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

Trustees P and Q hold property for Neha. Q receives trust money and misuses it. P signs a joint receipt with Q for conformity only, and later proves that he himself did not receive the money. P has no other involvement, and the trust deed has no contrary declaration. Under the Indian Trusts Act, 1882, what follows?

P is not answerable merely because of his signature. The Indian Trusts Act, 1882 provides that a co-trustee who joins in signing a receipt for trust property and proves he did not receive it is not answerable, by reason of that signature only, for his co-trustee's loss or misapplication.

  1. AP is liable because his signature shows he received the money
  2. BP is liable because any signature on a receipt creates liability
  3. CP is not answerable by reason of that signature only, if he proves he did not receive the propertyCorrect
  4. DP is liable unless Neha consents to release him

Explanation

A co-trustee who joins in signing a receipt for trust property and proves he has not received it is not answerable, by reason of such signature only, for loss or misapplication by his co-trustee. P's signature alone does not make him liable. Liability could still arise only on another ground, such as the listed exceptions, which are not present.

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