Skip to main content

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

Comments

Post a Comment

Most viewed this month

Michigan House Approves 'Right-to-Work' Bill

Amid raucous protests, the Republican-led Michigan House approved a contentious right-to-work bill on  Dec 11 limiting unions' strength in the state where the (Union for American Auto Workers)  UAW was born. The chamber passed a measure dealing with public-sector workers 58-51 as protesters shouted "shame on you" from the gallery and huge crowds of union backers massed in the state Capitol halls and on the grounds. Backers said a right-to-work law would bring more jobs to Michigan and give workers freedom. Critics said it would drive down wages and benefits. The right-to-work movement has been growing in the country since Wisconsin fought a similar battle with unions over two years ago. Michigan would become the 24th state to enact right-to-work provisions, and passage of the legislation would deal a stunning blow to the power of organized labor in the United States. Wisconsin Republicans in 2011 passed laws severely restricting the power of public s...
Post a Comment
Read more

Power to re-assess by AO and disclosure of material facts

In AVTEC Limited v. DCIT, the division of the Delhi High Court held that AO is bound to look at the litigation history of the assessee and cannot expect the assessee to inform him.  In the instant case, the Petitioner, engaged in the business of manufacturing and selling of automobiles, power trains and power shift transmissions along with their components, approached the High Court challenging the re-assessment order passed against them. For the year 2006-07, the Petitioner entered into a Business Transfer Agreement with Hindustan Motors Ltd, as per which, the Petitioner took over the business from HML.  While filing income tax return for the said year, the petitioner claimed the expenses incurred in respect of professional and legal charges for the purpose of taking over of the business from HML as capital expenses and claimed depreciation. Article referred: http://www.taxscan.in/assessing-officer-bound-look-litigation-history-assessee-delhi-hc-read-order/8087/
Post a Comment
Read more

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more