Holding of property
by a trustee involves various obligations and duties on the parties to a trust
deed and these are enumerated in the Indian Trust Act 1882, which regulates the
formation, and function of the trusts, powers and duties of trusties in dealing
with trust properties.
Trust is an
obligation attached to the property thereby indicating how the property is to
be used and who are the beneficiaries of the trust Property. It is an agreement
between the Author of the Trust and the Trustee i.e. the manager of the trust
property and the owner of the trust property. A trust may be formed by any
person competent to contract, or with the permission of the court by a minor or
on behalf of minor. A trust consists of more than one person that is at least
two persons. The person that is the owner of the property, who reposes the
confidence in another to manage the property is called author of the Trust or a
settler.
The person who manages the property as per the directions of the
author of the trust is a trustee. Both the parties, i.e. the author of the
Trust, and the trustee are parties to the document called a trust deed, which
defines the objectives and functions of the Trust. The institution is called
the Trust. Apart from the author of the Trust, and the Trustee, the third party
who is entitled to the benefits is called the beneficiary, who is not a party
to the Trust Deed. The beneficiary has the right to insist that the trust
property can be used for their benefits although they are not a party to the
said trust deed. Any person capable of holding the property can be trustee but
not the government of India. Likewise a government servant cannot be a trustee
of mosque, temple, church or other religious institutions.
The important
ingredients of a trust are – the objectives must be certain, the beneficiaries
must be certain and clear and definition of the trust property must be clear
and identifiable. The trust cannot be created orally, must be in writing duly
signed by the Author and it can also be created by a Will. The Trusts are of
many types. A private trust, where the beneficiaries are the legal heirs of the
author, or a group of individual. A public trust is one where the beneficiaries
are whole lot of public. The trust may be partly public and partly private. A
charitable trust is created for relief, advancement of education, religion and
other purposes beneficial to the community at large.
1.
Purpose, which is forbidden by law.
2.
The purpose if permitted would defeat the provisions
of law.
3.
Fraudulent purpose.
4.
Involves or implies in injury to the person, property
of another.
5.
The court regards the purpose as immoral or opposed to
the public policy.
A
trust may be created only by a non-testamentary document that is a Trust Deed.
The Trust Deed is compulsorily registerable under section 17(b) of Indian
Registration Act 1908. The stamp duty payable on Trust Deed is governed by the
Indian Stamp Act 1899, and falls under the powers of the States hence the stamp
duty varies from State to State. It
is created by a deed, it is to be registered if the value-exceeds Rs. 100. The
trust act does not apply to public or private religions endowments. Section 18
of Transfer of Property Act 1882 relaxes all restrictions, in case of
properties transferred for benefit of public like advancement of knowledge,
religion, commerce, health and other allied objectives. A trustee cannot
delegate his duties to another, except clerical duties and must have the final
control over such delegation.
Often bailment and
trust are confused. In bailment, there is delivery of goods from one person to
another person for some purpose and on completion of such purpose; the goods
have to be returned. In case of Trust, the property is transferred in favour of
Trustee for the benefit of another person. In bailment, the person who received
the goods is not the legal owner, but the trustee is a legal owner of the
property.
The duties of the
Trustee shall be well defined; he should comply with the terms of the Trust
Deed, as per the directions of the author of the trust. He has to get
acquainted with the property of the Trust and take required care about the
genuinety and recoverability of the investments of the Trust money. The Trustee
should, protect the title of the Trust property, if necessary by instituting
legal proceedings. He should not set up any title adverse to the beneficiary.
He has to exercise proper care and be impartial and should prevent wastage and
convert any perishable property to permanent or profitable in nature. He has to
maintain proper accounts and adopt proper investment strategies. The trustees cannot
commit any breach of trust, cannot set off the loss occurred because of breach
of trust in one portion of the trust property against profit of another portion
of trust property. When a breach of trust is committed by one trustee, all the
trustees are liable to the beneficiary for the whole loss sustained. Like-wise,
the trustee has certain rights, like possession of the trust deed, title deeds
of the trust property, reimbursement of expenses, right to settlement of
accounts, right to seek the opinion of the court.
The trustee may
lease the Trust property for a period not exceeding 21 years without the
permission of the court, may sell the property in lots, by public auction, or
by a private contract. He may also sell under special conditions, and buy and
resell. He has powers to make the investment of the trust property, which must
be in securities listed in trust act. Any variations in investment other than
listed securities must be with the written consent of the beneficiary. He may
apply the property of the minor for maintenance of minor with proper care and
discretion.
After he accepts a trust he cannot renounce it except with the
permission of the court, or with the consent of all the beneficiaries. Trust
property cannot be used for his own benefit, and any benefit must be
transferred to the trust. It is to be noted that, the trustee cannot purchase
the trust property in respect of which he is trustee for sale. Even his agents
cannot buy the same. Further, trustee or his agent, cannot buy the
beneficiaries interest and cannot be a mortgagee, lessee of the trust property
without court permission. Similarly co-trustees cannot lend among themselves.
If trustee wrongfully sells the trust property, the beneficiaries have a right
to follow to so long it is traced notwithstanding the intermediate ownership
except in case of bonafide sale for value without the notice of the trust.
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