Sankar Padam Thapa  v. Vijaykumar Dineshchandra Agarwal: Landmark Decision on Trust – A Trust Cannot Be Made as a Party to a Litigation

Jojy George Koduvath.

See Earlier Article in ‘indianlawlive‘:
‘Does a Cheque-Case under NI Act Lie Against a Trust? Prana Educational and Charitable Trust v. State of Kerala, ILR 2023-4 Ker 252 – Whether Correctly Decided?’

Preface

Sankar Padam Thapa  v. Vijaykumar Dineshchandra Agarwal (Ahsanuddin Amanullah, Prashant Kumar Mishra, JJ), 2025 INSC 1210 (09-10-2025), is a landmark decision on trust.

It held:

  • A Trust Is Not a Legal Person.
  • A Trust Operates through its Trustees.
  • Trustees Can Maintain and Defend a Suit.
  • Trust is an Obligation and not a Legal Entity.
  • No Legal Requirement For A Trust To Be Made A Party.
  • Just as a Managing Director is responsible for the affairs of a company, a Chairman or Managing Trustee is responsible for the affairs and administration of a Trust, within the powers and duties conferred by the Trust Deed and law.

Question Considered

Two principal questions arose for consideration in this case. They are:

  • (i) Whether a complaint under Section 138 of the Negotiable Instruments Act, 1881, is maintainable against the Chairman or a Trustee of a Trust when the cheque in question has been issued on behalf of the Trust, without the Trust itself being made an accused; and
  • (ii) Whether the complainant under Section 138 must make specific averments regarding the accused-trustee’s role and responsibility in the conduct of the day-to-day affairs of the Trust, even though the person is admittedly a Trustee.

It arose from the decision of the Meghalaya High Court (2023-1 GLT 344) which quashed the proceedings before the Judicial Magistrate, Shillong.

The Impugned High Court Judgment

The respondent issued a Cheque to the complainant under the signature of the respondent as authorised signatory of Orion, a trust. The Cheque was dishonoured. It led to the filing of a complaint under Sections 138 and 142 of the NI Act, as well as under Section 420 of the Indian Penal Code, 1860. The Respondent preferred a Criminal Petition under Section 482 of the Code of Criminal Procedure, 1973, before the High Court seeking to quash the complaint, on the ground, inter alia, that Orion (Trust) is a juristic entity and a necessary party.

Part I

Apex Court Adjudicated –  Trust is NOT a Legal Person

Decisions relied on (in Sankar Padam Thapa  v. Vijaykumar Dineshchandra Agarwal) to show – Trust is not a ‘legal entity’ capable of being sued – are:

  • 1. Pratibha Pratisthan v. Manager, Canara Bank, (2017) 3 SCC 712.
  • 2. K P Shibu v. State of Kerala, 2019 SCC OnLine Ker 7585, 2019 (3) KHC 1.

Pratibha Pratisthan v. Manager, Canara Bank

In Pratibha Pratisthan v. Manager, Canara Bank, (2017) 3 SCC 712, it is held

  • A Trust is not a person.
  • It could not be a consumer.
  • A Trust cannot be a complainant.
  • It would not fall under the definition of ‘person’ as per Section 2(m) of the Consumer Protection Act.

The Apex Court, in Sankar Padam Thapa  v. Vijaykumar Dineshchandra, quoted the following from the Pratibha Pratisthan case-

  • “4. A reading of the definition of the words “complaint”, “complainant” and “consumer” makes it clear that a trust cannot invoke the provisions of the Act in respect of any allegation on the basis of which a complaint could be made. To put this beyond any doubt, the word “person” has also been defined in the Act and Section 2(1)(m) thereof defines a “person” as follows:
    • “2. (1)(m) “person” includes—
    • (i) a firm whether registered or not;
    • (ii) a Hindu undivided family;
    • (iii) a cooperative society;
    •  (iv) every other association of persons whether registered under the Societies Registration Act, 1860 (21 of 1860) or not;”
  • 5. On a plain and simple reading of all the above provisions of the Act it is clear that a trust is not a person and therefore not a consumer. Consequently, it cannot be a complainant and cannot file a consumer dispute under the provisions of the Act.”

After quoting Sections 3 (definition of Trust) and 13 (Trustee to protect title to trust-property) of the Trust Act, the Apex Court observed in Sankar Padam Thapa  v. Vijaykumar Dineshchandra Agarwal as under:

  • “23. To our mind, the above-extracted Sections of the Trusts Act would also favour the view we are taking, as the obligation to ‘maintain and defend’ suits is placed on the shoulders of a Trustee and not the Trust itself. It is clear that only a Trustee has the obligation to file, maintain and defend any suit on behalf of the Trust. Meaning thereby, that a Trust does not have a separate legal existence of its own, making it incapable of suing or being sued.”

KP Shibu v. State of Kerala

The Kerala High Court, in  KP Shibu v. State of Kerala (B. Sudheendra Kumar, J.), 2019 (3) KHC 1, held –

  • Trustees can maintain and defend a suit to protect the Trust property.
  • A Trust is not a juristic person or a legal entity, and has no legal existence of its own.
  • A Trust itself cannot sue or be sued in a court of law.
  • A Trust would not fall within the term ‘association of individuals’.

In Sankar Padam Thapa  v. Vijaykumar Dineshchandra Agarwal the Apex Court quoted the following from KP Shibu v. State of Kerala, 2019 (3) KHC 1-

  • “16. Thus, it is clear from the above provisions that all the trustees are the owners of the property, but they are obliged to use the same in a particular manner. If a number of trustees exist, they are the joint owners of the property. The trustees are bound to maintain and defend all suits, for the preservation of the trust-property and the assertion or protection of the title thereto. Thus, it appears that the “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. Therefore, 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.”

Trust is an Obligation and not a Legal Entity

Trust, as defined under the Indian Trusts Act, 1882 is an obligation and not a legal entity.

The Apex Court, while discussing this matter, referred (with approval) the following decisions placed by the Appellant:

  • KR Rajan v. Cherian K Cherian, 2019 SCC OnLine Ker 4699 (Kerala High Court)
  • Duli Chand v. M/s MPTC Charitable Trust, 1983 SCC OnLine Del 270 (Delhi High Court)
  • V Chandrasekaran v. Venkatanaicker Trust, 2016 SCC OnLine Mad 33745 (Madras High Court)
  • Narayana Iyer v. Anandammal Adheena Trust, (2021) 3 CTC 776; (Madras High Court)
  • Kansara Abdulrehman Sadruddin v. Trustees of the Maniar Jamat Ahmedabad, AIR 1968 Guj 184 (Gujarat High Court)
  • Vijay Sports Club v State of Bengal, 2019 SCC OnLine Cal 2331 (Calcutta High Court).

A Trust operates through its Trustees

After referring the aforestated decisions, the Apex Court (in Sankar Padam Thapa  v. Vijaykumar Dineshchandra Agarwal) said as under:

  • “25. …. A Trust is also not like a corporation which has a legal existence of its own and therefore can appoint an agent. A Trust operates through its Trustees, who are legal entities. We may gainfully refer to the decision of the Kerala High Court in KR Rajan (supra), where the said Court has rightly held:
  • ‘7. The legal status of a trust, is thus well discernible. Trust not being a legal person, and the Code of Civil Procedure not providing any enabling provision for the Trust to sue or for being sued in its name, there is no merit in the contention that the Trust is to be arrayed as a co-nominee party. The arraying of the trust in its own name is otiose or redundant. It is the trustees who are to be impleaded to represent the trust. Therefore, the contention of the petitioner on the ground of non-joinder, also fails’.”

Trust Is An Obligation Imposed On The Ostensible Owner – Trustee

The Apex Court held further as under (in Sankar Padam Thapa  v. Vijaykumar Dineshchandra Agarwal):

  • “26. Ergo, it is clear that though a Trust may act or even be treated as an entity for certain legal purposes and not all legal purposes, a Trust is an obligation imposed on the ostensible owner of the property to use the same for a particular object – for the benefit of a named beneficiary or charity, and it is the Trustee(s) who are bound to maintain and defend all suits and to take such other steps with regard to the nature, land or the value of the Trust property, that may be reasonably required for the preservation of the Trust property, and the assertion of protection of title thereto, subject to the provisions of the instructions of Trust to take such other steps.”

No Legal Requirement For A Trust To Be Made A Party

The Apex Court held further as under (in Sankar Padam Thapa  v. Vijaykumar Dineshchandra Agarwal):

  • “27. There exists no ambiguity about there being no legal requirement for a Trust to be made a party in a proceeding before a Court of Law since it is only a/the Trustee(s) who are liable and answerable for acts done or alleged to have been done for and on behalf of the said Trust. From a perusal of Orion’s Deed of Trust, of which the Respondent is the Chairman/Authorized Signatory, it emerges clearly that the relevant clauses deal with the Trustee insofar as administering and holding the funds and properties of the Trust are concerned. Which is to say that the Trust (i.e., Orion) operates only through the Trustee(s) and that the objects thereof were for charitable purposes. The Deed of Trust also provides for permitting one or more Trustees to operate a bank account. It becomes all the more apparent that it is the Trustees alone, through whom the Trust funds/property(ies) are managed and dealt with. The Trust itself is without any independent legal status.”

Apex Court Disapproved Prana Educational Trust Case

The Apex Court (in Sankar Padam Thapa  v. Vijaykumar Dineshchandra Agarwal) disapproved Prana Educational and Charitable Trust v. State of Kerala, 2023 (6) KHC 175, holding as under:

  • “32. We do not approve of the manner in which the learned Single Judge in Prana Educational and Charitable Trust  (supra) decided to ignore binding precedent in K P Shibu (supra), which was a judgment rendered by another learned Single Judge of the same Court, earlier in point of time, merely by noting ‘it is discernible that the said decision is not so elaborative and the interpretation of the term “association of individuals” not done by applying the ratio of ejusdem generis.’ It was not open to the learned Judge in Prana Educational and Charitable Trust (supra) to prefer the view expressed by other High Courts in preference to the view of a Bench of the own High Court of equal strength expressed previously. At the most, recording his disagreement with the view in K P Shibu (supra), the learned Judge in Prana Educational and Charitable Trust (supra) ought to have referred the matter to the learned Chief Justice of the High Court seeking constitution of a larger Bench. The only other way Prana Educational and Charitable Trust (supra) could have gotten over K P Shibu (supra) despite being a co-equal Bench would have been by undertaking an analysis via the principles of per incuriam and/or sub-silentio, as undertaken by a 3-Judge Bench recently in A Raja v D Kumar, 2025 SCC OnLine SC 1033. We say this illustratively. Not as a matter of routine can a later Bench of equal strength refuse to follow an earlier decision of a Bench of equal strength. The law hereon was stated in National Insurance Company Limited v Pranay Sethi, (2017) 16 SCC 680 and Union Territory of Ladakh v Jammu and Kashmir National Conference, 2023 SCC OnLine SC 1140. Therefore, while not disturbing Prana Educational and Charitable Trust (supra) inter- parties, we declare the statement of law therein incorrect to the extent it rules on the issue before us, on account of failure to adhere to binding precedent.”

Read Also:

Part II

Requirement of Averments – Role of Trustee-Accused in Affairs of Trust

The position of a Managing Director in a company carries responsibility for its affairs. A similar principle applies to Trusts — the Trustees (authorised signatory or Managing Trustee, where designated) are responsible for the administration and conduct of the Trust’s affairs, subject to the powers and duties defined by the Trust Deed and applicable law.

The Apex Court (in Sankar Padam Thapa  v. Vijaykumar Dineshchandra Agarwal) relied upon the decision SMS Pharmaceuticals Ltd. v Neeta Bhalla, (2005) 8 SCC 89 [3-Judge Bench], wherein it was held that a position of a Managing Director would suggest responsibility of the person holding the said position, in the day-to-day affairs of the Company.

The following portion from SMS Pharmaceuticals Ltd. (supra) is quoted by the Apex Court.

  • “…. The answer to the question posed in sub-para (b) has to be in the negative. Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. …
  • …. the managing director or joint managing director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141.”

The Apex Court also sought support from KK Ahuja v. VK Vora, (2009) 10 SCC 48, which held as under:

  • “27. The position under Section 141 of the Act can be summarised thus:
  • .(i) If the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director or Joint Managing Director at the relevant time. This is because the prefix “Managing” to the word “Director” makes it clear that they were in charge of and are responsible to the company, for the conduct of the business of the company.”

The Apex Court also relied on Sunita Palita v. Panchami Stone Quarry, (2022) 10 SCC 152, where it was observed:

  • “36. The High Court also rightly held that the Managing Director or Joint ManagingDirector would admittedly be in charge of the company and responsible to the company for the conduct of its business by virtue of the office they hold as Managing Director or Joint Managing Director. These persons are in charge of and responsible for the conduct of the business of the company, and they get covered under Section 141 of the NI Act.”

End Notes

Trustees Can Maintain and Defend a Suit

Sections 3 and 13 of the Trusts Act read thus:

  • “3. Interpretation-clause:
  • “Trust”—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;
  • the person who reposes or declares the confidence is called the “author of the trust”; the person who accepts the confidence is called the “trustee”;
  • the person for whose benefit the confidence is accepted is called the “beneficiary”; the subject-matter of the trust is called “trust-property” or “trust money”;
  • the “beneficial interest” or “interest” of the beneficiary is his right against the trustee as owner of the trust-property; and the instrument, if any, by which the trust is declared is called the “instrument of trust”;
  • a breach of any duty imposed on a trustee, as such, by any law for the time being in force, is called a “breach of trust”; and in this Act, unless there be something repugnant in the subject or context, “registered” means registered under the law for the registration of documents for the time being in force;
  • a person is said to have “notice” of a fact either when he actually knows that fact, or when, but for wilful abstention from inquiry or gross negligence, he would have known it, or when information of the fact is given to or obtained by his agent, under the circumstances mentioned in the Indian Contract Act, 1872, Section 229;
  • and all expressions used herein and defined in the Indian Contract Act, 1872, shall be deemed to have the meanings respectively attributed to them by that Act.
  • xxx
  • 13. Trustee to protect title to trust-property—A trustee is bound to maintain and defend all such suits, and (subject to the provisions of the instrument of trust) to take such other steps as, regard being had to the nature and amount or value of the trust-property, may be reasonably requisite for the preservation of the trust-property and the assertion or protection of the title thereto.”

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