Supreme Court Quashes Criminal Proceedings Against Karnataka Trust, Says Trust Cannot Be an Accused, Court holds a trust is not a juristic person and can neither sue nor be sued; prosecution may continue against managing trustee and other accused in IMAP-linked deposit scam case
The Supreme Court has ruled that a trust cannot be treated as a juristic person in criminal law and therefore cannot be arrayed as an accused, while allowing an appeal filed by Madasa Masih-UI-Uloom Educational and Charitable Trust in a case arising from the alleged IMAP investment fraud in Karnataka.
A Bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran delivered the judgment on September 10, 2026, and set aside the criminal proceedings against the appellant trust in Spl. C. No. 1055 of 2019 pending before the LXXXI Additional City Civil and Sessions Judge, Bengaluru. However, the Court made it clear that the prosecution against the managing trustee and the other accused would continue.
The case stems from allegations involving M/s I Monetory Advisory Private Limited (IMAP Limited) and its group companies, which were engaged in various businesses including financial operations. According to the prosecution, the company collected investments from members of the public but failed to refund them, leading to multiple complaints by investors and depositors. Several FIRs were initially registered by a Special Investigation Team constituted by the State of Karnataka and by the Anti-Corruption Bureau under the Prevention of Corruption Act, 1988. Later, the matter was transferred to the CBI under the Delhi Special Police Establishment Act, 1946.
The trust and its managing trustees had approached the courts seeking discharge, but the application was rejected in full by the Special Court, and the High Court refused to interfere. The present appeal before the Supreme Court was filed only by the trust.
Before the Court, senior counsel for the appellant argued that the issue of whether a trust is a juristic person had already been referred to a larger Bench in an earlier case. It was submitted that despite the pending reference, a coordinate Bench of the Supreme Court had already held in Sankar Padam Thapa v. Vijaykumar Dineshchandra Agarwal that a trust is not a juristic person and cannot sue or be sued.
The prosecution, represented by the Additional Solicitor General, argued that the present case involved offences under the Indian Penal Code and the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004, and that there was a clear money trail leading to the trust.
Examining the record, the Supreme Court noted that the principal allegations were directed against persons involved in the management of IMAP Limited and against the managing trustee of the appellant trust. The Court recorded allegations that the managing trustee had promoted IMAP’s activities within the community, projected its financial dealings as being in conformity with Islamic tenets, and raised funds which were allegedly used for real estate and for construction activities connected with educational institutions run by the trust. It was also alleged that money was accepted as donations by the trust.
Despite these allegations, the Bench held that the legal position on the status of a trust was clear. Relying on earlier precedents including Pratibha Pratisthan v. Manager, Canara Bank, A.P. Electrical Equipment Corporation v. Tahsildar, and Sankar Padam Thapa, the Court said a trust has no separate legal existence of its own. Referring to the principle stated in National Insurance Company Ltd. v. Pranay Sethi, the Bench observed that where judgments of equal bench strength conflict, the earlier view must prevail.
The Court emphasized that under the law of trusts, a trust is only an obligation attached to ownership of property and is not an independent legal entity. Therefore, the responsibility to maintain or defend legal proceedings lies with the trustee and not with the trust itself.
In a significant observation, the Bench said: “The Trust is not liable to be arrayed as an accused, it being a concept not capable of being termed as a juristic person.” It added that the allegation regarding acceptance of money was against the trustee, against whom the prosecution would continue.
Accordingly, the Supreme Court directed that the proceedings in the Bengaluru Special Court “shall not be proceeded with against the appellant herein,” while clarifying that it was interfering only to that limited extent. The criminal case against the other accused, including the trustee, remains unaffected.
The ruling is likely to have wider implications for criminal and civil proceedings involving trusts, especially in cases where investigative agencies or complainants seek to prosecute the trust as an independent entity rather than proceeding against its trustees.
Bottom Line:
A Trust cannot be treated as a juristic person and, therefore, cannot be arrayed as an accused in criminal proceedings. The responsibility to maintain or defend suits lies with the Trustee, not the Trust itself.
Statutory provision(s): Sections 3 and 13 of the Indian Trusts Act, 1882, Section 138 of the Negotiable Instruments Act, 1881, Prevention of Corruption Act, 1988, Delhi Special Police Establishment Act, 1946, Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004, Consumer Protection Act, 1986, Indian Penal Code
