Creation of Trust under the Indian Trust Act, 1882
1. Introduction
A trust is a legal arrangement in which a person (settlor or author of the trust) transfers property to another person or institution (trustee) for the benefit of a third person or for a public purpose (beneficiary).
Governed by the Indian Trusts Act, 1882.
Applicable to private trusts and public trusts.
2. Essentials of a Valid Trust
Section 4 of the Indian Trusts Act, 1882 lays down the essentials for the creation of a trust:
Author/Settlor:
The person creating the trust must be competent to contract (Sec. 7 of Indian Contract Act applies).
Must own the property to transfer or declare trust over it.
Trust Property (Trust Res):
Must be certain and identifiable.
Can be movable, immovable, tangible, or intangible.
Must be lawfully transferable.
Trustee:
A person to whom the property is entrusted.
Must be capable of holding property and performing duties.
Must accept the trust.
Beneficiary:
The person or group for whose benefit the trust is created.
Must be certain or ascertainable.
Trust Deed or Declaration:
Can be oral or written, though written is preferred for clarity.
Must specify trust property, trustee, beneficiary, and terms.
Intention to Create Trust:
There must be clear intention to create a trust.
Mere gift or transfer without intention to create a trust is not a trust.
Lawful Purpose:
Trust must be for a legal purpose.
Trusts created for illegal or immoral purposes are void.
3. Modes of Creating a Trust
3.1 Express Trust
Created deliberately by settlor, by declaration or deed.
Example: A settles property in a trust for the education of his children.
3.2 Implied Trust
Arises by operation of law from the conduct of the parties.
Example: If A delivers goods to B to be sold and proceeds given to C, an implied trust exists in favor of C.
3.3 Resulting and Constructive Trust
Resulting Trust:
Arises automatically by operation of law when settlor does not intend to benefit anyone else.
Example: If A transfers property to B without consideration and without specifying beneficiary, property results back to A.
Constructive Trust:
Imposed by law to prevent unjust enrichment or fraud.
Example: If someone fraudulently acquires property, the court may declare them a trustee for rightful owner.
4. Formalities
Private Trusts:
Can be created orally or in writing (Sec. 5).
For immovable property, trust must be created by a written instrument and registered (Sec. 6 of Registration Act).
Public Trusts:
Must comply with state or central laws, often registered with the Charity Commissioner or Public Trust Office.
5. Duties and Rights of Trustees
Trustee holds legal title to property but must manage it for the benefit of beneficiary.
Duties include:
Obey the terms of the trust
Protect and invest trust property prudently
Render accounts and not profit personally
Rights include:
Compensation for expenses
Power to act according to the trust instrument
6. Case Law Illustrations
Case 1: Vandana Parshad v. Union of India (AIR 1965 SC 489)
Facts: The settlor created a trust for charitable purposes.
Decision: Supreme Court held that a trust requires intention, property, trustee, and beneficiary.
Significance: Established essentials of a valid trust under the Act.
Case 2: K.K. Verma v. State of Haryana (1975)
Facts: Implied trust was alleged over property transferred without declaration.
Decision: Court recognized implied trust exists where conduct or circumstances indicate intention.
Significance: Clarifies creation of implied trusts without written deed.
Case 3: Gopal Krishna v. Union of India (1979)
Facts: A public charitable trust challenged by State.
Decision: Court upheld creation of public trust under the Act, emphasizing lawful purpose and registration.
Significance: Highlights importance of registration for public trusts.
7. Summary: Essentials of Creation of Trust
| Essentials | Explanation |
|---|---|
| Settlor | Must be competent to contract and own property. |
| Trust Property | Certain, identifiable, transferable, lawful. |
| Trustee | Capable, accepts trust, legal duties. |
| Beneficiary | Certain or ascertainable. |
| Intention | Clear intention to create trust. |
| Purpose | Must be lawful. |
| Mode | Express, implied, resulting, or constructive. |
| Formalities | Written for immovable property, registration for public trust. |
8. Conclusion
The Indian Trusts Act, 1882 provides a comprehensive framework for the creation and management of trusts:
Private trusts are simpler and can be oral (except immovable property).
Public trusts require registration and compliance with statutory regulations.
Case law consistently emphasizes intention, property, trustee, and beneficiary as essential elements.
Trustees are fiduciaries, bound to act in the best interest of beneficiaries.
✅ Key Takeaway:
A trust is a fiduciary relationship, and its creation under the Indian Trusts Act requires clear intention, property, trustee, lawful purpose, and identifiable beneficiaries. Courts recognize express and implied trusts, ensuring protection of property and interests of beneficiaries.
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