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RIGHTS , DUTIES AND POWERS OF TRUSTEES

INTRODUCTION
Section 10 of Indian Trust Act, 1882, defines a trustee. It goes as follows,
Every person capable of holding a property may be a trustee; but where the trust
involves the exercise of discretion, he cannot execute it unless he is competent to
contract.
A trust is a relationship whereby property (real or personal, tangible or
intangible) is held by one party for the benefit of another. A trust conventionally arises
when property is transferred by one party to be held by another party for the benefit of
a third party, although it is also possible for a legal owner to create a trust of property
without transferring it to anyone else, simply by declaring that the property will
henceforth be held for the benefit of the beneficiary. A trust is created by a settlor
(archaically known, in the context of trusts of land, as the feoffor to uses), who
transfers some or all of his property to a trustee (archaically known, in the context of
land, as the feoffee to uses), who holds that trust property (ortrust corpus) for the
benefit of the beneficiaries (archaically known as the cestui que use, or cestui que
trust). In the case of the self-declared trust, the settlor and trustee are the same person.
The trustee has legal title to the trust property, but the beneficiaries have equitable title
to the trust property (separation of control and ownership). The trustee owes a
fiduciary duty to the beneficiaries, who are the "beneficial" owners of the trust
property. (Note: A trustee may be either a natural person, or an artificial person (such
as a company or a public body), and there may be a single trustee or multiple cotrustees. There may be a single beneficiary or multiple beneficiaries. The settlor may
himself be a beneficiary.)

The trust is governed by the terms under which it was created. The terms of the
trust are usually written down in a trust instrument or deed but, in England and Wales,
it is not necessary for them to be written down to be legally binding, except in the case
of land. The terms of the trust must specify what property is to be transferred into the
trust (certainty of subject-matter), and who the beneficiaries will be of that trust
(certainty of objects). It may also set out the detailed powers and duties of the trustees
(such as powers of investment, powers to vary the interests of the beneficiaries, and
powers to appoint new trustees). The trust is also governed by local law. The trustee is
obliged to administer the trust in accordance with both the terms of the trust and the
governing law.
The Indian trust Act 1882, is an act to define and amend the law relating to
Private Trusts and Trustees. The trust can be and has been applied as a device for
accomplishing many different purposes As Maitland observes, of all exploits of
equity the largest and the most important is the invention and development of the
trust. According to him, the trust is an institute of great elasticity and generality; as
elastic, as general as contract.
A trust has been defined as an obligation annexed to the ownership of property
and arising out of confidence, and the person who accepts the confidence is called the
trustee. The obligation being annexed to the ownership of property it must vest in
the trustee, or at any rate he must have a right to call for a transfer of, or to possess
such property. Mere appointment of a person as a trustee without the vesting and
transfer of property would not constitute his title.
Section 10 of Indian Trust Act, 1882, defines a trustee. It goes as follows, Every
person capable of holding a property may be a trustee; but where the trust involves the
exercise of discretion, he cannot execute it unless he is competent to contract.

APPOINTMENT OF A TRUSTEE
Appointment of the trustee should be done formally, expressly in writing, even
though it will always be implied the individual will use the trust property, or
performs any act to carry out the trust for the interest of beneficiaries. Once the
acceptance has been tendered then no court of law can prevent the trustee from
holding the office, except for the breach of trust or good cause dependent upon clear
and lawful necessity.
Section 10 of the Indian Trusts Act, 1882, is about the appointment of a trustee. It lays
down as to who is capable of being a trustee.
REQUIREMENTS TO BE A TRUSTEE
Legal capacity to hold property is an essential qualification for being a trustee.
Where the nature of trust requires exercise of discretion on the part of the trustee, he
must also possess the capacity to contract without which he cannot execute the trust.
As observed by Lewin, a person to be a Trustee, must be capable of taking or holding
the property of which the trust is declared. The trustee should be competent to deal
with the estate as required by the trustor as directed by the beneficiaries. Whereas
certain classes are by nature or by rules of law under disability, the execution of the
trust may call for the application of judgement and knowledge of business. The trustee
ought to be amenable to the jurisdiction of the court which administers the trust. In
general terms, therefore, a trustee should be a person capable of taking and holding
the legal estate and possess a natural capacity and legal ability to execute the trust and
domiciled within the jurisdiction of a Court of Equity.
Thus in order to be a trustee, he must have the capacity to hold the property. For
being a bare trustee or a passive trustee whose function is merely to hold the trust
property, no further qualification is needed. Where, however, the trust involves duties

requiring the exercise of discretion, the person to be appointed as a trustee must also
be competent to contract.

ACCEPTANCE OF OFFICE
Nobody is bound to accept a trust. The acceptance of a trust is by express
declaration or by interfering with the trust property and acting as a trustee. A person
named as a trustee cannot be taken to have accepted his office from the fact that he
has taken possession of the trust deed, if he received the deed for safe custody only. If
the acts, however, are attributable only to his character as trustee, then they amount to
acceptance of trust.
By the acceptance of the trust, the trustee becomes subject to the statutory duties
imposed upon him. He cannot therefore cannot renounce except under the provisions
under section 71 of the Indian Trusts Act.
MODES OF ACCEPTANCE
(a) Acceptance by joining in the deed
When the trustee executes the instrument of trust in which he is named a trustee,
it constitutes an express acceptance of the officer by him. A trustee joining in the
execution of the instruments must be careful about the recitals made therein because
there is always a likelihood of his being bound by those recitals. There is however no
absolute bar on the trustee to contradict those recitals.
(b) Acceptance by express declaration
An express declaration of acceptance, in the deed of appointment or otherwise,
will fix the obligation of acting in accordance with the instrument of trust.

(c) Acceptance by conduct


The acceptance of office of the trustee maybe inferred from the conduct of the
trustee. Where he has acted with reference to the affairs of the trust such acts would be
evidence of acceptance. Thus giving a power-of-attorney to the co-trustees to receive
the assets of the estate has been held to amount to acceptance. A request to the debtors
of the estate to pay would amount to acceptance of the office. Likewise joining in an
assignment of testators office would amount to acceptance. The doing of an act which
is referable to the office of the executor or trustee would entail acceptance of the
office though the trustee or executor professes to disclaim.
It would not be open to the trustee to act univocally and afterwards take
advantage of the doubt and plead that he did not act as a trustee. Where, for instance, a
trustee had collected rents of the estate which was under a lease to the testators son
he was not permitted to take up the position that he had collected as agent of the son
who was the heir-in-law and not as a trustee of the estate.
(d) Conduct not implying acceptance
Where, however, the conduct is clearly referable to some other ground than the
execution of the trust it would not be construed as acceptance of the trust. Merely
taking delivery of the settlement deed as a measure of interim custody by a trustee has
been held not to amount to acceptance.
(e) Bias or interest of person appointed as trustee
When a person appointed as trustee has a discretionary power annexed to the
office and he has a bias or interest in the exercise of the power, he must disclose the
same before acceptance, otherwise he will be disentitled to exercise that discretionary
power.

(f) Estoppel by acceptance


A trustee who has once accepted his office is estopped from denying the
existence of that trust. Where for instance a person accepts a trust in relation to a
specific sum of money and agrees to invest it in his firm and also undertakes the
duties of a trustee in respect thereto, it would not be open to him to allege that the
transaction in relation to the amount is not a trust, and that the character in which he
holds the property, is different from that of a trustee. In the event of his insolvency, the
beneficiaries as well as the co-trustees would be entitled to trace the fund in the assets
held by the Official Assignee and claim priority.
POSITION OF A TRUSTEE
DUTIES OF A TRUSTEE
1) Duty to obey the direction of the testator or the settler(Section-11)
The guiding principle for the trustee is to obey the directions of the testator or
settler. Where, for instance, the author of the trust has directed calling in of the trust
monies and investing the same in the purchase of real estate the trustee must comply
with the direction, and in case of default he will have to make good the loss, if there is
any, as a result of his default. But the trustee would not be liable if the direction is not
clear. In the case of a trust for sale within a particular time the failure on the part of
the trustee to sell within the prescribed time will make him liable in the event of the
property being thereafter lost, for instance, by destruction.
2) Trustee to inform himself of the state of trust property(Section 12)
Section 12 states that A trustee is bound to acquaint himself, as soon as
possible, with the nature, and circumstances of the trust property; to obtain, where
necessary, a transfer of the trust to himself,(and subject to the provisions of trust) to
get in trust-moneys invested on insufficient or hazardous security.

The first duty of a trustee on acceptance of office is to acquaint himself with


the nature and circumstances of trust property. He is under a duty what the trust
property consists of that is proposed to be handed over to him and what are the trusts.
He must also look into the trust documents, make himself conversant with the terms
of the trust deed, ascertain the encumbrances and acquaint himself with all the matters
affecting the trust. He must ascertain whether assets are secure ie examine whether the
securities in which the assest have been invested are sufficient.
3) Duty to protect the title of the trust property(Section 13)
Section 13 of the Indian Trusts Act states that A trustee is bound to maintain
and defend all such suits, and (subject to the provisions of the instruments of trust) to
take such other steps as, regard being had to the nature and amount or value of the
trust-property, may be reasonably requisite for the preservation of trust property and
the assertion or protection of the title thereto.
The paramount duty of the trustee is to take all necessary steps of preservation
and protection of the trust property. It is the duty of the trustee to see that if anything
remains to be done to perfect the title to the trust property it is carried out. Sometimes
it may be necessary to protect the estate from the settler or others deriving title from
him so that they may not deal with the property in any manner adverse to the trust.
Where under the terms of the trust, there is an authority to purchase property, the
trustee must investigate the title before concluding the purchase.
The title deeds of the trust property must be kept by the trustee under safe custody. If
they are lost the trustee will be liable unless he could show that the loss was not due to
any negligence on his part.

4) Duty not to set up title adverse to beneficiary(Section 14)


Section 14 of the Indian Trust Act states that 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.
The position of a trustee being fiduciary it is not open to him to set up any title
adverse to the beneficiary. This section lays down two rules:
a)a trustee cannot set up or aid an adverse title; and
b) a trustee cannot set up or aid a third partys title against the trust.
The principle underlying the provisions of this section is that a trustee who has
accepted office must assume the validity of the trust and the title of the beneficiaries
to the trust property. Under the provisions of this section, a trustee is not permitted to
invoke formal title in himself in respect to the trust property adversely against the
interest of the beneficiary, nor should he act in a manner inconsistent with his duty as
trustee, nor can he take the benefit of breach of trust.
5) Duty to maintain accounts and information(Section 19)
Section 19 of the Indian Trusts Act states that 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
anmount and state of the trust property.
Trustees who have assumed management of the estates of the beneficiaries owe
a duty to them to keep a correct and true account of the transaction relating to trust
estate. The duty includes maintaining proper vouchers as regards the transactions. The
duty to keep accounts includes the maintainance of a diary relating to the
administration.

Besides the duty to keep correct accounts the trustee must constantly be ready
at all reasonable times to make them available to the beneficiary. Under Section 19, it
is not only the duty of a trustee to maintain accurate accounts of the trust property but
also a duty , nay an obligation to furnish beneficiaries with full and accurate
information as to the amount and condition of the trust property.
RIGHTS OF A TRUSTEE
1) Right to reimbursement of expenses(Section 32)
Section 32 of the Indian Trust Act states that Every trustee may reimburse
himself, or pay or discharge out of the trust property all expenses properly incurred in
or about the execution of the trust, or the realization, preservation or benefit of the
trust property or the protection or support of the beneficiary.
When a trustee has, by mistake, made an overpayment to the beneficiary, he may
reimburse the trust property out of the beneficiarys interest. If such interest fails, the
trustee is entitled to recover from the beneficiary personally the amount of such over
payment.
Under the provisions of this section, every trustee is entitled to reimburse
himself out of the trust property, or if it fails, to recover from the beneficiary,
personally on whose behalf he acted all expenses properly incurred in the execution of
the trust and interest thereon, even where the appointment has not been regular but the
trustees have acted bonafide they are entitled to reimbursement. Under section 32 of
the trusts Act which provides that a trustee is entitled to be reimbursed of the expenses
incurred properly by him about the realization, preservation or benefit of the trust
property ot the protection or support of the beneficiary.

2) Right to indemnify from gainer by breach of trust( Section 33)


Section 33 of the Indian Trust Act states that A person other than a trustee who
has gained an advantage from the breach of trust must indemnify the trustee to the
extent of the amount actually received by such person under the breach; and where he
is a beneficiary, the trustee has a charge on his interest for such amount.
Nothing in this section shall be deemed to entitle a trustee to be indemnified
who has, in committing the breach of trust, been guilty of fraud.
A trustee is undoubtedly liable to the beneficiary for any loss caused to the trust
estate by the breach of trust. But as between the trustees and a third person, who has
reaped the benefit of breach of trust, the loss will be cast upon the person who has
gained an advantage by the breach of trust.
3) Right to apply to Court for opinion in management of the trust property
(Section 34)
Section 34 of The Indian Trusts Act states 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 other than questions of detail, difficulty or
importance, not proper in the opinion of the court for summary disposal.
A copy of such petition shall be served upon, and the hearing thereof may be
attended by, such of the persons interested in the application as the Court thinks fit.
The trustee stating in good faith the facts in such petitions and acting upon the
opinion, advice or direction given by the Court shall be deemed, so far as regards his
own responsibility, to have discharged his duties as such trustee in the subject-matter
of the application.

The costs of every application under this section shall be in the discretion of the Court
to which it is made.
This section deals with the summary jurisdiction of the court on an application
by a trustee for the opinion, advice or direction of the court on any question respecting
the management or administration of the trust property. Questions of detail, difficulty
or importance which by reason of their complicated nature would not be fit for
summary consideration, have been expressly excluded. This section contains only
enabling provisions and it is not binding in each case to do so.
4) Right of settlement of accounts(Section 35)
Section 35 of The Indian Trusts Act states 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; and where nothing is due to the beneficiary under the
trust, to an acknowledgement in writing to that effect.
As provided under Section 19, a duty is cast upon a trustee to keep clear and
accurate accounts of the trust property and to furnish the beneficiary with full and
accurate accounts on being requested to do so. This section confers upon the trustee a
corresponding right, the right to an acquittance from the beneficiary that his claims
have been settled is an essential protection to the trustee against being called upon to
answer questions as regards the administration of the trust by him at a later time. In
order to the trustees from being faced with claims after long lapse of time, the law
gives him on the completion of trusteeship a right to have his accounts settled and to a
receipt from the beneficiary that all claims and demands have been settled. A receipt
as acknowledgement of settlement is sufficient acquittance of the trustee.

POWERS OF A TRUSTEE
(1) General Authority of a Trustee(Section 36)
Section 36 of Indian Trusts Act, 1882 states:
In addition to the powers expressly conferred by this Act and by the instrument
of trust, and subject to the restriction, if any, contained in such instrument, and to the
provisions of section 17, a trustee may do all acts which are reasonable and proper for
the realization, protection or benefit of the trust-property, and for the protection or
support of a beneficiary who is not competent to contract.
Except with the permission of a principal civil court of original jurisdiction, no trustee
shall lease trust-property for a term exceeding twenty-one years from the date of
executing the lease, nor without reserving the best yearly rent than can be reasonably
obtained.
(2) Power to sell in lots and either by public auction or by private contract
Section 37 states: Where the trustee is empowered to sell any trust-property, he may
sell the same subject to prior charges or not, and either together or in lots, by public
auction or private contract, and either at one time or at several times, unless the
instrument of trust otherwise directs.
(3) Power to sell under special conditions-Power to buy-in and re-sell :The trustee
making any such sale may insert such reasonable stipulations either as to title or
evidence of title, or otherwise, in any conditions of sale or contract for sale, as he
thinks fit; and may also buy-in the property or any part thereof at any sale by auction,
and rescind or vary any contract for sale, and re-sell the property so bought in, or as
to which the contract is so rescinded, without being responsible to the beneficiary for
any loss occasioned thereby.

Where a trustee is directed to sell trust-property or to invest trust-money in the


purchase of property, he may exercise a reasonable discretion as to the time of
effecting the sale or purchase.
(4) Power to convey: For the purpose of completing any such sale, the trustee shall
have power to convey or otherwise dispose of the property sold in such manner as
may be necessary.
(5) Power to vary investments Section 40 states: A trustee may, at his discretion,
call in any trust-property invested in any security and invest the same on any of the
securities mentioned or referred to in section 20, and from time to time vary any such
investments for others of the same nature: PROVIDED that, where there is a person
competent to contract and entitled at the time to receive the income of the trust
property for his life, or for any greater estate, no such change of investment shall be
made without his consent in writing
(6) Power to apply property of minors, etc. for their maintenance, etc Section 41
states:
Where any property is held by a trustee in trust for a minor, such trustee may, at
his discretion, pay to the guardians (if any) of such minor, or otherwise apply for or
towards his maintenance or education or advancement in life, or the reasonable
expenses of his religious worship, marriage or funeral, the whole or any part of the
income to which he may be entitled in respect of such property; and such trustee shall
accumulate all the residue of such income by way of compound interest, by investing
the same and the resulting income thereof from time to time in any of the securities
mentioned or referred to in section 20, for the benefit of the person who shall
ultimately become entitled to the property from which such accumulations have
arisen:

PROVIDED that such trustee may, at any time, if he thinks fit, apply the whole or any
part of such accumulations as if the same were part of the income arising in the then
current year.
Where the income of the trust-property is insufficient for the minor's
maintenance or education or advancement in life, or the reasonable expenses of his
religious worship, marriage or funeral, the trustee may, with the permission of a
principal civil court of original jurisdiction, but not otherwise, apply the whole or any
part of such property for or towards such maintenance, education, advancement or
expenses.
Nothing in this section shall be deemed to affect the provisions of any local law for
the time being in force relating to the persons and property of minors.
(7) Power to give receipts Section 42 states: Any trustees or trustee may give a
receipt in writing for any money, securities or other movable property payable,
transferable or deliverable to them or him by reason, or in the exercise of any trust or
power; and, in the absence of fraud, such receipt shall discharge the person paying,
transferring or delivering the same therefrom, and from seeing to the application
thereof, or being accountable for any loss or misapplication thereof.
(8) Power to compound Section 43 states: Two or more trustees acting together
may; if and as they think fit,(a) accept any composition or any security for any debt or for any property claimed;
(b) allow any time for payment of any debt;
(c) compromise, compound, abandon, submit to arbitration or otherwise settle any
debt, account, claim or thing whatever relating to the trust; and

(d) for any of those purposes, enter into, give, execute and do such agreements,
instruments of composition or arrangement, releases and other things as to them seem
expedient, without being responsible for any loss occasioned by any act or thing so
done by them in good faith. The powers conferred by this section on two or more
trustees acting together may be exercised by a sole acting trustee when by the
instrument of trust, if any, a sole trustee is authorized to execute the trusts and powers
thereof.
This section applies only if and as far as a contrary intention is not expressed in the
instrument of trust, if any, and shall have effect subject to the terms of that instrument
and to the provisions therein contained.
This section applies only to trusts created after this Act comes into force.
(9) Power to several trustees whom one disclaims or dies (Section 44)
Section 44 states: 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, unless from the terms of the instrument of trust it is apparent that
the authority is to be exercised by a number in excess of the number of the remaining
trustees.
(10) Suspension of trustees power by decree(Section 45)
Section 45 states: Where a decree has been made in a suit for the execution of a trust,
the trustee must not exercise any of his powers except in conformity with such
decree, or with the sanction of the court by which the decree has been made, or,
where an appeal against the decree is pending, of the appellate court.
REMOVAL OF A TRUSTEE
Section 70 of the Indian trusts Act states how the office of trustee is vacated.

The office of a trustee is vacated by his death or by his discharge from his office.
This Section lays down that the office of a trustee is vacated under two
circumstances, namely-(a) the death of the trustee, and (b) discharge of the trustee.
Section 44, has laid down that when one of the trustees disclaims or dies, the authority
of trustee may be excercised by the continuing trustees in the absence of an intention
to the contrary under the terms of the instruments of the trust. Section 76 provides that
on the death or discharge of several co-trustees, the trust survives and the trust
property passes to the others in the absence of an express declaration to the contrary
by the instrument of trust.
It may be noted that though the death of a trustee causes vacancy, his
bankruptcy does nto necessarily have that effect. A trustee becoming a bankrupt
doesnot ipso facto cease to be a trustee. He can continue to function till a new trustee
is appointed.
This section provides that the office of a trustee is vacated by his discharge from
office. The next section prescribes the various modes as to the discharge of a trustee.
Section 71 states that:
The trustee maybe discharged from his office only as follows:
(a) by extinction of the trust:
Extinction of the trust automatically puts an end to the office of the trustee,
because there cannot be a trustee without a trust.
(b) by completion of his duties under the trust:
Where the purpose of the trust has fulfilled itself, there is no need to continue
the trust and it will come to an end. Where, for instance, a trust is constituted for

looking after the estate of an infant, the office of the trustee comes to an end when the
trustee hands over the estate to the beneficiary on attainment of majority.
Thus, there may be several instances under which the trust works itself out and
nothing further remaining to be done, the office of the trustee becomes extinct. The
trustee gets discharged from his office by the extinction of the trust. It is to be noted,
however, that it doesnot mean that the trustee is relieved from his duty of redering
accounts and delivering the property to the beneficiaries.
(c) by such means as may be prescribed by the instrument of trust:
Prior to the statutory provisions for appointment of a new trustee in the place of
an existing trustee on his death or resignation, it was the practice to insert a special
power in the instrument of trust providing the appointment of a new trustee on the
death or retirement of any of the existing trustees. A common instance of appointment
of new trustees under the statutory power on removal of an existing trustee occurs in
the form that was usually taken by bankers in obtaining mortgages.
(d) by appointment under this act a new trustee in his place:
A new trustee may be appointed either under statutory power, or by court. In either
event, the office of the old trustee gets vacated.
(e) by consent of himself and the beneficiary, or, where ther are more
beneficiaries than one, all beneficiaries being competent ot contract:
Where all the beneficiaries under a trust are sui juris it is open to them to
discharge a trustee even, as it would be open to them to put an end to the trust. The
majority of trustees cannot, however, give a valid consent for retirement. Where there
are limitations under the trust instrument in favour of infant beneficiaries and/or
unborn children, thr unanimity of consent on the part of the beneficiaries is not
possible of procurement and there cannot be therefore, a valid retirement in such a

case. Where there are several trustees, it has been a matter of doubts as to whether one
of the trustees can retire even with the consent of all the beneficiaries but without the
consent of co-trustee or trustees.
(f) by the Court to which a petition for discharge is presented under this Act:
Section 72 of the Indian trusts Act states that, Notwithstanding the provisions
of Section 11, every trustee may apply by petition to a principal Civil Court of
original Jurisdiction to be discharged from his office; and if the court finds that there
is sufficient reason for such discharge, it may discharge him accordingly, and direct
his costs to be paid out of the trust property. But where there is no such reason, the
Court shall not discharge him, unless a proper person can be found to take his place.
CONCLUSION
In the concept of a trust, the trustee becomes the legal owner but the element of
legal ownership is absent in the phenomenon of a security. The trustee although
becomes the legal owner of the trust property, yet he does not become the full owner
thereof and cannot sell or otherwise dispose pf the same contrary to the provisions of
the trust deed. The trustee no doubt holds the trust property for the benefit of the
beneficiaries, but he does not hold it on their behalf. The expression on behalf of is
not synonymous but conveys different meanings. In a trust of land, the legal estate is
in the trustee and the interest of the beneficiary or the cestui que trust is an interest in
the land called equitable interest. Therefore, what vests, in the trustee is only the legal
estate or the legal ownership. The trustee is not the full owner of the property in the
real sense of the term because there is a beneficial interest and the ownership therein
carved out in the property. The legal ownership vesting in the trustee is for the
purpose of the trust and the administration of the provisions of the trust. Because the
beneficiary, until the trusts are carried out, is entitled to deal with the property, the

trustee is the person who is empowered to deal with the same, but can only deal with
it in accordance with the provisions of the deed of trust.
It is only for the provident administration of a particular charity that the trustees have
the power to sell the trust properties. Much will depend upon the provisions governing
in a particular trust.