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In an recent order of the Kerala High Court dated 6th February 2019 the court has laid down the observation that no prosecution is possible against a trust and its trustees for dishonour of cheque invoking Section 141 of the Negotiable Instruments Act which deals with the liability of companies in case of dishonour of cheques. In the present case the petitioners who are the trustees were accused in a complaint filed before the Magistrate Court for offence under Section 138 of the NI Act. The petitioners in the present matter have approached the High Court seeking to quash the complaint filed against them. The primary question before the High Court was whether a trust and its trustees fall within the definition of 'company' under the explanation to section 141 of the NI Act.
Judgment: The Single Judge bench of Justice B. Sudheendra Kumar remarked that definition of 'company' under Section 141 of Act means Any-body corporate and includes a firm or other association of individuals. However, in accordance to the findings of the court it was observed that trust is not a body corporate or juristic person as per S.3 of the Trusts Act and therefore Trust' is not capable of suing and being sued in a court of law. Hence the Court held that a Trust is not like a juristic person or a legal entity. The court also mentioned that the Trust is not an 'Association of Individuals' as an association of person/ body of individuals is a combination of persons coming together for a common action with a common understanding and a purpose to achieve some common benefit. As trustees are not beneficiaries and not have any common benefit, court held that trustees are not association of persons/ body of individuals. The judge also mentioned the precedent of Pratibha Pratisthan & Ors. v. Manager, Canara Bank & Ors where it was held that Trust is not a 'person' as defined in Consumer Protection Act, 1986 based on the reasoning that Trust is not an 'association of persons'. On the basis of above findings it was concluded that a trust is not a body corporate or association or individuals and that it does not fall within the meaning of 'company' under section 141 of the NI Act. Therefore, no prosecution is possible against the petitioner trust and trustees invoking section 141.
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