TRUST DEEDS

Introduction
A trust deed is a crucial legal document in India that outlines the
terms and conditions governing the establishment and
management of a trust. To put it simply, a trust deed specifies the
purpose of the trust, the property being transferred into the
trust, and the roles and responsibilities of the trustees. It is
executed by the settlor (person creating the trust) and the
trustees, and is typically registered with the appropriate
government authority. The Indian Trusts Act, 1882 provides the
legal framework for trust deeds.
The person who reposes or declares the confidence is called the
‘author of the trust’. The person who accepts the confidence is
called the ‘beneficiary’.
The subject matter of the trust is called the ‘trust property’ or the
‘trust money’. The person or persons who manages/manage the
trust property or trust money is/are called the ‘trustee/trustees’
of the trust. The author of the trust himself or any other person
can be the trustee of the trust.
The beneficial interest or interest of the beneficiaries is/are
his/their right(s) against the trustee as owner of the trust
property; and the instrument by which the trust is declared is
called the ‘instrument of trust’.
The breach of any duties imposed on the trustee by any law for
the time being in force is called ‘breach of trust’.
The person creating the trust must be legally competent to
contract and a trust may be created on behalf of a minor with the
permission of the Civil Court of the original jurisdiction.(section7)
Every person capable of holding property may be a trustee. But if
the trust involves exercise of discretion then he cannot execute it
unless he is competent to contract. (Section 10)
A trust is, in effect, the gift by the author of property or an
interest in property to a person or institution (the beneficiary) by
or through the intervention of trustee. The trust property vests in
the trustee and he holds it for the benefit of the beneficiary and
cannot use it for his own benefit. A ‘trust’ is a confidence and the
confidentee is the trustee.
His position is fiduciary vis-à-vis the cestui que trust (beneficiary).
In a trust the author vests the property in the trustee charging
him to utilise it or the income or profits arising therefrom for the
benefit of the beneficiary.
A corporate body, for example, a bank or a company can both
create a trust and be a trustee. In such a case it has to act
through its officers/duly constituted nominees. An insolvent can
also be a trustee and the trust property is not affected by his
insolvency.

Purpose of Trust Deeds

A trust deed is a legally binding document that serves as the
foundation for the operation and management of a trust. It
defines the objectives of the trust, the roles and responsibilities
of the trustees, and the rights and obligations of the
beneficiaries. Trust deeds are essential for ensuring that the
trust's goals are achieved and that the interests of all involved
parties are protected.

Objects of Trust
Section 4 of the Indian Trusts Act, 1882 provides that the object
of the trust must be lawful. The purpose of the trust is lawful
unless it is:
(i) forbidden by law, or
(ii) is of such a nature that, if permitted, it would defeat the
provisions of any law, or
(iii) is fraudulent, or
(iv) involves or implies injury to the person or property of
another, or
(v) the Court regards it as immoral or opposed to public policy.
Every trust of which the purpose is unlawful is void. And where a
trust is created for two purposes, of which one is lawful and the
other unlawful, and the two purposes cannot be separated, the
whole trust is void.
Any property which is transferable can be a subject of a trust
whether it be immovable or movable. But more beneficial
interest not subsisting trust cannot be made a subject of the
trust. The beneficiary of the trust may be any person capable of
holding property. Such person may be a sentient being or a
juristic person or even a deity.
Examples of illegal trust are - trust in restraint of marriage, trust
creating a perpetuity by settlement of properties intended for
maintenance of persons born or to be born indefinitely. Trust to
defraud a creditor.
Every trust of which the purpose is unlawful will be void and if
the object is both lawful and unlawful and the two operations
cannot be separated the whole trust would be void. Otherwise it
will be void as far as the unlawful part of the object which can be
separated. Any property which is transferable can be a subject of
a trust whether it be immovable or movable. But mere beneficial
interest not subsisting trust cannot be made a subject of the
trust.

Public and Private Trusts

In a public trust the beneficiary is the general public or a specified
section of it. In a private trust the beneficiaries are defined and
ascertained individuals. In a public trust the beneficial interest is
vested in an uncertain and fluctuating body of persons. The
nature of the trust may be proved by the evidence of dedication
or by user and conduct of parties. Where a trust is created for the
benefit of the members of the settlor’s family, it is a private trust
and not a public trust. Every charitable trust is only a public trust
as benefit to the community at large or to a section of the
community is of the essence of a valid charitable trust. But a
religious trust need not necessarily be a public trust as there can
be a private religious trust also. Public trusts are created for
charitable or public purposes, such as providing education,
healthcare, or social welfare services to the community. These
trusts are subject to additional regulations, such as the state-
specific public trusts acts (e.g., the Maharashtra Public Trusts Act,
1950), and may be eligible for tax exemptions.
Let's understand trust deed with an example,
Scenario - Private Trusts
Mr. Sharma is a successful businessman who has accumulated
significant wealth over the years. He wants to ensure that his
assets are properly managed and distributed for the benefit of his
family even after he is gone.
To achieve this, Mr. Sharma decides to create a private trust. He
drafts a trust deed that outlines the following:
Name of the Trust: The Sharma Family Trust
Purpose of the Trust: To manage and preserve Mr. Sharma's
assets for the benefit of his wife, children, and grandchildren.
Trustees: Mr. Sharma appoints his eldest son, daughter, and a
family lawyer as the trustees responsible for administering the
trust.
Trust Assets: Mr. Sharma transfers ownership of his bungalow,
stock portfolio, and business shares into the name of the trust.
Beneficiaries: The primary beneficiaries are Mr. Sharma's wife
and children. The trust deed specifies how the income and assets
of the trust will be distributed among them.
Amendments: The trust deed includes a clause allowing the
trustees to make amendments to the terms of the trust with the
consent of the majority of beneficiaries.
Dispute Resolution: The trust deed outlines a process for
resolving any disputes that may arise among the trustees or
beneficiaries.
Termination and Winding Up: The trust deed specifies the
conditions under which the trust can be terminated and the
assets distributed to the beneficiaries.
By creating this comprehensive trust deed, Mr. Sharma ensures
that his wealth is managed professionally and distributed
according to his wishes, even after he is gone. The trust deed
provides a clear legal framework for the trustees to follow and
protects the interests of the beneficiaries. This hypothetical
scenario illustrates how a trust deed is a crucial document for
establishing a trust and defining its operational details in India.
Scenario: Public Trust for Education and Healthcare
Name of the Trust: The Saksham Trust
Purpose of the Trust: The Saksham Trust is established to provide
education and healthcare services to underprivileged children
and families in rural areas of India.
Settlor: Mr. Ramesh, a successful businessman, decides to
establish the Saksham Trust to fulfill his lifelong dream of helping
those in need.
Trustees: The trustees of the Saksham Trust are appointed from a
panel of respected professionals and community leaders. They
are responsible for managing the trust's assets and ensuring that
the trust's objectives are achieved.
Trust Assets: The trust initially receives a donation of Rupees 10
million from Mr. Ramesh and later acquires additional funds
through grants and donations from various organizations and
individuals.
Beneficiaries: The primary beneficiaries of the trust are children
from low-income families residing in rural areas. The trust also
provides healthcare services to these communities.
Trust Deed: The trust deed outlines the following key clauses:
Management: The trustees are responsible for managing the
trust's assets and ensuring that the trust's objectives are
achieved.
Amendments: The trust deed allows for amendments to be made
with the consent of the majority of the beneficiaries.
Winding Up: The trust deed outlines the conditions under which
the trust can be terminated and the assets distributed to the
beneficiaries.
Legal Compliance: The trust deed is registered with the
appropriate authorities and complies with all relevant laws and
regulations.
Operations: The trust operates by providing scholarships to
deserving students, funding medical camps, and supporting local
healthcare centers.
Impact: Over the years, the Saksham Trust has made a significant
impact on the lives of thousands of children and families in rural
areas, providing them with access to education and healthcare
services that they would not have otherwise received.

Trusts among the Hindus and the Muslims

Though Hindu religious and charitable endowments sometime
partake of the nature of trusts, the Indian Trusts Acts does not
apply to them. Property can be dedicated to the beneficiary
either by giving it to the trustee and executing a trust in the usual
way or by directly dedicating it to the beneficiary.
Though wakfs are trusts, the Indian Trusts Act does not apply to
wakfs under the Muslim Law. However, it is open to a Muslim to
create a secular trust of a public and religious character. Such a
trust would be governed by the Indian Trusts Act, 1882.

Creation of Trust
A trust in respect of immovable property can be declared only by
a non-testamentary instrument in writing signed by the author of
the trust or the trustee and registered or by the will of the author
of the trust or of the trustee. A trust in respect of movable
property can be made either by a declaration as above or by the
transfer of the ownership of the property to the trustee (Section
5 of the Indian Trusts Act, 1882).
In places where the Indian Trusts Act, 1882 does not apply a trust
of immovable property may be created orally if the author of
trust is himself the trustee and consequently no transfer of the
property is involved, and all that is required is only a declaration
of trust (Madanji v. Tribhuwan, 36 B 366).
If a stranger is appointed as trustee, a transfer of property is
necessary and the conveyance must be made according to the
law of Transfer of Property.
The deed creating a trust should contain in reasonable certainty,
among others, the following: (a) an intention to create a trust;
(b) the purpose of the trust;
(c) the beneficiaries;
(d) names of the trustee/s;
(e) trust property;
(f) unless the author is himself a trustee transfer of the legal
ownership of the property to the trustee; and
(g) duties, rights and liability of the settler, trustee and the
beneficiary.
The deed may also provide for re-imbursement of expenses
incurred by the trustee(s) in connection with the discharge of
his/their duties as a trustee(s) and also all expenses properly
incurred in or about the execution of the trust for the realisation,
preservation or benefit of the trust property or the protection or
the support of the beneficiary.

Instrument of Trust: How it is Drafted

An instrument of trust is drafted either as a deed poll or as a
regular deed between the author of trust and the trustee. Where
trustees are strangers and a transfer of property is involved, it is
better to draft the deed as a deed between the author of trust
and the trustees. Where the author is to be the trustee himself
and the deed requires a mere declaration of trust, it is drafted as
a deed poll. No specific words are necessary, but, whatever the
words used, the deed should contain with reasonable certainty
the matters mentioned under the heading ‘Creation of Trust’.
While drafting a trust deed, it be seen that every clause in the
deed is clear in its meaning. If there is any reference to any
article, documents, rules, statutory Acts etc., the same are
properly applied out. In case reference to these is to be repeated
in the deed it is better to first define them and use the
abbreviation in the deed subsequently.
The most important and vital part of a trust is the expression of
an intention to create a trust which should be expressed in the
deed in unequivocal language and with reasonable certainty. No
particular or technical words are necessary but the words used
must be definite and unequivocal. The intention is expressed
clearly in the recitals of the deed and in the operative part also. If
the trustee is a stranger the property is transferable to him “upon
trust”. If the author is himself the trustee, he declares in the
operative part that he “dedicates” or “sets apart” the property in
trust for such and such purpose and constitutes himself as the
trustee.
Different directions are given to the trustees by the author as to
the manner in which the trust is to be worked. These are the
conditions and provisions of the trust and vary in different kinds
of trusts according to the circumstances. These conditions should
be clearly incorporated in the trust deed. If the situation so
warrants, provision for the appointment of new trustees should
also be made in the deed.
The process of creating a trust deed in India involves several key
steps:
Drafting the Trust Deed
The first step in the process is to draft the trust deed. The draft
should clearly outline the trust's objectives, the roles and
responsibilities of the trustees, and the rights and obligations of
the beneficiaries. Make sure that there is no ambiguity in this
document and it needs to comply with applicable laws and
regulations.
Execution on Stamp PaperThe trust deed must be executed on a
non-judicial stamp paper of the appropriate value, as prescribed
by the state government. This ensures the legal validity and
enforceability of the document.
Registration The trust deed must be registered with the Sub-
Registrar of the Registration Department of the respective state
government. This registration process provides legal recognition
to the trust and ensures that the document can be used as
evidence in any legal proceedings.

Acceptance of Trust
Acceptance of trust by trustee may be either express, e.g. by
executing the deed of trust or by verbal assent, or inferred from
conduct, e.g., by entering into possession of the property and on
the duties as trustee. But it is always safer to have the deed of
trust executed by the trustee also.
Registration and Stamp Duty
A trust created by will requires neither registration nor stamp
duty. But a trust in relation to movable or immovable property
which is declared by a non-testamentary instrument must be
registered, irrespective of the value of the property. Deeds of
wakf or of religious and charitable endowments must be
registered if they relate to immovable property worth Rs. 100
and upwards.
A trust declared otherwise than by a will is chargeable to stamp
duty under Article 64, Schedule I of the Indian Stamp Act, 1899.
The stamp duty varies from State to State.
Revocation and Extinction of Trusts
A trust cannot be revoked unless (1) all the beneficiaries consent;
(2) a power of revocation has been reserved in the deed; and (3)
in case of a trust for payment of debts, it has not been
communicated to the creditors. If the trust property is to be
applied for the author’s own benefit the trust can be revoked. A
power of revocation may with advantage always be reserved in
the deed. The declaration of trust for creating provident fund,
pension fund, superannuation fund, gratuity fund etc. should be
irrevocable. If they are otherwise the recognition under the
Income Tax Act, 1961 will not be available to such trusts and in
consequence the payment made to such funds will not be
allowed as deduction in the hands of the authors of the trusts in
their income tax assessments.
A trust is extinguished:
(a) when its purpose is completely fulfilled; or
(b) when its purpose becomes unlawful; or
(c)
whenthefulfilmentofitspurposebecomesimpossiblebydestruction
ofthetrustpropertyorotherwise;or (d) when the trust, being
revocable, is expressly revoked.

Content of Trust Deeds

A well-drafted trust deed typically includes the following key
clauses:
· Name Clause: The trust deed must specify the name of the
trust and its registered office.
· Objectives Clause: This clause outlines the objectives for
which the trust is being formed, ensuring that these
objectives are legally permissible.
· Duties and Liabilities of Trustees: The trust deed must
clearly define the duties and liabilities of the trustees,
including their powers and responsibilities.
 · Amendments Clause: This clause specifies who can make
amendments to the rules and regulations of the trust.
· Winding Up Clause: In the event of the trust being wound
up, this clause outlines the process for distributing the
trust's assets to the beneficiaries or a similar entity
legal Requirements for Trust Deed Registration in India

When registering a trust deed in India, there are several key legal requirements that must
be met:

Description of Property
If the trust deed relates to immovable property, it must contain a
detailed and precise description of the property. This description
should be sufficient to clearly identify the property in question,
including details like the address, survey numbers, boundaries,
and any other relevant identifiers. Providing this comprehensive
property description is essential for the legal validity of the trust
deed.
Presentation for Registration
The trust deed must be presented for registration within four
months of its execution. If this deadline is missed, the document
can still be presented within a further period of four months, but
a fine will be levied. This fine cannot exceed ten times the
amount of the standard registration fee. Timely registration is
crucial to ensure the trust deed is legally recognized.
Attestation of Changes
Any interlineations (insertions), blanks, erasures, or alterations
made within the trust deed must be duly attested by the
person(s) executing the deed. This attestation process helps
maintain the integrity and authenticity of the document,
preventing any unauthorized modifications.

Registration Fees
Registration fees, as prescribed by the respective state
government, must be paid upon presentation of the trust deed
for registration. These fees vary across states and are an essential
part of the registration process.
Certificate of Registration
Once the Registering Officer is satisfied that all the legal
requirements have been met, they will endorse a certificate on
the trust deed. This certificate will contain the word "registered"
along with the specific number and page of the registration book
where the document has been recorded. This signed, sealed, and
dated certificate serves as conclusive evidence that the trust
deed has been duly registered.

Advantages of Establishing a Trust in India

Establishing a trust in India can provide several key advantages
for individuals, families, and organizations. Let's explore these
benefits in detail:
Tax Exemptions
One of the primary advantages of setting up a trust in India is the
potential for tax exemptions. Trusts can enjoy tax exemptions on
the income generated from the trust's assets, which can be highly
beneficial for long-term financial planning and wealth
management.
Under the Income Tax Act, 1961, charitable and religious trusts
can claim exemptions on their income, provided they comply
with the specified conditions. This allows the trust's funds to be
utilized more effectively for the intended purposes, rather than
being eroded by taxation.
Additionally, donations made to registered charitable trusts are
eligible for tax deductions under Section 80G of the Income Tax
Act, incentivizing individuals and organizations to contribute to
these trusts.
Welfare Provisions
Trusts in India can be established for a wide range of purposes,
including providing medical assistance, educational support, and
other welfare services to specific individuals or groups. This
allows the trust's resources to be directed towards addressing
societal needs and improving the quality of life for the
beneficiaries.
By creating a trust, individuals or organizations can ensure that
their wealth and resources are channeled towards causes they
care about, such as supporting underprivileged communities,
funding research, or preserving cultural heritage. This can have a
significant positive impact on the lives of the trust's beneficiaries.
Legal Protection
Trust deeds provide robust legal protection to the trustees,
beneficiaries, and the trust's assets. The trust deed outlines the
terms and conditions governing the trust, ensuring that the
trust's objectives are achieved and its assets are managed in a
legally compliant manner.
This legal framework helps safeguard the interests of all involved
parties, reducing the risk of disputes or mismanagement.
Trustees are bound by their fiduciary duties to act in the best
interests of the trust and its beneficiaries, further strengthening
the trust's integrity.
Moreover, the registration of the trust deed with the appropriate
authorities provides legal recognition and enforceability, making
it a valuable tool for long-term planning and asset management.
Flexibility and Control
Trusts offer a high degree of flexibility in terms of structuring and
managing the trust's assets. The trust deed can be tailored to suit
the specific needs and objectives of the settlor, allowing them to
maintain a level of control over the trust's operations and the
distribution of its benefits.
This flexibility extends to the ability to amend the trust deed,
subject to the provisions outlined within it. This can be
particularly useful in adapting to changing circumstances or
evolving priorities over time.
WHO CAN CREATE A TRUST?
Anyone/ any individual can create trust of any kind. There is no
bar in such except for a minor and a person of unsound mind. It
should be created for a lawful purpose only. Section 4 of The
Indian Trust Act, 1882 lays down the grounds under which the
trust is said to be unlawful. Such grounds are as follows:
1. It is forbidden by law.
2. It defeats the provisions of Law under such Act.
3. The trust is attained by fraudulent means.
4. It is involved in causing injury or harm to another individual or
his property.
5. It is immoral and against the public policy.
Every individual member, HUF, AOP, Company, or Association of
persons can create a Trust. If a trust is at all to be created by or
on behalf of a minor, then permission is to be taken from a Civil
Court of Original Jurisdiction.
A Charitable or Religious Public Trust enjoys various tax
exemptions and incentives from the government. Donations to a
Charitable establishment are deductible from the donor’s taxable
profits. They can claim such exemption under sections 10 and 11
of the Income Tax Act, 1961.

A Specimen Deed of Revocation of a Trust

THIS DEED is made on the........................ day of........................ by A.B. etc. (hereinafter
called “the Settlor”) of the one part AND C.D. etc. (hereinafter called “the Trustee”) of
the other part.

WHEREAS by a deed of trust dated........................ the Settlor transferred him property

specified therein to the Trustee upon trust to sell the same and with the proceeds of
the sale to pay the debts due from the Settlor to the several creditors named in the said
deed;

AND WHEREAS the trust created as aforesaid has not yet been communicated to any of
the aforesaid creditors;

AND WHEREAS the Settlor now desires to revoke the said trust and to make other
arrangements for the discharge of his aforesaid debts.

NOW THIS DEED WITNESSES that the Settlor hereby revokes the trust created by the
aforesaid deed of trust. IN WITNESS WHEREOF parties have signed this deed on
the........................ day of........................ Signed by...................................
In the presence of........................

and of........................................
Debenture Trust Deeds
Companies in the course of their normal business borrow funds by various modes, one
such mode being the issue of debentures. An issue of debentures is usually secured by
a trust deed, whereunder movable and immovable properties of the company are
mortgaged in favour of the trustees for the benefit of the debenture holders. The trust
deed so created, as in the case of a trust, should specify all the details which have been
mentioned earlier.

In addition, the usual important conditions of debenture trust deeds may be stated as
follows:

1. Thetrustdeedusuallygivesalegalmortgageonblockcapitalandafloatingsecurityonth
eotherassets of the company in favour of the trustee on behalf of the debenture
holders.

2. The trust deed gives in detail the conditions under which the loan is advanced.

3. The trust deed should specify in some detail the remuneration payable to the
trustee, their duties and responsibilities in relation to the trust property.

4. It also gives in detail rights of debenture holders to be exercised through the

trustees in case of default by the company in payment of interest and principal
as agreed upon.

The duty chargeable on a debenture is provided for by Article 27, Schedule I of the
Indian Stamp Act, 1899. The stamp duty varies from State to State. But when a trust-
deed accompanying a series of debentures is duly stamped, no stamp is necessary to be
affixed on the debentures if they are expressed to be issued in terms of the said trust
deed. See exceptions to the Article referred to.

The debenture trust deed is registrable and can be registered with the Registrar of
Assurances at the place where the registered office of the company is situated or at the
place where a part of the immovable property proposed to be given in the mortgage is
situate or at the metropolitan cities, namely, Delhi, Bombay, Calcutta and Madras.

Trust Deeds Constituting Provident Fund, Superannuation Fund,

Pension Fund, etc.
The companies create provident fund, superannuation fund, pension fund, gratuity
fund etc. through declaration of trust for the benefit of their employees. Such funds, as
we have seen earlier, will have to be irrevocable and should be drafted, keeping in view
the provisions of Schedule IV appended to the Income Tax Act, 1961 and the provisions
of the Income Tax Rules, 1962 made thereunder.
It is essential that there should be a clause in the trust deed giving necessary powers to
the trustees to make Rules for the smooth functioning of the trust on residuary matters
not provided in the trust deed.

A company cannot create a provident fund trust to cover the employees governed by
the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and the
Employees provident Fund Scheme, 1952 framed thereunder unless exemption has
been obtained from the appropriate Government for establishing such a fund.
Therefore, the provident fund trust established by the company should ordinarily cover
only those employees who are not governed by the Employees Provident Funds and
Miscellaneous Provisions Act, 1952. Likewise the gratuity fund established by
companies should ordinarily cover only those employees who are not governed by the
Payment of Gratuity Act, 1972. If any company wants to have a gratuity fund covering
even employees who are governed by the Payment of Gratuity Act, 1972 then they will
have to obtain the approval of the appropriate Government for this purpose.

The companies so creating the trusts will have to make an application to the
Commissioner of Income-tax for recognition of the respective funds. Only on receipt of
the recognition from the Commissioner of Income-tax the contribution made by a
company to these will be allowed as a deduction in its assessment(s).

Various forms for trust deeds constituting Provident Fund (Annexure I), Pension Fund
(Annexure II), Superannuation Fund (Annexure III) and the Debenture Trust Deed
(Annexure IV) are given hereafter.

ANNEXURES
DRAFT TRUST DEED

(Provident Fund)

ANNEXURE I

DECLARATION OF TRUST is made this............... day of..................... 2013,

between............... having its registered office at..................... (hereinafter called ‘the
Company’) of the One part and (1) Shri....................., (2) Shri..................... and, (3)
Shri..................... (hereinafter called ‘the Trustees’) of the Other Part.
WHEREAS THE COMPANY intends to creating a Provident Fund for the benefit of the
employees; AND WHEREAS it is necessary to execute a declaration of trust in respect of
the contribution of the company and of the members to the fund.

THIS DEED WITNESSETH AND IT IS HEREBY AGREED AND DECLARED BY AND BETWEEN
THE PARTIES HERETO AS FOLLOWS:

1. That the above-named persons, namely (1) Shri....................., (2) Shri.....................

and, (3) Shri..................... are hereby appointed as the first trustees for administering
the Provident Fund of the Company and the income thereof as provided in the
Provident Fund Rules of the Company (hereinafter called the Rules) in force for the
time being.

2. That the trustees shall stand possessed of the existing fund as also all contributions
made in future time to time with all accumulation to the said fund upon trust for the
benefit of the employees of the company who are covered under the Rules.

3. In these presents, unless there is anything repugnant to the subject or context:

• (a) “The Fund” means the Provident Fund constituted by these presents.

• (b) “Member” means an employee of the company subscribing to the

Fund.

• (c) “Subscription” means any sum credited by or on behalf of a member

out of his salary to his individual account but does not include any sum credited
as interest.
The company by way of employer’s contribution for credit to the member’s
account, but does not include any sum credited as interest.

• (d) “The Balance to the Credit of a Member”means the total amount to

the credit of a member to the Fund at any time.

• (e) “The Accumulated Balance due to a member”means the balance to

the credit of the Member’s Provident Fund Account or such portion thereof as
may be claimable by him on the day he ceases to be a member of the Fund.
st
• (f) “Year” means the period of twelve calendar months from the 1 of July
th
to the 30 June or such other period of twelve months as the Company may from
time to time adopt for making up its own accounts.

• (g) “Salary” includes dearness allowance and commission, if the terms of

employment so provide, but excludes all other allowances and perquisites.

4. That this Trust shall not be revocable except with the consent of all the members to
the Fund.
5. That the money for the time being constituting the Fund shall be invested by the
Trustees in such manner as may be specified from time to time by the Income-tax
Rules, 1962.

Provided that in execution of the Trust and in the performance of his duties and powers
hereunder conferred no trustee shall be made liable for any loss caused to the trust
arising by reason of any improper investment made bona fide and in good faith or for
the negligence or fraud of any agent employed by them or by reason of any error of
judgement or act, default, mistake or omission done in good faith and under bona fide
relief by any trustee or by reason of any other matter or thing except wilful and
individual wrong or fraud on the part of the Trustee or for breach of trust who is sought
to be made liable.

6. (i) The number of trustees at all times shall be three.

(ii) One of the trustees shall be nominated by the Board of directors of the company,
who may be either a director or an officer of the company. The other two trustees shall
be elected from among the members of the Provident Fund.

(iii) The nominees of the Board of directors of the company shall be the Chairman of
the Trust.

The Trustees other than the nominee of the Board of directors shall be elected by ballot
by members hereof and shall hold office as Trustees for 3 years, unless their seat
become vacant earlier under Clause 7 hereafter.

(iv) The nominee of the Board of directors of the company shall hold office until a new
representative is appointed by the Board of directors to take his place.

7. The place of a trustee shall become vacant if a Trustee (a) dies, or (b) resign his
office, or (c) is adjudged an insolvent, or (d) becomes of unsound mind, or (e) is
convicted of an offence involving moral turpitude, or (f) in the case of a nominee of the
Board of directors of the company ceases to be a director or an officer of the company
and in the case of an elected trustee ceases to be a member of the fund, or (g) fails to
attend three consecutive meetings of the trustees for any reason which the trustees do
not consider to be satisfactory.

8. (i) Any casual vacancy under Clause 7 above shall also be filled by holding a fresh
election, in case the vacancy occurs in a seat held by an elected trustee.

(ii) If a seat of an elected trustee remains vacant for more than one month, the Board
of directors of the company may fill the casual vacancy by appointing a trustee from
among the members for such period as the election does not take place.
(iii) The person elected or nominated to a casual vacancy shall be a trustee for the
residue of the term for which the person whose place he fills would have been a
trustee.

9. (i) The trustees may meet together for the despatch of business, adjourn and
otherwise regulate their meetings as they think fit. The Chairman and an elected
trustee shall form a quorum. Questions arising at any meeting shall be decided by a
majority of votes and in case of equality of votes the Chairman of the Trust shall have a
casting vote.

(ii) A resolution in writing signed by all the trustees for the time being shall be as valid
and effectual as if it had been passed at a meeting of the Board of Trustees duly called
and constituted.

10. (i) The Board of Trustees shall be authorised to delegate any of their powers to such
one or more of themselves as they may think fit, from time to time, and they may vary,
alter, or rescind such powers or any of them as they from time to time think fit.

(ii) No act or proceedings of the trustees shall be invalidated merely by reason of the
existence of a vacancy among the trustees.

(iii) The trustees shall cause proper minutes to be kept and entered in hand, in a book
provided for the purpose, of all their resolutions and proceedings and any such minutes
of any meeting of the trustees, if purporting to be signed by the Chairman of the
trustees shall be receivable as prima facie evidence of the matters stated in such
minutes.

11. The Fund shall be exclusively managed and administered by the Trustees in
accordance with these rules, and the decision of the trustees upon any question
relating to the fund or any rights or benefits in connection therewith or generally upon
the interpretation of any provision of these rules shall be absolutely final and binding
on all members, their executors, administrators, representatives, widows, or relatives
and the employers.

The costs, charges and expenses of administering the fund and of the determination of
any question arising under these rules or otherwise, including expenses incurred by the
trustees in the discharge of their duties shall be charged to the fund and may be
properly paid therefrom, from time to time.

Any decision of the trustees may be given under the hand of any one or more of them.

12. The trustees shall have power to employ any person or persons (including any one
or more of their numbers) to do any secretarial, legal, accountancy or other work which
they may consider necessary or expedient in connection with the management of the
fund and to pay therefor in addition to all other proper disbursements, all ordinary or
reasonable charges out of the fund.
13. (i) Every member shall subscribe to the fund at the rate of 10 per cent of his
monthly salary and such percentage shall be deducted from his salary, at the time of
payment thereof and shall, as soon as practicable, be paid to the trustees who shall
credit the same to the account of the member in the books of the Fund.

(ii) The monthly contribution payable by the company in respect of each member shall
be equal to the subscription payable by each member.

(iii) It shall be open for members to pay additional subscription to the Fund which shall
be a definite proportion of his salary for that year as provided in the “Rules”.

14. Subject to the previous approval by the Commissioner of Income tax, the trustees
shall, with the approval of the Board of directors, be competent to vary, alter, omit,
modify or add to the “Rules” of the Provident Fund.

15. The Trustees shall maintain an account of provident fund for each member of the
fund and it shall include the particulars prescribed in sub-rule (2) of Rule 74 of the
Income-tax Rules, 1962, and such other particulars as the Trustees hereof may, from
time to time, deem necessary and expedient.

The Trustees shall furnish a statement of Provident Fund account to each member at
such interval, not exceeding 12 months, in such form as the Trustees may prescribe. It
shall be the duty of every member to verify the correctness of the statement as and
when it is furnished to him and to bring the discrepancy, if any, to the notice of the
Trustees. Such a statement shall be signed by the Trustees or by any other person
specially authorised by the Trustees in this behalf.

16. The accounts of the Provident Fund Trust shall be made for each year and shall be
duly audited by the auditors appointed by the Trustees with the approval of the Board
of directors of the company. There shall be an annual meeting of the trustees after the
close of the year and at such annual meeting of the trustees the audited accounts of
the previous year of the Fund shall be presented and passed.

17. All matters of procedures and other ancillary matters not herein specifically
provided for and requiring the framing of rules shall be regulated by such rules as the
trustees may, in consultation with the Board of directors of the company, from time to
time, make in that behalf.

Without prejudice to the general powers conferred or implied in the last preceding sub-
clause, the Trustees may, in consultation with the Board of directors of the company
make rules:

(i) regarding the advance of loans to the members, (ii) regarding the mode of election
of the Trustees, and

(iii) regarding the conduct of the meetings of the Trustees.

18. The Trustees shall respectively be indemnified for and against all liabilities incurred
by them in bona fide execution of the Trust hereof.

Lesson 5 Drafting and Conveyancing Relating to Various Deeds and Agreements-III 211
IN WITNESS WHEREOF the parties hereto have duly executed this Trust on the date,
month and year first above written.

The Common Seal of the above named company was, pursuant to the resolution of the
Board of Directors of the Company passed in this behalf on....................., affixed
hereunto in the presence of the authorised director of the company, who has hereunto
set his hands in the presence of:

WITNESS: for COMPANY (DIRECTOR)

SIGNATURE OF TRUSTEES

1.

2.

3.

DRAFT TRUST DEED

(Pension Fund)

ANNEXURE II

DECLARATION OF TRUST is made this..................... day of..................... 2013,

between....................., having its registered office at..................... (hereinafter called
‘the Company’) of the One Part and (1) Shri....................., (2) Shri....................., and (3)
Shri..................... (hereinafter called ‘the Trustees’) of the Other Part.

WHEREAS THE COMPANY intends to creating a Pension Fund for the benefit of the
employees; AND WHEREAS it is necessary to execute a Declaration of Trust in respect
of the contribution of the Company.
THIS DEED WITNESSES AND IT IS HEREBY AGREED AND DECLARED BY AND BETWEEN
THE PARTIES THERETO AS FOLLOWS:

1. That the above named persons, namely (1) ....................., (2) ..................... and
(3) ..................... are hereby appointed as the first trustees for administering the
Pension Fund of the Company and the income thereof as provided in the rules in force
for the time being.

2. That the Trustees shall stand possessed of the existing Fund, Investments, as also all
contributions made in future, from time to time, with all accumulations to the said
Fund upon trust for the benefit of the employees of the Company.

3. In these presents, unless there is anything repugnant to the subject or context:

• (a) “The Fund” means the Pension Fund constituted by these presents.

• (b)
“Member”meansanemployeeoftheCompanywhohasbeenadmittedtothebenefits
ofthemembership of the Fund. Provided however that a director of the company
may be admitted to the benefits of membership of the fund only if he is a whole-
time bona fide employee of the Company and does not beneficially own shares
in the company carrying more than 5% of the total voting power.

• (c) “Salary” includes dearness allowance if the terms of employment so

provide but excludes all other allowances and perquisites.

• (d)
“Service”meanstheperiodofpaidemploymentwiththecompanywhichhasbeenspec
ificallydeclared by the company as having been satisfactory. Leave sanctioned
without pay except on grounds of sickness or study will not count towards the
total service, but the period of such leave will not be treated as an interruption
in the continuity of service.

(e) “Wife” means a woman to whom the member of the fund was married on the date
of his becoming

eligible to a pension and in whose favour a nomination has been lodged with the Trust.

(f) “Completed Years of Service” - ‘N’ is the integral quotient obtained by dividing by 12
the total service as an employee in terms of months, leave without pay other than on
grounds of sickness or study for total service, if any, not counting.

(g) “Terminal Leave” means leave as defined in Rule (.....................) of the “Company
Leave Rules 19.....”.
 st th
(h) “Year” means the period of 12 calendar months from 1 July to 30 June or such
other period of 12 months as the company may, from time to time, adopt for making
up its own accounts.

4. This Trust shall not be revocable except with the consent of the members of the
fund.

5. That the money for the time being constituting the fund shall be invested by the
trustees in such manner as may be specified, from time to time, by the Income-tax
Rules, 1962.

6. The Employee permitted to retire at any age after attaining the age of 55 (fifty five)
years shall be eligible for pension provided he has rendered not less than 120 calendar
months of continuous service with the company as an employee. The Pension to the
employee shall commence from the date immediately following the expiry of the
period of any terminal leave where it is granted to him on full pay or from the date
immediately following his retirement where it been granted cash compensation for the
said leave.

7. The amount of pension payable to an employee shall be a monthly pension of N/60

of the average monthly salary drawn by him during the 36 complete calendar months
preceding the date of retirement, ‘N’ as defined in para 3(f) above being limited to 30.
The amount of pension shall not exceed the monthly ceiling of Rs..............

8. The pension granted by the company shall be for life. However, where an employee,
who has been granted a pension dies before the expiry of 20 years from the date of the
commencement of pension, the pension from the date of his death for the balance of
20 years shall be paid firstly to his wife provided she does not re-marry, and, secondly,
if she re-marries or dies, to his children at the rate at which the deceased employee
was entitled.

9. An employee who having served the company for not less than 10 completed years
of service as an employee becomes mentally or physically incapacitated and is
medically declared unfit for further service with the company, may be granted by the
company an invalid pension calculated on the same basis as provided under clause 7
hereof and subject to the same monthly ceiling as provided in the said clause, even
though the employee has not attained the age of 55 years. Such an invalid pension will
be subject to review every year and may be reduced or stopped at the sole discretion
of the Board of directors of the Company.

10. If an employee dies while in service but after 10 years of completed service as an
employee or dies while in receipt of invalid pension then his wife or minor children may
at the sole discretion of the Board of Directors be sanctioned by the company a family
pension of an amount not exceeding the pension which the employee would have been
eligible to have had he retired after attaining the age of 55 years and having rendered
the same number of completed years of service as provided under clause 7 hereof and
subject to the same monthly ceiling as provided in the said clause. Such a pension shall
be subject to review every year and may be reduced/ stopped at the sole discretion of
the Board of directors of the company.

11. The trustees may allow commutation of pension granted under clauses 6 and 7
hereof in the following manner:

• (a) in a case where the employee receives any gratuity, the commuted
value of one-fourth pension which he is normally entitled to receive, and

• (b) in any other case, the commuted value of one-third of such pension;

such commuted value being determined having regard to the age of the recipient, state
of his health, the rate of interest, and officially recognised tables of mortality.

12. (i) The number of trustees at all times shall be three.

(ii) One of the Trustees shall be nominated by the Board of directors of the Company,
who may be either a director or an officer of the company. The other two trustees shall
be elected from amongst the members of the Pension Fund.

(iii) The nominee of the Board of directors of the company shall be the Chairman of the
Trust.

The trustees other than the nominee of the Board of directors shall be elected by ballot
by members hereof and shall hold office as trustees for 3 years, unless their seat
becomes vacant earlier under Clause 13 hereafter.

(iv) The nominee of the Board of directors of the company shall hold office until a new
representative is appointed by the Board of directors to take his charge.

13. The place of trustee shall become vacant if a trustee (a) dies, or (b) resigns his
office, or (c) is adjudged an insolvent, or (d) becomes of unsound mind, or (e) is
convicted of an offence involving moral turpitude, or (f) in the case of a nominee of the
Board of directors of the company ceases to be a director or an officer of the company
and in the case of a elected trustee ceases to be a member of the fund, or (g) fails to
attend three consecutive meetings of the trustees for any reason which the trustees do
not consider to be satisfactory.

14. (i) Any casual vacancy under clause 13 above shall also be filled by holding a fresh
election, in case the vacancy occurs in a seat held by an elected trustee.

(ii) If a seat of an elected trustee remains vacant for more than one month, the Board
of directors of the company may fill the casual vacancy by appointing a trustee from
among the members for such period as the election does not take place.
(iii) The person elected or nominated to a casual vacancy shall be a trustee for the
residue of the term for which the person whose place he fills would have been a
trustee.

15. (i) The trustees may meet together for the despatch of business, adjourn and
otherwise regulate their meetings as they think fit. The Chairman and an elected
trustee shall form a quorum. Questions arising at any meeting shall be decided by a
majority of votes and in case of equality of votes the Chairman of the Trust shall have a
casting vote.

(ii) A resolution in writing signed by all the trustees for the time being shall be as valid
and effectual as if it had been passed at a meeting of the Board of Trustees duly called
and constituted.

16. (i) The Board of Trustees shall be authorised to delegate any of their powers to such
one or more of themselves as they may think fit, from time to time, and they may vary,
alter or rescind such powers or any of them as they from time to time think fit.

(ii) No act or proceedings of the trustees shall be invalidated merely by reason of the
existence of a vacancy among the trustees.

(iii) The trustees shall cause proper minutes to be kept and entered, in a book provided
for the purpose, of all their resolutions and proceedings and any such minutes of any
meeting of the trustees, if purporting to be signed by the Chairman of the trustees shall
be receivable as prime facie evidence of the matters stated in such minutes.

17. The Fund shall be exclusively managed and administered by the trustees in
accordance with these rules, and the decision of the trustees upon any question
relating to the fund or any rights or benefits in connection therewith or generally upon
the interpretation of any provision of these rules shall be absolutely final and binding
on all members, their executors, administrators, representatives, widows or relatives
and the employers.

The costs, charges and expenses of administering the fund and of the determination of
any question arising under these rules or otherwise, including expenses incurred by the
trustees in the discharge of their duties shall be charged to the fund and may be
properly paid therefrom, from time to time.

18. The trustees shall have power to employ any person or persons (including any one
or more of their numbers) to do any secretarial, legal, accountancy or other work which
they may consider necessary or expedient in connection with the management of the
fund and to pay therefore in addition to all other proper disbursements, all ordinary or
reasonable charges out of the fund.

19. The trust property shall consist of such yearly and other contribution as the
company may make to the trust or such other sums as the company shall from time to
time, determine provided that the annual contribution by the company to the fund in
respect of any particular employee shall not exceed 25% of his salary for each year as
reduced by the company’s contribution, if any, to any provident fund (whether
recognised or not) in respect of the same employee for that year.

Interest, dividend or other accretions from investments and deposits of the Fund
hereby established; and Any Securities or other investments of the Trust money.

20. Subject to the previous approval by the Commissioner of Income-tax, the trustees
shall, with the approval of the Board of directors, be competent to vary, alter, omit,
modify or add to the rules of the Pension Fund.

21. The accounts of the Pension Fund shall be made for each year and shall be duly
audited by the auditors appointed by the Trustees with the approval of the Board of
directors of the company. There shall be an annual meeting of the trustees after the
close of the year and at such annual meeting of the trustees the audited accounts of
the previous year of the Fund shall be presented and passed.

22. All matters of procedures and other ancillary matters not herein specifically
provided for and requiring the framing of rules including for the election of trustees
and for conduct of their meetings shall be regulated by such rules as the trustees may,
in consultation with the Board of directors of the company, from time to time, make in
that behalf.

23. The Trustees shall respectively be indemnified for and against all liabilities incurred
by them in bona fide execution of the Trust hereof.

IN WITNESS WHEREOF the parties hereto have duly executed this Trust on the date,
month and year first above written.

The Common Seal of the above named Company was, pursuant to the resolution of the
Board of Directors of the Company passed in this behalf on....................., affixed
hereunto in the presence of the authorised director of the company, who has hereunto
set his hands in the presence of:

WITNESS:

1. 2. 3. 4.

for COMPANY (DIRECTOR)

SIGNATURE OF TRUSTEES

1. 2. 3.

Lesson 5 Drafting and Conveyancing Relating to Various Deeds and Agreements-III 215
ANNEXURE III

DRAFT TRUST DEED

(Superannuation Fund)

The Superannuation Fund Trust Deed should also be drafted on the same lines as
Pension Fund Trust Deed except for the following changes.

Clauses relating to the benefit accruing to the members of the fund, namely, Clauses 6
to 10, must be replaced as below:

6. On a member being permitted to retire from the service of the Company, at or

after the age of 55 years, of being permitted to retire before the age of 55 years
upon his being incapacitated, the Trustees shall, by payment of the amount lying
at his credit in the Fund made up to the date of retirement, purchase from the
Life Insurance Corporation of India an annuity for him for his life in the event of
there being no nominee, or for a duration of not less than ten years certain, on
either or survivors basis, jointly with the nominee(s) named in the declaration of
nominations.

7. NothingcontainedinthisTrustDeedshallbedeemedtorestrictinanywaytherightsofth
eCompanyto terminate the employment of a member at any time nor shall his
being a member be used by him as a ground for increasing damages in any action
brought by him against the company in respect of termination of his
employment and no expression of intention on the part of the Company herein
contained shall create for the benefit of the member any legal obligation or
impose any legal liability on the company.

8. Should a member die while in employment, the Trustees shall, by payment of

the amount lying at his credit in the Fund made-up to the date of death,
purchase from the Life Insurance Corporation of India an annuity for the first
named nominee in the declaration of nominations for a duration of not less than
ten years certain, on either or survivors basis, jointly with other nominees, if any.

9. Ifamemberdieswhileinservicewithoutmakinganominationorresignswithorwithout
duenoticefrom the employment of the Company or is discharged for reasons of
fraud, dishonesty, criminal charges, or other misconduct inconsistent with due
and faithful discharge of duty, the gross annual contribution to be made by the
Company to the Fund under the provisions of clause 15(ii) above for the relevant
year shall be reduced by the amount lying at the credit of such member in the
Fund and the Trustees shall thereupon by cancellation of the individual account
 of such member utilise the credit alongwith the annual contribution by the
Company, so reduced, for making up the individual accounts of the members.

10. No member shall assign, or create a charge upon his beneficial interest in or
under the Fund, and if such assignment or charge is made or created, such
assignment or charge shall be invalid.

In addition the Superannuation Fund Trust Deed should have the following clause:

“The Trustees shall maintain individual accounts for each member and credit thereto
the contributions received, from time to time, from the Company in respect of that
member. The yield from investment of funds or capital gains shall be credited to the
individual members’ accounts at the end of each year pro-rata to the amount and the
duration in the year of the credits in such accounts.”

ANNEXURE IV

DRAFT DEBENTURE TRUST DEED

THIS TRUST DEED is made this..................... day of..................... 2013,

between..................... incorporated under the Companies Act, 2013 with its registered
office at..................... (hereinafter called “the Company”) of the One Part, and
Mr..................... and Mr..................... (hereinafter called “the Trustees”) of the Other
Part.

WHEREAS by Sub-Clause..................... of Clause..................... of its Memorandum of

Association, the company is authorised to borrow or raise and secure the payment of
money by the issue of debentures charged upon any of the company’s property.

AND WHEREAS the Directors of the company being duly empowered in that behalf by
Article No. ..................... of the Articles of Association of the company have decided by
a resolution passed in pursuance to Section 179 of the Companies Act, 2013 by the
Board of directors in the meeting of the Board held on..................... to raise a sum of
Rs..................... by issue of..................... First Mortgage Debentures of Rs.....................
each, bearing interest at..................... per cent per annum framed in accordance with
the forms set for in the First Schedule hereto and to secure the same by mortgaging
with the trustees the properties described in the Second Schedule hereto.

AND WHEREAS the trustees above mentioned have consented to act as trustees for the
debenture holders.
NOW THIS DEED WITNESSETH AND IT IS HEREBY MUTUALLY AGREED TO AND
DECLARED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS:

1. That in these presents unless there be something in the subject or context consistent
therewith the expression following shall have the meaning hereafter mentioned, that is
to say:

• (a) “Company” means..................... Ltd.

• (b) “Trustees” means Mr..................... or any other trustees hereof for the
time being.

• (c) “Debentures” means the debenture of the company in the form set
out in the First Schedule hereto for the time being outstanding and entitled to
the benefit of these presents.

• (d) “Debentureholders”means the holder for the time being of the

debenture issued and entered in the register of debenture holders, mentioned
on the conditions endorsed on the debentures on the holder of the debentures.

• (e) “Mortgaged premises” means the property belonging to the company

described in the Second Schedule hereto and comprised in the security of the
debenture holders.
Words denoting the singular include the plural and vice versa unless the contrary
appears from the context.

• (f) Act means the Companies Act, 2013 and any modification or re-
enactments thereof.

2. The debentures entitled to the benefit of these presents shall consist of a series
of number of debentures of Rs..................... each, aggregating to Rs.....................
in all to rank pari passu without any preference or priority by reason of the date
of issue or otherwise and secured by the mortgage hereby created on the
mortgaged premises.

3. The company hereby covenants with the trustees that the company will on
the..................... day of..................... or such earlier day as the principal moneys
shall become payable under clause 7 hereof pay the debenture holders the
amounts secured by their debentures respectively, and in the meantime will pay
interest to the debenture holders on the day of..................... 20... in each year,
the first payment of interest to be made on the day of..................... 20...

4. All payments due by the company in respect of the Debentures issued hereunder
whether of interest, principal or premium shall be made by cheque or warrant
drawn by the company on its bankers and the company shall make at its own
expenses all arrangements, with its Bankers as shall be necessary to ensure that
 such cheques or warrants shall be encashable for the amount for which they are
expressed without any deduction whatsoever at the office of its bankers in Delhi
or such other places in the Union of India as the Trustees may require.

Lesson 5 Drafting and Conveyancing Relating to Various Deeds and Agreements-III 217

5. In consideration of the debentures hereby authorised aggregating to

Rs..................... the company, as the beneficial owner, hereby mortgages unto
the trustees all the fixed plant and machinery and fixture at present existing at
the company’s factory and described in part A of the Second Schedule hereto
and which may be acquired by the company hereafter or fixed or erected
hereafter at its factory for the benefit of the debenture holders and the property
described in Part B of the Second Schedule as security for the due payment of
principal moneys amounting to Rs..................... in aggregate with interest and all
other charges, expenses and other dues, the payment of which has been secured
by a charge on the mortgaged premises under these presents. The charge hereby
created on the property mentioned in Part A of the Second Schedule shall be the
specified charge, while that on the property included in Part B of the Second
Schedule shall rank as floating charges.
The trustees may, at any time, by notice in writing to the company, convert the
said floating charge into a specific charge as regards any assets included in the
Second Schedule and specified in the notice in case it is, in the opinion of the
trustees in danger of being seized or sold under any sort of distress or execution
levied or threatened or in any other case.

6. The company shall hold and enjoy all the mortgaged premises and carry on
therein and therewith the business or any of the business mentioned in the
Memorandum of Association of the company until the security hereby
constituted shall become enforceable under the terms of these presents, in
which case the trustees may, in their discretion, without any such request as
next hereinafter mentioned and shall upon the request in writing of the holder
or holders of..................... at least of the debentures, enter upon or take
possession of the mortgaged premises, or any of them and may in the like
discretion and shall upon the like request sell, call in, collect and convert into
money the same or any part thereof with full power to sell any of the same
premises either together or in parcels, and either by public auction or private
contract, and either for a lumpsum or for a sum payable by instalments or for a
sum on account and a mortgage or charge for the balance and with full power
upon every such sale to make any special or other stipulations as to title or
evidence, or commencement of the title or otherwise which the trustees shall
deem proper and with full power to modify or rescind or vary any contract for
sale of the said premises or any part thereof and to re-sell the same without
being responsible for any loss which may be occasioned thereby and with full
power to compromise and effect compositions and for the purposes aforesaid or
 any of them to execute and do all such assurance and things as they shall think
fit.

7. The principal moneys due to the debenture-holders under this Indenture shall
become immediately payable and the security hereby constituted shall become
enforceable within the meaning of these presents in each and any of the
following events:

• (a) If the company makes default in the payment of any interest which
ought to be paid in accordance with these presents.

• (b) If the company without the consent of debenture holders ceases to

carry on its business or gives notice of its intention to do so.

• (c) If an order has been made by the Court of competent jurisdiction or a

special resolution has been passed by the members of the company for winding
up the company.

• (d) If the company acts in contravention of clause..................... of its

Articles of Association.

• (e) If it is certified by a Chartered Accountant capable of being appointed

as auditor under the Act, that the liabilities of the company exceed its assets.

• (f)
Ifthecompanycreatesorattemptstocreateanychargeonthemortgagedpremisesora
nypartthereof without the prior approval of the trustees/debenture holders.

(g) If in the opinion of the trustees the security of debenture holders is in jeopardy.

Provided that on the happening of the events specified in sub-clause (a), the permission
given by clause 6 to hold and enjoy the mortgaged premises shall not be determined
unless and until the trustees shall have first served on the..................... company a
preliminary notice requiring the company to pay the interest in arrears and the
company shall have neglected for the period of 30 days to comply with such notice.

8. As soon as the principal money shall become payable and the security
enforceable under the last preceding clause 7 (and unless the time for payment
and the security to be enforced has been expressly extended by the debenture
holders), the trustees shall enter upon and take possession of the mortgaged
premises and shall forthwith take steps to consult the debenture holders for the
purpose of determining whether the business of the company may be allowed to
be carried on or whether the mortgaged premises shall be realised by sale or
otherwise.
9. Until the happening of some one of the events mentioned in clause no. 7 of this
Indenture, the trustees shall not be in any manner bound to interfere with the
management of affairs of the said business except to the extent they may
consider necessary for the preservation of the mortgaged premises or any part
thereof.

10. If the debenture-holders resolve not to allow the business of the company to be
carried on as mentioned in clause 9 above but to realise the security, the
trustees shall after giving a notice of 30 days in writing to the company, proceed
to realise the mortgaged premises by sale or otherwise and, in doing so, shall
conform to discretion, if any, given by debenture-holders.

11. The trustees shall apply the proceeds of such sale or other mode of realisation in
the following manner, that is to say, that the trustees shall pay:

• (a) In the first place all costs, charges and expenses incurred in or about
such sale or the performance or execution of trust or otherwise in relation
to these presents or otherwise in respect of the security, including the
remuneration of the trustees.

• (b) Secondly, the interest for the time being due and owing on the
debentures.

• (c) Thirdly, the principal money then due and owing to debenture-
holders.

• (d) And lastly, the surplus, if any, to the company or its assignee.

12. Provided that if the said money shall be insufficient to pay all such interest or
principal money in full, then the said moneys shall be paid rateably and without
preference or priority among all debenture-holders of this series according to
the amount of the face value of the debentures held by them, but all interest
shall be paid before any principal money.

13. When all the principal moneys and secured by these presents shall have been
paid and satisfied, the trustees shall forthwith, upon the request and at the cost
of the company and on being paid all the costs, charges and expenses properly
incurred by the trustees in relation to the security, reconvey, reassign, release
and surrender the mortgaged premises or so much or the same as shall not have
been sold or disposed of, unto the company or its assigns. If the company shall,
at any time during the continuance of the security, be desirous of selling,
demising or otherwise disposing of or dealing with any part of the mortgaged
premises otherwise than in respect of the floating charge the ordinary course of
the company’s business, the trustees may, if satisfied that the debenture-
holders’ security shall not be thereby prejudiced, assent to or concur in such
 sale, demise, disposal or other dealing, and may, if necessary, release the
property in question from the trust under this deed on such terms as the
trustees may determine.

14. The company hereby covenants with the trustees:

• (i) That the moneys secured by this deed shall be the first mortgage and
charge on the mortgaged premises and shall take precedence over all other
moneys which may hereinafter be borrowed by the company against the security
of the premises.

• (ii) that the company shall maintain the mortgaged premises and any and
every part thereof in a fit and efficient condition of repair and shall keep the said
property duly insured against risk of fire, riot, civil and war risks with such
insurers and in such manner as the trustees may determine from time to time
and, in default, the trustees shall carry out repair and keep insured the
mortgaged premises in the interest of the debenture-holders, and shall be
entitled to the immediate payment of such expenditure in full.

15. (a) The company shall in each and every year during the continuance of this
security pay to the Trustees for the time being of these presents as and by way
of remuneration for their services as Trustees the sum of Rs.....................
(Rupees..................... only) per annum in addition to all legal, travelling and other
costs, charges and expenses incurred by the Trustees on their officers,
employees or agents in connection with the execution of the trust hereof
(including all the costs, charges and expenses of and incidental to the approval
and execution of these presents) and all other documents effecting the security
herein and the first of such payments to be made proportionately for the period
and the said remuneration shall continue to be payable until the trust hereof
shall be finally discharged. The trustees acknowledge having received from the
company a sum of Rs..................... (Rupees..................only) as their fee for
agreeing and accepting the trusteeship of these presents.
(b) The company shall pay to the trustees all legal travelling and other costs,
charges and expenses incurred by them or their agents in connection with
execution of trusts of these presents including costs, charges and expenses of
and incidental to the approval and execution of these presents and all other
documents affecting the security herein and will indemnify them against all
actions, proceedings, costs, charges, expenses, claims and demands whatsoever
which may arise or be brought or made against or incurred by them in respect of
any matter or thing done or permitted to be done without their wilful default in
respect of or in relation to the mortgaged premises.

16. The trustees hereof being a corporate body may, in the execution and exercise of
all or any of the trusts powers, authorities and discretions vested in them by
these presents act by responsible officers or a responsible officer for the time
 being of the trustees and the trustees may also whenever they think it expedient
in the interests of the debenture-holders delegate by power of attorney or
otherwise to any such officer or officers all or any of the trusts power,
authorities, and discretions vested in them by these presents and any such
delegations may be made upon such terms and conditions and subject to such
regulations including power to sub-delegate as the trustees may, in the interest
of the debenture holders, think fit and the trustees shall not be bound to
supervise the proceedings of or be in any way responsible for any loss incurred
by reason of any misconduct or default or any mistake, oversight, error of
judgement, forgetfulness or want of prudence on the part of any such delegate.
Note: This clause is suitable where the trustees is a bank. In case of individual
this be modified suitably.

17. The debenture holders may, by an ordinary resolution, remove the trustee or
trustees, or the trustee or trustees may, with the consent of the directors of the
company and of the majority of the debenture holders in writing resign or retire
from trusteeship.

18. In the event of death, bankruptcy, disability or resignation of any trustee or

trustees, another trustee or trustees shall be appointed who shall thereafter
have and exercise all powers of the trustee or trustees under these presents. The
power of appointing a new trustee or trustees shall be vested in the directors,
but no such trustee or trustees shall be appointed by the company until his
appointment has been approved by an ordinary resolution of the debenture
holders.

19. The trustees may by agreement with the directors of the company modify the
terms of the deed in any manner that may be necessary to meet any
requirement or contingency, provided that the trustees are satisfied that such
modifications are in the interests of the debenture holders.

20. If any debenture is proved to the satisfaction of the company to have been lost,
the company shall issue a fresh debenture on payment of a fee of
Rs..................... for each such debenture and on such indemnity as the directors
may think fit.

21. The company hereby covenants with trustees that company will at all times
during the continuance of the security (except as may be otherwise previously
agreed in writing by the trustees).

• (a) carry on and conduct its business in proper and efficient manner with
due deligence and efficiency with sound financial standing and pay all
rents, cesses on mortgage premises, and insured these properties against
fire and natural calamities;
 • (b) to keep proper books of account as required under the Act and let
them be open to inspection of trustees during business hours;

• (c) to give trustees such in formation as he or they may require relating to

business, mortgage property and the affairs of the company;

• (d) not to effect any scheme of amalgamation, merger or reconstructions

during the period of debenture or any part thereof remain outstanding;

• (e) not to utilise any portion of the debentures for purposes other than
those for which the same are issued;

• (f) not to make any material changes in the existing management set up.
Not to declare any dividend to the equity (or preference shareholders, if
any) in any year until the company has paid or made satisfactory provision
for payment of the instalments of principal (if it has become due) and
interest due on the debentures;

• (g) allow the debenture holders a right to appoint a nominee director on

the Board of the company.The said director so appointed shall not be
liable for rotation nor required to hold any qualification. Thus, if need be,
the company shall take immediate steps to amend its Articles of
Association accordingly.

22. The company hereby further covenants with the Trustees that the company shall
duly perform and observe the obligations hereby imposed upon it by this deed.

IN WITNESS WHEREOF THE COMPANY has caused its Common Seal to be affixed to
these presents and the trustees have hereto set their hands the day and year above
written.

Common Seal of the.....................

Witnesses: affixed in the presence of

(DIRECTOR)

(TRUSTEES)
SAMPLE DRAFT – DEED OF TRUST THIS DEED OF TRUST executed on the
______ day of _______, _________ BETWEEN
___________________(Name and PAN),son of ___________________, by
faith- ___________________, by nationality-___________________,
residing at ____________________________(Party of the first part)
hereinafter called “SETTLOR OF THE TRUST” A N D 1.
___________________(Name and PAN),son of ___________________by
faith___________________, by nationality___________________,
residing at ______________________________ 2.
___________________(Name), wife of ___________________, by
faith___________________, by nationality- ___________________,
residing at ___________________ 3. ___________________(Name),
son of ___________________, by faith___________________, by
nationality___________________, residing at
______________________________________
(Hereinafter called “THE TRUSTEES” which expression shall unless
repugnant to the context or meaning thereof be deemed to include the
supervisors or supervisor of them and the trustees or trustee for the time
being of these presents and their heirs, executors and administrators of
the last surviving trustee, their or his assignees) of the other part;
WHEREAS the party hereto of the first part is possessed of the sum of Rs
___________________as his absolute property and he is desirous of
creating a Religious/Charitable/Educational Trust for the benefit of the
humanity at large.
AND WHEREAS each of the parties hereto of the “Other Part” has
individually and jointly has agreed at act as Trustees of the Trust,
proposed by the party of the first part.
AND WHEREAS all activities of the trust shall be carried out with a view to
benefit the public at large, without any profit motive and in accordance
with the provisions of the Income-tax Act, 1961 or any statutory
modification thereof.
AND WHEREAS the trust is hereby expressly declared to be a public
charitable trust and all the provisions of this deed are to be considered
accordingly.
AND WHEREAS All aims/objects/purpose of the trust herein stated herein
below shall come into effect/force after necessary approval of the
competent government authority in the cases where
affiliation/permission /license/sanction is required.