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Family trust - what recourse do beneficiaries have to remove a trustee ?

(Querist) 06 April 2012 This query is : Resolved 
I am one of the beneficiaries of a 125 year old family trust wherein the shares are determinate. The Trust possesses salt lands and agricultural lands. The Trust recently received an offer for its lands and a meeting of the family members was called to discuss the offer.

The Trustees presented the following facts at the family meeting :
(a) That they had received an offer for all the lands on as is where is basis of Rs. X.
(b) That they were all 75 + in age and as there was no one from the family who was interested in taking interest in the Trust matters, it was best that the lands be sold and the Trust wound up after distribution of sale proceeds to the beneficiaries.
(c) That the Trust did not have in it's possession the original title documents to the lands and the buyer was offering to buy despite that fact.
(d) That there was fear of encroachment by land mafia and even the govt was claiming that the salt lands are govt. lands and not the Trust's lands although the same were received by our forefather through a "grant" by the British government in lieu of "good services" to the crown.
(e) That there were many old beneficiaries who were in dire need of money and sale of the lands would help them financially in their hour of need.

One of the Trustees (who is the only young trustee) differed with the other Trustees at the meeting and said, that the Trust is the absolute owner of the lands. The dissenting Trustee asked for some time to search for title documents. A few beneficiaries also objected to the very low offer and it was finally resolved to give 4 months time to see if a better offer could be procured.

During the following months, the dissenting young trustee and these few beneficiaries who had raised the objection to the low offer, uncovered the following :
(a) They found the title documents to the agricultural lands from the house of the managing trustee (who maintained all the records).
(b) They also found that the managing trustee had given permission to a private electrical contractor to lay high tension line through the salt lands to supply electricity to a private mall without taking any consideration or signing any agreement. It surely appears that some consideration has passed under the table for such an act to happen. Upon inquiring why this was done...when such an act could put serious construction limitations resulting in procurement of lower market value for the lands, the said managing trustee had no answer.
(c) In a meeting with the buyer who had given the "low" offer to the Trust, we learnt that the original offer was not for Rs. X as told by the Managing Trustee to the family at the meeting but was for an amount which was 20% higher !!! When this was stated, neither the managing trustee nor the other two older aged trustees objected to the figure. This has brought the integrity of the managing trustee into question.
(d)There were a couple of other issues wherein the managing trustee together with the other trustees were found responsible for lack of application of mind and lack of action resulting in loss of crores of rupees.
(d) To undo one of their mistakes, the managing trustee has recently withdrawn monies from the Trust's bank account and is now trying to cook up the books by showing fake expenses to hide the true nature of the said payment.

The Trust deed clearly provides that the Trustee will be held personally responsible for any act that jeopardises the Trust or its properties.

Now, the managing trustee knows that some of us know of the blunders committed by him (some of which are of questionable integrity) and with the intention of saving his face, is seeking an opinion from a legal expert on whether a beneficiary can sell his "beneficial interest" to an outsider. His intention of doing this is to sell off his beneficial interest and let the other family members fend for themselves with an outsider (builder). Having an outsider would seriously impact the chances of the other beneficiaries ever getting a rightful share of the family property which was settled for the benefit of the family by our forefathers.

My questions to your expert panel are as follows :

(1) What recourse does a beneficiary have to demand resignation of such Trustee(s) ?
(2) Is a beneficiary by law, entitled to sell his beneficial interest in a family trust which was settled by the "settlors" with the intention of generating income for the benefit of the family ?
(3) Can an outsider who buys such a "beneficial" interest from a beneficiary, seek appointment as a trustee ?

I hope you can give me an answer quickly as time is running out. The legal opinion sought is likely to come within 10 days and if it states that "beneficial" interest can be sold, it will leave the other beneficiaries high and dry or with no choice but to toe the line of the unethical trustee and sell out ancestral property worth crores of rupees for a pittance !


Raj Kumar Makkad (Expert) 06 April 2012
It shall be better for you to take the legal services of a lawyer and personally consult with him with entire documents.
ESTHERPRIYA (Expert) 07 April 2012
I accept with Mr.Rajkumar. Better get in touch with an expert in your local area to solve this issue without any complications.
ARUN KUMAR VERMA (Expert) 07 April 2012
In matters of trust,the provisions of deed of trust are of prime importance and any advice is dependent on proper knoweldge of the provisionsof the tr;ust deed.

hence, please consult the local experts with the deed copy.


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