Negotiable Instruments Act, 1881 — Ss. 138 & 141 — Dishonour of cheque — Cheque issued on behalf of Trust — Maintainability of complaint against trustee/authorized signatory without impleading Trust as accused — Held, complaint maintainable.
A Trust, as defined under S.3 of the Indian Trusts Act, 1882, is an obligation annexed to ownership of property and not a juristic person having an independent legal existence. Under S.13 of the Trusts Act, the obligation to maintain and defend suits lies upon the trustee(s), not the Trust itself. A Trust operates only through its trustees, who are the legal entities. Hence, for the purpose of prosecution under Ss.138/141 NI Act, a complaint is maintainable against the trustee/chairman/authorized signatory who has issued and signed the cheque on behalf of the Trust, even though the Trust has not been arrayed as an accused. Non-joinder of the Trust does not vitiate the complaint.
(Paras 2, 23, 25–30, 40)
Negotiable Instruments Act, 1881 — S. 141 — Vicarious liability — Signatory of cheque — Liability.
The signatory of a dishonoured cheque is clearly responsible for the incriminating act and falls within the ambit of S.141(2). A managing director, chairman or person occupying an equivalent position, by virtue of the office held, is presumed to be in charge of and responsible for the conduct of business of the concern.
Relied on : SMS Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89; K.K. Ahuja v. V.K. Vora, (2009) 10 SCC 48; Sunita Palita v. Panchami Stone Quarry, (2022) 10 SCC 152; S.P. Mani & Mohan Dairy v. Dr. Snehalatha Elangovan, (2023) 10 SCC 685.
(Paras 17–20)
Trusts Act, 1882 — Ss. 3 & 13 — Nature of a Trust — Not a juristic person — Trustees to maintain and defend suits.
A Trust is merely an obligation attached to property; it has no separate legal existence apart from its trustees. Trustees are owners in whom property vests and upon whom the duties lie to maintain and defend all suits for preservation of trust property. Consequently, a Trust cannot sue or be sued in its own name.
(Paras 22–27)
Precedents — Conflicting Single-Judge decisions — Duty of co-equal Bench — Binding effect of earlier decision.
A later Single Judge of a High Court cannot disregard an earlier co-equal Bench decision merely on the ground of disagreement. Proper course is to refer matter to the Chief Justice for constitution of a larger Bench. Prana Educational & Charitable Trust v. State of Kerala, 2023 SCC OnLine Ker 8449, held incorrectly on this point.
Followed : National Insurance Co. Ltd. v. Pranay Sethi, (2017) 16 SCC 680; Union Territory of Ladakh v. J&K National Conference, 2023 SCC OnLine SC 1140.
(Paras 31–32)
Precedents distinguished/overruled.
Held, the views expressed by the High Courts in Prana Educational & Charitable Trust (Ker), Dadasaheb Rawal Co-op. Bank of Dondaicha Ltd. (Bom), Abraham Memorial Educational Trust (Mad), Mukund s/o Manohar Wazalwar (Bom-Nagpur) and Bijaya Manjari Satpathy (Ori) to the extent they treat a Trust as a juristic person for purposes of NI Act and require its impleadment, are incorrect in law and stand overruled (inter partes not disturbed).
(Paras 31–38)
Result:
Impugned judgment of High Court quashing complaint and summoning order set aside — Criminal Case No. 44(S)/2019 restored to file of Judicial Magistrate, Shillong, to proceed in accordance with law expeditiously.
(Paras 40–41)
2025 INSC 1210
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. OF 2025
[@ SPECIAL LEAVE TO APPEAL (CRIMINAL) NO.4459/2023]
SANKAR PADAM THAPA …APPELLANT
VERSUS
VIJAYKUMAR DINESHCHANDRA AGARWAL …RESPONDENT
J U D G M E N T
AHSANUDDIN AMANULLAH, J.
Leave granted.
2. The question for consideration in the instant appeal is as to
whether in the absence of a Trust being made an accused in a complaint
under the Negotiable Instruments Act, 1881 (hereinafter referred to as
the ‘NI Act’), when a Cheque has been issued on behalf of a Trust, the
said complaint would be maintainable against the Chairman/a Trustee of
the said Trust?
CRIMINAL APPEAL NO._____ OF 2025 [@ SPECIAL LEAVE TO APPEAL (CRIMINAL) NO.4459/2023]
2
THE IMPUGNED JUDGMENT:
3. The instant appeal arises from the Final Judgment and Order
dated 21.11.2022 (hereinafter referred to as the ‘Impugned Judgment’)
[2022 SCC OnLine Megh 624 | (2023) 1 GLT 344], passed by a learned
Single Judge of the High Court of Meghalaya, Shillong (hereinafter
referred to as the ‘High Court’) in Criminal Petition No.31/2019, wherein
the High Court quashed and set aside the proceedings in Criminal Case
No.44(S)/2019 pending before the Court of the learned Judicial
Magistrate, Shillong (hereinafter referred to as the ‘Trial Court’) and the
Summoning Order dated 11.02.2019 passed against the Respondent.
4. The William Carey University (hereinafter referred to as the
‘University’), a recognized Private University, owned and sponsored by
the Agriculture Crafts Trades and Studies Group of Institutions
(hereinafter referred to as the ‘ACTS Group’), was facing a severe
financial crisis. The ACTS Group entered into a Memorandum of
Understanding with Orion Education Trust (hereinafter referred to as
‘Orion’) on 12.10.2017 to hand over the management and administration
of the University to Orion. The Respondent is the Chairman of Orion. As
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3
Chairman of Orion, the Respondent issued authorization letters to all
concerned, duly entrusting the Appellant with the task of liaisoning with
governmental authorities and to undertake such activities to facilitate the
effective transition of all administrative control of the University from the
hands of the ACTS Group to Orion.
5. The Appellant alleged that pursuant to the above, upon such
transition being effected, the Respondent issued a Cheque dated
13.10.2018, bearing number 000013 for Rs.5,00,00,000/- (Rupees Five
Crores Only), drawn on Kotak Mahindra Bank, Vadodara Branch in his
favour for the services rendered by him under the signature of the
Respondent as authorized signatory of Orion. When presented by the
Appellant at his ICICI Bank Branch at Laitumkhrah, Shillong, East Khasi
Hills on 07.12.2018, the Cheque was dishonoured with the endorsement
‘insufficient funds’.
6. Notice under Section 138 of the NI Act was addressed by the
Appellant to the Respondent on 19.12.2018, which was received by the
Respondent on 27.12.2018. Response thereto was sent by the
Respondent vide Letter dated 28.12.2018. Subsequently, the Appellant
filed a complaint case No.44(S)/2019 before the Trial Court against the
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4
Respondent for offences under Sections 138 and 142 of the NI Act as
well as under Section 420 of the Indian Penal Code, 1860. On receipt of
summons, as per the Trial Court’s Order dated 11.02.2019, the
Respondent entered appearance and challenged the complaint case on
the issue of maintainability for non-joinder of necessary parties.
7. The Respondent, thereafter, preferred Criminal Petition
No.31/2019 under Section 482 of the Code of Criminal Procedure, 1973
(hereinafter referred to as the ‘Code’) before the High Court seeking to
quash the complaint case and the proceedings before the Trial Court, on
the ground, inter alia, that Orion - a juristic entity and a necessary party
being a Trust - not having been added as a party, the complaint case
was non-maintainable, and consequently, no vicarious liability could be
placed on the Respondent.
8. Allowing the Criminal Petition in the Respondent’s favour, the High
Court has, by way of the Impugned Judgment, quashed the complaint
case and the Summoning Order dated 11.02.2019 passed by the Trial
Court. Assailing the same, the present appeal has been preferred by the
Appellant.
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5
APPELLANT’S SUBMISSIONS:
9. The arguments put forth by the learned counsel for the Appellant
were basically two-fold – (i) the ineligibility of a Trust to be sued, and; (ii)
no mandate to make specific averments with regard to the accused’s
responsibility in conducting the day-to-day business of the Trust. 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.
10. 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. It was further held that a Trust
would not fall within the term ‘association of individuals’ as used in the NI
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6
Act. The High Court held that since Trustees do not join together for a
common action to achieve some common benefit for themselves as
Trustees, a Trust cannot be said to be an ‘association of persons/body of
individuals’.
11. 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
Abdulrehman 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.
12. With regard to the second limb of his argument, learned counsel
submitted that in the case at hand, the Respondent, being the
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7
Chairman/Authorized Representative of Orion, had signed the cheque in
question and thus, it was prima facie evident that he was responsible for
the day-to-day business of the Trust. To support his contention, learned
counsel relied upon the decision of this Court in SMS Pharmaceuticals
Ltd. v Neeta Bhalla, (2005) 8 SCC 89 [3-Judge Bench], wherein it was
held that a position of a Managing Director would suggest responsibility
of the person holding the said position, in the day-to-day affairs of the
Company, which in the present case, urged learned counsel, is akin to
the position of the Chairman/Authorized Representative of the Trust viz.
Orion. The relevant portion from SMS Pharmaceuticals Ltd. (supra) is
quoted below:
‘19. In view of the above discussion, our answers to the
questions posed in the reference are as under:
(a)It is necessary to specifically aver in a complaint under
Section 141 that at the time the offence was
committed, the person accused was in charge of, and
responsible for the conduct of business of the
company. This averment is an essential requirement of
Section 141 and has to be made in a complaint.
Without this averment being made in a complaint, the
requirements of Section 141 cannot be said to be
satisfied.
(b)The answer to the question posed in sub-para (b) has
to be in the negative. Merely being a director of a
company is not sufficient to make the person liable
under Section 141 of the Act. A director in a company
cannot be deemed to be in charge of and responsible
to the company for the conduct of its business. The
requirement of Section 141 is that the person sought to
be made liable should be in charge of and responsible
for the conduct of the business of the company at the
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8
relevant time. This has to be averred as a fact as there
is no deemed liability of a director in such cases.
(c) The answer to Question (c) has to be in the affirmative.
The question notes that the managing director or joint
managing director would be admittedly in charge of the
company and responsible to the company for the
conduct of its business. When that is so, holders of
such positions in a company become liable under
Section 141 of the Act. By virtue of the office they hold
as managing director or joint managing director, these
persons are in charge of and responsible for the
conduct of business of the company. Therefore, they
get covered under Section 141. So far as the signatory
of a cheque which is dishonoured is concerned, he is
clearly responsible for the incriminating act and will be
covered under sub-section (2) of Section 141.’
(emphasis supplied)
13. To further support his contentions, learned counsel for the
Appellant placed reliance on the decision of this Court in K K Ahuja v V
K Vora, (2009) 10 SCC 48; Sunita Palita v Panchami Stone Quarry,
(2022) 10 SCC 152; D Purushotama Reddy v K Sateesh, (2008) 8
SCC 505 and the decision of the Gauhati High Court in Pranab Jyoti
Dutta v Chief Branch Manager, SBI, 2023 SCC OnLine Gau 243. It
was urged that the appeal deserved to be allowed.
RESPONDENT’S SUBMISSIONS:
14. Au contraire, learned senior counsel for the Respondent submitted
that a Trust is a juristic person, capable of suing and being sued in a
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9
court of law. He placed reliance on the decision of the High Court of
Kerala in Prana Educational and Charitable Trust v State of Kerala,
2023 SCC OnLine Ker 8449, where it was held that the expression
‘company’ used in sub-clause (a) of the Explanation to Section 141 of the
NI Act includes ‘any body corporate’ or ‘other association of individuals’,
and the said term, by applying the principle of ejusdem generis would
include a club, a Trust (emphasised by learned senior counsel), and a
Hindu Undivided Family within the expression ‘company’ or ‘firm’. The
High Court further held that a Trust, either private or public/charitable is a
juristic person liable to prosecute or be prosecuted for the offence
punishable under Section 138 of the NI Act. In this regard, reliance was
also placed on the decisions of the Bombay High Court in Dadasaheb
Rawal Co-op. Bank of Dondaicha Ltd. v Ramesh s/o Jawrilal Jain,
2008 SCC OnLine Bom 794 and Mukund s/o Manohar Wazalwar v
Eknath s/o Bajirao Hatwar (Dead) through his L.R. Durwas Eknath
Hatwar, 2023 SCC OnLine Bom 3015 and the decision by the Orissa
High Court in Bijaya Manjari Satpathy v State of Orissa, 2022 SCC
OnLine Ori 4092. Attention was also drawn to a decision of the High
Court of Madras in Abraham Memorial Educational Trust v Suresh
Babu, 2012 SCC OnLine Mad 2986, where that High Court held that a
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10
Trust is a juristic person which can sue or be sued for offence punishable
under the NI Act.
15. Learned senior counsel supported the Impugned Judgment,
submitted that the appeal merited dismissal and advanced that the High
Court had not erred.
ANALYSIS, REASONING AND CONCLUSION:
16. We have heard respective learned counsel for the parties and
perused the materials on record. The question for consideration, as
indicated in Paragraph 2 supra, is as to whether in the absence of a Trust
being made an accused in a complaint under the NI Act, when a cheque
has been issued on behalf of the Trust, the said complaint would be
maintainable against the Chairman/a Trustee of the said Trust?
17. On the issue that it is not mandatory to make substantive
averments pertaining to the responsibility of the Respondent in the
conduct of the day-to-day business of the Trust, reliance was rightly
placed on the decision of a 3-Judge Bench of this Court in SMS
Pharmaceuticals Ltd. (supra) by learned counsel for the Appellant.
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11
18. We need only reiterate the view espoused by this Court in SMS
Pharmaceuticals Ltd. (supra) and K K Ahuja (supra). As such, a person
designated as ‘Managing Director’ or ‘Joint Managing Director’, by virtue
of the office held, would be in charge of and responsible for the daily
conduct or business of the company, and thus, be covered under Section
141 of the NI Act. Further, as far as the signatory of a cheque which is
dishonoured be concerned, he is responsible for the incriminating act and
will be covered under Section 141 of the NI Act. Support for the above
from K K Ahuja (supra) can be traced as under:
‘22. Section 141 uses the words “was in charge
of, and was responsible to the company for the conduct of
the business of the company”. (emphasis supplied) It is
evident that a person who can be made vicariously liable
under sub-section (1) of Section 141 is a person who is
responsible to the company for the conduct of the
business of the company and in addition is also in charge
of the business of the company. There may be many
Directors and secretaries who are not in charge of the
business of the company at all. The meaning of the words
“person in charge of the business of the company” was
considered by this Court in Girdhari Lal Gupta v. D.H.
Mehta [(1971) 3 SCC 189: 1971 SCC (Cri) 279] followed
in State of Karnataka v. Pratap Chand [(1981) 2 SCC 335:
1981 SCC (Cri) 453] and Katta Sujatha v. Fertilizers &
Chemicals Travancore Ltd. [(2002) 7 SCC 655: 2003 SCC
(Cri) 151] This Court held that the words refer to a person
who is in overall control of the day-to-day business of the
company. This Court pointed out that a person may be a
Director and thus belongs to the group of persons making
the policy followed by the company, but yet may not be in
charge of the business of the company; that a person may
be a manager who is in charge of the business but may
not be in overall charge of the business; and that a person
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12
may be an officer who may be in charge of only some part
of the business.
xxx
27. The position under Section 141 of the Act can be
summarised thus:
(i) If the accused is the Managing Director or a Joint
Managing Director, it is not necessary to make an
averment in the complaint that he is in charge of, and is
responsible to the company, for the conduct of the
business of the company. It is sufficient if an averment is
made that the accused was the Managing Director or
Joint Managing Director at the relevant time. This is
because the prefix “Managing” to the word “Director”
makes it clear that they were in charge of and are
responsible to the company, for the conduct of the
business of the company.
(ii) In the case of a Director or an officer of the company
who signed the cheque on behalf of the company, there is
no need to make a specific averment that he was in
charge of and was responsible to the company, for the
conduct of the business of the company or make any
specific allegation about consent, connivance or
negligence. The very fact that the dishonoured cheque
was signed by him on behalf of the company, would give
rise to responsibility under sub-section (2) of Section 141.
(iii) In the case of a Director, secretary or manager [as
defined in Section 2(24) of the Companies Act] or a
person referred to in clauses (e) and (f) of Section 5 of the
Companies Act, an averment in the complaint that he was
in charge of, and was responsible to the company, for the
conduct of the business of the company is necessary to
bring the case under Section 141(1) of the Act. No further
averment would be necessary in the complaint, though
some particulars will be desirable. They can also be made
liable under Section 141(2) by making necessary
averments relating to consent and connivance or
negligence, in the complaint, to bring the matter under
that sub-section.
(iv) Other officers of a company cannot be made liable
under sub-section (1) of Section 141. Other officers of a
company can be made liable only under sub-section (2) of
Section 141, by averring in the complaint their position
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13
and duties in the company and their role in regard to the
issue and dishonour of the cheque, disclosing consent,
connivance or negligence.’
(emphasis supplied)
19. The position in law was further elucidated in Sunita Palita (supra),
where the following was observed:
‘36. The High Court also rightly held that the Managing
Director or Joint Managing Director would admittedly be in
charge of the company and responsible to the company
for the conduct of its business by virtue of the office they
hold as Managing Director or Joint Managing Director.
These persons are in charge of and responsible for the
conduct of the business of the company and they get
covered under Section 141 of the NI Act. A signatory of a
cheque is clearly liable under Sections 138/141 of the NI
Act.’
(emphasis supplied)
20. Further, in S P Mani and Mohan Dairy v Dr Snehalatha
Elangovan, (2023) 10 SCC 685, it was laid down that for an accused to
escape criminal liability, the accused would have to demonstrate that
he/she was not in charge or in control, as under:
‘58. Our final conclusions may be summarised as under:
58.1. The primary responsibility of the complainant is to
make specific averments in the complaint so as to make
the accused vicariously liable. For fastening the criminal
liability, there is no legal requirement for the complainant
to show that the accused partner of the firm was aware
about each and every transaction. On the other hand, the
first proviso to sub-section (1) of Section 141 of the Act
clearly lays down that if the accused is able to prove to
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14
the satisfaction of the Court that the offence was
committed without his/her knowledge or he/she had
exercised due diligence to prevent the commission of
such offence, he/she will not be liable of punishment.
58.2. The complainant is supposed to know only generally
as to who were in charge of the affairs of the company or
firm, as the case may be. The other administrative
matters would be within the special knowledge of the
company or the firm and those who are in charge of it. In
such circumstances, the complainant is expected to
allege that the persons named in the complaint are in
charge of the affairs of the company/firm. It is only the
Directors of the company or the partners of the firm, as
the case may be, who have the special knowledge about
the role they had played in the company or the partners in
a firm to show before the Court that at the relevant point
of time they were not in charge of the affairs of the
company. Advertence to Sections 138 and Section 141,
respectively, of the NI Act shows that on the other
elements of an offence under Section 138 being satisfied,
the burden is on the Board of Directors or the officers in
charge of the affairs of the company/partners of a firm to
show that they were not liable to be convicted. The
existence of any special circumstance that makes them
not liable is something that is peculiarly within their
knowledge and it is for them to establish at the trial to
show that at the relevant time they were not in charge of
the affairs of the company or the firm.
58.3. Needless to say, the final judgment and order would
depend on the evidence adduced. Criminal liability is
attracted only on those, who at the time of commission of
the offence, were in charge of and were responsible for
the conduct of the business of the firm. But vicarious
criminal liability can be inferred against the partners of a
firm when it is specifically averred in the complaint about
the status of the partners “qua” the firm. This would make
them liable to face the prosecution but it does not lead to
automatic conviction. Hence, they are not adversely
prejudiced if they are eventually found to be not guilty, as
a necessary consequence thereof would be acquittal.
58.4. If any Director wants the process to be quashed by
filing a petition under Section 482 of the Code on the
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15
ground that only a bald averment is made in the complaint
and that he/she is really not concerned with the issuance
of the cheque, he/she must in order to persuade the High
Court to quash the process either furnish some sterling
incontrovertible material or acceptable circumstances to
substantiate his/her contention. He/she must make out a
case that making him/her stand the trial would be an
abuse of process of Court.’
(emphasis supplied)
21. On the issue of whether a Trust is capable of suing or being sued,
though in the context of the Consumer Protection Act, in Pratibha
Pratisthan (supra), it was observed that a Trust is not a ‘person’ and
‘therefore not a consumer’. The Court went on to hold that a Trust ‘cannot
be a complainant and cannot file a consumer dispute under the
provisions’ of the Consumer Protection Act, as it would not fall under the
definition of ‘person’ as per Section 2(m) of the Consumer Protection Act.
Referring to the said provision from the Consumer Protection Act, in
Pratibha Pratisthan (supra), the Court opined:
‘4. A reading of the definition of the words “complaint”,
“complainant” and “consumer” makes it clear that a trust
cannot invoke the provisions of the Act in respect of any
allegation on the basis of which a complaint could be
made. To put this beyond any doubt, the word “person”
has also been defined in the Act and Section 2(1)(m)
thereof defines a “person” as follows:
“2. (1)(m) “person” includes—
(i) a firm whether registered or not;
(ii) a Hindu undivided family;
(iii) a cooperative society;
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16
(iv) every other association of persons whether
registered under the Societies Registration Act,
1860 (21 of 1860) or not;”
5. On a plain and simple reading of all the above
provisions of the Act it is clear that a trust is not a
person and therefore not a consumer. Consequently, it
cannot be a complainant and cannot file a consumer
dispute under the provisions of the Act.’
(emphasis supplied)
22. Sections 3 and 13 of the Trusts Act read thus:
‘3. Interpretation-clause—“Trust”. —A “trust” is an
obligation annexed to the ownership of property, and
arising out of a confidence reposed in and accepted by
the owner, or declared and accepted by him, for the
benefit of another, or of another and the owner;
the person who reposes or declares the confidence is
called the “author of the trust”; the person who accepts
the confidence is called the “trustee”; the person for
whose benefit the confidence is accepted is called the
“beneficiary”; the subject-matter of the trust is called
“trust-property” or “trust money”; the “beneficial interest”
or “interest” of the beneficiary is his right against the
trustee as owner of the trust-property; and the
instrument, if any, by which the trust is declared is called
the “instrument of trust”;
a breach of any duty imposed on a trustee, as such, by
any law for the time being in force, is called a “breach of
trust”;
and in this Act, unless there be something repugnant in
the subject or context, “registered” means registered
under the law for the registration of documents for the
time being in force; a person is said to have “notice” of a
fact either when he actually knows that fact, or when,
but for wilful abstention from inquiry or gross
negligence, he would have known it, or when
information of the fact is given to or obtained by his
agent, under the circumstances mentioned in the Indian
Contract Act, 1872, Section 229; and all expressions
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17
used herein and defined in the Indian Contract Act,
1872, shall be deemed to have the meanings
respectively attributed to them by that Act.
xxx
13. Trustee to protect title to trust-property. — A trustee is
bound to maintain and defend all such suits, and
(subject to the provisions of the instrument of trust) to
take such other steps as, regard being had to the nature
and amount or value of the trust-property, may be
reasonably requisite for the preservation of the trustproperty and the assertion or protection of the title
thereto.’
(emphasis supplied)
23. To our mind, the above-extracted Sections of the Trusts Act would
also favour the view we are taking, as the obligation to ‘maintain and
defend’ suits is placed on the shoulders of a Trustee and not the Trust
itself. It is clear that only a Trustee has the obligation to file, maintain and
defend any suit on behalf of the Trust. Meaning thereby, that a Trust does
not have a separate legal existence of its own, making it incapable of
suing or being sued. A learned Single Judge of the Kerala High Court,
relying on Pratibha Pratisthan (supra), in K P Shibu (supra), noted:
‘16. Thus, it is clear from the above provisions that all the
trustees are the owners of the property, but they are obliged
to use the same in a particular manner. If a number of
trustees exist, they are the joint owners of the property. The
trustees are bound to maintain and defend all suits, for the
preservation of the trust-property and the assertion or
protection of the title thereto. Thus, it appears that the “Trust”
is not capable of suing and being sued in a court of law,
even though the trustees can maintain and defend suits for
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the preservation and protection of the trust-property.
Therefore, a “Trust” is not a juristic person or a legal entity,
as the juristic person has a legal existence of its own and
hence it is capable of suing and being sued in a court of law.
Thus, it appears that a “Trust” is not like a body corporate,
which has a legal existence of its own and therefore can
appoint an agent. The above discussion would make it clear
that a “Trust” is not a body corporate.’
(emphasis supplied)
24. The same proposition has been reiterated by the Delhi High Court
in Duli Chand (supra), the Madras High Court in V Chandrasekaran
(supra) and Narayana Iyer (supra), the Gujarat High Court in Kansara
Abdulrehman Sadruddin (supra), the Calcutta High Court in Vijay
Sports Club (supra) and the Karnataka High Court in
Chikkamuniyappa Memorial Trust v State, ILR 1997 Kar 2460.
25. We find substance in the reasoning assigned by the High Courts of
Kerala, Delhi, Madras, Gujarat, Calcutta and Karnataka that a Trust is not
a ‘legal entity’ or ‘juristic person’. A Trust is also not like a corporation
which has a legal existence of its own and therefore can appoint an
agent. A Trust operates through its Trustees, who are legal entities. We
may gainfully refer to the decision of the Kerala High Court in K R Rajan
(supra), where the said Court has rightly held:
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‘7. The legal status of a trust, is thus well discernible. Trust
not being a legal person, and the Code of Civil Procedure
not providing any enabling provision for the Trust to sue or
for being sued in its name, there is no merit in the contention
that the Trust is to be arrayed as a co-nominee party. The
arraying of the trust in its own name is otiose or redundant. It
is the trustees who are to be impleaded to represent the
trust. Therefore, the contention of the petitioner on the
ground of non-joinder, also fails.’
(emphasis supplied)
26. Ergo, it is clear that though a Trust may act or even be treated as
an entity for certain legal purposes and not all legal purposes, a Trust is
an obligation imposed on the ostensible owner of the property to use the
same for a particular object - for the benefit of a named beneficiary or
charity, and it is the Trustee(s) who are bound to maintain and defend all
suits and to take such other steps with regard to the nature, land or the
value of the Trust property, that may be reasonably required for the
preservation of the Trust property, and the assertion of protection of title
thereto, subject to the provisions of the instructions of Trust to take such
other steps.
27. There exists no ambiguity about there being no legal requirement
for a Trust to be made a party in a proceeding before a Court of Law
since it is only a/the Trustee(s) who are liable and answerable for acts
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done or alleged to have been done for and on behalf of the said Trust.
From a perusal of Orion’s Deed of Trust, of which the Respondent is the
Chairman/Authorized Signatory, it emerges clearly that the relevant
clauses deal with the Trustee insofar as administering and holding the
funds and properties of the Trust are concerned. Which is to say that the
Trust (i.e., Orion) operates only through the Trustee(s) and that the
objects thereof were for charitable purposes. The Deed of Trust also
provides for permitting one or more Trustees to operate a bank account.
It becomes all the more apparent that it is the Trustees alone, through
whom the Trust funds/property(ies) are managed and dealt with. The
Trust itself is without any independent legal status.
28. Though we have delved into the issue of whether a Trust can sue
or be sued on its own, we would make it amply clear (and as would also
become evident from what follows infra) on this point, that our view is
confined to examination of the subject in the context of the NI Act alone,
in praesenti. We were called upon to consider only as to whether without
making a Trust an accused, a complaint would be maintainable against a
Trustee in the eye of law under the NI Act.
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29. Hence, the question posed is answered in the affirmative. When a
cause of action arises due to an alleged dishonour of cheque and a
complaint is initiated under the NI Act, the same is maintainable against
the Trustee who has signed the cheque, without the requirement to array
the Trust also as an accused.
30. As far as the judgments pressed into service by the Respondent
be concerned, we have bestowed thoughtful consideration thereto. We
are unable to concur with the propositions they purport to propound.
31. In Prana Educational and Charitable Trust (supra), a learned
Single Judge of the Kerala High Court held:
‘20. Analyzing the decision rendered by the Madras
High Court, it could be gathered that after elaborately
considering the relevant statutory provisions, the
learned Single Judge held as above. The High Courts of
Bombay and Gujarat interpreted the explanation
appended to Section 141 of the N.I. Act with reference
to “inclusive of any body corporate” or “other association
of individuals” and construed the above terms by
applying the principle of ejusdem generis and held that
the term “association of individuals” will include club,
trust, Hindu Undivided Family Business.
21. Coming to K.P. Shibu's case (supra), it is discernible
that the said decision is not so elaborative and the
interpretation of the term “association of individuals” not
done by applying the ratio of ejusdem generis. The
principle of ejusdem generis intented for the
construction of constitutional and statutory provisions
means “of the same kind” and this doctrine provides that
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the general words which follow the specified words will
be restricts to the same class of the specified words.
While applying this principle, (1) the general words must
follow the specific words and the specific words must
necessarily constitute, a genus/class (2) the legislative
intention of the statute to be born in mind for restricting
the general word to the genus/class of the specified
words if follows and (3) this principle has to be used by
the Courts properly and apply where it is necessary and
not use this principle where it is not necessary so as to
defeat the purpose of the statute and to cause
miscarriage of justice are the conditions to be satisfied.
Thus, it appears that the High Courts of Madras,
Bombay and Gujarat correctly interpreted the various
provisions and the law emerges from the said
judgments are as under: (i) The expression “company”
used in sub-clause (a) of explanation appended to
Section 141 of the N.I. Act includes any body corporate
or other “association of individuals” and the term
“association of individuals” to be interpreted by applying
the principle of ejusdem generis. To be construed so,
the term “association of individuals” will include club,
trust and Hindu undivided family business along with the
expression “company” or “firm”. (ii) A Trust, either
private or public/charitable or otherwise, is a juristic
person who is liable for punishment for the offence
punishable under Section 138 of the Negotiable
Instruments Act. (iii) A Trust, either private or
public/charitable or otherwise, having either a single
trustee or two or more trustees, is a company in terms
of Section 141 of the Negotiable Instruments Act. (iv)
For the offence under Section 138 of The Negotiable
Instruments 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.
22. Therefore, following the legal principles set forth
above, it has to be held that the challenge raised by the
accused on the ground that no prosecution under
Section 138 read with Section 141 of the N.I. Act
against the Trust would lie, cannot be sustained and the
same stands repelled.’
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(emphasis supplied)
32. We do not approve of the manner in which the learned Single
Judge in Prana Educational and Charitable Trust (supra) decided to
ignore binding precedent in K P Shibu (supra), which was a judgment
rendered by another learned Single Judge of the same Court, earlier in
point of time, merely by noting ‘it is discernible that the said decision is
not so elaborative and the interpretation of the term “association of
individuals” not done by applying the ratio of ejusdem generis.’ It was not
open to the learned Judge in Prana Educational and Charitable Trust
(supra) to prefer the view expressed by other High Courts in preference
to the view of a Bench of the own High Court of equal strength expressed
previously. At the most, recording his disagreement with the view in K P
Shibu (supra), the learned Judge in Prana Educational and Charitable
Trust (supra) ought to have referred the matter to the learned Chief
Justice of the High Court seeking constitution of a larger Bench. The only
other way Prana Educational and Charitable Trust (supra) could have
gotten over K P Shibu (supra) despite being a co-equal Bench would
have been by undertaking an analysis via the principles of per incuriam
and/or sub-silentio, as undertaken by a 3-Judge Bench recently in A Raja
v D Kumar, 2025 SCC OnLine SC 1033. We say this illustratively. Not
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as a matter of routine can a later Bench of equal strength refuse to follow
an earlier decision of a Bench of equal strength. The law hereon was
stated in National Insurance Company Limited v Pranay Sethi, (2017)
16 SCC 680 and Union Territory of Ladakh v Jammu and Kashmir
National Conference, 2023 SCC OnLine SC 1140. Therefore, while not
disturbing Prana Educational and Charitable Trust (supra) interparties, we declare the statement of law therein incorrect to the extent it
rules on the issue before us, on account of failure to adhere to binding
precedent.
33. Dadasaheb Rawal Co-op. Bank of Dondaicha Ltd. (supra) and
Abraham Memorial Educational Trust (supra) were decided by the
Bombay and Madras High Courts respectively, prior to Pratibha
Pratisthan (supra) and need not detain us further. Mukund (supra) was
decided by a learned Single Judge of the Bombay High Court, Bench at
Nagpur, where the learned Judge held:
‘10. The controversy in this case is required to be
addressed in the backdrop of the above stated facts. At
this stage, it would be necessary to consider the legal
position. There are number of reported decisions,
wherein it has been held that the phrase, “association of
individuals” has to be read along with the word
“company and firm” occurring in the explanation
appended to section 141 of the N.I. Act. It is also settled
legal position that the expression, “association of
individuals” is intended to cover the cases of societies,
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trusts etc, who have a legal and juristic personality.
Reference can be made to the decision in the cases
of Shri Banwarilal L. Saini. (supra), Bijaya Manjari
Satpathy v. State of Orissa, 2022 LiveLaw (Ori) 158,
and Abraham Memorial Educational Trust v. C. Suresh
Babu, Cri. OP Nos. 12630 and 12661 of 2012 decided
on 7-8-2012.
11. The primary question arisen in these cases was
whether the Trust either public or private is a company
covered in terms of section 141 of the N.I. Act and as
such a juristic person, liable for punishment for the
offence punishable under section 138 of the N.I. Act. It
is to be noted that the specific question as above fell for
consideration of the Madras High Court in the case
of Abraham Memorial Educational Trust. (supra). The
learned Single Judge of the Madras High Court, after
considering the length and breadth of the subject in this
erudite decision, has held that the Trust either public or
private/charitable or otherwise is a juristic person and is
liable for punishment for offence punishable under
section 138 of the N: I. Act. It is further held that a Trust
either private or public/charitable or otherwise having
either a single trustee or two or more trustees, is a
company in terms of section 141 of the N.I. Act. It is
further held that for the offence under section 138 of the
N.I. Act, committed by the Trust, every trustee, who
were the in-charge of the day-to-day affairs of the Trust
shall also be liable for punishment besides the Trust.
xxx
12. On going through the record and proceedings and
also the dicta laid down in the above decisions, I am of
the opinion that the Trustee is a juristic person. The
Trust, being an association of persons, would be a
company in terms of section 141 of the N.I. Act. In this
case, the cheque was issued by or on behalf of the
Trust. The Trust is, therefore, the principal offender in
this case. It is further pertinent to mention that by a legal
fiction created under section 141 of the N.I. Act, all the
persons who are the Office bearers of the Trust being
in-charge of the day-to-day affairs of the Trust, shall
also be liable for punishment besides the Trust.
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13. In this background, it would be necessary to
consider the settled position on the important point as to
the effects and consequences of not arraigning the
Trust as a principal accused or the effects and
consequences of deletion of the name of Trust from the
complaint during the pendency of the complaint. In my
view, this situation would be required to be addressed in
the backdrop of the law laid down in the cases
of Aneeta Hada v. Godfather Travels and Tours Pvt.
Ltd., (2012) 5 SCC 661: (2012) 4 Mah LJ (SC) 527:
(2012) 3 Mah LJ (Cri) (SC) 249, Himanshu v. B.
Shivamurthy, (2019) 3 SCC 797: 2019 Mah LJ OnLine
(Cri) (SC) 126 and Pawan Kumar Goel v. State of
U.P., 2022 SCC OnLine SC 1598: (2023) 2 Mah LJ (SC)
456: (2023) 2 Mah LJ (Cri) (SC) 1. The exposition of the
law in these decisions clearly states that if a cheque is
issued by the company or on behalf of the company,
then the Company is the principal offender. It is further
held that apart from the company being a principal
offender, every person who at the time when the offence
was committed was in-charge or was responsible to the
company for the conduct of the business of the
company, shall also be deemed to be guilty of offence
and shall be liable to be proceeded against and
punished. It is held that in the absence of company
being the principal accused in the complaint, the
prosecution against the remaining persons, being
vicariously liable by deeming fiction, gets vitiated.’
(emphasis supplied)
34. Clearly, Mukund (supra) principally proceeded on equating a Trust
with a ‘company’, which is a fallacy. If we trace our steps back to over a
century ago, in the locus classicus Salomon v A Salomon and Co. Ltd.,
[1897] AC 22, Lord Macnaghten of the House of Lords opined:
‘…
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The company is at law a different person altogether
from the subscribers to the memorandum; and, though it
may be that after incorporation the business is precisely
the same as it was before, and the same persons are
managers, and the same hands receive the profits, the
company is not in law the agent of the subscribers or
trustee for them. Nor are the subscribers as members
liable, in any shape or form, except to the extent and in
the manner provided by the Act. That is, I think, the
declared intention of the enactment. If the view of the
learned judge were sound, it would follow that no
common law partnership could register as a company
limited by shares without remaining subject to unlimited
liability.
…’
(emphasis supplied)
35. In Tata Engineering and Locomotive Co. Ltd. v State of Bihar,
(1964) 34 COMP CAS 458, this Court, in a composition of 5 learned
Judges, commented:
‘…
The true legal position in regard to the character of a
corporation or a company which owes its incorporation
to a statutory authority, is not in doubt or dispute. The
Corporation in law is equal to a natural person and has
a legal entity of its own. The entity of the Corporation is
entirely separate from that of its shareholders; it bears
its own name and has a seal of its own; its assets are
separate and distinct from those of its members; it can
sue and be sued exclusively for its own purpose; its
creditors cannot obtain satisfaction from the assets of its
members; the liability of the members or shareholders is
limited to the capital invested by them; similarly, the
creditors of the members have no right to the assets of
the Corporation. This position has been well established
ever since the decision in the case of Salomon v.
Salomon and Co. was pronounced in 1897; and indeed,
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it has always been the well-recognised principle of
common law. However, in the course of time, the
doctrine that the Corporation or a Company has a legal
and separate entity of its own has been subjected to
certain exceptions by the application of the fiction that
the veil of the Corporation can be lifted and its face
examined in substance. The doctrine of the lifting of the
veil thus marks a change in the attitude that law had
originally adopted towards the concept of the separate
entity or personality of the Corporation. As a result of
the impact of the complexity of economic factors,
judicial decisions have sometimes recognised
exceptions to the rule about the juristic personality of
the corporation. It may be that in course of time these
exceptions may grow in number and to meet the
requirements of different economic problems, the theory
about the personality of the corporation may be
confined more and more.
…’
(emphasis supplied)
36. Therefore, Mukund (supra) does not lay down the correct position
of law having wrongly assigned equivalence between a ‘company’ and a
Trust, besides running counter to our exposition qua Sections 3 and 13 of
the Trusts Act. The legal status accorded to a ‘company’ cannot be
imported to a Trust, in the eyes of law, in the case at hand.
37. Turning to the Orissa High Court’s verdict in Bijaya Manjari
Satpathy (supra), we find as under:
(a)The Orissa High Court relied on Aparna A Shah v Sheth
Developers Private Limited, (2013) 8 SCC 71, which related to a
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company and Dilip Hariramani v Bank of Baroda, 2022 SCC
OnLine SC 579, which concerned a partnership firm – both of
which cannot be equated with a Trust;
(b)The High Court also relied on Pawan Kumar Goel v State of
Uttar Pradesh, 2022 SCC OnLine SC 1598. However, this case
also concerned a company but the purpose for which the High
Court considered the same has no nexus with the question we
have answered. Likewise, National Small Industries
Corporation Limited v Harmeet Singh Paintal, (2010) 3 SCC
330 concerned a company and the pleadings/averments which
would be required to assign vicarious liability to the concerned
accused.
(c)The Orissa High Court altogether omitted to consider the relevant
provisions of the Trusts Act.
38. The views expressed by the respective High Courts in Prana
Educational and Charitable Trust (supra); Dadasaheb Rawal Co-op.
Bank of Dondaicha Ltd. (supra); Abraham Memorial Educational
Trust (supra); Mukund (supra), and; Bijaya Manjari Satpathy (supra)
run counter to what we have held above. The same do not commend
themselves to us and are overruled in law, without disturbing their
effect(s) inter-parties.
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39. The Impugned Judgment accorded reliance to SMS
Pharmaceuticals Ltd. (supra) and Pawan Kumar Goel (supra) while
acceding to the Respondent’s prayer(s) before it. Again, Pawan Kumar
Goel (supra) 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. (supra) 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.
40. Accordingly, for reasons aforesaid, taking a holistic view in the
entirety of the extant facts and circumstances as also the submissions
canvassed by the learned counsel for the parties, we find the Impugned
Judgment to be unsustainable. We have no hesitation in quashing and
setting aside the Impugned Judgment. Resultantly, the subjectproceeding in Criminal Case No.44(S)/2019 stands restored to its original
file and number, to be proceeded with by the Court concerned in
accordance with law. As the matter traces its origin to the year 2019, we
expect the Court concerned to take steps with due expedition.
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41. The appeal stands allowed. This Judgment shall not affect any
other contentions of law and fact, which may be raised before the Trial
Court, at the appropriate stage.
THE PENDING REFERENCE AND ITS EFFECT IN LAW:
42. We are conscious that Pratibha Pratisthan (supra) has been
doubted and referred to a Larger Bench vide Order dated 04.10.2019 in
Tara Bai Desai Charitable Opthalmic Trust Hospital v Supreme
Elevators India (P) Ltd., Special Leave Petition (Civil) No.18636/2019
[since reported as (2025) 3 SCC 80]. In fact, one of us (Ahsanuddin
Amanullah, J.) was nominated by Hon’ble the then Chief Justice of India
to be part of the 3-Judge Bench constituted to hear the afore-noted
reference. As the learned Judge presiding over that 3-Judge Bench has
since demitted office, it would entail nomination of a new coram.
However, till the reference is decided one way or the other, the law as
declared in Pratibha Pratisthan (supra) continues to hold the field as no
order has been passed in Special Leave Petition (Civil) No.18636/2019
requesting other Benches to await the outcome thereof. There is no
doubt on this, given the clear dicta in Union Territory of Ladakh (supra)
[2-Judge Bench], which after surveying the law, held:
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‘35. We are seeing before us judgments and orders by
High Courts not deciding cases on the ground that the
leading judgment of this Court on this subject is either
referred to a larger Bench or a review petition relating
thereto is pending. We have also come across
examples of High Courts refusing deference to
judgments of this Court on the score that a later
Coordinate Bench has doubted its correctness. In this
regard, we lay down the position in law. We make it
absolutely clear that the High Courts will proceed to
decide matters on the basis of the law as it stands. It is
not open, unless specifically directed by this Court, to
await an outcome of a reference or a review petition, as
the case may be. It is also not open to a High Court to
refuse to follow a judgment by stating that it has been
doubted by a later Coordinate Bench. In any case, when
faced with conflicting judgments by Benches of equal
strength of this Court, it is the earlier one which is to be
followed by the High Courts, as held by a 5-Judge
Bench in National Insurance Company
Limited v. Pranay Sethi, (2017) 16 SCC 680 [See
Paragraphs 27 and 28 in the report on this point.]. The
High Courts, of course, will do so with careful regard to
the facts and circumstances of the case before it.’
(emphasis supplied)
43. We have noticed a judgment by a Coordinate Bench in A P
Electrical Equipment Corporation v Tahsildar, 2025 SCC OnLine SC
447 stating:
‘35. If two decisions of this Court appear inconsistent
with each other, the High Courts are not to follow one
and overlook the other, but should try to reconcile and
respect them both and the only way to do so is to adopt
the wise suggestion of Lord Halsbury given
in Quinn v. Leathern, [1901] A.C. 495 and reiterated by
the Privy Council in Punjab Cooperative Bank
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Ltd. v. Commr. of Income Tax, Lahore AIR 1940 PC
230:
“…… every judgment must be read as applicable
to the particular facts proved or assumed to be
proved, since the generality of the expressions,
which may be found there, are not intended to
be expositions of the whole law, but governed or
qualified by the particular facts of the case in
which such expressions are to be found.”
and follow that decision whose facts appear more in
accord with those of the case at hand.’
(emphasis supplied)
44. The decision rendered in A P Electrical Equipment Corporation
(supra) does not whittle down the enunciation in Union Territory of
Ladakh (supra). A 5-Judge Bench of this Court in Pranay Sethi (supra)
has laid down that an earlier decision of a co-equal Bench must be
followed by a later Bench of co-equal strength, which has been restated
in Union Territory of Ladakh (supra). In any event, Union Territory of
Ladakh (supra) lays down that when following an earlier decision in the
face of a later conflicting decision by a co-equal Bench, the said exercise
is to be done ‘… with careful regard to the facts and circumstances of the
case…’ A P Electrical Equipment Corporation (supra) expresses the
principle slightly differently by urging to ‘… follow that decision whose
facts appear more in accord with those of the case at hand.’
Undoubtedly, on the facts of a case, it is always open to a Court to follow
the most applicable precedent, as per its understanding. Yet, the principle
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has long been settled that for questions of law, in the case of a conflict
between equal Bench-strength judgments, the earlier view alone should
be followed, as conclusively stated in Pranay Sethi (supra) and taken
note of in Union Territory of Ladakh (supra).
MISCELLANEOUS:
45. The Registry may seek suitable orders from Hon’ble the Chief
Justice of India apropos constitution of an appropriate Bench to decide
the pending reference in Special Leave Petition (Civil) No.18636/2019.
We clarify that the instant appeal is disposed of and not tagged with the
reference.
..…………………..................…..J.
[AHSANUDDIN AMANULLAH]
..…………………..................…..J.
[PRASHANT KUMAR MISHRA]
NEW DELHI
OCTOBER 09, 2025
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