Table of Contents
- Appointment of Trustee
- Appointment by Courts
- Removal of Trustee
- Rights of Trustee
- Duties of Trustee
- Powers of Trustee
- Disabilities of Trustee
- Liability of Trustee
- Discharge of Trustee
- Petition for Discharge
APPOINTMENT OF TRUSTEE
Section 10 of the Indian Trust Act provides that:
“A person who is capable to hold the property can be appointed as trustee.”
This means any individual who is legally competent to own property can be entrusted with the responsibilities of a trustee.
Section 73: Appointment of New Trustees
According to Section 73, new trustees can be appointed to replace the original or existing trustees. This can be done through the following authorities:
- By the person nominated for that purpose in the instrument of trust, or
- By the author of the trust, if alive and competent to contract, or
- By the surviving or continuing trustees, or
- By the legal representative of the last surviving or continuing trustee, or
- With the consent of the court, by the retiring trustees (if they all retire simultaneously), or
- With the consent of the court, by the last retiring trustee
Key Provisions Under Section 73
- Every appointment under this section shall be made in writing under the hand of the person making the appointment.
- The Official Trustee may be appointed (with his consent and by court order) if:
- Only one trustee is to be appointed, and
- That person is to act as the sole trustee.
APPOINTMENT BY COURTS
Section 74 of the Indian Trusts Act deals with situations where the Court steps in to appoint a new trustee.
This section provides that in appointing new trustees the court shall have regard to the following things:
- The wish of the author of the trust, as expressed or inferred from the instrument of trust
- The wishes of the person who is empowered to appoint new trustees
- The question whether it will promote or impede the execution of the trust and
- To the interest of all the beneficiaries where there are more than one.
REMOVAL OF TRUSTEE
Section 73 also makes provision for the removal of trustees in the following cases:
- If trustee is absent from India for a continuous period of six months, or
- If trustee leaves India for the purpose of residing abroad, or
- If the trustee is declared as insolvent
- If the trustee is incapable to act as an trustee
- If the trustee accepts something which is inconsistent to the trust.
RIGHTS OF TRUSTEE
As per Indian Trust Act, 1882, following are the rights of trustee:
Section 31 – Right to Title Deed
Under Section 31, a trustee has the right to possess the instrument of trust and all other documents related to the trust. This right ensures that the trustee can effectively perform their duties with complete access to the necessary legal documentation.
Section 32 – Right to Reimbursement
Trustees are entitled to be reimbursed from the trust property for all legitimate expenses incurred in:
- Executing the trust
- Realizing and preserving trust property
- Protecting the interests of the trust
- Supporting the beneficiaries
If a trustee pays these expenses out of their own pocket, they have a charge on the trust property for reimbursement. If the trust property is insufficient or fails, the trustee can recover the amount directly from the beneficiary.
Additionally, if a trustee mistakenly overpays a beneficiary, they can:
- Reimburse from the beneficiary’s share in the trust
- If the share fails, the beneficiary becomes personally liable to repay
Section 33 – Right to Indemnity
If a third party (including a beneficiary) gains an advantage through a breach of trust, they must indemnify the trustee for any resulting loss. In case the wrongdoer is a beneficiary, the trustee has a charge on the beneficiary’s interest for recovery of the indemnified amount.
Section 34 – Right to Seek Court’s Direction
A trustee may file a petition in the Principal Civil Court of original jurisdiction seeking its opinion, advice, or discretion on any matter related to the:
- Management
- Administration
- Execution of the trust property
This provision helps trustees act wisely and avoid potential liabilities.
Section 35 – Right to Settlement of Accounts
Once the trustee has fully discharged their duties, they are entitled to:
- Examine and settle the trust accounts
- Receive a formal acknowledgment from the beneficiary stating that no dues are pending
DUTIES OF TRUSTEE
The Indian Trusts Act outlines specific duties every trustee must follow to ensure the proper administration and protection of the trust. Here’s a detailed and engaging breakdown of these duties:
Section 11 – Duty to Execute the Trust
A trustee is legally bound to fulfill the purpose of the trust and obey all the directions given by the author of the trust. This is the fundamental duty of every trustee.
Section 12 – Acquaintance with Trust Property
Trustees must acquaint themselves with the nature and circumstances of the trust property. They must also transfer the property to themselves for better management and execution of the trust.
Section 13 – To Protect Title to Trust Property
Trustees must defend the title of the trust property and are required to take all reasonable legal steps, including maintaining and defending suits, to assert and protect that title.
Case Law:
Homi Nariman Bhiwandiwala vs Zoroastrian Co-operative Credit Bank [2001 (3) BOMCR 352] – It was held that all trustees must be made parties to a suit concerning trust property.
Section 14 – Not to Set Up Adverse Title
A trustee must not assert a title adverse to the interest of the beneficiary. They are legally restrained from creating or promoting a conflict of interest.
Case Law:
Narayan Bhagwantrao Gosavi vs Gopal Vinayak Gosavi (AIR 1960 SC 100) – It was held that a trustee must not mix personal property with trust property. Doing so puts the burden of proof on the trustee to distinguish their own property from the trust’s.
Section 15 – To Execute with Reasonable Care
Trustees must handle trust property with the same care as an ordinary prudent person would handle their own. They are not liable for loss if they have acted responsibly and with due diligence.
Section 16 – To Convert Perishable Property
When trust property is of a perishable nature and the trust benefits multiple persons in succession, the trustee must convert such property into something permanent and profitable.
Section 17 – To Be Impartial
In cases where a trust has multiple beneficiaries, the trustee must act with complete impartiality, ensuring equal treatment and fair benefits to all parties involved.
Section 18 – To Prevent Waste
If the trust property is used in a way that causes or threatens damage, the trustee has a duty to take preventive measures against such waste, especially when different beneficiaries succeed one another in possession.
Section 19 – To Maintain Proper Accounts
Trustees must keep clear, complete, and accurate records of trust property. They are also required to furnish beneficiaries with all relevant information about the trust’s state and finances.
Section 20 – Investment of Trust Property
If the trust includes money that cannot be immediately applied, trustees must invest it in securities notified by the Central Government in the Official Gazette. This ensures the safety and productivity of idle trust funds.
POWER OF TRUSTEE
The Indian Trusts Act empowers trustees with several rights to help them manage and administer trust property effectively. These powers ensure smooth functioning and enable trustees to make practical decisions in the interest of beneficiaries. Here’s an easy-to-understand breakdown:
Section 37 – Power to Sell in Lots
A trustee authorized to sell trust property may:
- Sell the property with or without prior charges.
- Sell in one lot or in multiple lots.
- Sell via public auction or private contract.
- Sell all at once or at different times.
Section 38 – Power to Sell with Special Conditions
Trustees can impose reasonable conditions of sale and:
- Decide matters related to title and possession,
- Buy the property back at auction if needed,
- Cancel or vary contracts when necessary.
They are not held liable for any resulting loss to the beneficiaries if actions are taken prudently.
Section 39 – Power to Convey
The trustee may convey or dispose of trust property in any way necessary to carry out the purpose of the trust.
Section 40 – Power to Vary Investments
A trustee may redeem investments in a current security and reinvest the proceeds in another authorized security, as allowed under the Act.
Section 41 – Power Regarding Minor Beneficiaries
A trustee may pay the whole or part of the income of trust property to the guardian of a minor beneficiary for:
- Maintenance and education
- Religious worship and marriage
- Funeral and advancement of life
If any income remains, it must be invested under Section 20. If income is insufficient, the property itself can be used—with permission from the court.
Section 42 – Power to Give Receipts
Trustees can give a valid receipt for money or property received. Such a receipt fully discharges the payer from any further liability regarding the payment.
Section 43 – Power to Compound and Settle Matters
Two or more trustees acting together may:
- Accept any composition or security for a debt or property claimed,
- Allow time for payment,
- Compromise or settle any claim, debt, or dispute,
- Submit to arbitration, or
- Enter into any agreement or release that seems expedient.
This section gives trustees the flexibility to resolve issues pragmatically without prolonged litigation.
Section 44 – Power When a Co-trustee Dies or Disclaims
If authority is conferred upon multiple trustees and one of them dies or disclaims the role, the remaining trustees can exercise the authority unless the instrument of trust states otherwise.
DISABILITY OF TRUSTEE
- Trustee cannot renounce- Section 46 of the Indian Trust act provides that a trustee who has accepted the trust cannot renounce the trust except in following conditions:
- With the permission of principal civil court
- With the consent of beneficiary, if he is competent to contract.
- By virtue of special power in the instrument of trust
- Trustee cannot delegate- Section 47 of the Indian Trust act provides that a trustee cannot delegate his office. This section is based on the legal maxim of ‘delegatus non potest delegare’ which means that delegate cannot further delegate. This section has the following exceptions:
- Delegation is provided by the instrument of trust.
- Delegation is in the regular course of business.
- Delegation is necessary.
- Competent beneficiary gives consent to delegation
Case- J.P. Srivastava & Sons Ltd. Vs M/S Gwalior Sugar Co. Ltd.(AIR 2004 SC 4916) – In this case it was held that trustee could act on behalf of others, if there is a clause in the Trust Deed authorizing the execution of the Trust to be carried out by “one or more or by majority of the trustees”.
Therefore although as a rule, trustees must execute their duties of their office jointly, this general principle is subject to the following exceptions when one trustee may act for all
(1) where the Trust Deed allows the trusts to be executed by one or more or by majority of trustees (2) where there is express sanction or approval of the act by the co-trustees;
(3) where the delegation of power is necessary;
(4) where the beneficiaries competent to contract consent to the delegation;
(5) where the delegation to a co-trustee is in the regular course of the business;
(6) where the co-trustee merely gives effect to a decision taken by the trustees jointly.
- Co Trustees cannot singly- Section 48 of the Indian Trust act provides that the trustees must act jointly in the execution of trust.
- Discretionary Power- Section 49 of the Indian Trust act provides that when discretionary power of a trustee is not exercised reasonably and in good faith, such a power shall be controlled by Principal Civil court.
- No right to Remuneration- Section 50 of the Indian Trust act provides that a trustee has no right to charge remuneration for his trouble, skill and loss of time in executing the trust.
Non Applicability- This section is not applicable on any Official Trustee, Administrator General, Public Curator, or person holding a certificate of administration.
- Not to use Trust property- Section 51 of the Indian Trust act provides that a trustee may not use or deal with the trust property either for his own profit or for any other purpose unconnected with the trust.
- Agent of Trustee cannot buy- Section 52 of the Indian Trust act provides that No trustee whose duty is to sell trust property, nor his agent employed for the purchase may
- Buy the trust property
- Any interest therein, on his own account or as agent for third person
- Trustee may not buy beneficiary`s interest without permission- Section 53 of the Indian Trust act provides that A trustee, or someone who was recently a trustee, cannot buy, mortgage, or lease any part of the trust property without approval from a principal Civil Court of original jurisdiction. Such approval will only be granted if the proposed transaction is clearly beneficial to the beneficiary.
- Co- trustee may not lend to one of themselves- Section 54 of the Indian trust act provides that a trustee responsible for investing trust money on mortgage or personal security cannot invest it in a mortgage or personal security involving themselves or a co-trustee.
LIABILITY OF TRUSTEE
The Indian Trusts Act lays down strict accountability for trustees to ensure that trust property is used diligently and in good faith. If a trustee fails to do so, they can be held personally liable. Here’s a simplified yet comprehensive look at Sections 23 and 27.
Section 23 – Liability for Breach of Trust
If a trustee commits a breach of trust, they are legally liable to compensate for any loss suffered to the trust property or the beneficiary. Trustee is liable to pay interest only in these situations:
- Where the trustee actually received interest
- Where the breach includes unnecessary delay in handing over money to the beneficiary
- Where the trustee ought to have received interest on trust money
- Where it is fair to presume the trustee did receive interest
- Where the breach involves misinvesting trust money meant to earn interest or dividends
- If trust funds were used in business, the trustee must account for profits or pay interest, as per the beneficiary’s choice
Takeaway: The law ensures that trustees cannot escape liability simply by returning the principal amount—they may also have to compensate for lost income.
Section 27 – Several Liability of Co-Trustees
Where two or more trustees are involved, the law ensures collective accountability. This section provides that:
- If co-trustees jointly commit a breach, or
- If one trustee’s neglect enables another to commit a breach,
Then each trustee is liable for the entire loss suffered by the trust or the beneficiary.
Example: If one trustee fails to oversee the investment decisions of another, and that results in a financial loss to the trust, both may be held equally accountable—even if only one directly caused the breach.
DISCHARGE OF TRUSTEE
Section 71 of the Indian Trust act provides that the trustee may be discharged from his office in the following ways:
- By extinction of trust
- By completion of his duties under trust
- By such means as prescribed in the trust instrument
- By appointment of new trustee
- By consent of himself and the beneficiary or beneficiaries
- By the court in response to a petition presented under Section 72
PETITION FOR DISCHARGE
Section 72 of the Indian Trust act deals with the petition of discharge of trustee. This section provides that a trustee may apply petition in the Principal civil court for discharge of his duties and if the court finds sufficient reason for such discharge, then the trustee may be discharged from his office and give directions for his cost to be paid out.
While if the reason presented in the petition are not sufficient the court appoints a proper person to take his place without discharging him from duties
References:
- Equity and Specific Relief by B.M. Gandhi
- Indian Trust Act, 1882 – Bare Act
