THE INDIAN TRUSTS ACT, 1882

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The Indian Trusts Act, 1882 was enacted on January 13, 1882 and enforced on March 1, 1882 for the reason of defining and modifying the legal principles governing Private Trust as well as the Trustees. In the interpretation clause the Act defines the term ‘trust’ as a responsibility taken over with the ownership of property and occurred out of an assurance reposed in and recognized by the owner or affirmed and accepted by such owner for the advantage of another or another person and the owner. A trustee is the person who admits the confidence and the beneficiary is a person for whose advantage the confidence is admitted.

The trust is formed for lawful reason and the purpose is unlawful if it is prohibited by law or the formation of the trust would defeat the requirements of the law or the trust is created with fraudulent motive or the trust would cause harm to the person or property of another or in the opinion of the Court the trust is morally wrong or conflicting with public policy. The trust created with an unlawful intention is invalid and where the trust is formed with dual motive, and one of them would defeat the purposes of law, the entire trust is void. The trust dealing with immovable property is legally binding unless it is affirmed by a non testamentary instrument which is in a written form and shall be signed by the author or the trustee of the trust and also registered. It shall also be declared by the will created by the author or the trustee. The moveable property under a trust is legally valid only when it is affirmed similar to that of an immovable property or by the transfer of ownership to the trustee.

A trust shall be formed by persons capable to enter into contract and by obtaining authorization from the Principal Civil Court having original jurisdiction either by a minor or on behalf of a minor. The issue of the trust must be property that is capable of being transferred to the beneficiary. All the persons who are competent to hold property may become a beneficiary or trustee. But the trustee shall be capable of entering into contract where the trust includes the application of discretion. The trustee is obliged to accomplish certain purposes of the trust and comply with the orders of the author except as adjusted by the approval of every beneficiary being capable to a contract. The trustee shall be reported regarding the details of the trust property and he shall safeguard the trust property including defending the suits against the property. If the trustee contravenes the terms of trust, he shall compensate the loss suffered by the trust property or the beneficiary according to the stipulations and exemptions provided under the Act. The Act does not permit set-off to the trustee and the trustee shall not be liable for the default of the predecessor.

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In addition to the right to perform all the activities that are reasonable and for the proper realization and protection of the trust property, the Act provides certain specific rights on the trustee consisting of right to:

  • Title deed;
  • Repayment of title deed;
  • Recoup for wrong over-payment;
  • Guarantee from gainer through breach of trust;
  • Apply to the Court for advice in the administration of the property of the trust;
  • Settlement of accounts.

The trustee shall have the power to sell the property of the trust, vary investments, apply property of the minor for the purpose of preservation, issue receipts etc. The trustee cannot relinquish the trust after acceptance, cannot delegate his functions, shall not utilize the property for his personal purpose and shall not purchase the beneficiaries interest without his consent. Furthermore, the beneficiaries are also entitled with rights under the Act including the right to rents and earnings, specific execution, reassign of possession and beneficial interest, supervise and take duplicates of the documents of trust, require to any act of responsibility etc. The Act provides provision for vacating office of the trustee by way of death or discharge from office. The legislation also contains elaborate provision for the extinction and revocation of the trust.

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The Indian Trusts Act, 1882 is an enactment formulated during the British regime which contains detailed provision for the unification of laws governing trusts and trust property. But due to changes in the society, there is an immense requirement to modify the provisions of the legislation. Hence The Indian Trusts (Amendment) Bill has been initiated in 2009 which is pending before the Rajya Sabha for approval.