The Indian Trusts Act, 1882 basically applies to and meant for private trusts, whereas Sec. 92 of the CPC pertains only to public trusts. Public and private religious or charitable trusts are expressly excluded from the ambit of the Indian Trusts Act.
The relevant portion of Sec. 1 of the Indian Trusts Act, 1882 reads as follows:
But there are common legal principles[1] which cover matters of both public and private trusts.[2] Our courts apply the general or common law of trusts and the universal rules of equity and good conscience upheld by the English judges in the matter of public trusts. In other words, the principles of the English Law of Trusts which have been incorporated in the Indian Trusts Act will apply to public trusts also.
In State of Uttar Pradesh Vs. Bansi Dhar[3] it was held by VR Krishna Iyer J. that merely because common legal principles which cover both private and public trusts find a place in the Trusts Act, they cannot become ‘untouchable’ where affairs of public trusts are involved.[4] It is held as under:
The Supreme Court, in Sheikh Abdul Kayum Vs. Mulla Alibhai,[6] observed:
Though the Indian Trusts Act do not apply in terms to the public trusts,[7] the common legal principles under various sections, 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), etc., and Chapter IX pertaining to implied trusts, apply to public trusts also. [8]
Our courts apply the general law of trusts and the universal rules of equity and good conscience upheld by the English judges. In other words, the principles of the English law of Trusts which have been incorporated in the Indian Trusts Act will apply to public Trusts also. Generally, the Courts in India apply the principles and Rules of English Law on the subjects and matters which are not provided for (in an enactment) unless they are inconsistent with the existing Rules and practice.
Provisions of Trusts Act Not Apply Proprio Vigore
Referring to Sheikh Abdul Kayum Vs. Mulla Alibhai[9] and State of UP Vs. Bansi Dhar,[10] it is held in Trustees of HEH The Nizams Pilgrimage Money Trust Hyderabad Vs. CIT, AP[11] that the general principles of trust adumbrated in the provisions of the Trust Act can be applied by invoking the universal rules of equity and good conscience even though provisions of the Trusts Act proprio vigore do not apply to public charitable trusts.
Indian Trusts Act: Scheme
Principles of Trusts Act Applied to Public Trusts
Principles in Sec. 46 and 47 of the Indian Trusts Act, which deal with renunciation and delegation of the powers as well as duties of the trustees, are applied by our Courts to various affairs of fiduciary relationship,[16] and duties[17] attached thereto as they contain the common law principles of the universal rules of equity, justice and good conscience upheld by the English judges[18] unless displaced by an enacted law.
These principles would also apply with equal force to servants and, in fact, to anybody who has entered on another’s property in a fiduciary capacity.[19]It is held by our Apex Court in Marcel Martins Vs. M Printer that the expression ‘fiduciary capacity’ is wider in its import.
Sec. 46 and 47 of the Indian Trusts Act make it clear: a fiduciary relationship and duties[20] 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 [21] Relying on Central Board of Secondary Education Vs. Adiya Bandopadhyay[22] it is held by our Apex Court in Marcel Martins Vs. M Printer[23] as under:
The agent who holds the property for the principal stands, in a fiduciary capacity and as a trustee; and he has a duty and responsibility to make over the unauthorised profits or benefits he derived while acting as an agent, and he has to properly account for the same to the principal.[24]
As a general rule, the trustees must exercise their duties jointly, unless the instrument of trust otherwise provides. A trustee cannot delegate any of the duties, functions and powers of his office to his co-trustees or to anyone else, as that would be contrary to his obligation under the Trust. The intent behind these propositions is clear: that, a fiduciary relationship created shall not be allowed to be shattered unilaterally.
Lewin on Trusts, lays down:
In Kishore Joo Vs. Guman Behari Joo Deo[26] it has been held that all the trustees would join to file an application to execute the decree obtained on behalf of the idol of a temple.
What are called ‘constructive or implied trusts’ in English Law are included under the head “obligations in the nature of trust”, in the Indian Trusts Act, and are dealt with in Chapter IX, Sections 80 to 96, titled: “Of Certain Obligations in the Nature of Trust”.[27]
As per the definition of trust in Sec. 3 of the Indian Trusts Act the trustees must have ‘accepted’ the ‘obligations’ in the trust. Chapter IX, Sections 80 to 96 implies that certain persons are bound by the obligations in the nature of trust ‘for the benefit of another’. Such instances of fiduciary obligations are founded either on implied intention, or on construction of law to meet the requirements of equity irrespective of implied intention.[28]
In State of Uttar Pradesh Vs. Bansi Dhar[29] it was held that Section 83 of the Trusts Act merely reflects a rule of good conscience and of general application. No doubt, this proposition applies to other provisions in Chapter IX also.
Indian Trusts Act, Sec. 46 and 47: Fiduciary Relationship
Sec. 46 and 47 of the Indian Trusts Act[30] make it clear – a fiduciary relationship and duties attached thereto should not be allowed to be unilaterally terminated or varied.
Principles in Sec. 46 and 47 of the Indian Trusts Act are applied to various affairs of fiduciary relationship,[31] and duties[32] attached thereto, 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. These principles would also apply with equal force to servants and, in fact, to anybody who has entered on another’s property in a fiduciary capacity.[33]It is held by our Apex Court in Marcel Martins Vs. M Printer that the expression ‘fiduciary capacity’ is wider in its import.
Relying on Central Board of Secondary Education Vs. Adiya Bando-padhyay[34] it is held by our Apex Court in Marcel Martins Vs. M Printer[35] as under:
The agent who holds the property for the principal stands, in a fiduciary capacity and as a trustee; and he has a duty and responsibility to make over the unauthorised profits or benefits he derived while acting as an agent, and he has to properly account for the same to the principal.[36]
Indian Trusts Act, S. 81 to 94: Obligations ‘In the Nature of Trusts’
S. 81 to 94 of the Indian Trusts Act deal with obligations ‘in the nature of trusts’. As per the definition of trust in Sec. 3 of the Indian Trusts Act the trustee must have ‘accepted’ the ‘obligations’ in the trust. Sections 80 to 96 of the Indian Trusts Act imply that the persons specified in these sections are bound by the ‘obligations in the nature of trust’ ‘for the benefit of another’. Such instances of fiduciary obligations are founded either on implied intention, or on construction of law to meet the requirements of equity irrespective of implied intention.[37]
Indian Trusts Act, Sec. 88 & 95: Apply to Directors & GB of Societies and Clubs
Section 88 of the Indian Trusts Act expressly refers to director of a company. Though directors of a company are not express trustees with respect to their liabilities and disabilities, the Indian Trusts Act takes the position of a director of a company to that of trustees[38] in Chapter IX of the Indian Trusts Act (Section 80 onwards). Their office is fiduciary in character. They are bound by the directives in Sec. 88.
Section 88 of the Indian Trusts Act reads:
Palmer’s Company Law explained this position as under:
In VS Ramaswamy Iyer Vs. Brahmayya and Company Official Liquidators Hanuman Bank Limited[39] referring to Palmer’s Company Law, Charitable Corporation Vs. Sutton,[40] York and North Midland Ry. Vs. Hudson,[41] GE Ry. Vs. Turner,[42] In Re Forest of Dean Co.,[43] Buckley on the Companies Acts, Halsbury’s Laws of England, Gore-Browne, Handbook of Joint Stock Companies, Flitcroft’s case,[44] Ramskill Vs. Edwards,[45] In Re Faure Electric Accumulator Company,[46] Concha Vs. Murrieta,[47] In Re Lands Allotment Company,[48] etc. (which held that though the directors of a company were not trustees in the strict sense, they had always been considered and treated as trustees of money which came to their hands) it is held that the law in India regarding the nature of the liability of directors has not been different.
It is legitimate to comprehend that the words ‘or other person’ in Sec. 88 of the Indian Trusts Act encompass the governing bodies of societies and clubs also. By virtue of Sec. 95 of the Indian Trusts Act it is further clear that the principles and incidents of ‘trust’ are impressed upon the property held by societies and clubs also.
Sec. 95 of the Indian Trusts Act reads as under:
The agent employed to purchase the property on behalf of his principal fraudulently got his name entered in the sale certificate. The agent was holding the property in trust on behalf of and for the principal, and the agent was under duty and responsibility to make good the unauthorised profits be derived in such capacity to the principal.[49]
Indian Trusts Act, Sec. 11 and 13
It is legitimate to comprehend that the principles in Sec. 11 and 13 of the Indian Trusts Act, 1882 as to duty of trustee to execute trust and protect and preserve trust property are applicable to the administrators of a society also.
Sec. 11 and 13 of the Indian Trusts Act reads as under:
Section 34: Direction of Court for Administration
Apart from Section 92 CPC, Section 34 of the Indian Trusts Act provides for seeking permission of the principal civil court of original jurisdiction with respect to management of trust property.
S. 34 of the Indian Trusts Act reads:
Similar provisions are contained in various (State) Public Trusts Acts for getting direction of the Court for the administration of the public trust.[50]
By virtue of Section 23 of the Indian Trusts Act, 1882 read with Section 95, the trustees/administrators who commit breach of trust are liable to make good the loss which the trust property or the beneficiaries have thereby sustained.
Section 23 of the Indian Trusts Act, 1882 reads as follows:
S. 90 of the Indian Trusts Act directs that constructive trustees who gain advantages must hold the same for the benefit of all persons so interested.
S. 90 of the Indian Trusts Act, 1882 states:
Even if the trust deed does not provide for sale of trust property, the court can grant permission if the court is satisfied that the sale is for the benefit of the trust.[51]
Provisions of Trusts Act Not Apply to Public Trusts: S. 77 and 78
As shown above, by virtue of Sec. 1 of the Trusts Act, 1882 the applicability of the Trusts Act is expressly excluded in the case of public or private religious or charitable endowments.
Therefore, the provisions of the Trusts Act as to ‘Trust how extinguished’ (Sec. 77) and ‘Revocation of trust’ (Sec. 78) do not apply to public or private religious or charitable endowments.
Sec. 77 reads as follows:
Sec. 78 reads as follows:
In Private Trusts Beneficiaries Can Give Consent on Certain Matters
Though the beneficiary has no proprietary or beneficial interest pertaining to owner, the Indian Trusts Act, 1882, with regard to private trusts, permits the beneficiaries, as a whole, who are competent to contract, to do, act or perform the following matters, as stated in those sections.
[1] Sk. Abdul KayumVs. Mulla Alibhai: AIR 1963 SC 309.
[2] State of Uttar Pradesh Vs. Bansi Dhar: AIR 1974 SC 1084
[3] AIR 1974 SC 1084
[4] Bai Dosabai Vs. Mathurdas Govinddas: AIR 1980 SC 1334.
[5] See also: HEH The Nizams Pilgrimage Trust Vs. Commr of IT AP: AIR 2000 SC 1802;
Kishore Joo Vs. GumanBehariJooDeo: AIR 1978 All 1;
Bonnerji Vs. Sitanath: 49 IA 46;
referred to in Arjan Singh Vs. Deputy Mal Jain ILR 1982- 1 Del 11;
Sk. Abdul Kayum Vs. Mulla Alibhai: AIR 1963 SC 309;
Shivramdas Vs. B V Nerukar: AIR 1937 Bom 374;
Rambabu Vs. Committee of Rameshwar: (1899) 1 Bom LR 667;
Nathiri Menon Vs. Gopalan Nair: AIR 1916 Mad 692.
[6] AIR 1963 SC 309
[7] Thayarmmal (dead) by L.Rs. Vs. Kankammal, (2005) 1 SCC 457;
Sk. Abdul Kayum and ors. Vs. Mulla Alibhai: AIR 1963 SC 309.
[8] Bai Dosabai Vs. Mathurdas Govinddas: AIR 1980 SC 1334.
[9] AIR 1963 SC 309.
[10] AIR 1974 SC 1084.
[11] AIR 2000 SC 1802.
[12] Chapter IX is titled: “Of Certain Obligations in the Nature of Trust”.
See: Rotopacking Materials Industry Vs. Ravinder Kumar Chopra: 2003-6 BCR 6
[13] Kishore Joo Vs. Guman Behari Joo Deo: AIR 1978 All 1;
Bapalal Godadbhai Kothari Vs. Charity Commissioner Gujarat: 1966 GLR 825
[14] Shanti Vijay And Co Vs. Princess Fatima Fouzia: AIR1980 SC 17;
Sk. Abdul Kayum Vs. Mulla Alibhai: AIR 1963 SC 309; AIR 1952 Cal 350
[15] Vrandan Bhaichand Shah Vs. Parshottam Motichand Shah: 1927 Bom 75.
[16] Reserve Bank Of India Vs. Jayantilal N. Mistry: AIR 2016 SC 1
[17] Bonnerji Vs. Sitanath 49 IA 46:
Referred to in Arjan Singh Vs. Deputy Mal Jain ILR 1982- 1 Del 11.
[18] HEH The Nizams Pilgrimage Money Trust Vs. Commr, IT: AIR 2000 SC 1802;
State of Uttar Pradesh Vs. Bansi Dhar: AIR 1974 SC 1084;
Kishore Joo Vs. Guman Behari Joo Deo: AIR 1978 All 1.
BonnerjiVs. Sitanath: 49 IA 46:
Referred to in Arjan Singh Vs. Deputy Mal Jain: ILR 1982- 1 Del 11;
Sk. Abdul Kayum Vs.Mulla Alibhai: AIR 1963 SC 309.
See also: Shivramdas Vs. B V Nerukar: AIR 1937 Bom 374;
Rambabu Vs. Committee of Rameshwar: (1899) 1 Bom LR 667;
Nathiri Menon Vs. Gopalan Nair: AIR 1916 Mad 692.
[19] Balram Chunnilal Vs.Durgalal Shivnarain: AIR1968 MP 81.
[20] Bonnerji Vs. Sitanath 49 IA 46:
Referred to in Arjan Singh Vs. Deputy Mal Jain ILR 1982- 1 Del 11.
[21] Balram Chunnilal Vs. Durgalal Shivnarain: AIR1968 MP 81.
[23] AIR 2012 SC 1987
[24] RV Sankara Kurup Vs. Leelavathy Nambiar: AIR 1994 SC 2694
See also: Balram Chunnilal Vs. Durgalal Shivnarain: AIR1968 MP 81.
[25] Referred to in Atmaram Ranchhodbhai Vs. Gulamhusein Gulam: AIR 1973 Guj 113
Man Mohan Das Vs. Janki Prasad, AIR 1945 PC 23
[27] See: Rotopacking Materials Industry Vs. Ravinder Kumar Chopra: 2003-6 BCR 6
[28] Narayani Amma Vs Eyo Poulose: AIR 1982 Ker 198.
[29] AIR 1974 SC 1084
[30] See Chapter: RIGHTS AND DUTIES OF TRUSTEES
[31] Reserve Bank Of India Vs. Jayantilal N. Mistry: AIR 2016 SC 1
[32] Bonnerji Vs. Sitanath 49 IA 46:
Referred to in Arjan Singh Vs. Deputy Mal Jain ILR 1982- 1 Del 11.
[33] Balram Chunnilal Vs.Durgalal Shivnarain: AIR1968 MP 81.
[35] AIR 2012 SC 1987
[36] RV Sankara Kurup Vs. Leelavathy Nambiar: AIR 1994 SC 2694
See also: Balram Chunnilal Vs. Durgalal Shivnarain: AIR1968 MP 81.
[37] Narayani Amma Vs Eyo Poulose: AIR 1982 Ker 198.
[38] See: V S Ramaswamy Iyer Vs. Brahmayya: 1966-36 Comp Cases 270, 1966-1 Mad LJ 234
[39] 1966-36 Comp Cases 270, 1966-1 Mad LJ 234
[41] 1853 16 Beav. 485
[42] 1872 L.R. 8 Ch. App. 149
[43] 1878 (10) Ch(D) 450
[44] 1882 (21) Ch(D) 519
[46] 1889 L.R. 40 Ch(D) 141
[47] 1889 L.R. 40 Ch(D) 543
[48] 1894 L.R. 1 Ch(D) 616
[49] PV Sankara Kurup Vs. Leelavathy Nambiar: AIR 1994 SC 2694.
[50] See MP Public Trust Act, 1951; Bombay Public Trusts Act, 1950
[51] Snehasagar Charitable Trust Vs. State: ILR 2010 (2) Ker 738
Read in this cluster (Click on the topic):
Book No. 1 . Handbook of a Civil Lawyer
Book No. 2: A Handbook on Constitutional Issues
Book No. 3: Common Law of CLUBS and SOCIETIES in India
Book No. 4: Common Law of TRUSTS in India