Pat

naLawCol
lege-Semest
erI
II

Equi
tyAndTr
ust-ByRahi
laI
mam

I
nthi
spar tofthecontentwewi lldi
scusshow at r
ustiscreatedandwhatdoesi t
r
equi
restocreateatrustundertheIndianTrustAct1882.Thiscontentwil
lpr
ovi
de
i
ndeep,howthecreat
ionofapr i
vatetrusti
nparti
cul
arisdoneundert heAct
.

Asweknow"
At rustmaybebyactofpar
ti
esorbyoper
ati
onofl
aw.Trust
sbyactof
par
ti
esar
eei
therexpressori
mpl
iedandanexpr
esstr
ustmaybepr
ivateorpubl
i
c".

Sec3oft heIndianTr ustAct1882pr ovi

destheinterpretat
ioncl auseon" tr
ust":
"aut
horoft hetrust"
:"tr
ustee":"
benefi
ciar
y":"
tr
ustproper ty
":"benefici
alinterest"
:"
i
nstrumentoftrust"-At rustisi
nobl i
gati
onannexedt ot heowner shipofpr operty,
andarisi
ngoutofaconf idencereposedinandacceptedbyt heowner ,ordeclared
andacceptedbyhi m,forthebenefi
tofanother
,orofanot herandtheowner ;

theper sonwhor eposesordeclarestheconfidencei scall

edt he"authoroft
het r
ust"
;
theper sonwhoaccept stheconf i
denceiscalledt he"tr
ustee",thepersonforwhose
benef ittheconfi
dencei sacceptediscal
ledthebenef ici
ary,t
hesubj ectmatterofthe
trustiscal l
ed" t
rustpropert
y"or" t
rustmoney ",the"benefi
cialinter
est"or"int
erest
"
oft hebenef i
ciaryishisri
ghtagainstthetrusteeasowneroft het r
ustpropert
yand
thei nstrumentifanybywhi chthetrusti
sdeclar ediscall
edthe" inst
rumentoftrust"
.

abreachofanydutyi
mposedonatr
ust
ee,assuchbyanyl
awf
ort
het
imebei
ngi
n
f
orceiscal
leda"br
eachoft
rust
",

Byseei ngtheabovedefi
niti
onclauseofsec3oftheIndi
anTr ustAct1882,
itiscl
ear
thet rusti
scompr isesoft hreepart
ies.Oneistheaut hor,reposor
,sett
lorwho
reposes the obli
gati
on on the another
,second the person who acceptsthis
obligati
onisknownast het r
usteeandthethi
rdisthepersonf orwhosebenefi
tthe
trustisfor
medknownast hetrust
ee.

Par
ti
est
oaTr
ust:
-1)Aut
hor
/set
tl
or/
Reposer

2)Tr
ust
ee

3)Benef
ici
ary

Thecr
eat
ionoft
het
rustshal
lal
way
sbef
orl
awf
ulpur
pose.

Sec4oft heI
ndianTrustAct1882provi
desforLawfulPurpose:
-Accor
dingt
othe
thi
ssect
ionatrustmaybecreat
edforanylawf
ulpurpose.

Thepur
poseoft
rusti
slawf
ulonl
ywheni
tisnot:

(
a)f
orbi
ddenbyl
aw (Law i
ncl
udes,wher
ethet
rustpr
oper
tyi
simmov
abl
eand
si
tuat
einaf
orei
gncount
ry,
thel
awofsuchcount
ry)or

(
b)ofsuchanat
uret
hat
,ifper
mit
ted,
itwoul
ddef
eatt
hepr
ovi
sionsofanyl
aw,
or

(
c)f
raudul
ent
,or

(d)oft
hatnat
urewhi
chi
nvol
vesori
mpl
i
esi
njur
ytot
heper
sonorpr
oper
tyof
anot
her
,or

(
e)suchwhi
cht
hecour
tregar
dsi
tasi
mmor
aloropposedt
opubl
i
cpol
i
cy

I
fanyoft
heabov
eisthepur
posebehi
ndcr
eat
ingapr
ivat
etr
ustt
hent
hatt
rustshal
l
beunl
awf
ulandv
oid.

Inmanysit
uati
onsomet imesthepurposeofthet
rusti
sofsuchnatur
ewhereatrust
i
screatedf
ortwopur posesofwhichonepartisl
awfulandtheot
herpar
tisunl
awful
andthetwopartcannotbeseperatedthent
hewholetrusti
svoi
d.

Example:-(
a)A bequeat
hsproper
tytoB intrustt
oempl oyitincarr
yingona
smuggli
ngbusi
ness,
andoutoftheprof
it
sther
eoftosuppor
tA'schi
ldr
en.Thetr
ust
i
sv oi
d.

(b)A,whil
eininsolventci
rcumstances,t
ransfer
spropert
yt oBintrustforAdur
ing
hisl
if
e,andafterhi
sdeat hforB.Aisdeclaredaninsol
vent.Thet
rustforAisi
nvali
d
i
sagainsthiscredi
tor'
s.

Sec5oft heActpr ovi

dest hetrustofimmov ablepr oper
ty:
-Itsaysthatnotrustin
rel
ati
ontothei mmov ablepropertyisvali
dunlessdecl ar
edbyanon-t estamentary
i
nstrumentinwr i
ti
ngsignedbyt heauthorofthetrustorthetr
usteeandregister
ed,
orbythewil
l oftheauthorofthet r
ustorofthetrustee.

Requi
sit
esf
orTr
ustofi
mmov
abl
etr
ustpr
oper
tyshoul
dbe:
-

(
I)decl
arat
ionbyanon-t
est
ament
aryi
nst
rumenti
nwr
it
ing

(
II
)mustbesi
gnedbyt
heaut
horoft
het
rustor

(
II
I)si
gnedbyt
het
rust
ee

(
IV)Mustber
egi
ster
edorbyt
hewi
l
loft
heaut
horoft
het
rustoroft
het
rust
ee.

Trustofmovablepropert
y: -Notr
usti
nrel
ati
ontomov
ableproper
tyi
sval
i
dunless
declar
edincaseofimmov ablepr
oper
tyorunl
esst
heownershi
pofthepr
oper
tyis
tr
ansferr
edt
ot het
rustee.

Butal
lthesecondi
ti
onsaregivent
ocr
eat
eav
ali
dtr
ust
.Itshal
lnotbecompl
yfort
he
cr
eati
onofaf r
audulentt
rust
.
Creat
ionofaTr ustSec6: -Atr
ustiscreat
edwhentheset tl
orofthetrusti
ndi
cat
es
withreasonabl
ecert
aini
tybyanywor dsoractst
hefoll
owingf ourt
hingswhichi
sto
bekepti nmindwhilecreati
ngatrustandtheyaresubjecttosec5andwi l
lbeas
under:

(a)ani nt
enti
ononthepar tofset
tl
or:-Thi
sisthefi
rstr
equir
ementtocreateatr
ust
whichsay sthatt
hereshallbeabonafidei
ntent
iononthe partofasett
lorwhi
chis
thefi
rstrequir
ementtocreateatr
ust.I
nabsenceoftheint
enti
onatrustmaybeheld
asani nval
idtr
ust
.

(b)thepurposeofthet r
ust:-Thi
sisthesecondrequi
rementforcreat
ingat r
ust
whichsaysthatf
orcreatingavali
dtr
ustther
emustbeav al
idandlawfulpurpose
behindcr
eati
ngatrust
.Ifthepur
posei
snotlawful
thenthetr
ustshal
lbevoid.

(c)thebenef
ici
ary:-Thet
hir
drequi
rementf
orcreat
ingat r
usti
sthepr
esenceofa
cert
ainbenef
ici
ary.Meani
ngherebyisthatthebenefi
ciar
ymustbeinexistence
whenat r
usti
sbeingcreat
ed.

(
d)thet r
ust
-property:-Forcreat
ingav al
i
dtr
ustt
hepropertymustbei
nexist
enceat
t
het i
meofi t
scr eati
on.Apr opertycanbebothi
mmov ableandmovabl
e.Andwhen
t
hetrustisdeclaredbywi l
lortheauthoroft
hetr
usti
shi mselft
obethetr
ustee,
the
t
ransferoft
het rustpr
opertyisnecessary
.

Exampl
e:-(
a)Abequeat
hsacert
ainproper
tyt
oB, hav
ingthef
ull
estconfi
dencet
hat
hewil
ldi
sposeofi
tfort
hebenef
itofC.Thi
screat
esat r
ustsofarasregardsAand
C.

(b)Abequeat
hscert
ainpr
opertytoB,hopinghewillcont
inuei
tint
hef
ami
l
y.Thi
s
doesnotcr
eateat
rust
,asthebenefi
ciar
yisuncer
tai
n.

(
c)Abequeat
hscertainpr
opert
ytoB,requesti
nghimt odistr
ibut
ei tamongsuch
membersofC'
sfami l
yasBshouldthi
nkmostdeser ving.Thi
sdoesnotcr eat
ea
t
rustf
ort
hebenef
ici
ari
esarenoti
ndi
cat
edwi t
hreasonablecer
taini
ty.

(d)Abequeat
hsashopandstock-i
n-tr
adet
oB,oncondi
ti
onthathepay
sA'
sdebt
s
andalegacyt
oC.Thi
sisacondi
tion,notat
rustf
orA'
scr
edi
tor
sandC.

Sec7oftheI
ndianTr
ustAct1882pr
ov i
desthecompet
enyoft
hesett
lororaut
hor
i
.e.WhomayCreat
eaTrust?SoAccordi
ngtothi
ssec7,ATr
ustmaybecreat
ed

(
a)byev
eryper
soncompet
entt
ocont
ract
,and

(b)wi
ththeper
missi
onofapr
inci
palCi
vi
lCour
tofor
igi
nalj
uri
sdi
cti
on,byoron
behal
fofami
nor

Butsubj
ecti
n each case t
othe l
aw f
ort
he t
ime bei
ng i
nfor
ce as t
othe
ci
rcumstancesandext
enti
nandt
owhi
cht
heaut
horoft
het
rustmaydi
sposeoft
he
tr
ust-
propert
y.

Wecansayt hatthecomplianceofsec11oft heIndianCont

ractAct1872shal l
also
beapplieddincreati
onofat r
ustwhenaper sonwant stocreateatrust.Sec11of
theI
ndianCont r
actAct1872say sthatifacontractismadebyami nor, oraperson
ofunsoundmi ndoraper sondisqual
i
fiedfr
om cont r
acti
ngbyanylawt owhi chheis
asubjectthent hatcontr
actwi l
lbev oi
d.Thiscompet encyofacont ractshallbe
appl
icableonanaut horal
soifwewant stocreat
eat rust
.

Aspertheclause( b)oft
heSecti
on7,ev
enami nororonbehal
foft
heminorcan
creat
eatrustbutitwil
lbesubj
ecttot
heappr
ovalandper
missi
onoft
heCi
vilCour
t
ortheHi
ghCour t
.

Sec8oft heIndi
anTrustAct1882talksabouttheSubjectofaTrustwhi
chsay s
thatt
hesubjectmat
terofatr
ustmustbepr oper
tyt
ransf
erabletot
hebenef
ici
ary
.It
mustnotbeamer el
ybenef
ici
ali
nter
estunderasubsi
sti
ngtrust.

I
nI ndi
atheproper
tyoftr
ustmustbecert
ainandi
ntheform ofpr
opert
ywhetheri
n
theform ofi
mmov abl
eormovable.Anyki
ndofbenef
ici
alorequi
tabl
eint
erestwi
ll
notcreat
eatrust
.

Sec9oft heActsaysthatwhomaybebenef i
ciar
y:-Accor di
ngt othi
ssecti
onev er
y
personcapabl
eofholdingproper
tymaybeabenef i
ciary
.Itf urt
hermeanst hata
chil
dinthewombofhermot hermayalsobeabeneficiarybutitistobekeptinmind
thattherul
eofperpet
uity
(Sec14oftheTransf
eroft hePr opertyAct)shal
lalsobe
apply.

I
ncasei fabenef i
ciarywantstorenouncehisi
nterestunderthetrusthecansenda
di
sclai
meraddr essedt othet rust
eeabouthisi ntenti
onofr enouncementort he
benefi
ciarycansendadi sclai
merbyset t
ingupwi thnoti
ceoft hetr
ust,aclai
m
i
nconsistentt
herewith.

Sec10oft heIndi
anTrustAct1882provi
desthecondi
ti
onsforbeingatrust
ee:-I
t
prov
idesthatatrust
eecanbeanyper sonwhoiscapabl
eofhol di
ngapropert
ybut
wherethetrusti
nvol
vestheexer
ciseofdi
scr
eti
on,hecannotexecutei
tunl
essheis
competenttocontr
act.

Againi ncaseofat r
usteeneedst ousehisdi
scret
ionthecompli
anceofSec11of
theIndiaContactAct1872shallbemade.Itmeansifapersonwantst
obeat r
ust
ee
andal soneedst oapplyhi
smi ndorhisworkintrusti
nvolv
estheexer
ciseofhi
s
discr
etionthenheshouldbecompet entt
ocontr
act.

So,ami norcanbeat
rust
eebutwhenther
ei saneedofappl
yi
ngt
hedi
scr
eti
onor
exer
cisi
ngthemindat
rust
eeshal
lbecompetentt
ocont
ract
.
Fol
lowingaret
heper
sonswhoar
enotpr
operper
sonsf
ort
hepur
poseofbecomi
ng
atr
ustee:-

1)aper
sondomi
cil
edabr
oad;

2)anal
i
enenemy
;

3)aper
sonhav
ingani
nter
esti
nconsi
stentwi
tht
hatoft
hebenef
ici
ary
;

4)aper
soni
ninsol
ventci
rcumst
ancesand

5)unlesst hepersonall
awofthebenefi
ciar
yallowsother
wise,
awomanandami nor
(Sec60): -thi
smeanst hataminororawomancanbecomeat r
ust
eeifthepersonal
l
aw oft hebenef i
ciar
yallowsthem t
obet hetrust
ee.Inthi
scasether
eshallbeno
appli
cationoft heSec10whi cht al
kstheneedofaper sonwhoiscompet entt o
contr
actwhent heappli
cati
onofmindisrequi
red.

Therei
sani mpor tantpointtoputinmi nd,thataper sonisnotboundt oacceptthe
off
erofbecomi ngat rusteeinat r
ust.Hei snotboundt oacceptt heofferof
becomingat rustee.Insteadofaccept i
nghecandi sclaimtheof ferofbecomi nga
tr
usteebydi sclai
mi ngwi thi
naper i
odofcer tai
nt imet hathedoesnotwantt o
becomeat rusteeorhei snotacceptingtheofferofbei ngatrustee.Ifhedi
sclaims
wit
hinareasonabl etimet hetr
ustpropert
yinthatcaseshal lnotvestinhim.

ForExample:-(
a)At ransf
erscert
ainpr
opertytoBintrustt
oselli
tandtopayoutof
theproceedsA'
sdebts.Bacceptsthetrustandsell
stheproper
ty.Sofarasr
egards
B,atr
ustoftheproceedsiscreat
edforA'scredi
tor
s.

I
nthi
sexampl
etheB'
saccept
ancei
sver
ycl
eart
ocr
eat
eav
ali
dtr
ust
.

(b)Abequet hesalakhofrupeestoBuponcer t
aintr
ust
sandappoint
shim hi
s
executor
.B sever
st helakhfr
om thegener
alassetsandappr
opr
iat
esi tt
othe
specif
icpur
pose.Thi
sisanaccept
anceoft
hetrust
.

I
nthi
sexampleBisut
il
isi
ngt
hel
akhf
ort
hespeci
fi
cpur
posewhi
chi
ndi
cat
est
hathe
i
saccept
ingt
hetr
ust.

Ther
eforef
rom t
heabovepoint
swecanconcl
udet
hatanexpr
esspr
ivat
etr
ustcan
becreat
edwit
hthet
hreepart
ies:-

(
i)t
heaut
horoft
het
rust
,cal
l
edaset
tl
or;

(
ii
)thet
rust
ee;

(
ii
i)t
hecest
uiquet
rustort
hebenef
ici
ary
.