Report No. 17

72. Section 64.-

Section 64 gives protection to a transferee of trust property for consideration from a bona fide purchaser without notice of the trust.

In England the rule as pointed out in Lewin1 is that a purchaser with notice from a purchaser without notice is exempt from the trust and this is by reason of the protection which the bona fide purchaser without notice enjoys. It is also pointed out that if the innocent purchaser is prevented from disposing of the beneficial interests it would result in stagnation of property. The same rule obtains in America and is contained in section 316 of the American Restatement.2

Under section 64, a transferee for consideration from a transferee in good faith for consideration, without notice of the trust, is protected and this protection extends whether such a transferee had or had not notice of the trust, for the section does not say that he should also be a person acting in good faith and without notice. There is no reason, therefore, to introduce into the section any other qualifications. When once we reach the stage of a bona fide transferee without notice, for consideration, of the trust property, the right to follow the trust property comes to an end and enables such a transferee to pass on good title. It is probably on this ground that a transferee for consideration from him is protected whether he had or had not notice of the trust.

But the question for consideration is whether a mere volunteer, that is, a transferee for no consideration with or without notice should also be protected. On principle, when an indefeasible title is vested in a bona fide transferee without notice, there is no reason to exclude the protection to a volunteer and draw a distinction between a person who paid consideration and one who had not, and a person who had notice and one who had not. We think that such volunteers should also be protected.

1. Lewin on Trusts, (15th Edn.), p. 723.

2. Vol. 2, p. 953.

73. There is also another suggestion which may be considered in this connection. If the trustee himself purchases the property from the transferee who fulfils the conditions of clause (a) of section 64, should he be allowed to retain the property in his own right or should it go back to the trust? In England and America, the law is that the property in his hands in that event is subject to the trust.1 The same is the position under section 65 of the Indian Act. We see no reason to alter the law on this point.

1. Lewin on Trusts, (15th Edn.), p. 723; American Restatement on Trusts, Vol. 2, section 317 p. 953.

74. The reference in the section to the Contract Act may be replaced by appropriate references to the Sale of Goods Act.