Supreme Court: Trust Need Not Be Arrayed as Accused in Cheque Bounce Case Against Signatory Trustee
In Sankar Padam Thapa v. Vijaykumar Dineshchandra Agarwal, the Supreme Court held that a complaint under Section 138 of the Negotiable Instruments Act, 1881 does not become non-maintainable merely because the Trust on whose behalf the cheque was issued was not itself arrayed as an accused, where the complaint proceeds against the trustee who signed the dishonoured cheque.
Question before the Supreme Court
The principal issue was whether a cheque-dishonour complaint could continue against the Chairman or trustee who signed a cheque on behalf of a Trust when the Trust itself had not been made an accused in the complaint.
Facts of the case
The dispute arose from a cheque for ₹5 crore issued in connection with services relating to the management of William Carey University, Shillong. The cheque was issued on behalf of Orion Education Trust and was dishonoured for insufficiency of funds. Proceedings were then initiated under Sections 138 and 142 of the Negotiable Instruments Act, 1881.
The Meghalaya High Court quashed the proceedings on the reasoning that the Trust had not been impleaded as an accused and that liability could therefore not be fastened on its Chairman. The complainant challenged that decision before the Supreme Court.
Why the signatory trustee could be proceeded against
The Supreme Court relied on the established principle that a person who actually signs the dishonoured cheque bears direct responsibility for that act. The Court referred to decisions including S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and K.K. Ahuja v. V.K. Vora, which explain the liability of a cheque signatory under Section 141 of the NI Act.
The ruling is therefore not a blanket proposition that every trustee is automatically liable whenever a Trust cheque is dishonoured. The decisive factual feature was that the respondent was the trustee/Chairman who had signed the cheque. Liability of other office-bearers would still depend on the statutory requirements and the necessary allegations concerning their role.
Sections 138, 141 and 142 of the NI Act
| Provision | Relevance |
|---|---|
| Section 138 | Creates the offence relating to dishonour of a cheque for insufficiency of funds or where the amount exceeds the arrangement with the bank, subject to the statutory presentation, notice and payment timelines. |
| Section 141 | Deals with offences by companies and persons responsible for the conduct of their business. Supreme Court precedent separately recognizes responsibility of the person who signed the dishonoured cheque. |
| Section 142 | Prescribes conditions governing cognizance of offences under Section 138, including who may file the complaint and the applicable limitation requirements. |
Current statutory position under the Negotiable Instruments Act
Section 138 of the Negotiable Instruments Act, 1881 remains the principal provision governing cheque dishonour. The statutory scheme continues to require presentation of the cheque within its validity period, a written demand notice within the prescribed period after receipt of dishonour information, and failure by the drawer to make payment within the statutory period after receipt of notice.
Section 141 continues to address offences by companies and persons responsible for their business. The Supreme Court's 2025 judgment clarifies how that framework operates when the cheque is issued on behalf of a Trust and the signatory trustee is prosecuted without separately arraying the Trust.
What happened to the High Court order
The Supreme Court set aside the Meghalaya High Court decision that had quashed Criminal Case No. 44(S) of 2019 and the summoning order dated 11 February 2019. The criminal proceedings were restored so that the trial court could proceed in accordance with law.
Practical significance of the ruling
The decision removes the procedural objection that a Section 138 complaint against the signatory trustee must necessarily fail merely because the Trust itself has not been shown as an accused. At the same time, the judgment should not be read as dispensing with the statutory ingredients of Sections 138 and 141 or with the need to establish the role of a person who did not sign the cheque.
Official legal sources
Read the reportable Supreme Court judgment and the current text of the Negotiable Instruments Act from the official sources below.
Supreme Court Judgment - 2025 INSC 1210
Negotiable Instruments Act, 1881 - India Code
Legal information reviewed and updated on 5 September 2026. The exact liability in any cheque-dishonour matter depends on the cheque, account, statutory notice, complaint averments, role of the accused and other facts of the case.