NI Act | Complaint Maintainable Against Trustee Signing Cheque Without Arraying Trust As Accused: Supreme Court
The Apex Court held that a trust is not a juristic person and acts through its trustees, who are personally responsible for acts done on its behalf.
Justice Ahsanuddin Amanullah and Justice Prashant Kumar Mishra, Supreme Court
The Supreme Court has ruled that a complaint under the Negotiable Instruments Act, 1881, for dishonour of a cheque can be maintained against the trustee who has signed the cheque on behalf of a trust without impleading the trust itself as an accused.
The Apex Court was hearing an appeal filed against a judgment of the Meghalaya High Court, which had quashed criminal proceedings initiated under Sections 138 and 142 of the NI Act on the ground that the trust had not been made a party to the proceedings.
A Bench comprising Justice Ahsanuddin Amanullah and Justice Prashant Kumar Mishra, while deciding the matter, observed that “…when a cause of action arises due to an alleged dishonour of cheque and a complaint is initiated under the NI Act, the same is maintainable against the trustee who has signed the cheque, without the requirement to array the trust also as an accused.”
Advocate Aditya Singh appeared on behalf of the appellant, while Senior Advocate Ardhendumauli Prasad represented the respondent.
Background
The appellant had filed a complaint under Sections 138 and 142 of the Negotiable Instruments Act, 1881, against the respondent trustee after the cheque issued on behalf of a trust was returned unpaid for “insufficient funds.”
The Magistrate took cognisance of the complaint, but the respondent trustee challenged the proceedings before the High Court under Section 482 of the Code of Criminal Procedure, 1973. The High Court allowed the petition and quashed the proceedings on the reasoning that the trust, on whose behalf the cheque was issued, was not impleaded as an accused.
Aggrieved by the order, the appellant approached the Supreme Court
Court’s Observation
The Supreme Court examined the scheme of the Indian Trusts Act, 1882 and noted that a trust is not an independent legal entity or juristic person. The Court clarified that Trusts exist only through their trustees, and “the obligation to ‘maintain and defend’ suits is placed on the shoulders of a Trustee and not the Trust itself”
The Supreme Court also endorsed earlier High Court decisions, including those of Kerala, Delhi, Madras, Gujarat, and Calcutta, which had held that a Trust is not a juristic person but merely an obligation attached to property, carried out through Trustees.
Further, while rejecting contrary views expressed by some High Courts that treated a Trust as a “company” or “association of individuals” under Section 141 of the NI Act, the Court clarified that such interpretation was “a fallacy,” emphasising that “the legal status accorded to a ‘company’ cannot be imported to a Trust, in the eyes of law, in the case at hand.”
In strong terms, the Apex Court disapproved of the Kerala High Court’s ruling in Prana Educational and Charitable Trust v. State of Kerala, which had departed from earlier binding precedent by holding that a Trust was a juristic person under the NI Act, stating that “not as a matter of routine can a later Bench of equal strength refuse to follow an earlier decision of a Bench of equal strength.”
Concluding that where a cheque is issued on behalf of a Trust, the Trustee signing the cheque can be made personally liable for dishonour, the Bench remarked that “there exists no ambiguity about there being no legal requirement for a Trust to be made a party in a proceeding before a Court of Law since it is only a/the Trustee(s) who are liable and answerable for acts done or alleged to have been done for and on behalf of the said Trust.”
Conclusion
The Supreme Court set aside the judgment of the Meghalaya High Court and restored the complaint proceedings before the trial court, holding that the complaint was maintainable against the respondent trustee in his personal capacity.
The Bench directed that the trial court proceed with the matter in accordance with the law and dispose of it expeditiously. The appeal was accordingly allowed.
Cause Title: Sankar Padam Thapa v. Vijaykumar Dineshchandra Agarwal (Neutral Citation: 2025 INSC 1210)
Appearances:
Petitioner: Advocates Aditya Singh, AOR, Shubham Singh, Kamal Kishor, and Vaseem.
Respondent: Senior Advocate Ardhendumauli Prasad, with Advocates Dinesh Gangwani, Amjid Maqbool, Prachi Pratap, Prashant Pratap, Pallavi Pratap, AOR.