Vol. 12 · pages 371–375

PART IV Constructive Trusts 1. There are fourteen cases of constructive trusts which are enumerated in the Trust Act. 2. They fall under five heads :— (1) C ONSTRUCTIVE T RUSTS ARISING OUT OF T RANSFERS —SECTIONS 81, 82,84,85. (2) C ONSTRUCTIVE T RUSTS ARISING OUT OF UNFAIR ADVANTAGE GAINED BY ONE PERSON AS AGAINST ANOTHER PERSON —SECS. 85, 88, 89, 90, 93. (3) C ONSTRUCTIVE T RUSTS ARISING OUT OF CONTRACTS MADE—SECS. 86, 91,92. (4) CONSTRUCTIVE TRUSTS ARISING OUT OF A MERGER OF TWO PERSONALITIES IN ONE INDIVIDUAL —SECTION 87. (5) C ONSTRUCTIVE T RUSTS ARISING OUT OF A PAST TRUST —SECTION 83. (1) TRANSFER OR BEQUEST OF PROPERTY (i) Section 81. 1. In certain cases the transfer or bequest of property imposes an obligation upon the tranferee or legatee in the nature of a trust in favour of the owner or his legal representative. Ordinarily the transferee or legatee would take the property absolutely without any such obligation. 2. When can it be held that the transferee or legatee takes it subject to an obligation ? He takes it subject to an obligation when there is no intention on the part of the owner to dispose of the beneficial interest in the property to the transferee or legatee. 3. How is intention to be determined ?—In the light of the circumstances of the case. It is the circumstances which must be referred to in order to find out the intention of the owner. (ii) Section 82. 1. The second case where the transfer of property imposes an obligation upon the transferee in the nature of a trust is the case where the transferee is made to one and the consideration is paid by another—in such a case the transferee holds it on trust for the person who paid the consideration. Ordinarily the transferee would be the owner in the eye of the law, the property being conveyed to him by the transferor. 2. This rule that a transferee who has not paid consideration holds it on trust for a person who has paid consideration applies generally except in one case—

352 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES 3. Exception : This rule does not apply where there is an intention on the part of the person who paid the consideration to benefit the transferee. 4. Proof of intention. (iii) TRANSFER FOR AN ILLEGAL PURPOSE. Section 84. 1. Ordinarily when a transfer is for an unlawful purpose the Court will neither enforce the transaction in favour of the transferee nor will it assist the transferor to recover the estate if he has parted with it. 2. But the rule does not apply under all circumstances. The rule does apply under certain circumstances. 3. What are the circumstances in which the rule does not apply ? The circumstances in which the rule does not apply are— (i) If the porpose is not carried into excecution. (ii) If the transferor is not as guilty as the transferee. (iii) If the effect of permitting the transferee to retain the property might be to defeat the provisions of any law. 4. In these cases the Court will help the transferor and impose upon the transferee an obligation to hold the property for the benefit of the transferor. (iv) BEQUEST UPON TRUST FOR AN ILLEGAL PURPOSE. Section 85. 1. The position in law with regard to transfers for an illegal purpose is on a par with trust for an illegal purpose. 2. That is, a Court will neither enforce the trust in favour of the parties intended to be benefited nor will it assist the settlor to recover the estate if he has parted with it. 9 Bom. S.R.542. 3. Section 85 recognizes a trust although the purpose is unlawful. This is in contrast with the general principle enunciated in section 4 of the Trust Act and therefore requires some explanation. 4. The general principles governing the rights of the parties to an unlawful trust and the exceptions to those principles may formulate as follows:—

353THE LAW OF TRUST I. Where a trust is created for an unlawful and fraudulent purpose, the Court will neither enforce the trust in favour of the parties intended to be benefited nor will it assist the settlor to recover the estate (except in one case). Q.—Why is a beneficiary not allowed to enforce it ? A.—Because it would be giving effect to an unlawful purpose. Q.—Why is the author not allowed to recover the estate if he has parted with it ? A.—Because it would be helping him to take advantage of his own fraud. II. The one case in which the settlor allowed to recover the property although the trust is for an illegal purpose is the case where the illegal purpose has failed to take effect. Q.—Why is this exception made ? A.—There are two reasons :— (i) The purpose being unlawful no trust arose—it being void ab initio. (ii) The trustee having paid no consideration has no right to retain the beneficial interest in the property which must, therefore, return to the settlor. III. The disabilities attaching to the author of an unlawful trust do not apply to his legal representatives— Q.—Why ? A.—Because they are not parties to the transactions. 5. The reason why section 85 recognizes a trust in favour of legal representatives is because they are innocent parties having nothing to do with the creation of an unlawful trust. (2) Constructive Trusts arising out of unfair advantage— I. Section 85. 1. The first case under this head arises where property is bequeathed under a will and the testator during his lifetime wanted to revoke the bequest and he is prevented from revoking it by coercion. 2. Under such circumstances the legatee takes the property not as a beneficial owner thereof but holds it as a trustee for the legal representatives of the testator.

354 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES 3. The reason is that the legatee has taken unfair advantage by using unfair means. He cannot, therefore, be allowed to retain such an advantage. II. Section 88 1. The second case arises when any person who is bound to protect the interest of another person by reason of his fiduciary relationship with the latter. 2. Persons who fall in this category are— (i) Agent and Principal. (ii) Partners in a firm. (iii) Guardian and ward. (iv) Trustee and beneficiary. (v) Executor and Legatee. 3. The section says— (i) That any such person who gains any pecuniary advantage by availing himself of his fiduciary. (ii) Enters into any dealings under circumstances in which his own interests are adverse to those of the person whom he is bound to protect and thereby gains for himself a pecuniary advantage Then He must hold the advantage so gained for the benefit of the person whose interest he was bound to protect. 4. Illus. (i) A partner buys land in his own name with funds belonging to his firm. He must hold it for the benefit of the partners. (ii) A trustee, retires from his trust in consideration of a bribe paid to him by his Co-trustee. The trustee must hold the sum for the benefit of the trustee. (iii) An agent is employed by A to secure a lease from B of a certain property. The agent obtained a lease for himself. The agent must hold it for the benefit of B. (iv) A guardian buys up the incumbrances on his ward’s property at an undervalue. He can charge the ward only for the value he has actually paid for the incumbrances.