Sankar Padam Thapa VS Vijaykumar Dineshchandra Agarwal

In the instant case, complaint u/S.138 NI Act filed against trustee for dishonour of cheque issued on behalf of trust was dismissed on ground of non-joinder of trust. Question before the Court was whether in the absence of a Trust being made an accused in a complaint under the Negotiable Instruments Act, 1881 , when a Cheque has been issued on behalf of a Trust, the said complaint would be maintainable against the Chairman/a Trustee of the said Trust?

Held, 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.

Under the law, the obligation to ‘maintain and defend’ suits is placed on the shoulders of a Trustee and not the Trust itself. It is clear that only a Trustee has the obligation to file, maintain and defend any suit on behalf of the Trust. Meaning thereby, that a Trust does not have a separate legal existence of its own, making it incapable of suing or being sued. Trust is not a ‘legal entity’ or ‘juristic person’. A Trust 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.

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. Perusal of Trust Deed showed that the Trust operated only through the Trustee(s) for charitable purposes. The Deed of Trust also provided for permitting one or more Trustees to operate a bank account. Trust funds/property(ies) were managed and dealt with only through the trustees. The Trust itself was without any independent legal status. Dismissal of complaint was erroneous.(Para 18
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