A Trust Cannot Be Arrayed As An Accused, Supreme Court Holds
The Pardiwala-Chandran Bench held that a Trust is not a juristic person capable of suing or being sued, quashing criminal proceedings against an educational and charitable Trust.
The Supreme Court has held that a Trust cannot be made an accused in a criminal prosecution because it is not a juristic person capable of suing or being sued. Deciding a criminal appeal on 10 September 2026, a Bench of Justice J. B. Pardiwala and Justice K. Vinod Chandran directed that proceedings before a Special Court in Bengaluru shall not continue against Madasa Masih-Ul-Uloom Educational and Charitable Trust. The Trust was arrayed as an accused in a case arising from investment collection activities of M/s I Monetory Advisory Private Limited (IMAP Limited) and its group companies. The Court found that a Trust is only an obligation annexed to the ownership of property, and that the duty to defend suits rests on the trustee, not the Trust. The prosecution against the individual trustee continues.
How the dispute reached the Court
Investors who did not get their money back filed complaints against IMAP Limited and its group companies. A Special Investigation Team constituted by the State of Karnataka registered numerous FIRs, some under the Prevention of Corruption Act, 1988, through the State Anti-Corruption Bureau. The Delhi Special Police Establishment Act, 1946 was later invoked and the matter was assigned to the CBI.
The Trust and its Managing Trustees moved a discharge application before the LXXXI Additional City Civil and Sessions Judge, Bengaluru — the Special Court dealing with cases related to former and sitting MPs and MLAs in Karnataka. That application was rejected in full. The High Court declined to interfere with the Special Court's order. The Trust alone carried the matter to the Supreme Court.
Sri Nagamuthu, Senior Counsel for the petitioners, argued that whether a Trust is a juristic person has been referred to a three-Judge Bench by order dated 24 October 2024. For the CBI, Additional Solicitor General Sri Kanakamedla Ravindra Kumar submitted that the cited case arose under Section 138 of the Negotiable Instruments Act, 1881, whereas the present proceedings were under the IPC and the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004, with a clear money trail to the Trust.
What the Court held
The Court held that a Trust is not liable to be arrayed as an accused, being a concept not capable of being termed a juristic person. It found that the allegation of accepting money was directed at the trustee — the second respondent — against whom the prosecution continues.
The allegations recorded by the Special Court were that the second respondent promoted IMAP Limited's activities within the community by projecting adherence to Islamic tenets in its financial dealings. The Managing Trustee, accused No. 32, was alleged to have obtained funds to further IMAP Limited's business among community members, using the proceeds for real estate purchases, and to have associated with IMAP Limited's directors to raise funds for construction at the Trust's educational institutions. Money accepted as donation by the Trust led to it being made an accused.
The reasoning on conflicting benches
The Court addressed the pending reference on whether a Trust is a juristic person. It relied on Sankar Padam Thapa v. Vijaykumar Dineshchandra Agarwal, where a co-ordinate Bench took the view that a Trust is not a juristic person and cannot sue or be sued, despite the reference being pending. That decision had considered the impact of a reference that remained unanswered, with no order to await its outcome.
On how conflicting equal-strength benches are to be reconciled, the Court noted the settled principle. In cases of conflict between equal Bench-strength judgments, “the earlier view alone should be followed”, as stated by a Constitution Bench of five Judges in National Insurance Company Limited v. Pranay Sethi.
Following this, the Court relied on Pratibha Pratisthan v. Manager, Canara Bank, decided in the context of the Consumer Protection Act, 1986, which held that a Trust is not a person and could not be a consumer, disabling a Trust from raising a consumer dispute. Interpreting Sections 3 and 13 of the Trusts Act, the Court reasoned that a Trust has no separate legal existence, being only an obligation annexed to the ownership of property arising out of a confidence reposed in and accepted by the owner for another's benefit. The obligation to maintain or defend suits is placed on the trustee, not the Trust itself.
Order
The Court directed that proceedings in Spl. C. No. 1055 of 2019, pending before the LXXXI Additional City Civil and Sessions Judge, Bengaluru, shall not be proceeded with against the appellant Trust. It clarified that it was interfering only to that extent and not with the proceedings continued against the other accused. The appeal was allowed, and pending applications, if any, were rejected.