Mismanagement: Judged not by Result; but, by Situation at Relevant Time
If Breach of Trust or Mismanagement, Suit Can be Brought
Doctrine of ‘Conditions of Modern Life’
Accounting by Trustees
Trustee Acted Under Competent Legal Advice: No Answer to Charge
Removal of Pujaries
Introduction
Under the law of associations, it is a trite principle that an act done beyond the objects mentioned in the memorandum of the association or company would be ultra vires. It is also well accepted that such an ultra vires action is void[1] and cannot be ratified[2] by any body of the company or association. These principles attached to companies and associations would also equally apply to Trusts.[3] Under law of trusts, such acts constitute ‘breach of trust’. Madras High Court in Thanthi Trust Vs. ITO,[4] dealing with the question whether the founder of a trust had power to revoke the same, observed as follows:
“If the trust had been really and validly created, any deviation by the founder of the trust or the trustees from the declared purposes would amount only to a breach of trust and would not detract from the declaration of trust. Therefore, the subsequent conduct of the founder in dealing with the funds of the trust long after the creation of the trust may not put an end to the trust itself.”
This passage of Madras High Court has been quoted with approval by our Apex Court in Agasthyar Trust Vs. Commr. IT Madras.[5]
Appointment of Trustees Irrevocable
A dedication of property to a public trust or deity is irrevocable, and the rules, if any, laid down by the founder at the time of dedication regulating succession to the office of the trustee or shebait should also be deemed to be irrevocable unless the power of revocation is reserved by the grantor. The condition relating to the rule of succession of trusteeship or shebaitship forms an integral part of the dedication itself.[6]
Breach of Trust and Removal of Trustees: Grounds
1. Denial of Trust Itself
The denial of validity of trust by a trustee, by itself, is sufficient to remove him from the trusteeship.[7]
2. Deviation by the Trustees from the Declared Purposes
Any deviation by the trustees from the declared purposes of the trust[8] or ultra vires acts[9]would amount to a breach of trust.
3. Assertion to Private Ownership and Adverse Title
Indian Trusts Act , 1882 reads as under:
Sec. 13. Trustee to protect title to trust property.—A trustee is bound to maintain and defend all suits, and to take such other steps as may be reasonably requisite for the preservation of the trust property.
Sec. 14. Trustee not to set up title adverse to beneficiary.—The trustee must not for himself or another set up or aid any title to the trust property adverse to the interest of the beneficiary.
A trustee cannot claim adverse title. An assertion to private ownership is enough ground for removal of a trustee.[10] Apart from Section 116 of the Indian Evidence Act, 1872, a Shebait or Mutawalli is not permitted, under Common Law, to make any adverse assertion of title upon a property of the temple or wakf he holds. When a property is assigned for a public purpose in perpetuity it is burdened with obligations. A transferee of such property will not acquire title without qualifications.[11]
The Supreme Court has held as to the claim of Shebaits, in Sree Sree Ishwar Sridhar Jew Vs. Sushila Bala Dasi (1952),[12] as under:
“If a Shebait by acting contrary to the terms of his appointment or in breach of his duty as such Shebait could claim adverse possession of the dedicated property against the idol it would be putting a premium on dishonesty and breach of duty on his part and no property which is dedicated to an idol would ever be safe. The Shebait for the time being is the only person competent to safeguard the interests of the idol, his possession of the dedicated property is the possession of the idol whose Shebait he is, and no dealing of his with the property dedicated to the idol could afford the basis of a claim by him for adverse possession against the idol. “
The Supreme Court held as to adverse possession, with respect to mosque-property, in Mohammad Shah Vs. Fasihuddin (1956),[13] as under:
“A stranger to the trust can encroach on the trust estate and will in course of time acquire a title by adverse possession. But Mutawalli cannot take up such a position. If the Mutawallis of a mosque choose to build on part of the mosque property in such a way as to integrate the whole into one unit then the Court is bound to regard this as an accretion to the estate of which they are trustees, and they will be estopped from adopting any other attitude because no trustee can be allowed to set up a title adverse to the trust or be allowed to make a benefit out of the trust, for his own personal ends.”
In Abdul Rahim Khan Vs. Fakir Mohammad Shah (1946)[14] it was heldby High Court at Nagpur as under:
“Where a person is a Mutawalli of a public charitable trust, all his acts which are claimed as acts showing adverse possession are referable to his lawful fiduciary position as Mutawalli. Adverse possession, in such circumstances, is a notion almost void of content. …. Having entered into possession as trustee he is estopped from setting an adverse title until he obtains a proper discharge from the trust . . . The mere fact that a person is described in the record of rights as the owner or describes himself as the “Mutawalli of a private mosque or imambada will not make that property his own if there is evidence on record to prove that the property was wakf. Nor will the mere fact that in certain applications the person uses expressions like “my mosque” or “my imambada” make the mosque his own when to his knowledge the property was held as wakf. “[15]
In Hafiz Mohammad FatehNasib Vs. Sir Swarup Chand Hukum Chand, a Firm (1948)[16], the same principle is reiterated by the Privy Council as under:
“In law a title by adverse possession can be established against wakf property, but it is clear that a trustee for a charity entering into possession of property belonging to the charity cannot, whilst remaining a trustee, change the character of his possession and assert that he is in possession as a beneficial owner.”[17]
Apart from Section 116 Evidence Act, a Shebait or Mutawalli is not permitted to make any adverse assertion of title upon a property of the temple or wakf, he holds. Betrayal of fiduciary position of a trustee entails his removal. Assertion to private ownership was enough ground for removal of a trustee.[18] A Mahant is liable to be removed if he sets up an adverse title to the properties of the Math.[19]
4. Betrayal of Fiduciary Position
Betrayal of fiduciary position of a trustee entails his removal. It is not open to the court on any sound principles, either of administration or of law, to permit the continuance of the trustee in the office in such a case.
5. Obligations Cannot be Faithfully Discharged
In Peary MohunVs. Manohar,[20] the Privy Council observed:
“… As a part of office it is indisputable that there are duties which must be performed, the estate does need to be safeguarded and kept in proper custody and it be found that a man in the exercise of his duties has put himself in a position in which the Court thinks that the obligations of his office can no longer be faithfully discharged that is sufficient ground for his removal.”
6. Mismanagement and Removal Necessary to Save Trust Property
Courts will order removal of trustees when such removal is necessary or desirable for the good of the charity, necessary in the interests of the trust,or to save the trust property.[21] In Bapugouda Yadagouda PatilVs.Vinayak Sadashiv Kulkarni[22] it was held that proof of breach of trust or mismanagement was not essential for the removal of a trustee of a charitable institution and the court had a wide discretion under Sec. 92 to take such action as it thought necessary or desirable for the good of the charity.
In S. Veeraraghava Achariar Vs. Parthasaruthy Iyengaar[23] it was held that once a person accepted an office of trusteeship the motive for all his actions should be the interest of the institution and that alone. Even though the evidence in a case against the trustees may not be sufficient to warrant, generally speaking, their removal from office on the ground of misconduct or negligence, still their removal may be ordered, if, in the opinion of the court, such removal is necessary in the interests of the trust to be administered.
Mismanagement:
Judged not by Result; but, by Situation at Relevant Time
It was observed by Allahabad High Court in Jagat Narain Vs. Mathura Das[24] that the degree of prudence expected from a manager of an endowment would be the prudence which an ordinary man would exercise with the knowledge available to him and the transaction would have to be judged not by the result, but by what might have been expected to be its results at the time it was entered into.
Administration Should Not be Ultra Vires
The trustees are bound to administer the affairs of the trust in accordance with the direction of the founder in the trust-deed; and it should not be ultra vires. In the leading case in this subject, Lakshmanaswami Mudaliar Vs. LIC,[25] the Supreme Court, in the context of interpretation of the Object Clause of a Memorandum of Association of a Company, observed as under:
“Power to carry out an object, undoubtedly includes power to carry out what is incidental or conducive to the attainment of that object, for such extension merely permits something to be done which is connected with the objects to be attained, as being naturally conducive thereto.”
In Mool Chand Khairati Ram Trust Vs. Director of Income Tax[26] it was pointed out that although the above observation of the Apex Court was made, in the context of interpretation of the Object Clause of a Memorandum of Association of a Company, the principle would also be applicable to determine whether any activity is ultra vires the purpose of a Trust.
If Breach of (private) Trust or Mismanagement, Civil Suit Can be Brought
If there is a breach of trust or mismanagement on the part of the trustee of a private trust, a suit can be brought in a Civil Court by any person interested for the removal of the trustee and for the proper administration of the endowment.[27] With respect to public trusts it is governed under Sec. 92 CPC. A suit can also be filed for settlement of a scheme for the purpose of effectively carrying out the objects of the trust.[28]
Doctrine of ‘Conditions of Modern Life’
In KC Kappor Vs.Radhika Devi,[29] the Supreme Court has held that the expression “compelling necessity” (qua alienation of property held by a trustee-Kartha) must be interpreted with due regard to the ‘conditions of modern life’. The Apex Court quoted from with approval the Bombay decision, NagindasManeklalVs. Mahomed Yusuf Mithcella[30].
Trustee Acted Under Competent Legal Advice:
No Answer to Charge
It is no answer to a charge of breach of trust that the trustee acted under competent legal advice.[31] Our Apex Court, in TMA Foundation Vs. State of Karnataka,[32]observed that a wrong legal advice may not give protection to the contemnor.[33]
Who can File Suit for Removal of Mahant
For the removal of aMahant or for recovery of endowed property, the action can be initiated by a person having legal authority to do so. It can be:
When an action is taken bona fide, though it be a mistaken one, that will not entail actions on breach of trust.[35]In the absence of any proved and deliberate dishonesty on the part of the trustee he is not liable to be removed, though he is held to have been guilty of misconduct in the discharge of his duties.[36] The test which must be applied is whether the acts or omissions complained of disclose conditions which render intervention necessary in order to save the trust property; whether such state of affairs were brought about deliberately or willfully; and whether the trustees were actuated by dishonest and corrupt motives.[37]
Mistake or Misunderstanding
There must be gross negligence or misconduct for removal of trustees. Want of capacity or of fidelity which is calculated to put the trust in jeopardy will be actionable. But, failure in the discharge of duty on account of mistake or misunderstanding is not a ground for removal unless such failure shows want of capacity to manage the trust.[38]
Where there is no willful default but merely a misunderstanding, the court will not necessarily visit the trustee with removal. Some degree of latitude is also allowed by the courts which do not order accounts against managers where there is no fraud or dishonesty but only mere error of judgment.[39]
In Azizor RehmanVs. Ahidennessa[40] it is held by Calcutta High Court as under:
“In the case of removal of a trustee the Court should be guided by considerations of the welfare of the trust estate, and before a removal of the trustee is directed, a clear necessity for the intervention of the Court to save the trust property must be established. It is not every mismanagement or neglect of duty which will induce the Court to remove a trustee. There must be such gross negligence or misconduct as to evidence a want either of capacity or of fidelity which is calculated to put the trust in jeopardy. Failure in the discharge of duty on account of mistake or misunderstanding is not a ground for removal unless such failure shows want of capacity to manage the trust.”[41]
In Managing Committee Vs. Hakim Mohd.[42] it is held by Oudh High Court as under:
“Errors of judgment or miscarriage of discretion have to be disregarded unless they be sufficiently chronic. One is apt occasionally to magnify such shortcomings into what are sometimes characterised as breaches of duty, misconduct, misfeasance or gross neglect. But if they are not the result of want of fidelity they cannot be made the basis of interference.”
Losses out of ‘Ultra Vires’, But ‘Bona Fide’,Acts of Directors
The Madras High Court in Karnataka Films Ltd. Vs. Official Liquidator, Chitrakala Movietone Ltd.[43] considered the judgment in the case of Liverpool Household Stores Association Ltd., In re, [1890] 59 LJ Ch 616 where the directors were charged with misfeasance on several grounds. The Madras High Court referred to the said decision in the said case and quoted the following passage therefrom (at p. 159):
“Section 165 of the Companies Act, 1862, enables a creditor of a company to obtain by summary process any relief to which he is entitled in respect of damages incurred through the misfeasance of an officer of the company, but the remedy afforded by the section is only for the recovery of damages for losses incurred. The misfeasance to which the section is directed is not restricted to acts of commission, but extends to all breaches of trust in relation to a company through which loss is incurred. Misfeasance is not to be imputed to a director unless he has dishonestly acted, or abstained from acting, in conflict with his plain duty and the burden of proof lies on the party making the charge; but in considering the question of the director’s liability, there must be imputed to him a special knowledge of the business which he has undertaken. Directors are liable for losses occasioned through acts done by them as directors in matters which are ‘ultra vires’ the company, and this liability is not dependent upon any question of honesty of intention. “
10. THE principles are well -settled but the question is whether, on the facts and in the circumstances of this case, the principles laid down by the aforesaid decisions can be applied at all. There is no allegation of misapplication of the assets of the company by the directors. The ground now urged by Mr. Sinha, learned advocate for the official liquidator, is that the company carried on business which is ultra vires the object clause and, accordingly, the directors are liable to make good the loss arising therefrom. Even if the business carried on by the directors is ultra vires, it cannot by itself constitute an act of misfeasance. The word “misfeasance” does not cover every misconduct by a director. There must be a breach of trust. Unless a director has done something wrongly by misapplying or retaining in his own hands any money of the company or the director has done something by which the company’s properties had been wasted resulting in actual loss to the company, there cannot be any misfeasance. The case of misfeasance in this case is on the ground that the company has indulged in speculation business. The auditor has stated in his evidence what, according to him, is speculation business. According to the auditor, the company indulged in a speculative transaction within the meaning of the Income Tax Act, 1961. The speculative transaction is not something like a wagering contract. Unless it is proved that at the very inception, the intention was only to deal in difference and in no circumstances to call for or give delivery, there cannot be any wagering contract. The mere fact that on settlement of same contract, the differences were entered into the book cannot establish that it was the intention of the parties not to call for and give delivery. The basic ingredients of a speculative transaction are that the contracts are to be periodically or ultimately settled and the settlement would be otherwise than by actual delivery or transfer of commodity. There is no evidence in this case that there was no delivery. The evidence is that the goods were bought and sold. Speculation business is separately treated under the Income Tax Act. It is treated as distinct and separate from any other business. No evidence whatsoever has been produced to show that the Income Tax Officer treated the business of the company as speculation business. On the contrary, in the report of the auditor, the auditor has referred to the assessment order where the Income Tax Officer held that in view of the financial difficulties, M/s. Abdul Karim Md. (1963) Company at 59, Biplabi, Rash Behari Avenue, Calcutta, took delivery of the goods and sold the same on behalf of the assessee-company. For this the company paid additional commission and ‘arat’ charges. The auditor has also referred that commission and ‘arat’ charges were paid as the company was unable to sell its goods. The directors were sought to be made liable for the amount of commission and arat charges paid. I am unable to appreciate the comment of the auditor “that instead of doing regular business in the normal course, the directors were found doing transactions of adventure, some of a wholly risky nature, but offering a chance of great or unusual gain in complete disregard of the objects clauses of the company. Upon scrutiny of the objects clauses, it would be evident that the company was not permitted to do any speculative businesses per objects clauses contained in the memorandum of association of the company. But the directors were found doing purely ” fatka ” business on behalf of the company in clear violation of the objects clauses.”
11. THE said comment is not based on facts. The auditor has drawn from his own imagination facts and circumstances which are not apparent from the records. There is no material to hold that the directors were engaged in speculation business. Even the Income Tax Officer did not go to the length of holding that the business was not carried on in the usual course. For the reasons aforesaid, I am unable to accept the contention of Mr. Sinha.
Removal of Trustees:
Valid Grounds
When a Junior is legally nominated to succeed to the Mahanthe cannot be removed, arbitrarily, even by the Head of the Mutt, except for a good and valid cause.[44]In Most Rev. PMA Metropolitan Vs. Moran Mar Marthoma,[45] BP Jeevan Reddi, J., held:
“We are, therefore, of the opinion that the charges, at any rate the main charges, on which the excommunication is based were not available as grounds of excommunication and could not constitute valid grounds therefore. Accordingly, it is held that the excommunication of Catholicos is not valid and legal.”
Cannot be by Executive Order
The Supreme Court, in Bishan Das Vs. State of Punjab,[46] held that a trustee can be removed only by procedure known to law and that he cannot be removed by an executive fiat. It is held in this decision:
“Even if the State proceeded on the footing that the trust was a public trust it should have taken appropriate legal action for the removal of the trustee as was opined by the State’s Legal Remembrancer. It is well recognised that a suit under S. 92, Civil Procedure Code, may be brought against persons in possession of the trust property even if they claim adversely to the trust, that is, claim to be owners of the property, or against persons who deny the validity of the trust.”
In Wazir Chand Vs. The State of Himachal Pradesh[47] it is held that the State or its executive officers cannot interfere with the rights of others unless they can point to some specific rule of law which authorises their acts.[48]
Removal of Mahant: Where Duties as Administrator
A Mahant is answerable as a trustee in the general sense for maladministration since he has to administer the endowed properties as trustee for general, pious and religious purposes and obligations attached to his office.[49]
Where the office of a Mahant is attached to administration of endowments he can be removed by a court of law when misconduct is proved. Even when no misconduct is established, he may be removed if it is proved that his continuance would prevent due execution of the trust.[50]
Removal of Mohants: Where Duties Purely Spiritual
In Murti Shivji Maharaj Birajman Asthal Mohalla Vs. Mathura Das Chela Naval Das Bairagi[51] Allahabad High Court observed that a Mahant possesses two capacities. He is spiritual head of the Mutt and administrator of its properties. Both are closely intermingled.[52] The whole assets are vested in him as the owner thereof in trust[53] for the institution itself. If it is found that the Mahant cannot faithfully discharge his functions without danger to the endowment, he can be removed from both the offices.
Where the duties of an office are purely spiritual[54] and moral, entirely unconnected with any office, with no pecuniary benefit attached to it, or property,[55]the Civil Court may not have jurisdiction to interfere. Even if the Mahantship on its spiritual side is regarded as purely an office of dignity, notwithstanding that the functions of such office are associated with religious rites and ceremonies, the Civil Court will have jurisdiction to entertain a suit, as being of a civil nature under Section 9 of the Civil Procedure Code.[56]
Religious Acts: No Court-Interference, Unless Whimsical, Arbitrary, Capricious etc.
If a spiritual or ecclesiastical offence is committed by anybody, his spiritual superior or ecclesiastical tribunal has to punish him in a proper proceeding. The civilcourt has nothing to do with such spiritual offence,[57]unconnected with office[58] or property.[59]
Math is an institutional sanctum presided over by a superior, the Mahanth. The dual office of being the religious or spiritual head of the particular cult of religious fraternity and the office of the manager of the secular properties of the institution are combined in him.[60] The succession to Mahantship is regulated by custom or usage of the particular institution.[61]Selection of the successor to the post of Mahanth and withdrawal of such person after selection are purely spiritual matters and religious in nature. They are not administrative or secular acts. Therefore, if such actions were the result of bone fide acts of the authorities concerned, the court will not interfere.[62]
It is a well-known custom that the Heads in several Mutts nominate their successors.[63] When a Junior is legally nominated to succeed to the Mahant and a status as such is created, it cannot be withdrawn or cancelled at the mere will of the parties.[64] But, in His Holiness Kasi-viswanatha Pandara Sannidhi Vs. State of Tamil Nadu[65] the High Court of Madras did not interfere in the action of removal of the petitioner as Junior PandaraSannathi holding that the act on the basis of bone fide consideration by the then Head of the Mutt and such action was purely religious in nature and the same fell outside the judicial reach. The said act of removal was found to be purely religious in nature and it was pointed out that such act cannot be subjected to judicial scrutiny unless the same appears to be for an extraneous consideration or the same was per se out of extraneous consideration, whimsical, arbitrary,capriciousoragainst the public interest. It was pointed out that the court exercising its judicial review under Article 226 of the Constitution of India cannot sit in judgment[66] over what is good cause except for the factors as stated above. Referring to Commissioner of Hindu Religious Endowments, Madras Vs. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt[67] and Sudhindra Thirtha Swamiar Vs. The Commissioner for Hindu Religious and Charitable Endowments[68] it was pointed out that generally a sanyasin is a person who has renounced wordly affairs. It would appear that he will not have any career at all. The High Court relied heavily on its earlier decision, His Holiness Sri-La-Sri Ambalavana Pandara Sannathi Avergal Vs. State of Tamil Nadu,[69] where it was held that the act of nomination of Pandara Sannathi is purely in religious nature and not an administrative act.
The Madras High Court also referred to the Supreme Court decision, AKKaulVs. Union of India,[70]arose from disciplinary action taken against certain Govt. Intelligence Officers in the intelligence Bureau, in a summary manner, by President of India, in the interest of the security of the State. Our Apex Court pointed out that ‘on account of want of judicially manageable standards, there may be matters which are not susceptible to the judicial process’.
Removal of Pujaries and Sevadars
In Balram Chunnilal Vs. Durgalal Shivnarain[71] it was found that an appointed pujari, for the purpose of worship and of maintaining the temple, was a servant and he got possession of temple property in a fiduciary capacity and that he was estopped as long as he continued to be in possession in that capacity from asserting his own title. When a servant occupied or came into possession of property belonging to his employer he was nothing more than a licensee or a bailee. In a general sense it was also a trust. Unless the pujuari handed over the temple to the panchas and acquires the capacity of a third party–of somebody other than a servant–he could not have been heard either to question the panchas’ title or to set up his own. It was held that plaintiffs (panchas as the trustees) were entitled to remove the pujaries who were in possession of the temple.
In Bhagwan DassVs.Jairam Dass[72] it was held by P&J High Court that the Sevadarwas liable to be removed where Sevadar asserted title hostile and failed to keep regular accounts.
The property vests in deity. It being a religious concern and there is no public element in it, Writ jurisdiction on the basis of public interest cannot be invoked.[73]
Parens Patriae Jurisdiction
In Prasannakumar v. The State of Kerala,(WP No. 6689 of 2013, 16-10-2014, T.R. Ramachandran Nair, P.V. Asha, JJ.) held as under:
“60. As far as the property of the Temple is concerned, this Court will be right in exercising the parens patriae jurisdiction. The Division Bench in paragraphs 61 and 63 of the judgment in Mohanan Nair’s case (2013 (3) KLT 132) has considered two aspects, viz. the power of this Court to interfere even if there is inaction on the part of the Board and the importance of protecting the interest of Deity. Herein, what we find from Ext. P7 order is that a complaint was made by the Temple Advisory Committee which was considered by the learned Ombudsman appointed by this Court for Travancore and Cochin Devaswom Boards. The learned Ombudsman had also directed the third respondent to take urgent action for recovery of Devaswom property. In paragraph 62 of the judgment in Mohanan Nair’s case (2013 (3) KLT 132) this Court relied upon the judgment of the Apex Court in Gopalakrishnan v. Cochin Devaswom Board (2007 (4) KLT 965) wherein the duty of the courts to protect and safeguard the interest of the Deity has been highlighted.”
It is held in Mohanan Nair’s case, 2013 (3) KLT 132, as under:
“62. The Apex Court, in a recent decision reported in Gopalakrishnan v. Cochin Devaswom Board (ILR 2007 (4) Ker. 181), has emphasised that it is the duty of the Courts to protect and safeguard the interest and properties of the religious and charitable institutions. The Bench presided over by Chief Justice K.G. Balakrishnan (as he then was), in para 10 has held as follows:
“10. The properties of deities, temples and Devaswom Boards, require to be protected and safeguarded by their Trustees/Archaks/Sebaits/employees. Instances are many where persons entrusted with the duty of managing and safeguarding the properties of temples, deities and Devaswom Boards have usurped and misappropriated such properties by setting up false claims of ownership or tenancy, or adverse possession. This is possible only with the passive or active collusion of the concerned authorities. Such acts of ‘fences eating the crops’ should be dealt with sternly. The Government, members or trustees of Boards/Trusts, and devotees should be vigilant to prevent any such usurpation or encroachment. It is also the duty of courts to protect and safeguard the properties of religious and charitable institutions from wrongful claims or misappropriation.”
That was also a similar case wherein the alleged encroachment of Temple property was raised in a complaint filed by a devotee.” (quoted in: Prasannakumar v. The State of Kerala,(WP No. 6689 of 2013, 16-10-2014)
In Mohanan Nair’s case, 2013 (3) KLT 132, it is further held as under:
“61. We will now come to the decisions relied upon by both sides. A Full Bench decision of this Court in Achuthan Pillai and others v. State of Kerala and others (1970 KLT 838 – FB) was relied upon by the learned counsel for the Temple Advisory Committee to show that in respect of matters concerning Hindu Religious Institutions and Temples, a contention regarding limitation/delay, etc. alone cannot deny the jurisdiction and hence this Court will be properly justified in considering the matter in detail. That was a case where the Full Bench considered the validity of an order passed by the Government under Section 99 of the Hindu Religious and Charitable Endowments Act, 1951 (Madras). By the said order the Government cancelled the sanction given for transfer of immovable property of a Devaswom. The initial order was passed by the Commissioner for sanction to lease 600 acres of forest land belonging to Emoor Bhagavathy Devaswom. The said order was passed in the year 1960 and the Government cancelled the same by Ext. P5 order dated 23.2.1967. The Full Bench, speaking through K.K. Mathew, J. (as he then was), traced the principles regarding the rights of an authority to protect the institution like Devaswom in order to prevent fraud. The relevant parts of the discussion contained in paragraphs 5 and 6 are extracted below:
“5………… The power to cancel a sanction and thereby to make null and void an improvident transfer or alienation of immovable property of a Devaswom, though exercised under the guise of revision, is visitorial in character. It is a matter of common knowledge that even from very early times religious and charitable institutions in India came under the special protection of the ruling authority. The rulers of the country always asserted their right to visit these institutions in order to prevent fraud and redress the abuses in their management. In the celebrated Rameswar Pagoda case, LR. 1 I. A. 299 it was pointed out by the Judicial Committee that the former rulers of this country always asserted the right to visit endowments of this kind to prevent and redress the abuses in their management…………….”
In Prasannakumar v. The State of Kerala,(WP No. 6689 of 2013, 16-10-2014, T.R. Ramachandran Nair, P.V. Asha, JJ.) held further as under:
60. As far as the property of the Temple is concerned, this Court will be right in exercising the parens patriae jurisdiction. The Division Bench in paragraphs 61 and 63 of the judgment in Mohanan Nair’s case (2013 (3) KLT 132) has considered two aspects, viz. the power of this Court to interfere even if there is inaction on the part of the Board and the importance of protecting the interest of Deity. Herein, what we find from Ext. P7 order is that a complaint was made by the Temple Advisory Committee which was considered by the learned Ombudsman appointed by this Court for Travancore and Cochin Devaswom Boards. The learned Ombudsman had also directed the third respondent to take urgent action for recovery of Devaswom property. In paragraph 62 of the judgment in Mohanan Nair’s case (2013 (3) KLT 132) this Court relied upon the judgment of the Apex Court
In Gopalakrishnan v. Cochin Devaswom Board (2007 (4) KLT 965) the duty of the courts to protect and safeguard the interest of the Deity has been highlighted as under:
“6. The authorities, therefore, support the conclusion that supervision and control of Hindu Religious and Charitable Institutions is a function of government and that government at all times asserted and exercised the power. Although India is today a secular State, “that would not preclude the secular administration of religious institutions”.
(See the observations of B.K. Mukherjee, J. in Commr. HRE v. Swamdur – AIR 1954 SC 282).
The fact that government did not exercise the power immediately when it became aware of the circumstances vitiating Ext. P1 order cannot prejudice the interest of the devaswom. If the contention of the petitioner were to prevail, it would mean that because the government was not very vigilant in exercising the power the interest of the devaswom should suffer. S.10 of the Limitation Act, 1963, provides no period of limitation for a suit against a person in whom the trust property has become vested for any specific purpose or against his legal representatives or assigns for the purpose of following in his or their hands such property. The reason behind the section is that an express trust ought not suffer by the misfeasance or non-feasance of a trustee…………. “
Their Lordships were of the view that “an express trust ought not suffer by the misfeasance or non-feasance of a trustee.” (quoted in: Mohanan Nair’s case, 2013 (3) KLT 132, and Prasannakumar v. The State of Kerala,(WP No. 6689 of 2013, 16-10-2014, T.R. Ramachandran Nair, P.V. Asha, JJ.)
The Full Bench, in Mohanan Nair’s case, 2013 (3) KLT 132, held that the misfeasance or non-feasance of a trustee and the time lag in the matter and inaction on the part of the Board will not deter the court from passing appropriate orders.
In Achuthan Pillai’s case (1970 KLT 838 – FB) it is held as under:
“63. The relevant principles under the Hindu law will show that the Deity is always treated similar to that of a minor and there are some points of similarity between a minor and a Hindu idol. This Court therefore is the guardian of the Deity and apart from the jurisdiction under Section 103 of the Land Reforms Act, viz. the powers of revision, this Court is having inherent jurisdiction and the doctrine of parens patriae will also apply in exercising the jurisdiction. Therefore, when a complaint has been raised by the Advisory Committee which was formed by the devotees of the Temple about the loss of properties of the Temple itself, the truth of the same can be gone into by this Court in these proceedings.” (quoted in: Prasannakumar v. The State of Kerala,(WP No. 6689 of 2013, 16-10-2014, T.R. Ramachandran Nair, P.V. Asha, JJ.)
In Prasannakumar v. The State of Kerala,(WP No. 6689 of 2013, 16-10-2014), it is further held that the absence of a revision petition under Section 103 of the Act (Kerala Land Reforms Act) against the Order of Land Tribunal will not prevent the High Court, from acting, especially in the light of the inherent jurisdiction available to the High Court and the applicability of the doctrine of parens patriae in the light of the principles rendered by the Full Bench in Achuthan Pillai’s case (1970 KLT 838 – FB) as well as that of the Apex Court in Gopalakrishnan’s case (2007 (4) KLT 965),
Rights and Duties/Liabilities of Trustees in a Nut Shell
Rights of a Trustee
Duties of a Trustee
Liabilities of a Trustee
Trustee ‘Holds’ Trust-Property for ‘Administration’
How Can a Trust Execute Deeds and Enter Contract?
Is Trusteeship a Property?
Application of Indian Trusts Act
Trustee is bound to fulfill the purpose of the trust
Trustees Should Act Jointly
Suit by One of its Trustees: Effect
In Strict Legal Sense, Shebait is not Trustee
Trustee Cannot Renounce
‘Cy pres’ Doctrine
Representation of Beneficiaries, Under O 31 R 1 CPC
Trustee has to Act Gratuitously
Doesn’t Revert Even If Trustee Refuses to Accept Office
Trustee not to Benefit
Trustee Must Exercise on His Own Judgment
Fiduciary Capacity
Trustee Cannot Claim Adverse Title
Claim of Adverse Title by a Trustee Entails his Removal
Accounting by Trustees
Shebait: Whether Similar to Guardian of Infant Heir
Degree of Prudence Expected
Doctrine of ‘Conditions of Modern Life’
Shebait has, to some extent, Rights of a Limited Owner
Succession of Office of Shebait
Right of Suit in the Shebait; and Not in the Idol
Dharmakartha/Shebait has Vide Discretion
When Estate of a Deceased Trustee Liable
Removal of Trustees on Breach of Trust
Introduction
A trust is what the author intended. The Indian Trusts Act, 1882 is basically meant for private trusts. Still, the principles of English Law of Trusts which have been incorporated in this Act will apply to public trusts also. Those principles will not become untouchable for it is incorporated in the Trusts Act.[1] Sec. 92 of the CPC and various (State) Public Trusts Acts govern public trusts. With respect to the applicability of the Indian Trusts Act, 1882, upon public trusts the Supreme Court observed, in Sheikh Abdul Kayum Vs. Mulla Alibhai,[2] as under:
“It is true that Sec. 1 of the Trusts Act makes provisions of the Act inapplicable to public or private religious or charitable endowments; and so these sections may not in terms apply to the trust of that kind. These sections however embody nothing more or less than the principles which have been applied to all trusts in all countries.”
The rights and liabilities of the trustees and beneficiaries are given in detail in the Indian Trusts Act enacted in 1882. The courts in India thoroughly followed the principles in the Trusts Act in the matters of public and religious trusts with regard to various rights, duties and liabilities of the trustees. The trustee is bound to fulfill the purpose of the trust, and to obey the directions of the author of the trust given at the time of its creation.[3] Usually, trustees are appointed by the founders, and new trustees are selected as directed by the founders.
Life is Bestowed upon Endowment When Trustee is Appointed
An ‘endowment’ is created by dedication of property for the purpose of religion or charity. For a valid trust both the subject and object should be certain and capable of ascertainment.[4] Though a trust is not a juristic person, legal recognition and vitality is bestowed upon the endowment by the appointment of a trustee. An endowment, sans trustee, remains static.
Trustee ‘Holds’ Trust-Property
Indian Trusts Act Sec. 10 states that every person capable of ‘holding’ property may be a trustee. The trustee ‘holds’ trust-property, for administration, as its legal owner. The Trusts Act denotes the relation between the trust property and trustee as ‘holding’, in preference to ‘possessing’. Apart from Sec. 10, it is clear from Sec. 29, 83 etc. and illustrations in Sec. 10, 61 etc.
‘Obligation Annexed to the Ownership of Property’ Imports ‘Administration’
The obligation, or fiduciary duty, in a trust, annexed to the ownership of property, is for ‘executing the trust’ by ‘administering’ the endowed property. The trustee has to administer the trust-property as if he is its (legal) owner. Because, as per the definition of trust, the obligation stands attached to the endowed property. By the very nature of ‘Trust’, the obligation ‘annexed’ to the trust-property is for administration.[5] It is clear from Sec. 11 of the Indian Trust Act. Sec. 11 of the Trusts Act casts duty on trustee to execute the trust, by fulfilling the purpose of the trust ‘obeying the directions of the author of the trust’. Therefore, the pertinent linkage of obligation to the endowed property is ‘management or administration’.
Sec. 11 of the Indian Trust Act, 1882 reads:
11. Trustee to execute trust.—The trustee is bound to fulfill the purpose of the trust, and to obey the directions of the author of the trust given at the time of its creation…
Nothing in this section shall be deemed to require a trustee to obey any direction when to do so would be impracticable, illegal or manifestly injurious to the beneficiaries.
As per the Indian Trust Act. 1882, the trustee holds the trust-property for ‘management’ or ‘administration’. The legal ownership vests in the trustee for the purposes of the trust, and its administration should be in accordance with the provisions of the deed of trust.[6] Sections 34, 35 and 60 of the Indian Trusts Act, 1882 specifically refer ‘administration’. Indian Trusts Act, 1882 reads:
Sec.34. Right to apply to Court for opinion in management of trust property.—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 ….
Sec. 35. Right to settlement of accounts.—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; ….
Sec. 60. Right to proper trustees.—The beneficiary has a right (subject to the provisions of the instrument of trust) that the trust property shall be properly protected and held and administered by proper persons and by a proper number of such persons.
Explanation I.—…
Explanation II.—When the administration of the trust involves the receipt and custody of money, the number of trustees should be two at least.
Trustee Administers as the ‘owner’of Trust
A trust is administered by the trustee, as its legal owner. As per the definition, a trust is (i) an obligation annexed to the ownership of property and (ii) arising out of a confidence accepted by the trustee as owner. And, the ‘beneficial interest’ of the beneficiary is his right against the trustee as owner of the trust property.
The trustee should have been appointed with clear directions for management. The trustee is bound to obey the directions of the author. The mode and modalities of administration of trusts are primarily determined under the terms of the trust (written or otherwise). Lewin on Trusts[7] reads as under:
“The person who created the trust may mould it in whatever form he pleases.”
Duty of the trustees may be passive or active according to the nature of the trust. With regard to duties of trustees it is stated in ‘Principles of Equity’ by H. A. Smith[8] as under:
“A trust is a duty seemed in equity to rest on the conscience of a legal owner. This duty may be either passive, such as to allow the beneficial ownership to be enjoyed the some other person, named the cestui que trust, in which case the legal owner is styled a bare trustee; or it may be some active duty, such as to sell, or to administer for the benefit of some other person or persons; such for example are the duties of a trustee in bankruptcy.”[9]
Underhill has defined a simple trust as a trust in which the trustee is a mere repository of the trust property, with no active duties to perform.[10]Trustees are bound by customs and usages. Apart from the enactments applicable, trusts and trustees are also governed under the directions of the competent authorities concerned.
A Compny can be a Trustee of a Public Trust
It was held in See M.Gomathinarayagam Pillai v. Sri.Manthramurthi High School Committee, Tirunelveli, AIR 1963 Mad 387, as under:
“For the application of that section (Section 92 CPC) it makes no difference whether the trustees is an individual or a company, nor is there any distinction between a company in whom the office of trustee vests and one which is specially formed for the purpose of executing the trust.” (Referred to in: S.N.D.P. Yogum v. G. Krishnamoorthy, ILR 2022-3 Ker 494; 2022-4 KHC 168; 2022-4 KLT 36)
Trustee is Bound to Fulfill the Purpose of the Trust
Indian Trusts Act, 1882 reads as under:
11. Trustee to execute trust. The trustee is bound to fulfill the purpose of the trust, and to obey the directions of the author of the trust given at the time of its creation, except as modified by the consent of all the beneficiaries being competent to contract.
Where the beneficiary is incompetent to contract, his consent may, for the purposes of this section, be given by a principal civil court of original jurisdiction.
Nothing in this section shall be deemed to require a trustee to obey any direction when to do so would be impracticable, illegal or manifestly injurious to the beneficiaries.
Explanation – Unless a contrary intention be expressed, the purpose of a trust for the payment of debts shall be deemed to be (a) to pay only the debts of the author of the trust existing and recoverable at the date of the instrument of trust, or, when such instrument is a will, at the date of his death, and (b) in the case of debts not bearing interest, to make such payment without interest. The trustee is bound to fulfill the purpose of the trust, and to obey the directions of the author…..
13. Trustee to protect title to trust property.—A trustee is bound to maintain and defend all suits, and to take such other steps as may be reasonably requisite for the preservation of the trust property.
Sec. 11 of the Indian Trusts Act casts an obligation on the trustees to fulfill the purpose of the trust. The trustees are bound to obey the directions of the author of the trust given at the lime of its creation, except as modified by consent of all the beneficiaries who are being competent to contract. The liability of trustees is also subject to the exception that the trustees are under no obligation to obey the directions that would be impractical illegal or manifestly injurious to the beneficiaries. The only way in which the directions of the testament may be varied is by applying cy-prus doctrine. It is applied where from lapse of time and change of circumstances it is no longer possible to apply the property left by the founder or donor in the precise way in which it was directed to be applied.[11] Correspondingly if the trustees fail or disclaim to carryout the lawful directions of the settlement it would amount to a breach of trust and any person having interest in the trust has a right to approach the competent authority for appointment of new trustees or for appropriate directions as the nature of the case may require.
In Abdul Kayum Vs. Alibhai[12] our Apex Court expounded the following legal incidents of trusteeship:
(i) Trustees cannot transfer their duties, functions & powers to some other body of men and create them trustees in their own place unless this is clearly permitted by the trust deed, or agreed to by the entire body of beneficiaries (Sec. 48);
(ii) A trustee is not bound to accept the trust; but having once entered upon the trust he cannot renounce the duties and liabilities except with the permission of the Court or with the consent of the beneficiaries or by the authority of the trust deed itself (Sec. 46).
(iii) A trustee cannot delegate his office or any of his functions except in some specified cases (Sec. 47).
Public Trust Depends on Charity and Donatins
Referring Sec. 14 of the Bombay Public Trust Act, 1950, it is observed in Khasgi (Devi Ahilyabai Holkar Charities) Trust, Indore v. Vipin Dhanaitkar, 2022-11 SCALE 1, 2022-17 SCR 173, as under:
“A Public Trust invariably depends on charity done by individuals by donating immovable property or by making cash donations.”
Eventhough the above observation is made invoking Sec. 14 of the BPT Act, it is clear that it is a common law principle applicable to all Public Trusts.
Legal Obligations of Trustees to Administer and Give Effect to Objects of Trust
It is held further in Khasgi (Devi Ahilyabai Holkar Charities) Trust, Indore v. Vipin Dhanaitkar, 2022-11 SCALE 1, as under:
“Though in law, the assets and properties of a Public Trust vest in its Trustees, they hold the Trust property in a fiduciary capacity for the benefit of the beneficiaries of the Trust. They hold the property for giving effect to the objects of the Public Trust. A Trust property cannot be alienated unless it is for the benefit of the Trust and/or its beneficiaries. The Trustees are not expected to deal with the Trust property, as if it is their private property. It is the legal obligation of the Trustees to administer the Trust and to give effect to the objects of the Trust. …. There are statutory constraints on the power of the Trustees to alienate the property of a Public Charitable Trust. …. The Trustees are the custodians of Trust properties. The Trustees have a duty to safeguard the interests of the beneficiaries of the Public Trust. That is how, a provision in Public Trust Law, like Sec. 14 of the Public Trusts Act, is of importance. This provision seeks to protect the Trust property in the hands of the Trustees from unwarranted alienations.”
Administration Should Not be Ultra Vires
The trustees are bound to administer the affairs of the trust to attain the objects[13] envisioned by the founder and in accordance with his directions laid down in the trust-deed; and the acts and actions of trustees ultra vires such objects or directions are void. If a trustee fails to administer in accordance with the terms of the trust, it amounts to breach of trust.[14]
The basic principle of foundation of a trust cannot be changed. Tudor on Charities[15] explained it as under:
“When a charity has been founded and trusts have been declared, the founder has no power to revoke, vary or add to the trusts. This is so irrespective of whether the trusts have been declared by an individual, or by a body of subscribers, or by the trustees. “[16]
Fundamental principles upon which an association is founded are also not open to alter even for the majority of its members, unless such a power is specifically reserved. This principle laid down in Milligan Vs. Mitchel,[17]Attorney General Vs. Anderson[18] and Free Church of England Vs. Overtoun[19] is referred to in Prasanna Venkitesa Rao Vs. Srinivasa Rao.[20]
Ultra Vires Acts, Void & Constitutes ‘Breach of Trust’.
A company is a juristic person. The actions and functioning of a company differ from that of a natural person who is free to act on his whims and fancies. The actions and functioning of a company are limited by its Memorandum of Association and Articles of Association.[21] A corporation, an association or a company has no inherent or natural common law rights. A company is competent to carry out its objects specified in the Memorandum of Association and cannot travel beyond the objects.[22] Any act of a company (save a case of indoor management) ultra vires its Memorandum and Articles of Association, even if backed by the Resolution of the Board of Directors, is void and not enforceable.[23]
These principles on doctrine of ‘ultra vires’ that are attached to companies and associations, equally apply to Trusts.[24] Under law of trusts, such acts constitute ‘breach of trust’.
Doctrine of Indoor Management
In MRF Ltd. Vs. Manohar Parrikar[25] our Apex Court discussed the concept of indoor management as under:
“The doctrine of indoor management is in direct contrast to the doctrine or rule of constructive notice, which is essentially a presumption operating in favour of the company against the outsider. It prevents the outsider from alleging that he did not know that the constitution of the company rendered a particular act or a particular delegation of authority ultra vires. The doctrine of indoor management is an exception to the rule of constructive notice. It imposes an important limitation on the doctrine of constructive notice. According to this doctrine, persons dealing with the company are entitled to presume that internal requirements prescribed in memorandum and articles have been properly observed. Therefore doctrine of indoor management protects outsiders dealing or contracting with a company, whereas doctrine of constructive notice protects the insiders of a company or corporation against dealings with the outsiders. However suspicion of irregularity has been widely recognized as an exception to the doctrine of indoor management. The protection of the doctrine is not available where the circumstances surrounding the contract are suspicious and therefore invite inquiry. This exception to the doctrine of indoor management has been subsequently adopted in many Indian cases. They are B. Anand Behari Lal v. Dinshaw and Co. (Bankers) Ltd, AIR 1942 Oudh 417 and Abdul Rehman Khan and Anr. v. Muffasal Bank Ltd. and Ors, AIR 1926 All 497. “
Ultra Vires Contracts
A contract made by the directors of a company upon a matter not included in the Memorandum of Association is ultra vires. Such a contract does not become binding on the company, even if, afterwards, expressly assented to by the shareholders at a General Meeting, it being void in its inception.
An ultra vires contract by a company is analogous to and stands on the same footing as a contract by an infant and in which case there is total incapacity. Just like a consent decree founded on the fortitude of an incompetent minor is void and a nullity, a contract founded by an incompetent company is void and a nullity.[26] An agreement arrived at between the shareholders and directors of a company with respect to management of the affairs of the company, without being incorporated in the Articles of Association is not enforceable against the company.[27] These principles are recapped in Ashbury Railway Carriage and Iron Co. Ltd. Vs. Riche.[28]
The principles in Ashbury Railway Carriage and Iron Co. Ltd. Vs. Riche[29] have been followed by our Apex Court in A. Lakshmanaswami Mudaliar Vs. Life Insurance Corporation of India,[30] In Re Steel Equipment and Construction Co. (P) Ltd. etc.[31]
In A. Lakshmanaswami Mudaliar Vs. Life Insurance Corporation of India[32]it is observed as under:
“A company is competent to carry out its objects specified in the memorandum of association and cannot travel beyond the objects.”
As to the applicability of doctrine of ultra vires in relation to the contractual capacity of a Corporation or a Company, it is stated in Anson’s Law of Contract 24th Edition[33] as follows:
“The contractual capacity of a Corporation incorporated by statute is limited by the fact that any act done by the Corporation outside its statutory powers is, at common law, Ultra Vires and void. Since the Corporation has no existence independent of the Act of Parliament which creates the Corporation or authorities its creation, it follows that its capacity is limited to the exercise of such powers as are actually conferred by, or may reasonably be deduced from, the language of the statute. Thus a company incorporated under the Companies Act is bound by the objects listed in its memorandum of association, for it is incorporated for the purposes set out in the memorandum. The company can make no contracts inconsistent with, or foreign to, those objects, and if it does so, the contract so made is, at common law, void and unenforceable as being Ultra Vires the company. The leading case on the application of the ultra vires doctrine is Ashbury Railway carriage And Iron Co. Vs Riche (1875 LR 7 HL 653): A company was incorporated with objects (set out in the memorandum of association)as follows: (i) to make, and sell, or to lend on hire, railway wagons and carriages and other rolling stock, (ii) to carry on the business of mechanical engineers and general contractors, (iii) to purchase, lease, work and sell mines, minerals, land and buildings, and (iv) to buy and sell as merchants, timber, coal, metals, or other materials. The Company contracted to assign to another company a concession which it had bought for the construction of a railway in Belgium. The House of Lords held that the contract, being related to the actual construction of a railway, as opposed to railway stock, was Ultra Vires the objects in the memorandum and void. Even if the shareholders subsequently ratified the contract, it could not thereby be rendered binding on the company.”[34]
A. Ramaiya, in ‘Companies Act’ stated as under:
“It is ultra vires for a company to act beyond the scope of its memorandum. Any attempted departure will be invalid and cannot be validated even if assented to by all the members of the company. By ultra vires is meant an act or transaction of a company, which, though it may not be illegal, is beyond the company’s powers by reason of not being within the objects of the memorandum is, so to speak, the area beyond which a company cannot travel. Ashbury Ry. Carriage Company v. Riche, (1875) 7 HL 653. An act beyond the objects mentioned in the memorandum is ultra vires and void and cannot be ratified. Dr. Lakshmanaswami Mudaliar v. Life Insurance Corporation, (1963) 1 Com LJ 248 : (AIR 1963 SC 1185)”.
These principles pertained to companies and associations, equally apply to Trusts.[35]
Breach of Trust Will Not Put An End to the Trust
In Agasthyar Trust Vs. CIT, Madras[36]our Apex Court quoted with approval the following passage of Madras High Court in Thanthi Trust Vs. ITO.[37]
“If the trust had been really and validly created, any deviation by the founder of the trust or the trustees from the declared purposes would amount only to a breach of trust and would not detract from the declaration of trust. Therefore, the subsequent conduct of the founder in dealing with the funds of the trust long after the creation of the trust may not put an end to the trust itself.”
Ultra Vires Acts Cannot Be Ratified
The Articles of Association of a Company are contract between members and are binding not only on the members but also on the company.[38] It is not permissible for directors to act contrary to the powers conferred by the Articles. Any such action would be ultra vires the Articles, as also Section 10 of the Companies Act, 2013.[39]
Consequently, any action contrary to or in defeasance of these participatory rights or objects mentioned in the memorandum is ultra vires and void;[40] and for its inherent illegalities, the issue of ratification of such acts would not arise at all.[41]
Trustee is the Legal Owner for Limited Purpose
Under Common Law of India and as per the definition[42] of trust in the Indian Trusts Act, 1882 the trustee holds the trust property as its legal owner.The properties ‘vest in the trustee’, or he holds the same, for the limited purpose of administration and management.[43] He has the obligation to use this ownership for the benefit of the beneficiaries.[44] It is not the legal (or trust) ownership referred to in English law. In English law, when ‘legal ownership’ is referred, it denotes: ‘legal estate’; one of the ownerships bifurcated from the ‘duel ownership’.
Similarly, the Indian Trusts Act does not refer to ‘beneficial ownership’ with the beneficiary; it refers to ‘interest’ or ‘beneficial interest’ alone with the beneficiary[45]. In English law, when ‘beneficial interest’ is referred, it denotes: ‘beneficial ownership’ or ‘beneficial estate’; the other bifurcated ownerships in the ‘duel ownership’.
A founder can also be a beneficiary of a trust after its dedication. (But, he cannot claim any special right on that score, unless he reserved the same positively.) It is observed by the Kerala High Court in Mohammed Basheer Vs. Ahmed Kutty,[46] following the decision of the Privy Council in Chhatra Kumari Vs. Mohan Bikram[47] and the definition of trust in the Indian Trusts Act, that, ‘unlike English law, in Indian law the owner of the trust property is the trustee, and beneficial interest of course is to be conveyed to the beneficiary’. Under Indian law, beneficiaries have beneficial interest (pertaining to beneficiaries) alone; and it is not ‘proprietary interest’ or ‘beneficial interest pertaining to owner’. ‘Beneficial interest pertaining to the owner’ is also dedicated ‘in the trust’ when a trust is established.
Property Vests in Trustee; But No ‘Proprietary Interest’
Under Indian law, beneficial interest pertaining to beneficiaries alone is with beneficiaries; and it is not beneficial interest pertaining to owner. ‘Beneficial interest pertaining to the owner’ is also ‘dedicated’ in favour of the ‘trust’ when a trust is established.
As pointed out in WO Holdsworth Vs. State of Uttar Pradesh[48] by our Apex Court the Indian Trusts Act, 1882 declares legal ownership with trustees while defining trust and beneficial interest in Sec. 3. Trust is defined to be an obligation annexed to the ownership of property for the benefit of another, the ‘beneficial interest’ as the beneficiary’s right against the trustee as owner of the trust property.
Sec. 6 of the Indian Trusts Act lays down that transfer of the dedicated property to the trustee is essential for creation of a trust. Inasmuch as the vesting of ownership of trust property with the trustee is under an obligation to manage it for the benefit of the beneficiaries (Sec 3, definition of trust of in the Indian Trusts Act), it can be concluded that the trust properties vest in the (sole) ‘legal ownership’ of the trustees.[49]
Though legal or trust ownership[50] is ‘vested’ with the trustee, as in English law, in Indian law also, the trustee has no ‘proprietory interest’, inasmuch as the beneficial interest is ‘carved out’, or impressed upon, in the property itself. In dealings with the world at large, the trustee personates or represents as the owner of the property.[51]
The Privy Council explained in M. E. Moolla Sons Vs Official Assignee of The High Court of Judicature at Rangoon (1936)[52] that the beneficiary has no interest(proprietary interest) in immovable property because his right was only to call upon the trustees to carry out their trust, or because the distinction between legal and equitable estates did not as such exist in the law of India.
Sec. 10 and 75 of the Indian Trusts Act denotes ‘vesting of property in trustees’.
Sec. 10 of the Indian Trust Act, 1882 reads:
10. ….. Disclaimer of trust.—Instead of accepting a trust, the intended trustee may, within a reasonable period, disclaim it, and such disclaimer shall prevent the trust property from vesting in him. A disclaimer by one of two or more co-trustees vests the trust property in the other or others and makes him or them sole trustee or trustees from the date of the creation of the trust.
Sec. 75 of the Indian Trust Act, 1882 reads:
75. Vesting of trust property in new trustees.—Whenever any new trustee is appointed under section 73 or section 74, all the trust property for the time being vested in the surviving or continuing trustees or trustee, or in the legal representative of any trustee, shall become vested in such new trustee, either solely or jointly with the surviving or continuing trustees or trustee, as the case may require.
Trustee Must Exercise on His Own Judgment
A trustee cannot delegate the exercise of powers which he ought to personally perform. Although a trustee may listen to the opinions and wishes of others, he must exercise his own judgment. Thus a trustee for sale of property, cannot leave the whole conduct of the sale to his co-trustees. The reason for this proposition is that the settler has entrusted the trust property and its management to all the trustees, and the beneficiaries are entitled to the benefit of their collective wisdom and experience[53].
Fiduciary Capacity of Trustees of Religious Trusts
Because of the fiduciary position, liability of a Shebait or Mutawalli equates trustee.[54] Archakas[55] are also deemed to be in possession in a fiduciary capacity and as such they could not claim adverse possession.
In Balram Chunnilal Vs. Durgalal Shivnarain[56] it was found that an appointed pujari, for the purpose of worship and of maintaining the temple, was a servant and he got possession of temple property in a fiduciary capacity and that he was estopped as long as he continued to be in possession in that capacity from asserting his own title. When a servant occupied or came into possession of property belonging to his employer he was nothing more than a licensee or a bailee. In a general sense it was also a trust.
Trustee has to Act Gratuitously
Trustee, under English Law, has to perform his duties gratuitously. No remuneration can be claimed from the trust property or income unless the terms of the trust do not allow it. But that does not mean that the trustee has to meet the expenses from his pocket. He can charge actual expenses from the trust/property.
Indian Trusts Act , 1882 reads as under:
32.Right to re-imbursement of expenses.—Every trustee may re-imburse himself, or pay or discharge out of the trust property, all expenses properly incurred in or about the execution of the trust.
36. General authority of trustee.— A trustee may do all acts which are reasonable and proper for the realisation, protection or benefit of the trust property.
44. Power to several trustees of whom one disclaims or dies.—When an authority to deal with the trust property is given to several trustees and one of them disclaims or dies, the authority may be exercised by the continuing trustees.
West and Buhler in Digest of Hindu Law[57] states as under:
“Even when no emoluments are attached to the office of a Shebait, he enjoys some sort of right or interest in the endowed property which has partially at least the characteristics of a proprietary right….. The Shebait’ spower to alienate the debutter property is very much limited and can be exercised only when there is a justifying legal necessity or benefit to the Deity; yet he can create derivative tenures in respect of the endowed property, which, even if not supported by legal necessity, cannot be impeached so long as he is alive and remains in office. The Shebait therefore has to some extent the rights of a limited owner.”
West and Buhler in Digest of Hindu Law[58]reads further as under:
“Like the trustee in English law, a Shebait has to act gratuitously and he cannot charge the debutter estate for any remuneration on account of the time and labour he spends over his affairs. The position would certainly be different if there is a provision in the deed of dedication to that effect; or, in the absence of any deed of endowment, there is a usage sanctioning such remuneration to the Shebait. The law is well established that, in the absence of any provision in the deed of dedication or any usage to that effect, a Shebait has no right to take any portion of the income of the debutter estate nor even the surplus that remains after meeting the expenses of the deity. In this income would be included not merely the rents and profits of the debutter property but the offerings which are made to the deity by its devotees. “
Underhill in his treatise Law relating to Trusts and Trustees under the caption, Right to Reimbursement and Indemnity, it has been stated as under:
“Trustee is entitled to be reimbursed out of the trust property all expenses which he has properly incurred having regard to the circumstances of each particular case but without interest unless he has paid an interest bearing claim in which case he stands in the shoes of the creditor by subrogation.”
Section 32 of the Indian Trusts Act, 1882 which provides that the trustee is entitled to get reimbursement out of the trust property all expenses properly incurred in relation to the execution of the trust property and for preservation of the trust property is a principle of the English law of Trusts which has been incorporated in the Indian Trusts Act. Therefore such principles in Sec. 32 of the Indian Trusts Act are applied to public trusts also.[59]
Trustee not to Benefit
It is the duty of the trustee to administer the trust solely in the interest of the beneficiaries. He is not permitted to place himself in a position where it would be for his own benefit or to violate his duty to the beneficiaries.[60]
Indian Trusts Act , 1882 reads as under:
Sec. 50. Trustee may not charge for services.—In the absence of express directions to the contrary contained in the instrument of trust or of a contract to the contrary entered into with the beneficiary or the Court at the time of accepting the trust, a trustee has no right to remuneration for his trouble, skill and loss of time in executing the trust.
Indian Trusts Act , 1882 reads as under:
51. Trustee may not use trust property for his own profit.—A trustee may not use or deal with the trust property for his own profit or for any other purpose unconnected with the trust.
Appointment of Trustees Irrevocable
A dedication of property to a trust is irrevocable, and the rules, if any, laid down by the founder at the time of dedication regulating succession to the office of the trustee should also be deemed to be irrevocable unless the power of revocation is reserved by the grantor. The condition relating to the rule of succession of trusteeship forms an integral part of the dedication and formation of trust itself.[61]
Can a Foreigner be Appointed as a Trustee
Unless an enactment explicitly prevents, a foreigner can be a trustee of a trust in India. The Division Bench of the Madras High Court, in an appeal, Government of TamilnaduVs. K. Sevanthinatha Pandarasannathi,[62]upheld an amendment effected to the Tamil Nadu Hindu Religious and Charitable Endowments Act which barred non-citizens to be qualified to be trustees of any religious institution under Tamil Nadu Hindu Religious and Charitable Endowments Act. This appeal arose from the decision in K. Sevanthinatha Pandarasannathi Vs. Government of Tamilnadu.[63]Calling upon Article 14 of the Constitution of India, the Single Judgehad observed that there was no bar for a Christian or Muslim to be a Head of the Wakf or Church in India, even though he may happen to be a foreigner. The Division Bench, in appeal, pointed out that the State was not prevented from making a special provision with regard to Hindu Religious and Charitable Institutions, without making a similar provision for other Religious Minority Institution.
Trustee Cannot Renounce
Indian Trusts Act , 1882 reads as under:
46. Trustee cannot renounce after acceptance.—A trustee who has accepted the trust cannot afterwards renounce it except (a) with the permission of a principal Civil Court of original jurisdiction, or (b) if the beneficiary is competent to contract, with his consent, or (c) by virtue of a special power in the instrument of trust.
A person/trustee is not bound to accept the trust; but having once accepted, he cannot renounce the duties and liabilities except with the permission of the Court or with the consent of the beneficiaries or under the authority of the trust deed itself.
Trustee Cannot Delegate
S. 47 of the Trusts Act reads as follows:
47. Trustee cannot delegate.—” A trustee cannot delegate his office or any of his duties either to a co-trustee or to a stranger unless (a) the instrument of trust so provides, or (b) the delegation is in the regular course of business, or (c) the delegation is necessary, or (d) the beneficiary, being competent to contract, consents to the delegation.”
Section 48 provides:
48. Co-trustees cannot act singly.—”When there are more trustees than one, all must join in the execution of the trust, except where the instrument of trust otherwise provides.”
Delegatus Non Potest Delegare (a delegate has no power to delegate, unless sub-delegation of the power is authorised by express words by the terms of the deed or necessary implication[64]) is a well-settled principle of law;[65] but, they can appoint a manager in the absence of any indication prohibiting the same or get him appointed through court. Our Apex Court held in Barium Chemicals Limited Vs. The Company Law Board[66] that the maxim Delegatus Non Potest Delegare did not embody a rule of law. It indicates a rule of construction of a statute or other instrument conferring an authority.
The trustee may be allowed to delegate his functions, in cases of necessity or with the consent of the entire beneficiaries if the beneficiaries are identifiable. Trustees can appoint servants or managers.[67] If manager appointed is one among the trustees, he acts as agent of other trustees. The principles arise in Sec. 46 and 47 of the Indian Trusts Act, which deal with renunciation and delegation of the powers and duties of the trustees, are applied to matters of public trust by our Courts, as they contain the common law principles of the universal rules of equity, justice and good conscience upheld by the English judges. Sec. 46 and 47 of the Indian Trusts Act make it clear that the fiduciary relationship, and duties[68] attached thereto, should not be allowed to be unilaterally terminated or varied, as it would be against the interests of society in general.
These principles would apply with equal force to servants and, in fact, to anybody who has entered on another’s property in a fiduciary capacity.[69]
Appointment and Succession of Trustees
Method of appointment of trustees and the mode of their succession are the matters for the author of the trust. If sought for, court will give effect to the same. In the absence of an instrument of trust, custom and usage will hold the field. Under Sec. 92 CPC, when the trustees fail to take administration of the trust, the designated court is destined to interfere in the appointment of new trustees if the trust deed is silent as to the appointment of the new trustees.
Under Hindu Law, when there is no provision in the deed of endowment about the succession of office of Shebait, or the succession provided therein comes to an end, the management and control of the property follows the ordinary rule of inheritance from the founder and passes to his heirs.[70] Where a founder does not provide for the management of the property, the right to nominate trustees remains vested in him until his death and continues to his heirs after him.[71]The property dedicated to a trust beingre-vested in the donor or his legal representatives when all the trustees failed to administer the trust, the Court would interfere for the purpose of appointing of trustees if only the legal representatives were not available or they do not take charge of the trust.[72]
Rights, Duties and Liabilities of Trustees in a Nut Shell
Trustee has all rights as a legal-owner of the trust property. It includes possession of the trust property. Rights enumerated under Chapter IV (The Rights And Powers of Trustee) of the Indian Trusts Act, in a nut shell, are the following:
Sec.31. Right to title-deed.
32. Right to re-imbursement of expenses.
Right to be recouped for erroneous over-payment.
33. Right to indemnity from gainer by breach of trust.
34. Right to apply to Court for opinion in management of trust property.
35. Right to settlement of accounts.
36. General authority of trustee.
37. Power to sell in lots and either by public auction or private contract.
38. Power to sell under special conditions power to buy-in and re-sell.
39. Power to convey.
40. Power to vary investments.
41. Power to apply property of minors, etc., for their maintenance, etc.
42. Power to give receipts.
43. Power to compound, etc.
44. Power to several trustees of whom one disclaims or dies.
45. Suspension of trustee’s powers by decree.
The Duties and Liabilities of a Trustee:
The duties and liabilities of trustees include the following:
voluntarily accept the position.
must be aware of the responsibilities.
faithfully discharge obligations, solely in the interest of the beneficiaries.
should not use the trust property for his own profit.
not to comingle trust property and personal property.
cannot renounce without the consent of all of the beneficiaries or the court.
do not delegate duties (even to a co-trustee) that would reasonably be required to personally perform.
take reasonable care and caution when selecting agents and attorneys.
if co-trustees, do not act unilaterally unless the duties are effectively divided.
should not purchase or appropriate the trust property (even as an agent of a third person)
act gratuitously (but, entitled reimbursement)
if one trustee breaches, the other trustees to compel him to redress it.
Liabilities of a Trustee:
personally liable for a breach of duties.
beneficiaries can recover trust property if a trustee misappropriates or wrongfully disposes.
beneficiaries can enforce the trust on the newly acquired property purchased utilising the proceeds of the wrongful sale.
account to beneficiaries if they enforce the same.
The duties and liabilities of trustees enumerated under Chapter III (The Duties and Liabilities of Trustees) of the Indian Trusts Act, in a nut shell, are the following:
11. Trustee to execute trust.
12. Trustee to inform himself of state of trust property.
13. Trustee to protect title to trust property.
14. Trustee not to set up title adverse to beneficiary.
15. Care required from trustee: as carefully as a man of ordinary prudence. would deal with such property if it were his own
16. Convert perishable property.
17. Trustee to be impartial.
18. Trustee to prevent waste.
19. Keep clear and accurate accounts and information.
20. Investment of trust-money as directed in the Trusts Act.
20A. Power to purchase redeemable stock at a premium.
21. Mortgage of land pledged to Govt: Deposit in Govt. Savings Bank.
22. Sale by trustee directed to sell within specified time.
23. Liable for breach of trust.
24. No set-off allowed to trustee.
25. Non-liability for predecessor’s default.
26. Non-liability for co-trustee’s default.
27. Several liability of co-trustee.
28. Non-liability of trustee paying without notice of transfer by beneficiary.
29. Liability of trustee where beneficiary’s interest is forfeited to Govt.
30. Indemnity of trustees- Chargeable for such amounts actually received.
Trustees may Execute Title Deeds and Enter into Contracts
As explained in previous chapters, jurisprudentially, trust is neither an association of persons nor a juristic person.[73] The affairs of a trust have to be dealt with in the name of its trustees; and not in the name of the trust, it being not a legal person. The trusts are not authorised in the CPC to sue in their name, as allowed in the case of firms.[74]
Therefore, the proper way to execute title deeds or enter into contracts relating to matters of a trust is to execute the same by the trustees in their name for and on behalf of the trust. It must also be in accordance with the specific directions in the trust deed, if any.
All Trustees Should Act Jointly
Indian Trusts Act, 1882 reads as under:
48. Co-trustees cannot act singly.—When there are more trustees than one, all must join in the execution of the trust, except where the instrument of trust, otherwise provides.
The instrument of trust may provide that one or more trustees shall be managing trustees and where such provision is made, those who are empowered to act as managing trustees would be entitled to execute the duties of the office without the concurrence of the other co-trustees.
“In the case of co-trustees of a private trust, the office is a joint one. Where the administration of the trust is vested in co-trustees, they all form as it were but one collective trustee and therefore must execute the duties of the office in their joint capacity. Sometimes, one of several trustees is spoken of as the acting trustees, but the Court knows of no such distinction: all who accept the office are in the eyes of the law acting trustees. If anyone refuses or is incapable to join, it is not competent for the others to proceed without him, and, if for any reason they are unable to appoint a new trustee in his place under Section 36(1) of the Act, the administration of the trust must devolve upon the Court. However, the act of one trustee done with the sanction and approval of a co-trustee may be regarded as the act of both, though such sanction or approval must be strictly proved.”[76]
No trustee can delegate his powers and duties to another trustee and any agreement to do so would be against the obligations he had undertaken, illegal and void.[77] But in the absence of such provision, all co-trustees must join in the execution of the duties of the office.[78]This principle applies both to Public and private trusts.[79]
In Kishore Joo Vs. Guman Behari Joodeo[80]it has been held that the trustees would join to file an application to execute the decree obtained on behalf of the idol of a temple. However, it was also observed that it was a settled law that it was Shebait alone who can file a suit. But in exceptional circumstances, persons other than Shebait can institute a suit on behalf of the idol. Our Apex Court in M/s. Shanti Vijay and Co. Vs. Princess Fatima Fouzfa[81] held as under:
“The act of one trustee done with the sanction and approval of a co-trustee may be regarded as the act of both. But such sanction or approval must be strictly proved.”[82]
Is Trusteeship a Property?
Shebaits and Mahants have proprietary interest in the properties of the trust. Such a right to receive beneficial interest creates proprietary interest in them. But, in most other cases, the trustees are ‘bare trustees’ to administer the trust property and to perform their duties without any proprietary interest.[83]
Managing Trustees Would be Entitled to Execute the Duties
The instrument of trust may provide that one or more trustees shall be managing trustees and where such provision is made, those who are empowered to act as managing trustees would be entitled to execute the duties of the office without the concurrence of the other co-trustees. But in the absence of such provision, all co-trustees must join in the execution of the duties of the office.[84]
In JP Srivastava and Sons Ltd. Vs. Gwalior Sugar Co[85] it is held by the Supreme Court as follows:
“Therefore, although as a rule, trustees must execute the 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 a majority of trustees;
(2) where there is express sanction or approval of the act by 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.”
Doesn’t Revert Even If Trustee Refuses to Accept Office
It is an established principle of equity jurisprudence that a trust never fails even if there is no trustee;[86] that in proper cases the court enforces trust; and that the beneficiaries can enforce the trust. The property does not revert to the settlor or his heirs. Dr. BK Mukherjea, J. on The Hindu Law of Religious and Charitable Trusts reads as follows:
“The trust itself does not fail. Only the property ceases to vest in the trustee who refuses to accept the office. The person in possession of the property undertakes the obligation in the nature of trust. The property does not revert to the representatives or the heirs of the settlor testator who has already divested himself of the title and interest in the property by creating a valid and complete trust. Refer to Narasingha Charan Vs. Radha Kant, ILR 1950 Cut 374. But compare Robson Vs. Flight (1865) 4 De G. J. & Subject matter 608 with Mallot Vs. Wilson (1980) Ch 494. In the latter case it was held that where all the trustees disclaim, the property reverts in the disposer, or if he is dead, in his legal representative, who becomes, by operation of law, the trustee thereof for the purpose of the trust. In the former case, it was held that so far as the trust itself is concerned, the disclaimer by a trustee or by all the trustees does not have the effect of avoiding the trust. That is, the beneficiaries can enforce it, or the object of the trust can be enforced where beneficiaries are not capable of suing”[87]
Trustee Cannot Claim Adverse Title
See Chapter: Breach Trust and Removal of Trustees
Accounting by Trustees
Indian Trusts Act , 1882 Sec. 19 and 23 read as under:
19. Accounts and information.—A trustee is bound (a) to keep clear and accurate accounts of the trust property, and (b) at all reasonable times, at the request of the beneficiary to furnish him with full and accurate information as to the amount and state of the trust property.
23. Liability for breach of trust.—Where the trustee commits a breach of trust, he is liable to make good the loss which the trust property or the beneficiary has thereby sustained.
No trustee can get a discharge unless he renders accounts of his management even when there is no allegation of misfeasance, malfeasance and nonfeasance and also gross negligence Courts have discretion in regard to the fixing the period of accounting in a suit for accounting against a trustee of a charity. [88]
In Vedagiri Lakshmi Narasimha Swami Temple Vs. Induru Pattabhirami Reddi[89] new trustees alleged misfeasance, malfeasance and non-feasance and also gross negligence against former trustees. On the questions whether the present trustees can demand rendition of account from the ex-trustees in respect of their management without alleging against them any acts of negligence or willful default and, if so, whether there was a bar to the maintainability of a suit for the relief of rendition of accounts in a civil court, it was observed by our Apex Court that it was ‘common place that no trustee can get a discharge unless he renders accounts of his management’ and that this liability was irrespective of any question of negligence or wilful default. They are, therefore, held liable to render accounts of their management to the present trustees.
When Estate of a Deceased Trustee Liable
In Gore-Browne, Handbook of Joint Stock Companies,[90] it is stated:
“In the case of the death of a director his estate remains liable for any breach of trust he may have committed (including any wrongful dealing with the company’s property, such as a payment of dividend out of capital or sale of its assets at an undervalue).”
An action for misrepresentation or negligence survives against the personal representatives of deceased director. In Halsbury’s Laws of England[91] it is stated:
“A director who has misapplied or retained or become liable or accountable for any money or property of the company, or who has been guilty of any breach of trust in relation to the company must make restitution or compensate the company for the loss. Where the money of the company has been applied for purposes which the company cannot sanction, the directors must replace it, however honestly they may have acted. The estate of a deceased director has always been liable for his breaches of trust.”
‘Cy pres’ Doctrine
When it is found by the court that the particular mode of charity, indicated by the donor, cannot be carried on for impossibility or impracticability, the court will execute and accomplish the donor’s intention applying ‘cy pres’ doctrine. It is applied where from lapse of time or change of circumstances it is no longer possible to apply the property left by the founder or donor in the precise way in which it was directed to be applied.[92] It is based on the principle that the court is the protector of all charities;[93] and that the court will not allow to fail a validly created trust or objects of foundation.
Invoking ‘cy pres’ doctrine the court will apply the property of the Trust to a charitable purpose ‘as nearly as possible’[94] resembling the original Trust. Besides physical impossibility, becoming the trust valueless, owing to attendant circumstances, also invites application of cy pres doctrine[95].
The trustees are bound to carry out the directions of the author under Sec. 11 of the Trusts Act and the only way in which the directions of the testament may be varied is by applying ‘cy pres’ doctrine.
Charitable and Religious Trusts Act, 1920
This Act permits ‘any trustee of an express or constructive trust created or existing for public purpose of a charitable or religious nature’ to apply “ for the opinion, advice or direction of the Court on any question affecting the management or administration of the trust property”.
Following are the important provisions.
“2. Interpretation. — In this Act, unless there is anything repugnant in the subject or context, ‘the Court’ means the Court of the District Judge or any other Court empowered in that behalf by the State Government and includes the High Court in the exercise of its ordinary original civil jurisdiction.
7. Powers of trustee to apply for directions.—
.(1) Save as hereinafter provided in this Act, any trustee of an express or constructive trust created or existing for public purpose of a charitable or religious nature may apply by petition to the Court, within the local limits of whose jurisdiction any substantial part of the subject-matter of the trust is situate, for the opinion, advice or direction of the Court on any question affecting the management or administration of the trust property, and the Court shall give its opinion, advice or direction, as the case may be, thereon:
Provided that the Court shall not be bound to give such opinion, advice or direction on any question which it considers to be a question not proper for summary disposal.
(2) The Court on a petition under sub-section (1), may either give its opinion, advice or direction hereon forthwith, or fix a date for the hearing of the petition, and may direct a copy thereof, together with notice of the date so fixed, to be served on such of the person interested in the trust, or to be published for information in such manner, as it thinks fit.
(3) On any date fixed under sub-section (2) or on any subsequent date to which the hearing may be adjourned, the Court, before giving any opinion, advice or direction, shall afford a reasonable opportunity of being heard to all persons appearing in connection with the petition.
(4) A trustee stating in good faith the facts of any matter relating to the trust in a petition under sub-section (1), and acting upon the opinion, advice or direction of the Court given thereon, shall be deemed, as far as his own responsibility is concerned, to have discharged his duty as such trustee in the matter in respect of which the petition was made.
9. Savings.— No petition under the foregoing provisions of this Act in relation to any trust shall be entertained in any of the following circumstances, namely:—
.(a) if a suit instituted in accordance with the provisions of section 92 of the Code of Civil Procedure 1908 (5 of 1908), is pending in respect of the trust in question;
(b) if the trust property is vested in the Treasurer of Charitable Endowments, the Administrator General, the Official Trustee, or any Society registered under the Societies Registration Act, 1860 (21 of 1860); or
(c) if a scheme for the administration of the trust property has been settled or approved by any Court of competent jurisdiction, or by any other authority acting under the provisions of any enactment.
12. Barring of appeals.— No appeal shall lie from any order passed or against any opinion, advice or direction given under this Act.”
Court is Guardian or Protector of All Public Trusts
In Sennimalai Swamy Madam Trust, Palani v. NIL, 1999-3 CTC 390 it is observed as under:
“10. In view of these decisions, it has to be held that petitioner is competent to file an application before lower court seeking opinion. Unless Court finds that the opinion cannot be given since there are complicated facts or question of law is to be decided, it may not be proper on its part to refuse to give opinion. After all, Court is guardian or Protector of all public trusts and it cannot refuse to give its opinion, when the same is sought for by a Trustee.” (Avoch Thevar v. Chummar, AIR 1957 Ker 171, In Re Birla Jankalyan Trust, AIR 1971 Cal. 290, In Re Dhanalat, AIR 1975 Cal. 67, referred to)
Courts desist if Complicated Facts or Question of Law
In Avoch Thevar v. Chummar, AIR 1957 Ker 171, it is observed that serious questions of res judicata, estoppel, good faith etc. could not be adjudicated under Sec. 7 of the Charitable and Religious Trusts Act, 1920. It is said as under:
“6. …. “The Court under the section exercises what might be called its consultative jurisdiction, giving guidance to the trustee. The court is not, however, to grant sanction merely because it is applied for. The limitation is that the court will refuse to consider the matter if in its opinion the question is one not capable of summary disposal e.g. if it is one of the detail or difficulty. In any event the court will consider judicially the matters placed before it before disposing of the matter.”
This Kerala decision is followed in Hasan Bin Mubarak v. Chief Judge, City Civil Court, Hyderabad AIR 1999 AP 11, observing as under:
“Section 34 of the Act contemplates only a summary disposal on non-controversial issues. The mental condition of a person being an important personal problem, the Court cannot dispose of the same in a summary manner. What the Court below has done was to examine 3rd respondent, who is alleged to be an insane person and give the opinion on the basis of her statement. Though Ex.R-1, certificate, alleged to have been given by a psychiatrist, was marked, the Court made no effort to examine the said doctor. Obviously, this could not have been done because the matter has to be disposed of in a summary manner. Thus, it is evident that the advice that was sought for by the trustee required a determination on contentious facts and the jurisdiction of the Court under section 34 being only in the nature of giving guidelines or directions without entering into the merits, the application ought not to have been entertained by the Court. The trustee might have got a valid and satisfactory opinion had he approached a qualified medical man or the Court in a properly instituted suit.
23. In Avoch Thevar case (supra) following the decision in Armugan Chetty vs. Raja Jagaveera ILR 28 Madras 444, it was clearly held that while providing the trustees a right to apply to the Court for opinion to the Management and the Members, Section 34 embodied at the same time, a limitation governing the questions to be asked viz. that there should not be hypothetical and any questions of details or difficulty or importance, not proper in the opinion of the Court for summary disposal……” (quoted in Ashok Kumar Kapur VS Ashok Khanna, AIR 2007 SC 6; 2007-5 SCC 189)
Avoch Thevar v. Chummar, AIR 1957 Ker 171, is followed in P. D. Jaiswal v. Dwarikadhish Temple Trust, 2006 2 ADJ 680; 2006 3 AllLR 21; 2006 3 AWC 2823 saying as under:
“39. The last strand of Mr. Ravi Kant’s arguments was a Kerala Division Bench decision given in the case of Avoch Thevar v. Chummar, A.I.R. 1957 Ker 171, which was delivered for the Court by Hon’ble Mr. Justice Varadaraja lyengar. With the greatest of respect, it is a beautiful learned judgment which should be read by any reader of this judgment and we do not set out the materials collected therein simply because we cannot do it better or in a briefer way. We respectfully referred the reader to paragraph-6, 7, 8 and 9 of the said judgment.
40. Following the said judgment and the authorities quoted there, which are fully persuasive in our respectful opinion, we must opine that a decision under Section 7 of the 1920 Act is not to be given at all by the District Court in matters which are seriously disputed or contested, or which required difficult decisions on questions of fact or law,”
Appointment of Manager by Trustees or Courts
A public trust is perpetual. Rule against perpetuities does not apply to it. It is the onerous duty of the persons entrusted with such endowment, to carry out the objectives of this entrustment. It can never be put to an end through its nature may be changed.[96] If entrustment is to any juristic person, mere absence of a manager would not negate the existence of a juristic person.
The Supreme Court held in SGPC Vs. Som Nath Dass[97] that the identity of an endowment or juristic person is not depended on the appointment of a manager. It may be proper or advisable to appoint such a manager while making any endowment but in its absence, it may be done either by trustees or courts in accordance with law. Mere absence of a manager does not negative the existence of a juristic person.
The Rights and Liabilities of the Beneficiaries
Indian Trusts Act, 1882 permits the beneficiaries, as a whole, who are competent to contract, to do, act or perform the following matters, as stated in those sections.
Sec.11. Modify the purpose of the trust and the directions for management.
23. Acquiesce a breach of trust of trustee.
46. Allow the trustee to renounce.
47. Allow the trustee to delegate his office or any of his duties.
56. Require trustee to transfer the trust property to them, or to another.
58. Transfer the interest of beneficiary.
62. Ratify the sale to the trustee.
71. Discharge the trustee.
77. Allow to extinguish trust.
78. Revoke the trust.
Chapter VI of the Indian Trusts Act speaks the rights and liabilities of the beneficiaries. The following are substance of such enumerated rights and liabilities in the Act:
55. Right to rents and profits.—The beneficiary has a right to the rents and profits of the trust property.
56. Right to specific execution.—The beneficiary is entitled to have the intention of the author of the trust specifically executed.
Right to transfer of possession.—where thebeneficiaries may require the trustee to transfer the trust property to them, or to such person as they may direct.
57. Right to inspect and take copies of instrument of trust accounts, etc.—
58. Right to transfer beneficial interest.—The beneficiary may transfer his interest and dispose of such interest.
59. Right to sue for execution of trust.—Where no trustees are appointed or all the trustees die, disclaim or are discharged, the beneficiary may institute a suit for the execution of the trust.
60. Right to proper trustees.—The beneficiary has a right (subject to the provisions of the instrument of trust) that the trust property shall be properly protected and held and administered by proper persons and by a proper number of such persons.
61. Right to compel to any act of duty.—The beneficiary has a right that his trustee shall be compelled to perform any particular act of his duty and restrained from committing any breach of trust.
62. Wrongful purchase by trustee.—Where a trustee has wrongfully bought trust property, the beneficiary has a right to have the property declared subject to the trust or re-transferred by the trustee.
63. Following trust property into the hands of third persons.—Where trust property comes into the hands of a third person inconsistently with the trust, the beneficiary may institute a suit for a declaration, that the property is comprised in the trust.
Where the trustee has disposed of trust property, the beneficiary has rights as nearly as may be the same as his rights in respect of the original trust property.
64. Saving of rights of certain transferees.—…
65. Acquisition by trustee of trust property wrongfully converted.—Where a trustee wrongfully transfers trust property and afterwards himself becomes the owner of the property, the property again becomes subject to the trust.
66. Right in case of blended property.—Where the trustee wrongfully mingles the trust property with his own, the beneficiary is entitled to a charge on the whole fund for the amount due to him.
67. Wrongful employment by partner-trustee of trust property for partnership purposes.—If a partner, being a trustee, wrongfully employs trust property in the business, other partners having such notice of the breach of trust are jointly and severally liable for the breach of trust.
68. Liability of beneficiary joining in breach of trust.—Where one of several beneficiaries joins in committing breach of trust, the other beneficiaries are entitled to have all his beneficial interest impounded as against him
69. Rights and liabilities of beneficiary’s transferee.—Every person to whom a beneficiary transfers his interest has the rights of the beneficiary in respect of such interest at the date of the transfer.
Removal of Trustees on Breach of Trust
See Chapter: Breach of Trust and Removal of Trustees.
All Trustees Together to File the Suit for Eviction
See Chapter: How to Sue trust and Trustees
In our law, trustee alone is the ‘landlord’ to file a suit for eviction as held in Kansara Abdulrehman Sadruddin Vs. Trustees of the Maniar Jamat Ahmedabad.[98] It is observed in Kishorelal Asera Vs. Haji Essa Abba Sait Endowments[99] as under:
“Order XXXI, Rule 1 C.P.C. dealing with the representation of beneficiaries in suits concerning property vested in Trustees says that the Trustee shall represent the persons so interested. …. Therefore, in a suit for evicting the tenant from the Trust premises, the Trustees jointly or any one of them, when authorised in that behalf by the rest of them, can maintain the suit.”
TRUST in Transfer of Property to MINORS, under the TP Act
Transfer for benefit of Unborn Person
(Similar provision in Section 113 of the Indian Succession Act, 1925)
Sections 13 and 14 of the TP Act are worded in a tiresome manner. It is too difficult to understand the purport of the Section, in its correct perspective, without a thorough exploration. Both these sections says about transfer of property to unborn persons.
Sec. 13 of the TP Act reads as under:
13. Transfer for benefit of unborn person. Where, on a transfer of property, an interest therein is created for the benefit of a person not in existence at the date of the transfer, subject to a prior interest created by the same transfer, the interest created for the benefit of such person shall not take effect, unless it extends to the whole of the remaining interest of the transferor in the property.
As articulated in Sec. 5 of the Transfer of Property Act, ‘Transfer of Property’ must be by a living person, to another living person. Sec. 13 is an enabling provision to transfer property to an unborn person. It directs that following conditions must be satisfied for a valid transfer to an unborn person:
(i) Prior-Interest must have been created in ‘someone’:
The interest in the property (referred to in this Section as prior interest), for the period between the transfer and the birth of the unborn person, must have been created (in someone), by the same transfer.
[The aforesaid proposition can be deduced from the clause in Sec. 13 – “subject to a prior interest created by the same transfer“];
(ii) Whole of the remaining interest of the transferormust be created in the unborn person:
The ‘prior-interest-holder’ must have been directed (by the transferor) to create/transfer the whole remaining interest (directly) to such unborn person.
That is, if a life-interest stands created, or continues, on another, (even after the birth of the said ‘unborn’) it will not ‘take effect‘.
[These can be deduced from the clause in Sec. 13 – “the interest created for the benefit of such person shall not take effect, unless it extends to the whole of the remaining interest of the transferor in the property”; and from the illustration in Sec. 13.]
The Illustration in Sec. 13 of the TP Act reads as under:
Illustration: A transfers property of which he is the owner to B in trust for A and his intended wife successively for their lives, and, after the death of the survivor, for the eldest son of the intended marriage for life, and after his death for A’s second son. The interest so created for the benefit of the eldest son does not take effect, because it does not extend to the whole of A’s remaining interest in the property.
“For the benefit of” – Implies ‘TRUST’
Sec. 13 begins with the words – “Where, on a transfer of property, an interest therein is created for the benefit of a person not in existence”. The words ‘for the benefit of‘ definitely brings-in the concept of ‘trust’.
Prior interest holders will be ‘TRUSTEES’ for unborn persons, if not directed otherwise
The transferor of property to the unborn person is free to provide ‘beneficial enjoyment’ to the ‘prior-interest-holder’. If it is not so specifically provided, going by the principles of law, the prior-interest-holder (in Sec. 13) will be a mere ‘trustee’ for the unborn person (the beneficiary).
Note: Trust is ‘an obligation’ upon the trustee to administer the trust property, as if he is its owner and as required by the author, for the benefit of the beneficiaries.
“TRANSFER OF PROPERTY” and ‘CREATION OF INTEREST’ in Sec. 13
It is clear that the words, ‘transfer of property‘ and ‘an interest created therein’ are used in Sec. 13 to denote two different notions. Transfer of property to the ‘unborn’ should take place on his/her birth. Creation of interest can be done only on attaining his/her majority.
Upto the birth of the ‘unborn’, the enjoyment can be had by two ways:
One, creating beneficial enjoyment on anyone.
Second, creating a trustee (for administering the property; and if so provided by the transferor, he would continue upto the majority of the ‘unborn’).
Even if no trustee is appointed, and it does not come out from the deed of transfer as to who should be the trustee, the court will appoint a trustee, on the principle – ‘no trust will fail for want of trustees’.
Transfer to Unborn can only be made by a Machinery of Trust
Mulla, on The Transfer of Property Act, in commentary to Sec, 122, Gifts, it is stated:
“A gift may be made by the equitable machinery of a trust; and the interposition of the trustees enables a gift to be made to a person not yet in existence and, therefore, incapable of being the donee of a direct gift.” (See: Controller of Estate Duty, Bombay v. Bhagwandas Velji Joshi, 1983-139 ITR 316 (Bom); 1981-6 TAXMAN 202; Saraswathi v. Devaki Amma, ILR 1986-1 Ker 550; 1985 KLT 217.)
In Mathen Mathew v. Kunjika Bharathi: AIR 1968 Ker 12, it is held as under:
“18. The gift can be to the named donees as representing the group of persons composed of the wife and children including children to be born. Such a gift can be made only through the machinery of a trust, the named donees holding as trustees for themselves and the other beneficiaries.”
In The Commissioner of Income Tax v. Brig. Kapil Mohan, [2001] 252 ITR 830: 118 Taxman 430 (Delhi ) observed as under:
“5. A transfer cannot be made directly to an unborn person, for the definition of transfer in Section 5 is limited to living persons. Such transfer can only be made by the machinery of trusts. Possibly, to express this distinction, the expression “for the benefit of” has been used, since trustees being the transferees hold the property for the benefit of the unborn person.”
The Madras High Court in T Subramania Nadar v. T Varadharajan, AIR 2003 Mad 364, pointed out as under:
“12. Under Section 13 of Transfer of Property Act transfer cannot be made directly to an unborn person as the definition of transfer in Section 5 of Transfer of Property Act is limited to living persons. The transfer in favour of an unborn person can be made by a machinery. It is intended to express this distinction by the words “for the benefit of“, the trustees being the transferees who hold the property for the benefit of the unborn persons. The estate must vest in some person between the date of the transfer and the coming into existence of the unborn person. The interest of the unborn person must therefore be in every case preceded by a prior interest. Section 13 says that the interest of the unborn person must be the whole remainder.”
Sec. 13 does not specifically refer to Prior Interest “HOLDERS”. Why?
The (main) object of this section is to provide – ‘whole remainder interest … in the unborn person‘.
The creation of interest, in a prior interest HOLDER, for the period between the transfer and the birth of such unborn person, is an inevitable coincident.
The prior interest HOLDER may be a person who is entitled for ‘beneficial enjoyment’; or, he may be a mere trustee, not entitled for ‘beneficial enjoyment’. In either case, the ‘the whole of the remaining interest‘ must have been directed to be vested in the (unborn) person (when he born).
For the above, only an indication as to creation of prior interest was sufficient.
Sec. 14. Rule against perpetuity – Analysed.
(Similar provision in Section 114 of the Indian Succession Act, 1925)
Sec. 14 of the TP Act reads as under:
14. Rule against perpetuity. No transfer of property can operate to create an interest which is to take effect after the life-time of one or more persons living at the date of such transfer, and the minority of some person who shall be in existence at the expiration of that period, and to whom, if he attains full age, the interest created is to belong.
Sec. 14 of the TP Act lays down the following:
Property can be transferred to an unborn person.
Sec. 14 basically declares the maximum period (perpetuity period) for creating an interest in an unborn person as regards an immovable property.
For transferring property to an unborn person, such (unborn) person must have born within the life-time of ‘one or more persons’ named in the transfer deed (who must be one living at the date of such transfer).
The interest in the property can be created in favour of such (unborn) person only on attaining majority by such (unborn) person (i.e., 18 years).
Therefore, the maximum period (perpetuity period) for creating the interest in the property in favour of such (unborn) person will be the remaining (after transfer) ‘life-time‘ of such ‘one or more persons‘ (who were living at the date of such transfer) plus (+) the ‘minority’ of such (unborn) person (i.e., 18 years).
It is clear – such (unborn) person must have born at least on the day of death of such ‘one or more persons‘.
Sec. 14 allows the transferor to name any ‘one or more persons‘ whose ‘life-time’ is to be taken into consideration for Sec. 14.
Who are such ‘one or more persons‘ has to be inferred from the transfer deed.
As stated in Sec. 13, the interest in the property, for the period between the transfer and the birth of such unborn person (referred to as prior interest), must have been created in ‘some’ (prior interest) holder.
Note: The prior interest holder in Sec. 13 need not necessarily be the ‘one or more persons‘ stated in Sec. 14.
G. Ramakrishniah v. Dasaratharama Reddiar, AIR 1970 Mad 484 ( Natesan, J.), vividly explains these matters, as under:
“The perpetuity period under Section 14 of the Act consists of the lifetime of one or more persons living at the time the transfer takes effect, and the further period of the minority of a person in existence at the close of the person living at the time of the transfer. ….. Section 14 of the Act however does not place any restriction as to who can be the living person whose existence can postpone the vesting. It allows the settlor to use any life for the purpose…… It may be any person or any number of persons, but the person or persons must be living at the date of such transfer. True, one must infer from the document itself the person or persons whose life has to be considered.”
Status of the ‘one or more persons‘ whose ‘life-time’ is to be taken into consideration
As stated earlier, the prior interest holder in Sec. 13 need not necessarily be the ‘one or more persons‘ stated in Sec. 14.
They are not ‘trustees’ inasmuch as no property is entrusted for their administration, and no obligation is casted upon them.
Therefore, they are persons merely chosen by the transferor of property (to an unborn), for the purpose of Sec. 14.
[1] Sk. Abdul Kayum Vs. MullaAlibhai: AIR 1963 SC 309;
Uttar Pradesh Vs. BansiDhar: AIR 1974 SC 1084;
BaiDosabai Vs. MathurdasGovinddas: AIR 1980 SC 1334.
[39]Section: 10, Companies Act, 2013 reads as under:
10. Effect of memorandum and articles: (1) Subject to the provisions of this Act, the memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by the company and by each member, and contained covenants on its and his part to observe all the provisions of the memorandum and of the articles.
(2) All monies payable by any member to the company under the memorandum or articles shall be a debt due from him to the company.
Faith, hope, confidence, entrustment, obligation, conviction, expectation, belief, assurance, care etc.
Derivative:
Reposition of confidence in trustee, by the founder;
Obligationof trustee to administer the trust property;
Unconditional responsibility undertaken by the trustee.
Associationinvolved in the affairs of the trust.
Endowment or property held in trust;
Institution managed under the trust;
TRUST – In Law
Trust is an ‘obligation’-
that arises from the reposition of confidence by the author
upon the trustee
to deal with or administer the trust-property
for the benefit the beneficiaries.
Trustee is the person who is-
entrusted by the founder
to deal with or administer the trust property
for the benefit the beneficiaries..
Trust-property is the property –
that is endowed by the founder
with a particular object that would benefit
the specified beneficiaries.
Thus, the constituents for a valid trust are the following:
Founder, Property,
Object, Trustee,
Obligation,
Reposition of confidence, and
Beneficiary.
Definitions Given by Jurists
Underhill in ‘Law Relating to Trusts and Trustees’ defines trust as under:
“A trust is an equitable obligation binding a person (who is called a trustee) to deal with property over which he has control (which is called the trust property) for the benefit of persons (who are called the beneficiaries) of whom he may himself be one, and any one of whom may enforce the obligation.”[1]
Halsbury’s Laws of England describes ‘trust’ as a confidencereposed in a person with respect to property of which he has possession or over which he can exercise a power, to the intent, that he may hold the property or exercise the power for the benefit of some other person or object.[2]
Salmond on Jurisprudence[3] refers to trust as under:
“A trust is a very important and curious instance of duplicate ownership. Trust property is that which is owned by two persons at the same time, the relation between the two owners being such that one of them is under an obligation to use his ownership for the benefit of the other. The former is called the trustee, and his ownership is trust ownership: the latter is called the beneficiary, and his is beneficial ownership. As between trustees and beneficiary, the law recognises the truth of the matter: as between these two, the property belongs to the latter and not to the former. But as between the trustee and third persons, the fiction prevails. The trustee is clothed with the rights of his beneficiary, and is so enabled to personate or represent him in dealings with the world at large.”[4]
TRUST: Definition in Indian Trusts Act
Definition of ‘trust’ in the Indian Trusts Act, 1882 contains the quintessence and spirit of the definitions given by Underhill, Halsbury and Salmond. Sec. 3 of the Trusts Act 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:
‘Author of the trust’: ‘trustee’; ‘beneficiary’;‘trust property’;‘beneficial interest’;‘instrument of trust’: –
The person who reposes or declares the confidence is called the ‘author of the trust’;
the person who accepts the confidence is called the ‘trustee’;
the person for whose benefit the confidence is accepted is called the ‘beneficiary’;
the subject-matter of the trust is called ‘trust property’ or ‘trust money’;
the ‘beneficial interest’ or ‘interest’ of the beneficiary is his right against the trustee as owner of the trust property; and
the instrument, if any, by which the trust is declared is called the ‘instrument of trust’.”
Definition of ‘Trust’: Simplified
The definition of ‘trust’ in Sec. 3 of the Indian Trusts Act, 1882 can be simplified as under:
1. A ‘trust’ is anobligation upon the trustees.
2. It arises from the reposition of confidence, upon the trustees, by the author.
3. It is to deal with or administer the trust property, as if he (trustee) himself is the owner, for the benefit the beneficiaries.
Definition of ‘Trust’: Analysed
Sec. 3 presents the definition in a ‘noncompound’ expression; that is, ‘trust is an obligation’. It is only qualified further, as shown under:
A ‘trust’ is an obligation-
(i) annexed to the ownership of property (to administer), and
(ii)(a) arising out of a confidence reposed in (trustee, by the author) and accepted by the owner (that is, trustee, the legal owner), or
(ii)(b) declared and accepted by him (that is, trustee),#
(iii) for the benefit of another, or of another and the owner (that is, trustee, the legal owner).
# The words “by him” denote that the obligation is “declared and accepted” by the same person. This situation comes-up only when the author himself declares to act as trustee. See notes below under the head: ‘Obligation … Declared And Accepted By Him’.
In simple terms, trust is the legal obligation of the Trustees to deal with (Arjan Singh v Deputy Mal Jain, 1982-22 DLT 14; 1981-1 DMC 248; ILR 1982-1 Del. 11; Arjan Singh Vs Deputy Mal Jain, 1982-22 DLT 14; 1981-1 DMC 248; ILR 1982-1 Del. 11; P. Elumalai v Pachaiyappa’s Trust Board, 2017-8 MLJ 529) or administer (Khasgi Trust Indore v. Vipin Dhanaitkar, 2022 SCC Online SC 900; 2022-11 SCALE 1; 2022-17 SCR 173) the trust property and to give effect to the objects of the Trust.
A Drill Required to Appreciate the Definition – Taking Aid from other Provisions
The definition of ‘trust’ in Sec. 3 of the Indian Trusts Act is complicated. Not only certain courts but some learned authors of treatises also went completely wrong while explaining the definition.
An exercise is necessary to understand the purport and implication of the definition. For that effort we have to take aid from other sections of the Act; though, usually, definitions are tools for explaining the substantive provisions of a statute, and not vice-versa.
(i) ‘A Trust is An Obligation’
According to the Indian ‘Trusts Act’, ‘a trust is an obligation’ (arises from the reposition of confidence by the author).
It casts a responsibility upon the trustees to deal with or administer the trust property (as he himself is the owner). The word ‘trust’ is used in law as an ‘abstract[5]-countable[6] noun’, similar to ‘a business’, ‘an idea’ or ‘a duty’.[7]
(ii) ‘Obligation Annexed to the Ownership’ refers ‘Administration‘
As per the definition, trust is an obligation ‘annexed to the ownership’ of the trust-property. By the very nature of ‘Trust’, the obligation ‘annexed’ to the trust-property is for administration.[8] It is made clear in Sec. 11 of the Indian Trust Act.
Sec. 11 casts duty on trustee to execute the trust, by fulfilling ‘the purpose of the trust’, and obeying ‘the directions of the author of the trust’.[9] Sec. 34, 35 and 60 also refer to ‘administration’ or ‘management’ by trustee.
Sec. 11 Says – The trustee is bound to fulfil the purpose of the trust, and to obey the directions of the author
Sec. 34 says – Right to apply to Court for opinion in managementof trust-property
Sec. 60 says – Right to proper trustees.—The beneficiary has a right that the trust-property shall be properly protected and held and administered by proper persons …
(iii) Confidence is ‘Reposed’ by the Author ‘in the Owner’ – Owner is Trustee
Trust is defined to be an obligation arising out of a confidence ‘reposed in’ and ‘accepted by’ the owner. When the ‘author of the trust’ is defined, it is stated:
“The person who reposes or declares the confidence is called the ‘author of the trust’.”
Therefore, it is definite that the words, ‘confidence reposed in the owner’, denote the confidence that is ‘reposed’ by the author[10] ‘in the owner’.
(iv) The ‘Owner’ who ‘Accepts’ the Confidence is Trustee.
As we have seen, it is the author who ‘reposes’ the confidence; and the confidence is ‘reposed in’, and ‘accepted by’, the owner. Who is the ‘owner’?
It is trustee.[11] The observations in some decisions[12] that the word ‘owner’ refers to the ‘author’ is absolutely incorrect.
The nexus between owner and trustee is clear from the definitions of ‘trust’ and ‘trustee’ – when ‘trust’ is defined, it is stated: the confidence is ‘accepted by the owner’; when ‘trustee’ is defined, it is stated: the confidence is ‘accepted by the trustee’.
According to the definition of trust, the ‘obligation’ stands ‘annexed to the ownership’ of the trust-property. Sec. 6 of the Trusts Act makes it clear that ‘a trust is created when the author of the trust transfers the trust property to the trustee’. Therefore, the ‘obligation’ upon the trustee casts a duty upon him to deal with or administer the trust-property as if he is its ‘owner’.
From Sec. 6 of the Trusts Act, it is further clear that a trust cannot be said to have been constituted, unless the trustee is constituted as the ‘owner’ of the endowed property.[13] For due administration,[14] such transfer[15] and vesting[16] of property in the trustee, as its (legal) owner,[17]is inevitable.
To find the answer, who is the ‘owner’ referred to in the definition of trust,we can also refer to the definition of ‘beneficial interest or interest’, in Sec. 3. The definition reads:
“The ‘beneficial interest’ or ‘interest’ of the beneficiary is his right against the trustee as owner of the trust property.”
The endowed property of a trust stands vested in trustee as its (sole) ‘owner’.[18] In RP Kapur Vs. Kaushalya Educational Trust[19] it is held by Delhi High Court that ‘obligation’ in trust refers to a ‘tie of equity’ (viniculum-juris), whereby the trustee accepts the confidence reposed in him by the author to hold or apply the trust property for the purposes of the trust.
(v) ‘Obligation … Declared And Accepted By Him’
Going by the definition, the pronoun ‘him’ stands for ‘owner’. The definition reads:
“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 …..”
As we have found in the notes just above, the confidence is ‘reposed and declared’ by the author;[20] and the confidence is ‘reposed in’, and ‘accepted by’, the trustee[21] (trustee is referred to in the definition as ‘owner’ – since trustee is the ‘legal owner’).
The expression, ‘obligation … declared and accepted by him’, is applied only when the declaration and the acceptance are made by the same person – it is Trustee. Rajasthan High Court observed in Heeralal Vs. Firm Ratanlal Mahavir Prasad[22] as under:
“If only the trustee himself is the author, then only the trustee can make a declaration of trust.”
Therefore it is clear that this expression is attracted when the author declares ‘himself to be the trustee’.[23] (In such cases, the requirement of a formal ‘reposition of confidence upon the trustee’ does not arise.)
Section 6 of the Trusts Act expressly states that an author can be a founder-trustee. Clause (e) of Sec. 6 indicates that the formal ‘transfer of the trust-property to the trustee’ is not required where the author ‘indicates with reasonable certainty by any words or acts’ that he himself would be the trustee.
Our Apex Court held in Tulsidas Kilachand Vs. CIT Bombay City[24] as under:
“No doubt, under Ss. 5 and 6 of the Indian Trusts Act if the declarer of the trust is himself the trustee also, there is no need that he must transfer the property to himself as trustee; but the law implies that such a transfer has been made by him, and no overt act except a declaration of trust is necessary. The capacity of the declarer of trust and his capacity as trustee are different, and after the declaration of trust, he holds the assets as a trustee. Under the Transfer of Property Act, there can be a transfer by a person to himself or to himself and another person or persons. In our opinion, there was, in this case, a transfer by Mr. Tulsidas Kilachand to himself as a trustee, though there was no formal transfer.”
(vi) ‘Confidence (Reposed in and) Accepted by the Owner’
We have seen, on analysis of the definition, that:
the confidence is ‘reposed in’ and ‘declared by’ by the author; and
the confidence is ‘accepted’ by the trustee.
From the definition, it is clear that the clause, ‘Confidence Reposed in and Accepted by the Owner’ manifest that (i) the ‘Obligation‘ on trustee is that enjoined bythe author, and (ii) the Obligation must have been accepted by the trustee, on his own.
“Accepted by the Owner” denotes Unconditional Obligation undertaken by the Trustee
The words, “accepted by the owner (trustee)” is used in the definition with the deliberate object of denoting the unconditional obligation undertaken by the trustee, ‘on his own’; if not, the words “and accepted by” stand superfluous; inasmuch as a trust will not endure without a trustee.
The definition of Trust can be explained, in a nutshell, as under:
A trust is an obligation annexed to the ownership of property, and
Trust is an obligation (upon trustee[25]). It is to deal with or administer[26]the trust-property as its (legal) owner.
arising out of a confidence
Duty of a Trustee is fiduciary[27]in nature.[28] It is moral as well as legal.[29] (It must have been arisen from the confidence reposed in by the author.)
reposed in
Confidence is reposed in Trustee (by the Author[30]).
and accepted by the owner, or
Trustee,[31]the (legal) owner,[32] must have (unconditionally) accepted the confidence (reposed in by the author).
declared and accepted by him
The obligation is ‘declared and accepted‘ by the trustee. (Only when the author himself is the trustee,[33] the obligation canbe ‘declared and accepted’ by one person.)
for the benefit of another, or of another and the owner.
Author creates trust for the benefit of others. Trustee can be one among the beneficiaries.
Essential Requirements for a Valid Trust
Sec. 4 of the Indian Trusts Act, 1882 speaks as to creation of trust for ‘lawful purpose’. It reads as under:
4. Lawful purpose. A trust may be created for any lawful purpose. The purpose of a trust is lawful unless it is
(a) forbidden by law, or
(b) is of such a nature that, if permitted, it would defeat the provisions of any law, or
(c) is fraudulent, or
(d) involves or implies injury to the person or property of another, or
(e) the Court regards it as immoral or opposed to public policy.
Every trust of which the purpose is unlawful is void. And where a trust is created for two purposes, of which one is lawful and the other unlawful, and the two purposes cannot be separated, the whole trust is void.
Explanation. In this section, the expression “law” includes, where the trust property is immovable and situate in a foreign country, the law of such country.
The essential elements for creation of a trust, enumerated in Sec. 6 of the Indian Trusts Act, reads as under:
6. Creation of trust: Subject to the provisions of section 5, a trust is created when the author of the trust indicates with reasonable certainty by any words or acts
(a) an intention on his part to create thereby a trust,
(b) the purpose of the trust,
(c) the beneficiary, and
(d) the trust-property, and
(e) (unless the trust is declared by will or the author of the trust is himself to be the trustee) transfers the trust-property to the trustee.
Trust and Endowment
For a valid trust there should be certainty[34] as to:
These are the ingredients of an endowment also. Appointment of a trustee[39] and transfer[40] of property to trustee for administration make Trust different from an Endowment.
The word ‘endow’[41] expresses the idea of giving, bequeathing or dedicating something for some purpose.[42] An ‘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.[43] There may be dedication (granting) of property for subjecting it to an ‘easement’. But, in ‘law of trusts’, dedication involves the extinguishment of the rights of the original owner of the lands.[44] By ‘dedication’, the owner divests all his rights, title and interest in the property which becomes the property of the deity[45] or other endowment.
An ‘endowment’ can be public or private.[46] It is a corporeal reality to which social concepts are adhered to; whereas, a trust is primarily a legal concept attached to the administration of the endowed property.[47]
Property Vests in Trustee, by Transfer; But no Proprietary Interest
According to the definition of ‘Trust’, in the Indian Trusts Act, ‘a trust is an obligation (a) annexed to the ownership of property, and (b) arising out of a confidence reposed in and accepted by the owner/trustee. To establish a valid trust, the author must have completely parted with all his interest in the trust-property, and the property must have been transferred[48] to the trustee. But, the trustee acquires only ‘legal ownership’ over the trust-property, under the law in India. And, the beneficiaries have no proprietary-interest, or ‘beneficial interest’ pertaining to owners, as they have no ownership in the trust property.
In WO Holdsworth Vs. State of Uttar Pradesh (1957),[49] referring to the definition of trust, it is laid down by our Apex Court that the trustee is the owner of the trust property and the property vests in him as such. It is held in this decision as under:
“22. Whatever be the position in English Law, the Indian Trusts Act, 1882 (II of 1882) is clear and categoric on this point. Sec. 3 of that Act defines a Trust as 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 : the person who accepts the confidence is called the ‘trustee’ : the person for whose benefit the confidence is accepted is called the ‘beneficiary’ : ‘the beneficial Interest’ or ‘interest’ of the beneficiary is his right against the trustee as owner of the trust property; the subject-matter of the trust is called ‘trust property’ or ‘trust money’.”
Following WO Holdsworth Vs. State of Uttar Pradesh,[50] it is observed by the Supreme Court in State Bank of India Vs. Special Secretary Land and Land Revenue[51] that Sec. 3 of the Trusts Act emphasises the fact that the beneficiary has a right to obtain his beneficial interest or interest against the trustee as owner of the trust property and that the trustee would become trust property’s owner for the purpose of effectively executing or administering the trust.
It is observed by the Calcutta High Court in Sree Sree Iswar Gopal Jew Vs. Commr. of IT[52] as under:
“Three parties are necessary to the constitution of a trust, namely, the settlor, the trustee and the beneficiary. A trust is not completely constituted until the trust property is vested in trustees for the benefit of the cestui que trust.”
In Khairul Bashar Vs. Thannu Lal (1957)[53] the Allahabad High Court had held as under:
“A trust is an obligation annexed to the ownership of the property (vide Sections 3 and 5 of the Trusts Act). It is an essential condition of trust that property must vest in the trustee. Unless, therefore, the trustee is constituted as the owner of the property entrusted to him, a trust cannot be said to have been constituted. Reference in this connection might be made to cases reported in Hussain Ali v. Baqir Ali, AIR 1946 Mad 116 (A); Shri Mahadeoji v. Baldeo Prasad, AIR 1941 Nag 181 (B) and Khemchand Ramdas v. Girdharidas Radhakishaindas, AIR 1947 Sind 187 (C); Ma Thein May v. U Po Kin, AIR 1925 Rang 289 (D) and Secretary of State for India v. Guru Proshad Dhur, ILR 20 Cal 51 (FB) (E). … The mere fact that a person is holding the property on behalf of another, will not constitute him a trustee, unless the ownership of the property is also vested in him.”
The definitions of ‘trust’, ‘trustee’ and ‘beneficiary’ lay down that the trustee is the owner of the trust property and the beneficiary has a right against the trustee as owner of the trust property.
The obligation upon the trustee, to administer,[54] being ‘annexed to the ownership of property’, the property has to be administered by the trustee as if he is the ‘owner’ of the same;[55] and, for such administration, the property must have been vested upon him as its (legal) owner.
Under Sec. 6 of the Trusts Act, a trust is created when the author of the trust transfers[56] the trust-property to the trustee.[57] Holding that the trustee is the legal owner of the trust property, it is observed in Maulavi Kamiruddin Khan Vs. Badrun Nisa Bibi (1940)[58] as under:
“In short, it is an obligation annexed to the ownership of property and before there can be a trust the trustee must be the owner. The matter is made abundantly clear in Section 6, Trusts Act, 1882, which is in these terms:
‘Subject to the provisions of Section 5, a trust is created when the author of the trust indicates with reasonable certainty by any words or acts an intention on his part to create thereby a trust, the purpose of the trust, the beneficiary, and the trust property, and (unless the trust is declared by will or the author of the trust is himself to be the trustee) transfers the trust property to the trustee.’
In short, there must be a transfer of the property to the trustee before a trust is created.”
Orissa High Court held in Narasingh Charan Mohapatra Vs. Radhakanta Mohapatra[59] as under:
“A trust in the accepted sense of the word is the creation of an obligation by the owner to the intent that he may hold the property for the benefit of some other person or object. As soon as the trust is declared according to the requirements of the law, the legal ownership passes to the trustee and he is bound to apply the income arising out of the property to the use and benefit of ‘cestuique trust’. As a general rule, it may be laid down that in order to make a voluntary declaration of trust binding upon the author of the trust he must have completely parted with all his interest in the property to the trustee or declared himself to be a trustee of the property for the benefit of the ‘cestuique trust’ –See: Agnew’s Trusts, p. 53.”
Sec. 10 and 75 of the Indian Trusts Act implies ‘vesting of property in trustees’.
Sec. 10 of the Indian Trust Act, 1882 reads:
10. ….. Disclaimer of trust—Instead of accepting a trust, the intended trustee may, within a reasonable period, disclaim it, and such disclaimer shall prevent the trust property from vesting in him. A disclaimer by one of two or more co-trustees vests the trust property in the other or others and makes him or them sole trustee or trustees from the date of the creation of the trust.
Sec. 75 of the Indian Trust Act, 1882 reads:
75. Vesting of trust property in new trustees.—Whenever any new trustee is appointed under section 73 or section 74, all the trust property for the time being vested in the surviving or continuing trustees or trustee, or in the legal representative of any trustee, shall become vested in such new trustee, either solely or jointly with the surviving or continuing trustees or trustee, as the case may require.
A Compny can be a Trustee of a Public Trust
It was held in See M.Gomathinarayagam Pillai v. Sri.Manthramurthi High School Committee, Tirunelveli, AIR 1963 Mad 387, as under:
“For the application of that section (Section 92 CPC) it makes no difference whether the trustees is an individual or a company, nor is there any distinction between a company in whom the office of trustee vests and one which is specially formed for the purpose of executing the trust.” (Referred to in: S.N.D.P. Yogum v. G. Krishnamoorthy, ILR 2022-3 Ker 494; 2022-4 KHC 168; 2022-4 KLT 36)
Duel Ownership, as comprehended by Salmond is Not accepted in Indian Law
Trustee is full and Sole Owner, under Indian law.
Under English law, there is ‘duel ownership’ on trust property. First is the ‘legal ownership’ which is vested with trustee; and the second, the ‘equitable or beneficial ownership’ vested with the beneficiary. Salmond on Jurisprudence[60] refers it as under:
“A trustee is the legal owner of the property, the actual owner thereof having lost title thereto by the creation of a trust. The equitable ownership in the trust property vests in the beneficiaries. The trust is thus an incident of dual ownership in which the creator of the trust no longer figures.”[61]
The Law of Trust in India does not follow the ‘doctrine of dual ownership’; because, it does not recognise legal and equitable estates. The trustee ‘holds’ and administers the trust property as its (sole[62]) ‘legal owner’[63] or the ‘full (legal) owner’. The Privy Council, in Chhatra Kumari Vs. Mohan Bikram (1931),[64] held as under:
“The Indian Law does not recognise legal and equitable estates. By that law, therefore, there can be but one owner; and where the property is vested in a trustee, the owner must, their Lordship think, be the trustee. This is the view embodied in the Indian Trusts Act: See Sec. 3, 55, 56, etc. … “[65]
If more than one trustee, the trustees altogether are (joint) owners of the trust property.[66]
Out Apex Court, referring, Mount Royal/Walsh Inc. v. Jensen Star, the Ship, (1990) 1 FC 199, of Federal Court of Appeal in Canada, observed in Ahmed Abdulla Ahmed Al Ghurair Vs. Star Health and Allied Insurance Co. Ltd.[67] as under:
“49. The term ‘Beneficial interest’ is defined under Section 3 of the Indian Trust Act, 1882 which is reproduced hereunder:
‘Beneficial interest’ or ‘interest of the beneficiary’ is his right against the trustee as owner of the trust property.’
50. As it can be discerned from the definition of ‘Beneficial interest’ provided in Section 3 of the Indian Trust Act, 1882, there are two parties involved in an issue governing beneficial interest. One is a beneficiary named as ‘beneficial owner’ and the other is the owner named as ‘registered owner’ being the trustee of the property or the asset in question. Thus, one can deduce the underlining principle that the ownership is nonetheless legal over the trust property, which vests on him but he also acts as a trustee of the beneficiary. A beneficial owner may include a person who stands behind the registered owner when he acts like a trustee, legal representative or an agent.”
It is beyond doubt that the Canadian law that follows the English principles is not applicable in India, in these aspects.
‘Beneficiaries’have Merely Beneficial Interest; ‘Legal Ownership‘ with Trustees
In The Province of Bihar v. FR Hayes, 1946-14 ITR 326 (Patna), Fazl Ali, CJ (as he then was) while interpreting Bihar Agricultural Income-Tax Act, 1938, referring the definition of trust in the Indian Trusts Act, held as under:
“The framers of the Act must be assumed to have known the accepted legal meaning of the expression and also known that the term ‘beneficiary’ in law is not generally used with reference to a full legal owner but with reference to a person who has ‘beneficial interest’ in some property which is usually in the possession and control of another person. The distinction between beneficial interest and legal ownership is one of the most notable features of a trust and in my judgment ‘beneficiaries’ referred to in Section 11 are those persons who have merely beneficial interest in a property while the legal ownership of the property vests in a person or persons who hold the property for their benefit.”
Trustee Holds ‘On His Own Right’; Not ‘On Behalf Of’ the Beneficiaries
In WO Holdsworth Vs. State of Uttar Pradesh[68] it is laid down by our Apex Court as under:
“23. These definitions emphasise that the trustee is the owner of the trust property and the beneficiary only has a right against the trustee as owner of the trust property. The trustee is thus, the legal owner of the trust property and the property vests in him as such. He, no doubt, holds the trust property for the benefit of the beneficiaries but he does not hold it on their behalf. The expressions ‘for the benefit of’ and ‘on behalf of’ are not synonymous with each other. They convey different meanings.”
Our Apex Court observed in Comm. Wealth Tax Vs. Kirpashanker Dayashankar[69] that the trustee holds the trust property ‘on his own right’ and not ‘on behalf of’ someone else though he holds it ‘for the benefit of’ the beneficiaries.
Indian Trusts Act, 1882 does not accept the doctrine of ‘duel ownership’. ‘Legal ownership’ of the trust property is ‘vested’ with the trustee. Indian Trusts Act expounds that the trustee ‘holds’ the trust property as its (sole[70]) owner. These obligations are casted upon trustees only to manage the trust property for the benefit of the beneficiaries.[71] It is beyond doubt that the trustee has no ‘proprietary interest’ inasmuch as the beneficial interest is ‘carved out’[72] in the property itself. In dealings with the world at large, the trustee personates or represents as the owner of the property.[73]The Act refers only to ‘beneficial interest’ entitled to by the beneficiaries; and, not ‘beneficial ownership’.
It is clear from the following statements in the definition of ‘trust’ in Sec. 3 of the Indian Trusts Act, 1882:
(i) “A ‘trust’ is an obligation … arising out of a confidence reposed in and accepted by the owner… for the benefit of another….”
(ii) “(T)he ‘beneficial interest’… is his (beneficiary’s) right against the trustee as owner of the trust property.”
The Common Law of Trust predicated by the courts in India,[74] in the matters of public trusts, has disfavoured the doctrine of ‘duel ownership’;[75] and followed the Trusts Act.
The Indian Trusts Act, 1882 repeatedly lays down – trustees are ‘holding’ trust property(Sec. 10, 29 and Chap. IX: Sec. 80 onwards). It is subject to the obligation to use his ownership ‘for the benefit of’ the beneficiaries.
Sec. 10 of the Indian Trust Act, 1882 reads:
10. Who may be trustee.—Every person capable of holding property may be a trustee; but, where the trust involves the exercise of discretion, he cannot execute it unless he is competent to contract.
Sec. 29 of the Indian Trust Act, 1882 reads as under:
29. Liability of trustee where beneficiary’s interest is forfeited to Government.—When the beneficiary’s interest is forfeited or awarded by legal adjudication to the Government, the trustee is bound to hold the trust property to the extent of such interest for the benefit of such person in such manner as the State Government may direct in this behalf.
‘Obligation’ in Trustee: Moral & Legal Duty
A trust being an ‘obligation’ (i) for administration and (ii) arising out of a ‘confidence’ reposed in the trustee, the trustee has to discharge the ‘obligation’ and ‘confidence’ faithfully.[76]It must be for the benefit of the beneficiaries. He has to fulfill the object and the purpose of the trust and obey the directions of the author of the trust given at the time of its creation.[77]It is his moral as well as legal duty.[78]
As pointed out by our Apex Court, in WO Holdsworth Vs. State of Uttar Pradesh,[79] the Indian Trusts Act, 1882 declares vesting legal ownership with trustees. The vesting of ownership of trust property with the trustee is under an obligation to manage it for the benefit of the beneficiaries.[80] Though, in a trust, the trust property must have been transferred to the trustees, and the trust property vests in the trustee as owner thereof, it does not absolutely belong to any individual. The property is vested in trustees subject to the obligations upon which the trustees accepted the trust.[81] The trustee deals with the property in accordance with the provisions of the deed of trust.[82] In dealings with the world at large, the trustee personates or represents as the owner of the property.[83]The legal ownership which vests in the trustee is for the purposes of the trust and to administer[84] the same.
It is observed by the Supreme Court in State Bank of India Vs. Special Secretary Land and Land Revenue[85] that the trustee would become the owner of the trust property for the purpose of effectively executing or administering the trust for the benefit of the beneficiaries and for due administration thereof, and not for any other purpose. Merely because the property is vested in the trustee as the legal owner, he has no ‘proprietor interest’, inasmuch as the beneficial interest is ‘carved out’ in the property itself. The trustee is not the full owner of the property in the real sense of the term.
Trustee has to perform these duties gratuitously.[86] No remuneration can be claimed from the trust property or income unless the terms of the trust do not specifically allow it. But, the trustee is entitled to get reimbursement out of the trust property for all expenses properly incurred in relation to the execution of the trust and for preservation of the trust property.[87]
Distinguishing Particularities of Trust from Other Legal-Relations
Trust imposes obligation upon trustees.[88]The whole edifice of trust rests upon the acceptance of ‘confidence’ by the trustee, reposed in by the author.[89] It is for administration[90] as desired by the author. As soon as the trust is validly declared by the author and duly accepted by the trustee, the legal ownership passes to the trustee[91]and the property vests[92] in him. The trustee holds the endowed property for the benefit of the beneficiaries.[93] The distinguishing particularities of trust from other legal-relations lie in ‘obligation’, ‘confidence’ and ‘entrustment of ownership in trustee’.
Entrustment with Banker
The trustee administers the property as its (legal) owner (Alagappa Vs. Lakshmanan: AIR 1919 Mad 555; In Re Sabnis, Goregaonkar Senjit Vs. Shivramdas: AIR 1937 Bom 374; Himansu Kumar Vs. Hasem Ali Khan: AIR 1938 Cal818; Kamiruddin Khan Vs. Badrun Nisa Bibi: AIR 1940 Pat 90; Life Insurance Corp. of India Vs. Iqbal Kaur: AIR 1984 J&K 1) with exclusive rights. (Pandit Rao Vs. Vishwakarma: 2010-85 AIC 762; 2009-6 ALT 197, 2009-6 ALD 269). In N. Raghavender v. State of Andhra Pradesh (13.12.2021) the Supreme Court held as under:
“The money that a customer deposits in a bank is not held by the latter on trust for him. It becomes a part of the banker’s funds who is under a contractual obligation to pay the sum deposited by a customer to him on demand with the agreed rate of interest. Such a relationship between the customer and the Bank is one of a creditor and a debtor. The Bank is liable to pay money back to the customers when called upon, but until it’s called upon to pay it, the Bank is entitled to utilize the money in any manner for earning profit.”
‘Once a (Public) Trust Always a Trust’
A public trust is perpetual. Rule against perpetuities does not apply to it. It can never be put to an end though its nature may be changed.[94] Once a public endowment is made, even the former owners or founders cannot revoke it.[95]Subsequent conduct of the founder or his descendants contrary to such dedication would amount to a breach of trust.[96] Tudor on Charities,[97] while dealing with creation of charitable trusts, explains it as under:
“When a charity has been founded and trusts have been declared, the founder has no power to revoke, vary or add to the trusts. This is so irrespective of whether the trusts have been declared by an individual, or by a body of subscribers, or by the trustees. “[98]
In Halsbury’s Laws of England,[99]it is stated as under:
“Charitable trusts have sometimes been declared subject to express powers of revocation, but there has apparently been no decision on the validity of such a power except as regards the rule against perpetuities.”[100]
Underhill in ‘Law relating to Trusts and Trustees’ has explained it,with respect to associations, thus:
“However, the crucial difference surely is that no absolutely entitled members exist if the gift is on trust for future and existing members, always being for the members of the Association for the time being. The members for the time being cannot under the Association rules Appropriate Trust property for themselves for there would then be no property held on trust as intended by the testator for those persons who some years later happened to be the members of the Association for the time being.”[101]
When the author/settlor creates or establishes the trust reserving his power to terminate the trust, or change the beneficiaries and trustees, or the terms of the trust, as he likes, such trust at the will and pleasure of the author is called revocable trust (See: Jyotendrasinhji v. SI Tripathi, AIR 1993 SC 1991).
Such trusts are possible only in private trusts. In case of revocable trusts, there will not be complete dedication of trust property.
77. Trust how extinguished.—A trust is extinguished
(a) ….(b) …..(c) ….. or
(d) when the trust, being revocable, is expressly revoked.
A Trust or An Endowment Shall Not Fail for Want of Trustees.
It is a principle of equity that no trust shall fail for want of trustees.[102] It applies in three occasions: First, though a trust was clearly intended, the settler did not or could not appoint trustees owing to a mere omission or the trustee who was named either refused or was unable to act.[103] Secondly, when a vacancy of trustee occurs. Thirdly, in dedication to a juristic person like temple, or to a well identified institution or purpose though it is not regarded as juristic person.
Sec. 6 of the Indian Trusts Act shows that, generally, a trust is created by transfer of trust-property to a trustee; and that a trust can also be created otherwise than ‘by any words or acts’ as to appointment of trustee when the author of the trust indicates with reasonable certainty by any words or acts that he himself would be the trustee.
Dedication of property is like a rocket fired. As long as it is in private realm it retains the character of a private property.[104] Once dedication is complete, it cannot be revoked.[105] It is a trite law that ‘once a trust always a trust’.[106] In Shiromani Gurdwara Prabandhak Committee, Amritsar Vs. Som Nath Dass[107] the Supreme Court has described ‘Endowment’ as under:
“Endowment is when donor parts with his property for it being used for a public purpose and its entrustment is to a person or group of person in trust for carrying out the objective of such entrustment. Once endowment is made, it is final and it is irrevocable. It is the onerous duty of the persons entrusted with such endowment, to carry out the objectives of this entrustment. They may appoint a manager in the absence of any indication in the trust or get it appointed through Court.”
Sec. 92, CPC, applicable to public trusts, expressly authorizes court to appoint a new trustee.[108] Section 59 of the Indian Trusts Act, 1882, applicable to public trusts, deals[109] with the principle ‘A Trust shall not fail for want of a trustee’. It reads:
59. Right to sue for execution of trust.—Where no trustees are appointed or all the trustees die, disclaim or are discharged, or where for any other reason the execution of a trust by the trustee is or becomes impracticable, the beneficiary may institute a suit for the execution of the trust, and the trust shall, so far as may be possible, be executed by the Court until the appointment of a trustee or new trustee.
Public Trusts & Indian Trusts Act
The Indian Trusts Act, 1882 is enacted primarily to govern private trusts; and ‘public or private charitable or religious endowments’ are expressly excluded from its ambit.
In Sec. 1, under the head, ‘Savings’, it is stated:
But nothing herein contained affects the rules of Mohammedan law as to waqf, or the mutual relations of the members of an undivided family as determined by any customary or personal law, or applies to public or private religious or charitable endowments, or to trusts to distribute prizes taken in war among the captors; and nothing in the Second Chapter of this Act applies to trusts created before the said day.
Though the Indian Trusts Act does not apply, in terms, to the public trusts, the common legal principles,[110] which cover matters of both public and private trusts, especially the Sections that speak as to the Duties and Liabilities of Trustees (Chapter III), Disabilities of Trustees (Chapter V), and Chapter IX pertaining to implied trusts, apply to public trusts also.[111]They ‘cannot become untouchable’[112] merely because they find a place in the Trusts Act.
Our courts apply the general law of trusts, and the universal rules of equity and good conscience upheld by the English judges in this subject, in appropriate cases.
Registration of Public Trusts
Various State Public Trusts Acts require registration of all public trusts with the authorities appointed under the said Acts. In New Noble Educational Society v. Chief Commissioner of Income Tax-1, 2023-6 SCC 649, it is held with reference to Andhra Pradesh Charitable andHindu Religious Institutions and Endowments Act, 1987, as under:
“67. In the event of failure to comply with Section 43(1), or failure to intimate changes in the trust, or for supplying false information, the trustee or other person in charge, can be penalized by Section 43 (11). Section 44 empowers the Commissioner to direct charitable organizations and trusts to comply and register under the Act.
68.The assessees had argued that since they were registered under the Andhra Pradesh Societies Registration Act, 2001 or were trusts duly registered, they could not be compelled to comply with state laws as a condition for consideration of their application as charitable institutions, under Section 10 (23C).
69. This court is of the opinion that the findings in the impugned judgment on this aspect are sound. The requirement of registration of every charitable institution is not optional. Aside from the fact that the consequences of non-registration are penal, which indicates the mandatory nature of the provisions of the A.P. Charities Act, such local laws provide the regulatory framework by which annual accounts, manner of choosing the governing body (in terms of the founding instrument: trust, society, etc.), acquisition and disposal of properties, etc. are constantly monitored. Entry 32 of List II of the Seventh Schedule to the Constitution reads as follows:
“32. Incorporation, regulation and winding up of corporations, other than those specified in List I, and universities; unincorporated trading, literary, scientific, religious and other societies and associations; cooperative societies.”
By Entry 28, List III of the Seventh Schedule, the states have undoubted power to enact on the subject of charities:
“28. Charities and charitable institutions, charitable and religious endowments and religious institutions.”
Private Religious Trusts
So far as private religious trusts are concerned, there are no specific statutory enactments to regulate their affairs. Such trusts are governed by the foundational principles upon which they are established, as evidenced by documents, if any; customs and usages;general law of contract and transfer of property, etc; apart from the Common Law of the Land applicable to such trusts.
In Hindu Endowments, Managers are Trustees in a General Sense
Three parties are necessary to constitute a trust; namely, the settlor, the trustee and the beneficiary, as laid down in Sree SreeIswar Gopal Jew Vs. CIT[113]. Trustee holds the property for the benefit of the beneficiaries or cesti que trust. In Hindu religious endowments, the trustees hold the endowed properties for the institution. It is laid down in Ram Parkash Dass Vs. Anant Das (1916)[114] as under:
“He (Mahanth) sits upon the gadi, he initiates candidates into the mysteries of the cult; he superintends the worship of the idol and the accustomed spiritual rites; he manages the property of the institution; he administers its affairs; and the whole assets are vested in him as the owner thereof in trust for the institution itself.”
This decision was noticed by the Board in Vidya Varuthi Vs. Baluswami[115] (1922) and it was observed:
“They thus concur with the first court that there was no “specific trust” which was the foundation of the plaintiff’s case. But after examining some of the judgments of their own court, they apparently felt constrained to hold that the decision of his Board in Ram Parkash Das Vs. Anand Das had crystallised the law on the subject, and definitely declared the Mahant to be a trustee. It is to be observed that in that case the decision related to the office of Mahant, but in the course of their judgment their Lordships conceived it desirable to indicate inter alia what, upon the evidence of the usages and customs applicable to the institution with which they were dealing, and similar institutions, were the duties and obligations attached to the office of superior: and they used the term trustee in a general sense, as in previous decisions of the Board, by way of a compendious expression to convey a general conception of those obligations. They did not attempt to define the term or to hold that the word in its specific sense is applicable to the laws and
In Pratap Singhji Vs. Charity Commissioner[116] our Apex Court held as under:
“ ‘Endowment’ is dedication of property for purposes of religion or charity having both the subject and object certain and capable of ascertainment. It is to be remembered that a trust in the sense in which the expression is used in English law is unknown in the Hindu system, pure and simple. Hindu piety found expression in gifts to idols and images consecrated and installed in temples, to religious institutions of every kind and for all purposes considered meritorious in the Hindu social and religious system. Under the Hindu law the image of a deity of the Hindu pantheon is, as has been aptly called, a ‘juristic entity’, vested with the capacity of receiving gifts and holding property. The Hindu law recognises dedications for the establishment of the image of a deity and for maintenance and worship thereof. The property so dedicated to a pious purpose is placed extra-commercium and is entitled to special protection at the hands of the Sovereign whose duty it is to intervene to prevent fraud and waste in dealing with religious endowments. Dedication need not always be in writing and can be inferred from the facts and circumstances appearing. It would be a legitimate inference to draw that the founder of the temple had dedicated it to the public if it is found that he had held out the temple to be a public one: Pujari Lakshmana Goundan Vs. Subramania Ayyar, AIR 1924 PC 44.”
The same is the position with respect to Wakf property held by Sajadahnashin who controls and manages the same.[117]
In Manohar Ganesh Vs. Lakhmiram,[118] it was held that ‘the Hindu Law like the Roman law and those derived from it recognizes not only corporate bodies with rights or property-vested in the corporation’ apart from its individual members, but also juridical persons and subjects called foundations.’ The religious institutions like mutts and other establishments obviously answer to the description of foundations in Roman law. The idea is the same, namely, when property is dedicated for a particular purpose, the property itself upon which the purpose is impressed, is raised to the category of a juristic person so that the property which is dedicated would vest in the person so created.
Trustee Represents Beneficiaries
The beneficiaries do not have right of ownership over the trust property. But, Order XXXI, Rule 1 CPC lays down that the Trustee shall represent the persons interested in the trust in suits concerning property vested in the Trustee. Apart from providing an enabling stipulation, it indicates the significance of obligation casted on the trustees. And, it also asserts the paramount importance of the beneficiaries in a trust.
Vesting of Ownership of Trust Property
While establishing a trust the author completely parts with all his interest in the trust-property, and the property has to be transferred[119] to the trustee. But, the trustee acquires only ‘legal ownership’ over the trust-property, under the law in India. And, the beneficiaries have mere ‘beneficial interest’, as they have no proprietary-interest or ownership. Then, an interesting question arises: In whom the actual ownership vests?
The following propositions can be presented as to the vesting of ownership of the trust-property.
In most cases of public trusts, the ‘ultimate vesting’ may not be a matter of practical importance; because, the endowment will be permanent and indivisible; and court takes cognizance, when practical difficulties are faced while carrying out the object of the trust, by applying cy pres doctrine, or by invoking its inherent jurisdiction.
The terms of dedication (as revealed from the deed of dedication, if any, or on other substantial evidence) determine the person or body of persons in whom/which such property ultimately vest in.
If the ownership of the property of a trust vests in a legal person, such vesting is permanent (thereby it cannot be put to an end), and such vesting is subject to the object and purpose envisaged by the founder.
If the subject matter of the trust is dedicated to public at large or a section of public, the title of such subject matter stands separated from the owner and vests in public or the section of public who are the beneficiaries, subject to the objectives of foundation.
If the property is that of an unregistered association and the members thereof are ascertainable (as in the case of an unregistered society) the actual ownership of the property will be presumed to be vested with those members (from time-to-time), only as joint owners (contra-distinct to ownership under tenants-in-common).
If the property is one stands dedicated to a Political Party, unregistered Association or a Church, and the beneficiaries thereof are unascertainable, the property vests with the entire members (of such Party, Association or Church), from time to time, subject to its objectives Such vesting is permanent, whereby it cannot be put to an end even by a majority decision of the members of a particular time.
In case such unregistered association or church becomes defunctive and it is impossible to carry on the affairs of the trust as intended by the founders, the court will apply the trust-property to a charitable purpose, ‘as nearly as possible’[120]to the objects of the original Trust, invoking ‘cy pres’ doctrine.
If the subject matter of a trust is one partially dedicated to public at large or a section of public (as in the case of a waiting shed or a public well) by a known person and administered and maintained by himself or through another person, the property will remain vested with the owner, when the purpose of dedication is extinguished.
Two (Kinds of) “Trusts” over the Parish or Branch Property
One Property, Several Trusts Possible
Trust is a general term used in wider sense in law. Therefore –
If a property is acquired by a branch of a larger body, or a parish of a Church, the entire members of the larger body, from time to time, will be presumed to be the owners, subject to (i) the byelaws of the (entire) association or trust and (ii) the purposes or objectives ‘aimed to achieve’ by that particular property.
If the bylaws (expressly or by necessary implication) provides for special beneficial enjoyment by the members of the branch or parish, over the branch/parish properties, definitely there will be two (kinds of) “trusts” over the same property – one, trust for the beneficial enjoyment of whole body; and the other, for the members of the branch/parish.
Are Shebait, Mahant, Mutawalli etc. Trustees in ‘True Sense’?
‘A Trust’ is ‘an obligation’ according to the definition in the Trusts Act. In common law also it does not convey the idea that it is a tangible or a corporeal property. Grammatically speaking, as pointed out earlier, it is an ‘abstract[121]-countable[122] noun’. Therefore, it can neither be a juristic person[123] nor an association of persons.[124]
‘Trust’ is essentially a legal concept attached to the endowed property. It arises by the appointment of a trustee. For creation of a trust, the trust-property must have been transferred to the trustee.[125]The Delhi High Court held in Birdhi Chand Jain Charitable Trust Vs. Kanhaiya Lal Sham Lal[126] as under:
“A trust is primarily a legal concept, a mode of transfer of property and of holding property. On the other hand, an institution is primarily a social concept. It is not a legal concept at all. For, there is established legal method by which an institution may come into being. It may be established by way of an organisation which may assume any or no legal form. It may be a trust or a company or a statutory corporation or a mere unincorporated association or a society registered or otherwise. It is its work and place in the society that is the hall-mark of an institution. As observed by Lord Macnaghten in Mayor, etc. of Manchester V. Mcadam,3 Tax Cases 491 at 497, ‘it is the body (so to speak) called into existence to translate the purpose as conceived in the mind of the founders into a living and active principle.’ In the present case, the founders of the trust may have transferred their property to a charitable purpose and thus created a public trust. But the body to translate the trust into a living and active principle has not yet come into existence. It is that body which will be entitled to be called an institution. It is not a mere legal arrangement like a trust but an active working body with a social impact which can be called an institution.”
‘Trust’ is Used as Synonym to Endowment/Association
Inasmuch as the ‘trust’ has no existence without its trust property, and it is an ‘obligation’ ‘annexed to’ the trust property, the endowment or 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’.
In the inclusive definition of ‘trust’ in the Public Trusts Acts enacted by various States and in several Tax-Laws, Trust ‘means and includes’ a temple, a math, wakf, a dharmada or any other religious or charitable endowment, and even a society. It is interesting to note that the word ‘trust’ is used as an ‘entity’ even in Illustration (b) of Sec. 15 of the Trusts Act –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, ….”
Life is Bestowed upon Endowment When Trustee is Appointed
An ‘endowment’ is arisen by the dedication of a specified property for purposes of religion or charity having both the subject and object certain and capable of ascertainment.[127]
The differentiating particularity of a trust from an endowment is, the ‘transfer[128] of the trust-property to the trustee’.[129]The other ingredients for creation of trust as stated in the clauses (a) to (d) of Section 6 of the Act (Intention to create trust, Purpose, Beneficiary, and Property) are the requisites for endowments also.
The author endows the property with a definite purpose, beneficial to the beneficiaries. Trust arises when a trustee is appointed for administration of the endowment.[130] For the formation of a trust, the trust-property must have been vested in trustees.[131]The administration by the trustee must be to accomplish the purpose intended by the founder. The ‘obligation’ upon trustee arises only when the trustee accepts the confidence reposed-in by the author. The duty accepted by the trustee is ‘fiduciary’ in character. The administration by the trustee must be carried on with prudence,[132] and as a reasonable man.[133]
The Trustee of a Charitable Trust is enjoined with the duty to preserve and protect the property of the Trust as if the Manager of an infant, but such power of the Trustees cannot be read as that of a pleasure doctrine or a sweet will of the Trustees to dispose of the property. The degree of obligation is coupled with their fiduciary capacity to preserve and protect the property for the larger interest of the Trust and to be made available to the beneficiaries of the Trust to the maximum possible extent.[134]
Therefore, a legal identity is renowned, or life is bestowed, upon the endowment when a trustee is appointed. An endowment, sans trustee, remains static.
Trust Property must be one “Transferable to the Beneficiary”: Import
It must not be merely beneficial interest.
Section 8 of the Indian Trusts Act, 1882 reads:
8. Subject of Trust. The subject-matter of a trust must be property transferable to the beneficiary. It must not be merely beneficial interest under a subsisting trust.
Subject matter[135] of an endowment and a trust will, normally, be a corporeal property. Sections 5 of the Indian Trusts Act, 1882 speaks as to ‘trust of’ movable and immovable properties. Under Section 8 of the Indian Trusts Act, 1882, the subject-matter of a (private) trust must be property transferable(note:- not, ‘be transferred’, ultimately)to the beneficiary, and it must not be merely beneficial interest under a subsisting trust. It conveys us two ideas:
(i) those who created the trust must be owners of the trust property and must be capable of transferring their interest in the trust properties[136] and
(ii) a Trust cannot be created only for a beneficial interest, (Note: Not the ‘proprietary interest’ or interest pertaining to owner; it is the interest pertaining to beneficiaries.) or there is no trust upon a trust. In Pestonji Jalbhoy Chichgar Vs. Jalbhoy Jehangir Chichgar[137] it is observed by the Privy Council: “What the S. 8 forbids is a trust upon a trust– a trust of a mere right of the beneficiary to proceed against the trustee, and if the Will of Gulbai amounts to a declaration of a trust of her beneficial interest, that is, of her right to go against the trustees of Kaka’s will, then the trust offends against S.8.”
(Note: Section 8 does not postulate that the property should be transferred to the beneficiaries, ultimately.)
Salmond’s Jurisprudence (while describing “property”) refers to corporeal property as, ‘the right of ownership in a material object, or that object itself’.[138]A founder can also be a beneficiary of a trust after its dedication. (But, he cannot claim any special right on that score, unless he reserved the same positively.)
Progressive Jurists Accept Trust in a ‘General Sense’
Indian law of trusts follows the progressive view of jurists like Halsbury. They preferred investing principles of trust, in a ‘wider’ or ‘general’ form. They see principles of trust in all matters of fiduciary relationships under which one holds property on behalf of, or for the benefit of, others. Halsbury’s Laws of England defines ‘trust’ as a confidence reposed in a person with respect to property of which he has possession or over which he can exercise a power, to the intent, that he may hold the property or exercise the power for the benefit of some other person or object. Sec. 3 of the Indian Trusts Act, 1882 substantially follow this definition.
Our Common Law imports still wider meaning to ‘trust’ in the matters of religious trusts.
Are Shebait, Mahant, Mutawalli etc. Trustees in ‘True Sense’?
It is trite law that dedicated property of a temple will be vested with the idol as the legal owner thereof, though such vesting is qualified to be in an ‘ideal or secondary sense’;[139] and the possession and management thereof will be with some human being identified as Shebait or Manager, though in the strict legal sense, they cannot be accepted as trustees.
In Wali Mohammed v. Rahmat Bee, (1999- 3 SCC 145), to the question whether the Mutawalli of a Wakf would be a trustee, our Apex Court observed as under:
“35. It will be seen that the main part of Sec. 10 (Limitation Act) states that no period of limitation applies for recovery of property from a trustee in whom the property is vested for a specific purpose, unless such a person is an assignee for valuable consideration. The Explanation further states that it shall be deemed that a person managing the property of a Hindu, Muslim or Buddhist religious or charitable endowment is to be deemed to be a trustee in whom such property has vested for a specific purpose. We shall explain these provisions in some detail.
36. In Vidya Varuthi Thirtha Swamigal v. Baluswami Ayyar [AIR 1922 PC 123 : ILR 44 Mad 831] the Privy Council held that property comprised in a Hindu or Mohammedan religious or charitable endowment was not property vested in trust for a specific purpose within the meaning of the said words in the main section. The reason was that according to the customary law, where property was dedicated to a Hindu idol or mutt or to a Mohammedan wakf, the property vested in the idol or the institution or God, as the case may be, directly and that the shebait, mahant, mutawalli or other person who was in charge of the institution was simply a manager on behalf of the institution. As Sec. 10 did not apply unless these persons were trustees this judgment made recovery of properties of the above trusts from donees, from these managers, rather difficult.
37. The legislature therefore intervened and amended Sec. 10 for the purpose of getting over the effect of the above judgment. The Statement of Objects and Reasons to the Bill of 1929 makes this clear. It says: “The (Civil Justice) Committee’s recommendation refers, it is understood, to the decisions of the Privy Council in Vidya Varuthi v. Baluswami [AIR 1922 PC 123 : ILR 44 Mad 831] and Abdur Rahim v. Narayan Das Aurora [(1922) 50 IA 84] which lay down that a dharmakarta, mahant or manager of a Hindu religious property or the mutawalli or sajjadanashin in whom the management of Mohammedan religious endowment is vested, are not trustees within the meaning of the words as used in Sec. 10 of the Limitation Act, for the reason that the property does not vest in them. The result is that when a suit is brought against a person, not being an assignee for valuable consideration, endowments of this nature are not protected. The Committee’s recommendation is that Sec. 10 of the Limitation Act should be amended so as to put Hindu and Mohammedan religious endowments on the same footing as other trust funds which definitely vest in a trustee.” (Quoted in: Maharashtra State Board of Wakfs v. Shaikh Yusuf Bhai Chawla, 2022-12 SCR 482).
In Maharashtra State Board of Wakfs v. Shaikh Yusuf Bhai Chawla, 2022-12 SCR 482, the Apex Court held that the Mutawalli is not a trustee in its true sense. The Supreme Court formulated a crucial question and answered it as under:
“127. Thus, the Mutawalli is treated as a trustee. But would the amendment made to Sec. 10 of the Limitation Act, 1963 make a Mutawalli a trustee generally?
Our answer is an emphatic No. This is for the reason that the change in Sec. 10 of the Limitation Act was effected to overcome the judgment of the Privy Council, when it held that a Mutawalli would not be a trustee and when in view of the requirement in Sec. 10 that the suit must be one against a person in whom the property has become vested in trust for any specific purpose and as a Mutawalli would not be a trustee in law per se, the legislature brought in the explanation. But what is striking are two features. Firstly, the change is brought by way of an Explanation. More importantly, the explanation begins with words “For the purpose of this section and proceeds to declare that “any property comprised in a Hindu, Muslim or Buddhist religious or charitable endowment shall be deemed to be properly vested in trust for a specific purpose and the manager of the property shall be deemed to be the trustee thereof.”
Both Express and Constructive Trusts Differ from Contract
Trust differs from contract. Trust is a concept derived by law to give effect to a pious or philanthropic wish of a generous man, and to ensure the benefits thereof to the beneficiaries intended by its founder. But, contract is the result of positive acts of two persons. There is no intermediary in contract, as trustees in a trust. A contract without consideration is void. In ‘trust’, trustee undertakes an obligation; and there is no question of consideration.
In express trust there must be a deliberate intention on the part of the author to create a trust.[140] Constructive trust emerges without regard to the intention of the parties to create a trust. It is an equitable remedy exercises by court of law. In both cases, there no direct involvement of beneficiaries. In a contract, the claims of one party against the other are personal in nature;[141] whereas, trust is governed by obligation and fiduciary relation. Fiduciary relationship for trustees and beneficial interest for beneficiaries in the trust property are the characteristics of trust; they are absent in contract.[142] Trustee deals with the property in a discretionary manner applying his prudence.[143]The beneficiaries of a trust have the right to get the trust enforced. Beneficiary of a contract has merely a personal claim against the promisor.
Breach of trust by itself is punishable under law; whereas breach of a contract, without fraud or cheating, raises civil liability alone. Every breach of contract is not breach of trust or cheating. A breach of contract is different from the offence of cheating or criminal breach of trust under IPC. In the absence of illegal motives or intention at the very inception, no offence of cheating would be made out in a contract.[144]
The service of a person agreeing to collect rent for another[145] with the undertaking to render accounts thereof does not create a trust even constructively or impliedly.[146] A mortgagee in possession is also not a trustee in the strict sense, and a constructive or implied trust is legally recognised, as in cases governed by S. 90 and 95 of the Trusts Act, for he holds a fiduciary character in certain respects.[147]
Courts have jurisdiction and duty[149] to administer and enforce public trusts.[150] As in the case of English Law, Indian Law also accepts court as the ultimate protector of all charities.[151] It is the guardian of the public charitable trusts or institutions[152] and its property.[153] In legal theory the Court is the guardian of charity, as it is of an infant.[154]In P. Elumalai Vs. Pachaiyappa’s Trust Board[155] the Madras High Court while passing an order exercising the ‘Parens Patriae’ jurisdiction over the trust held that, as ‘Parens Patriae’, the Courts were empowered to protect the sanctity of public trust in case of breach of trust on account of irregularities committed in trust. In this decision it was held that the Court could not remain a mute spectator when illegality had been committed against a public Trust in front of its own eyes.[156]
Public Trust Doctrine
Who is the owner of the sea, sky, air, rivers, sea shore etc.? Roman Law thought about it first. They found the answer and declared: either owned by no one (res nullius) or by everyone in common (res communious). The said resources being a gift of nature, they should be made freely available to everyone irrespective of the status in life.
The Public Trust Doctrine rests on the principle that the resources made available by the nature are of immense importance to the people as a whole and that it will stand wholly unjustified if made them an object of private ownership.
This doctrine envisages that the natural resources such as lakes, ponds (water bodies)etc. are held by the State as a ‘trustee’ of the public. The State is the trustee of all natural resources. The public trust doctrine[157]enjoins upon the Government to protect the resources for the enjoyment of the general public rather than to permit their use for private ownership or commercial purposes.[158]It requires the State to protect, conserve and augment the gift of nature including the traditional water retaining structures.
The Government cannot ignore the fiduciary duty of care and responsibility casted upon it. If a water body has been fallen into disuse or forest is burnt up, that by itself, would not be a good ground for the Government to regularise the encroachments therein; as it amounts to breach of the public trust.
Any act or attempt made by the Government, or even the legislature, that derogate the object for which such land air or water exists, has to be held illegal by the higher authority, if any, which is equipped to scrutinise the illegality of such acts.
MC Mehta Vs. Kamal Nath
The Doctrine of Public Trust, by that name, is introduced to our legal system by our Apex Court in MC Mehta Vs. Kamal Nath.[159] It was a public interest litigation. It arose from a news item appeared in the Indian Express. It was stated that a private company, Span Motels, had built a motel at the bank of River Beas in Kullu Valley, by encroaching forest land. The major shares of the company were with the relatives of one Kamal Nath. The encroachment was later regularized by the government; and the land was leased out to the company, when Kamal Nath was the Minister for Environment and Forests.
The Motel used earth-movers and bulldozers to turn the course of river Beas. It was found to be illegal and constituted ‘callous interference with the natural flow of river Beas’; and that it resulted in the degradation of the environment. In this case the Supreme Court found that the Motel was liable to pay compensation by way of cost for the restitution of the environment and ecology of the area and issued various directions to restore the original position.
The Apex Court observed that the public had a right to expect certain lands and natural areas to retain their natural characteristics. It was declared in the judgment that the public trust doctrine, ‘as discussed by in this judgment is a part of the law of the land’.
In this trailblazing landmark decision, the Apex Court quoted Joseph L. Sax, Professor of Law, University of Michigan – proponent of the Modern Public Trust Doctrine -from his erudite article ‘Public Trust Doctrine in Natural Resource Law: Effective Judicial Intervention’, Michigan Law Review, Vol. 68, Part 1 p. 473, which gave the historical background of the Public Trust Doctrine,[160] as under :
“The source of modern public trust law is found in a concept that received much attention in Roman and English law – the nature of property rights in rivers, the sea, and the seashore. That history has been given considerable attention in the legal literature, need not be repeated in detail here. But two points should be emphasized. First, certain interests, such as navigation and fishing, were sought to be preserved for the benefit of the public; accordingly, property used for those purposes was distinguished from general public property which the sovereign could routinely grant to private owners. Second, while it was understood that in certain common properties – such as the seashore, highways, and running water – ‘perpetual use was dedicated to the public’, it has never been clear whether the public had an enforceable right to prevent infringement of those interests. Although the State apparently did protect public uses, no evidence is available that public rights could be legally asserted against a recalcitrant government.”
“Three types of restriction on governmental authority are often thought to be imposed by the public trust; first the property subject to the trust must not only be used for a public purposes but it must be held available for use by the general public; second, the property may not be sold, even for a fair cash equivalent; and third the property must be maintained for particular types of uses:”
The Supreme Court held further as under:
“Our legal system – based on English common law – includes the public trust doctrine as part of its jurisprudence. The State is the trustee of all natural resources which are by nature meant for public use and enjoyment. Public at large is the beneficiary of the sea-shore, running waters, airs, forests and ecologically fragile lands. The State as a trustee is under a legal duty to protect the natural resources. These resources meant for public use cannot be converted into private ownership.”[161]
In Tehseen Poonawalla Vs. Union of India[162] it is pointed out that the principles such as the ‘polluter pays’ and the public trust doctrine have evolved during the adjudication of public interest petitions. (Also See: In Re: T. N. Godavarman Thirumulpad v. Union of India, AIR 2024 SC 1955.)
Expansion of the Concept
In Fomento Resorts & Hotels Vs. Minguel Martins[163] our Apex Court held that the heart of the public trust doctrine is that it imposes limits and obligations upon government agencies and their administrators on behalf of all the people; especially future generations. It is pointed out in Noida Entrepreneurs Association Vs. Noida[164]that the doctrine has been developed from Article 21 of the Constitution. (Referred to in Bikramchatterji Vs. Union Of India: 2019 5 Supreme 3; 2019 0 Supreme(SC) 768).
It is held by the Supreme Court in State of Tamil Nadu Vs. State of Kerala (2014 AIR SC 2407, Referred to in In Re: The Punjab Termination of Agreement Act, 2004: AIR 2016 SC 5145) that the judicial function is also a very important sovereign function of the State and the foundation of the rule of law, and that the legislature cannot indirectly control the action of the courts and directly or indirectly set aside the authoritative and binding finding of fact by the court, by invoking ‘public trust doctrine’ or ‘precautionary principle’.
Our Apex Court held in Tata Housing Development Company Vs. Aalok Jagga (2020) 15 SCC 784; 2019 0 Supreme(SC) 1228) that the housing project, setting up of high-rise buildings up to 92 meters, fell within the catchment area of Sukhna Lake and 123 meters away from the boundary of Sukhna Wildlife Sanctuary, could not be allowed to come up. 95 MLAs were to be the recipients of the flats in the buildings. The State of Punjab was required to act on the basis of Doctrine of Public Trust.
In Bikram Chatterji Vs. Union of India(2019 (8) SCC 527; 2019 SCC OnLine SC 901.) our Apex Court pointed out that the Public Trust Doctrine imposes on the State and its functionaries a mandate to take affirmative action for effective management, and the citizens are empowered to question its ineffectiveness. When the land of the farmers had been acquired for the purpose of housing and infrastructure needs by the State Government and handed over to the concerned authorities for construction, they were bound to ensure that builders acted in accordance with the objective behind the acquisition of land and the conditions on which allotment had been made. The concerned officials were not only enjoined to ensure protection of the rights of the home buyers, but also the interests of the authorities and bankers. The public authorities are duty-bound to observe that the leased property is not frittered away along with the money of the home buyers.
How to Subscribe ‘IndianLawLiveFree’? Click here – “How to Subscribe“
[1] Quoted in: Shanmughan Vs. Vishnu Bharatheeyan: AIR 2004 Ker 143.
[2] Quoted in: Christopher Karkada Vs. Church of South India: ILR 2012 Kar. 72
[3] Salmond on Jurisprudence: 12th Edition, page 256.
[4] Quoted in: Assn. of University Teachers Vs. AICTE: AIR 1999 Mad 164.
[5] Contra-distinct to ‘concrete noun’ like God, earth, man, president etc.
[6] Contra-distinct to ‘uncountable noun’ like poverty, wealth, kindness, innocence etc.
[7] Grammatically, ‘a trust is attached to a property’, as ‘a business is done by a man’.
[8] State Bank of India Vs. Spl Secretary: 1995-Supp. 4 SCC 30; Bhavna Nalinkant Vs. Commr. Gift Tax: 2002-174 CTR 152: 2002-255 ITR 529; Ramabai Govind Vs. Raghunath Vasudevo: AIR 1952 Bom 106.
[9] Sec. 11 reads: “11. Trustee to execute trust.—The trustee is bound to fulfil the purpose of the trust, and to obey the directions of the author of the trust given at the time of its creation ….”
[10] Allahabad Bank Vs. IT Commr.: AIR 1953 SC 476; Chikkamuniyappa Reddy Vs. State of Karnataka: ILR 1997 Kar 2460; Dinshaw Rusi Mehta Vs. State of Maharashtra: AIR 2017 SC 1557.
[11] Khairul Bashar Vs. Thannu Lal: AIR1957 All 553; Mysore Spinning and Manufacturing Co Vs. CIT: 1966-61 ITR 572 (Bom); Christopher Karkada VS Church of South India: ILR 2012 Kar 725; Chockalinga Sethurayar Vs. Arumanayakain: AIR 1969 SC 569; Rajah SagiJanaki Vs. Appururu Bhukta: 1976-2 AndWR 117, 1976-1 APLJ 312; Special Secy Govt of WB Vs. State Bank of India: AIR 1989 Cal 40; CIT Vs. K Shyamaraju: 1991-1 KantLJ 233; Chikkamuniyappa Reddy Vs. State of Karnataka: ILR 1997 Kar 2460.
[12] C. Pandit Rao Vs. Vishwakarma Association: 2010-85 AIC 762, 2009-6 ALD 269, B Vasudeva Rao Vs. K Laxminarayana : AIR 1985 Kar 129,
[13] Khairul Bashar Vs. ThannuLal: AIR1957 All 553; Christopher Karkada Vs. Church of South India: ILR 2012 Kar 725;.
[14] State Bank of India Vs. Spl Secretary: 1995-Supp. 4 SCC 30.
[15] Maulavi Kamiruddin Khan Vs. Badrun Nisa Bibi: AIR 1940 Pat 90; Chief Controlling Revn. Authority Vs. Banarsi Dass Ahluwalia: AIR 1972 Del 128; Pankumari Kochar Smt Vs. Controller Of Estate Duty: 1969-73 ITR 373.
[16] Ramdass Trust Vs. Damodardas: 1967 RLW(Raj) 273; Quoted in: Sagar Sharma Vs. Addl. CIT: 2011-239 CTR 169: 2011-52 DTR 89. Chikkamuniyappa Reddy Vs. State of Karnataka: ILR 1997 Kar 2460
[17] Alagappa Vs. Lakshmanan: AIR 1919 Mad 555; Chhatra Kumari Vs. Mohan Bikram: AIR 1931 PC 196; In Re Sabnis, Goregaonkar Senjit Vs. Shivramdas: AIR 1937 Bom 374; Himansu Kumar Vs. Hasem Ali Khan: AIR 1938 Cal818; Kamiruddin Khan Vs. Badrun Nisa Bibi: AIR 1940 Pat 90; WO Holdsworth Vs. State of UP: AIR1957 SC 887, Chockalinga Sethurayar Vs. Arumanayakain: AIR 1969 SC 569; Comm. Wealth Tax Vs. Kirpashanker Dayashankar: AIR 1971 SC 2463; Controller of Estate Duty Lucknow Vs. Aloke Mitra: AIR 1981SC 102; Life Insurance Corp. of India Vs. Iqbal Kaur: AIR 1984 J&K 1. Special Secy. Govtof W B Vs. State Bank of India: AIR 1989 Cal 40; Christopher Karkada Vs. Church of South India: ILR 2012 Kar 725; PrabhakarGonesPrabhu Vs. Saradchandra Suria Prabhu: 2019-11SCALE 381.
[18] Chhatra Kumari Vs. Mohan Bikram: AIR 1931 PC 196; WO Holdsworth Vs. State of UP: AIR1957 SC 887; Chockalinga Sethurayar Vs. Arumanayakain: AIR 1969 SC 569.
[25] Sec. 11 of the Trusts Act casts duty on the trustee to execute the trust, by fulfilling ‘the purpose of the trust’, and obeying ‘the directions of the author of the trust’.
[26] Ramabai Govind Vs. Raghunath Vasudevo: AIR 1952 Bom 106; State Bank of India Vs. Spl. Secretary: 1995-Supp. 4 SCC 30; Bhavna Nalinkant Vs. Commr. Gift Tax: 2002-174 CTR 152,2002-255 ITR 529; Khasgi Trust Indore v. Vipin Dhanaitkar, 2022 SCC Online SC 900; 2022-11 SCALE 1; 2022-17 SCR 173.
[27] R P Kapur Vs. Kaushalya Edl Trust: 1982-21 DLT 46: ILR 1982-1Del 801, Gobinda Chandra Ghosh Vs. Abdul Majid: AIR1944 Cal 163.
[28] Paru Vs. Chiruthai: 1985 KerLJ 480, 1985 KerLT 563: Referred: UN Mitra’s Law of Limitation and Prescription, 9th Edn., Vol. II, at page 1574, Para 66; Bhavna Nalinkant Vs. Commr Gift Tax: 2002-174 CTR 152: 2002-255 ITR 529, CBSE Vs. Aditya Bandopadhyay: AIR 2011 SCW 4888: 2011-8 SCC 497; Reserve Bank of India Vs. Jayantilal N. Mistry: AIR 2016 SC 1.
[29] Dinshaw Rusi Mehta Vs. State of Maharashtra: AIR 2017 SC 1557
[30] Mysore Spinning Vs. Commr of IT: ITR 1966-61 572 (Bom); Ramdass Trust Vs. Damodardas: 1967 RLW(Raj) 273; Canara Bank Vs. State of Kerala: AIR 1982 Ker 1: ILR 1981-2 Ker 649; R P Kapur Vs. Kaushalya: 1982-21 DLT 46; ILR 1982-1Del 801; Chikkamuniyappa Reddy Vs. State of Karnataka: ILR 1997 Kar 2460.
[31] Mysore Spinning Vs. Commr of IT: ITR 1966-61 572 (Bom); R P Kapur Vs. Kaushalya: 1982-21 DLT 46; ILR 1982-1Del 801; Chikkamuniyappa Reddy Vs. State of Karnataka: ILR 1997 Kar 2460; Dinshaw Rusi Mehta Vs. State of Maharashtra: AIR 2017 SC 1557.
Chhatra Kumari Devi Vs. Mohan Bikram Shah: AIR 1931 PC 196; WO Holdsworth Vs. The State of Uttar Pradesh: AIR 1957 SC 887; Khairul Bashar Vs. Thannu Lal: AIR1957 All 553; Ramdass Trust Vs. Damodardas: 1967 RLW (Raj) 273; Quoted in: Sagar Sharma Vs. Addl. CIT: 2011-239 CTR 169: 2011-52 DTR 89. Benafasilal Rajgorhia Vs. Central Bank of India: 1971-76 CalWN 807; BomiMunchershaw Mistry Vs. Kesharwani Co Op H. Society: 1993 BCR 301; Chikkamuniyappa Reddy Vs. State of Karnataka: ILR 1997 Kar 2460.
[34] Life Insurance Corp. of India VS Iqbal Kaur: AIR 1984 J&K 1; Patel Chhotabhai Vs. Gian Chandra Basak: AIR 1935 PC 97; Chambers Vs. Chambers: AIR 1944 PC 78.
[35] Chambers Vs. Chambers, AIR 1944 PC 78, Benafasilal Rajgorhia Vs. Central Bank of India: 1971-76 CalWN 807; Municipal Corporation of Delhi Vs. Badri: 1966 2 DLT 294. Khub Narain Missir Vs. Ramchandra Narain Dass: AIR 1951 Pat 340; Patel Chhotabhai Vs.Jnan Chandra Bank: AIR 1935 PC 97.
[36] Laxman Balwant Bhopatkar Vs. Charity Commr, Bombay: AIR 1962 SC 1589, Banwarilal Vs. Edwin Bhagirathi: AIR 1981 MP 116.
[38] Cambay Municipality Vs. Ratilal Ambalal Reshamwala: 1995 Supp2 SCC 591. Mahabir Prasad Mishra Vs. Shyama Dev : 2013 9 ADJ 46; 2013 101 AllLR 402; Hardinge Memorial Fund Trust Vs. St. of Bihar: 2008 1 BLJR 28; 2007 3 PLJR 553, LIC of India Vs. Iqbal Kaur: AIR 1984 J&K 1.
[40]Sec. 6 Clause (e) of the Indian Trusts Act, 1882.
[41] Vidarbha and Marathwada, Nagpur Vs. Mangala: 1982 MhLJ 686; Maria Antonica Rodrigues Vs. DR Baliga: AIR 1967 Bom 465.
[42] Idol of Sri Renganathaswamy Vs. PK Thoppulan: (2020) 5 Mad LJ 331(SC); MJ Thulasiraman Vs. Comr, HR & CE: AIR 2019 SC 4050.
[43] Pratap Singhji Vs. Charity Commissioner: AIR 1987 SC 2064
[44]Gulam Mohideen Khan Vs. Abdul Majid Khan: AIR 1957 AP 941.
[45] SM Manorama Dasi Vs. Dhirendra Nath Busu: AIR 1931 Cal 329,
[46] Deoki Nandan 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
[47]Birdhi Chand Jain Charitable Trust Vs. Kanhaiya Lal Sham Lal: ILR 1973-1 Del 144,
[49] AIR1957 SC 887; Referred to in: Commr W. Tax Vs. Kirpashanker : AIR 1971 SC 2463; Shyam Sunder Kejriwal Vs. Usha: 2011-97 AIC 910: 2010-4 CalHN 782; Shyam Sunder Kayal Vs. Mist Valley: 2008-1 CalHN 900: 2007-3 CalLT 560. The Nizams Jewellery Trust Vs. Asst Commr: 1997-1 ALD 4: 1996-4 ALT 852, CIT Vs. A N Chowdhury: AIR 1970 Cal 124, See also: Ramabai Govind Vs. Raghunath Vasudevo: AIR 1952 Bom 106.
[53] Khairul Bashar Vs. Thannu Lal: AIR1957 All 553.
[54] Arjan Singh Vs Deputy Mal Jain, 1982-22 DLT 14; 1981-1 DMC 248; ILR 1982-1 Del. 11; P. Elumalai v Pachaiyappa’s Trust Board, 2017-8 MLJ 529; Khasgi Trust Indore v. Vipin Dhanaitkar, 2022 SCC Online SC 900; 2022-11 SCALE 1; 2022-17 SCR 173; State Bank of India v. Special Secretary Land, [1995] Suppl 4 SCC 30; Bhavna Nalinkant Vs. Commr Gift Tax: 2002-174 CTR 152,2002-255 ITR 529; Mathura Bai Vs. Regional Provident Fund: 1992 WLN 206(Raj); Ramabai Govind Vs. Raghunath Vasudevo: AIR 1952 Bom 106
[55] Chikkamuniyappa Reddy Vs. State of Karnataka: ILR 1997 Kar 2460.
[56] Maulavi Kamiruddin Khan Vs. Badrun Nisa Bibi: AIR 1940 Pat 90; Chief Controlling Revenue Authority Vs. Banarsi Dass Ahluwalia: AIR 1972 Del 128; Pankumari KocharSmt Vs. Controller Of Estate Duty: 1969-73 ITR 373.
[57] Alagappa Vs. Lakshmanan: AIR 1919 Mad 555, Goregaonkar Senjit Vs. Shivramdas: AIR 1937 Bom 374; Himansu Kumar Vs. Hasem Ali Khan: AIR 1938 Cal818; Rajah Sagi Janaki Vs.Appururu Bhukta: 1976-2 And WR 117, 1976-1 APLJ 312; Life Insurance Corp. of India VS Iqbal Kaur: AIR 1984 J&K 1.
[60] Salmond on Jurisprudence: 12th Edition, page 256
[61] See: Baba Badri Dass Vs. Dharma: ILR 1982(1) P&H 491; Govordhanhari Devasthan Vs. Collector of Ahmednagar: 1982 Mh.L.J 390.
[62] Chhatra Kumari Vs. Mohan Bikram: AIR 1931 PC 196; Himansu Kumar Roy Chowdhury Vs. Moulvi Hasem: AIR1938 Cal 818, Gobinda Chandra Ghosh Vs. Abdul Majid Ostagar: AIR1944 Cal163, Bomi Munchershaw Mistry Vs. Kesharwani Co Op H. Society: 1993-2-BCR-329.
[63] Chockalinga Sethurayar Vs. Arumanayakain: AIR 1969 SC 569, Birendra Kumar Datta Vs. Commr IT: AIR 1960 Cal 323: 1961-42 ITR 661, Shantiniketan Co Op Hsg. Society Vs. Dist. Regr Co Op So: AIR 2002 Guj 428; Bomi Munchershaw Mistry Vs. Kesharwani Co Op H. Society: 1993-2-BCR-329; Mohammed Basheer Vs. Ahmed Kutty: 2011 (3) Ker LJ 767.
[64] AIR 1931 PC 196. Referred to in: A S Krishna Murthy Vs. C N Revanna: AIR 2009KarRep 2692 , Raja Baldeodas Birla Santatikosh Vs. C I T: 1991-190ITR 578; Gobinda Chandra Ghosh Vs. Abdul Majid Ostagar: AIR1944 Cal 163, Himansu Kumar Roy Chowdhury Vs. MoulviHasem Ali Khan: AIR 1938 Cal 818.
[65] Quoted in Special Secy. Govt of W B Vs. State Bank of India: AIR 1989 Cal 40; Christopher Karkada Vs. Church of South India: ILR 2012 Kar. 72; Raja Sir Muthiah Chettiar Vs. CIT: 1984-38 CTR 76: 1984-148 ITR532: Commissioner of Income Tax Vs. Ganga Properties Ltd: 1970-77 ITR 637; Sardarilal Vs. Shrimati Shakuntla Devi: AIR 1961 P&H 378.
[66] Rakesh Arora Vs. Hamdard (Wakf) Laboratories: 2019-261 DLT 307; Duli Chand Vs. Mahabir Pershad Charitable Trust: AIR 1984 Del 145.
[70] Chhatra Kumari Vs. Mohan Bikram: AIR 1931 PC 196; Bomi Munchershaw Mistry Vs. Kesharwani Co Op H. Society: 1993-2-BCR-329 , Uma Roy VS Mehamala Dey: 1988 2 Cal HN 128.
[71] Kansara Abdulrehman Sadruddin Vs. Trustees Maniar: AIR 1968 Guj 184
[72] Christopher Karkada Vs. Church of South India: ILR 2012 Kar 725; Ramabai Govind Vs. Raghunath Vasudevo: AIR 1952 Bom 106; Special SecyGovtof W B Vs. State Bank of India: AIR 1989 Cal 40.
[73] Govardhandhari Devsthan Vs. Collector of Ahmednagar: AIR 1982 Bom 332. Kapoorchand Rajendra Kumar Jain Vs. ParasnathDigambar: 2000-1 MPJR 199
[74] Chhatra Kumari Devi Vs. Mohan Bikram Shah: AIR 1931 PC 196; WO Holdsworth Vs. The State of Uttar Pradesh: AIR 1957 SC 887 , Commissioner of Wealth Tax Vs. Kripashankar: AIR 1971 SC 2463, Bai Dosabai Vs. Mathuradas: AIR 1980 SC 1334; Bomi Munchershaw Mistry Vs. Kesharwani Co Op H. Society: 1993-2BCR301; Hem Chandra Vs. Suradham Debya: AIR 1940 PC 134; Ramabai Govind Vs. RaghunathVasudevo: AIR 1952 Bom 106. Deoki Nandan Vs. Murlidhar: AIR 1957 SC 133; Behari Lal Vs. Thakur Radha Ballabhji: AIR 1961 All 73.
[75] Smith Vs. Anderson, (1880) 15 Ch. D. 247;Quoted in: Bengal Luxmi Cotton Mills Vs. State: 1964-69 CalWN 137; 1965-35 CC 187
[76] Allahabad Bank Vs. IT Commr.: AIR 1953 SC 476.
[78] Dinshaw Rusi Mehta Vs. State of Maharashtra: AIR 2017 SC 1557
[79] AIR1957 SC 887; See also: Ramabai Govind Vs. Raghunath Vasudevo: AIR 1952 Bom 106.
[80] Chhatra Kumari Vs. Mohan Bikram: AIR 1931 PC 196; Kansara Abdulrehman Sadruddin Vs. Trustees Maniar Jamat: AIR 1968 Guj 184. See also: RamabaiGovind Vs. Raghunath Vasudevo: AIR 1952 Bom 106; Chikkamuniyappa Reddy Vs. State of Karnataka: ILR 1997 Kar 2460; Mathura Bai Fatechand Damani Vs. Regional PF: 1992 WLN 206(Raj).
[81] Chikkamuniyappa Reddy Vs. State of Karnataka: ILR 1997 Kar 2460; Mathura Bai Fatechand Damani Vs. Regional PF: 1992 WLN 206(Raj)
[82] Ramabai Govind Vs. Raghunath Vasudevo: AIR 1952 Bom 106
[83] Govardhandhari Devsthan Vs. Collector of Ahmednagar: AIR 1982 Bom 332. Kapoorchand Rajendra Vs. Parasnath Digambar: 2000-1 MPJR 199
[84] Bhavna Nalinkant Vs. Commr Gift Tax: 2002-174 CTR 152,2002-255 ITR 529.
[86] Scott on Trusts Vol. II Sec. 170. The leading case on the subject is Kench Vs. Gandford (1726) (White and Tudor Leading Cases in Equity page 693) , Referred to in: Arjan Singh Vs. Deputy Mal Jain ILR 1982- 1 Del 11.
[87] Kishore Joo Vs. Guman BehariJoo Deo: AIR 1978 All 1; Bapalal Godadbhai Kothari Vs. Charity Commissioner Gujarat: 1966 GLR 825
[88] Allahabad Bank Vs. IT Commr.: AIR 1953 SC 476.
[89] S Pandit Rao Vs. Vishwakarma Association: 2009-6 ALD 269; 2009-6 ALT 197
[90] State Bank of India Vs. Spl Secretary: 1995-Supp. 4 SCC 30.
[91] Narasingh Charan Mohapatra Vs. Radhakanta Mohapatra: AIR1951 Ori 132
[92] Ramdass Trust Vs. Damodardas: 1967 RLW(Raj) 273; Quoted in: Sagar Sharma Vs. Addl. CIT: 2011-239 CTR 169: 2011-52 DTR 89. Chikkamuniyappa Reddy Vs. State of Karnataka: ILR 1997 Kar 2460
[93]WO Holdsworth Vs. State of Uttar Pradesh:AIR 1957 SC887 .
[94] In Re Man Singh and Others, AIR 1974 Del. 228
[95] Ramkishorelal vs. Kamalnarayan, AIR 1963 SC 890; Agasthyar Trust Vs. CIT ; 1998 AIR (SCW)3945 ;(1998) 5 SCC 588). Krishnaswamy Pillai Vs. Kothandarama Naicken: AIR 1915 Mad 380; Dasami Sahu Vs. Param Shameshwar, AIR 1929 All 315
[96] Agasthyar Trust Madras Vs. CIT ; 1998 AIR (SCW) 3945 ; (1998) 5 SCC 588).
[100] See also: Radhika Mohan Nandy Vs. Amrita LalNandy, AIR 1947 Cal 301
[101] Quoted in: Most Rev. P.M.A. Metropolitan Vs. Moran Mar: AIR 1995 SC 2001.
[102] Silvy George Vs. Anna Joseph: 2014-2 KerLJ 462; Commr. of Wealth Tax Vs. Nawab Mir Barkat Ali:1983-139 ITR 517; Vadivelu Mudaliar Vs. CN Kuppuswami Mudaliar: ILR1971-3 Mad142; Mahadulal Vs. Chironji Lal: AIR 1963 MP 51; Chidambaranatha Thambiran Vs. Psnallasiva Mudaliar: AIR 1918 Mad 464.
[104] See: MAppala Ramanujacharyulu Vs. M Venkatanarasimha: 1974 AP 316; Siva Kanta Barua Vs. RajaniramNath:AIR 1950 Ass. 154: ILR 51 All. 626.
[105] Radhika Mohan Nandy v. Amrita LalNandy: AIR1947 Cal 301, Narayanan Vs. Nil: AIR 2005 Mad. 17; M Ashok Kumar Vs. N Janarthana: 2013(7) Mad. LJ 273; T C Chacko Vs. Annamma: AIR 1994 Ker. 107. Virbala K. Kewalram Vs. Ramchand Lalchand: AIR 1997 Bom 46
[106] See: Narayanan Vs. Nil: AIR 2005 Mad. 17; M Ashok Kumar Vs. N Janarthana: 2013(7) Mad. LJ 273; TC ChackoVs. Annamma: AIR 1994 Ker. 107. KS Varghese Vs. St. Peters and Pauls Syrian Orthodox Church: (2017) 15 SCC 333
[122] Contradistinct to ‘uncountable noun’ like poverty, wealth, kindness, innocence etc.
[123] Govt. of the Province of Bombay Vs. Pestonji Ardeshir Wadia: AIR 1949 PC 143; Thiagesar Dharma 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 Chand Charitable Trust: AIR 1984 Del 144; Thanthi Trust Vs. W. Tax Officer: (1989) 45 TAXMAN 121: (1989) 178 ITR 28; Chikkamuniyappa Reddy Vs. State of Karnataka: ILR 1997 Kar 2460; Kishorelal AseraVs. Haji Essa Abba: 2003-3 Mad LW 372: 2003-3 CCC367; Sagar Sharma Vs. Addl. Commner. of IT: 2011-239 CTR 169: 2011-336 ITR 611; Sambandam Died Vs. NatarajaChettiar: 2012-1 Mad LW 530.
[124] Canara Bank Vs. State of Kerala: AIR 1982 Ker 1: ILR 1981-2 Ker 649.
[125] Maulavi Kamiruddin Khan Vs. Badrun Nisa Bibi: AIR 1940 Pat 90; Chief Controlling Revenue Authority Vs. Banarsi Dass: AIR 1972 Del 128; Pankumari Kochar Smt Vs. Controller of Estate Duty: 1969-73 ITR 373.
[127] Pratap Singh ji Vs. Charity Commissioner: 1987 AIR SC 2064.
[128] CIT Vs. P. Bhandari 1984 -47 ITR 500 (Mad); L Gouthamchand Vs. Commr of IT: ITR 1989-176 442(Mad).
[129] Sec. 6 of the Indian Trusts Act, 1882, reads as under: “6. Creation of trust: Subject to the provisions of section 5, a trust is created when the author of the trust indicates with reasonable certainty by any words or acts: … … … (e) (unless the trust is declared by will or the author of the trust is himself to be the trustee) transfers the trust-property to the trustee.”
[130] Khairul Bashar Vs. Thannu Lal: AIR1957 All 553.
[131] Padmavathi Vs. Raghu Tippanna Ruge: 1968(1) MysLJ 583; Relied on: Shivramdas Vs. Nerukar: 39 Bom LR 633; Sree SreeIswar Gopal Jew Vs. Commr of IT: AIR 1951 Cal 309; Chief Controlling Revenue Authority Vs. Mgr. St. Bnk Mysore: AIR1988 Kar 1
[132] Shanti Vijay and Company Vs. Princess Fatima Fouzia: AIR 1980 SC 17; P Parthasarathy Vs. Kee Pee Yes: 2016-1 MLJ 267; Neelam Tirupatirayudu Vs. Vinjamuri: 1912-17 Ind Cas 597; 1912-23 MLJ 599.
[133] Shanti Vijay And Company VS Princess Fatima Fouzia: AIR1980 SC 17.
[134]Ramdev Developers Vs. Jt. Chrity Commissioner: 2009-1Guj LR 337,
[138]Quoted in: Maharashtra St. Co Op Bank Vs. Asst. Provt. Fund Commr: AIR 2010 SC 868; Santhoshkumar Vs. Shaji: AIR 2013 Ker 184; Ans Gopal heo Narain Vs. PK Banerji: AIR 1949 All 433.
[139] Bhupathi Nath Vs. Ramlal Maitra: ILR 37 Cal. 128
[140] Cambay Municipality Vs. Ratilal Ambalal: 1995 Supp2 SCC 591.
[141] LT Overseas, North America Vs. Sachdeva : 2018 252 DLT 270
[142] The Travancore Bank Ltd. Vs. Abraham: AIR 1955 TC 131; Rama Rao Vs. V Chandra Gopal: 1969-82 LW 738: 1969-2 MLJ 460
[143] Shanti Vijay and Company Vs. Princess Fatima Fouzia: AIR 1980 SC 17; P Parthasarathy Vs. Kee Pee Yes: 2016 1 MLJ 267; Neelam Tirupatirayudu Vs. Vinjamuri: 1912-17 Ind Cas 597; 1912-23 MLJ 599.
[144] Uma Shanker Gopalika Vs. State of Bihar (2006)2 SCC (Crl.) 49, Referred to in: Ranbaxy Vs. State of Telangana: 2016 2 ALT(Cri) 165.
[145] Mussamat Basso Kuar Vs. Lala Dhum Singh: 1887-15 Law Rep. Ind.App. 211
[146] BL Rai Vs. Bhaiyalal: AIR 1920 PC 8; Mahabir Prasad Mishra Vs. Shyama Devi: 2013-9 ADJ 46; 2013-101 AllLR 402
[147] Jagannath Vs. Sripathi Babu: AIR 1945 Mad. 297. Relied on in Narayani Amma Vs. Eyo Poulose: AIR 1982 Ker 198.
[148] See Chapter: State & Court – Protectors of All Charities
[149] AG Vs. Pearson: (1817) 3 Mer 353; Ram Dularey Vs. Ram Lal: AIR 1946 PC 34. Quoted in KS Varghese Vs. St. Peters and St. Pauls Syrian Orthodox Church: (2017) 15 SCC 333. Rajendra Gupta VS Corporation of Chennai, rep. by its Commissioner: 011 4 LW 633, Rajagopal v. Balachandran: 2002 (2) CTC 527, See also: Narasimhiah Vs. Y H Venkataramanappa: AIR 1976 Kar 43.
[150] C.K. Rajan Vs. Guruvayoor Devaswom Managing Committee: .AIR 1994 Ker 179. [Appeal Judgment: Guruvayoor Devaswom Managing Committee Vs. C.K. Rajan: AIR 2004 SC 561: (2003) 7 SCC 546]; Fakhuruddin Vs. Mohammad Rafiq: AIR 1916 All 115 (PC); Sridhar Vs. ShriJagan Nath Temple, AIR 1976 SC 1860; Yogendra Nath Naskar Vs. Commissioner Of Income Tax Calcutta: AIR 1969 SC 1089. Ch Hoshiar Singh Mann Vs. Charan Singh ILR 2009 (19) Dlh 265; I Nelson Vs. Kallayam Pastorate: AIR 2007 SC 1337; Sk. Abdul Kayum Vs. MullaAlibhai: AIR 1963 SC 309. See also: Mulla’s Hindu Law (11th Ed. Page 489) and Dr. B.K. Mukherjea: Hindu Law of Religious and Charitable Trusts (Fifth Ed, Page 407 and 412).
[151] C Chikka Venkatappa Vs. D Hanumanthappa 1970 (1) Mys LJ 296: Narayan Krishnaji Vs. Anjuman E Islamia: AIR 1952 Kar 14; Thenappa Chettiar Vs. Kuruppan Chettiar AIR 1968 SC 915; Subramonia Pillai Chellam Pillai Vs. Subramonia Pillai Chathan Pillai: AIR 1953 TC 198; M.G. Narayanaswami Naidu Vs. M. Balasundaram Naidu: AIR 1953 Mad 750.
[152] ChHoshiar Singh Mann Vs. Charan Singh Laws(Dlh)-2009-4-105 ILR (Dlh)- 2009-19-265], See also Thenappa Chettiar Vs. Kuruppan Chettiar AIR 1968 SC 915; I Nelson Vs. Kallayam Pastorate AIR 2007 SC 1337.
[153]Sujan Mohinder Charitable Trust Vs. Mohinder Kaur: 2019 0 Supreme(Del) 281, AM Shamsudeen Vs AM Mohamed Salihu: 2004 2 LW 487; 2003 2 MLJ 526.
[156] Referred to in: Thatha Sampath Kumar Vs. Vupputur Alwar: 2019-3MadLW 705
[157] Indian Council for Enviro-Legal Action Vs. Union of India: (1996) 5 SCC 281; T.K. Shanmugam Vs. The State of Tamil Nadu: AIR 2016 Mad 25.
[158] Fomento Resorts and Hotels Ltd. Vs. Minguel Martins (2009) 3 SCC 571. Quoted in Association for Environment Protection Vs. State of Kerala: AIR 2013 SC 2500; Navi Mumbai Environt. Preservation Society Vs. Ministry of Environment: 2019-1 BCR 39.
[159] 1997-1 SCC 388; Referred to in T. N. Godavarman Thirumulkpad v. Union of India , AIR 1997 SC 1228; In re T.N. Godavarman Thirumulpad v. Union of India, (2022) 4 SCC 289.
[160] Rajeev Suri Vs. Delhi Development Authority: 2021 SCC Online 7
[161]Jayant Etc Vs. State of Madhya Pradesh: AIR 2021 SC 496.
Saji Koduvath Associates 