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Sec.138 NI Act - Complaint Not Maintainable Against Trustees For Dishonour Of Cheque

In Crl. M. C. No. 3799, 3801, 3804, 3827, 3832, 3843, 3844, 3847, 3852 of 2018, in the appeal before the Kerala High Court, the petitioners, who were the trustees of a trust along with the trust, were arraigned as the accused persons in a complaint filed by a person before the Magistrate Court for offence under Section 138 of the NI Act. The petitioners approached the High Court seeking to quash the complaint filed against them.

The primary question before the High Court was whether a trust and its trustees fall within the definition of 'company' under the explanation to section 141.

As per the definition of 'company' under explanation to section 141, "company" means any body corporate and includes a firm or other association of individuals. Therefore, in order to answer whether section 141 can be invoked in case of a trust and its trustees, it became necessary for the Court to find out whether a trust means a 'body corporate', 'a firm' or an 'association of individuals'. The findings of the Court are given below.

The Court observed that as per S.3 of the Trusts Act, a "Trust" is an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner. Looking into the definition of trust and other provisions of the Indian Trust Act, 1882, Court observed that 'Trust' is not capable of suing and being sued in a court of law, even though the trustees can maintain and defend suits for the preservation and protection of the trust property. Hence the Court held that a "'Trust' is not like a juristic person or a legal entity, as a juristic person has a legal existence of its own and hence it is capable of suing and being sued in a court of law. Hence a 'Trust' is not like a body corporate, which has a legal existence of its own and therefore can appoint an agent.

The Court categorically observed that a trust is not a firm.

On going through various precedents, Court observed that an association of persons/ body of individuals are a combination of persons coming together for a common action with a common understanding and a purpose to achieve some common benefit. As trustees are not beneficiaries and not have any common benefit, court held that trustees are not association of persons/ body of individuals. Further, Court also relied on the ratio in Pratibha Pratisthan & Ors. v. Manager, Canara Bank & Ors (2017 (3) SCC 712) where it was held that Trust is not a 'person' as defined in Consumer Protection Act, 1986 based on the reasoning that Trust is not an 'association of persons'.

Thus, the Court concluded that as a trust is not a body corporate or association or individuals and that it does not fall within the meaning of 'company' under section 141 of the NI Act, no prosecution is possible against the petitioner trust and trustees invoking section 141 and quashed the complaint invoking powers under section 482 of CrPC.

Article referred: https://www.livelaw.in/news-updates/sec138-ni-act-complaint-not-maintainable-against-trustees-for-dishonour-of-cheque-kerala-hc-145533

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