Table of Contents
Under the Indian Trust Act, the beneficiary has no estate or interest in the subject matter of the trust. He has only the right to proceed against the trustee. The rights and liabilities of beneficiaries are also more commonly known as powers and remedies of the beneficiaries. These rights and liabilities of beneficiaries are dealt with under Section 55 to 69 under Chapter 6 of the Indian Trusts Act, 1882.
Right Of The Beneficiaries
Right To Rent And Profits
The beneficiary has, subject to the provision of the instrument of the trust, a right to rents and profits of trust property. The beneficiary has the right to collect any rents and profits or income of the trust properly, but this right is subject to such limitations as may be imposed by instruments of the trust.
Case law: Baker v/s Archer
In this case lord summer observed “The trustee has the full legal property in the whole of trust funds and the beneficiary has interest set apart from special provisions in particular. Settlements, which do not affect the general principles are valid. The trustee is not the agent of the beneficiary, who can neither appoint or dismiss him.”
Right To Specific Execution
Lewin defines the right to specific execution as the right to enforce in equity the specific execution of the intention of the settlor to the extent of the beneficiary’s particular interests. Thus, the beneficiary is entitled to have the intention of the author of the trust specifically executed to the extent of the beneficiary’s interest.
Where there are several beneficiaries with regard to whom the settlor or testator has created specific trust, each beneficiary is entitled to have the intention of the settler carried out according to the provision.
Case Law- Saunders vs Vautier
In this case, The trustees were directed to accumulate the income upon a legacy until a specified date. The court held that as soon as the beneficiary became of age, he would require the trustee at once to convey the capital amount to him.
Right To Transfer Of Possession
When there is only one beneficiary and he is competent to contract, or where there are several beneficiaries and they are competent to contract and all are of one mind, he or they may require the trustee to transfer the trust property.
Example– If A bequeaths a sum of rupees 20 thousand to trustees upon trust to purchase bond for B, B may become competent to contract and claim rupees 20 thousand himself.
Case Laws: Goodson vs Ellison
In this case it was held that the trustee must satisfy himself that the beneficiary or the purchaser is the only person interested and he can not be compelled to transfer parts of the trust state at various times.
Right To Inspect, Accounts And Take Copies Of Instrument Of Trust
The beneficiary has the right, as against the trustee and all persons claiming under him with notice of the trust, to inspect and take copies of instruments of trust, the document of title relating solely to the trust property, the accounts of the trust property and the vouchers in any. t is open to the beneficiaries to demand, at all reasonable times, inspection of the documents relating to the trust at their own expense to obtain copies of the same.
Case Law: Horton vs Brocklehurst
In this case It has been held that not only is a trustee bound to render accurate accounts, but if he stands by a defaulting co-trustee, he would himself become liable for the misrepresentation.
Right Transfer Beneficial Interest
The beneficiary if competent to contract, may transfer his interest, but subject to the law for the time being in forced, provided that when property is 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 shall authorize her to transfer such interest during her marriage.
Beneficiaries of a trust property who are ‘sue juris’ and whose rights are vested, may deal with and convey their beneficiary interest in the trust property, and the trustee will be required to convey the legal title in accordance therewith if such actions are not contrary with any statutes.
Case Law: Hem Chandra Vs Surdhani Debya
It has been held that the beneficial interest of the person under a trust is not technically regarded as an equitable estate in India and there is nothing to prevent such persons from such interest.
Right To Sue For Execution Of Trust
Where no trustees are appointed or all the trustees die, disclaim or are discharged, or for any other reason the execution of trust by the trustees is or becomes impracticable, the beneficiary may institute a suit for the execution of the trust, and the trust shall, so far as may be possible, be executed by the court until the appointment of new trustee.
Modes Of Execution
The court has to execute the power according to the circumstances. These modes are:
- Where the testator has prescribed the rule, the court shall follow it.
- Where the testator has not given a rule, the court will execute trust by the most reasonable rule according to the circumstances.
Case Law: Thangachi vs Ahmad Hussain
It was held that the beneficiary’s right to sue for execution is well recognized and has been applied to public trust as well. The beneficiary has a right to invoke the jurisdiction of the court for the due execution of the trust.
Right To Proper Trustee
The beneficiary has the right to appoint a proper person and number of such persons for the management, protection and administration of a trust property; the principle of right to proper trustees is based on the interests of the beneficiary. A beneficiary interested in the proper administration and preservation of the trust property, hence in the interest of it, is entitled to approach the court for the appointment of a new trustee.
Under the Indian trust act the following are not proper persons to be trustee:
- Domiciled abroad
- An alien enemy
- A person having inconsistent interest with that of the beneficiary
- An insolvent
- A minor
- A person of unsound mind
- A person convicted for a serious criminal
- A person with physical infirmity
Case Law: Teerathadas vs Parameshwaribai
Weston J. observed: “It may be taken that the list is not exhaustive, and that persons not following directly within one or other of these descriptions may not be proper persons within the meaning of this section”
Right To Compel The Trustee To Any Act Of Duty
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 contemplated or probable breach of trust. The beneficiary is entitled to bring an action against his trustee, and to compel him to execution or performance of any particular act or duty.
The beneficiary has not only a right to institute a suit to compel a trustee to do any act, he can file a suit for injunction against the trustee. But he has no right to move the court in a summary manner.
Wrongful Purchase By Beneficiary
Beneficiary has the right to retransfer any property which is wrongfully bought by the trustee which is in his hands and is unsold. Also the beneficiary is required to repay the purchase money paid by the trustee, with interest and any other expenses incurred on the preservation and maintenance of trust property.
However, nothing impairs the rights of the lessee to re-transfer the property if they have contracted in good faith with the trustee or purchaser.
Also, the property can not be re-transferred if the beneficiary has ratified the sale agreement with the testee and has given consent for the purchase of the property without any coercion and undue influence.
Following Trust Property
The beneficiary has the right to take all necessary steps to place trust property in the hands of the rightful owner, which has gone into the hands of a stranger. The rule applies not only to express trustees but also to all persons in a fiduciary capacity including agents.
Thus, where the trustee has disposed of trust property and the money or other property which he has received thereof can be stressed in his hands, or in the hands of his legal representative, the beneficiary has the right as nearly as may be same in respect of the original trust property.
Case Law: Nelson Vs Lahnott
Denning J. observed, “A man’s money in property is protected by law. It may exist in various forms such as coins, treasury notes, cash at banks, cheques or bills of exchange etc, it is protected according to one uniform principle. If taken from the rightful owner or indeed from the beneficial owner without an authority, he can recover the amount from any person in whose hands it can be tressed unless and until it reaches one who receives it in good faith and for value, and without notice of the want of authority. Even if the one who received it acted in good faith nevertheless, if he had notice that is if he knew or to known the want of authority he must pay”
Liabilities Of Beneficiaries
Liable to Compensate
It is the duty of the beneficiary to compensate or reimburse the trustee in case there are any damages caused either to the trustee or to the trust, due to the beneficiary. It is legally mandatory for the beneficiary to compensate if there is any injury or damage caused by himself.
Liability in case of breach of trust
The beneficiary is held liable, if by any chance, in any case, he/she breaches the trust agreement in any way. He is held fully liable for all losses/damages if he commits a breach of trust.
Liability for harming interest of other party
Beneficiary cannot harm another party’s interests in any way in the trust, as he will be liable for any harm caused to another party within the trust that is due to him or his behavior/etc.
Liability not to obtain any advantage without the consent of other beneficiaries
It is mandatory for the beneficiary to take consent of all other beneficiaries involved in the trust in case he/she needs to obtain any kind of advantage. If not done, it will be considered as a breach of trust.
Liable to Receive his interest
The beneficiary is entitled to get his/her interest from the trust, but the beneficiary should not claim more than his interest in the trust property.
Liability to take reasonable steps
The beneficiary will be held liable in case he fails to take reasonable steps and actions, as mentioned in the trust deed, within the rights and duties of other beneficiaries. It is mandatory for the beneficiary to only take steps within the limitations and boundaries set of all other beneficiaries.
To conclude, we can say that under the provisions of the trust act, there is an equal ratio of rights as well as the liabilities of the beneficiary. The beneficiary is entitled to many rights and is equally liable for any breaches as well.