Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | Crl.A. No.-004402-004402 – 2025 |
| Diary Number | 8395/2023 |
| Judge Name | HON’BLE MR. JUSTICE AHSANUDDIN AMANULLAH |
| Bench |
|
| Precedent Value | Binding authority |
| Overrules / Affirms |
|
| Type of Law | Criminal law (Negotiable Instruments Act, 1881; CrPC Section 482) & Trusts Act, 1882 |
| Questions of Law | Whether, when a cheque is issued on behalf of a Trust, a complaint under Section 138 NI Act is maintainable against the Trustee/Chairman who signed the cheque without naming the Trust as an accused. |
| Ratio Decidendi | The Court held that a Trust is not a juristic person but an obligation under Trusts Act Sections 3 & 13, operating through its Trustees. Under Section 141 NI Act, vicarious liability attaches to the person who signs the dishonoured cheque or holds a position akin to Managing Director, without requiring impleading of the Trust. Supreme Court precedent in SMS Pharmaceuticals and K K Ahuja on necessary averments and signatory liability is reaffirmed. High Court decisions treating a Trust as a company or juristic person under the NI Act are overruled. |
| Judgments Relied Upon |
|
| Logic / Jurisprudence / Authorities Relied Upon | Reaffirmed vicarious liability rules from SMS Pharmaceuticals and K K Ahuja; interpreted Trusts Act Sections 3 & 13 to hold Trusts are non-juristic obligations; applied binding-precedent rule from National Insurance v Pranay Sethi and UT of Ladakh; overruled later High Court judgments that treated Trusts as companies; distinguished corporate veil jurisprudence (Salomon). |
| Facts as Summarised by the Court | William Carey University was handed over by ACTS Group to Orion Education Trust by MOU dated 12.10.2017. The Respondent, as Chairman of Orion, authorized the Appellant to facilitate transition and issued a ₹5 crore cheque dated 13.10.2018, which was dishonoured for insufficient funds. Notice under Section 138 NI Act was sent and complaint filed under Sections 138/142 NI Act and Section 420 IPC naming only the Respondent. The Respondent challenged maintainability for non-joinder of the Trust; High Court quashed proceedings. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts |
| Persuasive For | Other High Courts, Tribunals |
| Overrules |
|
| Follows |
|
What’s New / What Lawyers Should Note
- A Trust is an obligation under the Trusts Act, not a separate juristic person; only Trustees can sue or be sued.
- Under Section 141 NI Act, liability attaches to the signatory of a dishonoured cheque or person akin to Managing Director, without impleading the Trust.
- No requirement to make substantive averments against a non-existent juristic Trust; focus on trustee’s position and signature.
- High Court decisions equating a Trust with a company under Section 141 NI Act are overruled.
- Trusts Act Sections 3 & 13 affirm that Trustees alone maintain and defend suits relating to Trust property.
Summary of Legal Reasoning
- Trusts Act Interpretation: Section 3 defines a Trust as an obligation, not a legal entity; Section 13 imposes duty on Trustees to maintain/defend suits, not the Trust itself.
- Vicarious Liability under NI Act: Reiteration of SMS Pharmaceuticals and K K Ahuja: signatory and persons in charge of business (akin to MD) are liable under Section 141; no need for express averment of control if signatory or designated officer.
- Non-joinder of Trust: A complaint under Section 138 NI Act is maintainable against the Trustee who signed the cheque, without impleading the Trust, since Trust lacks independent legal personality.
- Precedent Hierarchy: Binding-precedent rule from National Insurance v Pranay Sethi; earlier Supreme Court Bench decisions prevail over later High Court Judgments of equal strength.
- Overruling Conflicting HC Decisions: High Court cases treating Trust as juristic person under NI Act (Prana Educational, Dadasaheb Rawal, Abraham Memorial, Mukund, Bijaya Manjari) are disapproved and overruled.
Arguments by the Parties
Petitioner
- A Trust is not a legal entity or juristic person and cannot be sued; Trustees alone can maintain suits.
- No statutory requirement to aver Trust’s liability; SMS Pharmaceuticals permits liability of signatory without detailed averments.
- Respondent, as authorized Chairman and signatory, is responsible for the cheque and falls within Section 141 liability.
Respondent
- Trust is a juristic person capable of being sued; Explanation to Section 141 NI Act includes “association of individuals,” covering Trusts.
- High Court correctly held complaint non-maintainable for non-joinder of necessary party (the Trust).
Factual Background
William Carey University, facing financial crisis, was placed under Orion Education Trust’s management by MOU dated 12 October 2017. The Respondent, as Chairman of Orion, authorized the Appellant’s liaison and, on 13 October 2018, issued a ₹5 crore cheque. The cheque was dishonoured for insufficient funds. The Appellant served notice under Section 138 NI Act on 19 December 2018 and filed a complaint under Sections 138/142 NI Act and Section 420 IPC naming only the Respondent. The Respondent challenged maintainability for non-joinder of the Trust; the Meghalaya High Court quashed the proceedings. The Appellant appealed to the Supreme Court.
Statutory Analysis
Negotiable Instruments Act, 1881
- Section 138: Offence for dishonour of cheque.
- Section 141: Vicarious liability of persons in charge of business or signatories; Explanation includes “company,” “body corporate,” and “other association of individuals,” interpreted ejusdem generis.
- Section 142: Cognizance of offence.
Code of Criminal Procedure, 1973
- Section 482: Inherent power to quash non-maintainable proceedings.
Trusts Act, 1882
- Section 3: Defines Trust as obligation annexed to property; beneficiaries and trustees.
- Section 13: Trustees’ duty to maintain and defend suits relating to Trust property; Trust itself has no independent legal personality.
Alert Indicators
- 🚨 Breaking Precedent – Overrules multiple High Court decisions treating Trust as a juristic person under Section 141 NI Act
- ✔ Precedent Followed – SMS Pharmaceuticals Ltd. v Neeta Bhalla; K K Ahuja v V K Vora for vicarious liability principles