B.A. LL.B. (Five Years) Sem 5 Equity and Trust Law Oct 2025 Question Paper with Solutions

For full marks, cover: that the Act meant is the Indian Trusts Act 1882 (Chapter IX, sections 80 to 96); the meaning of an obligation in the nature of a trust and how it differs from an express trust; the resulting cases (sections 83 to 86); the constructive cases (sections 87 to 93); the repealed sections (81, 82 and 94); the duties of the person who holds (section 95) and the protection of bona fide purchasers (section 96); a leading case; a table; and a conclusion.

Introduction

The question refers to the Indian Trusts Act 1882. Chapter IX of that Act, sections 80 to 96, deals with obligations in the nature of trusts. Section 80 says: "An obligation in the nature of a trust is created in the following cases."

In an express trust, the owner declares a trust and the trustee accepts it. In the cases in Chapter IX, there is no declaration at all. The law itself treats a person as holding property, or an advantage, for the benefit of another. It does so because it would be unjust, or against good conscience, for him to keep it for himself.

3. Bequest for an illegal purpose (section 85). A testator may leave property on trust for a purpose that is unlawful on the face of the will. Or the legatee may agree in the testator's lifetime to apply it for an unlawful purpose. The legatee then holds it for the testator's legal representative. The same applies where the revocation of a bequest is prevented by coercion.

4. Transfer under a rescindable contract (section 86). Property may be transferred under a contract that is liable to rescission, or induced by fraud or mistake. On receiving notice, the transferee must hold the property for the transferor. The transferor must repay the consideration actually paid.

Part B: The constructive trust cases

5. Debtor who becomes the creditor's representative (section 87). A debtor may become the executor or other legal representative of his creditor. He must then hold the debt for the persons interested in the creditor's estate. He cannot treat the debt as wiped out.

6. Advantage gained by a fiduciary (section 88). This is the most important case. It covers "a trustee, executor, partner, agent, director of a company, legal advisor, or other person bound in a fiduciary character". Two situations are caught:

9. Property bought with notice of an existing contract (section 91). A person may buy property knowing that another holds an existing contract affecting it. If that contract could be specifically enforced, the buyer holds the property for the other person. This is only "to the extent necessary to give effect to the contract".

10. Purchase for a trust (section 92). A person may contract to buy property to be held on trust for certain beneficiaries, and buy it. He must hold it for them, to the extent needed to give effect to the contract.

11. Secret advantage of a compounding creditor (section 93). Creditors may agree together to compound their debts. If one of them secretly gains an undue advantage from the debtor, he holds it for all the creditors.

Part C: The repealed sections

Three sections of Chapter IX are no longer law:

1. section 81 (transfer where the transferor did not intend to give the beneficial interest);
2. section 82 (transfer to one person for consideration paid by another); and
3. section 94 (constructive trusts in cases not expressly provided for).

Part E: The leading case

Regal (Hastings) Ltd. v. Gulliver, (1942) 1 All ER 379. The directors of a company subscribed personally for shares in a subsidiary, when the company itself could not. They later made a profit when the group was sold. The House of Lords held that fiduciaries must account for profits made by reason of their office, however honest they were. The only escape was the sanction of the company in general meeting. The principle is the one that section 88 states for India. A director is named in that section, and the advantage he gains through his position is held for those he serves.

Part F: At a glance

Conclusion

Conclusion. Chapter IX of the Indian Trusts Act 1882 deals with obligations in the nature of trusts. In these cases no trust is declared, but the law makes a person hold property or an advantage for another. In the resulting cases (sections 83 to 86), the benefit goes back to the giver. In the constructive cases (sections 87 to 93), the law acts because of the holder's fiduciary position or conduct. Section 95 gives the holder a trustee's duties and liabilities, and section 96 protects honest purchasers for value. Sections 81, 82 and 94 were repealed in 1988. As Regal (Hastings) shows, the core idea is that no one may keep a gain made by abusing a position of trust.