IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CHEEKATI MANAVENDRANATH ROY, J.
Nava Education Trust Thro Shambhubhai Valjibhai Patel – Appellant
Versus
Prakashbhai Dhulabhai Patel & Anr. – Respondents
R/CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE FIR/ORDER) NO. 22109 of 2019
Decided on : 12-03-2024
Trust - Quashing of Complaint - Negotiable Instruments Act, 1881 - Section 138, Section 141 - The court discussed the legal position of a Trust under Section 141 of the NI Act and held that a Trust, either private or public/charitable or otherwise, is a juristic person who is liable for punishment under Section 138 of the NI Act. It further stated that for the offence under Section 138 of the NI Act, committed by the Trust, every trustee, who was in charge of the day-to-day affairs of the Trust, shall also be liable for punishment besides the Trust. The court also referred to the provisions of the Drugs and Cosmetics Act, 1940 to support its decision.
Fact of the Case:
The complainant alleged that a Trust borrowed a sum of money and issued a cheque for repayment, which was dishonoured. The accused, who was the authorized signatory of the Trust, sought quash of the complaint and the criminal prosecution on the ground that the complaint did not include the Trust as an accused.
Finding of the Court:
The court found that the Trust is a juristic person and is liable for the offence punishable under Section 138 of the NI Act. It held that the complaint filed without showing the Trust as an accused is legally not sustainable and maintainable, and therefore, quashed the complaint.
Issues: The main issue was whether a Trust can be prosecuted under Section 138 of the NI Act and whether the complaint filed without including the Trust as an accused is maintainable.
Ratio Decidendi: The court relied on the legal position established in previous judgments and held that a Trust is liable for punishment under Section 138 of the NI Act and falls within the ambit of Section 141 of the NI Act. It emphasized that to prosecute the Trust for the offence under Section 138 of the NI Act, both the Trust and its Trustee or the person responsible for the affairs of the Trust and who has issued the cheque, shall be necessary parties to be accused in the complaint.
Final Decision: The court allowed the application and quashed the complaint filed under Section 138 of the NI Act in Criminal Case No.5269 of 2019 on the file of Additional Judicial Magistrate First Class, Himmatnagar.
JUDGMENT :
1. This application under Section 482 of the Code of Criminal Procedure, 1973 is filed to quash the complaint filed under Sections 138 and 141 of the Negotiable Instruments Act, 1881 (for short “the NI Act”) and the criminal prosecution launched thereon against the applicant.
2. Heard learned advocate for the applicant and learned advocate for the respondent no.1.
3. Concise statement of facts leading to list in this case may be stated as follows:-
3.1 It is the case of the complainant that Nava Education Trust through its Trustee borrowed a sum of Rs.2,00,000/- from the complainant on 08.03.2012. Thereafter, the authorized signatory of the said Trust by name Shri Shambhubhai Valjibhai Patel, who is the accused in the said complaint, issued a cheque on 30.05.2019 for Rs.2,00,000/- towards repayment of the said loan and towards discharge of legally enforceable debt. The complainant has presented the said cheque in Dena Bank, Himmatnagar to encash the same. But the said cheque was dishonoured and it was returned with endorsement “payment stopped by drawer”. Thereafter, the complainant has issued a legal notice to the accused informing him about the dishonour of cheque and demanding him to pay the cheque amount. The accused has given reply to the said legal notice.
3.2 As the cheque amount was not paid even after issuing legal notice, the complainant has filed a complaint under Section 138 of the NI Act against the accused.
3.3 The applicant, who is the accused in the said complaint, sought quash of the said complainant and the criminal prosecution launched against him on the ground that the averments of the complaint show that the amount was borrowed by the Trust and the cheque was also issued by the authorized signatory of the said Trust and the Trust stands on par with the company and the firm as contemplated under Section 141 of the NI Act and to prosecute the petitioner for an offence punishable under Section 138 of the NI Act that both the Trust and its authorized signatory, who has issued cheque on its behalf, shall be shown as accused and in the absence of the Trust as an accused in the complaint that the said complaint is not maintainable. Therefore, on the aforesaid sole ground, the applicant sought quash of the said complaint.
4. Learned advocate for the applicant while reiterating the said stand contends that though the Trust is not specifically shown in Section 141 of the NI Act that as per the settled law that the Trust stands on the same footing on par with the company and the firm as contemplated under Section 141 of the NI Act and in the absence of the Trust as an accused that the complaint under Section 138 of the NI Act is not maintainable only against its authorized signatory or its Trustee.
5. Per contra, learned advocate for the first respondent-complainant would contend that the Trustee is not specifically shown in or covered by Section 141 of the NI Act and it deals only with company and the firm. Therefore, the Trust cannot be equated with the company and the firm for the purpose of filing of the complaint under Section 138 of the NI Act. He contends that the said bar engrafted under Section 141 of the NI Act to file a complaint under Section 138 of the NI Act is not applicable to the Trust. Therefore, he would pray to dismiss of this application.
6. The legal position whether the Trust is also covered by Section 141 of the NI Act and whether it stands on the same footing on par with the company and the firm for the purpose of Section 141 of the NI Act or not is no more res integra and the same has been well settled. The Madras High Court in the case of Abraham Memorial Educational Trust vs. C. Suresh Babu, 2012 SCC OnLine Mad 2986 had an occasion to deal with the said question whether the Trust also falls within the purview of Section 141 of the NI Act or not. The Madras High Court after the elaborate discussion, ultimately, held that a Trust having more than one Trustee is a combination of individuals
Hakkimuddin Taherbhai Shakor (Trustee) & 8 others vs. State of Gujarat & one Anr.
Specific averments are required to establish vicarious liability, and vicarious liability arises only when the company or firm commits the offense as the primary offender.
Trustees of an accused Trust are liable for cheque dishonor under NI Act, with notice served on the Trust meeting legal requirements.
(1) Dishonour of cheque – Offence by company – For fastening criminal liability, there is no legal requirement for complainant to show that accused partner of firm was aware about each and every tran....
(1) Dishonour of cheque – A person might have been jointly liable to pay debt, but if such a person who might have been liable to pay debt jointly, cannot be prosecuted unless bank account is jointly....
Maintaining the prosecution under Sec. 141 of N.I. Act requires the company to be arraigned as the accused.
Trustees can only be prosecuted under Section 138 of the Negotiable Instruments Act if there are specific averments of their involvement in the day-to-day affairs of the Trust.
An individual cannot be prosecuted under Section 138 of the NI Act if they did not issue the cheque drawn on their account. Liability regulations do not extend to directors not involved with the cheq....
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