Section 54 of The Indian Trust Act, 1882 in hindi
Co-trustees may not lend to one of themselves.
A trustee or co-trustee whose duty it is to invest trust-money on mortgage or personal security must not invest it on a mortgage by, or on the personal security of, himself or one of his co -trustees.
Summary
- A trustee who is responsible for investing trust money on a mortgage or personal security must not lend that money to themselves.
- The trustee is also forbidden from lending trust money to any of their co-trustees.
- This rule applies whether the loan is secured by a mortgage or given on personal security.
- This prevention avoids conflicts of interest where trustees might give themselves or colleagues favorable interest rates or high-risk loans.
Practical examples
FAQ
1. Can co-trustees lend trust money to each other under Section 54 of the Indian Trusts Act?
No, under Section 54 of the Indian Trusts Act, a trustee or co-trustee must not invest trust money on a mortgage by, or on the personal security of, themselves or any of their co-trustees.
2. Does the prohibition in Section 54 of the Indian Trusts Act apply to secured loans like mortgages?
Yes, Section 54 of the Indian Trusts Act explicitly bans investing trust money on a mortgage by a trustee or co-trustee, as well as on their personal security.
3. What is the main purpose of Section 54 of the 1882 trust law?
The main purpose of Section 54 of the 1882 trust law is to prevent trustees from using trust funds to finance loans for themselves or their fellow trustees, which protects the trust from self-dealing.
Test yourself
1.Under Section 54 of the Indian Trusts Act, 1882, if a trust has three co-trustees, what are they forbidden from doing with trust money that is to be invested on personal security?
2.Under Section 54 of the Indian Trusts Act, 1882, which type of transaction is prohibited for a trustee whose duty is to invest trust money?
3.Under Section 54 of the Indian Trusts Act, 1882, does the ban on lending trust funds to a co-trustee apply if the borrower trustee offers their own valuable land as mortgage security?
4.Under the Indian Trusts Act, 1882, how does the restriction on buying property in Section 52 compare to the lending restrictions under Section 54?