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

Anita and Bharat are co-trustees of a trust in Jaipur. Bharat alone misapplies trust funds, and Anita neither knew of it nor handed him the property or let him hold it. Under the Indian Trusts Act, 1882, what is Anita's liability?

Anita is not, as such, liable for Bharat's breach. The Indian Trusts Act, 1882 states that one trustee is not liable for a co-trustee's breach of trust, unless a listed exception applies, such as delivering property without seeing to its application or ignoring a known breach. None applies here.

  1. ALiable, because all co-trustees are jointly liable for every breach
  2. BNot, as such, liable for Bharat's breach of trustCorrect
  3. CLiable for the whole loss because she is the senior trustee
  4. DLiable only if the beneficiary is a minor

Explanation

The general rule is that one trustee is not, as such, liable for a breach of trust by a co-trustee. None of the exceptions apply, since Anita did not deliver property without seeing to its application, allow retention, or learn of and ignore the breach. Joint liability for every breach is not the rule.

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