A, a trustee of leasehold property, directs the tenant to pay the rents to B, a banker then in credit,…
Under section 15 a trustee who acts with ordinary prudence is, in the absence of a contract to the contrary, "not responsible for the loss" of trust-property. Illustration…
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A, a trustee of leasehold property, directs the tenant to pay the rents to B, a banker then in credit, and leaves the money with B only till it is wanted. Before the money is drawn out, B becomes insolvent. A had no reason to believe B was in insolvent circumstances. Under the Indian Trusts Act, 1882, what is A's liability?
Answer and explanation
Correct answer C
Under section 15 a trustee who acts with ordinary prudence is, in the absence of a contract to the contrary, "not responsible for the loss" of trust-property. Illustration (b) to section 15 treats leaving rents for a short time with a banker then in credit as prudent, so A is not liable when the banker unexpectedly fails. It was reasonable not to invest money that would soon be wanted.