In a significant judgment on Thursday, the Supreme Court of India clarified that a Trust itself cannot be treated as a legal person under the Negotiable Instruments Act (NI Act). Instead, only its trustees or authorized representatives can be prosecuted in cheque bounce cases. The ruling came in Sankar Padam Thapa vs Vijaykumar Dineshchandra Agarwal (2025 INSC 1210), where a five-crore-rupee cheque issued by a charitable trust had bounced, raising a key legal question - can a Trust be made an accused in such cases?
Background
The case originated from a financial transaction between the Orion Education Trust and William Carey University in Shillong. The University, facing a severe cash crunch, entered into a management transfer agreement with Orion in 2017. The respondent, Vijaykumar Agarwal, as Chairman of Orion, issued a ₹5 crore cheque to appellant Sankar Padam Thapa for liaison work during the transition.
However, when Thapa presented the cheque, it was dishonoured for “insufficient funds.” Thapa then filed a criminal complaint under Sections 138 and 142 of the NI Act. The Meghalaya High Court, however, quashed the case, ruling that since the Trust wasn’t named as an accused, the complaint was non-maintainable.
This prompted Thapa to approach the Supreme Court.
Court’s Observations
Justice Ahsanuddin Amanullah, writing for the Bench, disagreed with the High Court’s interpretation. The Court framed a sharp question: “Can a cheque issued on behalf of a Trust lead to prosecution of its Chairman or Trustee without naming the Trust itself as an accused?”
After examining multiple High Court and Supreme Court precedents, the Bench ruled that a Trust is not a juristic person - it has no independent legal existence and cannot sue or be sued in its own name. “A Trust,” the Court explained, “is merely an obligation attached to ownership of property. It acts only through its trustees.”
The bench referred to earlier rulings such as Pratibha Pratisthan v. Canara Bank (2017) and K.P. Shibu v. State of Kerala (2019), emphasizing that trustees are the ones legally responsible for defending or initiating proceedings related to trust affairs.
The Court rejected contrary views from certain High Courts that had earlier equated trusts with companies or associations of individuals. “We do not approve of the reasoning that treats a Trust like a company. A Trust lacks separate personality and functions only through its trustees,” Justice Amanullah observed.
Quoting from the judgment, the bench said: “When a cheque is dishonoured, the complaint under the NI Act is maintainable against the trustee who signed it, without the requirement to array the Trust as an accused.”
Decision
Allowing Thapa’s appeal, the Supreme Court set aside the Meghalaya High Court’s order and revived the criminal proceedings in the trial court. The matter, pending since 2019, has been directed to be expedited.
In a broader clarification, the Court also overruled earlier conflicting High Court decisions - including those from Kerala, Bombay, Madras, Gujarat, and Orissa - that had treated trusts as legal entities for the purpose of cheque bounce prosecutions.
The bench concluded:
“A Trust is not a legal entity or juristic person. Only its trustees are liable and answerable for acts done on behalf of the Trust.”
With this, the Supreme Court has firmly settled the position that in cases of cheque dishonour under the NI Act, only individuals managing the trust can be prosecuted - not the trust itself.
Case Title: Sankar Padam Thapa v. Vijaykumar Dineshchandra Agarwal
Citation: 2025 INSC 1210
Case Type: Criminal Appeal (arising from SLP (Crl.) No. 4459 of 2023)
Date of Judgment: October 9, 2025