A trust, the Court held, has no separate legal existence of its own; it is only an obligation attached to the ownership of property, and the duty to sue or defend rests on the trustee, not the trust. On that footing a trust cannot be made an accused. The criminal case will continue against the trustee who is alleged to have taken the money, and against the other accused.
New Delhi: The Supreme Court has held that a trust is not a juristic person capable of being sued, and therefore cannot be arrayed as an accused in a criminal prosecution, directing that proceedings in a Bengaluru deposit-scam case not be continued against an educational and charitable trust [Madasa Masih-Ul-Uloom Educational and Charitable Trust v. State of Karnataka and Others].
A Bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran allowed the trust’s appeal, setting aside to that extent the orders of the Special Court and the Karnataka High Court, which had rejected the trust’s discharge application.
The background
The prosecution arises from the collapse of M/s I Monetary Advisory Private Limited and its group companies, which had collected investments from a large number of people and, according to the depositors, failed to refund them. Numerous FIRs followed, a Special Investigation Team was constituted by the State of Karnataka, some cases were registered by the Anti-Corruption Bureau under the Prevention of Corruption Act, and the matter was eventually handed to the CBI.
The allegations, as extracted by the Special Court, are that a trustee of the appellant trust promoted IMAP’s activities within the community by projecting that its financial dealings followed Islamic tenets, and that the Managing Trustee raised funds for the trust through associations with IMAP’s directors, money said to have been accepted by the trust as donation and used towards construction in its educational institutions. On that basis the trust itself was arrayed as an accused, and its discharge application was rejected in full. The trust alone appealed to the Supreme Court.
The point of law, and a pending reference
The question whether a trust is a juristic person is not entirely settled, and the order navigates that carefully.
Senior counsel for the trust pointed out that the very question of whether a trust is a juristic person has been referred to a three-Judge Bench, in Administrator, Smt. Tara Bai Desai Charitable Ophthalmic Trust Hospital, Jodhpur v. Managing Director, Supreme Elevators India Pvt. Ltd., and that the reference remains pending. Notwithstanding that pendency, a coordinate two-Judge Bench had held in Sankar Padam Thapa v. Vijaykumar Dineshchandra Agarwal that a trust is not a juristic person and cannot sue or be sued. For the CBI, it was submitted that the cited case arose under Section 138 of the Negotiable Instruments Act, whereas the present proceedings are under the IPC and the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004, and that there was a clear money trail to the trust.
The Court noted that Sankar Padam Thapa had itself considered the effect of the pending reference and recorded that no order had been passed directing courts to await its outcome. It reiterated the settled rule, stated by a Constitution Bench in National Insurance Company Limited v. Pranay Sethi, that where there is a conflict between judgments of equal Bench strength, the earlier view is to be followed.
Why a trust cannot be an accused
The substantive reasoning rests on what a trust is under the Indian Trusts Act. Following Sankar Padam Thapa, which in turn drew on the decision in Pratibha Pratisthan v. Manager, Canara Bank holding that a trust is not a “person” and so could not be a consumer, the Court explained that a trust does not have a separate legal existence of its own.
Interpreting Sections 3 and 13 of the Trusts Act, the Court set out the conceptual position: a trust is only an obligation annexed to the ownership of property, arising out of a confidence reposed in and accepted by the owner for the benefit of another. The obligation to maintain or defend proceedings falls on the trustee, not on the trust itself. From that it followed that a trust is incapable of suing or being sued.
Applying that to the criminal case, the Court held:
“We follow the above dictum 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 juristic person.”
The Court added that the allegation of accepting the money was in any event levelled against the trustee, the second respondent, against whom the prosecution continues.
The relief, and its limits
The Court directed that the proceedings in the Special Court at Bengaluru not be continued against the appellant trust. It was careful to confine the relief:
“We interfere with the proceedings only to that extent and not with the proceedings commenced and continued against the other accused.”
The appeal was allowed to that limited extent, leaving the prosecution of the trustees and the other accused wholly unaffected.
Why it matters
The ruling draws a clean line that has real consequences for how economic-offence cases are framed. Investigating agencies routinely name a trust, society or similar body alongside the individuals who run it, on the reasoning that the entity received or held the tainted money. This order says that, for a trust at least, that is a category error: the trust is not a legal person, so it cannot be prosecuted, and the case must be built against the trustees who bear the obligations in law.
The practical effect is not to let anyone off. The money trail the CBI relies on leads, on the prosecution’s own case, to the trustee who is alleged to have accepted and used the funds, and he remains an accused. What the order removes is the trust as a named defendant, which changes the form of the prosecution rather than its substance. Where recovery of trust property is sought, that is a matter for the statutory attachment and recovery machinery under the depositor-protection law, not for arraigning the trust as an accused in the criminal trial.
Two caveats should be kept in view. First, the point of law sits under a pending three-Judge reference, and the Court applied the earlier-view rule to reach its conclusion; if the larger Bench ultimately takes a different view of a trust’s juristic status, the position could change. Second, the reasoning is specific to trusts and their particular character under the Trusts Act, and does not disturb the settled position that companies, which are juristic persons, can be prosecuted. For now, the immediate and binding effect is that a trust cannot stand in the dock, and prosecutors will have to array the trustees instead.
Case Title: Madasa Masih-Ul-Uloom Educational and Charitable Trust v. State of Karnataka and Others [Criminal Appeal arising out of SLP (Crl.) No. 1358 of 2026]
Bench: Justice J.B. Pardiwala and Justice K. Vinod Chandran, Supreme Court of India
Date of Order: September 10, 2026
Appearances: Senior Advocate Nagamuthu for the appellant. Additional Solicitor General Kanakamedla Ravindra Kumar for the CBI.
Status: Appeal allowed to the limited extent that proceedings shall not continue against the trust. Prosecution of the trustees and the other accused is unaffected.