Raffles University, Neemrana

School of Law

“PROJECT TOPIC”
ON
“Creation of Trust and Right & Its Impact on Right Liabilities of
Beneficiary”

Submitted To: Submitted By

Miss. Mukta Jangir Shivansh Jaiswal; Yogita Jaiswal

Asst. Professor Roll No: 16 RU 11030; 16RU 11025

Laws of Equity & Trust BA. LLB (8th Semester)
 TABLE OF CONTENTS

Page No:

1. Declaration 3

2. Acknowledgement 4

3. Research Methodology 5

4. Abstract 7

5. Introduction 8

6. Creation of trust 9

7. Who may create trust 10

8. Right of beneficiary 11

9. Liabilities of beneficiary 16

10. Case Law 17

11. Conclusion 18

12. Bibliography 19

2|Page
DECLARATION

I, Shivansh Jaiswal, Roll No. 16 RU 11030, 8th Semester of Raffles University do hereby
declare that, this project is my original work and I have not copied this project or any part
thereof from any source without due acknowledgement. I am highly grateful of the my
subject professor who help me and guide me out in making this project, authors of the books
that I have mentioned in my project as well as the writers of the articles and the owner of the
information taken from website on it. It is only because of their contribution and proper
guidance of my faculty advisor Ms. Mukta Jangir, that I was able to gather lights on this
project.

3|Page
 ACKNOWLEDGEMENT

I would like to express my solemn and deepest gratitude to, Ms. Mukta Jangir Faculty for
giving me this opportunity to do a project on such a valuable topic of “RIGHT OF
BENEFICIARY AND CREATION OF TRUST UNDER TRUST ACT”. I am grateful
for the assistance, guidance and support that were long during the course of the research. I am
also thankful to the Department for provided the resources necessary for my research work.

4|Page
Research Methodology

Title

Creation of trust and right of beneficiary.

Problem

It is very hard to write such a huge topic in few pages if we have to deal with all federalism
as well as the relationship between union and state.

Rationale

To study the who may create trust?

To study the liabilities of beneficiaries.

Objective of the project

The objective of the project is to fulfillment of work given to me. The important objective of
my research is to examine the A Right of beneficiary under the trust act. The object of writing
this project is to give a clear picture of the Liability under this trust act.

Review of literature

1. Singh G.P.

2. Ahmed Aqil.

5|Page
Source of Data

The secondary sources of data collection such as the books and several journals have been
used with the help of the access to the library. The data which is used in this particular project
is from the library, Google books and articles from the internet.

Method of Research

For this project, I followed doctrinal technique which includes both descriptive method and
analytical method of writing throughout this project. Books and other reference materials are
taken from the Department Library and this books are very helpful for the achievement of
this research paper.

6|Page
ABSTRACT

The law relating to private trusts and trustees is codified under the Indian Trusts Act, 1882. A
Right of beneficiary under the trust act. The object of writing this project is to give a clear
picture of the Liability under this trust act. The trust laws came to India via English Trust law
which stipulates dual ownership of trust property i.e. legal titles vests with the trustee while
equitable title vests with the beneficiary. On this basis, Indian trusts act 1882 was enacted. It
governs private or family trusts and excludes wakfs and public or private charitable or
religious endowments.

Under Indian laws, it is defined and dealt in accordance with the Indian Trusts Act. Section 2
of the Act states the definition of ‘trust’. According to the section, “trust means 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.” Thus creation of trust is envisaged with many issues and challenges.
By the virtue of the enactment creation of trust leads to some rights and liabilities for the
beneficiaries. In this research work I will address those rights and liabilities in a whole.

Key Words: Trustees, Beneficiary, issues

7|Page
Creation of Trust & Liabilities of Beneficiaries

1. INTRODUCTION

Trust has been rightly – claimed by various authors of importance on the subject as the
highest achievement of equity in England and it would be useful to note some of these
opinions. Trusts Creating in and as developed by the court of Chancery in England have now
become immensely popular and useful in among, other countries India and its importance in
the legal, commercial, social and religious life of today need not be more emphasized. The
common Law in England was deficient in certain matters of natural and universal justice
and mainly in matters of trust and self-confidence it took no cognizance. Therefore the
Common Law being silent on the subject, Courts of Equity, considering the conscience of
the party trusted, as bound to perform the trust, in order to prevent a total failure of
justice, indirect to compel the performance of it. The Courts of Equity assisted the trustees,
whenever they sought after the aid of the Courts as to the launch, management, or
implementation of the trust.

Indian Trust Act—How far created on pre-existing Laws.—The Indian Trust Act, 1882,
contains no law which the courts were not, before its passing, bound to manage, without its
assistance. The only difference that the Act completed was that, instead of the courts
grouping for principles and precedents to give their decisions, the principles would be made
prepared for the courts to follow.

Definition of Trust - Section 31 of the Indian Trust Act.—This section 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 advantage of another or of
another and to owner”

1
Define Trust in Sec 3 of Trust Act, Singh G.P., Principle of Equity p. 242, (Central Law Agency, Allahabad, 9th
edn and Reprint, 2015)

8|Page
Underhill defines - Trust “as an equitable obligation either expressly undertaken or
constructively imposed by the court, whereby the obligor is bound to deal with property overt
which he has control for the advantage of persons of whom he may or might not himself be
one and any of whom any enforce the obligation”.

2. CREATION OF TRUST

I need be recalled that one of the bases for the classification of trust was with affection to the
method of their creation and their principal divisions of trust under their classification are:
express trust, implied trust and constructive trust. It is, therefore proper and necessary to
consider the subject under two heads; (1) express Trust, (2) Trusts arising by their operation of
Law. Maitland also classified trust according to their modes of creation in to above two heads.

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 (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.

Illustrations

➢ A give certain property to B, "having the fullest self-confidence that he will dispose
of it for the benefit of" C. This creates a trust so far as regards A and C.

➢ A give certain property to B "hoping he will continue it in the family". This

doesn’t create a trust, because the beneficiary isn’t indicated with reasonable
certainty.

9|Page
 ➢ In Shiv Nath Prasad V. State of Bengal & Ors,2 the Supreme Court has held that a
mere declaration for creation of trust, can create a trust obligation, particularly
when the settler in the sole trustee under trust.

3. RULE OF THREE CERTINITES

The three certainties of trust in the checking of an effective purpose trust are commonly
called the three certainties of an express and were first laid down and named as such by
Lord Langdale in Knight v. Knight, 3 no trust can arise in case the deceleration is unlimited
with regard to one or more of these essential.

A. Certainty as to intention.
B. Certainty as to the subject – matter if trust.
C. Certainty as to the subject of the trust.

1. WHO MAY CREATE TRUST?

Any person or corporation capable at law or in equity of alienating to any extent trust
property or an interest in property, either inter vinous or within the case of an individually
by a testamentary instrument is to the some extent capable of making a trust therein
property or interest or of disposing thereof I trust inter vivos or in case of an individually
by a testamentary instrument. Section 7 of the Indian trust act lays down that:-

A trust may be created –

a) by every person competent to contract.

b) with the permission of a principal Civil Court of original jurisdiction, by or on
behalf of a minor; but subject in each case to the law for the time being in force as

2
(2006) 2 SCC 757, Ahmed Aqil, Equity Trust and Mortgage & Specific Relief Act, p. 235, (Central Law Agency,
Allahabad, 4th ed. 7 Reprinted 2011)
3
(1860) 3 Beau atp.173, , Singh G.P., Principle of Equity p. 305, (Central Law Agency, Allahabad, 9th edn and
Reprint, 2015)

10 | P a g e
 to the circumstances and extent in and to which the author of the trust may dispose
of the trust-property.
c) It is very clear from the provision of section 11 of contract act, which lays down
that “every individual person is competent to the contract who is of the age of
majority according to the law”.

Right of Beneficiaries

Who is beneficiaries – Section 3: The persons for whom benefit the trust is to be held by
the trustee is called “beneficiary”. The person for whose benefit the arrogance is accepted
by the trustee, is named, the “beneficiary”. In English Law the person on whose behalf the
rights are to be exercised are called the cestui que trust. While the legal title of the trust
property was vests within the trustee, the equitable title vests in the beneficiary. A
beneficiary is entitled to enforce the provisions of the trust. A person may at an equivalent
time be trustee and one among the cestui que trust.

Persons who may be beneficiaries Section 9 - Disclaimer by beneficiary. - Every person

is capable of holding property may be a beneficiary. A proposed beneficiary may be
renounce his interest under the trust by the disclaimer addressed to the trustee, or by the
setting up, with notice of the trust, a claim inconsistent therewith.

The following may be beneficiaries under the law –

➢ The Crown.
➢ Corporations.
➢ Aliens.
➢ Married Woman.
➢ Unborn Person.4

Individual beneficiaries cannot himself be a trustee; a trustee can be one of the several

4
Tagore V Tagore, 18 w.r. 375, Ahmed Aqil, Equity Trust and Mortgage & Specific Relief Act, p. 238, (Central
Law Agency, Allahabad, 4th ed. 7 Reprinted 2011)

11 | P a g e
beneficiaries.5

5. RIGHTS OF BENEFICIRES: - Right & liabilities of beneficiary have been together

laid down in the chapter IV of section 55 to 69 of the Indian Trust Act, 1882. By Doctor
Hanbury before taking up the rights and remedies of beneficiaries has applied in remarked:
“Equity being…. a string of loosely linked glosses on commonly, does not admit willingly
of scientific classification. There is bound to be a great deal of over developing.” 6

1. Rights to rent and profits - The beneficiary has, subject to the provisions of the
instrument of trust, a right is to given the rents and profits of the trust property. The
cestui que trust has been a right to require the rents and profits or revenue of the
trust property. But nevertheless, this right is subject such limitation as could also be
imposed by the instrument of the trust.
2. Right to specific execution: - The beneficiary is entitled to have the intention of the
author, the trust specifically accomplished to the extent of the beneficiary's interest;
Right to transfer of possession. Right to transfer of possession and, where there’s
only one beneficiary then he is competent to contract, or where there are several
beneficiaries and that they are competent to contract and all of one mind, he or they
may have the trustee to transfer the trust property to him or them, or to such person
as he or they may direct.
When property has been transferred or given for the advantage of a wife , in order
that she shall not have power to deprive herself of her beneficial interest, nothing
within the second clause of this section applies to such property during her
marriage.

5
Air 1927 MAD, Ahmed Aqil, Equity Trust and Mortgage & Specific Relief Act, p. 239, (Central Law Agency,
Allahabad, 4th ed. 7 Reprinted 2011)

6
Modern, Equity by H.G Hanbury, 4th ed.,p.325, Singh G.P., Principle of Equity p. 373, (Central Law Agency,
Allahabad, 9th edn and Reprint, 2015)

12 | P a g e
 ❖ Example: - A transfers certain property to B and directs him to sell or invest it for
the advantage of C, who is competent to contract. C may elect to require the property
in its original character.

3. Right to inspect and take copies of instrument of trust, accounts, etc.

(Section 57) -The beneficiary features a right, as against the trustee and every one
the persons claiming under him with notice of the trust, to examine and take the
copies of the instrument of trust and therefore the documents of title relating solely
to the trust-property, the accounts of the trust- property and therefore the vouchers
(if any) by which they’re supported, and therefore the cases submitted and opinions
taken by the trustee for his guidance in the discharge of his duty.

It has been held that in Springett v. Dashwood,7 That the beneficiary has every right to have
the accurate information regarding the state of the trust property.

4. Right to transfer beneficial interest (Section 58) - The beneficiary, if capable to

contract then may transfer his interest, but subject to the law for the time being
effective because the circumstances may extent in and to which he may dispose of
such interest.

Provided that when the property is bequeathed or transferred for the benefit of the married
woman, so that she shall not have the power to deprive herself for her beneficial interest,
nothing in this section shall authorize her to transfer such interest during her marriage.

5. 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 unrealistic, the beneficiary may institute a suit
for the execution of the trust, and therefore the trust shall, so far as may be possible,

7
2.Giff 521, Singh G.P., Principle of Equity p. 376, (Central Law Agency, Allahabad, 9th edn and Reprint, 2015)

13 | P a g e
 be executed by the Court until the appointment of a trustee or new trustee.

In Salisbury V. Bengal, 8
“In this court said that the equity never wants a trustee, and
whenever there is no trustee is however limited person in whom the legal statute is vested
or personal legal representative.

6. Right to proper trustees (Section60) - 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.

Principle – The Principle of Right of proper trustee is predicated on the principle of on the
interest of the cesestui que trust. A beneficiary is interest within the proper administration
and preservation of trust property.

Who is Proper Person? - Under the Indian Trust Act the subsequent are not proper to be
trustee; -

1. An alien enemy.
2. Any person domiciled abroad.
3. Any person having inconsistent interest with that of the beneficiary.
4. Any person who insolvent.
5. Any person who is Minor

7. Right to compel to any act of duty (Section61) :- The beneficiary has a right that
his trustee shall be compelled to perform any particular act of his duty as such, and
restrained from committing any contemplated or probable breach of trust.

8
Swanet, 608, Ahmed Aqil, Equity Trust and Mortgage & Specific Relief Act, p. 305, (Central Law Agency,
Allahabad, 4th ed. 7 Reprinted 2011)

14 | P a g e
6. DOCTRINE OF TRACING – Tracing may be a claim in rem not in persoam. The
Doctrine is founded on principal that when a trust is impressed on the property, It attaches
itself into a shape it’s going to be converted. The doctrine is not confined only to those cases
where there has been conversion of trust property, but in all cases where the trust property
comes in to hands of a stranger who occupies a fiduciary position.

7. RIGHT AGAINST THE TRUST PROPERTY –

➢ Right to recover from trustee – The proper right arises –

a) Against the trustee himself personally.

b) Where the trustee having wrongfully disposed of the trust property subsequently
required the trust property himself.9

➢ Right in the Case of Blended Property (Sec. 66) - Where the trustee
wrongfully mingles the trust-property together with his own, the
beneficiary is entitled to a charge on the whole fund for the amount due
to him.

9
(1859) 3 D. Co. & J.563, Ahmed Aqil, Equity Trust and Mortgage & Specific Relief Act, p. 311, (Central Law
Agency, Allahabad, 4th ed. 7 Reprinted 2011)

15 | P a g e
Liabilities of Beneficiaries

Where a trustee commits a breach of trust at the investigation or with the consent of one or
some of the several beneficiaries under a trust, such beneficiary is liable for the loss caused
thereby to the trust estate and the other beneficiaries are entitled to have all the beneficial
interest under the trust impounded until the loss caused by the breach has been
compensated.10

The trust of these are dealt with in section 68 of the Indian Trust Act - Liability of beneficiary
j o i n i n g in breach of trust. Where one of several beneficiaries—

a) joins in committing breach of trust, or

b) knowingly obtains any advantage therefrom, without the consent of the other
beneficiaries, or
c) becomes aware of a breach of trust committed or intended to be committed, and
either actually conceals it, or
d) does not within a reasonable time take proper steps to protect the interests of the
other beneficiaries, or
e) has deceived the trustee and thereby induced him to commit a breach of trust, the
other beneficiaries are entitled to have all his beneficial interest impounded as
against him and all who claim under him (otherwise than as transferees for
consideration without notice of the breach) until the loss caused by the breach has
been compensated.

When property has been transferred or bequeathed for the benefit of a married woman, so
that she shall not have power to deprive herself of her beneficial interest, nothing in this
section applies to such property during her marriage.

Rights and liabilities of beneficiary's transferee. -Every person to whom a beneficiary

transfers his interest has the rights, and is subject to the liabilities, of the beneficiary in
respect of such interest at the date of the transfer.

10
Compare section 33 of the Indian trust act, 1882, Singh G.P., Principle of Equity p. 387, (Central Law Agency,
Allahabad, 9th edn and Reprint, 2015)

16 | P a g e
Case Law’s –

1. In Sunders V. Vauiter,11 The trustee was directed to accumulate the

income upon a legacy until a specified date. The court held that as soon
because the beneficiary became of aged, he could require the trustee at
directly to convey the capital amount of them.

2. Hem Chandra v. Surdhani Debi12, It has been held that the beneficial
interest of a person under a trust isn ’ t technically considered as an
equitable estate in India; there’s nothing to stop such person from
transferring such interest.

11
(1841) Cr. Ph. 240, Singh G.P., Principle of Equity p. 374, (Central Law Agency, Allahabad, 9th edn and Reprint,
2015)

12
AIR 1940 PC 134, Ahmed Aqil, Equity Trust and Mortgage & Specific Relief Act, p. 304, (Central Law Agency,
Allahabad, 4th ed. 7 Reprinted 2011)

17 | P a g e
CONCLUSION

I would like to conclude that beneficiaries have many right and a few liabilities to the trust
property. They use his right in well manner and that they don’t exercise his right the right
given within the Act. From the above discussions on the doctrine and various case laws, it is
evident that the state isn’t the owner of the natural resources within the country but a
trustee who holds fiduciary relationship with the people. The Indian Trusts Act 1882 deals
with all the matters associated with to trusts, trustee and beneficiaries.

18 | P a g e
BIBLIOGRAPHY

Name of Author: Ahmad, Aquil

Book Title: Equity: Trust, Mortgage and Specific Relief Act.
Publisher City: Allahabad
Publisher Name: Central Law Agency

Name of Author: Singh G.P.

Book Title: Equity: Principal of trust and equity.
Publisher City: Allahabad
Publisher Name: Central Law Agency

19 | P a g e