Summary
A complaint under Section 138 of the Negotiable Instruments Act over a cheque issued on behalf of a trust is maintainable against the trustee who signed it, without arraying the trust as an accused. A trust is an obligation annexed to property under the Indian Trusts Act, not a juristic person, and acts only through its trustees. The High Court's quashing of the complaint was set aside, and contrary High Court decisions were overruled.
Issues
- Whether, when a cheque is issued on behalf of a trust, a complaint under the Negotiable Instruments Act is maintainable against the Chairman or a trustee without the trust being made an accused.
- Whether a trust is a juristic person capable of suing and being sued, or a "company" or "association of individuals" for the purposes of Section 141 of the NI Act.
- Whether a later bench of equal strength may decline to follow an earlier coordinate decision.
Provisions considered
- Sections 138 and 141, Negotiable Instruments Act, 1881Following SMS Pharmaceuticals and K.K. Ahuja, a signatory of a dishonoured cheque is responsible for the incriminating act. The Court held that the Section 141 jurisprudence on companies, under which the company must be arraigned, cannot be carried over to a trust, which is not a company. (¶¶ 17, 18, 19, 20, 29, 36, 39)
- Sections 3 and 13, Indian Trusts Act, 1882A trust is defined as an obligation annexed to the ownership of property, and the duty to maintain and defend suits rests on the trustee. The Court read these provisions to hold that a trust has no separate legal existence and acts only through its trustees, who are answerable for its acts. (¶¶ 22, 23, 25, 26, 27)
Held
- A trust is not a legal entity or juristic person and, unlike a company, cannot appoint an agent; it operates through its trustees, who alone are bound to maintain and defend suits on its behalf. There is therefore no legal requirement to make a trust a party; its trustees are liable for acts done on its behalf. (¶¶ 23, 25, 26, 27)
- A complaint under the NI Act arising from the dishonour of a cheque issued on behalf of a trust is maintainable against the trustee who signed the cheque, without arraying the trust as an accused. This view is confined to the NI Act. (¶¶ 28, 29)
- Equating a trust with a company for Section 141 is a fallacy, since a company's separate legal personality cannot be imported to a trust. Prana Educational and Charitable Trust, Dadasaheb Rawal Co-op. Bank, Abraham Memorial Educational Trust, Mukund and Bijaya Manjari Satpathy were overruled on this point without disturbing their effect between the parties. (¶¶ 34, 36, 37, 38)
- The High Court wrongly relied on Pawan Kumar Goel, which concerned a company, and on SMS Pharmaceuticals, which dealt with the averments needed for vicarious liability and not with non-impleadment of a trust. (¶ 39)
- A Single Judge cannot disregard an earlier decision of a coordinate bench of the same High Court because it is "not so elaborative"; he must follow it, or refer the matter to a larger bench, or show that it is per incuriam or sub silentio. (¶ 32)
- Pratibha Pratisthan continues to hold the field until the pending reference doubting it is decided. Where coordinate benches of the Supreme Court conflict on a question of law, the earlier view is to be followed, applied with regard to the facts; A.P. Electrical Equipment Corporation does not dilute this. (¶¶ 42, 44)
Result
Appeal allowed; High Court judgment set aside and Criminal Case No.44(S)/2019 restored for expeditious disposal; other contentions left open before the Trial Court; Registry to seek orders from the Chief Justice for a bench to hear the pending reference on Pratibha Pratisthan.