Trustees Are Liable for Cheques Dishonored by Trust | No Need for Separate Notice to Establish Vicarious Liability

Case Details: Harpreet Sahni v. ShriChand Hemnani - [2024] 163 taxmann.com 676 (HC - Delhi)

Judiciary and Counsel Details

• Navin Chawla, j.
• Sanjay Madan, Adv. for the Petitioner.
• Neeraj Gupta & Kamal Gupta, Advs. for the Respondent.

Facts of the Case

In the instant case, the respondent extended a loan to trust ‘P’. ‘P’ defaulted in repayment of the loan, and when the respondent deposited cheques issued by ‘P’ for the said repayment, the same were dishonoured with remark funds insufficient.

The Respondent issued legal notices to ‘P’ to repay the cheque amount. However, the same was not paid. Thereafter, the Respondent filed a complaint against ‘P’ and its trustees, including the petitioner, under section 138 of the Negotiable Instruments Act, 1881.

The Trial Court passed the impugned order and issued a summons to ‘P’ and its trustees, as accused in the complaint. The petitioner filed instant petitions, being aggrieved by the impugned order, and submitted that the said notice was not addressed to him in his capacity. Therefore, the complaint against the petitioner was not maintainable, and the petitioner could not be summoned in it.

It was noted that the petitioner, in their capacity as trustees of said trust, was an officer in charge of the trust. Further, for a complaint for an offence under section 138 of the Act to be maintainable, the holder of the cheque should demand repayment by giving a notice in writing to the drawer of the cheque.

High Court Held

The High Court noted that the cheques were drawn by said trust, i.e., the drawer of cheques, and legal notice was issued to the trust, which was addressed to be served on trust through its trustees.

The High Court held that since there was no requirement for separate notice to be issued to each of the trustees of the said trust to make them vicariously liable and to be proceeded against in terms of section 138 read with section 141, all trustees were deemed to be duly served with a legal notice, thereby meeting the requirement of proviso (b) to section 138 and, thus, the instant petition was to be dismissed.