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

Meera is appointed trustee of a family trust after the earlier trustee, Mr. Sethi, retired. An audit shows Mr. Sethi had wrongly invested some trust funds during his tenure. Meera had no part in those investments. Under the Indian Trusts Act, 1882, what is Meera's position regarding Mr. Sethi's defaults?

Meera is not, as such, liable for the acts or defaults of her predecessor. The Indian Trusts Act, 1882 provides that a trustee who succeeds another does not become answerable for the predecessor's defaults merely by succession, and she took no part in the wrongful investments.

  1. AShe is not, as such, liable for the acts or defaults of her predecessorCorrect
  2. BShe is automatically liable for all defaults of her predecessor
  3. CShe is liable only to the extent of half the loss
  4. DShe is liable because every successor trustee guarantees the predecessor's acts

Explanation

The Act says a trustee who succeeds another is not, as such, liable for the predecessor's acts or defaults. Meera took no part in the wrongful investments, so she is not answerable merely because she succeeded him. The option imposing automatic liability contradicts this rule.

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