Indian Trusts Act,1882
Act No : 2
Section : Care required from trustee
15. Care required from trustee.-A trustee is bound to deal withthe trust-property as carefully as a man of ordinary prudence woulddeal with such property if it were his own; and, in the absence of acontract to the contrary, a trustee so dealing is not responsible forthe loss, destruction or deterioration of the trust-property. Illustrations (a) A, living in Calcutta, is a trustee for B, living in Bombay.A remits trust-funds to B by bills drawn by a person of undoubtedcredit in favour of the trustee as such, and payable at Bombay. Thebills are dishonoured. A is not bound to make good the loss. (b) A, a trustee of leasehold property, directs the tenant to paythe rents on account of the trust to a banker. B, then in credit. Therents are accordingly paid to B, and A leaves the money with B onlytill wanted. Before the money is drawn out, B becomes insolvent. A,having had no reason to believe that B was in insolvent circumstances,is not bound to make good the loss. (c) A, a trustee of two debts for B, releases one and compoundsthe other, in good faith, and reasonably believing that it is for B'sinterest to do so. A is not bound to make good any loss caused therebyto B. (d) A, a trustee directed to sell the trust-property by auction,sells the same, but does not advertise the sale and otherwise fails inreasonable diligence in inviting competition. A is bound to make goodthe loss caused thereby to the beneficiary.---------------------------------------------------------------------1 See now the Indian Registration Act, 1908 (16 of 1908),25 (e) A, a trustee for B, in execution of his trust, sells thetrust-property, but from want of due diligence on his part fails toreceive part of the purchase-money. A is bound to make good the lossthereby caused to B. (f) A, a trustee for B of a policy of insurance, has funds inhand for payment of the premiums. A neglects to pay the premiums, andthe policy is consequently forfeited. A is bound to make good the lossto B. (g) A bequeaths certain moneys to B and C as trustees, andauthorizes them to continue trust-moneys upon the personal security ofa certain firm in which A had himself invested them. A dies, and achange takes place in the firm. B and C must not permit the moneys toremain upon the personal security of the new firm. (h) A, a trustee for B, allows the trust to be executed solely byhis cotrustee, C. C misapplies the trust-property. A is personallyanswerable for the loss resulting to B.
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