CSR and Social Governance · Societies and Trusts

Obligations in the Nature of Trusts under the Indian Trusts Act

Updated 11 October 2026 · Fact-checked

Obligations in the nature of trusts are duties the law imposes on a person holding property for another, even though no trust was declared. Examples are constructive and resulting trusts. To solve a question, find the property, the holder, the wrongful or unexplained holding, and any section 64 protection for a good faith buyer.

Understand Certain Obligations in the Nature of Trusts

A trust is normally created by a clear declaration: an owner says he holds property for a beneficiary. Such a trust is an express trust. Chapter IX of the Indian Trusts Act, 1882 deals with a different situation. Here no one declared a trust, but the law says the holder must act as if he were a trustee, because it would be unfair for him to keep the benefit.

These are called obligations in the nature of trusts. The holder is bound to hold the property for the person who is rightly entitled. The usual examples are: a person who gains an advantage by fraud or by abusing a position of trust, a person who buys property with another's money, and a person who receives property that the owner never meant to give him.

Two terms help you in the exam. A constructive trust is imposed by law to stop unjust gain, usually where there is fraud, breach of duty or a conflict between interest and duty. A resulting trust arises where the beneficial interest comes back to the original owner, because the transfer failed to dispose of it fully or the real purchaser paid but put the title in another's name. Keep one test in mind: express trust comes from the owner's intention; these obligations come from the law, whatever the holder intends.

The consequence is that the holder has the duties of a trustee in respect of that property. If the property passes to a third party, the beneficiary's right to follow it into the transferee's hands comes from section 63. Section 64 is a saving of that right: it protects the 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 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.

Section 64 has further parts. A judgment-creditor of the trustee who attaches and purchases trust property is not a transferee for consideration within the meaning of the section. Also, nothing in section 63 applies to money, currency notes and negotiable instruments in the hands of a bona fide holder to whom they passed in circulation. Section 64 also says section 63 is not to be deemed to affect section 108 of the Indian Contract Act, 1872, or the liability of a person to whom a debt or charge is transferred.

Key rules to remember

Express trust vs. obligation in the nature of a trust: Express trust = created by the owner's declaration; Obligation in the nature of a trust = imposed by law without a declaration; Use this as the opening line when asked to distinguish the two.
Constructive trust: Unjust gain (fraud, breach of duty, abuse of position) → law makes the holder a trustee for the person entitled; Test: would it be unfair for the holder to keep the benefit?
Resulting trust: Beneficial interest not fully disposed of, or paid for by one and titled in another → benefit returns to the original owner or payer; The word 'results' means the benefit comes back.
Section 64(a) protection: Good faith + consideration + no notice of the trust (when money paid or conveyance executed) → section 63 gives the beneficiary no right in that property; All three conditions must be met. A gift fails because the section requires consideration. Notice of the trust at the stated time defeats protection.
Section 64(b) protection: Transferee for consideration from a protected transferee → also protected; Apply the wording of 64(b) as it stands: a transferee for consideration from such a transferee.
Judgment-creditor provision: Judgment-creditor attaching and purchasing trust property ≠ transferee for consideration; A further provision of section 64. Such a creditor is not protected by the section.
Money and negotiable instruments: Bona fide holder to whom money, currency notes or negotiable instruments passed in circulation → section 63 gives no right in that property; A further provision of section 64. It also says section 63 does not affect section 108 of the Indian Contract Act, 1872 or the liability of a person to whom a debt or charge is transferred.

How to solve Certain Obligations in the Nature of Trusts questions

Use this order for any case question on obligations in the nature of trusts. It matches the expected format: provision, facts, conclusion.

1Identify the property and who now holds it. Note who claims to be entitled.
2Check whether any trust was declared. If none, say the issue falls under obligations in the nature of trusts.
3Name the kind of obligation: constructive (fraud, breach of duty, unjust gain) or resulting (benefit returns to the owner or payer). Link it to the facts.
4State the consequence: the holder must hold the property for the person entitled, with a trustee's duties.
5If the property has passed to a third party, test section 64: good faith, consideration, no notice at the time of payment or conveyance. A gift fails this test because there is no consideration.
6Check the further provisions of section 64: a judgment-creditor who attaches and purchases is not a transferee for consideration, and money, currency notes and negotiable instruments passed in circulation to a bona fide holder are outside section 63.
7Conclude clearly on who holds the beneficial interest and whether the claimant can recover the property.
8Add a practical point if relevant, such as drafting a notice, demanding an account, or filing a suit.

Quickest way: Three-question check

When to use it: Use when time is short and the question is a short case problem.

Ask: was there a declaration of trust? If no, treat as an obligation in the nature of a trust.
Ask: has the property reached a third party? If no, the holder is liable as a trustee.
If yes, ask: did the third party pay value, act in good faith and lack notice? If all yes, section 64 protects him; if any no, the beneficiary can follow the property.

Common mistakes in Certain Obligations in the Nature of Trusts

Treating constructive and resulting trusts as the same thing.
Both arise without a declaration, so they look alike.
Fix: Link constructive to unjust gain imposed by law, and resulting to the benefit returning to the original owner or payer.
Saying any buyer is protected by section 64.
Students remember only 'transferee' and forget the conditions.
Fix: List all three conditions: good faith, consideration and no notice. A donee who gave no consideration is not protected under section 64(a).
Testing notice at the wrong time.
The wording is skimmed.
Fix: The text says notice is tested either when the purchase-money was paid or when the conveyance was executed.
Protecting a judgment-creditor who buys trust property at an attachment sale.
He seems to pay value.
Fix: The section says such a creditor is not a transferee for consideration.
Forgetting the money and negotiable instruments provision.
It sits in the last paragraph of the section.
Fix: Add it whenever the facts involve cash, notes or cheques passed in circulation to a bona fide holder.
Quoting a section number for the constructive trust rules without being sure.
Students guess numbers.
Fix: Cite section 64 where it applies and describe other rules in words.

Worked examples

Example 1

Rohan, a director of Sundaram Textiles Ltd., secretly buys a plot using a business opportunity meant for the company and registers it in his own name. The company asks for the plot. Is Rohan bound to hand it over?

Show the solution

Provision: no trust was declared, but the law treats a person who gains an advantage by abusing his position as holding it for the person entitled. This is a constructive trust, an obligation in the nature of a trust.
Facts: Rohan used a company opportunity for personal gain, a breach of duty. He still holds the plot, and no third party is involved.
Section 64 is not relevant because there is no transferee.
Conclusion: Rohan holds the plot as a trustee for the company and must transfer it to the company.

Answer: Yes. Rohan holds the plot under a constructive trust for the company and must hand it over.

Example 2

Meera holds a property on a constructive trust for Anil. She sells it for fair price to Karthik, who had no knowledge of Anil's claim when he paid and when the sale deed was executed. Karthik later sells it for fair price to Divya. Can Anil recover the property from Divya?

Show the solution

Provision: under section 64(a), section 63 gives Anil no right against a transferee in good faith for consideration without notice of the trust.
Facts: Karthik paid fair price, acted in good faith and had no notice at payment or conveyance. He is protected.
Section 64(b) also covers a transferee for consideration from such a transferee. Divya paid consideration and bought from Karthik, so the wording of 64(b) applies to her.
Conclusion: Anil cannot recover the property from Divya. His remedy lies against Meera personally.

Answer: No. Divya is protected by section 64(b). Anil must proceed against Meera.

Exam tips

Open every answer with the contrast: express trust from declaration, obligations in the nature of trusts from operation of law.
For case questions, test section 64 in order: good faith, consideration, notice, then the further provisions of the section.
Quote the key phrase 'without having notice of the trust, either when the purchase-money was paid, or when the conveyance was executed'.
Always end with who holds the beneficial interest and what remedy the claimant has.
Give section numbers only for section 64; describe other rules in plain words.

Practice questions from Societies and Trusts

Certain Obligations in the Nature of Trusts in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CS ExecutiveNature and Creation of a Trust

Certain Obligations in the Nature of Trusts: frequently asked questions

What is an obligation in the nature of a trust?

It is a duty the law places on a person to hold property for another, although no trust was declared. Constructive and resulting trusts are common examples. The holder must act as a trustee for the person entitled.

What is the difference between express and constructive trust?

An express trust is created by the owner's declaration of intention. A constructive trust is imposed by law to prevent unjust gain, whatever the holder intends.

Who is protected under section 64 of the Indian Trusts Act?

A transferee in good faith for consideration without notice of the trust is protected, and so is a transferee for consideration from such a person. A judgment-creditor who attaches and purchases trust property is not protected.

Does section 64 apply to money and cheques?

Yes, in a way. The right to follow does not apply to money, currency notes and negotiable instruments in the hands of a bona fide holder to whom they passed in circulation.