Trust is ‘An Obligation’; Not a Legal Entity

Saji Koduvath, Advocate, Kottayam.

Synopsis.

Introduction
Legal Persons, Arbitrary Creations of the Law
Hindu Conception on Legal Personality of Idol
Law Attributes, Legal Personality
Legally, ‘Trust’ is Not an Institution or Association
‘Trust’ Used to Identify Endowment/Association
Hindu Idol and Math are Juristic Persons
‘Trust’: Not a Legal Person
Certain Institutions are Identified as ‘Trusts’
Juristic Personality of Trusts Under NI Act
Trust Cannot be Sued in Its Own Name
How Can a Trust Execute Deeds and Enter Contract?
Trust Cannot be Sued in Its Own Name
Trustee represents beneficiaries
Juristic personality of Gurudwara
Juristic personality of Wakfs & Mosques
Juristic Personality of Churches

Introduction: What is Trust, in Law?

Sec. 3 of the Indian Trusts Act, 1882 defines trust as under:

“Trust: A ‘trust’ is an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner:

From the definition it is clear that ‘Trust’, in law, holds the following conceptions:

Trust is ‘an obligation’ upon the trustee.
It is to administer the endowed property.
The administration must be done by the trustee as if he is the owner of the trust property.
It must be done by him accepting the intents desired by the author.
And, the same must be for the benefit of the beneficiaries.

It is clear that the word ‘trust’ is used in law as an ‘abstract countable noun’, similar to ‘a concept’, ‘an idea’ or ‘a duty’.

Charitable and Religious Institutions – Legal Concept

Wealthy and mighty men of all social systems considered it their duty to help the weak and poor. Charitable and religious institutions are founded on this principle. With a view to legally recognise these institutions numerous legal theories have been propounded. One among them is attributing legal personality to those institutions and considering them as legal units.[1] The attributed legal personality, by itself, enabled to ascribe interests, rights and duties to those institutions. It made the courts possible to effectively adjudicate upon the assertions and obligations pertained to them. The conferment of legal personality also facilitated to accomplish the objects and purposes envisioned by the founders, in a pragmatic manner.[2]

All religions and its institutions have the aim of civilising man. They enforce man lead a disciplined life. Thus the religions and its institutions promote public welfare.[3] Though various public institutions are generally referred to as entities having its own identity, our law does not favour all. Our Law on this subject does not lay down a precise and explicit edict. It requires authoritative and cogent judicial dicta, exploring and reconciling divergent views as to the legal personality of various institutions (such as schools, hospitals, universities, libraries, ships[4] etc.).

Endowment and Trust

‘Trust’ is essentially a legal concept; whereas, ‘endowment’ is a corporeal reality to which social concepts are adhered to. Endowment is founded by dedication of property for the purposes of religion or charity having both the subject and object certain and capable of ascertainment.[5]

An ‘endowment’ may be public or private.[6] From the usage of the word ‘endow’ and the connected word ‘endowment’ it is clear that they relate to the idea of giving, bequeathing or dedicating property or other possession, for some specified purpose.[7] According to Chamber’s Twentieth Century Dictionary, the word ‘endowment’ means: ‘that which is settled on any person or institution’.[8] Webster’s International Dictionary gives the following meaning to the word ‘endowment’:

“(1) The act of bestowing a dower, fund, or permanent provision for support. (2) That which is bestowed or settled on a person or an institution; property, fund, or revenue permanently appropriated to any object; as the endowment of a church, a hospital or a college. (3) That which is given or bestowed upon the person or mind; gift of nature, accomplishment; natural capacity; talents; usually in the plural.”[9]

‘A Trust’ is “An Obligation” and Not a Legal Entity

‘A trust’, according to the definition, being ‘an obligation’, it is clear that ‘a trust’ does not convey the idea that the ‘trust’ is a legal person,[10] or a tangible or a corporeal property.

As explained above:

‘A trust’ is ‘an obligation’ or a fiduciary duty upon the trustee to administer the trust property for the benefit of the beneficiaries.
‘Trust’ being an obligation or fiduciary duty upon the trustee to administer the trust property for the benefit of the beneficiaries, it is essentially a legal concept.
The expression ‘a trust’ in the definition, being followed by the words ‘is an obligation’, it is clear that ‘a trust’ does not convey the idea that it is a tangible matter or a corporeal property.
Trust differs from an ‘Endowment’ for,the latter is basically a tangible corporeal reality to which social concepts are adhered to.
The trust-property (or the dedicated-property) vests in the ‘legal ownership’ of the trustee.
The term ‘endowment’ stands analogous to ‘trust property’, and not to ‘trust’ as such.

From the above, it is clear that, legally, the ‘trust’:

(i) cannot be a juristic person;
(ii) cannot be an association of persons; and
(iii) cannot be a tangible endowment or a corporeal property.

In Kansara Abdulrehman Sadruddin Vs. Trustees of the Maniar Jamat Ahmadabad[11] it is observed by the Gujarat High Court as under:

“The ‘trust property’ is nothing but the subject matter of the trust; that is, a property which is impressed with the obligation giving rise to a trust. When we speak of a trust, we speak merely of the requisite obligation which is annexed to the ownership of a property. This obligation is not a legal entity in any sense; as for example, the trust cannot own any property the property is owned by the trustee who is an entity by himself different from the trust, a trust cannot sue and a trust cannot be sued; it is only a trustee who can sue and who can be sued. It is only a trustee who can hold properties. A ‘trust’ cannot be a landlord since the trust properties vest in the legal ownership of the trustees. It is the trustee alone who can be a landlord. Since the trust is not a legal entity, no question of hardship suffered by the trust or accommodation required by the trust can arise for consideration.”[12]

In Government of the Province of Bombay Vs. Pestonji Ardeshir Wadia[13] the Privy Council held as under:

“The trust is not the plaintiff, and there is no power under the Code for trustees to sue in the name of their trust, as members of a firm may sue in the name of the firm. The plaintiffs were, and were bound to be, the three trustees, and, as no notice was given specifying their names and addresses, the condition precedent to the filing of the suit was not fulfilled”.

The view taken by the Privy Council was accepted by our Apex Court in GhanshyamDassVs. Dominion of India.[14]Penner JE, the Professor of Law at King’s College, London, in his book, The Law of Trusts, has commented as under:

“The trust itself has no legal personality like a company, on behalf of which agents of the company make contracts which bind the company as a legal person itself. Having no legal personality, one cannot sue the trust itself for breach of contract; one sues the trustee for his own breach of contract, even though the breach was of contractual obligation he undertook to benefit the trust.”

Relying the Privy Council and PennerJ Ethe Kerala High Court held in KR Rajan Vs. Cherian K. Cherian[15] as under:

“Trust not being a legal person, and the Code of Civil Procedure not providing any enabling provision for the Trust to sue or for being sued in its name, there is no merit in the contention that the Trust is to be arrayed as an eo-nominee party. The arraying of the trust in its own name is otiose or redundant. It is the trustees who are to be impleaded to represent the trust.”

The Madras High Court has held in Kishorelal Asera Vs. Haji Essa Abba Sait Endowments[16]and in Thiagesar Dharma Vanikam Vs. CIT[17]that atrust not being a legal person is not entitled to sue in its own name.[18]The Gujarat High Court has also held in Kansara Abdulrehman Sadruddin Vs. Trustees of the Maniar Jamat Ahmedabad[19] that ‘the trust is not a legal entity’.[20]

Legal Persons, Arbitrary Creations of the Law

Salmond on Jurisprudence[21] reads:

“A legal person is any subject-matter other than a human being to which the law attributes personality. This extension, for good and sufficient reasons, of the conception of personality beyond the class of human beings is one of the most noteworthy feats of the legal imagination.”

Salmond reads further:

“Legal persons, being the arbitrary creations of the law, may be of as many kinds as the law pleases. Those which are actually recognised by our own system, however, are of comparatively few types. Corporations are undoubtedly legal persons, and the better view is that registered trade unions and friendly societies are also legal persons though not verbally regarded as corporations. If, however, we take account of other systems than our own, we find that the conception of legal personality is not so limited in its application, and that there are several distinct varieties, of which three may be selected for special mention.
1. The first class of legal persons consists of corporations, as already defined, namely, those which are constituted by the personification of groups or series of individuals. The individuals who thus form the corpus of the legal person are termed its members.
2. The second class is that in which the corpus, or object selected for personification, is not a group or series of persons, but an institution. The law may, if it pleases, regard a church or a hospital, or a university, or a library, as a person. That is to say, it may attribute personality, not to any group of persons connected with the institution, but to the institution itself.
3. The third kind of legal person is that in which the corpus is some fund or estate devoted to special uses a charitable fund, for example or a trust estate.”[22]

In Manohar Ganesh Vs. Lakshmiram (1888),[23]the Division Bench of the Bombay High Court set out the rationale for and the process by which legal personality is conferred on a Hindu idol. Justice West observed:

“The Hindu law, like the Roman law and those derived from it, recognizes, not only corporate bodies with rights of property vested in the corporation apart from its individual members, but also juridical persons or subjects called foundations. A Hindu, who wishes to establish a religious or charitable institution, may, according to his law, express his purpose and endow it, and the ruler will give effect to the bounty … A trust is not required for this purpose: the necessity of a trust in such a case is indeed a peculiarity and a modern peculiarity of the English law. In early times a gift placed, as it was expressed, “on the altar of God sufficed to convey to the church the lands thus dedicated.”[24]

Law Attributes Legal Personality

Roscoe Pound,[25] on “Jurisprudence”, reads as under:

“In civilised lands even in the modern world it has happened that all human beings were not legal persons. In Roman law down to the constitution of Antonius Pius the slave was not a person. He enjoyed neither rights of family nor rights of patrimony. He was a thing, and as such like animals, could be the object of rights of property. … In French colonies, before slavery was there abolished, slaves were put in the class of legal persons by the statute of April 23, 1833 and obtained a ‘somewhat extended juridical capacity’ by a statute of 1845. In the United States down to the Civil War, the free Negroes in many of the States were free human beings with no legal rights.”[26]

The Supreme Court in Som Prakash Rekhi Vs. Union of India[27]held that ‘a legal person is any entity other than human being to which law attributes personality’. It held further as under:

“Let us be clear that the jurisprudence bearing on corporations is not myth but reality. What we mean is that corporate personality is a reality and not an illusion or fictitious construction of the law. It is a legal person. Indeed, a legal person is any subject-matter other than a human being to which the law attributes personality. This extension, for good and sufficient reasons, of the conception of personality is one of the most noteworthy feats of the legal imagination. Corporations are one species of legal persons invented by the law and invested with a variety of attributes so as to achieve certain purposes sanctioned by the law.”[28]

In SGPC Vs. Som Nath Dass[29] the Supreme Court held:

“The very words ‘Juristic Person’ connote recognition of an entity to be in law a person which otherwise it is not. In other words, it is not an individual natural person but an artificially created person which is to be recognized in law as such.”

It held further that Guru Granth Sahib revered in Gurudwara had all the qualities to be recognized as juristic person. Holding otherwise would mean giving too restrictive a meaning to a ‘juristic person’ and that would erase the very jurisprudence which gave birth to it.It is observed (obiter) in this case that ‘it is really the religious faith that leads to the installation of an idol in a temple. Once installed, it is recognised as a Juristic Person. The idol may be revered in homes but its Juristic Personality is only when it is installed in a public temple’. Nevertheless, Dr. BK Mukherjea, J. in his treatise ‘On Hindu Law of Religious & Charitable Trusts’ the principles as to legal personality, rights emanating therefrom, etc. with respect to a family temple, are presented in the same manner[30] as that of a public temple.[31]

Public Trust and Endowment: Different Concepts

Jurisprudentially, trust and endowment are not synonyms.[32]‘Trust’ being an obligation upon the trustee to administer the trust propertyfor the benefit of the beneficiaries, it is essentially an idea or a legal concept. ‘Endowment’ is basically a corporeal reality to which social concepts are adhered to.

Life is bestowed upon endowment when trustee is appointed. A public ‘endowment’ is created by dedication of property for the purpose of religion or charity having both the subject and object certain and capable of ascertainment.[33] A legal recognition and status is acquired by the endowment by the appointment of a trustee. An endowment, sans trustee, remains static.

But, Dr. BK Mukherjea, J. in his erudite treatise ‘On Hindu Law of Religious & Charitable Trusts’points out that under Hindu law, if an endowment is made for a religious or charitable institution, without the instrumentality of a trust, and the object of the endowment is one which is recognised as pious, being either religious or charitable under the accepted notions of Hindu law, the institution will be treated as a juristic person capable of holding property.[34]

Legally, the term ‘endowment’ stands analogous to ‘trust property’; and not to trust. Sections 5 of the Indian Trusts Acts peaks as to ‘trust of’ movable and immovable (corporeal) properties. Salmond’s Jurisprudence, while describing property, refers to corporeal property as ‘the right of ownership in a material object or that object itself’.[35]The imperative characteristics of ‘trust’ that differ from an ‘endowment’ are the following:

(a) trustee, for administration,
(b) entrustment/transfer of trust property to the trustee, and
(c) vesting of ‘legal ownership’ in trustee.

As the managers of religious ‘endowments’ are not ‘trustees’ in its full sense, deeming provision was inserted in Sec. 10 of the (old) Limitation Act to bring-in such managers also under this section.[36]

‘Trust’ is Used as Synonym to Endowment/Association

However, inasmuch as the ‘trust’ has no existence without its trust property, and it is an ‘obligation’ ‘annexed to’ the trust property, the endowment/institution, upon which the obligation of ‘trust’ is pervaded, is personified as a ‘trust’. Certain public institutions established or dedicated with philanthropic view are also generally described as ‘trusts’.

Similarly, when a ‘trust’ is created/managed under the auspices of an association, the term ‘trust’ is generally used to denote the ‘association of persons’, in view of the underlying significant nexus between the members of the association and the ‘trust’.

The term ‘trust’ is also used as a compendious expression taking-in the trustees, the beneficiaries and the subject-matter of the trust.It is observed in Thiagesar Dharma Vanikam Vs. CIT[37] as under:

“The word ‘trust’ is a convenient and a compendious description of the trustees, the beneficiaries and the subject-matter of the trust. ….”[38]

It is interesting to note that the word ‘trust’ is used an ‘entity’ even in Illustration (b) of Sec. 15 of the Trusts Act – and it is the only one place in this Act where the term ‘trust’ is used in this manner. The Illustration (b) of Sec. 15 reads:

“(b) A, trustee of lease-hold property, directs the tenant to pay the rents on account of the trust to a banker, B, ….”

In Public Trusts Acts enacted by various States and in several Tax-Laws, wider import is given to ‘trust’. Various Town Improvement Acts refer to vesting of land ‘in the trust’. [39] In the inclusive definition of Public Trusts Acts, ‘trust’ embraces a temple, a math, wakf, a dharmada or any other religious or charitable endowment and even a society. For example, Section 2(13) of the Bombay Public Trusts Act reads:

” ‘Public trust’ means an express or constructive trust for either a public religious or charitable purpose or both and includes a temple, a math, wakf, a dharmada or any other religious or charitable endowment and a society formed either for a religious or charitable purpose or for both and registered under the Societies Registration Act. 1860.”

The trust cannot sue or be sued in its own name. Trustee being the legal owner of the trust property he has to sue or be sued for and on behalf of the Trust.[40]There is no provision under the CPC for the trustees to sue in the name of their trust, as allowed in the case of firms.[41]Order XXXI, Rule 1 CPC deals with the representation of beneficiaries in suits concerning property vested in the trustee. It lays down that the trustee shall represent the persons so interested.[42]

It is observed by Madras High Court in Thiagesar Dharma Vanikam Vs. CIT:[43]

“Sometimes, the expression ‘trust’ is used to denote the trustees. For example, when the trustees carry on a business, we generally say that the trust is doing so”.

The Supreme Court quoted with approval, in Commissioner of Income-Tax Vs. Krishna Warriar[44] the following passage of Madras High Court in Thiagesar Dharma Vanikam Vs. CIT:[45]

“When the trustee acts, it is only the trust that acts, as the trustee fully represents the trust. A business carried on, on behalf of a trust rather indicates a business which is not held in trust, than a business of the trust run by the trustees.”

Juristic Personality of Public Charitable Trusts Under NI Act

To the question whether a Public Charitable Trust has been recognised as a juristic person for the purpose of Negotiable Instrument Act , it is held in Abraham Memorial Vs C. Suresh Babu[46] that a Public Charitable Trust being capable of contracting, and capable of making and issuing a cheque or Bill (Sec. 26), it is a juristic person for the purpose of the said Act; and that a Trust, either private or public/charitable or otherwise, is a juristic person liable for punishment for the offence punishable under Sec. 138 of the N I Act.

[1] Shiromani Gurdwara Vs. Som Nath Dass: AIR 2000 SC 1421, M Siddiq Vs. Mahanth Suresh Das (Ayodhya Case):2020-1 SCC 1.

[2] M Siddiq Vs. Mahanth Suresh Das (Ayodhya Case): 2020-1 SCC 1

[3] ‘Hindu and Mohamedan Endowments’ by P. R. GanapathiIyer, (Quoted in: Papanna Vs. State of Karnataka: AIR1983 Kar 94.

[4] MV Elisabeth Vs. Harwan Investment and Trading: 1993 Supp (2) SCC 433. M Siddiq Vs. Mahanth Suresh Das (Ayodhya Case):2020-1 SCC 1.

[5]PratapSinghji v. Charity Commissioner: AIR 1987 SC 2064

[6]DeokiNandan Vs. Murlidhar: AIR 1957 SC 133, Quoted in: M Siddiq Vs. Mahanth Suresh Das (Ayodhya Case): 2020-1 SCC 1, Pratap Singhji Vs. Charity Commissioner: AIR 1987 SC 2064

[7]Idol of Sri Renganatha-swamy Vs. PK Thoppulan Chettiar: 2020 0 Supreme(SC) 177; MJ Thulasiraman Vs. Comr, HR & CE: AIR 2019 SC 4050.

[8]Vidarbha and Marathwada, Nagpur Vs. Mangala: 1982 0 MhLJ 686

[9]Maria Antonica Rodrigues Vs. DR Baliga: AIR 1967 Bom 465.

[10] Govt. of the Province of Bombay Vs. Pestonji Ardeshir Wadia: AIR 1949 PC 143; Thiagesar Dharma Vanikam Vs. CIT: AIR 1964 Mad 483: 1963- 50 ITR 798 (Mad); Ramdass Trust Vs. Damodardas 1967 Raj LW 273; Quoted in: Sagar Sharma Vs. Addl. CIT: 2011-239 CTR 169: 2011-52 DTR 89. Duli Chand Vs. Mahabir Pershad Trilok Chand Trust: AIR 1984 Del 144; Thanthi Trust Vs. Wealth Tax Officer: 1989- 45 TAXMAN 121: 1989-178 ITR 28; Chikkamuniyappa Reddy Memorial Trust Vs. State: ILR 1997 Kar 2460; KishorelalAseraVs. Haji Essa Abba: 2003-3 Mad LW 372: 2003-3 CCC367; Sagar Sharma Vs. Addl. CIT: 2011-239 CTR 169: 2011-336 ITR 611; Sambandam Vs. Nataraja Chettiar: 2012-1 Mad LW 530.

[11] AIR 1968 Guj 184.

[12] See also: RamabaiGovindVs. RaghunathVasudevo: AIR 1952 Bom 106.

[13] AIR 1949 PC 143

[14] AIR 1984 SC 1004

[15] LAWS(KER) 2019 11 168

[16] 2003-3 Mad LW 372: 2003-3 CCC367

[17] AIR 1964 Mad 483; 1963- 50 ITR 798

[18] Referred to in: Thanthi Trust Vs. Wealth Tax Officer: 1989-78 CTR 54: 1989- 45 TAXMAN 121: 1989-178 ITR 28.

[19] AIR 1968 Guj 184.

[20] See also: Ramabai Govind Vs. Raghunath Vasudevo: AIR 1952 Bom 106.

[21] 12th Edn., Page 305.

[22] Quoted in: Shriomani Gurudwara Vs. Shri Som Nath: AIR 2000 SC 1421.

[23] (1888) ILR 12 Bom 247

[24] Quotted in M Siddiq Vs. Mahanth Suresh Das (Ayodhya Case):2020-1 SCC 1

[25] Roscoe Pound, Jurisprudence, Part IV, 1959 Edition.

[26] Quoted in: Shiromani Gurdwara Vs. ShriSom Nath: AIR 2000 SC 1421; M Siddiq Vs. Mahanth Suresh Das (Ayodhya Case):2020-1 SCC 1.

[27] AIR 1981 SC 212

[28] Quoted in: Shriomani Gurudwara Prabandhak Vs. Shri Som Nath :AIR 2000 SC 1421. See also: Samatha Hyderabad Abrasives Minerals Vs. State of AP: AIR 1997 SC 3297.

[29] AIR 2000 SC 1421.

[30] KM Senthivel Pillai Vs. Kulandaivel Pillai: 1970-2 MADLJ 555; P. Jayader Vs. Thiruneelakanta Nadar: ILR 1966-2 Mad 92; Commissioner of Endowments Vs. Sri Radhakanta Deb: 1969-35 Cut LT 992.

[31] See Chapter: DEDICATION IN PRIVATE TRUSTS AND FAMILY TEMPLE.

[32] Shanmughan Vs. Vishnu Bharatheeyan: AIR 2004 Ker 143.

[33] Pratap Singhji Vs. Charity Commissioner: AIR 1987 SC 2064. M R GodaRao Sahib Vs. State of Madras: AIR 1966 SC 653. See also: Ram Charan Das Vs. Mst. Girjanandani Devi: AIR 1959 All 473; S. Shanmugam Pillai Vs. K. Shanmugam Pillai: AIR 1972 SC 2069; Controller of Estate Duty WB Vs. Usha Kumar: AIR 1980 SC 312.

[34]page 36. Quoted in M.Siddiq Vs.Mahant Suresh Das: 2020-1 SCC 1,

[35] Quoted in: Maharashtra State Co Op. Bank Ltd. Vs. Asst. PF Commir: AIR 2010 SC 868; Santhoshkumar Vs. Shaji: AIR 2013 Ker 184; Ans Gopal Sheo Narain Vs. PK Banerji: AIR 1949 All 433.

[36] See: Sri Silambani Vs. Chidambaram Chettiar: AIR 1943 Mad 691.

[37] AIR 1964 Mad 483; ([1963] 50 ITR 798)

[38] Quoted in: Thanthi Trust Vs. Wealth Tax Officer: (1989)78 CTR 54: (1989) 45 TAXMAN 121: (1989) 178 ITR 28. See also: Kishorelal Asera Vs. Haji Essa Sait : 2003-3 Mad LW 372: 2003-3 CCC 367.

[39] Eg. Punjab Town Improvement Act, 1922; Nagpur Improvement Act, 1936; Calcutta Improvement Act, 1911; Rajasthan Urban Improvement Act; United Province Town Improvement Act, 1919 etc.

[40] Kishorelal Asera Vs. Haji Essa Abba Sait Endnts: 2003-3 Mad LW 372: 2003-3 CCC 367

[41] K. Dhondoji Rao Vs Dominion of India: AIR 1957 Kar 94.

[42] Kishorelal Asera Vs. Haji Essa Abba Sait Endts.: 2003-3 Mad LW 372: 2003-3 CCC367

[43] AIR 1964 Mad 483

[44] AIR 1965 SC 59

[45] AIR 1964 Mad 483

[46] 2013- 2 Bank Case 133: 2012-5 CTC 203: CC 2012-175 361. Relied on in Hakkimuddin Taherbhai Shakor Vs. State of Gujarat: 2017 CrLJ 3143.

Read in this cluster (Click on the topic):

Book No. 1. Handbook of a Civil Lawyer

Book No. 2: A Handbook on Constitutional Issues

Book No. 3: Common Law of CLUBS and SOCIETIES in India

Book No. 4: Common Law of TRUSTS in India

Trust is ‘An Obligation’; Not a Legal Entity

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