Skip to content

CS Executive · Setting Up of Business, Industrial and Labour Laws · Non-Corporate Entities

Anil and Bhavna are co-trustees of a trust. Anil alone misapplies trust money. Bhavna did not deliver the property to him, did not allow him to hold it unduly, and knew nothing of his act. The trust instrument has no contrary declaration. Under the Indian Trusts Act, 1882, what is Bhavna's liability?

Bhavna is not, as such, liable for Anil's breach. The Indian Trusts Act, 1882 says one trustee is not liable for a co-trustee's breach, and none of the exceptions applies because she neither handed over the property, failed to enquire, nor knew of and ignored the breach.

  1. AShe is liable because co-trustees are jointly liable for every breach
  2. BShe is not, as such, liable for a breach committed by her co-trusteeCorrect
  3. CShe is liable because she signed the trust deed
  4. DShe is liable for half the loss as a matter of law

Explanation

One trustee is not, as such, liable for a breach committed by a co-trustee, subject to the listed exceptions. None of the exceptions (delivering property without seeing to its application, allowing receipt without enquiry, concealing or ignoring a known breach) applies to Bhavna. Hence she is not liable.

Did you get it right without looking?

One question tells you little. A timed set on Non-Corporate Entities shows your real accuracy, how long you take and where you lose marks.

Practise Non-Corporate EntitiesFree diagnostic mock

More Non-Corporate Entities questions