TaxTMI 
TaxTMI 
2025 (10) TMI 490
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....nal Judgment and Order dated 21.11.2022 (hereinafter referred to as the 'Impugned Judgment') [2022 SCC OnLine Megh 624 | (2023) 1 GLT 344], passed by a learned Single Judge of the High Court of Meghalaya, Shillong (hereinafter referred to as the 'High Court') in Criminal Petition No. 31/2019, wherein the High Court quashed and set aside the proceedings in Criminal Case No. 44(S)/2019 pending before the Court of the learned Judicial Magistrate, Shillong (hereinafter referred to as the 'Trial Court') and the Summoning Order dated 11.02.2019 passed against the Respondent. 4. The William Carey University (hereinafter referred to as the 'University'), a recognized Private University, owned and sponsored by the Agriculture Crafts Trades and Studies Group of Institutions (hereinafter referred to as the 'ACTS Group'), was facing a severe financial crisis. The ACTS Group entered into a Memorandum of Understanding with Orion Education Trust (hereinafter referred to as 'Orion') on 12.10.2017 to hand over the management and administration of the University to Orion. The Respondent is the Chairman of Orion. As Chairman of Orion, the Respondent issued authorization letters to all concerned, d....
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....asically two-fold - (i) the ineligibility of a Trust to be sued, and; (ii) no mandate to make specific averments with regard to the accused's responsibility in conducting the day-to-day business of the Trust. For the first proposition, learned counsel placed reliance on the decision of this Court in Pratibha Pratisthan v Manager, Canara Bank, (2017) 3 SCC 712, where, in the context of the Consumer Protection Act, 1986 (hereinafter referred to as the 'Consumer Protection Act'), it was held that a Trust is not a person and therefore, could not be a consumer. 10. Next, in support of his argument that a Trust is not capable of being sued or suing in a court of law, learned counsel drew the attention of this Court to the decision of the Kerala High Court in K P Shibu v State of Kerala, 2019 SCC OnLine Ker 7585, holding that in the context of the NI Act, it is the Trustees who can maintain and defend a suit to protect the Trust property, and the Trust itself cannot sue or be sued in a court of law, therefore, a Trust is not a juristic person or a legal entity, as a juristic person has a legal existence of its own and hence is capable of suing and being sued in a court of law. It was f....
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....nt is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied. (b) 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 requirement of Section 141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases. (c) The answer to Question (c) has to be in the affirmative. The question notes that 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 directo....
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....ue or be sued for offence punishable under the NI Act. 15. Learned senior counsel supported the Impugned Judgment, submitted that the appeal merited dismissal and advanced that the High Court had not erred. ANALYSIS, REASONING AND CONCLUSION: 16. We have heard respective learned counsel for the parties and perused the materials on record. The question for consideration, as indicated in Paragraph 2 supra, is as to whether in the absence of a Trust being made an accused in a complaint under the NI Act, when a cheque has been issued on behalf of the Trust, the said complaint would be maintainable against the Chairman/a Trustee of the said Trust? 17. On the issue that it is not mandatory to make substantive averments pertaining to the responsibility of the Respondent in the conduct of the day-to-day business of the Trust, reliance was rightly placed on the decision of a 3-Judge Bench of this Court in SMS Pharmaceuticals Ltd. (supra) by learned counsel for the Appellant. 18. We need only reiterate the view espoused by this Court in SMS Pharmaceuticals Ltd. (supra) and K K Ahuja (supra). As such, a person designated as 'Managing Director' or 'Joint Managing Director', by v....
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....rge of and are responsible to the company, for the conduct of the business of the company. (ii) In the case of a Director or an officer of the company who signed the cheque on behalf of the company, there is no need to make a specific averment that he was in charge of and was responsible to the company, for the conduct of the business of the company or make any specific allegation about consent, connivance or negligence. The very fact that the dishonoured cheque was signed by him on behalf of the company, would give rise to responsibility under sub-section (2) of Section 141. (iii) In the case of a Director, secretary or manager [as defined in Section 2(24) of the Companies Act] or a person referred to in clauses (e) and (f) of Section 5 of the Companies Act, an averment in the complaint that he was in charge of, and was responsible to the company, for the conduct of the business of the company is necessary to bring the case under Section 141(1) of the Act. No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable under Section 141(2) by making necessary averments relating to consent and conniv....
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....ho are in charge of it. In such circumstances, the complainant is expected to allege that the persons named in the complaint are in charge of the affairs of the company/firm. It is only the Directors of the company or the partners of the firm, as the case may be, who have the special knowledge about the role they had played in the company or the partners in a firm to show before the Court that at the relevant point of time they were not in charge of the affairs of the company. Advertence to Sections 138 and Section 141, respectively, of the NI Act shows that on the other elements of an offence under Section 138 being satisfied, the burden is on the Board of Directors or the officers in charge of the affairs of the company/partners of a firm to show that they were not liable to be convicted. The existence of any special circumstance that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial to show that at the relevant time they were not in charge of the affairs of the company or the firm. 58.3. Needless to say, the final judgment and order would depend on the evidence adduced. Criminal liability is attract....
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....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.' (emphasis supplied) 22. 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 d....
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....on 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.' (emphasis supplied) 24. The same proposition has been reiterated by the Delhi High Court in Duli Chand (supra), the Madras High Court in V Chandrasekaran (supra) and Narayana Iyer (supra), the Gujarat High Court in Kansara Abdulrehman Sadruddin (supra), the Calcutta High Court in Vijay Sports Club (supra) and the Karnataka High Court in Chikkamuniyappa Memorial Trust v State, ILR 1997 Kar 2460. 25. We find substance in the reasoning assigned by the High Courts of Kerala, Delhi, Madras, Gujarat, Calcutta and Karnataka that a Trust is not a 'legal entity' or 'juristic person'. 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 ent....
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....her a Trust can sue or be sued on its own, we would make it amply clear (and as would also become evident from what follows infra) on this point, that our view is confined to examination of the subject in the context of the NI Act alone, in praesenti. We were called upon to consider only as to whether without making a Trust an accused, a complaint would be maintainable against a Trustee in the eye of law under the NI Act. 29. Hence, the question posed is answered in the affirmative. When a cause of action arises due to an alleged dishonour of cheque and a complaint is initiated under the NI Act, the same is maintainable against the Trustee who has signed the cheque, without the requirement to array the Trust also as an accused. 30. As far as the judgments pressed into service by the Respondent be concerned, we have bestowed thoughtful consideration thereto. We are unable to concur with the propositions they purport to propound. 31. In Prana Educational and Charitable Trust (supra), a learned Single Judge of the Kerala High Court held: '20. Analyzing the decision rendered by the Madras High Court, it could be gathered that after elaborately considering the relevant....
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....either private or public/charitable or otherwise, having either a single trustee or two or more trustees, is a company in terms of Section 141 of the Negotiable Instruments Act. (iv) For the offence under Section 138 of The Negotiable Instruments Act, committed by the Trust, every trustee, who was in-charge of the day-to-day affairs of the Trust shall also be liable for punishment besides the Trust. 22. Therefore, following the legal principles set forth above, it has to be held that the challenge raised by the accused on the ground that no prosecution under Section 138 read with Section 141 of the N.I. Act against the Trust would lie, cannot be sustained and the same stands repelled.' (emphasis supplied) 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 ....
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....istic personality. Reference can be made to the decision in the cases of Shri Banwarilal L. Saini. (supra), Bijaya Manjari Satpathy v. State of Orissa, 2022 LiveLaw (Ori) 158, and Abraham Memorial Educational Trust v. C. Suresh Babu, Cri. OP Nos. 12630 and 12661 of 2012 decided on 7-8-2012. 11. The primary question arisen in these cases was whether the Trust either public or private is a company covered in terms of section 141 of the N.I. Act and as such a juristic person, liable for punishment for the offence punishable under section 138 of the N.I. Act. It is to be noted that the specific question as above fell for consideration of the Madras High Court in the case of Abraham Memorial Educational Trust. (supra). The learned Single Judge of the Madras High Court, after considering the length and breadth of the subject in this erudite decision, has held that the Trust either public or private/charitable or otherwise is a juristic person and is liable for punishment for offence punishable under section 138 of the N.I. Act. It is further held that a Trust either private or public/charitable or otherwise having either a single trustee or two or more trustees, is a company in ....
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....on, gets vitiated.' (emphasis supplied) 34. Clearly, Mukund (supra) principally proceeded on equating a Trust with a 'company', which is a fallacy. If we trace our steps back to over a century ago, in the locus classicus Salomon v A Salomon and Co. Ltd., [1897] AC 22, Lord Macnaghten of the House of Lords opined: '... The company is at law a different person altogether from the subscribers to the memorandum; and, though it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or trustee for them. Nor are the subscribers as members liable, in any shape or form, except to the extent and in the manner provided by the Act. That is, I think, the declared intention of the enactment. If the view of the learned judge were sound, it would follow that no common law partnership could register as a company limited by shares without remaining subject to unlimited liability. ...' (emphasis supplied) 35. In Tata Engineering and Locomotive Co. Ltd. v State of Bihar, (1964) 34 COMP CAS 458,....
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.... (a) The Orissa High Court relied on Aparna A Shah v Sheth Developers Private Limited, (2013) 8 SCC 71, which related to a company and Dilip Hariramani v Bank of Baroda, 2022 SCC OnLine SC 579, which concerned a partnership firm - both of which cannot be equated with a Trust; (b)The High Court also relied on Pawan Kumar Goel v State of Uttar Pradesh, 2022 SCC OnLine SC 1598. However, this case also concerned a company but the purpose for which the High Court considered the same has no nexus with the question we have answered. Likewise, National Small Industries Corporation Limited v Harmeet Singh Paintal, (2010) 3 SCC 330 concerned a company and the pleadings/averments which would be required to assign vicarious liability to the concerned accused. (c) The Orissa High Court altogether omitted to consider the relevant provisions of the Trusts Act. 38. The views expressed by the respective High Courts in Prana Educational and Charitable Trust (supra); Dadasaheb Rawal Co-op. Bank of Dondaicha Ltd. (supra); Abraham Memorial Educational Trust (supra); Mukund (supra), and; Bijaya Manjari Satpathy (supra) run counter to what we have held above. The same do not com....
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.... continues to hold the field as no order has been passed in Special Leave Petition (Civil) No.18636/2019 requesting other Benches to await the outcome thereof. There is no doubt on this, given the clear dicta in Union Territory of Ladakh (supra) [2-Judge Bench], which after surveying the law, held: '35. We are seeing before us judgments and orders by High Courts not deciding cases on the ground that the leading judgment of this Court on this subject is either referred to a larger Bench or a review petition relating thereto is pending. We have also come across examples of High Courts refusing deference to judgments of this Court on the score that a later Coordinate Bench has doubted its correctness. In this regard, we lay down the position in law. We make it absolutely clear that the High Courts will proceed to decide matters on the basis of the law as it stands. It is not open, unless specifically directed by this Court, to await an outcome of a reference or a review petition, as the case may be. It is also not open to a High Court to refuse to follow a judgment by stating that it has been doubted by a later Coordinate Bench. In any case, when faced with conflicting judgme....