⚠️ DISCLAIMER: This content is for informational purposes only and does not constitute legal advice. Consult a qualified legal professional for specific legal guidance. The information provided is based on judicial interpretation and may be subject to changes in law.
If a cheque issued by a Trust bounces, can you file a complaint under the Negotiable Instruments Act solely against the Trustee who signed the cheque, or must you also name the Trust as an accused?
Yes, you can file the complaint solely against the Trustee.
The Supreme Court has clarified that a Trust is not a separate legal entity that can sue or be sued in its own name. It is the Trustees who are legally responsible for the Trust's actions, including issuing cheques.
Therefore, a complaint for a dishonoured cheque is perfectly maintainable against the Trustee who signed it, and there is no legal requirement to also array the Trust as an accused party.
The Court delved into the core definition of a Trust under the Indian Trusts Act, 1882. It emphasized that a Trust is not a juristic person like a company or a corporation. Instead, it is an "obligation" imposed on the Trustee (the owner of the property) to use that property for the benefit of another.
The Supreme Court reinforced that the Indian Trusts Act places the duty to "maintain and defend all suits" squarely on the Trustee, not the Trust itself.
The respondent argued that just as a company must be named as the principal accused before its directors can be held vicariously liable, the Trust must also be named. The Supreme Court firmly rejected this analogy.
The Supreme Court specifically overruled several judgments from High Courts (Kerala, Bombay, Madras, Orissa) that had taken the contrary view—that a Trust is a juristic person and must be prosecuted. The Court found these judgments to be based on a flawed equivalence between a Trust and a company.
Sue the Trustee, Not Just the Trust: Your primary legal target should be the individual Trustee(s) who authorized and signed the dishonoured cheque.
Verify the Signatory: Obtain a copy of the cheque and identify who signed it and in what capacity (e.g., "Chairman," "Managing Trustee").
State the Facts Clearly: Explain the relationship, the reason for the cheque, and its dishonour.
Explicitly Name the Trustee: Clearly state the name of the Trustee being sued and specify their role.
You Need Not Plead "Day-to-Day Affairs": If the accused is the signatory, their signature itself establishes responsibility.
If the Accused Challenges the Complaint: Cite this Supreme Court judgment if they argue that the Trust should have been named as an accused.
Personal Liability is Real: Signing a cheque on behalf of a Trust does not shield you from liability under the NI Act.
The "It Was for the Trust" Defense is Weak: You cannot avoid prosecution merely by claiming the cheque was for Trust purposes.
Challenge the Facts: Focus on factual disputes like:
- No legally enforceable debt.
- Cheque issued as security.
- Stoppage of payment for valid reasons.
Avoid Frivolous Technical Challenges: Quashing petitions based only on the Trust not being impleaded are now unlikely to succeed.
"A Trust operates only through the Trustee(s)... The Trust itself is without any independent legal status."
This judgment ensures that cheque bounce cases involving Trusts have a clear path to justice. It affirms that: