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Duties Of Trustee Under The Indian Trust Act Of 1882

A trust is created for the benefit of a third person called the beneficiary and the duties of the trust (to see that it functions properly) are carried out by the trustee.

Who is a Trustee?

The person who accepts the confidence is called the "Trustee". It is his duty to see that the trust functions properly and there is no misuse of the trust property at any stage. The duties of a trustee are defined from Sections 11 to 22 of the Indian Trust Act of 1882.

Section 11- Trustee to execute a trust

As laid down by the section, a trustee
  1. is bound to fulfill the purpose of the trust; and
  2. to obey the author's directions contained in the instrument.
Where the directions of the author are illegal, impracticable, or manifestly injurious to the beneficiaries, they need not be obeyed. Besides, where all the beneficiaries are competent to contract and they collectively consent to modify the directions or where a court allows a departure from them, the original directions need not be followed. A trust is obligatory and the fulfillment of its purpose in a directed manner is the fundamental duty of a trustee.

This finds expression in an adage giving homely truth in a condensed manner, that "he who pays the piper, calls the tune", or "one who pays, dictates". Where such directions are given after a trust has been created, they are ineffective and of no consequence because on the creation of a trust its property is transferred to the trustee, and the owner losses all control over it.

The gist of Section 11 which lays down a general principle can be stated this way, a trustee is to execute the trust as far as it is legally, practicable, and beneficial.

  1. A, a trustee is simply authorized to sell certain land by public auction. He cannot sell the land by private contract.
  2. A, a trustee of certain land for X, Y, and Z, is authorized to sell the land for a specified sum. X, Y, and Z are competent to contract and consent that A may sell the land to C for a less sum. A may sell accordingly.

Section 12- Trustee to inform himself of state of trust property

The second duty of a trustee is:
  1. To acquaint himself with the nature in circumstances of trust property as soon as possible after his appointment.
  2. He must also obtain a transfer of such property to himself, and
  3. Get in trust money invested on insufficient or hazardous securities.

For example, if the trust money is a debt or a chose-in-action, a trustee should take immediate steps to recover it or to reduce it into possession immediately unless he can show founded justification for his delay or default.

  1. The trust property is a debt outstanding on personal security. The instrument of trust gives the trustee no discretionary power to leave the debt so outstanding. The trustee must recover the debt without unnecessary delay.

Section 13- Trustee to protect the title of the trust property

It is the most fundamental duty of a trustee to secure and place the trust property in a state of security. He has to maintain and defend suits for the assertion and protection of its title and for this purpose must take all reasonable and possible steps suitable to the occasion. A trust property is given to the author of the trust by an unregistered deed, it is his duty to get such an instrument registered. This situation of a trustee requires the utmost diligence, exacta diligentia, and fidelity on his part. And in doing so he cannot deviate from the letter of the trust.

  1. The trust property is an immovable property that has been given to the author of the trust by an unregistered instrument. Subject to the provision of the Indian Registration Act, of 1877, the trustee, duty is to cause the instrument to be registered.

Section 14- Trustee not to set up title adverse to beneficiary

The trustee must not for himself or another setup or aid any title to the trust property adverse to the interest of the beneficiary.

Venkatraman V Jayamal [1]
In this case, it was held that the trustee's interest should not conflict with that of the beneficiary and if it is so, he cannot be allowed to do so unless he obtains a proper discharge from the trust which he has clothed himself.

Asharam V Ludheshwar[2]

In this case, it was held that a trustee cannot impeach the trust.

Narayan B Gosavi V G.V Gosavi[3]

A trustee consequently cannot mix his property with that of the trust. If he does so, a burden lies heavily upon him to prove that any particular property belongs to him as distinct from the trust property.

Section 15- Care required from the trustee
This section informs about the care required of a trustee in dealing with the trust property. The trustee is bound to deal with the trust property as carefully as a man of ordinary prudence would deal with the such property if it were his own.

In absence of a contract to the contrary, if a trustee in dealing with trust property suffers any damage, he is not responsible for the loss, destruction, or deterioration of the trust property.

  1. A, a trustee for B, allows the trust to be executed solely by his co-trustees, C. C misapplies the trust property. A is personally answerable for the loss resulting to B.
  2. A, living in Calcutta, is a trustee for B, living in Bombay. A remits trust funds to B by bills drawn by a person of undoubted credit in favour of the trustee as such, and payable at Bombay. The bills are dishonoured. A is not bound to make good the loss.

Section 16- Conversion of perishable property

Where the trust property is created for the benefit of several persons in succession and the trust property is of a wasting nature or a future or revisionary interest, the trustee is bound, unless an intention to the contrary may be inferred from the instrument of trust, to convert the property into property of permanent and immediately profitable character.

Howe V Earl of Dartmouth

A, a trustee for B, C, and D is empowered to choose between several specified modes of investing the trust property. A in good faith chooses one of these modes. The court will not interfere, although the result of the choice may be to vary the relative right to B, C, and D.

  1. A bequeaths to B all his property in trust for C during his life, and on his death for D, and on his death for E. A's property consists of three leasehold houses and there is nothing in A's will to show that he intended the houses to be enjoyed in specie. B should sell the houses and invest the proceeds in accordance with section 20.
  2. A bequeaths to b his three leaseholds house in Calcutta and all the furniture there in trust for C during his life, and on his death for D, and on D's death for E. Here an intention that the houses and furniture should be enjoyed in specie appears clearly and B should not sell them.

Section 17- Trustee to be Impartial

Where there are more beneficiaries than one, he cannot execute the trust in favour of one at the expense of another. He has to be impartial. He has not to pat and choose between beneficiaries; that is not given to him. He should not honour a tenant for life by investing in a more productive but less secure property.

Where the trustee has discretionary power, nothing in this section shall be deemed to authorize the court to control the exercise reasonably and in good faith of such discretion.

  1. A, a trustee for B, C, and D is empowered to choose between several specified modes of investing the trust property. A in good faith chooses one of these modes. The court will not interfere, although the result of the choice may be to vary the relative right to B, C, and D.

Section 18- Trustee to prevent waste

Where out of several beneficiaries in succession, one in possession of the property commits or threatens to commit or threatens to commit any act which is destructive or permanently injurious thereto, the trustee is bound to take measures to prevent the such act.

Lalit Mohan V Kishan Mohan Laxmichand [4]

In this case, it was held that a trustee is bound to prevent waste unless they are permissive in their character.

Section 19- Accounts and Information

A trustee is bound to maintain clear and proper accounts of trust property and must be prepared to produce it on demand by the beneficiaries. He should not conceal anything. He is also bound to render such accounts in respect of the state of the trust property.

He is at the same time entitled under Section 35 to get his accounts settled and examined on completion of his office and to receive an acknowledgment from the beneficiaries that there is nothing due in the trust.

He cannot advance his illiteracy and incapability as a defense for his fault.

Lakhmichand V Jaykuvashi[5]

In this case, it was held that if there is any fault in the accounts of trust, the trustee becomes prime facie liable for the loss that thereby occurs.

Vasudeva V Bhavadasan[6]

A trustee is not only liable for amounts of money received in his possession but also liable for his possession had acted with suitable alertness and diligence.

Section 20- Investment of Trust Money

Where the trust property consists of money and cannot be applied immediately or at an early date to the purpose of the trust, the trustee is bound 9subject to any direction contained in the instrument of trust) to invest the money.

Section 20A- Power to Purchase redeemable stock at Premium

A trustee may invest in any of the securities referred to in Section 20 notwithstanding that the same may be redeemable and that the price extends the redemption value.

Section 21-

Mortgage of land pledged to Government under the Act 26 of 1871, deposit in government saving bank
Nothing in Section 20 shall apply to investments made before this Act comes into force, or shall be deemed to preclude or investment in a mortgage of immovable property already pledged as security for an advance under the Land Improvement Act, 1871 or, in case the trust money does not exceed three thousand rupees, a deposit thereof in a Government Savings Bank.

Section 22- Sale by trustee directed to sell within the specified period
When a trustee is directed to sell within a specified time and if it extends the such time, the burden proving, as between himself and the beneficiary, that the latter is not prejudiced by the extension lies upon the trustee, unless the extension has been authorized by a Principal Court of original jurisdiction.

Ratilal v/s State of Bombay[7]
A trustee should not keep unnecessary cash with him which is not required for immediate expenses. This should be avoided.

A bequeaths property to b, directing him with all convenient speed and within five years to sell it and apply proceeds for the benefit of C. In the exercise of reasonable discretion. B postpones the sale for six years. The sale is not thereby rendered invalid, but C, alleging that he has been injured by the postponement, institutes a suit against B to obtain compensation. In the such suit the burden of proving that C has been injured on B.

The relationship between trust is compared to a glass, as it is claimed. It is never the same again after being broken. A cursory examination of the Indian Trust Act reveals that, in addition to its legal provisions, its obligations and authority are intended to safeguard the delicate relationship of trust, allowing it to be maintained and the purpose for which it was established to be achieved. We may now wrap up this section by discussing the responsibilities granted to trustees under the Indian Trust Act of 1882.

  1. AIR 1963 Mad 353
  2. AIR 1931 Nag 335 (FB)
  3. AIR 1960 SC 100
  4. (1904) 6 Bomb LR 907
  5. 6 BLR 907
  6. AIR 1934 Mad 115
  7. AIR 1954 SC 388

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