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

Ramesh takes over as trustee of a family trust in Pune after the earlier trustee, Suresh, retired. Later it is found that Suresh had wrongly invested trust money in a risky scheme before retiring. Ramesh had no part in that investment. Under the Indian Trusts Act, 1882, what is Ramesh's position for Suresh's default?

Ramesh is not, as such, liable for Suresh's default. Under the Indian Trusts Act, 1882, a trustee who succeeds another is not answerable merely because of succession for the acts or defaults of his predecessor, so his acceptance of the office does not create liability for earlier wrongs.

  1. AHe is not, as such, liable for the acts or defaults of his predecessorCorrect
  2. BHe is liable for all defaults of his predecessor because he accepted the office
  3. CHe is liable only for half of the loss as the successor
  4. DHe is liable if the beneficiaries ask for compensation from him

Explanation

The Act says a trustee who succeeds another is not, as such, liable for the acts or defaults of his predecessor. Ramesh's acceptance of office does not make him answerable for Suresh's earlier investment. The option imposing full liability ignores this rule.

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