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Creation of Trust under the Indian trust Act of 1882

The Indian Trusts Act is one of India's most significant pieces of legislation. The objectives of trusts in India are governed by and protected by this statute. India's trust law is intricate and has seen extensive development. According to the Indian Trusts Act, a trust's main goal is to safeguard the interests of its beneficiaries.

Definition of Trust

Accordingly, trust is "an equitable obligation binding a person (who is called a trustee) to deal with property over which he has control (called the trust property), for the benefit of persons (called the beneficiaries)of himself be one, an anyone of whom may enforce the obligation. \

Indian Trust Act, 1882

Section 3 of the Indian Trust Act, of 1882 defines a Trust. But one has to note that the Act is confidence to private trust ( Section 1). It does not apply to public trust or private religious or charitable trust.

Definitions of Trust by Historians

According to Ketton, the trust arises whenever a person called the trustee has compelled the equity to hold the property whether real or personal, legal or equitable for the benefit of some person or some object permitted by law in such a way that the rear benefit is provided to the beneficiary.

According to Smith, it is a duty deemed in equity to rest on the conscience of the legal owner.

According to Snell, it is a beneficial interest provided to the beneficiary by legal ownership.

Types of Trust under the Indian Trust Act, of 1882

  1. Public Trust
  2. Private Trust
    1. Express
    2. Implied
    3. Constructive

Constructive Trust is further divided into:
  1. Trust for Value
  2. Voluntarily Trust

Public Trust
Public Trust is a trust which provides benefits to the public at large. It is for the benefit or to promote public welfare like education and medical facilities in form of a charitable trust or religious trust.

Private Trust
Private Trust is created for the benefit of a specified class or a certain group of individuals. For eg. A transfers certain property to B as a trustee for the benefit of C as an individual.

Express Trust
Trust is created on express terms whether written or verbal. For eg, A declares himself a trustee of 'Blackacre' for B. Similarly where A conveys the land to C in trust for B, the same result follows.

Implied Trust
Implied Trust is assumed or created by the act of construction of law. For eg. Hindu Undivided Family.

Constructive Trust
It is created based on the operation of law. In certain circumstances, the legal owner of the property must hold it in trust for another according to the principles of equity. It is not possible in such circumstances to observe formalities. When it would be an abuse of confidence for the owner of the property to hold the same for his benefit, a trust is imposed upon him irrespective of his intention. For eg. C as a trustee after completion of a specified time renew that trust again and acts as a trustee based on equity.

Trust for Value
Where a party gets a consideration by the beneficiary to the settlor to bring a trust into existence. The resultant trust is Trust for Value. For eg. A creates trust in favour of P if she marries A. Marriage is a valuable consideration.

Wherever the trustee accepts the trust with free will without any kind of pressure or force that is called voluntary trust.

Section 3- Interpretation Clause

  1. Trust- A "Trust" is an obligation annexed to the ownership of property and arising out of confidence respond in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner.'
  2. Author of the Trust- The person who reposes or declares the confidence is called the author of the trust.
  3. Trustee- The person who accepts the confidence is called the "Trustee".
  4. Beneficiary- The person for whose benefit the confidence is accepted is called the ' Beneficiary'.
  5. Trust Property- The subject matter of the trust is called "trust property".
  6. Beneficial Interest- Beneficial interest or interest of the beneficiary in his right against the trustee as owner of the trust property.
  7. Instrument of Trust- The instrument by which trust is declared is called an 'instrument of trust".
  8. Breach of Trust- 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".

In the case of Bai Dosabai V Mathurdas Govinddas[1], it was held that an obligation annexed to the ownership of property, not amounting to interest in the property", but an obligation which may be conferred against a transferee with notice or a gratuitous transferee.

Section 4- Lawful Purpose

A trust may be created for any lawful purpose. The purpose of a trust is lawful unless it is.
  1. forbidden by law, or
  2. is of such nature that, if permitted, it would defeat the provision of any law, or
  3. fraudulent in nature
  4. involves or implies injury to the person or property of another, or
  5. the court regards it as immoral or opposed to public policy.
Every Trust of which the purpose is unlawful is void. When a trust is created for two purposes of which one is lawful and the other is unlawful and the other two purposes cannot be separated, the whole trust is void.

  1. 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. In this case, the purpose of the trust is void.

Section 5- Trust of Immovable Property

No trust about the 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 the trustee.

The trust of immovable property

No trust about the movable property is valid unless declared or aforementioned, or unless the ownership of the property is transferred to a trustee. Immovable property must be transferred mere vesting is not enough.

In the case of Hemcahnd V Pyarelal[2], it was held that an uncertain trust and a trust void for want of registration may be made perfect by 12 years of adverse possession by the trustee, and action against them for remedy is barred thereafter.

Section 6- Creation of Trust

Subject to the provision of Section 5, a trust is created when the author of the trust indicates with reasonable certainty by any words or acts:
  1. an intention on his part to create thereby a trust.
  2. Purpose of Trust
  3. beneficiary
  4. trust-property
  5. unless the trust is declared by will or the author of the trust is himself to be a trustee and transfers the trust property to the trustee. As laid down by the section, the following are necessary for the creation of a trust:
    1. intention,
    2. trust-property
    3. beneficiaries
    4. purpose of the trust, and
    5. transfer of trust property to the trustee which may be transferred inter vivos or under a will.

  1. A bequeaths certain property to B, "having the fullest confidence that he will dispose of it for the benefit of C. This creates trust so far as regards A and C.
  2. 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 to C.

Section 7- Who may create a Trust

A Trust may be created by:
  1. By every person competent to contract
    1. who is major and attained the age of majority as defined in the Majority Act, 1875.
    2. He is of sound mind.
    3. He is not disqualified from contracting by any law to which he is subject.
  2. with the permission of a Principal Civil Court of original jurisdiction, on or behalf of a minor, but subject in each case to the law for the time being in force as to the circumstances and extent to which the author of the trust may dispose of the trust property.

Also, the following are eligible to create a trust:
  1. Hindu Undivided Family
  2. Minor
  3. Women
  4. Association of persons
  5. Company registered under the Company Act, 2013

Section 8- Subject of Trust
The subject matter of a trust must be property transferrable to the beneficiary. It must not be a merely beneficial interest under a subsisting trust.

  1. A conveys property to B in trust to apply the profits to nurture female foundlings to be trained up as prostitutes. The trust in this case is void as the subject of the trust is for an unlawful purpose.
  2. A conveys property to B in interest for C for his lifetime. In this case, the trust is held to be valid as it is for the benefit of C.

Section 9, Who may be beneficiary
Every person capable of holding property may be a beneficiary. A proposed beneficiary may renounce his interest under the trust by a disclaimer addressed to the trustee, or by giving notice to the trustee.

This means that even a minor or a child in its mother's womb may be a beneficiary. Of course, in giving property to such an unborn person, the rule as to perpetuities (Section 14 of the Transfer of Property Act) should not be broken.

  1. A bequeaths property to B in trust to apply the profits for the benefit of C (here C can act as a beneficiary).

Section 10- Who may be a 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.

Thus, a minor can be a trustee but where the question of using discretion arises, he is considered not competent to become a trustee. Besides, as per Section 60 of the Act, 'the beneficiary has a right that the trust property shall be properly protected and shall be administered by proper persons, and by a proper number of such persons".

Reading Section 10 with Section 60 it is clear that though a minor can be a trustee if the beneficiaries object to his being such and the court does not consider him to be a proper person, he cannot be one. A married women's position is also the same. If the personal law of the beneficiary allows a minor or woman to be a trustee, the section has no application.

The following are not proper persons within the meaning of this section:
  1. A Person Domiciled Abroad;
  2. An Alien Enemy;
  3. A Person Having An Interest Inconsistent With That Of The Beneficiary;
  4. A Person In Insolvent Circumstances; And
  5. Unless The Personal Law Of The Beneficiary Allows Otherwise, A Woman And A Minor (Section 60).

  1. 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.
The article would particularly specify Sections 3 to 10 of the Indian Trust Act, of 1882 which deals with the creation of trust and various measures to be followed. From the above discussion, we can conclude that there are various measures or steps that one needs to follow or abide by to register one's trust if one wants that his trust may not be declared void.

  1. (1980) 3 SCC 545
  2. AIR 1942 PC 64

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