Semester-4 | our & Industiia! Law (K-402) | N NITIN PRAKASHAT 2G coll OPP, R.G, DEGREE COL" cror74 PH: (0121) (0) 2 jension of the parties was that time should be of the essence of the contract” Q.10. Give the definition of the following ‘Trust’, ‘Trustee’ and ‘Beneficiary’, What are the essentials of a valid trust? What are the three certainties regarding the formation ofa valid trust? Ans, ‘The term *Trust’ has been defined as under: 1, According to Underhill, “A trust is an equitable obligation, cither expressly undertaken or constructively imposed by the court, whereby the obligor is bound to deal with property over which he has control for the benefit of persons of whom he may or may not himself be one and any one of whom “may enforce the obligation” 2. According to 8.3 of Indian Trusts Act, “a ‘trust’ is an obligation annexed to the ownership, and arising out of a confidence reposed in and accepted by the owner, or declared and acepted by him, for the benefit of another; or of another and the owner” 3-According to Story, “A trustis an equitable right, ttle or interest in property, real or personal, distinct from the legal ownership thereof.” 4. According to Lindley C.J. “A trust is really nothing except a Confidence reposed by one person in another and enforceable in a court of Equity.” S.According to Snell, “Trust i ownership of, real or personal prop, or legal ownership thereof” sauthor cv Pet8on who reposes or declares the confidence is called the Author of the trust’; the person who accepts the confidence is called the “trustee of the trust’ ; + the person who accepts the confidence is called the is a beneficial interest in, or beneficial erty, unattended with the Possessory ‘trustee’; the person for whose benefit the confidence is accepted is called the beneficiary’ .na.For Example-S transfers certain to T forthe education of Here T becomes for owner of the} ny his ownership is attached the obligation of using theEquity, Trust & Fiduciary Relationship ” purchaser who takes trust property with notice actual or Constructive a the trust must hold the property subject to the trust even as a trustee dog, Q.17(a). Describe the rights of a trustee. : (b). Describe the various powers ofa trustee. Ans. (a) Right to Title-deed—According to 8.31, a trustee is entitled to have in his possession the instrument of trust and all the documents of title (if any) relating solely to the trust property. This right of trustee is in continuation of the provision of $.13 which places an obligation in the trustee to protect title to trust Property and to maintain and defend suits thereto, Moreover, if a beneficiary for life were allowed to have the custody of title-deeds, he might mortgage or convey the trust property for valuable consideration without notice, ang the interests of the remaindermen would be injured 2. Right to Reimbursement of Expenses—S.32 says that (a) Every trustee may reimburse himself, or pay or discharge out of the trust property all expenses on property incurred in or about the (i) execution of the trust, or (ii) the realization, preservation or benefit of the trust Property, or (ii) the protection or support of the beneficiary (b) Ifhe pays such expenses out of his own pocket, he has a first charge upon the trust property for such expenses and interest thereon but such charge (unless the expenses have been incurred with the sanction ofa Principal Civil court of original jurisdiction) shall be enforced only by prohibiting any disposition of the trust-property without previous payment of such expenses and interest. The period of limitation to enforce the right is six years from the date of retirement of the trustee. (c) If the trust-property fails, the trustee is entitled to recover from the beneficiary personally on whose behalf he acted and at whose request expressed or implied, he made the payment, the amount of such expenses. (d) Where a trustee has, by mistake, made an over-payment to the beneficiary, he may reimburse the tnist property out of the beneficiary's interest. If such interest fails, the trustee is entitled to recover from the beneficiary personally the amount of such over-payment. 3. Right to Indemnify from Gainer by Breach of Trust- According to $.33, a trustee who has gained an advantage from breach of trust must indemnify the trustee to the extent of the amount actually teceived by such person under the breach; and where he is a beneficiary, the trustee has a charge on his interest for such amount. Nothing in this section shall be deemed to entitle a trustee to be pepioes who has, in committing the breach of trust, been guilty of _ Right to Indemnity for Breach of Trust Against Cestui Que Trust les The right of a trustee who has committed a breach of trust to indemnitya LL.B. Questions & Answers Law Series maybe exercised- 1. Against a cestui que trust, or 2. Against a co-trustee, Thus, it was held that as between the trustees and a third person, who has reaped the benefit of the breach of trust, though the trustee must make disbursement in the first instance to the injured party, the loss will eventually be cast on the person who was the gainer by the breach of trust. And if the person, who has the advantage of the breach of trust, be the beneficiary himself, the trustee will have a charge on the interest of such beneficiary to the extent of the amount which he has gained by such breach. The liability of the beneficiary, personally to indemnify the trustee against a breach of trust instigated by him will be limited to the actual advantage reaped by the beneficiary. But the beneficiary must know at the time of the act or omission that it will amount to a breach of trust. 4, Right to Apply to Court for Opinion in the Management of Trust- Property—According to §.34, any trustee, may, without instituting a suit, apply by petition to a principal Civil Court of original jurisdiction for its opinion, advice or direction on any present questions respecting the management or administration of the trust-property, other than questions of detail, difficulty or importance, not proper in the opinion of the court for summary disposal. 5. Right to Settlement of. Account—According to $.35, when the duties of a trustee, as such are completed, he is entitled to have the accounts of his administration of the trust property examined and settled; and where nothing is due to the beneficiary under the Trust, to an acknowledgment in writing to that effect. In case of difference the accounts must be taken to and settled through a court of law, Thus, where the trust business has been completed, final adjustment of the trust account is made, in order to enable the trustee to hand over the balance, if any, to the parties entitled. Upon the completion of the trust, a trustee is entitled to have his accounts examined and settled by the beneficiary. Ttis to be noted that the trustee has a right after the trust has been completed to have his accounts examined, and to have a settlement of them. A suit for accounts can be brought by the cestui que trust against the trusts for the settlement of accounts. ; 6- Right to Discharge—It is enough if the beneficiary gives a receipt to the trustee stating in writing that nothing is due to him. No deed of release can be demanded by a trustee, ho deeds are to by the beneficiary in his favour. Ans (b) The powers of a trustee may bs saan aia following four heads namely— aeEquity, Trust & Fiduciary Relationship ”" 1, General Powers 2, Powers given by the trust instrument 3. Powers given by Statute, and 4, Powers available under the general principle of law or equity 1. General Powers of Trustees According 10 8.36, in addition tg the powers expressly conferred by the Indian Trusts Act and by the of trust, and subject to the restrictions, if any considered in isions of 8.17, a trustee may do all acts for the realization, protection or benefit tion or support of a beneficiary who ig instrument such instrument, and to the prov which are reasonable and proper of the trust-property and the protec not competent to contract Except with the permission of a principal ¢ ivil Court of original jurisdiction, no trustee shall lease trust property for a term exceeding twenty one years from the date of executing the lease, nor without reserving the best yearly rent that can be reasonably obtained, The powers U/S. 36 may be illustrated as under (a) Reasonable and Proper Acts—A trustee may do all acts which are reasonable and proper for the realisation, protection or the trust property. Ifa trustee finds decaying timber, he may cut it down, In Holas Rai Vs. Rella Ram, A.I.R. 1934 it has been held that the trustee cannot and attention to the business of the trust be expected to devote more care than an ordinary man would use in dealing with his own affairs. The trustee must act reasonably as well as honestly, and the burden of showing it is on the trustee. On the same principle, a truste in necessary repairs in improving the estate. Similarly, general authority to do an act with a view to the protection or support of a beneficiary who is not competent to contract. (b) Authority of a Trustee may be General or Special —As to the general authority, it is derived from the law and consists of the powers incidental to the office of trustee whereas the special powers are such which are conferred on the trustee by the settlor himself expressly in the instrument creating the trust. oe nO: poner of Lease—The leases for a long term without permission ronan tei as being malum prohibition and illegal per se, ioe rowecte e Ra at the option of the cestui que trust. Do slats vo nell ths tee ase and Sell Trust Property—A trustee has A property unless the deed of trust confers such Power, Further, it was held in M: ae anikka Narainbachari Vs. M.V- Ramasubbier (1970 )) Mad, that i merely becanee (oo that trustee is not entitled to sell the property ¢ will be justified in spending money a trustee has a} LL.B. Questions & Answers Law Series prise (e) Power to Mortage, Exchange or Partition—A trustee is not gent to mortgage, exchange or partition a trust property unless express provided under the instrument or deed, 2, Statutory Powers of Trustees—The statutory powers of trustee ven in the Indian Trusts Act, 1882 are as follows — (i Power to sell Trust Property—(a) According to 8.33, where ihe trustee is empowered to sell any trust property, he may sell the same ubject to prior charges or not, and either together or in lots, by public auction or private contract and either at one time or at several times, unless the instrument of trust otherwise directs, ©) According to S.38, the trustee making any such sale may make such reasonable Stipulations either as to title or evidence of title, or otherwise, in any conditions of sale or contract for sale, as he thinks fit; and may also buy the property’, or any part thereof, at any sale by auction and rescind or vary any contract for sale, and re-sell the property so bought in, or as to which the contract is so rescinded, without being responsible to the beneficiary for any loss occasioed thereby. Conduct of Sale—If the trustee is empowered to sell any trust property, he is entitled to sell by public auction or private contract, as he may think beneficial. He should therefore, use reasonable diligence in getting best price of the property. A trustee in executing a trust for sale is not bound by the wishes of a beneficiary. Interest of Beneficiary to be Considered—Where there are several beneficiaries, it is the duty of trustee to see that the trust for sale is exercised with due regard to the interests of all the beneficiaries. According to $.38, where a trustee is directed to sell trust property or to invest trust-money in the purchase of property, he may exercise a reasonable discretion as to the time of effecting the sale or purchase. (©) According to $.39, for the purpose of completing any such sale the trstee shall have power fo convey o otherwise dispose of the is manner as may be necessary. preavinntiseaa tinder which sale is conducted must be reasonable, d Re-Sale-A trustee is empowered to buy in and Power to Buy an it is his duty to follow the powers given re-sale trust property. Moreover itt ae conditions given by the under the deed. A trustee mustsIiEAY TT mut take every care not testator in the instrument ee {sa loss on the re-sale, he may be to deal in re-selling, otherwis 1 trustees all of them must attend to held liable: Where there are sett only some of them is nota ood i chase p Raynesthe Teasonable expenses of his reli Marriage or funeral, etc. Thus, where the incor "s maintenance or educ: 1S religious worshij ission of a Principal » apply the whole or any such maintenance, education me of the trust Property is M Sufficient for t] ‘ation or the Teasonable the trustee ‘ y, Jutisdiction, by, rty for or towards or advancement in life, 'P, Marriage or funeral, with the permi Civil Court of original not otherwise, lusive evidence of Payment. : Das “o Power to Compound-According to S.43, two or more trustees acting together may, if and as they think fit- res o act gy composition or any security for any debt or Property claimed; : ce ) Allow any time for payment of any debt; co aucune Compromise compound, abandon, submit to nceeee isushcrecan and debt, account, claim or thing whatever’ trust; and ee Sg oe a PeeLL.B. Questions & Answers Law Seri es 8 ements, instruments of co Mpositi er things as seem to them ex 10n oF agreement, re : occasioned by any act or ene being responsible for oy The powers conferred by this ee them in good faith. -g together may be exercised by a sole - two or more trustees #00 ent of trust, if any, a sold trustee is chai when by the sespowers. Tor Example-when the act of one trustee ys fae his co-trustee, the act will be binding on the trust sanctioned ‘vesting of Trustee’s Powers-As regards y mae een grovides that when an authority to deal with the trust pear SA4 trustees and one of them disclaims or dies, the authorit —s exercised by the continuing trustees, unless from the ee jastrument of trust, it is apparent that the authority is to be exercised by anumber in excess of the number of the remaining trustees. The ae ofa provision in a trust-deed for a particular number of trustees and a provision for filling up vacancies in their places does not, in law, necessarily or merely by itself debar the surviving trustees from representing the trust estate, in case there is any outstanding vacancy in anumber of trustees. Similarly, powers will devolve upon new trustees on their appointment, unless there is any contrary provision in the instrument of trust. Suspension of Trustee’s Power— Trustees powers are suspended bya judgment of the court. S.45 lays down that where a decree has been nade in a suit for the execution of trust, the trustee must not exercise any ofhis powers except in conformity with such decree or with the sanction of the court by which the decree has been made, or where an appeal against the decree is pending, of the Appellate Court. Q.18. What are the different methods under the Indian Trust Act trust is created? 1882 in which an obligation in the nature ofatn _ Ans:-Obligations in the Nature of Trevis i _“bligation in the nature of @ trust is created Wt ep —— a) “Mentioned under Ss. 81 to 94 of Indian Trust * 1. Where Ee it does not Appea aa where the owner of POPS) ns 92 ae $0) OE Poe uh the, A