Whether in case of a trust, vicarious liability could be placed on the chairman/trustee in absence of making the trust itself a party
An interesting question arose in this case where a cheque issued by a trust was dishonoured and in a complaint under the NI Act, the Chairman of the trust was implicated in a criminal complaint without making trust itself a party and the high court held that without adding the trust as a party, the complaint was not maintainable.
The appellant before the Supreme Court argued that the Trust was not a juristic entity as it was not capable of being sued or suing in a court of law.
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.
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.
Learned counsel for the Appellant submitted that a Trust, as defined under the Indian Trusts Act, 1882 (hereinafter referred to as the ‘Trusts Act’), is an obligation and not a legal entity. Learned counsel for the Appellant placed reliance on the decision of the Kerala High Court in K R Rajan v Cherian K Cherian, 2019 SCC OnLine Ker 4699;
the decision of the Delhi High Court in Duli Chand v M/s M P T C Charitable Trust, 1983 SCC OnLine Del 270;
decisions by the Madras High Court in V Chandrasekaran v Venkatanaicker Trust, 2016 SCC OnLine Mad 33745 and Narayana Iyer v Anandammal Adheena Trust, (2021) 3 CTC 776; decision of the Gujarat High Court in Kansara Sadruddin v Trustees of the Maniar Jamat Ahmedabad, AIR 1968 Guj 184 and;
the decision by the Calcutta High Court in Vijay Sports Club v State of Bengal, 2019 SCC OnLine Cal 2331.
Moreover the trust did not fell within the definition of Association of Individuals under the NI Law. Under the Trust Act also, a trust was an obligation and not an entity.
Below rulings in context of company and not trusts:
The Impugned Judgment accorded reliance to SMS Pharmaceuticals Ltd. and Pawan Kumar Goel while acceding to the Respondent’s prayer(s) before it. Again, Pawan Kumar Goel was in the context of a company and the principles laid down could not be made applicable straightaway to a Trust, moreso in light of the reasoning by us hereinabove. The extracts from SMS Pharmaceuticals Ltd. cited in the Impugned Judgment are distinguishable as they related to the averments necessary in a complaint to invoke vicarious liability and not the factum of impleadment or lack thereof, specifically, a Trust in a complaint. Concededly, neither party urged submissions based on the Trusts Act before the High Court.
Conclusion:
The Ld Judges after analysing the provisions of the Trust Act and other acts, held that obligation to maintain and defend suits in the Trust act is placed on the trustees only and not on the trust itself, meaning thereby that a trust doesn’t have an existence of its own. A trust is not like a legal entity or a juristic person. A trust does not have seperate existence of its own. A trust operates through its trustees who are legal entities. Thus, there was no legal requirement to make the trust itself a party and thus the appeal was allowed and the complaint to be proceeded with under the NI Act.
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