Criminal liability of trusts: Where does the buck stop?

On 10 September 2026, the Supreme Court held that a trust which lacks a separate juristic personality cannot be prosecuted if money allegedly linked to a criminal offence finds its way into the trust. 

The Bench of Justices J.B. Pardiwala and K.V. Chandran stopped criminal proceedings against Madasa Masih-Ul-Uloom Educational and Charitable Trust. Prosecution against its managing trustee and other accused persons will continue.

The order relies on Sankar Padam Thapa v Vijaykumar Dineshchandra Agarwal (2025), which held that a trust is neither a legal nor a juristic person.

There is a distinction between the two cases. Sankar Padam Thapa concerned the dishonour of a cheque and expressly confined its examination of the issue to the Negotiable Instruments Act, 1881. The 10 September order applies the same reasoning to a prosecution involving the Indian Penal Code, 1860 (IPC) and the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004.

While the Central Bureau of Investigation (CBI) had relied on this distinction, the Order followed Sankar Padam Thapa. It therefore raises a larger question: how far can the Court’s reasoning on the legal personality of trusts travel beyond the statutory context in which it was developed?

From an investment scheme to a trust

Investors and depositors complained that the M/s I Monetory Advisory Private Limited (IMAP) and its group companies collected investments from the public and did not return them back. The investigation was assigned to the CBI following several First Information Reports.

The prosecution alleged that the managing trustee of Madasa Masih-Ul-Uloom Educational and Charitable Trust promoted IMAP’s activities among members of the community by projecting that its financial activities followed Islamic tenets.

The managing trustee was accused of associating with IMAP’s directors to raise funds for the Trust. A Special Court in Bengaluru refused to interfere with petitions by the Trust and its managing trustees seeking a discharge. The Karnataka High Court also declined to interfere. The Trust approached the Supreme Court.

This brought the legal identity of the Trust to the centre of the dispute.

Why does the Trust’s legal identity matter?

The law recognises some entities as having a legal personality distinct from the individuals associated with them. A company, for instance, has an existence separate from its shareholders and directors and can sue or be sued in its own name.The Court has treated an ordinary trust differently.

In the 10 September order, the Bench relied on decisions which described a trust as an obligation attached to the ownership of property. The obligation to maintain or defend proceedings concerning trust property rests on the trustee rather than the trust itself.

The Court held that Madasa Masih-Ul-Uloom Educational and Charitable Trust was “not liable to be arrayed as an accused”, as it was not capable of being termed a juristic person.

The Court noted that prosecution will continue against the managing trustee as the allegation concerning the acceptance of money was against them. It stopped the proceedings only against the trust.

Sankar Padam Thapa supplied the precedent

The immediate precedent was the Court’s 9 October 2025 judgement in Sankar Padam Thapa. 

The Meghalaya High Court had quashed proceedings under the Negotiable Instruments Act against the Chairman of the Orion Education Trust. A cheque for ₹5 crore, issued on behalf of the trust, had been dishonoured for insufficient funds. The High Court had directed that the trust itself should have been arraigned as an accused.

A Supreme Court Bench of Justices Ahsanuddin Amanullah and P.K. Mishra reversed this conclusion.The Court held that a trust was neither a legal nor a juristic person under the Indian Trusts Act, 1882. It functioned through its trustees and could not sue or be sued in its own name. Therefore, the authorised signatory who issued the cheque could be prosecuted.

Sankar Padam Thapa noted that the holding on the identity of the trust was confined to the context of the Negotiable Instruments Act.

That qualification assumes importance in the 10 September order.

CBI invokes the distinction

The CBI had argued that Sankar Padam Thapa arose under Section 138 of the Negotiable Instruments Act. The present proceedings involved the IPC and Karnataka’s legislation protecting the interests of depositors in financial establishments. Further, the prosecution argued that there was a clear money trail to the Trust.

The Bench, however, held that the Trust could not be made an accused because it was not a juristic person. 

The Court, in its 10 September Order, does not examine whether the IPC or the Karnataka depositor-protection legislation permits a trust to be treated as an accused. Instead, it applies the proposition in Sankar Padam Thapa. 

An unresolved larger-Bench reference

In Administrator Smt. Tara Bai Desai Charitable Ophthalmic Trust Hospital, Jodhpur v Managing Director, Supreme Elevators India Pvt Ltd, (2019) the Supreme Court reconsidered its earlier judgement in Pratibha Pratisthan v Manager, Canara Bank (2017). 

Pratibha Pratisthan held that a trust was not a “person” under the Consumer Protection Act, 1986 and could not maintain a complaint. 

In Tara Bai Desai, the Court expressed reservations about that conclusion and referred the issue for consideration by a larger Bench in October 2019.

The scope of that reference was limited to consumer law and does not directly concern whether a trust can be prosecuted under the IPC or another criminal statute.

A three-judge Bench was constituted to hear the reference. The issue, however, remained unresolved when Sankar Padam Thapa was decided.

In Sankar Padam Thapa, the Court concluded that the unanswered reference did not prevent the Bench from deciding the case. Until the larger Bench decided otherwise, Pratibha Pratisthan continued to operate.

The 10 September Bench has now followed Sankar Padam Thapa without awaiting the outcome of the consumer-law reference.

How far does the 10 September order go?

The doctrinal significance of the 10 September order is wide. 

Sankar Padam Thapa held that a trust lacked independent juristic personality. Yet, the Bench expressly confined its examination to the Negotiable Instruments Act.

The 10 September order takes that underlying reasoning into another statutory setting. It indicates that the Court’s reasoning about the absence of a trust’s juristic personality can operate beyond cheque-dishonour prosecutions.

The reach of that proposition may ultimately depend upon the statute in question. Tara Bai Desai illustrates why: its reference arose because the Consumer Protection Act contains its own definition of “person”. A statute that expressly includes a trust or otherwise confers legal capacity upon it may require a different inquiry.

The 10 September decision is a reasoned order rather than a judgement settling the legal status of trusts across statutory contexts.

The question left open is where the boundary lies when another statute expressly treats a trust, or a comparable body, as capable of bearing legal rights and liabilities.