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I. INTRODUCTION:

When one person or entity agrees to act on behalf of another person or entity in
matters of importance, such as legal, financial, and authority, he or she is
considered a fiduciary. The client, author, or beneficiary, has the right to expect
the fiduciary to put forth his best effort, using all of his expertise, skill, and care in
acting on the principals behalf.

A fiduciary is held to a lofty standard in the eyes of the law, being expected to act
honestly and diligently, and to make full disclosure to his principal. A fiduciary
may not take any action that benefits him personally at the expense of the
principal. To explore this concept, consider the following fiduciary definition.

II. DEFINITION OF FIDUCIARY:

1) Noun: A person or entity to which property, assets, or power have been

entrusted for the benefit of another.

2) Adjective (Fiduciary Duty): The obligation of a fiduciary to another person

or entity, called a principal.

3) Origin: 1585-95 Latin fdcirius, of something held in trust.

4) Lord Millett, In Bristol and West Building Society v Mothew 1 held that
A fiduciary is someone who has undertaken to act for and on behalf of
another in a particular matter in circumstances which give rise to a
relationship of trust and confidence.

Thus it can be said that a fiduciary is a person who holds a legal or ethical
relationship of trust with one or more other parties (person or group of persons).
Typically, a fiduciary prudently takes care of money or other asset for another
person.

1
Mothew (t/a Stapley & Co) v Bristol & West Building Society [1996] EWCA Civ 533, [1998] Ch 1 (24 July 1996),
Court of Appeal (England and Wales).

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For e.g. One party, a corporate trust company or the trust department of a bank,
acts in a fiduciary capacity to the other one, who for example has entrusted funds
to the fiduciary for safekeeping or investment. Likewise, asset managers
including managers of pension plans, endowments and other tax-exempt assets
are considered fiduciaries under applicable statutes and laws.2

In a fiduciary relationship, one person, in a position of vulnerability, justifiably

vests confidence, good faith, reliance, and trust in another whose aid, advice or
protection is sought in some matter.3 In such a relation good conscience requires
the fiduciary to act at all times for the sole benefit and interest of the one who
trusts.

III. DEFINITION OF FIDUCIARY RELATIONS:

Fiduciary relations signify some relations which have some of the incidents of
trusts. It arises in the context of jural relationship. When a person acts on behalf
of another, he stands in a fiduciary relation.

Indian Trusts Act does not define terms Fiduciary Relationship. Other
enactments in India are silent about the definition of the same. To solve this
problem we have to look the decisions of the Court. For the first time
Anantnarayan, J. of the Madras High Court has defined the term as follows:

A fiduciary relationship may arise in the context of a jural relationship. Where

confidence is reposed by one in another and that leads to a transaction in which
there is a conflict of interest and duty in the person in whom such confidence is
reposed, fiduciary relationship immediately springs into existence.4

The presumption of fiduciary relationship arises whenever two persons stand in

such a situation that confidence is reposed by one and the obligation which
naturally grows out of that confidence is held by the other for him who confided.
Further, it is commonly understood that fiduciary relation is a trust.
2
Lemke and Lins, ERISA for Money Managers, Chapter 1 (Thomson West, 2013)
3
Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64, (1984) 156 CLR 41, High Court
(Australia).
4
Mrs. Nelie Wapshare v, Piere Leslie and [Link]. AIR 1960 Mad. 410

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But the American Restatement of the law of Trusts treats it the reverse way i.e. a
trust is a kind of fiduciary relationship. But each and every fiduciary relationship
is not necessarily a trust. On trust the settlor reposes the confidence in the trustee
whereas in fiduciary relations the confidence is reposed in the fiduciary by the
beneficiary himself for his own benefits and protection of his own interests.

Thus it can be said that fiduciary relationship, in generic sense, is a situation

where one person is under a confidential obligation to act in the interest of
another person.

Honble Supreme Court Interprets Fiduciary Relationship in a Landmark

Case in December 16, 2015:
In a landmark case Reserve Bank of India and Ors. v. Jayantilal N. Mistry
and Ors. on December 16, 2015, the Honble Supreme Court upheld the order
passed by the Central Information Commissioner (CIC) on the issue:

Whether the Public Authorities under Right to Information Act, 2005 can deny
information to the public on the basis of certain legal exemptions: public at
economic interest; commercial confidence; public interest and fiduciary
relationship?

Whether giving information to the general public would be detrimental to the

economic interest of the Country?

The Supreme Court held that the RBI does not place itself in a fiduciary
relationship with the Financial institutions (though, in word it puts itself to be
in that position) because, the reports of the inspections, statements of the
bank, information related to the business obtained by the RBI are not under the
pretext of confidence or trust. In this case neither the RBI nor the Banks act in
the interest of each other. By attaching an additional fiduciary label to the
statutory duty, the Regulatory authorities have intentionally or unintentionally
created an in terrorem effect.

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Background of the case:

The respondent Jayantilal N. Mistry sought information from the CPIO, RBI in
respect of a Cooperative Bank viz. Saraspur Nagrik Sahkari Bank Limited related
to inspection report, which was denied by the CPIO on the ground that the
information contained therein were received by RBI in a fiduciary capacity and
are exempt under Section 8(1)(e) of RTI Act. The CIC directed the petitioner to
furnish that information since the RBI expressed their willingness to disclose a
summary of substantive part of the inspection report to the respondent. While
disposing of the appeal the CIC observed:-

Before parting with this appeal, we would like to record our observations that
in a rapidly unfolding economics scenario, there are public institutions, both in
the banking and non-banking sector, whose activities have not served public
interest. On the contrary, some such institutions may have attempted to defraud
the public of their moneys kept with such institutions in trust. RBI being the
Central Bank is one of the instrumentalities available to the public which as a
regulator can inspect such institutions and initiate remedial measures where
necessary. It is important that the general public, particularly, the shareholders
and the depositors of such institutions are kept aware of RBIs appraisal of the
functioning of such institutions and taken into confidence about the remedial
actions initiated in specific cases.

This will serve the public interest. The RBI would therefore be well advised to be
proactive in disclosing information to the public in general and the information
seekers under the RTI Act, in particular. The provisions of Section 10(1) of the
RTI Act can therefore be judiciously used when necessary to adhere to this
objective.

The Reserve Bank refused to give the information taking the defence of Section
8(1) (a) & (e) of the RTI Act. It stated that the Information sought is maintained
by the bank in a fiduciary capacity and was obtained by Reserve Bank during the
course of inspection of the bank. Hence, cannot be given to outsiders. Moreover,
disclosure of such information may harm the interest of the bank & banking
system.

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Section 8(1)(a) and (e) of the RTI Act states that:

(a) information, disclosure of which would prejudicially affect the sovereignty
and integrity of India, the security,
strategic, scientific or economic interests of the State, relation with foreign
State or lead to incitement of an
offence;
(e) information available to a person in his fiduciary relationship, unless the
competent authority is satisfied that the larger public interest warrants the
disclosure of such information.

The court took a detailed view on the definition of fiduciary in light of The
Advanced Law Lexicon, 3rd Edition, 2005.
The dictionary says that:
A relationship in which one person is under a duty to act for the benefit of the
other on the matters within the scope of the fiduciary relationship. Fiduciary
relationship usually arise in one of the four situations:
1) when one person places trust in the faithful integrity of another, who as a
result gains superiority or influence over the first,

2) when one person assumes control and responsibility over another,

3) when one person has a duty to act or give advice to another on mattes falling
within the scope of the relationship, or

4) when there is specific relationship that has traditionally be recognized as

involving fiduciary duties, as with a lawyer and a client, or a stockbroker and
a customer.

i. No Conflict rule- A fiduciary must not place himself in a position where his
own interests conflicts with that of his customer or the beneficiary. There
must be real sensible possibility of conflict.

ii. No profit rule- a fiduciary must not profit from his position at the expense of
his customer, the beneficiary;

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iii. Undivided loyalty rule- a fiduciary owes undivided loyalty to the

beneficiary, not to place himself in a position where his duty towards one
person conflicts with a duty that he owes to another customer. A consequence
of this duty is that a fiduciary must make available to a customer all the
information that is relevant to the customers affairs

iv. Duty of confidentiality- fiduciary must only use information obtained in

confidence and must not use it for his own advantage, or for the benefit of
another person.

The Supreme Court refused to accept the argument that a fiduciary relationship
exists between the RBI and Financial Institutions. The information collected after
the investigations do not fall under the purview of fiduciary relationship.

On the contrary the Court held that:

RBI is supposed to uphold public interest and not the interest of individual
banks.
RBI is not in any fiduciary relationship with any bank.
RBI has no legal duty to maximize the benefit of any public sector or private
sector bank, and thus there is no relationship of trust between them.
RBI has a statutory duty to uphold the interest of the public at large, the
depositors, the countrys economy and the banking sector.
The exemption contained in Section 8(1)(e) applies to exceptional cases and
only with regard to certain pieces of Information, for which disclosure is
unwarranted or undesirable. If information is available with a regulatory
agency not in fiduciary relationship, there is no reason to withhold the
disclosure of the same.

However, where information is required by mandate of law to be provided to an

authority, it cannot be said that such information is being provided in a fiduciary
relationship.

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The information which may be withheld includes the following:

Information which is in national economic interest, disclosure of information about

currency or exchange rates, interest rates, taxes, the regulation or supervision of
banking, insurance and other financial institutions, proposals for expenditure or
borrowing and foreign investment could in some cases harm the national economy,
particularly if released prematurely. However, lower level economic and financial
information, like contracts and departmental budgets should not be withheld under
this exemption.

The Court held that RBI is a statutory body set up by the RBI Act as Indias
Central Bank. It is a statutory regulatory authority to oversee the functioning of the
banks and the countrys banking sector. Under Section 35A of the Banking
Regulation Act, RBI has been given powers to issue any direction to the banks in
public interest, in the interest of banking policy and to secure proper management
of a banking company. It has several other far-reaching statutory powers.

RBI is supposed to uphold public interest and not the interest of individual banks.
RBI is clearly not in any fiduciary relationship with any bank. RBI has no legal
duty to maximize the benefit of any public sector or private sector bank, and thus,
there is no relationship of trust between them. RBI has a statutory duty to uphold
the interest of the public at large, the depositors, the countrys economy and the
banking sector. Thus, RBI ought to act with transparency and not hide information
that might embarrass individual banks. It is duty bound to comply with the
provisions of the RTI Act and disclose the information sought by the respondents
herein.

In this case the RBI and the Banks have sidestepped the General publics demand
to give the requisite information on the pretext of Fiduciary relationship and
Economic Interest. This attitude of the RBI will only attract more suspicion and
disbelief in them. RBI as a regulatory authority should work to make the Banks
accountable to their actions.

Furthermore, the RTI Act under Section 2(f) clearly provides that the inspection
reports, documents etc. fall under the purview of Information which is obtained
by the public authority (RBI) from a private body. Section 2(f), reads thus:

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information means any material in any form, including records, documents,

memos, e-mails, opinions, advices, press releases, circulars, orders, logbooks,
contracts, reports, papers, samples, models, data material held in any electronic
form and information relating to any private body which can be accessed by a
public authority under any other law for the time being in force.

By reading the above section it can be inferred that the Legislatures intent was to
make available to the general public such information which had been obtained by
the public authorities from the private body. Had it been the case where only
information related to public authorities was to be provided, the Legislature would
not have included the word private body. As in this case, the RBI is liable to
provide information regarding inspection report and other documents to the general
public.

Even if we were to consider that RBI and the Financial Institutions shared a
Fiduciary Relationship, Section 2(f) would still make the information shared
between them to be accessible by the public. The facts reveal that Banks are trying
to cover up their underhand actions, they are even more liable to be subjected to
public scrutiny.

The Court finally concluded that the right to information is a fundamental right as
conferred by the Constitution of India. Thus, it is imperative that the RTI Act be
observed astutely and remains transparent. The only exemptions to be observed
should be the ones listed under Section 8 of the RTI Act. The cases notability is
attributed to its advocacy of greater accountability and transparency in exchange of
information. The case has given hope to the birth of a new India, awakening to a
deeper realization of truth and awareness.

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IV. CLASSIFICATION OF FIDUCIARY RELATIONS:

FIDUCIARY
RELATIONSHIP
IN
TRUSTEESHIP
FIDUCIARY
RELATIONSHIP COMPANY'S
IN PARTNERSHIP AGENCY
DIRECTIORS
COMMERCIAL
TRANSACTIONS
MANAGER
FIDUCIARY
OF JOINT
RELATIONSHIP PARENT &
FAMILY &
IN DOMESTIC CHILD
FAMILY
TRANSACTIONS
MEMBERS
CLASSIFICATION FIDUCIARY
ON THE BASIS OF RELATIONSHIP
HUMAN IN
TRANSACTIONS PROFESSIONAL
TRANSACTIONS
FIDUCIARY
RELATIONSHIP IN
JURAL
TRANSACTION
FIDUCIARY
RELATIONSHIP IN
PUBLIC
TRANSACTION
FIDUCIARY FIDUCIARY RELATIONSHIP
RELATIONS IN OTHR CONFIDENTIAL
TRANSACTION TO BE
MADE OUT BY
CIRCUMSTANCES
CONTROL
OVER
PROPERTY

COMMITMENT OF
CLASSIFICATION JOB
ACCORDING TO FIDUCIARY
THE RELATIONSHIP
CONFIDENTIAL INDUCED BY PROFIT
DIMENSION
UNDER INFLUENCE

CONFIDENTIAL
INFORMATION

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A. CLASSIFICATION ON THE BASIS OF HUMAN TRANSACTION:

Where confidence is reposed in numerous human transactions and is exercised
for this reason it is termed as classification of fiduciary relations on the basis of
human transactions.

1) FIDUCIARY RELATIONSHIP IN TRUSTEESHIP -

Trusteeship is fiduciary relationship. The trustee is under an obligation to
protect the interest of the cestui que trust for whose benefit the confidence has
been reposed on him. There is thus a fiduciary relationship between the two i.e.
between trustee and the cestui que trust.

In Roinson v. pett5, it has been held that the basic principle is that a trustee acts
voluntarily and is not paid for his services. It does not matter whether his
services are of a professional nature. It follows that a trustee can only claim
remuneration if he can show a specific entitlement of it.

2) FIDUCIARY RELATIONSHIP IN COMMERCIAL TRANSACTIONS -

Fiduciary relationship is conscience of commercial transactions which are based
in confidence.

a) Company directors: Thus there is fiduciary relationship between the

company and the director principal and the agent and the partner. Directors
are not expressly trustees as company s estates do not vest in them. In order
to apply Section 88 of the Indian Trusts Act to the transactions of sale of the
company s lands to its Directors, it is necessary to show that the directors
have gained for themselves any pecuniary advantage by selling the lands of
the company to themselves and their relations at a lower price. In
commissioner of Agricultural Income Tax, Bihar v. Shree Hanuman Sugar
Mills Ltd, the directors of the company and their relations purchased he
lands belonging to the company. It was held that the company was entitled
to take back the ands because it was possible to take the view that the
directors obtained gains by impugned dealing with the company.

5
(1734) 3P. Wms. 249.

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b) Partnership: The question of fiduciary relation between the existing

partners arises where it is established that there is a managing partner in
whom confidence has been reposed by other partners. All the circumstances
have to be considered to determine whether or not this confidential
relationship exists. If a claim is made by a partner against another partner, it
would have to be shown whether the claim in fact arises out of the partners
fiduciary relationship. 6

There is certainly a fiduciary relationship between the existing partners and

former partners as a matter of jural relation, as provided in Section 37 of the
partnership Act, 1932.

c) Agency: Agency is a fiduciary relationship where the principal reposes

confidence in the agent who accepts it and undertakes to act on behalf of the
person who so confided. The fiduciary duty of loyalty is that where the agent
is in a position in which his own interest may affect the performance of his
obligation to the principal, he must make a full disclosure of all the material
circumstances so that the principal can make up his mind whether or not to
give consent to the agents acting. If he deals without full disclosure, he
principal may cancel the transaction.

Thus in Macpherson v. Watt7, the agent of two ladies wanted to sell their
house and himself purchased it in the agent of two ladies wanted to sell their
house and himself purchased it in the name of his brother. He concealed that
he was purchasing for himself. They did not order for specific performance
as it was a clear violation of fiduciary relation. In such cases the agent is
bound to hold the gain for the benefit of his principal, who is legally entitled
to such gain.

6
Mathura Dutt Bhatta v. Prem Ballabh Khulba, AIR 1961 All. 19.
7
(1877) 3 App. Cases 254

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3) FIDUCIARY RELATIONSHIP IN DOMESTIC TRANSACTIONS -

There are several domestic transactions which are founded on confidential
relationship. A few family relations where confidence is readily inferred are as
follows:

a) Manager of joint family and family members: A coparcener of joint Hindu

family utilizing the joint property was held to be in a fiduciary capacity the
manager (Karta) of the Hindu joint family is, however, not the trustee of the
family, and therefore, he is not bound to give accounts to other member as in
the case between the trustees and cestui que trust. Rules applicable to trustee
and beneficiary are equally applicable to the joint family manager.

b) Parent and Child: Father has been held to be in possession of property on

behalf of son. Undoubtedly the fiduciary relationship exists between the
guardian and the ward. There are natural guardians defacto testamentary
guardians. Even the defacto guardians is said to be fiduciary relation.

In Abdul wazid v. Osman abdual rabb, it was held that a Mohammedan,

who keeps his brother s property as a defacto guardian and does not invest
properly, will be bound to pay interest . It should be proved that assets, held
by him were not properly invested then the benefit of Section 23 of trust Aft,
1932 can be obtained, guardians are needed for minors, as they are not of
mature mind.

4) FIDUCIARY RELATIONSHIP IN PROFESSIONAL TRANSATIONS -

Persons taking confidential employments such as religious, medical, legal and
other advisers are deemed to occupy fiduciary position in relation to the persons
whom they advise. Equitable invention in such cases is justified on the ground
that the defendant has caused the plaintiffs judgment to be clouded and as such
he plaintiff could not consider the matter as he ought.

5) FIDUCIARY RELATIONSHIP IN JURAL TRANSACTIONS-

Fiduciary relationship in such transactions includes the relations between the
executor and heir, and between guardian and ward.

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6) FIDUCIARY RELATIONSHIP IN PUBLIC TRANSACTIONS -

The principle in this context is that there is a fiduciary relationship whenever
the plaintiff entrusts of the defendant a job to be performed so that a servant of
the crown stands in a fiduciary relationship to the crown and is accountable to
the crown for the bribes he has accepted by misusing his position.

7) FIDUCIARY RELATIONSHIP IN OTHER CONFIDENTIAL TRANSACTIONS TO BE

MADE OUT BY CIRCUMSTANCES -
The question of fiduciary relationship in other transactions arises when it is
proved that confidence has under the circumstances been reposed in fact.
In Boardman v Phipps 8, Lord Hodson has observed, essentially the problem
is one of determining the limits of fiduciary principle. The rules of equity have
to be applied to such a great diversity of circumstances that they may e stated
only in the most general terms and applied with particular attention to the exact
circumstances of each case.

8
(1967) 2A.C. 46

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REFERENCE
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THANKS

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