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

Trustees Farhan and Geeta both sign a receipt for sale proceeds of trust property. Geeta proves she never actually received the money, which Farhan later misapplied. No other facts suggest default by Geeta. Under the Indian Trusts Act, 1882, is Geeta answerable by reason of her signature alone?

Geeta is not answerable by reason of her signature alone. The Indian Trusts Act, 1882 says a co-trustee who joins in signing a receipt and proves she did not receive the trust property is not liable merely for signing, for the other trustee's loss or misapplication.

  1. AYes, any signature on a receipt makes her fully liable
  2. BYes, but only for half the amount
  3. CNo, a co-trustee who joins in signing a receipt and proves she did not receive the property is not answerable by that signature onlyCorrect
  4. DNo, because a receipt can never be signed by a trustee

Explanation

The Act provides that a co-trustee who joins in signing a receipt for trust property and proves she did not receive it is not answerable, by reason of that signature only, for loss or misapplication by the co-trustee. Geeta proved non-receipt, so signing for conformity does not make her liable. Liability could arise only on other grounds.

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