INDIAN TRUSTS (AMENDMENT) ACT, 2016 THE INDIAN TRUSTS
(AMENDMENT) ACT, 2016 [Act No. 34 of 2016] [26th July, 2016] An Act further to
amend the Indian Trusts Act, 1882. Be
it enacted by Parliament in the Sixty-seventh Year of the Republic of India as
follows:- (1) This Act may be called the Indian Trusts
(Amendment) Act, 2016. (2) It shall come into force on such date[1] as
the Central Government may, by notification in the Official Gazette, appoint.
Preamble - INDIAN TRUSTS (AMENDMENT)
ACT, 2016PREAMBLE
Section 2 - Substitution of new section for section 20
For section 20 of the Indian Trusts Act, 1882 (hereinafter
referred to as the principal Act) (2 of 1882), the following section shall be
substituted, namely:-
'20.
Investment of trust-money
Where
the trust-property consists of money and cannot be applied immediately or at an
early date to the purposes of the trust, the trustee shall, subject to any
direction contained in the instrument of trust, invest the money in any of the
securities or class of securities expressly authorised by the instrument of
trust or as specified by the Central Government, by notification in the
Official Gazette:
Provided
that where there is a person competent to contract and entitled in possession
to receive the income of the trust-property for his life, or for any greater
estate, no investment in any of the securities or class of securities mentioned
above shall be made without his consent in writing.
Explanation.-
For the purposes of this section, the expression "securities" shall
have the same meaning as assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act,
1956 (42 of 1956).'.
Section 3 - Amendment of section 20A
In section 20A of the principal Act, in sub-section (1), the
proviso shall be omitted.
Statement of Objects and Reasons -
INDIAN TRUSTS (AMENDMENT) ACT, 2016
STATEMENT OF OBJECTS
AND REASONS
(1) The Indian Trusts Act, 1882 (2 of 1882) provides
the law relating to Private Trusts and Trustees. Section 20 of the Act states
that where the trust-property consists of money and cannot be applied
immediately or at an early date to the purpose of the trust, the trustee is
bound, subject to any direction contained in the instrument of trust, to invest
the money in securities enumerated in clauses (a) to (f) of the said section.
Clause (a) of section 20 provides for investing the trust-money in promissory
notes, debentures, stock and other securities of the United Kingdom of Great
Britain and Ireland and clause (b) for bonds, debentures, and annuities charged
or secured by Parliament of the United Kingdom. The Law Commission of India, in
its 17th Report has, inter alia, recommended for amendment of section 20 and
for deletion of the provisions for the securities which have become obsolete.
(2) The Indian Trusts (Amendment) Bill, 2015 seeks to
amend sections 20 and 20A of the said Act. The proposed amendments to section
20 empowers the Central Government to notify a class of securities, for the
purposes of investing trust-money and it does away with the requirement of case
to case approval by the Government of "any security" and provides to
the trustees greater autonomy and flexibility to take decisions on investment
of trust-money based on their assessment of the risk return trade off and the
relevant provisions of the trust deed. It would be consistent with the current
economic environment and the present shift from a merit based regulatory regime
to a disclosure based regulatory regime.
(3) The Bill seeks to enable the Central Government to
notify a class of securities for the purposes of investment of trust-money by
the trustees in such securities and it deletes reference to the outdated and
obsolete securities from the Act.
(4) The Bill seeks to achieve the above objects.