June 12, 2019
In a recent case, the High Court of Kerala has held that cheque bounce complaint under Section 138 of NI Act is not maintainable against the Trustees of a Trust.
In the case, the respondent had filed a complaint against the Petitioners, who are the Trustees of the Trust under Section 138 of Negotiable Instrument Act, 1881 for offence of dishonor of cheque. The Petitioners have argued in the case that since “Trust” is not an “association of individuals”, no successful prosecution against the petitioners, invoking the provisions under S.141 of the NI Act could be sustained.
The High Court of Kerala in view of relevant provisions under the Negotiable Instrument Act and the Indian Trust Act held that
The Court made the following observations in the case:
Whether Trust is a Body corporate or not?
In view of relevant provisions of the Indian Trust Act and the requirements of a juristic person or legal entity and Body Corporate, the Court held that a “Trust” is not a juristic person or a legal entity, as the juristic person has a legal existence of its own and hence it is capable of suing and being sued in a Court of law. Thus it appears that a “Trust” is not like a body corporate, which has a legal existence of its own and therefore can appoint an agent. The above discussion would make it clear that a “Trust” is not a body corporate.
Whether Trust is an “Association of Individuals”?
While deciphering this issue, the Court noted that a mere combination of persons or coming together of persons, without any intention to have a joint venture or carry on some common activity with a common understanding and purpose to achieve some common benefit, would not convert two or more persons into a “body of individuals / association of persons.”
In view of the aforesaid observations, the High Court held that discussion would make it clear that the “Trust” is not a “body corporate” or an “association of individuals” as provided in the explanation to S.141 of the NI Act. Therefore, no prosecution against the trustees, invoking the provisions under S.141 of the N.I. Act, can be maintained.