Indian Kanoon - Search engine for Indian Law

15. The question is whether the beneficiary under the trust can convert at his option the beneficial interest into an absolute interest by accelerating the transition of the interest into ownership. Normally, the direction of the trustee is binding on the beneficiary. If no power is vested in the beneficiary by the settlor under the terms of the trust, he cannot bring the trust to an end and cause any modification in its terms. But, this is not an inflexible rule. Under Section 78 of the Indian Trusts Act, the beneficiary or the beneficiaries can end a trust by accelerating the distribution of the corpus if the beneficiaries are competent to contract. Clause (a) of Section 78 says that a trust otherwise created than by will can be revoked, where all the beneficiaries are competent to contract--by their consent; no doubt, the provisions postulate plurality of beneficiaries but the same principle shall also apply where the beneficiary is a single person.

17. But, the question is whether in a case where the settlor has a specific mandate that the gift of the corpus to the beneficiary is contingent on his attaining a certain age, Section 78 can apply or the court can override such mandate. In such a situation, the mandate that the gift shall actually take effect on a particular date is indelible. This again brings us to section 11 of the Indian Trusts Act which says that the trustee is bound to fulfil the purpose of the trust, and to obey the directions of the author of the trust given at the time of its creation. This rule is, however, subordinated to a condition that consent of all the beneficiaries being competent to contract shall, however, prevail over the directions of the settlor. The said section also says that where the beneficiary is incompetent to contract, his consent may, for the purpose of this section, be given by a principal civil court of original jurisdiction. There is also a limitation on the powers of the court. As earlier said, when a settlor or a testator has made some provision that postpones the enjoyment through a direction for accumulation of the income for a given period, the trustees cannot disobey the direction of the settlor. In general terms, as long as a trust is being properly administered and is duly continuing, a beneficiary has no right to interfere in its administration but has passively to wait to receive the benefit under the trust. If, however, the trust is not being properly administered, a beneficiary can take steps to compel its proper administration and in any case may take certain action to preserve his beneficial right. Section 11 in the ultimate analysis accepts the proposition that the beneficiaries for whose benefit the trust was created are the final masters of the trust. At any rate, the beneficiary's power to accelerate the transfer of the property upon revocation of the trust is hedged in by the various conditions of which the principal one is that the minor beneficiary requires the consent of the principal court of original jurisdiction which again shall intervene only where the continuation of the trust is to the jeopardy of the interest of the beneficiary, otherwise not.

18. Where the settlor directs the trustees to pay an infant beneficiary the corpus and accumulations on his attaining a specified age and in the meantime to allow maintenance, the infant takes an absolute interest. The ownership vests in him though transmissible on attaining the stated age. The beneficiary in such a case cannot put an end to the trust sooner. See Re Lord Nunburnholme, Wilson v. Nunburnholme [1912] 1 Ch. 489 (CA).

19. Even if we assume that in view of the deferment of full ownership of the corpus till the age of 21 years, the beneficiary during such deferment cannot be held to be the full owner and he can be assessed only in respect of the beneficial interest, that does not settle the controversy.