A cheque dishonour complaint
under Section 138 of the Negotiable Instruments Act, 1881 is maintainable
directly against the trustee who signed the cheque on behalf of a trust, even
if the trust itself is not arrayed as an accused.
Title: Trustee
Personally Liable For Bounced Cheques: Supreme Court’s Landmark Ruling In Sankar Padam Thapa v. Vijaykumar
Dineshchandra Agarwal (2025 INSC 1210)
· Case Title: Sankar Padam Thapa v. Vijaykumar Dineshchandra Agarwal[
· Citation: 2025 INSC 1210; also reported as 2025 SCC OnLine SC 2194 (provisional)
· Court: Supreme Court of India, Criminal Appellate Jurisdiction
· Coram: Ahsanuddin Amanullah J., Prashant Kumar Mishra J.
· Date of Judgment: 9 October 2025
· Statutes involved: Negotiable Instruments Act, 1881 – Sections 138, 141, 142; Indian Trusts Act, 1882 – Sections 3, 13; Code of Criminal Procedure, 1973
· Core holding: A trust is not a juristic person or “company” under Section 141 NI Act; the trustee–signatory of the cheque can be prosecuted under Section 138 without impleading the trust.
As Senior Research Advocate
Umakant Tripathi, this judgment is treated as a turning point for cheque bounce
litigation involving educational, charitable and religious trusts across India.
It settles the long‑standing confusion whether a trust must be arraigned as an
accused, clarifies the personal exposure of trustees, and reshapes drafting
strategy for both complainants and defence in Section 138 proceedings.
Case note A – Section 138 NI Act and
trustees
·
Dishonour of a cheque issued on behalf of a trust can
validly give rise to prosecution under Section 138 against the trustee who
signed it.
·
There is no legal
requirement to array the trust itself as an accused for maintaining such a
complaint.
·
The Court treats the signatory trustee as the “drawer” for
the purposes of Section 138, because the trust has no independent legal
personality.
·
The cause of action under Section 138 (presentation,
dishonour, notice, failure to pay within 15 days) remains the same; only the
proper accused is clarified.
·
If the cheque bears the name of a trust account, but is
signed by a trustee as Chairman/Authorised Signatory, prosecution lies against
that trustee personally.
·
Trustees who are in charge of the trust’s financial affairs
and sign the cheque cannot escape criminal process by arguing that the trust is
the “principal offender.”
·
The judgment restores a complaint which had been quashed by
the Meghalaya High Court solely because the trust was not impleaded.
·
The Supreme Court emphasises that procedural objections
about “non‑joinder of trust” cannot defeat the object of Section 138 to protect
cheque‑based transactions.
·
The trustee–signatory’s liability is anchored in his act of
issuing the cheque from an account he manages, not in the separate personality
of the trust.
·
Even where several trustees exist, the focus under Section
138 is on the person who actually signed the cheque leading to dishonour.
·
The Court borrows the reasoning from K.K. Ahuja v. V.K. Vora that the signatory is clearly responsible
for the incriminating act and hence falls within the sweep of Section 141
principles.
·
There is no need for elaborate averments about the trustee’s
role where the complaint clearly states that he is Chairman/Authorised
Signatory and signatory of the cheque.
·
By restoring the complaint, the Court allows the trial to
test the factual defences, instead of terminating the case at the threshold on
technical grounds.
·
The judgment protects payees dealing with trusts, who
otherwise faced the risk of complaints failing due to technical pleas about
arraying parties.
·
The ruling will affect thousands of cheque bounce cases
where trusts run schools, hospitals, religious institutions, NGOs and
educational institutions.
·
Trustees now stand in a position similar to managing
directors and signatory directors of companies for cheque dishonour purposes.
·
Complaints can be framed directly against the
trustee–signatory, without fear that courts will insist on adding the trust as
an additional accused.
·
This reduces unnecessary multiplicity of parties and ensures
speedy adjudication, in line with the objectives of Chapter XVII NI Act.
·
The Court reiterates that Section 138 is a strict liability
provision with limited defences, and trustees cannot dilute it by relying on
technicalities of trust law.
·
Defence relating to absence of legally enforceable debt,
financial capacity of complainant or nature of transaction remains open at
trial; the decision only settles maintainability.
·
The ruling harmonises NI Act with the Indian Trusts Act by
recognising that obligations of trustees include defending and maintaining
suits in their own name.
·
It underlines that criminal liability follows control and
signature, not the nomenclature of the account.
·
Trustees who casually sign cheques for huge sums on behalf
of trusts must now appreciate the personal exposure under Section 138.
·
The judgment will likely be cited in future to repel pleas
that complaints are bad for non‑joinder of unincorporated bodies.
·
Trial courts have been directed to proceed expeditiously in
such matters, reinforcing the pro‑complainant tilt of NI Act jurisprudence.
·
For practitioners, this case becomes a standard authority to
overcome maintainability objections in trust‑related cheque bounce litigation.
Case note B – Trust is not a juristic
person; no “principal offender” requirement
·
The Supreme Court holds that a trust is not a juristic person like a company or a society and cannot be
treated as a “company” or “association of individuals” under Section 141 NI
Act.
·
Under Section 3 of the Indian Trusts Act, a trust is defined
as an obligation attached to the ownership of property, not as a separate legal
entity.
·
Section 13 of the Trusts Act casts the duty to “maintain and
defend” suits on the trustee, confirming that the trust itself neither sues nor
is sued in its own name.
Trust vs company – key differences
|
Aspect |
Trust (Indian Trusts Act) |
Company (Companies Act /
jurisprudence) |
|
Legal status |
Separate legal entity distinct from
members [7] |
|
|
Capacity to sue/be sued |
Acts only through trustees; they sue
and are sued personally [6][7] |
Company sues/is sued in its own name [7] |
|
Section 141 NI Act |
Expressly covered as “company”;
officers can be vicariously liable [2][9] |
|
|
Criminal liability locus |
On trustees who control and act,
especially signatory [1][10] |
·
Because a trust is not a company, the concept of “principal
offender” under Section 141 does not apply in the same way; there is no
necessity of first arraigning the trust as an accused.
·
Vicarious liability in the trust context arises directly
against trustees who actually act and sign, not through the fiction of
corporate personality.
·
The Court explicitly identifies as a “fallacy” the earlier
approach of some High Courts which equated trusts with companies for NI Act
purposes.
·
By clarifying that trusts are unincorporated obligations,
the Court closes the door on attempts to use Section 141’s structure to insist
on naming the trust as principal offender.
·
The decision reinforces the doctrinal line that criminal
statutes extending vicarious liability must be strictly construed and cannot be
expanded beyond their explicit text.
·
For drafting, this means complainants should directly target
the human actors (trustees) who executed the cheque, rather than focusing on
the abstract entity of the trust.
Case note C – Interaction with the
Indian Trusts Act and earlier conflicting High Court views
·
The Supreme Court undertakes a detailed reading of Sections
3 and 13 of the Trusts Act to anchor its conclusion that a trust lacks
independent legal personality.
·
It highlights that the entire scheme of the Trusts Act is
centred on duties and responsibilities of trustees, not on any separate persona
of the trust.
·
Earlier High Court decisions (including those in Kerala,
Orissa and other States) that had treated trusts as companies or juristic
persons for NI Act purposes are expressly disapproved.
·
The Court aligns itself with High Courts such as Delhi,
Madras, Gujarat and Calcutta which had already held that a trust is not a
juristic person.
·
This resolves a long‑standing interpretive conflict that had
led to inconsistent trial‑court orders on whether trusts must be arraigned in
cheque bounce complaints.
·
The judgment also draws on corporate law principles from Salomon v. A. Salomon & Co. Ltd. to
demonstrate why the company–trust analogy is misleading.
·
By rejecting the broader view of juristic personality, the
Court strengthens the orthodox property‑cum‑obligation understanding of trusts
in Indian law.
·
This reasoning will influence not only NI Act litigation but
also wider questions of how trusts enter into contracts, hold property and face
liabilities.
·
The case arises from a ₹5 crore cheque issued by Orion Education Trust, signed by its
Chairman/Authorised Signatory, the respondent, in favour of the appellant for
liaisoning services.
·
The cheque was presented and dishonoured due to
insufficiency of funds, leading to a statutory notice and then a complaint
under Sections 138/142 NI Act before the Judicial Magistrate at Shillong.
·
The complaint named only the Chairman‑trustee as accused,
not the trust, which triggered an objection that the trust was a necessary
party.
·
The Meghalaya High Court, in revision, quashed the complaint
holding that proceedings against the trustee alone, without impleading the
trust, were not maintainable.
·
The complainant appealed to the Supreme Court, raising a
pure question of law on the maintainability of a Section 138 complaint against
a trustee–signatory without arraying the trust.
Issues before the Supreme Court
·
Whether a trust is a “juristic person”, “company” or
“association of individuals” for the purposes of Section 141 of the Negotiable
Instruments Act.
·
Whether a cheque dishonour complaint under Section 138 NI
Act is maintainable against a trustee who has signed the cheque on behalf of
the trust without impleading the trust as an accused.
·
Whether the Meghalaya High Court was justified in quashing
the complaint at the threshold on the ground of non‑joinder of the trust.
Arguments – appellant vs respondent
Appellant (complainant):
·
A trust is not a juristic person and cannot sue or be sued
in its own name; trustees are the real actors and are personally answerable.
·
The cheque was signed by the respondent as
Chairman/Authorised Signatory of the trust, making him directly liable under
Section 138.
·
Section 141 NI Act does not apply because there is no
“company”; even by analogy, the signatory trustee stands in the shoes of a
managing director and can be prosecuted without arraigning the trust.
·
The High Court misapplied the concept of “principal
offender” and created an additional, unwarranted procedural hurdle.
Respondent (accused trustee):
·
The trust was the real drawer and principal offender;
without impleading it, prosecution against the trustee alone is not
maintainable.
·
The structure of Section 141 NI Act requires arraignment of
the company or principal entity first, before making officers vicariously
liable.
·
Treating a trust as outside Section 141 would result in
anomalous treatment vis‑à‑vis companies and societies, which enjoy procedural
safeguards.
·
The complaint, therefore, was defective and rightly quashed
by the High Court.
Reasoning – key doctrinal steps
·
Nature of a trust in Indian law: The Court begins by reciting the
definition in Section 3 of the Trusts Act and concludes that a trust is an
obligation relating to property, not a legal person.
·
Duties of trustees: Section 13 and related provisions make
it clear that trustees are personally under a duty to maintain and defend
suits, indicating that litigation involving trust property must be in trustees’
names.
·
Rejection of juristic‑person
status: On this basis, the Court holds
that a trust is not a juristic person like a corporation or company and cannot
be treated as such for criminal liability.
·
Limited scope of Section 141 NI
Act: Section 141 is confined to
“companies” and “associations of individuals”; it cannot be judicially extended
to include trusts, which are of a different legal character.
·
Analogy with managing directors: However, by drawing on earlier NI Act
cases such as SMS Pharmaceuticals Ltd. v.
Neeta Bhalla and K.K. Ahuja v. V.K.
Vora, the Court observes that the signatory of the cheque is always clearly
responsible for its issue.
·
Signatory trustee as responsible
person: Applying that logic, a trustee
who signs a cheque on behalf of a trust is the person “in charge of and
responsible for” the relevant transaction and cannot avoid liability.
·
No requirement to arraign trust: Since the trust is not a juristic
person and cannot be the “company” under Section 141, there is no legal
requirement that it be arrayed as an accused before proceeding against the
trustee–signatory.
·
Disapproval of contrary High
Court rulings:
Decisions which extended Section 141 to trusts or insisted on impleading the
trust as principal offender are explicitly disapproved as being based on a
flawed analogy.
·
Object of Section 138: The Court reiterates that Section 138
is aimed at enhancing the credibility of cheques and cannot be frustrated by
technical pleas about the non‑impleadment of non‑juristic entities.
·
Restoration of complaint: On these foundations, the Court sets
aside the High Court’s quashing order and restores the complaint to the trial
court for disposal on merits.
·
A trust is not a
juristic person and cannot be equated to a “company” or “association of
individuals” for the purposes of Section 141 NI Act.
·
A cheque dishonour complaint under Section 138 is maintainable against a trustee who has
signed the cheque, without arraying the trust as an accused.
·
Trustees who manage and sign on behalf of the trust bear
personal criminal liability for cheque dishonour.
·
Earlier High Court decisions treating trusts as companies
for NI Act purposes are erroneous and stand disapproved.
·
The Meghalaya High Court’s order quashing the complaint for
non‑joinder of the trust is set aside; the trial is directed to proceed
expeditiously.
Interaction with earlier precedents
·
The Court relies on SMS
Pharmaceuticals Ltd. v. Neeta Bhalla and K.K. Ahuja v. V.K. Vora to affirm that a cheque signatory is
presumed responsible for the conduct leading to dishonour.
·
It distinguishes corporate‑personality jurisprudence such as
Salomon v. Salomon to show that
companies and trusts occupy different conceptual spaces.
·
Conflicting High Court rulings on whether trusts are covered
by Section 141 are surveyed and those extending company logic to trusts are
rejected.
·
The judgment thus aligns NI Act jurisprudence with orthodox
trust‑law doctrine, while preserving the pro‑creditor thrust of cheque bounce
decisions.
Practical takeaways for complainants
·
When a dishonoured cheque is issued from a trust account,
name the trustee‑signatory (and other active trustees if facts justify) as
accused under Section 138.
·
It is no longer necessary to implead the trust as a separate
accused in such complaints.
·
Draft the complaint to clearly state the trustee’s
designation (e.g., Chairman/Managing Trustee/Authorised Signatory) and the fact
that he signed the cheque.
·
Focus on establishing legally enforceable debt/liability and
compliance with statutory timelines (presentation, notice, 15‑day payment
window, filing) as usual.
·
Use this judgment to counter preliminary objections and
quashing petitions based on non‑joinder of the trust.
Practical takeaways for accused
trustees
·
Trustees who sign cheques on behalf of trusts face direct
personal exposure under Section 138 and cannot hide behind the trust’s name.
·
Defences should focus on absence of legally enforceable
liability, lack of consideration, or other statutory exceptions, rather than on
technical arguments about parties.
·
Where a trustee is merely a name‑lender and has not in fact
signed or managed the financial affairs, the record must be marshalled to
demonstrate lack of control and involvement.
·
Trustees must insist on robust internal controls, proper
record‑keeping and careful delegation of signing powers to minimise personal
risk.
Drafting and litigation strategy – Adv.
Umakant Tripathi’s notes
·
In complaints involving trusts, prominently cite Sankar Padam Thapa v. Vijaykumar
Dineshchandra Agarwal, 2025 INSC 1210 at the maintainability stage.
·
In the cause title, array the trustee(s) by name with
designation; description of the trust can be added in the body as context, not
as an accused.
·
In quashing or revision proceedings, emphasise that the
Supreme Court has directed trial to proceed where similar objections were
raised and rejected.
·
Combine this judgment with authorities on presumptions under
Sections 118 and 139 NI Act to build a strong pro‑complainant narrative on both
liability and procedure.
·
For defence briefs, focus on rebutting presumptions,
demonstrating absence of enforceable liability, or showing that the cheque was
issued for security or without authority, rather than disputing party‑array.
How this judgment fits into the larger
NI Act landscape
·
It continues the trajectory of Supreme Court decisions that
protect the integrity of cheque transactions and disfavour hyper‑technical
objections.
·
By clarifying the status of trusts, it closes a major
loophole that had allowed trustees to seek quashing on non‑joinder grounds.
·
The ruling will shape drafting, due‑diligence and
risk‑management practices for educational, charitable and religious
institutions that operate through trusts.
·
Settles the conflict among various High Courts on whether a
trust is a juristic person and whether it must be arraigned under Section 141
NI Act.
·
Sends a clear message that trustees who sign cheques cannot
avoid personal responsibility in cheque bounce cases.
·
Provides clear drafting guidance for lawyers: sue the
trustee–signatory; do not worry about making the trust an accused.
·
Strengthens creditor confidence when dealing with trusts and
aligns NI Act jurisprudence with foundational principles of Indian trust law.
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