THE TRUST ACT 1882
Preamble
[Act No.2 Of 1882]
[13th January 1882]
An Act to define and amend the law relating to Private Trusts and Trustees. WHEREAS it is expedient to define and amend the law relating to private trusts and trustees; it is hereby enacted as follows: –
CHAPTER I
PRELIMINARY
Short title and commencement- This 1
Act may be called the 2
* Trusts Act,
1882, and it shall come into force on the first day of March 1882.
3
[It extends to 4 [the whole of Pakistan.]. But nothing herein contained affects the rules of 5 [Muslim] law as to waqf, or the mutual relations of the members of an undivided family as determined by any customary or personal law, or applies to public or private religious or charitable endowments, or to trusts to distribute prizes taken in war among the captors; and nothing in the second Chapter of this Act applies to trusts created before the said day.
2. Repeal of enactments – [Repeal of enactments.] Omitted by the Federal Laws
(Revision and Declaration) Ordinance, 1981 (XXVII of 1981), s. 3 and Sch. II.
3. Interpretation Clause “Trust” – A “trust” is an obligation annexed to the ownership of property, and rising 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: the person who reposes or declares the confidence is called the “author of the trust”: the person who accepts the confidence is called the “trustee”: the person whose benefit the confidence is accepted is called the “beneficiary”: the subject-matter of the trust is called “Trust-property” or “Trust-money”: the “beneficial interest” or “interest” of the beneficiary is his right against the trustee as owner of the trust-property: and the instrument, if any, by which the trust is declared is called the “instrument of the trust”:
1
For Report of the Indian Law Commission on the Private Trusts Bill which they were instructed to consider among others, see Gazette of India, 1880, Supplement, p. 104, and for the Statement of Objects and Reasons, see Gazette of India, 1880 pt. V, p.476; for report of the Select Committee, see ibid., Supplement, 1881, p.766; for further Report of the Select Committee, see ibid., Supplement, 1882, p. 67; for proceedings in Council, see ibid., Supplement, 1881, p. 687; and ibid., Supplement, 1882, p. 68.
This Act has been applied to Phulera in the Excluded Area of Upper Tanawal to the extent the Act is applicable in the N. W. F. P., subject to certain modifications; and also extended to the Excluded Area of Upper Tanawal (N. W. F. P.) other than Phulera with effect from such date and subject to such modifications as may be notified – see NWFP (Upper Tanawal) (Excluded Area) Laws Regulation, 1950.
2
The word “Indian” omitted by A. O., 1949, Sch.
3
Subs. Ibid., for the first sentence of this paragraph, as amended by A. O., 1937.
4
Subs. by the Central Laws (Statute Reform) Ordinance, 1960 (21 of 1960), s. 3 and
2nd Sch., for “all the Provinces” (with effect from the 14th October, 1955).
5
Subs. By F. A. O., 1975, Art. 2 and Table, for “Mohammadan”.
THE TRUST ACT 1882
2
a breach of any duty imposed on a trustee, as such, by any law for the time being in force, is called a “breach of trust”:
and in this Act, unless there be unless there be something repugnant in the subject or context, “registered” means registered under the law for the registration of documents for the time being in force; a person is said to have “notice” of a fact either when he actually knows that fact, or when, but for willful abstention from inquiry or gross negligence, he would have known it, or when information of the fact is given to or obtained by his agent, under the circumstances mentioned in the Contract Act,1872, Section 229; an all expressions used herein and defined in the Contract Act,1872, shall be deemed to have the meanings respectively attributed to them by that Act.
CHAPTER II
OF THE CREATION OF THE TRUSTS
4. Lawful purpose – A trust may be created for any lawful purpose. The purpose of a trust is lawful unless it is (a) forbidden by law, or (b) is of such a nature that, if permitted, it would defeat the provisions of any law, or (c) is fraudulent, or (d) involves or implies injury to the person or property of another, or (e) the Court regards it as immoral or opposed to public policy. Every trust of which the purpose is unlawful is void. And where a trust is created for two purposes, of which one is lawful and the other unlawful, and the two purposes cannot be separated, the whole trust is void. Explanation – In this section the expression “law” includes, where the trust property is immovable and situate in a foreign country, the law or such country. Illustrations
(a) A conveys property to B in trust to apply the profits to the nurture of female foundlings to be trained up as prostitutes. The trust is void.
(b) A bequeaths property to B in trust to employ it in carrying on a smuggling business, and out of the profits thereof to support A’s children. The trust is void.
(c) A, while in insolvent circumstances, Transfers Property to B in trust for A during his life, an after his death for B. A is declared an insolvent. The trust for A is invalid as against his creditors. 5. Trust of immovable property- No trust in relation to immovable property is valid unless declared by a non-testamentary instrument in writing signed by the author of the trust or the trustee and registered, or by the will of the author of the trust or of the trustee.
Trust of movable property- No trust in relation to movable property is valid unless declared as aforesaid, or unless the ownership of the property is transferred to the trustee. These rules do not apply where they would operate so as to effectuate a fraud.
6. 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.
THE TRUST ACT 1882
Illustrations
(a) A bequeaths certain property to B, “having the fullest confidence that he will dispose of it for the benefit of C.” This creates a trust so far as regards A and C.
(b) A bequeaths certain property to B “hoping he will continue it in the family”. This does not create a trust, as the beneficiary is not indicated with reasonable certainty.
(c) A bequeaths certain property to B, requesting him to distribute it among such members of C’s family as B should think most deserving. This does not create a trust, for the beneficiaries are not indicated with reasonable certainty.
(d) A bequeaths certain property to B, desiring him to divide the bulk of it among
C’s children. This does not create a trust, for the trust-property is not indicated with sufficient certainty.
(e) A bequeaths a shop and stock-in-trade to B, on condition that he pays A’s
debts and a legacy to C. This is a condition, not a trust for A’s creditors and C.
7. Who may create trusts – A trust may be created
(a) By every person competent to contract1
, and
(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 to the circumstances and extent in and to which the author of the trust may dispose of the trust property.
8. Subject of trust – The Subject-matter of a trust must be property transferable to the beneficiary.
It must not be merely beneficial interest under a subsisting trust.
9. Who may be beneficiary – Every person capable of holding property may be a beneficiary.
Disclaimer by beneficiary – A proposed beneficiary may renounce his interest under the trust by disclaimer addressed to the trustee, or by setting up, with notice of the
trust, a claim inconsistent therewith.
10. Who may be trustee – Every person capable of holding property may be a trustee; but, where the trust involves the exercise of discretion, he cannot execute it
unless he is competent to contract. No one is bound to accept a trust.
Acceptance to trust – A trust is accepted by any words or acts of the trustee indicating with reasonable certainty such acceptance.
Disclaimer of trust – Instead of accepting a trust, the intended trustee may, within a reasonable period, disclaim it and such disclaimer shall prevent the trustproperty
from vesting in him.
1
See Section 11 of the Contract Act, 1872 (9 of 1872).
THE TRUST ACT 1882
4
A disclaimer by one of two or more co-trustees vests the trust-property in the other or others, and makes him or them sole trustee or trustees from the date of the
creation of the trust.
Illustrations
(a) A bequeaths certain property to B and C, his executors, as trustees for D, B and C prove A’s will. This is in itself an acceptance of the trust, and B and C hold the
property in trust for D.
(b) A transfers certain property to B in trust to sell it and to pay out of the proceeds A’s debts. B accepts the trust and sells the property. So far as regards B, a trust
of the proceeds is created for A’s creditors.
(c) A bequeaths a lakh of rupees to B upon certain trusts and appoints him his executor. B severs the lakh from the general assets and appropriates it to the specific
purpose. This is an acceptance of the trust.
CHAPTER III
OF THE DUTIES AND LIABILITIES OF TRUSTEES
11. Trustee to execute trust – The trustee is bound to fulfill the purpose of the trust, and to obey the directions of the author of the trust given at the time of its
creation, except as modified by the consent of all the beneficiaries being competent to contract. Where the beneficiary is incompetent to contract, his consent may, for the purposes of this section, be given by a principal Civil Court of original jurisdiction. Noting in this section shall be deemed to require a trustee to obey any direction
when to do so would be impracticable, illegal or manifestly injurious to the beneficiaries. Explanation – Unless a contrary intention be expressed, the purpose of a trust for the payment of debts shall be deemed to be (a) to pay only the debts of the author of the trust existing and recoverable at the date of the instrument of trust, or, when such instrument is a will, at the date of his death, and (b) in the case of debts not bearing interest, to make such payment without interest.
Illustrations
(a) A, a trustee, is simply authorized to sell certain land by public auction. He cannot sell the land by private contract.
(b) A, a trustee of certain land for X,Y and Z, is authorized to sell the land to B for a specified sum. X, Y and Z, being competent to contract, consent that A may sell
the land to C for a less sum. A may sell the land accordingly.
(c) A, a trustee for B and her children, is directed by the author of the trust to lend, on B’s request, trust-property to B’s husband, C, on the security of his bond. C
becomes insolvent and B requests A to make the loan. A may refuse to make it.
12. Trustee to inform himself to state of trust-property – A trustee is bound to acquaint himself, as soon as possible, with the nature and circumstances of the trustproperty; to obtain, where necessary, a transfer of the trust-property to himself; and (subject to the provisions of the instrument of trust) to get in trust-moneys invested or insufficient or hazardous security.
THE TRUST ACT 1882
Illustrations
(a) The trust-property is a debt outstanding on personal security. The Instrument of trust gives the trustee no discretionary power to leave the debt so outstanding. The
trustee’s duty is to recover the debt without unnecessary delay. (b) The trust-property is money in the hands of one of two co-trustees. No discretionary power is given by the instrument of trust. The other co-trustee must not allow the former to retain the money for a longer period than the circumstances of the
case required.
13. Trustee to protect title to trust-property – A trustee is bound to maintain and defend all such suits, and (subject to the provisions of the instrument of trust) to
take such other steps as, regards being had to the nature and amount or value to the trust-property, may be reasonably requisite for the preservation of the trust-property and the assertion or protection of the title thereto.
Illustrations
The trust-property is immovable property, which has been given to the author of the trust by an unregistered instrument. Subject to the provisions of the 1
Indian
Registration Act, 1877, the trustee’s duty is to cause the instrument to be registered.
14. Trustee not to set up title adverse to beneficiary – The trustee must not for himself of another set up or aid any title to the trust-property adverse to the interest
of the beneficiary.
15. Care required from trustee – A trustee is bound to deal with the trustproperty as carefully as a man of ordinary prudence would deal with such property if it
were his own; and, in the absence of a contract to the contrary, a trustee so dealing is not responsible for the loss, destruction or deterioration of the trust-property.
Illustrations
(a) A, living in 2
[Lahore], is a trustee for B, living in 3
[Karachi]. A remits trustfunds
to B by bills drawn by a person of undoubted credit in favor of the trustee as such, and payable at 2 [Karachi]. The bills are dishonored. A is not bound to make good the
loss.
(b) A, a trustee of leasehold property, directs the tenant to pay the rents on account of the trust to a banker, B, then in credit. The rents are accordingly paid to B,
and A leaves the money with B only till wanted. Before the money is drawn out, B becomes insolvent. A, having had no reason to believe that B was in insolvent
circumstances, is not bound to make good the loss.
(c) A, a trustee of two debts for B, releases one and compounds the other, in
good faith and reasonably believing that it is for B’s interest to do so. A is not bound to
make good any loss caused thereby to B.
1
See now the Registration Act, 1908 (16 of 1908)
2
Subs, by the Federal Laws (Revision and Declaration) Ordinance, 1981 (27 of 1981),
s.3 and 2nd Sch., for “Chittagong”, which was previously subs, by the Central Laws (Statute
Reform) Ordinance, 1960), s. 3 and 2nd Sch., for “Calcutta” (with effect from the 14th
October, 1955).
3
Subs., by Ord. 21 of 1960, s. 3 and 2nd Sch., for “Bombay” (with effect from the
14th October, 1955).
THE TRUST ACT 1882