Negotiable Instruments Act, 1881 – Trusts Act, 1882 – Cheque issued in favour of the Appellant under the signature of the Respondent-Chairman of the Trust as authorized signatory of the Trust, was dishonoured – Appellant filed complaint against the Respondent for offences u/ss.138 and 142, NI Act as well as u/s.420, IPC – Respondent sought quashing of the complaint on the ground that the Trust being a juristic entity and a necessary party not having been added as a party, the complaint was not maintainable – Complaint quashed by High Court – Sustainability:
Held: Impugned judgment unsustainable, quashed – A Trust is not a ‘legal entity’ or ‘juristic person’ – It is incapable of suing or being sued – There is 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 – In the present case, in Orion’s Deed of Trust, of which the Respondent is the Chairman/Authorized Signatory, the relevant clauses deal with the Trustee insofar as administering and holding the funds and properties of the Trust are concerned – The Trust (i.e., Orion) operates only through the Trustee(s) and the objects thereof were for charitable purposes – The Deed of Trust also provides for permitting one or more Trustees to operate a bank account – Thus, it is the Trustees alone, through whom the Trust funds/property(ies) are managed and dealt with – The Trust itself is without any independent legal status – 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 – It was not mandatory to make substantive averments pertaining to the responsibility of the Respondent in the conduct of the day-today business of the Trust – Proceedings restored – Trusts Act, 1882. [Paras 26, 29, 17, 40]
Trusts Act, 1882 – ss.3, 13 – Negotiable Instruments Act, 1881 – Whether a Trust can sue or be sued on its own – Issue examined in the context of the NI Act alone, in praesenti: Held: Only a Trustee has the obligation to file, maintain and defend any suit on behalf of the Trust – A Trust does not have a separate legal existence of its own, making it incapable of suing or being sued – A Trust is not a ‘legal entity’ or ‘juristic person’ – It is also not like a corporation which has a legal existence of its own and therefore can appoint an agent – A Trust operates through its Trustees, who are legal entities – Though, a Trust may act or even be treated as an entity for certain legal purposes and not all legal purposes, a Trust is an obligation imposed on the ostensible owner of the property to use the same for a particular object- for the benefit of a named beneficiary or charity, and it is the Trustee(s) who are bound to maintain and defend all suits and to take such other steps with regard to the nature, land or the value of the Trust property, that may be reasonably required for the preservation of the Trust property, and the assertion of protection of title thereto, subject to the provisions of the instructions of Trust to take such other steps. [Paras 23, 25, 26]
Judicial Precedents – Following of – Matter referred to Larger Bench, reference pending – Effect – Pratibha Pratisthan doubted and referred to a Larger Bench in Tara Bai Desai Charitable Opthalmic Trust Hospital v Supreme Elevators India (P) Ltd., Special Leave Petition (Civil) No.18636/2019 – Reference pending:
Held: Till the reference is decided one way or the other, the law declared in Pratibha Pratisthan continues to hold the field as no order has been passed in Special Leave Petition (Civil) No.18636/2019 requesting other Benches to await the outcome thereof – On the facts of a case, it is always open to a Court to follow the most applicable precedent, as per its understanding yet, the principle is settled that for questions of law, in the case of a conflict between equal Bench-strength judgments, the earlier view alone should be followed. [Para 44]
Trusts Act, 1882 – Legal status of a ‘company’ cannot be imported to a Trust:
Held: Mukund does not lay down the correct position of law having wrongly assigned equivalence between a ‘company’ and a Trust, besides running counter to the exposition of this Court qua ss.3 and 13 of the Trusts Act – The legal status accorded to a ‘company’ cannot be imported to a Trust, in the eyes of law, in the case at hand. [Para 36]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Divya Pandey. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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