO RAISE FUNDS

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Referring to Supreme Court decision in Agasthyar Trust Vs. Commr. IT, Madras[42] and Thanthi Trust Vs. ITO[43], it was observed in CIT Vs. AS Kupparaju Brothers Charitable Foundation Trust[44]??that it was clear that once the authors of the trust transferred the title of the property to the trustees and created a trust, they had no right to meddle with the property even if they had created partition deed, rectification deed and offered the property as security to the bank to raise funds. As pointed out by the Apex Court in the aforesaid judgment, they were of no consequence. All those transactions were void ab initio and in no way-affected the right of the trust and were no more than a scrap of paper.

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TRUSTEES CANNOT ALTER THE TRUST.

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Trustees cannot alter the purposes of the trust[45]. In RP Kapur Vs. Kaushalya Educational Trust[46] it is held by Delhi High Court (Avadh Behari Rohatgi) as under:

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QUOTE

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The trustees can bring the trust to an end where there is power of dissolution, as in this case. But they cannot alter the purposes of the trust. They are not authorised by the trust instrument to remodel the trust. The trustees have no power to alter, amend or vary the trust purposes, whether on the ground of “expansion” or “addition” or “enlargement” of the objects of the trust. I decline to accept any suggestion that the trustees can alter a man’s intention because they think it beneficial to divert the trust property to charity. It seems to me: that is quite impossible. The reason is that a trust is an obligation, that is to say a tie of equity (viniculum juris), whereby the trustee accepts the confidence reposed in him by the author of the trust to hold or apply the trust property for the purposes of the trust.

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UNQUOTE

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Under Section 77[47] of Indian Trusts Act, 1882 a trust is extinguished in the four enumerated instances. Very rarely these provisions apply to public trusts. For example, complete destruction of the trust property, or conversion of the status of entire beneficiaries so that they all are not entitled to be the beneficiaries of the trust.

Under section 71[48], a trustee is discharged from his office by the extinction of the trust. But this discharge does not mean that the trustee is ceased to be a trustee, or relieved from his duty of rendering accounts and delivering the trust property to the beneficiaries[49].

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No trustee can get a discharge unless he renders accounts of his management even when there is no allegation of misfeasance, malfeasance and nonfeasance and also gross negligence. Courts have discretion regarding the fixing the period of accounting in a suit for accounting against a trustee of a charity[50].?

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PROPERTY ENTRUSTED BY WIFE TO HUSBAND?– TRUST AND LIMITATION

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In Sheela Vs. Suresh[51], it is held by the Kerala High Court as under:

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QUOTE

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It is settled law and as laid down in the judgments aforesaid, when the?wife entrusts with the husband any property belonging to her,?a trust is created?and the husband is bound to return the same to his wife. If the same is not returned, the wife has a right to demand the same by filing a suit or as in the present case, file an application before the Family Court or take other necessary steps under the relevant statutes in force. When?S. 10 of the Limitation Act?indicates that there is?no limitation?for initiating any such action, in the absence of any other statute providing for a limitation, the trustee cannot take a contention that he shall not return the trust property on account of any period of limitation.

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UNQUOTE

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EFFECT OF AN AGREEMENT SETTLING OBLIGATIONS

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In Sheela Vs. Suresh[52], after laying down the aforesaid settled position the Court considered whether the wife can claim property entrusted to husband (other than dowry for which there is a statutory trust as per Sec 6[53] of the Dowry Prohibition Act, 1961) where there is an agreement between the parties settling the obligations arising from the trust. The court held as under:

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QUOTE

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The?question involved in the above reference is that, when there is a change in circumstances between the spouses, especially when there is a dissolution of marriage and substantial time had elapsed, whether the?trust created between them would be extinguished.

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The question posed is,?when the relationship between the parties gets deranged and results in divorce, whether the trust gets extinguished,?and the divorced wife would be entitled to invoke S. 10[54] of the Limitation Act?and file a suit at her will and pleasure at any point in time.?In such an event, the questions to be considered are (i) whether a trust had been created at any point of time, (ii) if a trust has been created and the husband remains in the position of a trustee, whether it gets extinguished on the dissolution of marriage or under any other circumstances.

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UNQUOTE

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After quoting Sec. 77[55] the High Court observed as under:

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Therefore, unless any of the eventualities as mentioned U/s. 77 takes place, which of course is a question of fact to be decided on a case to case basis and once a trust is created, it continues to operate, even though there is a dissolution of marriage.

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However, in an instance where there is an agreement between the parties settling the obligations arising from the trust, it gets fulfilled in terms of S.77(a).

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REVOCABLE TRUST

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When the author/settler creates or establishes the trust reserving his power to terminate the trust, or change the beneficiaries and trustees, or the terms of the trust, as he likes, such trust at the will and pleasure of the author is called revocable trust[56].

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A TRUST WILL NEVER BE ALLOWED TO FAIL FOR WANT OF A TRUSTEE

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On the rule of equity it is held that a trust will never be allowed to fail for want of a trustee[57]. The trusts will fasten upon the conscience of whoever holds the property. Even when court directs the trustee to hand over trust property to donor it does not extinguish the trust; it makes the donor himself a trustee.

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It is also well settled principle that the death of a trustee or trustees would not extinguish the trust. The office of the trustee/trustees as well as the trust estate survives to the surviving trustee or trustees. They can carry out the trust and exercise all such powers as were given to the original trustees. Upon the death of the last surviving trustee, the trust property devolves on his legal representative[58] as provided in Sections 75[59] and 76[60] of the Indian Trust Act.

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NO DISCHARGE IF NOT ACCOUNTED

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The principles laid down in Section 19[61], Section 23[62] and section 71 of the Trusts Act apply the public trusts also. They contain the general principles of law.

In Vedagiri Lakshmi Narasimha Swami Temple Vs. Induru Pattabhirami Reddi[63]?new trustees alleged misfeasance, malfeasance and nonfeasance and also gross negligence against former trustees. On the questions whether the present trustees can demand rendition of account from the ex-trustees in respect of their management without alleging against them any acts of negligence or wilful default and, if so, whether there was a bar to the maintainability of a suit for the relief of rendition of accounts in a civil court, it was observed by the Apex Court that? it was ‘common place that no trustee can get a discharge unless he renders accounts of his management’ and that this liability was irrespective of any question of negligence or wilful default. They are, therefore, held liable to render accounts of their management to the present trustees[64].

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VARIATION OF TRUST

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The Trust or the author of the trust has no authority or jurisdiction to execute a fresh trust deed, after revoking the earlier trust deed[65]. The sole beneficiary, or all the beneficiaries together, can give a different direction to the trust by their common consent in the absence of incompetence on the part of any one or more of the beneficiaries. This rule has been summarized in Underhill’s Law of Trusts and Trustees[66].

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If there is only one beneficiary, or if there are several (whether entitled concurrently or successively) and they are all of one mind and he or they are not under any disability, the specific performance of the trust may be arrested and the trust modified or extinguished by him or them without reference to the wishes of the settler or trustees[67].

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SHIFTING OF A CHURCH

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The property of an Episcopal Church is vested with the ecclesiastical authorities, or in the endowment or trust itself, and that of a congregational church is vested with the congregation[68]. It is difficult to pin-point a tangible-nucleus or a core-element for a church (building). In this respect a church resembles Mosque. Christians also worship the invisible God Almighty. For Christians, as in the case of Muslims, worship is important, rather than the place where they worship.?

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For all the above, it can be concluded that the decision lawfully taken by the authoritative body of the church to effect a shifting of the church from one place to another may not be rendered illegal. Doctrines of faith or any legal proposition (including ‘once a trust always trust’ and ‘once a dedication always a dedication’) cannot be validly raised.

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CY PRES DOCTRINE

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When it is found by the court that the mode of charity, indicated by the donor, cannot be carried on for impossibility or impracticability, the court will execute and accomplish the donor’s intention applying ‘cy pres’ doctrine.? It is applied where from lapse of time or change of circumstances it is no longer possible to apply the property left by the founder or donor in the precise way in which it was directed to be applied[69].? It is based on the principle that the court is the protector of all charities[70] and that the court will not allow to fail a validly created trust or objects of foundation.?

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Invoking ‘cy pres’ doctrine the court will apply the property of the Trust to a charitable purpose ‘as nearly as possible’[71] resembling the original Trust. Besides physical impossibility, becoming the trust valueless, owing to attendant circumstances, also invites application of cy pres doctrine[72].

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The trustees are bound to carry out the directions of the author under Sec. 11[73] of the Trusts Act and the only way in which the directions of the testament may be varied is by applying ‘cy pres’ doctrine.

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TRANSFER OF TRUSTEESHIP TO ANOTHER BODY

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Trust is a confidential relationship which involves a special duty of loyalty to the purpose or object of the trust.? There is no principle of law or precedent which permits transfer of trust in favour of another body of persons[74].

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In Abdul Kayum Vs. Alibhai[75]?the Apex Court expounded the following legal incidents of trusteeship:

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(i)????????????? Trustees cannot transfer their duties, functions & powers to some other body of men and create them trustees in their own place unless this is clearly permitted by the trust deed, or agreed to by the entire body of beneficiaries;

(ii)??????????? A trustee is not bound to accept the trust; but having once entered upon the trust he cannot renounce the duties and liabilities except with the permission of the Court or with the consent of the beneficiaries or by the authority of the trust deed itself.

(iii)?????????? A trustee cannot delegate his office or any of his functions except in some specified cases.

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ABUSE OF TRUST – DEDICATION WILL REMAIN VALID

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The endowment and its dedication will remain valid even if there is misappropriation or abuse of trust by the trustees after a valid dedication[76].

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TRUST PROPERTY DOESN’T REVERT EVEN IF TRUSTEE REFUSES

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It is an established principle of equity jurisprudence that a trust never fails even if there is no trustee. The property does not revert to the settlor or his heirs[77]

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[1] 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 Bs 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.

[2] 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 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 trustmoney 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 trustmoney 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 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.

[3] Trustee cannot renounce after acceptance.

A trustee who has accepted the trust cannot afterwards renounce it except (a) with the permission of a principal Civil Court of original jurisdiction, or (b) if the beneficiary is competent to contract, with his consent, or ( c) by virtue of a special power in the instrument of trust.

[4] Trustee cannot delegate

A trustee cannot delegate his office or any of his duties either to a co-trustee or to a stranger, unless (a) the instrument of trust so provides, or (b) the delegation is in the regular course of business, or (c) the delegation is necessary, or (d) the beneficiary, being competent to contract, consents to the delegation.

Explanation.-- The appointment of an attorney or proxy to do an act merely ministerial and involving no independent discretion is not a delegation within the meaning of this section.

Illustrations

(a)?????????? A bequeaths certain property to B and C on certain trusts to be executed by them or the survivor of them or the assigns of such survivor. B dies. C may bequeath the trust-property to D and E upon the trusts of A's will.

(b)?????????? A is a trustee of certain property with power to sell the same. A may employ an auctioneer to effect the sale

(c)??????????? A bequeaths to B fifty houses let at monthly rents in trust to collect the rents and pay them to C. B may employ a proper person to collect these rents.

[5] ?Right to specific execution

The beneficiary is entitled to have the intention of the author of the trust specifically executed to the extent of the beneficiary s interest;

Right to transfer of possession.-- and, where there is only one beneficiary and he is competent to contract, or where there are several beneficiaries and they are competent to contract and all of one mind, he or they may require the trustee to transfer the trust -property to him or them, or to such person as he or they may direct.

When property has been transferred or bequeathed for the benefit of a married woman, so that she shall not have power to deprive herself of her beneficial interest, nothing in the second clause of this section applies to such property during her marriage.

Illustrations

Certain Government securities are given to trustees upon trust to accumulate the interest until A attains the age of 24, and then to transfer the gross amount to him. A on attaining majority may, as the person exclusively interested in the trust-property, require the trustees to transfer it immediately to him.

A bequeaths Rs.10,000 to trustees upon trust to purchase an annuity for B, who has attained his majority and is otherwise competent to contract. B may claim the Rs. 10,000.

A transfers certain property to B and directs him to sell or invest it for the benefit of C, who is competent to contract. C may elect to take the property in its original character

[6] Right to transfer beneficial interest

The beneficiary, if competent to contract, may transfer his interest, but subject to the law for the time being in force as to the circumstances and extent in and to which he may dispose of such interest:

Provided that when property is transferred or bequeathed for the benefit of a married woman, so that she shall not have power to deprive herself of her beneficial interest, nothing in this section shall authorise her to transfer such interest during her marriage.

[7] Wrongful purchase by trustee

Where a trustee has wrongfully bought trust-property, the beneficiary has a right to have the property declared subject to the trust or retransferred by the trustee, if it remains in his hands unsold, or, if it has been bought from him by any person with notice of the trust, by such person. But in such case the beneficiary must repay the purchase -money paid by the trustee, with interest, and such other expenses (if any) as he has properly incurred in the preservation of the property; and the trustee or purchaser must

(a)?????????? account for the net profits of the property,

(b)?????????? be charged with an occupation-rent, if he has been in actual possession of the property, and

(c)??????????? allow the beneficiary to deduct a proportionate part of the purchase-money if the property has been deteriorated by the acts or omissions of the trustee or purchaser.

Nothing in this section--

(a)?????????? impairs the rights of lessees and others who, before the institution of a suit to have the property declared subject to the trust or retransferred, have contracted in good faith with the trustee or purchaser; or

(b)?????????? entitles the beneficiary to have the property declared subject to the trust or retransferred where he, being competent to contract, has himself, without coercion or undue influence having been brought to bear on him, ratified the sale to the trustee with full knowledge of the facts of the case and of his rights as against the trustee.

[8] Discharge of trustee.

A 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.

[9] Trust how extinguished

A trust is extinguished--

(a)?????????? when its purpose is completely fulfilled; or

(b)?????????? when its purpose becomes unlawful; or

(c)??????????? when the fulfilment of its purpose becomes impossible by destruction of the trust-property or otherwise; or

(d)?????????? when the trust, being revocable, is expressly revoked.

[10] 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)???? (c) where the trust is for the payment of the debts of the author of the trust, and has not been communicated to the creditors--at the pleasure of the author of the trust.

Illustration

A conveys property to B in trust to sell the same and pay out of the proceeds the claims of A's creditors. A reserves no power of revocation. If no communication has been made to the creditors, A may revoke the trust. But if the creditors are parties to the arrangement, the trust cannot be revoked without their consent.

[11] Narayanan Vs. Nil: AIR 2005 Mad. 17; M Ashok Kumar Vs. N Janarthana: 2013(7) Mad. LJ 273; TC Chacko Vs. Annamma:? AIR 1994 Ker. 107

[12] This Act may be called the Indian Trusts Act, 1882:

Commencement.-- and it shall come into force on the first day of March, 1882.

Local extent.--?1[It extends to?2[the whole of India?3*** and] the Andaman and Nicobar Islands?4***; but the Central Government may, from time to time, by notification in the Official Gazette, extend it to?5[the, Andaman and Nicobar Islands] or to any part thereof.]

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.

[13] Profulla Chorone Requitte Vs. Satya Chorone Requitte: AIR 1979 SC 1682

[14] (1876) 4 Ind App 52 (PC)

[15] (1925) 52 Ind App 245

[16] Profulla Chorone Requitte Vs. Satya Chorone Requitte: AIR 1979 SC 1682

[17] St. John’s College Vs. Todington: (1757) 1 Burr. 158; Green Vs. Rutherford: (1750) 1 Ves. Sen. 462; Ananda Chandra Chuckerbutly Vs.? Braja Lal Singh (1922) I.L.R. 50 C. 292; Settikara Venkatarama? Vs. OP Damodaram? : AIR 1926 Mad 1150: (1926) 51 MLJ 457

[18] (1904) AC 515

[19] 40 ER 852

[20](1888) 57 LJ Ch 543

[21] AIR 1931 Mad. 12

[22] AIR 2014-3 Bom R 211: 2013-6 BCR 72

[23]In Re Man Singh and Others, AIR 1974 Del. 228

[24] Ramkishorelal vs. Kamalnarayan, AIR 1963 SC 890;?Agasthyar Trust Vs. Commr IT Madras; 1998 AIR (SCW)3945 ;(1998) 5 SCC 588). Krishnaswamy Pillai Vs. Kothandarama Naicken: AIR 1915 Mad 380; Dasami Sahu Vs. Param Shameshwar, AIR 1929 All 315

[25] Agasthyar Trust Madras Vs. CIT: 1998- 5 SCC 588

[26] 6th Edn.? At p. 131

[27] Quoted in: Agasthyar Trust Vs. Commr IT Madras: 1998-5 SCC 588, Sri Gasthyar Trust vs. CIT: [1999] 236 ITR 23:103 Taxman 363

[28] 4th Edn., Vol. 5, para. 624

[29]Radhika Mohan Nandy Vs. Amrita Lal Nandy, AIR 1947 Cal 301

[30] ILR 51 All. 626; AIR 1974 AP 316; AIR 1950 Ass. 154

[31] Narayanan Vs. Nil: AIR 2005 Mad. 17; M Ashok Kumar Vs. N Janarthana: 2013(7) Mad. LJ 273; T C Chacko Vs. Annamma:? AIR 1994 Ker. 107

[32] KS Varghese Vs. St. Peters and Pauls Syrian Orthodox Church: (2017) 15 SCC 333

[33] Narayanan Vs. Nil: AIR 2005 Mad. 17; M Ashok Kumar Vs. N Janarthana: 2013(7) Mad. LJ 273; T C Chacko Vs. Annamma:? AIR 1994 Ker. 107

[34] Quoted in: Most Rev. P.M.A. Metropolitan Vs. Moran Mar Marthoma: AIR 1995 SC 2001- Para 69

[35] In Re Man Singh and Others, AIR 1974 Del. 228

[36]1998 AIR (SCW)3945 ;(1998) 5 SCC 588)

[37] Thanthi Trust Vs. ITO: 91 ITR 261

[38] [1914] 27 MLJ 582

[39] [1938] 1 MLJ 359: AIR 1938 PC 73

[40] [1940] 2 MLJ 409: AIR 1940 Mad. 920

[41] Quoted also in: CIT Vs. AS Kupparaju Brothers Chari. Fondn. Trust: DTR 2012 69 315

[42] 1998 AIR (SCW)3945 ;(1998) 5 SCC 588)

[43] Thanthi Trust Vs. ITO: 91 ITR 261

[44] DTR 2012 69 315

[45] Agasthyar Trust Madras Vs. Commr IT ; 1998 AIR (SCW) 3945 ; (1998) 5 SCC 588). Commissioner of IT Vs. Ramaswamy Iyer: 1977 CTR? 21; 1977-110 ITR 364; Naresh Sengupta Foundation Vs. Commir IT: 1994 207 ITR 340 (Cal); Christopher Karkada Vs. Church Of South India Madras: KCCR 2012 1 503

[46] 1982-21 DLT 46; ILR? 1982-1Del 801

[47] Trust how extinguished.

A trust is extinguished--

(a)?????????? when its purpose is completely fulfilled; or

(b)?????????? when its purpose becomes unlawful; or

(c)??????????? when the fulfilment of its purpose becomes impossible by destruction of the trust-property or otherwise; or

(d)?????????? when the trust, being revocable, is expressly revoked.

?

[48] Discharge of trustee.

A 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.

[49] S Darshan Lal Vs RES Dalliwall: AIR 1952? All 825

[50] Attorney General Vs. Exetor Mayor: (1822) 37 ER 918; Anyasayya Vs. Muthamma: AIR 1919 Mad 943; Hariharabrahman Vs. Janakiramiah: AIR 1955 Andhra 18

[51] ILR 2020-4 Ker 486

[52] ILR 2020-4 Ker 486

[53] Dowry to be for the benefit of the wife or her heirs.—

(1)??? Where any dowry is received by any person other than the woman in connection with whose marriage it is given, that person shall transfer it to the woman—

(a)??? if the dowry was received before marriage, within three months after the date of marriage; or

(b)??? if the dowry was received at the time of or after the marriage, within three months after the date of its receipt; or

(c)???? if the dowry was received when the woman was a minor, within three months after she has attained the age of eighteen years, and pending such transfer, shall hold it in trust for the benefit of the woman.

(2)??? If any person fails to transfer any property as required by sub-section (1) within the time limit specified therefor, or as required by sub-section (3), he shall be punishable with imprisonment for a term which shall not be less than six months, but which may extend to two years or with fine which shall not be less than five thousand rupees, but which may extend to ten thousand rupees or with both.

(3)??? Where the woman entitled to any property under sub-section (1) dies before receiving it, the heirs of the woman shall be entitled to claim it from the person holding it for the time being:

Provided that where such woman dies within seven years of her marriage, otherwise than due to natural causes, such property shall,—(a)if she has no children, be transferred to her parents; or(b)if she has children, be transferred to such children and pending such transfer, be held in trust for such children.

(3A)??????????????????????????? Where a person convicted under sub-section (2) for failure to transfer any property as required by sub-section (1) or sub-section (3) has not, before his conviction under that sub-section, transferred such property to the woman entitled thereto or, as the case may be, her heirs, parents or children the Court shall, in addition to awarding punishment under that sub-section, direct, by order in writing, that such person shall transfer the property to such woman or, as the case may be,her heirs, parents or children within such period as may be specified in the order, and if such person fails to comply with the direction within the period so specified, an amount equal to the value of the property may be recovered from him as if it were a fine imposed by such Court and paid to such woman or, as the case may be, her heirs, parents or children.

(4)??? Nothing contained in this section shall affect the provisions of section 3 or section 4.

[54] Suits against trustees and their representatives.—

Notwithstanding anything contained in the foregoing provisions of this Act, no suit against a person in whom property has become vested in trust for any specific purpose, or against his legal representatives or assigns (not being assigns for valuable consideration), for the purpose of following in his or their hands such property, or the proceeds thereof, or for an account of such property or proceeds, shall be barred by any length of time.Explanation.—For the purposes of this section any property comprised in a Hindu, Muslim or Buddhist religious or charitable endowment shall be deemed to be property vested in trust for a specific purpose and the manager of the property shall be deemed to be the trustee thereof.

[55] Trust how extinguished.

A trust is extinguished--

(a)?????????? when its purpose is completely fulfilled; or

(b)?????????? when its purpose becomes unlawful; or

(c)??????????? when the fulfilment of its purpose becomes impossible by destruction of the trust-property or otherwise; or

(d)?????????? when the trust, being revocable, is expressly revoked.

[56] See: Jyotendrasinhji v. SI Tripathi, AIR 1993 SC 1991

[57] Sharf-uz-Zaman v. Sir Henry Stanyon, 1923 AIR Oudh 80; Seth Soorajmull Jalan Trust Vs. Tolaram Jalan, 2015 AIR (CC) 3225, 2015-4 Cal LT ?1

[58] Seth Soorajmull Jalan Trust Vs. Tolaram Jalan, 2015 AIR (CC) 3225, 2015-4 Cal LT ?1

[59]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 discretions, and shall in all respects act, as if he had been originally nominated a trustee by the author of the trust.

[60] ?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.

[61] 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.

[62] 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:--where he has actually received interest;

(a)?????????? where the breach consists in unreasonable delay in paying trust-money to the beneficiary;

(b)?????????? where the trustee ought to have received interest, but has not done so;

(c)??????????? 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.

(d)?????????? 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;

(e)?????????? 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 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 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.

[63] AIR 1967 SC 781

[64] Referred to in: M. M. Jaffar Kermani VS M. M. Hassan Kirmani: AIR 1978? Mad 121; Bhimasena Mahapatra VS Ramesh Chandra Mohapatra: AIR 1978? Ori 159, TG? Viswanathan Chettiar Vs.? A? Shanmugha Chettiar:? AIR 1992? Mad 148

[65] Christopher Karkada, Bangalore Vs. Church of South India: ILR 2012 Kar 725: 2012-1 KCCR 503

[66] 10th?Ed., p. 421

[67] Quoted in: A D Vehvalwala Vs. M C H Rustomji: 1970 Cal LJ 312;1970-1 Cal LT 292

[68] Most Rev. PMA Metropolitan Vs. Moran Mar Marthoma: AIR 1995 SC 2001

[69] BalkrishnaVishvanath Vs. Vinayak Narayan: AIR 1932 Bom 191; AP Shah Vs. BM Institute of Mental Health: 1986? GLH 262

[70] C ChikkaVenkatappa Vs. D Hanumanthappa 1970 (1) Mys LJ 296; Narayan Krishnaji Vs. Anjuman E Islamia: AIR 1952 Kar 14

[71] In Re Man Singh and Others, AIR 1974 Del. 228

[72]Hormusji Franji Warden, ILR 32? B. 214

[73] 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 Bs 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.

[74] Abdul Kayua Vs. Alibhai AIR 1963 SC 309: Referred to in Arjan Singh Vs. Deputy Mal Jain: ILR? 1982-1 Del-11

[75] AIR 1963 SC 309

[76] ILR 1936 Cal. 420.Kuldip Chand Vs. A G Government of H P: AIR 2003 SC 1685; AIR 1954 M. 1110

[77] Yelandau Arasikere Deshikendra Sammthana Vs. Gangadharaiah: 2007-5 AIR Kar R 565: 2008-4 Kat LJ 323. See also: Arjan Singh Vs. Deputy Mal Jain ILR 1982- 1 Del 11. See Chapter: RIGHTS AND DUITIES OF TRUSTEES