Sections 65-67 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
These three sections deal with what happens after a trustee misuses trust property in particular ways. Section 65 says property a trustee wrongfully transferred becomes subject to the trust again if he later becomes its owner. Section 66 gives the beneficiary a charge on the whole fund where the trustee mixes trust property with his own. Section 67 says when a trustee's partners are, and are not, liable if he puts trust property into the partnership business. The Act deals with private trusts; public, charitable and religious trusts are governed by other laws (see private vs public trust). If trust money has been mixed or used in a business, our legal dispute resolution team can look at the records.
Section 65: where a trustee wrongfully sells or transfers trust property and afterwards himself becomes the owner, the property again becomes subject to the trust, whatever want of notice there was on the part of intervening good-faith transferees for consideration. Section 66: where the trustee wrongfully mingles trust property with his own, the beneficiary is entitled to a charge on the whole fund for the amount due to him. Section 67: a partner-trustee who wrongfully employs trust property in the partnership business does not make his partners personally liable unless they had notice of the breach; those with notice are jointly and severally liable.
Section 65: the trustee who gets the property back
Section 65 reads: "Where a trustee wrongfully sells or otherwise transfers trust-property and afterwards himself becomes the owner of the property, the property again becomes subject to the trust, notwithstanding any want of notice on the part of intervening transferees in good faith for consideration."
Section 64 can protect a good-faith buyer who has no notice. Section 65 deals with the situation after that buyer: the trustee wrongfully sold the property, it passed through innocent hands, and it came back to the trustee. At that point the property is again subject to the trust. The innocence of the people in the middle does not help him. He cannot launder the property through a friendly buyer and then keep it. The section does not say how the trustee must get the property back; "becomes the owner" is the test.
Section 66: blended property
Section 66 reads: "Where the trustee wrongfully mingles the trust-property with his own, the beneficiary is entitled to a charge on the whole fund for the amount due to him."
A "charge" is a right to be paid out of the property. Here the charge is on "the whole fund", so a beneficiary can look to the mixed fund and not merely to the part that was originally his. The section does not set an order of priority against other creditors of the trustee; the text is silent on that. The section applies where the mingling is "wrongful"; the text does not say whether a deed could authorise mixing.
Section 67: partner-trustee
Section 67 reads: "If a partner, being a trustee, wrongfully employs trust-property in the business or on the account of the partnership, no other partner is liable therefor in his personal capacity to the beneficiaries, unless he had notice of the breach of trust. The partners having such notice are jointly and severally liable for the breach of trust."
| Partner | Liable personally to the beneficiaries? |
|---|---|
| The partner who is the trustee | He committed the breach; the rest of the Act applies to him |
| Other partners with no notice of the breach | No |
| Other partners with notice of the breach | Yes, jointly and severally |
"Jointly and severally" means each such partner can be made to answer for the whole, and not merely a share. The section speaks only of "personal capacity"; it says nothing here on whether the partnership assets themselves can be reached.
The Act's own illustrations
The Act gives two illustrations under section 67. In plain words:
- Illustration (a). A and B are partners. A dies, having bequeathed all his property to B in trust for Z and appointed B his sole executor. B, instead of winding up the partnership, retains all the assets in the business. Z may compel B, as partner, to account for so much of the profits as come from A's share of the capital. B is also answerable to Z for the improper employment of A's assets.
- Illustration (b). A, a trader, bequeaths his property to B in trust for C, appoints B his sole executor and dies. B enters into partnership with X and Y in the same trade and employs A's assets in the partnership business. B gives an indemnity to X and Y against C's claims. X and Y are jointly liable with B to C as having knowingly become parties to the breach of trust.
In (b) the Act says X and Y "knowingly" became parties to the breach, which fits the rule on notice.
No illustrations are printed under sections 65 and 66 in the scanned copy; the illustrations appear after section 67.
A modern example of our own
Mahesh Pillai is trustee of a fund for his niece Divya. He sells a trust-owned warehouse in Kochi to a buyer who knows nothing of the trust and pays full value. Two years later Mahesh buys the warehouse from that buyer for himself.
- Under section 65, the warehouse is again subject to the trust. The innocence of the intermediate buyer does not matter.
- Separately, Mahesh puts Rs 10 lakh of Divya's trust money into his own current account, together with his own savings, and uses both for his business. Under section 66, Divya has a charge on the whole fund for what is due to her.
- Mahesh then puts another Rs 5 lakh of trust money into a partnership with Neeraj and Prakash. If Neeraj and Prakash did not know it was trust money, section 67 says they are not personally liable to Divya. If they knew, they are jointly and severally liable.
What the instrument of trust can change
Sections 65 to 67 do not mention the instrument of trust. The text is silent on whether a deed could permit mixing of funds or use of trust money in a partnership, and a settlor who wishes to allow such things should take advice and say so clearly. Partners should not assume that a deed clause protects them.
Practical points
- Trustees: keep trust money in a separate account, never mix it with your own funds, and keep clear records of every purchase and sale.
- Beneficiaries: ask for the accounts; see section 57.
- Business partners of a trustee: if you learn that trust money has gone into the business, take advice at once, because notice is the dividing line in section 67.
- For general liability for breach of trust, see liabilities of trustees.
Need help with mixed or misused trust funds?
If trust money has been mixed with a trustee's own money, used in a partnership, or trust property has come back to the trustee after a sale, start by collecting the bank statements and sale papers. Our legal dispute resolution team can read them and advise on how these sections may apply.
Key takeaways
- Section 65: property a trustee wrongfully transferred becomes subject to the trust again when he becomes its owner, even if intervening transferees acted in good faith.
- Section 66: where trust property is wrongfully mingled with the trustee's own, the beneficiary has a charge on the whole fund.
- Section 67: other partners are not personally liable for a partner-trustee's wrongful use of trust property unless they had notice; partners with notice are jointly and severally liable.
- The Act's two illustrations under section 67 concern a partnership where assets of a trust were kept in the business.
- The Act deals with private trusts only.
Read next
- Sections 68-69: beneficiary joining in breach and rights of beneficiary's transferee
- Sections 63-64: following trust property into third-party hands and saving of transferees
- Liabilities of trustees for breach of trust
- Duties of trustees under the Trusts Act
Disclaimer: Based on the text of the Indian Trusts Act, 1882 as consulted on 1 October 2026 from a scanned copy; the Act applies to private trusts, and public, charitable and religious trusts are governed by other laws. This article is general information, not legal advice; check the official text and take advice before acting.