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THE TRUSTS ACT, 1882
CONTENTS
CHAPTER I
PRELIMINARY
1. Short title
Commencement
Local extent
Savings
2. [Omitted.]
3. Interpretation clause "trust"
CHAPTER II
OF THE CREATION OF TRUSTS
4. Lawful purpose
5. Trust of immoveable property
Trust of moveable property
6. Creation of trust
7. Who may create trusts
8. Subject of trust
9. Who may be beneficiary
Disclaimer by beneficiary
10. Who may be trustee
No one bound to accept trust
Acceptance of trust
Disclaimer of trust
Page 1 of 33
CHAPTER III
OF THE DUTIES AND LIABILITIES OF TRUSTEES
11. Trustee to execute trust
12. Trustee to inform himself of state of trust-property
13. Trustee to protect title to trust-property
14. Trustee not to set up title adverse to beneficiary
15. Care required from trustee
16. Conversion of perishable property
17. Trustee to be impartial
18. Trustee to prevent waste
19. Accounts and information
20. Investment of trust-money
20A. Power to purchase redeemable stock at a premium
21. Mortgage of land pledged to Government under Act XIX of 1883.
Deposit in Government Savings Bank
22. Sale by trustee directed to sell within specified time
23. Liability for breach of trust
24. No set-off allowed to trustee
25. Non-liability for predecessor's default
26. Non-liability for co-trustee's default
Joining in receipt for conformity
27. Several liability of co-trustees
Contribution as between co-trustees
28. Non-liability of trustee paying without notice of transfer by beneficiary
29. Liability of trustee where beneficiary's interest is forfetied to the Government
30. Indemnity of trustees
CHAPTER IV
OF THE RIGHTS AND POWERS OF TRUSTEES
31. Right to title-deed
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32. Right to reimbursement of expenses
Right to be recouped for erroneous over-payment
33. Right to indemnity from gainer by breach of trust
34. Right to apply to Court for opinion in management of trust-property
35. Right to settlement of accounts
36. General authority of trustee
37. Power to sell in lots, and either by public auction or private contract
38. Power to sell under special conditions
Power to buy in and re-sell
Time allowed for selling trust-property
39. Power to convey
40. Power to vary investments
41. Power to apply property of minors, etc., for their maintenance, etc
42. Power to give receipts
43. Power to compound, etc
44. Power to several trustees of whom one disclaim or dies
45. Suspension of trustee's powers by decree
CHAPTER V
OF THE DISABILITIES OF TRUSTEES
46. Trustee cannot renounce after acceptance
47. Trustee cannot delegate
48. Co-trustees cannot act singly
49. Control of discretionary power
50. Trustee may not charge for services
51. Trustee may not use trust-property for his own profit
52. Trustee for sale or this agent may not buy
53. Trustee may not buy beneficiary's interest without permission
Trustee for purchase
54. Co-trustees may not lend to one of themselves
Page 3 of 33
CHAPTER VI
OF THE RIGHTS AND LIABILITIES OF THE BENEFICIARY
55. Rights to rents and profits
56. Right to specific execution
Right to transfer of possession
57. Rights to inspect and take copies of instrument of trust, accounts, etc
58. Right to transfer beneficial interest
59. Right to sue for execution of trust
60. Right to proper trustees
61. Right to compel to any act of duty
62. Wrongful purchase by trustee
63. Following trust-property-
into the hands of third persons;
into that into which it has been converted
64. Saving of rights of certain transferees
65. Acquisition by trustee of trust-property wrongfully converted
66. Right in case of blended property
67. Wrongful employment by partner-trustee of trust-property for partnership purposes
68. Liability of beneficiary joining in breach of trust
69. Rights and liabilities of beneficiary's transferee
CHAPTER VII
OF VACATING THE OFFICE OF TRUSTEE
70. Office how vacated
71. Discharge of trustee
72. Petition to be discharged from trust
73. Appointment of new trustees on death, etc
74. Appointment by Court
Rules for selecting new trustees
75. Vesting of trust-property in new trustees
Powers of new trustees
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76. Survival of trusts
CHAPTER VIII
OF THE EXTINCTION OF TRUSTS
77. Trust how extinguished
78. Revocation of trust
79. Revocation not to defeat what trustees have duly done
CHAPTER IX
OF CERTAIN OBLIGATIONS IN THE NATURE OF TRUSTS
80. Where obligation in nature of trust is created
81. Where it does not appear that transferor intended to dispose of beneficial interest
82. Transfer to one for consideration paid by another
83. Trust incapable of execution or executed without exhausting trust-property
84. Transfer for illegal purpose
85. Bequest for illegal purpose
Bequest of which revocation is prevented by coercion
86. Transfer pursuant to rescindable contract
87. Debtor becoming creditor's representative
88. Advantage gained by fiduciary
89. Advantage gained by exercise of undue influence
90. Advantage gained by qualified owner
91. Property acquired with notice of existing contract
92. Purchase by person contracting to buy property to be held on trust
93. Advantage secretly gained by one of several compounding creditors
94. Constructive trusts in cases not expressly provided for
95. Obligor's duties, liabilities and disabilities
96. Saving of rights of bona fide purchasers
THE SCHEDULE.
[Omitted.]
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1
THE TRUSTS ACT, 1882
2
ACT No. II 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
1. Short title, Commencement. This Act may be called the 3* Trusts Act, 1882; and it shall come
into force on the first day of March, 1882.
Local extent, Savings. 4[It extends to 5[the whole of Pakistan]. But nothing herein contained affects
the rules of 6[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.] 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 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:
“author of the trust”: “trustee”: “beneficiary”: “trust property”: "beneficial interest":
instrument of trust": 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 for whose benefit
the confidence is accepted is called the “beneficiary” : the subject matter of the trust is called “trust
property” or “trustmoney” : the “beneficial interest” or “interest” of the beneficiary is his right
against the trustee as owner of the trustproperty; and the instrument, if any, by which the trust
is declared is called the “instrument of trust”:
“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”:
1
The Trust Act, 1882 is repealed to the extent of I.C.T by Act NO. XXV of 2020,s.111.
2
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 PhuIera with effect from such date and subject to such
modifications as may be notified-see N.W.F.P. (Upper Tanawal) (Excluded Area) Laws Regulation, 1950.
3
The word “Indian” omitted by A. O., 1949, Sch.
4
Subs. ibid., for the first sentence of this paragraph, as amended by A. O., 1937.
5
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).
6
Subs. by F. A. 0., 1975, Art. 2 and Table, for “Muhammadan”.
Page 6 of 33
“registered”: and in this Act, 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:
“notice”. a person is said to have "notice" of a fact either when he actually knows that fact, or
when, but for wilful 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, (IX of 1872) section 229;
Expressions defined in Act IX of 1872. and all expressions used herein and defined in the
Contract Act, 1872 (IX of 1872), shall be deemed to have the meanings respectively attributed to them
by that Act.
CHAPTER II
OF THE CREATION OF 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
immoveable 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, and after his death for B. A is declared an insolvent. The trust for A is
invalid as against his creditor.
5. Trust of immoveable property. No trust in relation to immoveable 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 moveable property. No trust in relation to moveable 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
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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) 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 trustproperty 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.
1 See section 11 of the Contract Act, 1872 (9 of 1872).
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No one bound to accept trust. No one is bound to accept a trust.
Acceptance of 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 trust-property from vesting in him.
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 fulfil 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.
Nothing 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 ease of debts not bearing interest, to make such payment without interest.
Page 9 of 33
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, trustproperty 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 of 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 trustproperty to himself; and (subject to the provisions of the instrument
of trust) to get in trust-moneys invested on insufficient or hazardous security.
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,
regard being had to the nature and amount or value of the trust-property, may be reasonably requisite
for the preservation of the trust-property and the assertion or protection of the title thereto.
Illustration
The trust-property is immoveable property which has been given to the author of the trust by
an unregistered instrument. Subject to the provisions of the 1Indian Registration Act, 1877, (III of
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 or
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 trust-property 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.
1
See now the Registration Act, 1908 (16 of 1908)
Page 10 of 33
Illustrations
(a) A, living in 1[Lahore] is a trustee for B, living in 2[Karachi]. A remits trust-funds
to B by bills drawn by a person of undoubted credit in favour of the trustee as
such, and payable at 2[Karachi]. The bills are dishonoured. 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.
(d) A, a trustee directed to sell the trust-property by auction, sells the same, but does
not advertise the sale and otherwise fails in reasonable diligence in inviting
competition. A is bound to make good the loss caused thereby to the beneficiary.
(e) A, a trustee for B, in execution of his trust, sells the trust-property, but from
want of due diligence on his part fails to receive part of the purchase money. A
is bound to make good the loss thereby caused to B.
(f) A, a trustee for B of a policy of insurance, has funds in hand for payment of the
premiums. A neglects to pay the premiums, and the policy is consequently
forfeited. A is bound to make good the loss to B.
(g) A bequeaths certain moneys to B and C as trustees, and authorizes them to
continue trust- moneys upon the personal security of a certain firm in which A
had himself invested them. A dies, and a change takes place in the firm. B and
C must not permit the moneys to remain upon the personal security of the new
firm.
(h) A, a trustee for B, allows the trust to be executed solely by this co-trustee, C. C
misapplies the trust-property. A is personally answerable for the loss resulting
to B.
16. Conversion of perishable property. Where the trust is created for the benefit of
several persons in succession, and the trust-property is of a wasting nature or a future or reversionary
interest, the trustee is bound, unless an intention to the contrary may be inferred from the instrument
of trust, to convert the property into property of a permanent and immediately profitable character.
1Subs. 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 (21 of 1960), s. 3 and 2nd Sch., for “Calcutta” (with effect from the 14th October, 1955).
2Subs. by Ord. 21 of 1960, s. 3 and 2nd Sch., for “Bombay” (with effect from the 14th October. 1955).
Page 11 of 33
Illustrations
(a) A bequeaths to B all his property in trust for C during his life, and on his death
for D and on D’s death for E. A’s property consists of three leasehold houses,
and there is nothing in A’s will to show that he intended the houses to be enjoyed
in specie. B should sell the houses, and invest the proceeds in accordance with
section 20.
(b) A bequeaths to B his three leasehold houses in l[Quetta] and all the furniture
therein in trust for C during his life, and on his death for D, and on D’s death
for E. Here an intention that the houses and furniture should be enjoyed in specie
appears clearly, and B should not sell them.
17. Trustee to be impartial. Where there are more beneficiaries than one, the trustee is
bound to be impartial, and must not execute the trust for the advantage of one at the expense of another.
Where the trustee has a discretionary power, nothing in this section shall be deemed to
authorize the Court to control the exercise reasonably and in good faith of such discretion.
Illustration
A, a trustee for B, C and D, is empowered to choose between several specified modes of
investing the trust-property. A in good faith chooses one of these modes. The Court will not interfere,
although the result of the choice may be to vary the relative rights of B, C and D.
18. Trustee to prevent waste. Where the trust is created for the benefit of several persons
in succession and one of them is in possession of the trust property, if he commits, or threatens to
commit, any act which is destructive or permanently injurious thereto, the trustee is bound to take
measures to prevent such act.
19. Accounts and information. A trustee is bound (a) to keep clear and accurate accounts
of the trust-property, and (b), at all reasonable times, at the request of the beneficiary, to furnish him
with full and accurate information as to the amount and state of the trust-property.
20. Investment of trust-money. Where the trust-property consists of money and cannot be
applied immediately or at an early date to the purposes of the trust, the trustee is bound (subject to any
direction contained in the instrument of trust) to invest the money on the following securities, and on
no other :__
(a) in promissory notes, debentures, stock or other securities 2[of any 3[Provincial
Government] or] of the 4[Federal Government], or of the United Kingdom of
Great Britain and Ireland:
1
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 (21 of 1960), s. 3 and 2nd Sch., for “Calcutta” (with effect from the 14th October,
1955).
2
Ins. by the Repealing and Amending Act, 1920 (31 of 1920), s. 2 and Sch. I.
3
Subs. by A. O., 1937, for “Local Government”.
4
Subs. by F.A.O., 1975, Art. 2 and Table, for “Central Government”, which was previously subs. by A. O., 1937, for “Government of India”, to read
as above.
Page 12 of 33
1
[Provided that securities, both the principal whereof and the interest whereon shall
have been fully and unconditionally guaranteed by any such Government, shall be
deemed, for the purposes of this clause, to be securities of such Government;]
(b) in bonds, debentures and annuities 2[charged or secured 3[before the 15th August,
1947] by the 4[parliament of the United Kingdom] on the revenues of India or of
the 5[Governor-General in Council] or of any Province] :
6
[Provided that, after the fifteenth day of February, 1916, no money shall be
invested in any such annuity being a terminable annuity unless a sinking fund has
been established in connection with such annuity; but nothing in this proviso shall
apply to investments made before the date aforesaid ;]
6
[(bb) in India three and a half per cent stock, India three per cent. stock, India two and a
half percent. stock or any other capital stock which 16[was at any time] issued by
the Secretary of State for India in Council under the authority of an Act of
Parliament 7[of the United Kingdom] and charged on the revenues of India 8[or
which 17[was] issued by the Secretary of State on behalf of the Governor- General
in Council under the provisions of Part XIII of the Government of India Act,
1935(26 Geo. 5, ch.2.] ;]
(c) in stock or debentures of, or shares in, Railway or other Companies the interest
whereon shall have been guaranteed by the Secretary of State for India in Council
6
[or by the 9[Federal Government]] 10[or in debentures of the Bombay 11[Provincial]
Co-operative Bank Limited, the interest whereon shall have been guaranteed, by
the Secretary of State for India in Council] 8[or the Provincial Government of
Bombay] :
12
[Provided that after the 31st day of March, 1949 no trustee shall invest the money
in debentures of the Bombay Provincial Cooperative Bank Limited;]
13
[(d) in debentures or other securities for money issued, under the authority of any
14
[Central Act or Act] of a Legislature established in 15[a Province] by or on behalf
of any municipal body, port trust or city improvement trust in any Presidency-town,
or in Rangoon Town, or by or on behalf of the trustees of the port of Karachi:]
1Proviso ins. by the Indian Trusts (Amdt.) Act, 1934 (18 of 1934), s. 2.
2Subs. by A. O., 1937, for “charged by the Imperial Parliament on the revenues of India”.
3Ins. by A. O., 1949, Sch.
4Subs. by A. O., 1961, Art, 2 and Sch., for “Imperial Parliament” (with effect from the 23rd March, 1956).
5Subs. by A. O., 1949, Sch., for “Federation”.
6Ins. by the Indian Trusts (Amdt.) Act, 1916 (1 of 1916), s. 2.
7
Ins. ibid. (with effect from the 23rd March, 1956).
8
Ins. by A. O., 1937.
9
Subs. by F.A.O., 1975, Art. 2 and Table, for “Central Government” which was previously subs. by A. O., 1937, for “Government of India”, to read
as above.
10
Ins. by the Indian Trusts (Amdt.) Act., 1917 (21 of 1917), s. 2.
11
Subs. by the Repealing and Amending Act, 1925, (37 of 1925), s. 2 and Sch. I. for “Central”.
12
Proviso ins. by A. O., 1949, Sch.
13
Subs. by the Indian Trusts (Amdt.) Act, 1908 (3 of 1908), s. 2, for the original clause.
14
Subs. by A. O., 1949, Sch., for “Act”.
15
Subs. ibid., for “British India”.
16
Subs. by A.O., 1961, Art.2 and Sch., for “may at any time have after be”, (with effect from the 23, March, 1956)
17
Subs. by ibid., for “may be (with effect from the 23, March, 1956)
Page 13 of 33
1
[Provided that after the 31st day of March, 1949 no trustee shall invest the
money in any securities issued by or on behalf of a municipal body, port trust
or city improvement trust in any Presidencytown, or in Rangoon Town ;]
(e) on a first mortgage of immoveable property situate in 2[a Province] : Provided
that the property is not a leasehold for a term of years and that the value of the
property exceeds by one-third, or, if consisting of buildings, exceeds by
onehalf, the mortgagemoney; or
(f) on any other security expressly authorized by the instrument of trust, or by any
rule which the High Court may from time to time prescribe in this behalf [;or]3
3
[(g) in bonds, redeemable capital, debt securities or instruments issued by the
Pakistan Water and Power Development Authority and in listed securities
subject to the conditions as may be prescribed by the Government [;or]4
4
[(h) in units issued by schemes established under the Asset Management Companies
Rules, 1995.]
Provided that, where there is a person competent to contract and entitled in
possession to receive the income of the trust-property for his life, or for any
greater estate, no investment on any security mentioned or referred to in clauses
(d), (e) and (f) shall be made without his consent in writing.
5[20A. Power to purchase redeemable stock at a premium.__ (1)A trustee may invest in any
of the securities mentioned or referred to in section 20, notwithstanding that the same may be
redeemable and that the price exceeds the redemption value:
Provided that a trustee may not purchase at a price exceeding its redemption value any security
mentioned or referred to in clauses (c) and (d) of section 20 which is liable to be redeemed within
fifteen years of the date of purchase at par or at some other fixed rate, or purchase any such security
as is mentioned or referred to in the said clauses which is liable to be redeemed at par or at some other
fixed rate at a price exceeding fifteen per centum above par or such other fixed rate.
(2) A trustee may retain until redemption any redeemable stock, fund or security which
may have been purchased in accordance with this section.]
21. Mortgage of land pledged to Government under Act XIX of 1883. Deposit in
Government Savings Bank. Nothing in section 20 shall apply to investments made before this Act
comes into force, or shall be deemed to preclude an investment on a mortgage of immoveable
property already pledged as security for and advance under the 6[Land Improvement Loans Act, 1883],
or, in case the trust-money does not exceed three thousand rupees, a deposit thereof in a Government
Savings Bank.
1
Proviso ins. by A. O., 1949, Sch.
2
Subs. by the Federal Laws (Revision and Declaration) Act, 1951 (26 of 1951), s. 4 and 3rd Sch., for “the Provinces and the Capital of the Federation”
which were subs. by A.O., 1949, Arts. 3(2) and 4, for “British India”.
3
Subs. & added by Act. XII of 1994, s.2.
4
Subs. & added by Finance Act 3 of 1998, s.2.
5S. 20A ins. by the Indian Trusts (Amdt.) Act, 1916 (1 of 1916), s. 3.
6
Subs. by the Federal Laws (Revision and Declaration) Ordinance, 1981, (2 of 1981), s.3 and 2 nd Schedule., for “Local Improvement Act, 1871”.
Page 14 of 33
22. Sale by trustee directed to sell within specified time. Where a trustee, directed to sell
within a specified time extends such time, the burden of proving, as between himself and the
beneficiary, that the latter is not prejudiced by the extension lies upon the trustee, unless the extension
has been authorized by a principal Civil Court of original jurisdiction.
Illustration
A bequeaths property to B, directing him with all convenient speed and within five years to sell
it, and apply the proceeds for the benefit of C. In the exercise of reasonable discretion, B postpones
the sale for six years. The sale is not thereby rendered invalid, but C, alleging that he has been injured
by the postponement, institutes a suit against B to obtain compensation. In such suit the burden of
proving that C has not been injured lies on B.
23. Liability for breach of trust. Where the trustee commits a breach of trust, he is liable
to make good the loss which the trust-property or the beneficiary has thereby sustained, unless the
beneficiary has by fraud induced the trustee to commit the breach, or the beneficiary, being competent
to contract, has himself, without coercion or undue influence having been brought to bear on him,
concurred in the breach, or subsequently acquiesced therein, with full knowledge of the facts of the
case and of his rights as against the trustee.
A trustee committing a breach of trust is not liable to pay interest except in the following
cases: -
(a) where he has actually received interest:
(b) where the breach consists in unreasonable delay in paying trust-money to the
beneficiary:
(c) where the trustee ought to have received interest, but has not done so :
(d) where he may be fairly presumed to have received interest.
He is liable in case (a), to account for the interest actually received, and, in cases
(b), (c) and (d), to account for simple in terest at the rate of six per cent. per
annum, unless the Court otherwise directs.
(e) where the breach consists in failure to invest trust- money and to accumulate the
interest or dividends thereon, he is liable to account for compound interest (with
half-yearly rests) at the same rate.
(f) where the breach consists in the employment of trust property or the proceeds
thereof in trade or business, he is liable to account, at the option of the benefi
ciary, either for compound interest (with half-yearly rests) at the same rate, or
for the net profits made by such employment.
Illustrations
(a) A trustee improperly leaves trust-property outstanding, and it is consequently
lost: he is liable to make good the property lost, but he is not liable to pay interest
thereon.
Page 15 of 33
(b) A bequeaths a house to B in trust to sell it and pay the proceeds to C. B neglects
to sell the house for a great length of time, whereby the house is deteriorated
and its market price falls. B is answerable to C for the loss.
(c) A trustee is guilty of unreasonable delay in investing trust-money in accordance
with section 20, or in paying it to the beneficiary. The trustee is liable to pay
interest thereon for the period of the delay.
(d) The duty of the trustee is to invest trust-money in any of the securities mentioned
in section 20, clause (a), (b), (c) or (d). Instead of so doing, he retains the money
in his hands. He is liable, at the option of the beneficiary, to be charged either
with the amount of the principal money and interest, or with the amount of such
securities as he might have purchased with the trurt-money when the investment
should have been made, and the intermediate dividends and interest thereon.
(e) The instrument of trust directs the trustee to invest trust-money either in any
such securities or on mortgage of Immoveable property. The trustee does
neither. He is liable for the principal money and interest.
(f) The instrument of trust directs the trustee to invest trust-money in any of such
securities and to accumulate the dividends thereon. The trustee disregards the
direction. He is liable, at the option of the beneficiary, to be charged either with
the amount of the principal money and compound interest, or with the amount
of such securities as he might have purchased with the trust-money when the
investment should have been made, together with the amount of the
accumulation which would have arisen from a proper investment of the
intermediate dividends.
(g) Trust-property is invested in one of the securities mentioned in section 20,
clause (a), (b), (c) or (d). The trustee sells such security for same puropose not
authorized by the terms of the instrument of trust. He is liable, at the option of
the beneficiary, either to replace the security with the intermediate dividends
and interest thereon, or to account for the proceeds of the sale with interest
thereon.
(h) The trust-property consists of land. The trustee sells the land to a purchaser for
a consideration without notice of the trust. The trustee is liable, at the option of
the beneficiary, to purchase other land of equal value to be settled upon the like
trust, or to be charged with the proceeds of the sale with interest.
24. No set-off allowed to trustee. A trustee who is liable for a loss occasioned by a breach
of trust in respect of one portion of the trust-property cannot set-off against his liability a gain which
has accrued to another portion of the trust-property through another and distinct breach of trust.
25. Nonliability for predecessor’s default. Where a trustee succeeds another, he is not,
as such, liable for the acts or defaults of his predecessor.
26. Nonliability for cotrustee’s default. Subject to the provisions of sections 13 and 15,
one trustee is not, as such, liable for a breach of trust committed by his co-trustee:
Provided that, in the absence of an express declaration to the contrary in the instrument of trust,
Page 16 of 33
a trustee is so liable__
(a) where he has delivered trust-property to his co-trustee without seeing to its
proper application:
(b) where he allows his co-trustee to receive trust-property and fails to make due
enquiry as to the cotrustee’s dealings therewith or allows him to retain it
longer than the circumstances of the case reasonably require:
(c) where he becomes aware of a breach of trust committed or intended by his
co-trustee, and either actively conceals it or does not within a reasonable time
take proper steps to protect the beneficiary’s interest.
Joining in receipt for conformity. A co-trustee who joins in signing a receipt for
trust-property and proves that he has not received the same is not answerable, by reason of such
signature only, for loss or misapplication of the property by his co-trustee.
Illustration
A bequeaths certain property to B and C, and directs them to sell it and invest the proceeds for
the benefit of D. B and C accordingly sell the property, and the purchase-money is received by B and
retained in his hands. C pays no attention to the matter for two years, and then calls on B to make the
investment. B is unable to do so, becomes insolvent, and the purchase-money is lost. C may be
compelled to make good the amount.
27. Several liability of co-trustees. Where co-trustees jointly commit a breach of trust, or
where one of them by his neglect enables the other to commit a breach of trust, each is liable to the
beneficiary for the whole of the loss occasioned by such breach.
Contribution as between co-trustees. But as between the trustees themselves, if one be less
guilty than another and has had to refund the loss, the former may compel the latter, or his legal
representative to the extent of the assets he has received, to make good such loss; and, if all be equally
guilty, anyone or more of the trustees who has had to refund the loss may compel the others to
contribute.
Nothing in this section shall be deemed to authorize a trustee who has been guilty of fraud to
institute a suit to compel contribution.
28. Non-liability of trustee paying without notice of transfer by beneficiary. When any
beneficiary's interest becomes vested in another person, and the trustee, not having notice of the
vesting, pays or delivers trust-property to the person who would have been entitled thereto in the
absence of such vesting, the trustee is not liable for the property so paid or delivered.
29. Liability of trustee where beneficiary’s interest is forfeited to the Government.
When the beneficiary's interest is forfeited or awarded by legal adjudication l[to the Government], the
trustee is bound to hold the trust-property to the extent of such interest for the benefit of such person
in such manner as 2[the Provincial Government] may direct in this behalf.
1
The words “to Government” have successively been amended by A.O., 1937 and A.O., 1961, Art. 2 (with effect from the 23rd March, 1956) to read as
above.
2
Subs. by A.O., 1937, for “the Government”.
Page 17 of 33
30. Indemnity of trustees. Subject to the provisions of the instrument of trust and of
sections 23 and 26, trustees shall be respectively chargeable only for such moneys, stocks, funds and
securities as they respectively actually receive and shall not be answerable the one for the other of
them, nor for any banker, broker or other person in whose hands any trust-property may be placed, nor
for the insufficiency or deficiency of any stocks, funds or securities, nor otherwise for involuntary
losses.
CHAPTER IV
OF THE RIGHTS AND POWERS OF TRUSTEES
31. Right to title-deed. A trustee is entitled to have in his possession the instrument of trust
and all the documents of title (if any) relating solely to the trust -property.
32. Right to reimbursement of expenses. Every trustee may reimburse himself, or pay or
discharge out of the trust-property, all expenses properly incurred in or about the execution of the trust,
or the realization, preservation or benefit of the trust-property, or 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.
If the trust-property fail, 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.
Right to be recouped for erroneous over-payment. Where a trustee has by mistake made an
over-payment to the beneficiary, he may reimburse the trust-property out of the beneficiary's interest.
If such interest fail, the trustee is entitled to recover from the beneficiary personally the amount of such
over-payment.
33. Right to indemnity from gainer by breach of trust. A person other than a trustee who
has gained an advantage from a breach of trust must indemnify the trustee to the extent of the amount
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 indemnified who has, in
committing the breach of trust, been guilty of fraud.
34. Right to apply to Court for opinion in management of trust-property. 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.
A copy of such petition shall be served upon, and the hearing thereof may be attended by, such
of the persons interested in the application as the Court thinks fit.
The trustee stating in good faith the facts in such petition and acting upon the opinion, advice
or direction given by the Court shall be deemed, so far as regards his own responsibility, to have
Page 18 of 33
discharged his duty as such trustee in the subject matter of the application.
The costs of every application under this section shall be in the discretion of the Court to which
it is made.
35. Right to settlement of accounts. When the duties of a trustee, as such, are completed,
he is entitled to have the accounts of his administration of the trustproperty examined and settled; and,
where nothing is due to the beneficiary under the trust, to an acknowledgment in writing to that effect.
36. General authority of trustee. In addition to the powers expressly conferred by this Act
and by the instrument of trust, and subject to the restrictions, if any, contained in such instrument, and
to the provisions of section 17, a trustee may do all acts which are reasonable and proper for the
realization, protection or benefit of the trust-property, and for the protection or support of a beneficiary
who is not competent to contract.
1* * * * * * *
Except with the permission of a principal Civil Court of original jurisdiction, no trustee shall
lease trust-property for a term exceeding twenty-one years from the date of executing the lease, nor
without reserving the best yearly rent that can be reasonably obtained.
37. Power to sell in lots, and either by public auction or private contract. Where the
trustee is empowered to sell any trust-property, he may sell the same subject to prior charges or not,
and either together or in lots, by public auction or private contract, and either at one time or at several
times, unless the instrument of trust otherwise directs.
38. Power to sell under special conditions. The trustee making any such sale may insert
such reasonable stipulations either as to title or evidence of title, or otherwise, in any conditions of sale
or contract for sale, as he thinks fit; and may also buy in the property or any part thereof at any sale by
auction, and rescind or vary any contract for sale, and
Power to buy in and re-sell. re-sell the property so bought in, or as to which the contract is so
rescinded, without being responsible to the beneficiary for any loss occasioned thereby.
Time allowed for selling trust-property. Where a trustee is directed to sell trust-property or
to invest trust-money in the purchase of property, he may exercise a rea sonable discretion as to the
time of effecting the sale or purchase.
Illustrations
(a) A bequeaths property to B, directing him to sell it with all convenient speed and
pay the proceeds to C. This does not render an immediate sale imperative.
(b) A bequeaths property to B, directing him to sell it at such time and in such
manner as he shall think fit and invest the proceeds for the benefit of C. This
does not authorize B, as between him and C, to postpone the sale to an indefinite
period.
39. Power to convey. For the purpose of completing any such sale, the trustee shall have
power to convey or otherwise dispose of the property sold in such manner as may be necessary.
1The second paragraph of this section was repealed by the Amending Act, 1891 (12 of 1891), s. 2 and Sch. I.
Page 19 of 33
40. 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 the time to receive
the income of the trust-property for his life, or for any greater estate, no such change of investment
shall be made without his consent in writing.
41. Power to apply property of minors, etc., for their maintenance, etc. Where any
property is held by a trustee in trust for a minor, such trustee may, at his discretion, pay to the guardians
(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, the whole or any part
of the income to which he may be entitled in respect of such property; and such trustee shall accumulate
all the residue of such income by way of compound interest by investing the same and the resulting
income thereof from time to time in any of the securities mentioned or referred to in section 20, for the
benefit of the person who shall ultimately become entitled to the property from which such
accumulations have arisen:
Provided that such trustee may, at any time, if he thinks fit, apply the whole or any part of such
accumulations as if the same were part of the income arising in the then current year.
Where the income of the trust-property is insufficient for the minor's maintenance or education
or advancement in life, or the reasonable expenses of his religious worship, marriage or funeral, the
trustee may, with the permission of a principal Civil Court of original jurisdiction, but not otherwise,
apply the whole or any part of such property for or towards such maintenance, education, advancement
or expenses.
Nothing in this section shall be deemed to affect the provisions of any local law for the time
being in force relating to the persons and property of minors.
42. Power to give receipts. Any trustees or trustee may give a receipt in writing for any
money, securities or other moveable property payable, transferable or deliverable to them or him by
reason, or in the exercise, of any trust or power; and, in the absence of fraud, such receipt shall
discharge the person paying, transferring or delivering the same therefrom, and from seeing to the
application thereof, or being accountable for any loss or misapplication thereof.
43. Power to compound, etc. Two or more trustees acting together may, if and as they
think fit,
(a) accept any composition or any security for any debt or for any property claimed;
(b) allow any time for payment of any debt;
(c) compromise, compound, abandon, submit to arbitration or otherwise settle any
debt, account, claim or thing whatever relating to the trust; and
(d) for any of those purposes, enter into, give, execute and do such agreements,
instruments of composition or arrangement, releases and other things as to them
seem 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
Page 20 of 33
by a sole acting trustee when by the instrument of trust, if any, a sole trustee is authorized to execute
the trusts and powers thereof.
This section applies only if and as far as a contrary intention is not expressed in the instrument
of trust, if any, and shall have effect subject to the terms of that instrument and to the provisions therein
contained.
This section applies only to trusts created after this Act comes into force.
44. Power to several trustees of whom one disclaim or dies. When an authority to deal
with the trust-property is given to several trustees and one of them disclaims or dies, the authority may
be exercised by the continuing trustees, unless from the terms of the instrument of trust it is apparent
that the authority is to be exercised by a number in excess of the number of the remaining trustees.
45. Suspension of trustee's powers by decree. Where a decree has been made in a suit for
the execution of a trust, the trustee must not exercise any of his powers except in conformity with such
decree, or with the sanction of the Court by which the decree has been made, or, where an appeal
against the decree is pending, of the Appellate Court.
CHAPTER V
OF THE DISABILITIES OF TRUSTEES
46. Trustee cannot renounce after acceptance. A trustee who has accepted the trust cannot afterwards
renounce it except (a) with the permission of a principal Civil Court of original jurisdiction, or (b) if the
beneficiary is com petent to contract, with his consent, or (c) by virtue of a special power in the instrument of
trust.
47. Trustee cannot delegate. A trustee cannot delegate his office or any of his duties either
to a co-trustee or to a stranger, unless (a) the instrument of trust so provides, or (b) the delegation is in
the regular course of business, or (c) the delegation is necessary, or (d) the beneficiary, being
competent to contract, consents to the delegation.
Explanation. The appointment of an attorney or proxy to do an act merely ministerial and
involving no independent discretion is not a delegation within the meaning of this section.
Illustrations
(a) A bequeaths certain property to B and C on certain trusts to be executed by them
or the survivor of them or the assigns of such survivor. B dies. C may bequeath
the trust- property to D and E upon the trusts of A's will.
(b) A is a trustee of certain property with power to sell the same. A. may employ
an auctioneer to effect the sale.
(c) A bequeaths to B fifty houses let at monthly rents in trust to collect the rents
and pay them to C. B may employ a proper person to collect these rents.
48. Co-trustees cannot act singly. When there are more trustees than one, all must join in
the execution of the trust, except where the instrument of trust otherwise provides.
49. Control of discretionary power. Where a discretionary power conferred on a trustee
is not exercised reasonably and in good faith, such power may be controlled by a principal Civil Court
Page 21 of 33
of original jurisdiction.
50. Trustee may not charge for services. In the absence of express directions to the
contrary contained in the instrument of trust or of a contract to the contrary entered into with the
beneficiary or the Court at the time of accepting the trust, a trustee has no right to remuneration for his
trouble, skill and loss of time in executing the trust.
Nothing in this section applies to any Official Trustee, Administrator General Public Curator
or person holding a certificate of administration.
51. Trustee may not use trust property for his own profit. A trustee may not use or deal
with the trust-property for his own profit or for any other purpose unconnected with the trust.
52. Trustee for sale or this agent may not buy. No trustee whose duty it is to sell
trust-property, and no agent employed by such trustee for the purpose of the sale, may, directly or
indirectly, buy the same or any interest therein, on his own account or as agent for a third person.
53. Trustee may not buy beneficiary’s interest without permission. No trustee, and no
person who has recently ceased to be a trustee, may, without the permission of a principal Civil Court
of original jurisdiction, buy or become mortgagee or lessee of the trustproperty or any part thereof;
and such permission shall not be given unless the proposed purchase, mortgage or lease is manifestly
for the advantage of the beneficiary.
Trustee for purchase. And no trustee whose duty it is to buy or to obtain a mortgage or lease of
particular property for the beneficiary may buy it, or any part thereof, or obtain a mortgage or lease of
it, or any part thereof, for himself.
54. Co-trustees may not lend to one of themselves. A trustee or co-trustee whose duty it
is to invest trust-money on mortgage or personal security must not invest it on mortgage by, or on the
personal security of, himself or one of his co-trustees.
CHAPTER VI
OF THE RIGHTS AND LIABILITIES OF THE BENEFICIARY
55. Rights to rents and profits. The beneficiary has, subject to the provisions of the
instrument of trust, a right to the rents and profits of the trust property.
56. Right to specific execution. The beneficiary is entitled to have the intention of the
author of the trust specifically executed to the extent of the beneficiary's interest;
Right to transfer of possession. and, where 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 of one
mind, he or they may require 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 bequeathed for the benefit of a married woman, so that
she shall not have power to deprive herself of her beneficial interest, nothing in the second clause of
this section applies to such property during her marriage.
Page 22 of 33
Illustrations
(a) Certain Government securities are given to trustees upon trust to accumulate the
interest until A attains the age of 24, and then to transfer the gross amount to
him. A on attaining majority may, as the person exclusively interested in the
trust-property, require the trustees to transfer it immediately to him.
(b) A bequeaths Rs. 10,000 to trustees upon trust to purchase an annuity for B, who
has attained his majority and is otherwise competent to contract. B may claim
Rs. 10,000.
(c) A transfers certain property to B and directs him to sell or invest it for the benefit
of C, who is competent to contract. C may elect to take the property in its
original character.
57. Rights to inspect and take copies of instrument of trust, accounts, etc. The
beneficiary has a right, as against the trustee and all persons claiming under him with notice of the
trust, to inspect and take copies of the instrument of trust, the documents of title relating solely to the
trust- property, the accounts of the trust-property and the vouchers (if any) by which they are supported,
and the cases submitted and opinions taken by the trustee for his guidance in the discharge of his duty.
58. Right to transfer beneficial interest. The beneficiary, if competent to contract, may
transfer his interest, but subject to the law for the time being in force as to the circumstances and extent
in and to which he may dispose of such interest:
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.
59. 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 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 a trustee or
new trustee.
60. Right to proper trustees. 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.
Explanation I.__The following are not proper persons within the meaning of this section:__
A person domiciled abroad: an alien enemy: a person having an interest inconsistent with that
of the beneficiary: a person in insolvent circumstances; and, unless the personal law of the beneficiary
allows otherwise, a married woman and a minor.
Explanation II. When the administration of the trust involves the receipt and custody of money,
the number of trustees should be two at least.
Illustrations
(a) A, one of several beneficiaries, proves that B, the trustee, has improperly
disposed of part of the trustproperty, or that the property is in danger from B’s
Page 23 of 33
being in insolvent circumstances, or that he is incapacitated from acting as
trustee. A may obtain a receiver of the trust-property.
(b) A bequeaths certain jewels to B in trust for C. B dies during A’s lifetime; then
A dies, C is entitled to have the property conveyed to a trustee for him.
(c) A conveys certain property to four trustees in trust for B. Three of the trustees
die. B may institute a suit to have three new trustees appointed in the place of
the deceased trustees.
(d) A conveys certain property to three trustees in trust for B. All the trustees
disclaim. B may institute a suit to have three trustees appointed in place of the
trustees so disclaiming.
(e) A, a trustee for B, refuses to act, or goes to reside permanently out of 1[Pakistan]
or is declared an insolvent, or compounds with his creditors, or suffers a
co-trustee to commit a breach of trust. B may institute a suit to have A removed
and a new trustee appointed in his room.
61. Right to compel 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 any
contemplated or probable breach of trust.
Illustrations
(a) A contracts with B to pay him monthly Rs. 100 for the benefit of C. B writes
and signs a letter declaring that he will hold in trust for C the money so to be
paid. A fails to pay the money in accordance with his contract. C may compel
B on a proper indemnity to allow C to sue on the contract in B's name.
(b) A is trustee of certain land, with a power to sell the same and pay the proceeds
to B and C equally. A is about to make an improvident sale of the land. B may
sue on behalf of himself and C for an injunction to restrain A from making the
sale.
62. Wrongful purchase by trustee. Where a trustee has wrongfully bought trust property,
the beneficiary has a right to have the property declared subject to the trust or retransferred by the
trustee, if it remains in his hands unsold, or, if it has been bought from him by any person with notice
of the trust, by such person. But in such case the beneficiary must repay the purchase"‘money paid by
the trustee, with interest, and such other expenses (if any) as he has properly incurred in the
preservation of the property; and the trustee or purchaser must (a) account for the net profits of the
property, (b) be charged with an occupation"‘rent, if he has been in actual possession of the property,
and (c) allow the beneficiary to deduct a proportionate part of the purchase"‘money if the property has
been deteriorated by the acts or omissions of the trustee or purchaser.
Nothing in this section__
(a) impairs the rights of lessees and others who, before the institution of a suit to have the
property declared subject to the trust or retransferred, have contracted in good faith with
the trustee or purchaser; or
1Subs. by the Central Laws (Statute Reform) Ordinance, 1960 (21 of 1960), s. 3 and 2nd Sch. (with effect from the 14th October, 1955), for “the Provinces
Page 24 of 33
and the Capital of the Federation” which had been subs. by A. O., 1949, Arts. 3 (2) and 4, for “British India”.
(b) entitles the beneficiary to have the property declared subject to the trust or retransferred
where he, being competent to contract, has himself, without coercion or undue influence
having been brought to bear on him, ratified the sale to the trustee with full knowledge of
the facts of the case and of his rights as against the trustee.
63. Following trust-property into the hands of third persons; into that into which it
has been converted. Where trust-property comes into the hands of a third person inconsistently with
the trust, the beneficiary may require him to admit formally, or may institute a suit for a declaration,
that the property is comprised in the trust.
Where the trustee has disposed of trust-property and the money or other property which he has
received therefore can be traced in his hands, or the hands of his legal representative or legatee, the
beneficiary has, in respect thereof, rights as merely as may be the same as his rights in respect of the
original trust -property.
Illustrations
(a) A, a trustee for B of Rs. 10,000 wrongfully invests the Rs. 10,000 in the
purchase of certain land. B is entitled to the land.
(b) A, a trustee, wrongfully purchases land in his own name, partly with his own
money, partly with money subject to a trust for B. B is entitled to a charge on
the land for the amount of the trust-money so misemployed.
64. Saving of rights of certain transferees. Nothing in section 63 entitles the beneficiary
to any right in respect of property in the hands of__
(a) a transferee in good faith for consideration without having notice of the trust,
either when the purchase-money was paid, or when the conveyance was
executed, or
(b) a transferee for consideration from such a transferee.
A judgment-creditor of the trustee attaching and purchasing trust-property is not a transferee
for consideration within the meaning of this section.
Nothing in section 63 applies to money, currency notes and negotiable instruments in the hands
of a bona fide holder to whom they have passed in circulation, or shall be deemed to affect the Contract
Act, 1872(IX of 1872), section 108, or the liability of a person to whom a debt or charge is transferred.
65. Acquisition by trustee of trust-property wrongfully converted. Where a trustee
wrongfully sells or otherwise transfers trust"‘property and afterwards himself becomes the owner of
the property, the property again becomes subject to the trust, notwithstanding any want of notice on
the part of intervening transferees in good faith for consideration.
66. Right in case of blended property. Where the trustee wrongfully mingles the
trust-property with his own, the beneficiary is entitled to a charge on the whole fund for the amount
due to him.
67. Wrongful employment by partner-trustee of trust-property for partnership
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purposes. If a partner, being a trustee, wrongfully employs trust-property in the business, or on the
account of the partnership, no other partner is liable therefore in his personal capacity to the
beneficiaries, unless he had notice of the breach of trust.
The partners having such notice are jointly and severally liable for the breach of trust.
Illustrations
(a) A and B are partners. A dies, having bequeathed all his property to B in trust for
Z and appointed B his sole executor. B, instead of winding up the affairs of the
partnership, retains all the assets in the business. Z may compel him, as partner,
to account for so much of the profits as are derived from A’s share of the capital.
B is also answerable to Z for the improper employment of A’s assets.
(b) A, a trader, bequeaths his property to B in trust for C, appoints B his sole
executor, and dies. B enters into partnership with X and Y in the same trade,
and employs A’s assets in the partnership business. B gives an indemnity to X
and Y against the claims of C. Here X and Y are jointly liable with B to C as
having knowingly become parties to the breach of trust committed by B.
68. Liability of beneficiary joining 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 does not within a reasonable time take proper steps
to protect the interests of the other beneficiaries, or
(d) 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.
69. 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.
CHAPTER VII
OF VACATING THE OFFICE OF TRUSTEE
70. Office how vacated. The office of a trustee is vacated by his death or by his discharge
from his office.
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71. Discharge of trustee. The trustee may be discharged from his office only as follows:__
(a) by the extinction of the trust;
(b) by the completion of his duties under the trust;
(c) by such means as may be prescribed by the instrument of trust;
(d) by appointment under this Act of a new trustee in his place;
(e) by consent of himself and the beneficiary, or, where there are more
beneficiaries than one, all the beneficiaries being competent to contract; or
(f) by the Court to which a petition for his discharge is presented under this Act.
72. Petition to be discharge from trust. Notwithstanding the provisions of section 11,
every trustee may apply by petition to a principal Civil Court of original jurisdiction to be discharged
from his office; and, if the Court finds that there is sufficient reason for such discharge, it may
discharge him accordingly, and direct his costs to be paid out of the trust property. But, where there is
no such reason, the Court shall not discharge him, unless a proper person can be found to take his
place.
73. Appointment of new trustees on death, etc. Whenever any person appointed a trustee
disclaims, or any trustee, either original of substituted, dies, or is for a continuous period of six months
absent from 1[Pakistan], or leaves 1[Pakistan] for the purpose of residing abroad, or is declared an
insolvent, or desires to be discharged from the trust, or refuses or becomes, in the opinion of a principal
Civil Court of original jurisdiction, unfit or personally incapable to act in the trust, or accepts an
inconsistent trust, a new trustee may be appointed in his place by__
(a) the person nominated for that purpose by the instrument of trust (if any), or
(b) if there be no such person, or no such person able and willing to act, the author
of the trust if he be alive and competent to contract, or the surviving or
continuing trustees or trustee for the time being, or legal representative of the
last surviving and continuing trustee, or (with the consent of the Court) the
retiring trustees, if they all retire simultaneously, or (with the like consent) the
last retiring trustee.
Every such appointment shall be by writing under the hand of the person making it.
On an appointment of a new trustee the number of trustees may be increased.
The Official Trustee may, with his consent and by the order of the Court, be appointed under
this section, in any case in which only one trustee is to be appointed and such trustee is to be the sole
trustee.
The provisions of this section relative to a trustee who is dead include the case of a person
nominated trustee in a will but dying before the testator, and those relative to a continuing trustee
include a refusing or retiring trustee if willing to act in the execution of the power.
1Subs. by the Central Laws (Statute Reform) Ordinance, 1960 (21 of 1960), s. 3 and 2nd Sch. (with effect from the 14th October, 1955), for “the Provinces
and the Capital of the Federation” which had been subs. by A. O., 1949, Arts. 3(2) and 4, for “British India”.
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74. Appointment by Court. Whenever any such vacancy or disqualification occurs and it
is found impracticable to appoint a new trustee under section 73, the beneficiary may, without
instituting a suit, apply by petition to a principal Civil Court of original jurisdiction for the appointment
of a trustee or a new trustee, and the Court may appoint a trustee or a new trustee accordingly.
Rules for selecting new trustees. In appointing new trustees, the Court shall have regard (a)
to the wishes of the author of the trust as expressed in or to be inferred from the instrument of trust;
(b) to the wishes of the person, if any, empowered to appoint new trustees; (c) to the question whether
the appointment will promote or impede the execution of the trust; and (d) where there are more
beneficiaries than one, to the interests of all such beneficiaries.
75. Vesting of trust-property in new trustees. Whenever any new trustee is appointed
under section 73 or section 74, all the trust"‘property for the time being vested in the surviving or
continuing trustees or trustee, or in the legal representative of any trustee, shall become vested in such
new trustee, either solely or jointly with the surviving or continuing trustees or trustee, as the case may
require.
Powers of new trustees. Every new trustee so appointed, and every trustee appointed by a
Court, either before or after the passing of this Act, shall have the same powers, authorities and
discretions, and shall in all respects act, as if he had been originally nominated a trustee by the author
of the trust.
76. Survival of trusts. On the death or discharge of one of several co-trustees, the trust
survives and the trust-property passes to the others, un less the instrument of trust expressly declares
otherwise.
CHAPTER VIII
OF THE EXTINCTION OF TRUSTS
77. Trust how extinguished. A trust is extinguished__
(a) when its purpose is completely fulfilled; or
(b) when its purpose becomes unlawful; or
(c) when the fulfillment of its purpose becomes impossible by destruction of the
trust- property or otherwise; or
(d) when the trust, being revocable, is expressly revoked.
78. Revocation of trust. A trust created by will may be revoked at the pleasure of the
testator.
A trust otherwise created can be revoked only__
(a) where all the beneficiaries are competent to contract by their consent;
(b) where the trust has been declared by a non-testamentary instrument or by word
of mouth- in exercise of a power of revocation expressly reserved to the author
of the trust; or
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(c) where the trust is for the payment of the debts of the author of the trust, and has
not been communicated to the creditors-at the pleasure of the author of the trust.
Illustration
A conveys property to B in trust to sell the same and pay out of the proceeds the claims of
A's creditors. A reserves no power of revocation. If no communication has been made to the creditors,
A may revoke the trust. But if the creditors are parties to the arrangement, the trust cannot be revoked
without their consent.
79. Revocation not to defeat what trustees have duly done. No trust can be revoked by
the author of the trust so as to defeat or prejudice what the trustees may have duly done in execution
of the trust.
CHAPTER IX
OF CERTAIN OBLIGATIONS IN THE NATURE OF TRUSTS
80. Where obligation in nature of trust is created. An obligation in the nature of a trust
is created in the following cases.
81. Where it does not appear that transferor intended to dispose of beneficial interests.
Where the owner of property transfers or bequeaths and it cannot be inferred consistently with the
attendant circumstances that he intended to dispose of the beneficial interest therein, the transferee or
legatee must hold such property for the benefit of the owner or his legal representative.
Illustrations
(a) A conveys land to B without consideration and declares no trust of any part. It
cannot, consistently with the circumstances under which the transfer is made,
be inferred that A intended to transfer the beneficial interest in the land. B holds
the land for the benefit of A.
(b) A conveys to B two fields, Y and Z, and declares a trust of Y, but says nothing
about Z. It cannot, consistently with the circumstances under which the transfer
is made, be inferred that A intended to transfer the beneficial interest in Z. B
holds Z for the benefit of A.
(c) A transfers certain stock belonging to him into the joint names of himself and
B. It cannot, consistently with the circumstances under which the transfer is
made, be inferred that A intended to transfer the beneficial interest in the stock
during his life. A and B hold the stock for the benefit of A during his life.
(d) A makes a gift of certain land to his wife B. She takes the beneficial interest in
the land free from any trust in favour of A, for it may be inferred from the
circumstances that the gift was for B’s benefit.
82. Transfer to one for consideration paid by another. Where property is transferred to
one person for a consideration paid or provided by another person, and it appears that such other person
did not intend to pay or provide such consideration for the benefit of the transferee, the transferee must
hold the property for the benefit of the person paying or providing the consideration.
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1
[Nothing in this section shall affect the provisions of the Code of Civil Procedure, 1908(Act
V of 1908)].
83. Trust incapable of execution or executed without exhausting trust-property.
Where a trust is incapable of being executed, or where the trust is completely executed without
exhausting the trust-property, the trustee, in the absence of a direction to the contrary, must hold the
trust-property, or so much thereof as is unexhausted, for the benefit of the author of the trust or his
legal representative.
Illustrations
(a) A conveys certain land to B-
"upon trust," and no trust is declared; or
"upon trust to be thereafter declared," and no such declaration is ever made; or
upon trusts that are too vague to be executed; or
upon trusts that become incapable of taking effect; or
"in trusts for C," and C renounces his interest under the trust. In each of these
cases B holds the land for the benefit of A.
(b) A transfers Rs. 10,000 in the four per cents, to B, in trust to pay the interest
annually accruing due to C for her life. A dies. Then C dies. B holds the fund
for the benefit of A's legal representative.
(c) A conveys land to B upon trust to sell it and apply one moiety of the proceeds
for certain charitable purposes, and the other for the maintenance of the worship
of an idol. B sells the land, but the charitable purposes wholly fail, and the
maintenance of the worship does not exhaust the second moiety of the proceeds.
B holds the first moiety and the part unapplied of the second moiety for the
benefit of A or his legal representative.
(d) A bequeaths Rs. 10,000 to B, to be laid out in buying land to be conveyed for
purposes which either wholly or partially fail to take effect. B holds for the
benefit of A's legal representative the undisposed of interest in the money or
land if purchased.
84. Transfer for illegal purpose. Where the owner of property transfers it to another for
an illegal purpose and such purpose is not carried into execu tion, or the transferor is not as guilty as
the transferee, or the effect of permitting the transferee to retain the property might be to defeat the
provisions of any law, the transferee must hold the property for the benefit of the transferor.
85. Bequest for illegal purpose. Where a testator bequeaths certain property upon trust
and the purpose of the trust appears on the face of the will to be unlawful, or during the testator's
life-time the legatee agrees with him to apply the property for an unlawful purpose, the legatee must
hold the property for the benefit of the testator's legal re presentative.
1Subs. by the Federal Laws (Revision and Declaration) Ordinance, 1981 (27 of 1981), s.3 and 2nd Sch., for the existing paragraph.
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Bequest of which revocation is prevented by coercion. Where property is bequeathed and
the revocation of the be quest is prevented by coercion, the legatee must hold the property for the
benefit of the testator's legal representative.
86. Transfer pursuant to rescindable contract. Where property is transferred in
pursuance of a contract which is liable to rescission or induced by fraud or mistake, the transferee
must, on receiving notice to that effect, hold the pro perty for the benefit of the transferor, subject to
repayment by the latter of the consideration actually paid.
87. Debtor becoming creditor’s representative. Where a debtor becomes the executor or
other legal representative of his creditor, he must hold the debt for the benefit of the persons interested
therein.
88. Advantage gained by fiduciary. Where a trustee, executor, partner, agent, director of
a company, legal adviser, or other person bound in a fiduciary character to protect the interests of
another person, by availing himself of his character, gains for himself any pecuniary advantage, or
where any person so bound enters into any dealings under circumstances in which his own interests
are, or may be, adverse to those of such other person and thereby gains for himself a pecuniary
advantage, he must hold for the benefit of such other person the advantage so gained.
Illustrations
(a) A, an executor, buys at an undervalue from B, a legatee, his claim under the
will. B is ignorant of the value of the bequest. A must hold for the benefit of B
the difference between the price and value.
(b) A, a trustee, uses the trust property for the purpose of his own business. A holds
for the benefit of his beneficiary the profits arising from such user.
(c) A, a trustee, retires from his trust in consideration of his successor paying him
a sum of money. A holds such money for the benefit of his beneficiary.
(d) A, a partner, buys land in his own name with funds belonging to the partnership.
A holds such land for the benefit of the partnership.
(e) A, a partner, employed on behalf of himself and his co-partners in negotiating
the terms of a lease, calandestinely stipulates with the lesser for payment to
himself of a lakh of rupees. A holds the lakh for the benefit of the partnership.
(f) A and B are partners. A dies. B, instead of winding up the affairs of the
partnership, retains all the assets in the business. B must account to A’s legal
representative for the profits arising from A’s share of the capital.
(g) A, an agent employed to obtain a lease for B, obtains the lease for himself. A
holds the lease for the benefit of B.
(h) A, a guardian, buys up for himself incumbrances on his ward B’s estate at an
undervalue. A holds for the benefit of B the incumbrances so bought, and can
only charge him with what he has actually paid.
89. Advantage gained by exercise of undue influence. Where, by the exercise of undue
influence, any advantage is gained in derogation of the interests of another, the person gaining such
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advantage without consideration, or with notice that such influence has been exercised, must hold the
advantage for the benefit of the person whose interests have been so prejudiced.
90. Advantage gained by qualified owner. Where a tenant for life, co-owner, mortgagee
or other qualified owner of any property, by availing himself of his position as such, gains an
advantage in derogation of the rights of the other persons interested in the property, or where any such
owner, as representing all persons interested in such property, gains any advantage, he must hold, for
the benefit of all persons so interested, the advantage so gained, but subject to repayment by such
persons of their due share of the expenses properly incurred, and to an indemnity by the same persons
against liabilities properly contracted, in gaining such advantage.
Illustrations
(a) A, tenant for life of lease hold property, renews the lease in his own name and
for his own benefit. A holds the renewed lease for the benefit of all those
interested in the old lease.
(b) A village belongs to a Hindu family. A, one of its members, pays nazrana to
Government and thereby procures his name to be entered as the inamdar of the
village. A holds the village for the benefit of himself and the other members.
(c) A mortgages land to B, who enters into possession. B allows the Government
revenue to fall into arrear with a view to the land being put up for sale and his
becoming himself the purchaser of it. The land is accordingly sold to B. Subject
to the repayment of the amount due on the mortgage and of his expenses
properly incurred as mortgagee, B holds the land for the benefit of A.
91. Property acquired with notice of existing contract. Where a person acquires property
with notice that another person has entered into an existing contract affecting that property, of which
specific performance could be enforced, the former must hold the property for the benefit of the latter
to the extent necessary to give effect to the contract.
92. Purchase by person contracting to buy property to be held on trust. Where a person
contracts to buy property to be held on trust for certain beneficiaries and buys the property accordingly,
he must hold the property for their benefit to the extent necessary to give effect to the contract.
93. Advantage secretly gained by one of several compounding creditors. Where
creditors compound the debts due to them, and one of such creditors, by a secret arrangement with the
debtor, gains an undue advantage over his co-creditors, he must hold for the benefit of such creditors
the advantage so gained.
94. Constructive trusts in cases not expressly provided for. In any case not coming
within the scope of any of the preceding sections, where there is no trust, but the person having
possession of property has not the whole beneficial interest therein, he must hold the property for the
benefit of the persons having such interest, or the residue thereof (as the case may be), to the extent
necessary to satisfy their just demands.
Illustrations
(a) A, an executor, distributes the assets of his testator B to the legatees without
having paid the whole of B’s debts. The legatees hold for the benefit of B’s
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creditors, to the extent necessary to satisfy their just demands, the assets so
distributed.
(b) A by mistake assumes the character of a trustee for B, and under colour of the
trust receives certain money. B may compel him to account for such moneys.
(c) A makes a gift of a lakh of rupees to B, reserving to himself, with B’s assent,
power to revoke at pleasure the gift as to Rs. 10,000. The gift is void as to Rs.
10,000, and B holds that sum for the benefit of A.
95. Obligor’s duties, liabilities and disabilities. The person holding property in
accordance with any of the preceding sections of this Chapter must, so far as may be, perform the same
duties, and is subject, so far as may be, to the same liabilities and disabilities, as if he were a trustee of
the property for the person for whose benefit he holds it:
Provided that (a) where he rightfully cultivates the property of employs it in trade or business,
he is entitled to reasonable remuneration for his trouble, skill and loss of time in such cultivation or
employment; and (b) where he holds the property by virtue of a contract with a person for whose
benefit he holds it, or with any one through whom such person claims, he may, without the permission
of the Court, buy or become lessee or mortgagee of the property or any part thereof.
96. Saving of rights of bona fide purchares. Nothing contained in this Chapter shall
impair the rights of transferees in good faith for consideration, or create an obligation in evasion of
any law for the time being in force.
THE SCHEDULE. Omitted by the Federal Laws (Revision and Decleration) ordinances ,1981
(XXVII of 1981), s.3 and Sch. II.
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Source: Pakistan Code, Ministry of Law and Justice (pakistancode.gov.pk). Text on this page is reproduced verbatim from the official PDF and is provided for reference only. For the authoritative version, always consult the source document or a current reported edition.
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