‘Trust’, in Law, Simplified.

Saji Koduvath, Advocate, Kottayam.

TRUST: Word Meaning

• Primary:
  • Faith, hope, confidence, entrustment, obligation, conviction, expectation, belief, assurance, care etc.
• Derivative:
  • Reposition of confidence in trustee, by the founder;
  • Obligation of trustee to administer the trust property;
  • Unconditional responsibility undertaken by the trustee.
  • Association involved in the affairs of the trust.
  • Endowment or property held in trust;
  • Institution managed under the trust;

TRUST – In Law

• Trust is an ‘obligation’-
  • that arises from the reposition of confidence by the author
  • upon the trustee
  • to administer the trust-property
  • for the benefit the beneficiaries.
• Trustee is the person who is-
  • entrusted by the founder
  • to administer the trust property
  • for the benefit the beneficiaries..
• Trust-property is the property –
  • that is endowed by the founder
  • with a particular object that would benefit
  • the specified beneficiaries.

Thus, the constituents for a valid trust are the following:

• Founder, Property, Object, Trustee, Obligation, Reposition of confidence, and Beneficiary.

Definitions Given by Jurists

Underhill in ‘Law Relating to Trusts and Trustees’ defines trust as under:

• “A trust is an equitable obligation binding a person (who is called a trustee) to deal with property over which he has control (which is called the trust property) for the benefit of persons (who are called the beneficiaries) of whom he may himself be one, and any one of whom may enforce the obligation.”[1]

Halsbury’s Laws of England describes ‘trust’ as a confidence reposed in a person with respect to property of which he has possession or over which he can exercise a power, to the intent, that he may hold the property or exercise the power for the benefit of some other person or object.[2]

Salmond on Jurisprudence[3] refers to trust as under:

• “A trust is a very important and curious instance of duplicate ownership. Trust property is that which is owned by two persons at the same time, the relation between the two owners being such that one of them is under an obligation to use his ownership for the benefit of the other. The former is called the trustee, and his ownership is trust ownership: the latter is called the beneficiary, and his is beneficial ownership. As between trustees and beneficiary, the law recognises the truth of the matter: as between these two, the property belongs to the latter and not to the former. But as between the trustee and third persons, the fiction prevails. The trustee is clothed with the rights of his beneficiary, and is so enabled to personate or represent him in dealings with the world at large.”[4]

TRUST: Definition in Indian Trusts Act

Definition of ‘trust’ in the Indian Trusts Act, 1882 contains the quintessence and spirit of the definitions given by Underhill, Halsbury and Salmond. Sec. 3 of the Trusts Act defines trust as under:

• “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 ‘trust money’;
  • the ‘beneficial interest’ or ‘interest’ of the beneficiary is his right against the trustee as owner of the trust property; and
  • the instrument, if any, by which the trust is declared is called the ‘instrument of trust’.”

Definition of ‘Trust’: Simplified

The definition of ‘trust’ in Sec. 3 of the Indian Trusts Act, 1882 can be simplified as under:

• 1. A ‘trust’ is an obligation upon the trustees.
• 2. It arises from the reposition of confidence, upon the trustees, by the author.
• 3. It is to administer the trust property, as if he (trustee) himself is the owner, for the benefit the beneficiaries.

Definition of ‘Trust’: Analysed

Sec. 3 presents the definition in a ‘noncompound’ expression; that is, ‘trust is an obligation’. It is only qualified further, as shown under:

• A ‘trust’ is an obligation-
  • (i) annexed to the ownership of property (to administer), and
  • (ii)(a) arising out of a confidence reposed in (trustee, by the author) and accepted by the owner (that is, trustee, the legal owner), or
  • (ii)(b) declared and accepted by him (that is, trustee),^#
  • (iii) for the benefit of another, or of another and the owner (that is, trustee, the legal owner).
    • ^{# The words “by him” denote that the obligation is “declared and accepted” by the same person. This situation comes-up only when the author himself declares to act as trustee. See notes below under the head: ‘Obligation … Declared And Accepted By Him’.}

A Drill Required to Appreciate the Definition – Taking Aid from other Provisions

The definition of ‘trust’ in Sec. 3 of the Indian Trusts Act is complicated. Not only certain courts but some learned authors of treatises also went completely wrong while explaining the definition.

An exercise is necessary to understand the purport and implication of the definition. For that effort we have to take aid from other sections of the Act; though, usually, definitions are tools for explaining the substantive provisions of a statute, and not vice-versa.

(i) ‘A  Trust is An Obligation’

According to the Indian ‘Trusts Act’, ‘a trust is an obligation’ _{(arises from the reposition of confidence by the author)}.

It casts a responsibility upon the trustees to administer the trust property (as he himself is the owner). The word ‘trust’ is used in law as an ‘abstract^[5]-countable^[6] noun’, similar to ‘a business’, ‘an idea’ or ‘a duty’.[7]

(ii)  ‘Obligation Annexed to the Ownership’ refers Administration.

As per the definition, trust is an obligation ‘annexed to the ownership’ of the trust-property. By the very nature of ‘Trust’, the obligation ‘annexed’ to the trust-property is for administration.[8] It is made clear in Sec. 11 of the Indian Trust Act.

Sec. 11 casts duty on trustee to execute the trust, by fulfilling ‘the purpose of the trust’, and obeying ‘the directions of the author of the trust’.[9] Sec. 34, 35 and 60 also refer to ‘administration’ or ‘management’ by trustee.

(iii) Confidence is ‘Reposed’ by the Author ‘in the Owner’ – Owner is Trustee

Trust is defined to be an obligation arising out of a confidence ‘reposed in’ and ‘accepted by’ the owner. When the ‘author of the trust’ is defined, it is stated:

• “The person who reposes or declares the confidence is called the ‘author of the trust’.”

Therefore, it is definite that the words, ‘confidence reposed in the owner’, denote the confidence that is ‘reposed’ by the author[10] ‘in the owner’.

(iv) The ‘Owner’ who  ‘Accepts’ the Confidence is Trustee.

As we have seen, it is the author who ‘reposes’ the confidence; and the confidence is ‘reposed in’, and ‘accepted by’, the owner.  Who is the ‘owner’?

It is trustee.[11] The observations in some decisions[12] that the word ‘owner’ refers to the ‘author’ is absolutely incorrect.

The nexus between owner and trustee is clear from the definitions of ‘trust’ and ‘trustee’ – when ‘trust’ is defined, it is stated: the confidence is ‘accepted by the owner’; when ‘trustee’ is defined, it is stated: the confidence is ‘accepted by the trustee’.

According to the definition of trust, the ‘obligation’ stands ‘annexed to the ownership’ of the trust-property. Sec. 6 of the  Trusts Act makes it clear that ‘a trust is created when the author of the trust transfers the trust property to the trustee’.  Therefore, the ‘obligation’ upon the trustee casts a duty upon him to administer the trust-property as if he is its ‘owner’.

From Sec. 6 of the  Trusts Act, it is further clear that a trust cannot be said to have been constituted, unless the trustee is constituted as the ‘owner’ of the endowed property.[13]  For due administration,[14] such transfer[15] and vesting^[16] of property in the trustee, as its (legal) owner,[17]is  inevitable. 

To find the answer, who is the ‘owner’ referred to in the definition of trust,we can also refer to the definition of ‘beneficial interest or interest’, in Sec. 3. The definition reads: 

• “The ‘beneficial interest’ or ‘interest’ of the beneficiary is his right against the trustee as owner of the trust property.”

The endowed property of a trust stands vested in trustee as its (sole) ‘owner’.[18] In RP Kapur  Vs. Kaushalya Educational Trust[19]  it is held by Delhi High Court that  ‘obligation’ in trust refers to a ‘tie of equity’ (viniculum-juris), whereby the trustee accepts the confidence reposed in him by the author to hold or apply the trust property for the purposes of the trust.

(v) ‘Obligation … Declared And Accepted By Him’

Going by the definition, the pronoun ‘him’ stands for ‘owner’. The definition reads:

• “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 …..”

As we have found in the notes just above, the confidence is ‘reposed and declared’ by the author;[20] and the confidence is ‘reposed in’, and ‘accepted by’, the trustee[21] (trustee is referred to in the definition as ‘owner’ – since trustee is the ‘legal owner’).

The expression, ‘obligation … declared and accepted by him’, is applied only when the declaration and the acceptance  are  made by the same person – it is Trustee. Rajasthan High Court observed in Heeralal  Vs. Firm Ratanlal Mahavir Prasad[22] as under:

• “If only the trustee himself is the author, then only the trustee can make a declaration of trust.”

Therefore it is clear that this expression is attracted when the author declares ‘himself to be the trustee’.^[23] (In such cases, the requirement of a formal ‘reposition of confidence upon the trustee’ does not arise.)

Section 6 of the Trusts Act expressly states that an author can be a founder-trustee. Clause (e) of Sec. 6 indicates that the formal ‘transfer of the trust-property to the trustee’ is not required where the author ‘indicates with reasonable certainty by any words or acts’ that he himself would be the trustee.

Our Apex Court held in Tulsidas Kilachand Vs. CIT Bombay City[24]  as under:

• “No doubt, under Ss. 5 and 6 of the Indian Trusts Act if the declarer of the trust is himself the trustee also, there is no need that he must transfer the property to himself as trustee; but the law implies that such a transfer has been made by him, and no overt act except a declaration of trust is necessary. The capacity of the declarer of trust and his capacity as trustee are different, and after the declaration of trust, he holds the assets as a trustee. Under the Transfer of Property Act, there can be a transfer by a person to himself or to himself and another person or persons. In our opinion, there was, in this case, a transfer by Mr. Tulsidas Kilachand to himself as a trustee, though there was no formal transfer.”

(vi) ‘Confidence (Reposed in and) Accepted by the Owner’

We have seen, on analysis of the definition, that:

• the confidence is ‘reposed in’ and ‘declared by’ by the author; and
• the confidence is ‘accepted’ by the trustee.

From the definition, it is clear that the clause, ‘Confidence Reposed in and Accepted by the Owner’ manifest that (i) the ‘Obligation‘ on trustee is that enjoined by the author, and (ii) the Obligation must have been accepted by the trustee, on his own.

“Accepted by the Owner” denotes Unconditional Obligation undertaken by the Trustee

The words, “accepted by the owner (trustee)” is used in the definition with the deliberate object of denoting the unconditional obligation undertaken by the trustee, ‘on his own’; if not, the words “and accepted by” stand superfluous; inasmuch as a trust will not endure without a trustee.

The definition of Trust can be explained, in a nutshell, as under:

A trust is an obligation annexed to the ownership of property, and	Trust is an obligation (upon trustee[25]). It is to administer[26] the trust-property as its (legal) owner.
arising out of a confidence	Duty of a Trustee is fiduciary[27] in nature.[28]  It is moral as well as legal.[29] (It must have been arisen from the confidence reposed in by the author.)
reposed in	Confidence is reposed in Trustee (by the Author[30]).
and accepted by the owner, or	Trustee,[31]the (legal) owner,[32] must have (unconditionally) accepted the confidence (reposed in by the author).
declared and accepted by him	The obligation is ‘declared and accepted‘ by the trustee. (Only when the author himself is the trustee,[33] the obligation can be ‘declared and accepted’ by one person.)
for the benefit of another, or of another and the owner.	Author creates trust for the benefit of others. Trustee can be one among the beneficiaries.

Essential Requirements for a Valid Trust

Sec. 4 of the Indian Trusts Act, 1882 speaks as to creation of trust for ‘lawful purpose’. It reads as under:

• 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 immovable and situate in a foreign country, the law of such country.

The essential elements for creation of a trust, enumerated in Sec. 6 of the Indian Trusts Act, reads as under:

• 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 to create thereby a trust,
  • (b) the purpose of the trust,
  • (c) the beneficiary, and
  • (d) the trust-property, and
  • (e) (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.  

Trust and Endowment

For a valid trust there should be certainty[34] as to:

• Intention to create trust,[35]
• Purpose,[36]
• Beneficiary,[37]  and
• Property.[38]

These are the ingredients of an endowment also. Appointment of a trustee[39] and transfer[40] of property to trustee for administration make Trust different from an Endowment.

The word ‘endow’^[41] expresses the idea of giving, bequeathing or dedicating something for some purpose.^[42] An ‘endowment’ is founded by dedication of property for the purposes of religion or charity having both the subject and object certain and capable of ascertainment.^[43]  There may be dedication (granting) of property for subjecting it to an ‘easement’. But, in ‘law of trusts’, dedication involves the extinguishment of the rights of the original owner of the lands.^[44] By ‘dedication’, the owner divests all his rights, title and interest in the property which becomes the property of the deity^[45] or other endowment.

An ‘endowment’ can be public or private.[46] It is a corporeal reality to which social concepts are adhered to; whereas, a trust is primarily a legal concept attached to the administration of the endowed property.[47]

See Blog: Dedication of Property in Public Trusts

Property Vests in Trustee, by Transfer; But no Proprietary Interest

According to the definition of ‘Trust’, in the Indian Trusts Act, ‘a   trust is an obligation (a) annexed to the ownership of property, and (b) arising out of a confidence reposed in and accepted by the owner/trustee. To establish a valid trust, the author must have completely parted with all his interest in the trust-property, and the property must have been transferred[48] to the trustee. But, the trustee acquires only ‘legal ownership’ over the trust-property, under the law in India. And, the beneficiaries have no proprietary-interest, or ‘beneficial interest’ pertaining to owners, as they have no ownership in the trust property.

In WO Holdsworth Vs. State of Uttar Pradesh (1957),[49] referring to the definition of trust, it is laid down by our Apex Court that the trustee is the owner of the trust property and the property vests in him as such.  It is held in this decision as under:

• “22. Whatever be the position in English Law, the Indian Trusts Act, 1882 (II of 1882) is clear and categoric on this point. Sec. 3 of that Act defines a Trust as 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 : the person who accepts the confidence is called the ‘trustee’ : the person for whose benefit the confidence is accepted is called the ‘beneficiary’ : ‘the beneficial Interest’ or ‘interest’ of the beneficiary is his right against the trustee as owner of the trust property; the subject-matter of the trust is called ‘trust property’ or ‘trust money’.”

Following WO Holdsworth  Vs. State of Uttar Pradesh,[50] it is observed by the Supreme Court in State Bank of India Vs. Special Secretary Land and Land Revenue[51] that Sec. 3 of the Trusts Act emphasises the fact that the beneficiary has a right to obtain his beneficial interest or interest against the trustee as owner of the trust property and that the trustee would become trust property’s owner for the purpose of effectively executing or administering the trust. 

It is observed by the Calcutta High Court in Sree Sree Iswar Gopal Jew Vs. Commr. of IT^[52] as under:

• “Three parties are necessary to the constitution of a trust, namely, the settlor, the trustee and the beneficiary. A trust is not completely constituted until the trust property is vested in trustees for the benefit of the cestui que trust.”

In Khairul Bashar Vs. Thannu Lal (1957)[53] the Allahabad High Court had held as under:

• “A trust is an obligation annexed to the ownership of the property (vide Sections 3 and 5 of the Trusts Act). It is an essential condition of trust that property must vest in the trustee. Unless, therefore, the trustee is constituted as the owner of the property entrusted to him, a trust cannot be said to have been constituted. Reference in this connection might be made to cases reported in Hussain Ali v. Baqir Ali, AIR 1946 Mad 116 (A); Shri Mahadeoji v. Baldeo Prasad, AIR 1941 Nag 181 (B) and Khemchand Ramdas v. Girdharidas Radhakishaindas, AIR 1947 Sind 187 (C); Ma Thein May v. U Po Kin, AIR 1925 Rang 289 (D) and Secretary of State for India v. Guru Proshad Dhur, ILR 20 Cal 51 (FB) (E). … The mere fact that a person is holding the property on behalf of another, will not constitute him a trustee, unless the ownership of the property is also vested in him.”

The definitions of ‘trust’, ‘trustee’ and ‘beneficiary’ lay down that the trustee is the owner of the trust property and the beneficiary has a right against the trustee as owner of the trust property.

The obligation upon the trustee, to administer,[54] being ‘annexed to the ownership of property’, the property has to be administered by the trustee as if he is the ‘owner’ of the same;[55]  and, for such administration, the property must have been vested upon him as its (legal) owner.

Under Sec. 6 of the Trusts Act, a trust is created when the author of the trust transfers[56] the trust-property to the trustee.[57] Holding that the trustee is the legal owner of the trust property, it is observed in Maulavi Kamiruddin Khan Vs.   Badrun Nisa Bibi (1940)[58] as under:

• “In short, it is an obligation annexed to the ownership of property and before there can be a trust the trustee must be the owner. The matter is made abundantly clear in Section 6, Trusts Act, 1882, which is in these terms:

‘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 an intention on his part to create thereby a trust, the purpose of the trust, the beneficiary, and 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.’

In short, there must be a transfer of the property to the trustee before a trust is created.”

Orissa High Court held in Narasingh Charan Mohapatra Vs. Radhakanta Mohapatra[59] as under:

• “A trust in the accepted sense of the word is the creation of an obligation by the owner to the intent that he may hold the property for the benefit of some other person or object. As soon as the trust is declared according to the requirements of the law, the legal ownership passes to the trustee and he is bound to apply the income arising out of the property to the use and benefit of ‘cestuique trust’. As a general rule, it may be laid down that in order to make a voluntary declaration of trust binding upon the author of the trust he must have completely parted with all his interest in the property to the trustee or declared himself to be a trustee of the property for the benefit of the ‘cestuique trust’ –See: Agnew’s Trusts, p. 53.”

Sec. 10 and 75 of the Indian Trusts Act implies ‘vesting of property in trustees’.

Sec. 10 of the Indian Trust Act, 1882 reads:

• 10. ….. 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.

Sec. 75 of the Indian Trust Act, 1882 reads:

• 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.

Duel Ownership, as comprehended by Salmond is Not accepted in Indian Law

Trustee is full and Sole Owner, under Indian law.

Under English law, there is ‘duel ownership’ on trust property. First is the ‘legal ownership’ which is vested with trustee; and the second, the ‘equitable or beneficial ownership’ vested with the beneficiary. Salmond on Jurisprudence[60]  refers it as under:

• “A trustee is the legal owner of the property, the actual owner thereof having lost title thereto by the creation of a trust. The equitable ownership in the trust property vests in the beneficiaries. The trust is thus an incident of dual ownership in which the creator of the trust no longer figures.”[61]

The Law of Trust in India does not follow the ‘doctrine of dual ownership’; because, it does not recognise legal and equitable estates. The trustee ‘holds’ and administers the trust property as its (sole[62]) ‘legal owner’[63] or the ‘full (legal) owner’. The Privy Council, in Chhatra Kumari Vs.  Mohan Bikram (1931),[64] held as under:

• “The Indian Law does not recognise legal and equitable estates. By that law, therefore, there can be but one owner; and where the property is vested in a trustee, the owner must, their Lordship think, be the trustee. This is the view embodied in the Indian Trusts Act: See Sec. 3, 55, 56, etc. … “[65]

If more than one trustee, the trustees altogether are (joint) owners of the trust property.[66]

Out Apex Court, referring, Mount Royal/Walsh Inc. v. Jensen Star, the Ship, (1990) 1 FC 199, of Federal Court of Appeal in Canada, observed in Ahmed Abdulla Ahmed Al Ghurair Vs. Star Health and Allied Insurance Co. Ltd.[67] as under:

• “49. The term ‘Beneficial interest’ is defined under Section 3 of the Indian Trust Act, 1882 which is reproduced hereunder:
• ‘Beneficial interest’ or ‘interest of the beneficiary’ is his right against the trustee as owner of the trust property.’
• 50. As it can be discerned from the definition of ‘Beneficial interest’ provided in Section 3 of the Indian Trust Act, 1882, there are two parties involved in an issue governing beneficial interest. One is a beneficiary named as ‘beneficial owner’ and the other is the owner named as ‘registered owner’ being the trustee of the property or the asset in question. Thus, one can deduce the underlining principle that the ownership is nonetheless legal over the trust property, which vests on him but he also acts as a trustee of the beneficiary. A beneficial owner may include a person who stands behind the registered owner when he acts like a trustee, legal representative or an agent.”

It is beyond doubt that the Canadian law that follows the English principles is not applicable in India, in these aspects.

‘Beneficiaries’ have Merely Beneficial Interest; ‘Legal Ownership‘ with Trustees

In The Province of Bihar v. FR Hayes,  1946-14 ITR 326 (Patna), Fazl Ali, CJ (as he then was) while interpreting Bihar Agricultural Income-Tax Act, 1938, referring the definition of trust in the Indian Trusts Act, held as under:

• “The framers of the Act must be assumed to have known the accepted legal meaning of the expression and also known that the term ‘beneficiary’ in law is not generally used with reference to a full legal owner but with reference to a person who has ‘beneficial interest’ in some property which is usually in the possession and control of another person. The distinction between beneficial interest and legal ownership is one of the most notable features of a trust and in my judgment ‘beneficiaries’ referred to in Section 11 are those persons who have merely beneficial interest in a property while the legal ownership of the property vests in a person or persons who hold the property for their benefit.”

Read Blog: Indian Law Does Not Accept Salmond, as to Dual Ownership

Trustee Holds ‘On His Own Right’; Not ‘On Behalf Of’ the Beneficiaries

In WO Holdsworth  Vs. State of Uttar Pradesh[68]  it is laid down by our Apex Court as under:

• “23. These definitions emphasise that the trustee is the owner of the trust property and the beneficiary only has a right against the trustee as owner of the trust property. The trustee is thus, the legal owner of the trust property and the property vests in him as such. He, no doubt, holds the trust property for the benefit of the beneficiaries but he does not hold it on their behalf. The expressions ‘for the benefit of’ and ‘on behalf of’ are not synonymous with each other. They convey different meanings.”

Our Apex Court observed in Comm. Wealth Tax Vs. Kirpashanker Dayashankar[69] that the trustee holds the trust property ‘on his own right’ and not ‘on behalf of’ someone else though he holds it ‘for the benefit of’ the beneficiaries.

Indian Trusts Act, 1882 does not accept the doctrine of ‘duel ownership’.  ‘Legal ownership’ of the trust property is ‘vested’ with the trustee. Indian Trusts Act expounds that the trustee ‘holds’ the trust property as its (sole[70]) owner.  These obligations are casted upon trustees only to manage the trust property for the benefit of the beneficiaries.[71] It is beyond doubt that the trustee has no ‘proprietary interest’ inasmuch as the beneficial interest is ‘carved out’[72] in the property itself.  In dealings with the world at large, the trustee personates or represents as the owner of the property.[73]The Act refers only to ‘beneficial interest’ entitled to by the beneficiaries; and, not ‘beneficial ownership’.

It is clear from the following statements in the definition of ‘trust’ in Sec. 3 of the Indian Trusts Act, 1882:

• (i) “A ‘trust’ is an obligation … arising out of a confidence reposed in and accepted by the owner… for the benefit of another….”
• (ii) “(T)he ‘beneficial interest’…  is his (beneficiary’s) right against the trustee as owner of the trust property.”

The Common Law of Trust predicated by the courts in India,[74] in the matters of public trusts, has disfavoured the doctrine of ‘duel ownership’;[75] and followed the Trusts Act.

The Indian Trusts Act, 1882 repeatedly lays down – trustees are ‘holding’ trust property(Sec. 10, 29 and Chap. IX: Sec. 80 onwards).  It is subject to the obligation to use his ownership ‘for the benefit of’ the beneficiaries.

Sec. 10 of the Indian Trust Act, 1882 reads:

• 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.

Sec. 29 of the Indian Trust Act, 1882 reads as under:

• 29. Liability of trustee where beneficiary’s interest is forfeited to Government.—When the beneficiary’s interest is forfeited or awarded by legal adjudication 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 the State Government may direct in this behalf.

‘Obligation’ in Trustee: Moral & Legal Duty

A trust being an ‘obligation’ (i) for administration and (ii) arising out of a ‘confidence’ reposed in the trustee, the trustee has to discharge the ‘obligation’  and ‘confidence’ faithfully.[76]It must be for the benefit of the beneficiaries. He has to fulfill the object and the purpose of the trust and obey the directions of the author of the trust given at the time of its creation.[77]It is his moral as well as legal duty.^[78]

As pointed out by our Apex Court, in WO Holdsworth  Vs. State of Uttar Pradesh,[79]  the Indian Trusts Act, 1882 declares vesting legal ownership with trustees. The vesting of ownership of trust property with the trustee is under an obligation to manage it for the benefit of the beneficiaries.[80]  Though, in a trust, the trust property must have been transferred to the trustees, and the trust property vests in the trustee as owner thereof, it does not absolutely belong to any individual. The property is vested in trustees subject to the obligations upon which the trustees accepted the trust.[81] The trustee deals with the property in accordance with the provisions of the deed of trust.[82]  In dealings with the world at large, the trustee personates or represents as the owner of the property.[83]The legal ownership which vests in the trustee is for the purposes of the trust and to administer[84] the same.

It is observed by the Supreme Court in State Bank of India Vs. Special Secretary Land and Land Revenue[85] that the trustee would become the owner of the trust property for the purpose of effectively executing or administering the trust for the benefit of the beneficiaries and for due administration thereof, and not for any other purpose. Merely because the property is vested in the trustee as the legal owner, he has no ‘proprietor interest’, inasmuch as the beneficial interest is ‘carved out’ in the property itself.  The trustee is not the full owner of the property in the real sense of the term.

Trustee has to perform these duties gratuitously.[86] No remuneration can be claimed from the trust property or income unless the terms of the trust do not specifically allow it.  But, the trustee is entitled to get reimbursement out of the trust property for all expenses properly incurred in relation to the execution of the trust and for preservation of the trust property.[87]

See Blog: Trustees and Administration of Public Trusts

Distinguishing Particularities of Trust from Other Legal-Relations

Trust imposes obligation upon trustees.^[88]The whole edifice of trust rests upon the acceptance of ‘confidence’ by the trustee, reposed in by the author.[89] It is for administration[90] as desired by the author.  As soon as the trust is validly declared by the author and duly accepted by the trustee, the legal ownership passes to the trustee[91]and the property vests^[92] in him. The trustee holds the endowed property for the benefit of the beneficiaries.[93] The distinguishing particularities of trust from other legal-relations lie in ‘obligation’, ‘confidence’ and ‘entrustment of ownership in trustee’. 

Entrustment with Banker

The trustee administers the property as its (legal) owner (Alagappa Vs. Lakshmanan:  AIR 1919 Mad 555; In Re Sabnis, Goregaonkar Senjit  Vs.  Shivramdas:  AIR 1937 Bom 374; Himansu Kumar Vs. Hasem Ali Khan:   AIR   1938 Cal818; Kamiruddin Khan Vs. Badrun Nisa Bibi: AIR 1940 Pat 90; Life Insurance Corp.  of India Vs.   Iqbal Kaur: AIR 1984 J&K 1) with exclusive rights. (Pandit Rao Vs. Vishwakarma: 2010-85 AIC 762; 2009-6 ALT 197, 2009-6 ALD 269).  In N. Raghavender v. State of Andhra Pradesh (13.12.2021) the Supreme Court held as under:

“The money that a customer deposits in a bank is not held by the latter on trust for him. It becomes a part of the banker’s funds who is under a contractual obligation to pay the sum deposited by a customer to him on demand with the agreed rate of interest. Such a relationship between the customer and the Bank is one of a creditor and a debtor. The Bank is liable to pay money back to the customers when called upon, but until it’s called upon to pay it, the Bank is entitled to utilize the money in any manner for earning profit.”

‘Once a (Public) Trust Always a Trust’

A public trust is perpetual. Rule against perpetuities does not apply to it. It can never be put to an end though its nature may be changed.[94] Once a public endowment is made, even the former owners or founders cannot revoke it.[95]Subsequent conduct of the founder or his descendants contrary to such dedication would amount to a breach of trust.[96]  Tudor on Charities,[97]  while dealing with creation of charitable trusts, explains it as under:

•  “When a charity has been founded and trusts have been declared, the founder has no power to revoke, vary or add to the trusts. This is so irrespective of whether the trusts have been declared by an individual, or by a body of subscribers, or by the trustees. “[98]

In Halsbury’s Laws of England,[99]it is stated as under:

• “Charitable trusts have sometimes been declared subject to express powers of revocation, but there has apparently been no decision on the validity of such a power except as regards the rule against perpetuities.”[100]

Underhill in ‘Law relating to Trusts and Trustees’ has explained it,with respect to associations, thus:

• “However, the crucial difference surely is that no absolutely entitled members exist if the gift is on trust for future and existing members, always being for the members of the Association for the time being. The members for the time being cannot under the Association rules Appropriate Trust property for themselves for there would then be no property held on trust as intended by the testator for those persons who some years later happened to be the members of the Association for the time being.”[101]

• Read Blogs: Alienation of Public Trust Property
• Breach of Trust and Removal of Trustees
• Remedies Under Sec. 92 CPC

Revocable Trust

When the author/settlor creates or establishes the trust reserving his power to terminate the trust, or change the beneficiaries and trustees, or the terms of the trust, as he likes, such trust at the will and pleasure of the author is called revocable trust (See: Jyotendrasinhji v. SI Tripathi, AIR 1993 SC 1991).

Such trusts are possible only in private trusts. In case of revocable trusts, there will not be complete dedication of trust property.

• 77. Trust how extinguished.—A trust is extinguished
• (a) ….(b) …..(c) ….. or
• (d) when the trust, being revocable, is expressly revoked.

Read Blog: Extinction, Discharge, Revocation, etc. of Public Trusts

A Trust or An Endowment Shall Not Fail for Want of Trustees.

It is a principle of equity that no trust shall fail for want of trustees.[102]  It applies  in three occasions: First, though a trust was clearly intended, the settler did not or could not appoint trustees owing to a mere omission or the trustee who was named either refused or was unable to act.[103]  Secondly, when a vacancy of trustee occurs.  Thirdly, in dedication to a juristic person like temple, or to a well identified institution or purpose though it is not regarded as juristic person.

Sec. 6 of the Indian Trusts Act shows that, generally, a trust is created by transfer of trust-property to a trustee; and that a trust can also be created otherwise than ‘by any words or acts’ as to appointment of trustee when the author of the trust indicates with reasonable certainty by any words or acts that he himself would be the trustee.

Dedication of property is like a rocket fired.  As long as it is in private realm it retains the character of a private property.[104] Once dedication is complete, it cannot be revoked.[105] It is a trite law that ‘once a trust always a trust’.[106]  In Shiromani Gurdwara Prabandhak Committee, Amritsar Vs. Som Nath Dass[107] the Supreme Court has described ‘Endowment’ as under:

• “Endowment is when donor parts with his property for it being used for a public purpose and its entrustment is to a person or group of person in trust for carrying out the objective of such entrustment. Once endowment is made, it is final and it is irrevocable. It is the onerous duty of the persons entrusted with such endowment, to carry out the objectives of this entrustment. They may appoint a manager in the absence of any indication in the trust or get it appointed through Court.”

Sec. 92, CPC, applicable to public trusts, expressly authorizes court to appoint a new trustee.[108] Section 59 of the Indian Trusts Act, 1882, applicable to public trusts, deals[109] with the principle ‘A Trust shall not fail for want of a trustee’.  It reads:

• 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.

Public Trusts &  Indian Trusts Act

The Indian Trusts Act, 1882 is enacted primarily to govern private trusts; and ‘public or private charitable or religious endowments’ are expressly excluded from its ambit. 

In Sec. 1, under the head, ‘Savings’, it is stated:

• But nothing herein contained affects the rules of Mohammedan 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.

Though the Indian Trusts Act does not apply, in terms, to the public trusts, the common legal principles,[110] which cover matters of both public and private trusts, especially the Sections that speak as to the Duties and Liabilities of Trustees (Chapter III), Disabilities of Trustees (Chapter V), and Chapter IX pertaining to implied trusts, apply to public trusts also.[111]They ‘cannot become untouchable’[112] merely because they find a place in the Trusts Act.

Our courts apply the general law of trusts, and the universal rules of equity and good conscience upheld by the English judges in this subject, in appropriate cases.Various State Public Trusts Acts require registration of all public trusts with the authorities appointed under the said Acts. So far as private religious trusts are concerned, there are no specific statutory enactments to regulate their affairs. Such trusts are governed by the foundational principles upon which they are established, as evidenced by documents, if any; customs and usages;general law of contract and transfer of property, etc; apart from the Common Law of the Land applicable to such trusts.

See Blog (click): Public & Private Trusts in India.

In Hindu Endowments, Managers are Trustees in a General Sense

Three parties are necessary to constitute a trust; namely, the settlor, the trustee and the beneficiary, as laid down in Sree SreeIswar Gopal Jew Vs. CIT^[113]. Trustee holds the property for the benefit of the beneficiaries or cesti que trust. In Hindu religious endowments, the trustees hold the endowed properties for the institution. It is laid down in Ram Parkash Dass Vs. Anant Das (1916)[114] as under:

• “He (Mahanth) sits upon the gadi, he initiates candidates into the mysteries of the cult; he superintends the worship of the idol and the accustomed spiritual rites; he manages the property of the institution; he administers its affairs; and the whole assets are vested in him as the owner thereof in trust for the institution itself.”

This decision was noticed by the Board in Vidya Varuthi Vs. Baluswami[115] (1922) and it was observed:

• “They thus concur with the first court that there was no “specific trust” which was the foundation of the plaintiff’s case. But after examining some of the judgments of their own court, they apparently felt constrained to hold that the decision of his Board in Ram Parkash Das Vs. Anand Das had crystallised the law on the subject, and definitely declared the Mahant to be a trustee. It is to be observed that in that case the decision related to the office of Mahant, but in the course of their judgment their Lordships conceived it desirable to indicate inter alia what, upon the evidence of the usages and customs applicable to the institution with which they were dealing, and similar institutions, were the duties and obligations attached to the office of superior: and they used the term trustee in a general sense, as in previous decisions of the Board, by way of a compendious expression to convey a general conception of those obligations. They did not attempt to define the term or to hold that the word in its specific sense is applicable to the laws and

In Pratap Singhji   Vs. Charity Commissioner[116] our Apex Court held as under:

• “ ‘Endowment’ is dedication of property for purposes of religion or charity having both the subject and object certain and capable of ascertainment. It is to be remembered that a trust in the sense in which the expression is used in English law is unknown in the Hindu system, pure and simple. Hindu piety found expression in gifts to idols and images consecrated and installed in temples, to religious institutions of every kind and for all purposes considered meritorious in the Hindu social and religious system. Under the Hindu law the image of a deity of the Hindu pantheon is, as has been aptly called, a ‘juristic entity’, vested with the capacity of receiving gifts and holding property. The Hindu law recognises dedications for the establishment of the image of a deity and for maintenance and worship thereof. The property so dedicated to a pious purpose is placed extra-commercium and is entitled to special protection at the hands of the Sovereign whose duty it is to intervene to prevent fraud and waste in dealing with religious endowments. Dedication need not always be in writing and can be inferred from the facts and circumstances appearing. It would be a legitimate inference to draw that the founder of the temple had dedicated it to the public if it is found that he had held out the temple to be a public one: Pujari Lakshmana Goundan Vs. Subramania Ayyar, AIR 1924 PC 44.”

The same is the position with respect to Wakf property held by Sajadahnashin who controls and manages the same.[117]

• See Blogs: Hindu Temples & Law of Trusts
• Law of Mutts and Other Hindu Endowments
• Legal Personality of Temples, Gurudwaras, Churches and Mosques
• Shebaits & Mahants and Law of Trustees
• Ayodhya Disputes: M. Siddiq case – Pragmatic Verdict

Roman Law and Hindu Law

In Manohar Ganesh Vs. Lakhmiram,[118] it was held that ‘the Hindu Law like the Roman law and those derived from it recognizes not only corporate bodies with rights or property-vested in the corporation’ apart from its individual members, but also juridical persons and subjects called foundations.’ The religious institutions like mutts and other establishments obviously answer to the description of foundations in Roman law. The idea is the same, namely, when property is dedicated for a particular purpose, the property itself upon which the purpose is impressed, is raised to the category of a juristic person so that the property which is dedicated would vest in the person so created.

Trustee Represents Beneficiaries

The beneficiaries do not have right of ownership over the trust property.  But, Order XXXI, Rule 1 CPC lays down that the Trustee shall represent the persons interested in the trust in suits concerning property vested in the Trustee. Apart from providing an enabling stipulation, it indicates the significance of obligation casted on the trustees. And, it also asserts the paramount importance of the beneficiaries in a trust. 

Vesting of Ownership of Trust Property

While establishing a trust the author completely parts with all his interest in the trust-property, and the property has to be transferred[119] to the trustee. But, the trustee acquires only ‘legal ownership’ over the trust-property, under the law in India. And, the beneficiaries have mere ‘beneficial interest’, as they have no proprietary-interest or ownership. Then, an interesting question arises: In whom the actual ownership vests?

The following propositions can be presented as to the vesting of ownership of the trust-property.

1. In most cases of public trusts, the ‘ultimate vesting’ may not be a matter of practical importance; because, the endowment will be permanent and indivisible; and court takes cognizance, when practical difficulties are faced while carrying out the object of the trust, by applying cy pres doctrine, or by invoking its inherent jurisdiction.
2. The terms of dedication (as revealed from the deed of dedication, if any, or on other substantial evidence) determine the person or body of persons in whom/which such property ultimately vest in.
3. If the ownership of the property of a trust vests in a legal person, such vesting is permanent (thereby it cannot be put to an end), and such vesting is subject to the object and purpose envisaged by the founder.
4. If the subject matter of the trust is dedicated to public at large or a section of public, the title of such subject matter stands separated from the owner and vests in public or the section of public who are the beneficiaries, subject to the objectives of foundation.
5. If the property is that of an unregistered association and the members thereof are ascertainable (as in the case of an unregistered society) the actual ownership of the property will be presumed to be vested with those members (from time-to-time), only as joint owners (contra-distinct to ownership under tenants-in-common).
6. If the property is one stands dedicated to a Political Party, unregistered Association or a Church, and the beneficiaries thereof are unascertainable, the property vests with the entire members (of such Party, Association or Church), from time to time, subject to its objectives Such vesting is permanent, whereby it cannot be put to an end even by a majority decision of the members of a particular time.
7. In case such unregistered association or church becomes defunctive and it is impossible to carry on the affairs of the trust as intended by the founders, the court will apply the trust-property to a charitable purpose, ‘as nearly as possible’[120]to the objects of the original Trust, invoking ‘cy pres’ doctrine.  
8. If the subject matter of a trust is one partially dedicated to public at large or a section of public (as in the case of a waiting shed or a public well) by a known person and administered and maintained by himself or through another person, the property will remain vested with the owner, when the purpose of dedication is extinguished.
9. If the property is one acquired by a branch of a larger body, or a parish of a Church, for the benefit of all members of the larger body, the entire members of the larger body, from time to time, will be presumed to be the owners, subject to the byelaws of the association and the objectives of the trust impressed upon the property. 

Read Blog: Vesting of Property in Trusts

Trust is a Legal Concept ; Not a Juristic Person

‘A Trust’ is ‘an obligation’ according to the definition in the Trusts Act. In common law also it does not convey the idea that it is a tangible or a corporeal property. Grammatically speaking, as pointed out earlier, it is an ‘abstract[121]-countable[122] noun’. Therefore, it can neither be a juristic person[123] nor an association of persons.[124]

‘Trust’ is essentially a legal concept attached to the endowed property. It arises by the appointment of a trustee. For creation of a trust, the trust-property must have been transferred to the trustee.[125]The Delhi High Court held in Birdhi Chand Jain Charitable Trust Vs. Kanhaiya Lal Sham Lal[126] as under:

• “A trust is primarily a legal concept, a mode of transfer of property and of holding property. On the other hand, an institution is primarily a social concept. It is not a legal concept at all. For, there is established legal method by which an institution may come into being. It may be established by way of an organisation which may assume any or no legal form. It may be a trust or a company or a statutory corporation or a mere unincorporated association or a society registered or otherwise. It is its work and place in the society that is the hall-mark of an institution. As observed by Lord Macnaghten in Mayor, etc. of Manchester V. Mcadam,3 Tax Cases 491 at 497, ‘it is the body (so to speak) called into existence to translate the purpose as conceived in the mind of the founders into a living and active principle.’ In the present case, the founders of the trust may have transferred their property to a charitable purpose and thus created a public trust. But the body to translate the trust into a living and active principle has not yet come into existence. It is that body which will be entitled to be called an institution. It is not a mere legal arrangement like a trust but an active working body with a social impact which can be called an institution.”

Read Blog: Trust is ‘An Obligation’; Not a Legal Entity

‘Trust’ is Used as Synonym to Endowment/Association

Inasmuch as the ‘trust’ has no existence without its trust property, and it is an ‘obligation’ ‘annexed to’ the trust property, the endowment or institution, upon which the obligation of ‘trust’ is pervaded, is personified as a ‘trust’. Certain public institutions established or dedicated with philanthropic view are also generally described as ‘trusts’.

In the inclusive definition of ‘trust’ in the Public Trusts Acts enacted by various States and in several Tax-Laws, Trust ‘means and includes’ a temple, a math, wakf, a dharmada or any other religious or charitable endowment, and even a society.  It is interesting to note that the word ‘trust’ is used as an ‘entity’ even in Illustration (b) of Sec. 15 of the Trusts Act –it is the only one place in this Act where the term ‘trust’ is used in this manner.

The Illustration (b) of Sec. 15 reads: 

• “(b) A, trustee of lease-hold property, directs the tenant to pay the rents on account of the trust to a banker, B, ….”

See Blog: Incidents of Trust in Clubs and Societies

Life is Bestowed  upon Endowment When Trustee is Appointed

An ‘endowment’ is arisen by the dedication of a specified property for purposes of religion or charity having both the subject and object certain and capable of ascertainment.[127]

The differentiating particularity of a trust from an endowment is, the ‘transfer^[128] of the trust-property to the trustee’.[129]The other ingredients for creation of trust as stated in the clauses (a) to (d) of Section 6 of the Act (Intention to create trust,  Purpose,  Beneficiary,  and Property)are the requisites for endowments also.

The author endows the property with a definite purpose, beneficial to the beneficiaries. Trust arises when a trustee is appointed for administration of the endowment.^[130]  For the formation of a trust, the trust-property must have been vested in trustees.[131]The administration by the trustee must be to accomplish the purpose intended by the founder. The ‘obligation’ upon trustee arises only when the trustee accepts the confidence reposed-in by the author. The duty accepted by the trustee is ‘fiduciary’ in character. The administration by the trustee must be carried on with prudence,[132] and as a reasonable man.[133]

The Trustee of a Charitable Trust is enjoined with the duty to preserve and protect the property of the Trust as if the Manager of an infant, but such power of the Trustees cannot be read as that of a pleasure doctrine or a sweet will of the Trustees to dispose of the property. The degree of obligation is coupled with their fiduciary capacity to preserve and protect the property for the larger interest of the Trust and to be made available to the beneficiaries of the Trust to the maximum possible extent.[134]

Therefore, a legal identity is renowned, or life is bestowed, upon the endowment when a trustee is appointed. An endowment, sans trustee, remains static.

Trust Property must be one “Transferable to the Beneficiary”: Import

It must not be merely beneficial interest.

Section 8 of the Indian Trusts Act, 1882 reads:

• 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.

Subject matter[135] of an endowment and a trust will, normally, be a corporeal property. Sections 5 of the Indian Trusts Act, 1882 speaks as to ‘trust of’ movable and immovable properties. Under Section 8 of the Indian Trusts Act, 1882, the subject-matter of a (private) trust must be property transferable(note:- not, ‘be transferred’, ultimately)to the beneficiary, and it must not be merely beneficial interest under a subsisting trust. It conveys us two ideas:

• (i) those who created the trust must be owners of the trust property and must be capable of transferring their interest in the trust properties[136] and
• (ii) a Trust cannot be created only for a beneficial interest, (Note: Not the ‘proprietary interest’ or interest pertaining to owner; it is the interest pertaining to beneficiaries.) or there is no trust upon a trust.  In Pestonji Jalbhoy Chichgar Vs. Jalbhoy Jehangir Chichgar[137] it is observed by the Privy Council: “What the S. 8 forbids is a trust upon a trust– a trust of a mere right of the beneficiary to proceed against the trustee, and if the Will of Gulbai amounts to a declaration of a trust of her beneficial interest, that is, of her right to go against the trustees of Kaka’s will, then the trust offends against S.8.”

(Note: Section 8 does not postulate that the property should be transferred to the beneficiaries, ultimately.)

Salmond’s Jurisprudence (while describing “property”) refers to corporeal property  as, ‘the right of ownership in a material object, or that object itself’.[138]A founder can also be a beneficiary of a trust after its dedication. (But, he cannot claim any special right on that score, unless he reserved the same positively.)

Progressive Jurists Accept Trust in a ‘General Sense’

Indian law of trusts follows the progressive view of jurists like Halsbury.  They preferred investing principles of trust, in a ‘wider’ or ‘general’ form.  They see principles of trust in all matters of fiduciary relationships under which one holds property on behalf of, or for the benefit of, others.  Halsbury’s Laws of England defines ‘trust’ as a confidence reposed in a person with respect to property of which he has possession or over which he can exercise a power, to the intent, that he may hold the property or exercise the power for the benefit of some other person or object. Sec. 3 of the Indian Trusts Act, 1882 substantially follow this definition.

Our Common Law imports still wider meaning to ‘trust’ in the matters of religious trusts.

Are Shebait, Mahant, Mutawalli etc. Trustees in ‘True Sense’?

It is trite law that dedicated property of a temple will be vested with the idol as the legal owner thereof, though such vesting is qualified to be in an ‘ideal or secondary sense’;[139] and the possession and management thereof will be with some human being identified as Shebait or Manager, though in the strict legal sense, they cannot be accepted as trustees.

In Wali Mohammed v. Rahmat Bee, (1999- 3 SCC 145), to the question whether the Mutawalli of a Wakf would be a trustee, our Apex Court observed as under:

• “35. It will be seen that the main part of Sec. 10 (Limitation Act) states that no period of limitation applies for recovery of property from a trustee in whom the property is vested for a specific purpose, unless such a person is an assignee for valuable consideration. The Explanation further states that it shall be deemed that a person managing the property of a Hindu, Muslim or Buddhist religious or charitable endowment is to be deemed to be a trustee in whom such property has vested for a specific purpose. We shall explain these provisions in some detail.
• 36. In Vidya Varuthi Thirtha Swamigal v. Baluswami Ayyar [AIR 1922 PC 123 : ILR 44 Mad 831] the Privy Council held that property comprised in a Hindu or Mohammedan religious or charitable endowment was not property vested in trust for a specific purpose within the meaning of the said words in the main section. The reason was that according to the customary law, where property was dedicated to a Hindu idol or mutt or to a Mohammedan wakf, the property vested in the idol or the institution or God, as the case may be, directly and that the shebait, mahant, mutawalli or other person who was in charge of the institution was simply a manager on behalf of the institution. As Sec. 10 did not apply unless these persons were trustees this judgment made recovery of properties of the above trusts from donees, from these managers, rather difficult.
• 37. The legislature therefore intervened and amended Sec. 10 for the purpose of getting over the effect of the above judgment. The Statement of Objects and Reasons to the Bill of 1929 makes this clear. It says: “The (Civil Justice) Committee’s recommendation refers, it is understood, to the decisions of the Privy Council in Vidya Varuthi v. Baluswami [AIR 1922 PC 123 : ILR 44 Mad 831] and Abdur Rahim v. Narayan Das Aurora [(1922) 50 IA 84] which lay down that a dharmakarta, mahant or manager of a Hindu religious property or the mutawalli or sajjadanashin in whom the management of Mohammedan religious endowment is vested, are not trustees within the meaning of the words as used in Sec. 10 of the Limitation Act, for the reason that the property does not vest in them. The result is that when a suit is brought against a person, not being an assignee for valuable consideration, endowments of this nature are not protected. The Committee’s recommendation is that Sec. 10 of the Limitation Act should be amended so as to put Hindu and Mohammedan religious endowments on the same footing as other trust funds which definitely vest in a trustee.” (Quoted in: Maharashtra State Board of Wakfs v. Shaikh Yusuf Bhai Chawla, 2022-12 SCR 482).

In Maharashtra State Board of Wakfs v. Shaikh Yusuf Bhai Chawla, 2022-12 SCR 482, the Apex Court held that the Mutawalli is not a trustee in its true sense. The Supreme Court formulated a crucial question and answered it as under:

• “127. Thus, the Mutawalli is treated as a trustee. But would the amendment made to Sec. 10 of the Limitation Act, 1963 make a Mutawalli a trustee generally?

Our answer is an emphatic No. This is for the reason that the change in Sec. 10 of the Limitation Act was effected to overcome the judgment of the Privy Council, when it held that a Mutawalli would not be a trustee and when in view of the requirement in Sec. 10 that the suit must be one against a person in whom the property has become vested in trust for any specific purpose and as a Mutawalli would not be a trustee in law per se, the legislature brought in the explanation. But what is striking are two features. Firstly, the change is brought by way of an Explanation. More importantly, the explanation begins with words “For the purpose of this section  and proceeds to declare that “any property comprised in a Hindu, Muslim or Buddhist religious or charitable endowment shall be deemed to be properly vested in trust for a specific purpose and the manager of the property shall be deemed to be the trustee thereof.”

Both Express and Constructive Trusts Differ from Contract

Trust differs from contract. Trust is a concept derived by law to give effect to a pious or philanthropic wish of a generous man, and to ensure the benefits thereof to the beneficiaries intended by its founder. But, contract is the result of positive acts of two persons. There is no intermediary in contract, as trustees in a trust. A contract without consideration is void. In ‘trust’, trustee undertakes an obligation; and there is no question of consideration.

In express trust there must be a deliberate intention on the part of the author to create a trust.[140] Constructive trust emerges without regard to the intention of the parties to create a trust.  It is an equitable remedy exercises by court of law. In both cases, there no direct involvement of beneficiaries. In a contract, the claims of one party against the other are personal in nature;[141] whereas, trust is governed by obligation and fiduciary relation. Fiduciary relationship for trustees and beneficial interest for beneficiaries in the trust property are the characteristics of trust; they are absent in contract.[142] Trustee deals with the property in a discretionary manner applying his prudence.[143]The beneficiaries of a trust have the right to get the trust enforced. Beneficiary of a contract has merely a personal claim against the promisor.

Breach of trust by itself is punishable under law; whereas breach of a contract, without fraud or cheating, raises civil liability alone. Every breach of contract is not breach of trust or cheating. A breach of contract is different from the offence of cheating or criminal breach of trust under IPC. In the absence of illegal motives or intention at the very inception, no offence of cheating would be made out in a contract.[144]

The service of a person agreeing to collect rent for another[145] with the undertaking to render accounts thereof does not create a trust even  constructively or impliedly.[146]  A mortgagee in possession is also not a trustee in the strict sense, and a constructive or implied trust  is legally recognised, as in cases governed by S. 90 and 95 of the Trusts Act, for he holds a fiduciary character in certain respects.[147]

Court is the Ultimate Protector of Charities[148]

Courts have jurisdiction and duty[149] to administer and enforce public trusts.[150]  As in the case of English Law, Indian Law also accepts court as the ultimate protector of all charities.[151] It is the guardian of the public charitable trusts or institutions[152] and its property.[153] In legal theory the Court is the guardian of charity, as it is of an infant.[154]In P. Elumalai Vs. Pachaiyappa’s Trust Board[155] the Madras High Court while passing an order exercising the ‘Parens Patriae’ jurisdiction over the trust held that, as ‘Parens Patriae’, the Courts were empowered to protect the sanctity of public trust in case of breach of trust on account of irregularities committed in trust. In this decision it was held that the Court could not remain a mute spectator when illegality had been committed against a public Trust in front of its own eyes.[156]

Public Trust Doctrine

Who is the owner of the sea, sky, air, rivers, sea shore etc.? Roman Law thought about it first. They found the answer and declared: either owned by no one (res nullius) or by everyone in common (res communious).  The said resources being a gift of nature, they should be made freely available to everyone irrespective of the status in life.

The Public Trust Doctrine rests on the principle that the resources made available by the nature are of immense importance to the people as a whole and that it will stand wholly unjustified if made them an object of private ownership.

This doctrine envisages that the natural resources such as lakes, ponds (water bodies)etc. are held by the State as a ‘trustee’ of the public. The State is the trustee of all natural resources. The public trust doctrine[157]enjoins upon the Government to protect the resources for the enjoyment of the general public rather than to permit their use for private ownership or commercial purposes.[158]It requires the State to protect, conserve and augment the gift of nature including the traditional water retaining structures.

The Government cannot ignore the fiduciary duty of care and responsibility casted upon it. If a water body has been fallen into disuse or forest is burnt up, that by itself, would not be a good ground for the Government to regularise the encroachments therein; as it amounts to breach of the public trust.

Any act or attempt made by the Government, or even the legislature, that derogate the object for which such land air or water exists, has to be held illegal by the higher authority, if any, which is equipped to scrutinise the illegality of such acts.

MC Mehta Vs. Kamal Nath

The Doctrine of Public Trust, by that name, is introduced to our legal system by our Apex Court in MC Mehta Vs. Kamal Nath.[159]  It was a public interest litigation. It arose from a news item appeared in the Indian Express.  It was stated that a private company, Span Motels, had built a motel at the bank of River Beas in Kullu Valley, by encroaching forest land. The major shares of the company were with the relatives of one Kamal Nath. The encroachment was later regularized by the government; and the land was leased out to the company, when Kamal Nath was the Minister for Environment and Forests.

The Motel used earth-movers and bulldozers to turn the course of river Beas. It was found to be illegal and constituted ‘callous interference with the natural flow of river Beas’; and that it resulted in the degradation of the environment. In this case the Supreme Court found that the Motel was liable to pay compensation by way of cost for the restitution of the environment and ecology of the area  and  issued various directions to restore the original position.

The  Apex  Court observed that the public had a right to expect certain lands and natural areas to retain their natural characteristics.  It  was  declared in the judgment that the public trust doctrine, ‘as discussed by in this judgment is a part of the law of the land’.

In this   trailblazing landmark decision, the Apex Court quoted Joseph L. Sax, Professor of Law, University of Michigan – proponent of the Modern Public Trust Doctrine -from his  erudite article ‘Public Trust Doctrine in Natural Resource Law: Effective Judicial Intervention’, Michigan Law Review, Vol. 68, Part 1 p. 473, which gave the historical background of the Public Trust Doctrine,[160] as under :

• “The source of modern public trust law is found in a concept that received much attention in Roman and English law – the nature of property rights in rivers, the sea, and the seashore. That history has been given considerable attention in the legal literature, need not be repeated in detail here. But two points should be emphasized. First, certain interests, such as navigation and fishing, were sought to be preserved for the benefit of the public; accordingly, property used for those purposes was distinguished from general public property which the sovereign could routinely grant to private owners. Second, while it was understood that in certain common properties – such as the seashore, highways, and running water – ‘perpetual use was dedicated to the public’, it has never been clear whether the public had an enforceable right to prevent infringement of those interests. Although the State apparently did protect public uses, no evidence is available that public rights could be legally asserted against a recalcitrant government.”
• “Three types of restriction on governmental authority are often thought to be imposed by the public trust; first the property subject to the trust must not only be used for a public purposes but it must be held available for use by the general public; second, the property may not be sold, even for a fair cash equivalent; and third the property must be maintained for particular types of uses:”

The Supreme Court held further as under:

• “Our legal system – based on English common law – includes the public trust doctrine as part of its jurisprudence. The State is the trustee of all natural resources which are by nature meant for public use and enjoyment. Public at large is the beneficiary of the sea-shore, running waters, airs, forests and ecologically fragile lands. The State as a trustee is under a legal duty to protect the natural resources. These resources meant for public use cannot be converted into private ownership.”[161]

In Tehseen Poonawalla  Vs. Union of India[162] it is pointed out that the principles such as the ‘polluter pays’ and the public trust doctrine have evolved during the adjudication of public interest petitions.

Expansion of the Concept

In Fomento Resorts & Hotels Vs. Minguel Martins[163] our Apex Court held that the heart of the public trust doctrine is that it imposes limits and obligations upon government agencies and their administrators on behalf of all the people; especially future generations. It is pointed out in Noida Entrepreneurs Association Vs. Noida[164]that the doctrine has been developed from Article 21 of the Constitution.[165] 

It is held by the Supreme Court in State of Tamil Nadu Vs. State of Kerala[166] that the judicial function is also a very important sovereign function of the State and the foundation of the rule of law, and that the legislature cannot indirectly control the action of the courts and directly or indirectly set aside the authoritative and binding finding of fact by the court, by invoking ‘public trust doctrine’ or ‘precautionary principle’.

Our Apex Court held in Tata Housing Development Company  Vs.  Aalok Jagga[167] that the housing project,  setting up of high-rise buildings up to 92 meters, fell within the catchment area of Sukhna Lake and 123 meters away from the boundary of Sukhna Wildlife Sanctuary, could not be allowed to come up. 95 MLAs were to be the recipients of the flats in the buildings. The State of Punjab was required to act on the basis of Doctrine of Public Trust.

In Bikram Chatterji Vs. Union of India[168]our Apex Court pointed out that the Public Trust Doctrine imposes on the State and its functionaries a mandate to take affirmative action for effective management, and the citizens are empowered to question its ineffectiveness. When the land of the farmers had been acquired for the purpose of housing and infrastructure needs by the State Government and handed over to the concerned authorities for construction, they were bound to ensure that builders acted in accordance with the objective behind the acquisition of land and the conditions on which allotment had been made. The concerned officials were not only enjoined to ensure protection of the rights of the home buyers, but also the interests of the authorities and bankers. The public authorities are duty-bound to observe that the leased property is not frittered away along with the money of the home buyers.