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Madasa Masih-UI-Uloom Trust | Supreme Court Quashes Criminal Case, Says Trust Not a
The has firmly reiterated that a trust, being a mere legal concept, lacks the capacity to be treated as a and therefore cannot be in criminal proceedings. In a significant ruling delivered on , a Bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran quashed the criminal case pending against the Madasa Masih-UI-Uloom Educational and Charitable Trust, which had been implicated in a large-scale financial scam involving investments collected by ) and its group companies.
Trust Not a : Axiom Reaffirmed
The Court relied on the settled position of law laid down in Pratibha Pratisthan v. Manager, Canara Bank (), which interpreted to hold that a trust does not possess a . “A Trust does not have a of its own, making it , since it is only an arising out of a ,” the Bench observed.
The legal principle was further cemented in Sankar Padam Thapa v. Vijaykumar Dineshchandra Agarwal (), which the Court followed, noting that even though the broader question of whether a trust is a is pending before a three-judge Bench, decisions must be adhered to. The Court quoted the in National Insurance Company Limited v. Pranay Sethi (), which held that “for questions of law, in the case of conflict between equal Bench-strength judgments, the earlier view alone should be followed.”
The Allegations and the Money Trail
The case stemmed from complaints by investors whose funds were not refunded by . A ) and the registered multiple FIRs, and the matter was later transferred to the . The prosecution alleged that the Managing Trustee of the appellant-trust had obtained funds to propagate the business of among the community, using the proceeds to purchase properties and carry out construction at educational institutions run by the trust. The trust was consequently arrayed as an accused.
The State, represented by , argued that the precedent in Sankar Padam Thapa (which dealt with cheque dishonour under the ) could not be extended to the present case involving offences under the and the . However, the Supreme Court rejected this contention, holding that the core legal question—whether a trust is a —remains the same regardless of the statutory framework.
Key Observations from the Bench
The Court made the following pivotal observations:
“We follow the above 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 . The allegation of acceptance of money is also by the Trustee who is the second respondent against whom the prosecution is continuing.”
The Bench clarified that the obligation to maintain or defend legal proceedings rests with the trustee, not with the trust itself. “The obligation to maintain or defend suits is placed on the shoulders of a Trustee and not on the Trust itself,” the judgment states.
The Final Decision: Proceedings Quashed Against Trust, Trustees Remain
The Supreme Court allowed the appeal and directed that the proceedings in Spl. C. No.1055 of 2019 pending before the shall not proceed against the appellant-trust. However, the Court made it clear that the proceedings against the other accused—including the trustees—shall continue unaffected.
“We interfere with the proceedings only to that extent and not with the proceedings commenced and continued against the other accused,” the Bench concluded.
The ruling serves as a clear reminder that while trustees can be held individually liable for their actions, a trust as a conceptual entity cannot bear . This decision is expected to have far-reaching implications for cases where trusts are named as accused in criminal complaints, particularly in financial fraud and deposit scam matters.
