Madasa Masih-UI-Uloom Educational And Charitable Trust Vs State of Karnataka & Ors. (Supreme Court of India)
A Trust Cannot Be Put in the Accused Box: It Is an Obligation, Not a Juristic Person Capable of Prosecution
A Trust may own and administer substantial properties through its trustees, receive donations & conduct educational or charitable activities. But does the Trust itself possess a separate legal personality enabling it to be arraigned as an accused in criminal proceedings? The Supreme Court has answered this question in the negative, holding that a Trust is not a juristic person capable of suing, being sued or being prosecuted in its own name. The prosecution may continue against the concerned trustees and other accused, but not against the Trust as an independent accused.
The appellant, Madasa Masih-UI-Uloom Educational and Charitable Trust, challenged the order of the Karnataka High Court refusing to interfere with an order passed by the LXXXI Additional City Civil and Sessions Judge, Bengaluru. The Special Court had rejected an application seeking discharge of the accused.
Before the Special Court and High Court, both the managing trustees and the Trust had sought relief. However, before the Supreme Court, the appeal was filed only by the Trust. The limited issue was therefore whether the Trust, as such, could legally be arrayed and prosecuted as an accused.
The criminal proceedings arose out of the activities of I Monetory Advisory Private Limited, referred to as IMAP Limited, and its group companies. These entities were engaged in various businesses, including financial activities, and had collected investments from members of the public. Complaints were eventually filed by investors alleging that their investments had not been refunded.
Several FIRs were registered and investigated by a Special Investigation Team constituted by the State of Karnataka. Certain cases were also registered by the State Anti-Corruption Bureau under the Prevention of Corruption Act, 1988. Subsequently, the Delhi Special Police Establishment Act, 1946 was invoked & the investigation was entrusted to the CBI.
The prosecution alleged that persons managing IMAP Limited had promoted its financial activities among members of the community by representing that such activities were conducted in conformity with Islamic principles.
The second respondent, who was one of the trustees of the appellant Trust, was alleged to have promoted IMAP Limited’s activities within the community. The Managing Trustee, arrayed as accused No. 32, was alleged to have received funds for promoting and furthering IMAP Limited’s business and to have utilised the proceeds for real-estate activities, including the purchase of large properties and buildings.
It was further alleged that the Managing Trustee had associated with the directors of IMAP Limited to raise funds for the Trust, which was then engaged in construction activities relating to its educational institutions. Since the Trust was alleged to have accepted money in the form of donations, it was also arrayed as an accused.
The Trust contended that the broader question whether a Trust is a juristic person had been referred to a three-Judge Bench by an order dated 24 October 2024 in Administrator, Smt. Tara Bai Desai Charitable Ophthalmic Trust Hospital, Jodhpur v. Managing Director, Supreme Elevators India Pvt. Ltd. & Others [(2025) 3 SCC 80].
It was nevertheless pointed out that a coordinate Bench had subsequently held in Sankar Padam Thapa v. Vijaykumar Dineshchandra Agarwal [2025 SCC OnLine SC 2194] that a Trust was not a juristic person and could neither sue nor be sued.
The CBI attempted to distinguish that decision by arguing that Sankar Padam Thapa arose from proceedings u/s 138 of the Negotiable Instruments Act, whereas the present case involved offences under the IPC and the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004. The CBI also emphasised that a clear money trail leading to the Trust had been discovered.
The Supreme Court considered the effect of the pending reference. It observed that Sankar Padam Thapa had already examined this aspect. Where there are conflicting decisions rendered by Benches of equal strength and the reference has not been answered, with no direction requiring other cases to await its outcome, the earlier view continues to govern.
This principle was conclusively recognised by the Constitution Bench in National Insurance Co. Ltd. v. Pranay Sethi [(2017) 16 SCC 680]. Therefore, the mere pendency of a reference did not prevent the Court from applying the existing binding precedent.
The Court referred to Pratibha Pratisthan v. Manager, Canara Bank [(2017) 3 SCC 712], rendered in the context of the Consumer Protection Act, 1986. That decision held that a Trust was not a “person” and hence could not maintain a consumer complaint.
Interpreting sections 3 & 13 of the Trusts Act, the Court reiterated that a Trust does not possess a separate legal existence of its own. A Trust is essentially an obligation annexed to the ownership of property, arising out of confidence reposed in and accepted by the owner for the benefit of another.
The legal responsibility to institute, maintain or defend proceedings lies upon the trustees and not upon the Trust as an abstract entity. The Trust itself is therefore incapable of being treated as a juristic person.
Following this settled position, the Supreme Court held that the appellant Trust could not legally be arrayed as an accused. The allegation concerning acceptance of money was, in substance, directed against the trustee, who was already being prosecuted.
The Court accordingly directed that proceedings in Special Case No. 1055 of 2019 pending before the designated Special Court at Bengaluru should not continue against the appellant Trust. However, it expressly clarified that the proceedings against the trustees and all other accused would remain unaffected.
Author’s Comments
The ruling does not grant immunity to persons operating through a Trust. Its effect is confined to identifying the correct prosecutable person. A trustee who receives, diverts or misuses funds may continue to face criminal proceedings in his individual or representative capacity.
The decision also clarifies an important precedent rule: a pending reference does not automatically suspend an earlier binding judgment, unless the Court directs that matters must await the reference.
Unlike a company or statutory corporation, a Trust is not an independent legal body separated from its trustees. Therefore, while the law may follow the money into the hands of the persons managing the Trust, it cannot prosecute an abstract legal obligation as though it were a living juristic person.
Cases Discussed
- Administrator, Smt. Tara Bai Desai Charitable Ophthalmic Trust Hospital, Jodhpur v. Managing Director, Supreme Elevators India Pvt. Ltd. & Others [(2025) 3 SCC 80]
- Sankar Padam Thapa v. Vijaykumar Dineshchandra Agarwal [2025 SCC OnLine SC 2194]
- A.P. Electrical Equipment Corporation v. Tahsildar and Ors. [2025 SCC OnLine SC 447]
- National Insurance Company Limited v. Pranay Sethi [(2017) 16 SCC 680]
- Pratibha Pratisthan v. Manager, Canara Bank [(2017) 3 SCC 712]
FULL TEXT OF THE JUDGMENT/ORDER OF SUPREME COURT OF INDIA
Leave granted.
2. The appellant, a Trust is aggrieved with the impugned order passed by the High Court, which refused to interfere with the order of LXXXI Additional City Civil and Sessions Judge, Bengaluru. The appellant is a Trust and the petitioners before the Special Court and the High Court where the Managing Trustees and the Trust as petitioner Nos.1 and 2. The discharge application was in toto rejected and the Trust alone has filed an appeal to this Court.
3. The allegation in the case is very clear from the impugned order, which has extracted the order of the Special Court extensively. One M/s I Monetory Advisory Private Limited (hereinafter referred to as ‘IMAP Limited’) and its group companies were engaged in various businesses including financial. Investments were collected from various people and eventually it led to the investors/depositors filing complaints for reason of their investments having not been refunded. Numerous FIRs were registered by a Special Investigation Team (SIT) constituted by State of Karnataka and some by the State Anti-Corruption Bureau (ACB) under the Prevention of Corruption Act, 1988. Eventually the provisions of Delhi Special Police Establishment Act, 1946 was invoked and the matter was assigned to the CBI, who is represented by Sri Kanakamedla Ravindra Kumar, learned Additional Solicitor General. Sri Nagamuthu, learned Senior Counsel appeared for the petitioners.
4. According to Sri Nagamuthu, the question whether a Trust is a juristic person or not has been referred to a three-Judge Bench as is evident from order dated 24.10.2024 in Administrator Smt. Tara Bai Desai Charitable Opthalmic Trust Hospital Jodhpur v. Managing Director Supreme Elevators India Pvt. Ltd. & Ors.1 and other cases, but despite such reference being pending, a co-ordinate Bench has taken a view that a Trust is not a juristic person and cannot sue or be sued, in Sankar Padam Thapa v. Vijaykumar Dineshchandra Agarwal2. Sri Kanakamedla Ravindra Kumar submits that the cited case is one under Section 138 of the Negotiable Instruments Act, 1881, whereas herein the proceedings are under the IPC as also Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 (Act of 2004). There is also clear money trail found to the Trust is the contention.
5. Looking at the allegations from the records as has been noticed by the Special Court, it is levelled against the accused who were in Management of the IMAP Limited and the second respondent, who was a trustee of the appellant herein. It is categorically alleged that the second respondent was responsible for promoting the activities of IMAP Limited, among the community, projecting that they were following the Islamic tenets, insofar as the financial activities carried out. The allegation is also that the Managing Trustee, who was accused No.32, had obtained funds for propagating and furthering the business of IMAP Limited among the community members, through the proceeds of which he indulged in real estate business and purchased large extents of property, buildings and so on. An allegation is also raised that the Managing Trustee had associated with the Directors of IMAP Limited to raise funds for the Trust, who was in the process of carrying out constructions in the educational institutions run by the Trust. Money is thus said to have been accepted as donation by the Trust, which has led to the Trust also being arrayed as an accused.
6. We have to immediately notice the decision in Sankar Padam Thapa2, which had considered the impact of a reference, which has not been answered and in which there is no order passed to await the outcome of the reference itself. It has referred to the decision of this Court in Administrator Smt. Tara Bai Desai Charitable Ophthalmic Trust Hospital Jodhpur1, A.P. Electrical Equipment Corporation v. Tahsildar and Ors.3 to hold unequivocally that “the principle has long been settled that for questions of law, in the case of conflict between equal Bench-strength judgments, the earlier view alone should be followed” as conclusively stated in National Insurance Company Limited v. Pranay Sethi4, by a Constitution Bench of 5 Judges. Hence the learned Judges followed the decision in Pratibha Pratisthan v. Manager, Canara Bank5, which was in the context of Consumer Protection Act, 1986; in which it was held that a Trust is not a person and therefore, could not be a consumer. Thus, disabling a Trust to raise a consumer dispute. Interpreting Section 3 and 13 of the Trusts Act, it was held that a Trust does not have a separate legal existence of its own, making it incapable of suing or being sued, since it is only an obligation annexed to the ownership of the property arising out of a confidence reposed in and accepted
by the owner or declared and accepted by him, for the benefit of the another, or of another and the owner. The obligation to maintain or defend suits is placed on the shoulders of a Trustee and not on the Trust itself.
7. We follow the above dictum and hold that the Trust is not liable to be arrayed as an accused, it being a concept not capable of being termed as a juristic person. The allegation of acceptance of money is also by the Trustee who is the second respondent against whom the prosecution is continuing. We hence direct that the proceedings in Spl. C. No.1055 of 2019 pending in the Court of LXXXI Additional City Civil and Sessions Judge (Special Court dealing with cases related to elected former and sitting MPs/MLAs in the State of Karnataka), Bengaluru shall not be proceeded with against the appellant herein.
8. We interfere with the proceedings only to that extent and not with the proceedings commenced and continued against the other accused.
9. The appeal stands allowed.
10. Pending application(s), if any, shall stand rejected.
Notes:
1 (2025) 3 SCC 80
2 2025 SCC Online SC 2194
3 2025 SCC Online SC 447
4 (2017) 16 SCC 680
5 (2017) 3 SCC 712
