Table of Contents
A trustee is a firm or a person who holds and administers the assets or the properties for the benefit of a third party. They are considered as the manager of the trust property and are required to act and make decisions for the benefit of the beneficiaries. In order to carry out his duties the trustee has given certain rights and powers, with reasonable restrictions as provided under the trust deed.
Chapter IV of the Indian Trust Act, 1882 (Section 31-45) discusses certain rights and powers of the trustees which can be enjoyed by them.
Rights Of Trustees
Right To Title Deer (Section 31)
A trustee is entitled to have in his position the instrument of trust and all the documents of title (if any) relating solely to the trust property.
This right of trustee is in continuation of the provision of section 13 which places an obligation in the trustee to protect title to trust property and to maintain and different suits thereto. Moreover, if a beneficiary for life were allowed to have the custody of title deeds, he might mortgage or convey the trust property for valuable consideration without notice, and the interest of the remainder-men would be enjoyed
Case Law: Walker vs Linom
In a marriage settlement the husband’s land was settled on trust for the husband and the wife successively for life; the solicitors who acted for all the parties, had custody of all the documents, except the conveyance in respect of the land, which was retained by the settlor.
Sometime later, the settler mortgaged the land, using the conveyance which was in possession. It was held that the trustees were guilty of conveyance.
Right To Reimbursement Of Expenses (Section 32)
Every trustee may reimburse himself, or pay or discharge out of the trust property all expenses properly incurred by him in:
- The execution of the trust.
- The realization, preservation or benefit of the trust property.
- The protection or support of the beneficiary.
If he pays such expenses out of his own pocket, he has a first charge upon the trust property for such expenses and interest thereon, but such charge (unless the expenses have been incurred with the sanction of a
Principal Civil Court of original jurisdiction) shall be enforced only by prohibiting any disposition of the trust-property without previous payment of such expenses and interest. The period of limitation to enforce the right is six years from the date of retirement of the trustee.
If the trust-property fails, the trustee is entitled to recover from the beneficiary personally on whose behalf he acted and at whose request expressed or implied, he made the payment, the amount of such expenses.
Where a trustee has, by mistake, made an overpayment to the beneficiary, he may reimburse the trust property out of the beneficiary’s interest. If such interest fails, the trustee is entitled to recover from the beneficiary personally the amount of such over-payment.
Case Law: Worrall v. Harfard,
Lord Eldon has observed “It is in the nature of the office of the trustee, whether expressed in the instrument of trust or not, that the trust property shall reimburse him with all the charges and expenses incurred in the execution of trust. To be recoverable, such charges must fulfill two conditions:
- it must be in the execution of the trust;
- It must be reasonable and not speculative or oppressive.
Only the good faith of a trustee short of the above two conditions left unfulfilled, is not helpful to him.”
Right To Indemnify From Gainer By Breach Of Trust (Section 33)
A person other than a trustee, who has gained an advantage from breach of trust must indemnify the trustee to the extent of the account 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 bound indemnified who has, in committing the breach of trust, been guilty of fraud.
This right of a trustee who has committed a breach of trust to indemnity may be exercised against a cestui que trust and against a co-trustee.
Case Law: Trofford vs Boehin
“It was held that as between the trustee and a third person, who has reaped the benefit of the breach of trust, though the trustee must make disbursement in the first instance to the injured party, the loss will eventually be cast on the person who was the gainer by the breach of trust.”
Right To Apply To Court For Opinion In Management Of Trust Property (Section 34)
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.
If the trustee acts as directed by the Court, it would be sufficient to discharge his duty and he will not be liable therefore. Also, a copy of the petition should be served on the other party interested in the application.
Case Law: In Joint Commr, Hindu Religious and Charitable Endowment Adm. Vs Jayaram & Ors.
“The Supreme Court held that for permission to sell the trust property, the jurisdiction and duty of the court is advisory in nature. While granting permission, the court must make inquiry into the market value of the property at the relevant time. Also, the cost of every application shall be at the discretion of the court to which it is made.”
Right To Settlement Of Accounts (Section 35)
The Trustee has a right after the trust has been completed to have his accounts examined, and to have a settlement of them a suit for accounts can be brought by the cestui que trust against the trustee for the settlement of accounts.
It is enough if the beneficiary gives a receipt to the trustee stating in writing that nothing is due to him. No deed of release can be demanded by a trustee, no deeds are to be executed by the beneficiary in his favor.
Also, it must be noted that the trustee’s right to have the accounts settled is limited to the accounts of a particular trust in question. In other words, if there are two distinct trusts for the same beneficiary, he cannot refuse to pay up the first fund, until all the questions regarding the second funds have been settled.
Powers Or The Trustees
The Indian Trusts Act gives powers to enable the trustees to do their duties efficiently and effectively. As generally understood, the distinction between them is that power is discretionary whereas duty is non-discretionary. Discretion is thus the distinguishing factor between duties and powers of the trustee. As a matter of description, a power without discretion is duty, whereas a duty coupled with discretion is power. Strahan says that:
“In addition to power specifically given by the trust instrument or by Statute, a trustee has implied equitable power to do any act or execute any instrument which may be reasonably necessary for the purpose of carrying out the duties imposed on him by the general law or the trust instrument”.
The powers of a trustee may be classified under four heads namely:-
- General powers.
- Powers given by the trust instrument.
- Powers given by Statute.
- Powers available under the general principle of law or equity.
The general powers of a trustee have been given under Section 36 of the Indian Trusts Act. The powers under Section 36 may be illustrated as under-:
- Reasonable And Proper Acts- A trustee may do all acts which are reasonable and proper for the realization, protection or benefit of the trust property. If a trustee finds decaying timber, he may cut it down. In the case of Holas Rai vs Rella Ram, it has been held that the trustee cannot be expected to devote more care and attention to the business of the trust than an ordinary man would use in dealing with his own affairs. The trustee may act reasonably as well as honestly, and the burden of showing is on the trustees.
- Authority of a trustee may be general or special- As to the general authority, it is derived from the law and consists of the powers incidental to the office of a trustee whereas the special powers are such which are conferred on the trustee by the settlor himself expressly in the instrument creating the trust.
- Power Of Lease- The leases for a long term without permission of a court are not void as being malum prohibition and illegal per se, though they are certainly avoidable at the option of the cestui que trust.
- Power To PurchaseAnd Sell Trust Property- A trustee has no right to sell the trust property unless the deed of trust confers such power. Further it was held in Manikka Narainbachari vs M.V. Ramasubbier, that trustee is not entitled to sell the property merely because the price fetched is attractive or for the purpose of investing the price with a view to get larger income than derived from the property itself.
- Power To Mortgage, Exchange or Partition- A trustee is not competent to Mortgage, exchange or partition a trust property unless expressly provided under the instrument or deed.
Statutory Powers Of Trustees
The statutory powers of the trustee are dealt under Section 37 to 43 of the Indian Trust Act, 1882. Such powers are as follows:
Power To Sell Trust Property
Where the trustee is empowered to sell any trust property, he may sell the same subject to prior changes or not, and either together or in lots, by public auction or private contract and either at one time or at a several time, unless the instrument of trust otherwise directs.
Whereas there are several beneficiaries, it is the duty of the trustee to see that the trust for sale is exercised with due regard to the interests of all the beneficiaries.
Also, the trustee is empowered to buy and resale trust property. Moreover, it is his duty to follow the powers given under the deed. A trustee must strictly follow the conditions given by the testator in the instrument of trust deed. Trustee must take every care not to deal in re-selling, otherwise if there is a loss on resale, he may also be liable.
Power To Vary Investments
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 time to receive the income of the trust property for his life or for any greater estate, no such charge of investment shall be made without his consent in writing.
In the case of Pell vs Dwinton, the discretion given to trustee in the matter of varying investments of one nature into that of another must be exercised by him, with a view to the furtherance of the trust.
Power To Apply Property Of Minors For Their Maintenance
Where any property is held by a trustee in trust for a minor, such trustee may at his discretion, pay to the guardian (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 etc. However, the discretionary powers of the trustee for the maintenance etc of minor beneficiaries is subject to the general controlling powers vested in the court.
In the case of Waite vs Lidlewood, it was held that the trustee providing for the maintenance of the infant beneficiary has the option, either to himself directly spend for the purpose, or pay over the necessary money to the parents or guardians of the infants.
Power To Give Receipts
Any trustee or trustees 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 trust or power; and, in the absence of fraud, such receipt shall discharge theperson paying, transferring or delivering the same therefrom, and from seeing to the application thereof, or being accountable for any loss or misapplication thereof.
In the absence of fraud, a receipt shall be a valid discharge of the obligation of the person paying.
In Walker vs Simonds, it was held that
“All the trustees must join in the receipt unless the instrument of trust or settlement authorizes one of several trustees to give a discharge. In the absence of a receipt clause, a receipt for money must be authenticated by the whole body of trustees and not merely the majority.”
Power To Compound
Two or more trustees acting together may, if and as they think:
- To accept any composition or any security for any debt or for any property claimed;
- To allow any time for payment of any debt;
- To compromise, compound, abandon, submit to arbitration, or otherwise settle any debt, account, claim or thing whatever relating to the trust; and
- For any of those purposes, to enter into, give, execute, and do such agreements, instruments of composition or agreement, releases, and other things as seem to them 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 trust and powers.
For example-: When the act of one trustee has been sanctioned by his co-trustee, the act will be binding on the trust property.
Overall, the power of trustees is rooted in their ability to manage and make decisions that affect the interests and well-being of others. This power carries with it significant responsibilities and obligations to act in a trustworthy and responsible manner.