Indian Trusts Act, 1882

CHAPTER II - OF THE CREATION OF TRUSTS

Lawful purpose

4. A trust may
be created for any lawful purpose. The purpose of a trust is lawful unless it
is (a) forbidden by law, or (b) is of such a nature that, if
permitted, it would defeat the provisions of any law, or (c) is fraudulent, or (d)
involves or implies injury to the person or property of another, or (e) the
Court regards it as immoral or opposed to public policy.

Every trust of which the purpose is unlawful is void. And
where a trust is created for two purposes, of which one is lawful and the other
unlawful, and the two purposes, cannot be separated, the whole trust is void.

Explanation : In this
section, the expression "law" includes, where the trust property is
immovable and situate in a foreign country, the law of 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 creditors.

Trust of immovable property.

5. No trust in relation to immovable property is valid
unless declared by a. non-testamentary instrument in writing signed by the author
of the trust or the trustee and registered, or by the will of the author of the
trust or of the trustee.

Trust of movable
property.

No trust in
relation to movable property is valid unless declared as aforesaid, or unless
the ownership of the property is transferred to the trustee.

These rules do
not apply where they would operate so as to effectuate a fraud.

Creation of trust.

6. Subject to the provisions of section 5, a trust is
created when the author of the trust indicates with reasonable certainty by any
words or acts (a) an intention on his part to create thereby a trust, (b)
the purpose of the trust, (c) the beneficiary, and (d) the
trust-property, and (unless the trust is declared by will or the author of the
trust is himself to be the trustee) transfers the trust-property to the
trustee.

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 amongst such members of C's family as B should think most
deserving. This .does not create a trust, for the beneficiaries are not
indicated with reasonable certainty.

(d) A bequeaths certain property to
B, desiring him to divide the bulk of it among C's children. This does not
create a trust, for the trust-property is not indicated with sufficient
certainty.

(e) A bequeaths a shop and stock-in-trade to B, on condition
that he pays A's debts and legacy to C. This is a condition, not a trust for
A's creditors and C.

Who may create trusts.

7. A trust may be
created—

(a) by every person
competent to contract, 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.

Subject-matter of trust.

8. The
subject-matter of a trust must be property transferable to the beneficiary.

It must not be
merely beneficial interest under a subsisting trust.

Who may be beneficiary.

9. 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.

Who may be trustee.

10. Every person capable of holding property may be a
trustee; but, where the trust involves the exercise of discretion, he cannot
execute it unless he is competent to contract.

No one 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.

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Indian Trusts Act, 1882

CHAPTER II - OF THE CREATION OF TRUSTS

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