Author: Shanmayie Natchiyar M BA.LLB
Symbiosis Law school, Nagpur
The Indian Trusts Act of 1882 is one of the evergreen pieces of legislation that remains relevant even today in the transfer, safeguarding, and management of wealth and obligations in India. Crafted specifically for private trusts, this Act outlines the law to govern how one individual (the trustee) deals with property for another’s benefit (the beneficiary), in accordance with the guidance of the creator of the trust (the author).
In the intricate society of the present era where asset planning, financial guardianship, and welfare obligations play an important role, the Indian Trusts Act becomes a necessary roadmap for providing clarity, legality, and justice in private arrangements.
What is a Trust?
According to Section 3 of the Act, a trust is an obligation annexed to the ownership of property, arising out of a confidence reposed in and accepted by the owner (trustee), for the benefit of another (beneficiary).
Example:
Let’s say Ravi wants to fund his niece Anjali’s education. He entrusts ₹15 lakhs to his friend Meera, instructing her to invest it wisely and use the returns for Anjali’s school fees. Here:
- Ravi is the Author,
- Meera is the Trustee,
- Anjali is the Beneficiary,
- and ₹15 lakhs is the Trust Property.
Historical Background and Scope
Indian Trusts Act was passed during the British period to enact the laws relating to private trusts of India. It was effective from 1st March 1882. Although the Act is applicable to private trusts alone, public or charitable trusts are regulated individually under laws such as:
• The Charitable and Religious Trusts Act, 1920
• State legislation such as the Maharashtra Public Trusts Act, 1950
Key Components of the Act
The Act contains 11 chapters and 93 sections, dealing with:
• Creation of trusts
• Duties, rights, and liabilities of trustees
• Rights of beneficiaries
• Investment and management of trust property
• Extinction and revocation of trusts
Essentials for Creating a Valid Trust (Section 6)
To constitute a valid private trust in India, the following must exist:
1. Intent – There should exist a clear intention to create the trust.
2. Purpose – It should be a lawful and definite object.
3. Beneficiary – Must be clearly identifiable or ascertainable.
4. Trust Property – The property must be particular and transferable.
5. Competent Author – The author of the trust should be legally competent (major and of sound mind).
Duties and Responsibilities of a Trustee (Sections 11–20)
A trustee is in a position of fiduciary duty, so they have to act with utmost good faith and in the best interest of the beneficiary. One of their most important responsibilities includes:
•Carrying out the Trust according to the trust deed
•Maintenance and preservation of trust property
•Investment of trust money in government-approved securities (Section 20)
•Transparency and disclosure to beneficiaries
•Neutral conduct with more than one beneficiary
Prohibition
A trustee cannot benefit personally from the trust, nor can they sub-delegate tasks, except on special conditions provided for by the trust deed or law.
Rights of the Trustee (Sections 26–30)
While trustees possess various obligations, the Act grants them specific rights to ensure their role:
1. Right to own and handle trust property.
2. Right to be reimbursed for proper expenses.
3. Right to be indemnified for loss not arising due to negligence.
4. Right to advice from the court in respect of difficult issues.
5. Right to compensation (if authorized in the trust deed).
Liabilities of the Trustee (Sections 23–25)
Non-compliance with duties can make trustees liable in civil law. A trustee can be made liable:
• For breach of trust
• If they bring about a loss or damage to the trust property
• If they exercise powers outside the trust
• For losses resulting from negligence or dishonesty
Co-trustees can also be liable if they had knowledge of misconduct but did not intervene or report.
Rights and Liabilities of the Beneficiary
Rights (Sections 55–69):
• Be entitled to demand benefits under the trust according to terms
• Be entitled to examine accounts and insist upon reasonable record-keeping
• Enforce proper administration of the trust
• Sue for misconduct and claim damages
• Bring the trust to an end with consent (in some circumstances)
• Liabilities:
• Cannot act in defiance of the purpose of the trust
• Cannot demand benefits outside the ambit of the trust
• Must reasonably assist the trustee
Investment of Trust Property (Section 20)
Trustees are statutorily obligated to invest trust money in authorized securities, including:
• Government bonds
• Scheduled bank deposits
• Government guaranteed debentures or stocks
Any unsafe or unauthorized investment can be considered a violation of trust, though it may bring profit.
Extinction and Revocation of Trusts
Extinction (Section 77):
A trust comes to an end when:
- The purpose is fulfilled
- The purpose becomes unlawful or impossible
- The beneficiary renounces their interest
- The property ceases to exist
Revocation (Section 78):
A trust can be revoked by:
- The author, if power was reserved at the time of creation
- The consent of all competent beneficiaries
Analytical Insights
The Act demonstrates a contemporary appreciation of fiduciary obligations, where law and morality converge. It does not only address law enforcement, but also moral obligations. It reconciles power (trustee) and weakness (beneficiary) in an orderly way.
Foucaultian Perspective (Theoretical Analysis):
Drawing on Michel Foucault’s theory, the Act might be seen to institutionalize a kind of social surveillance and disciplinary power—where trustees are under constant watch through law to ensure their just conduct.
Landmark Cases
- Munjal vs Commissioner of Income Tax (1957):
- held a trust must have definite goals and cannot arise on the basis of vague intentions.
- CIT vs Kamla Town Trust (1996):
highlighted legal duty of the trustee to invest money prudently. Bad investments resulted in trustee liability.
Limitations of the Act
•Public or charitable trusts are not governed under the Act.
•Immovable property trusts are required to be registered, or they become unenforceable.
•Oral trusts are recognized under the law, but difficult to establish.
• The Act may be insufficient for contemporary financial instruments in the absence of case law to support it.
Conclusion: Why This Act Still Matters
With the rise in wealth management, estate planning, and social responsibility, the Indian Trusts Act, 1882 remains an important legal instrument in these times. It guarantees:
• Protection of rights of beneficiaries
• Ethical behaviour of trustees
• Legal validation of private arrangements
If you’re a law student, an investor, or a family member with futures to consider—this Act is important for you to know. It not only defines legal positions but encourages trust, both legally and emotionally, in private transactions.
“The best way to find out if you can trust somebody is to trust them—with a trust deed, of course.”
