2016 (4) TMI 1476 - HC - Indian Laws

Dishonour of Cheque - legality and validity of the order of issuance of process and continuity of proceedings in absence of impleadment of Hindu Undivided Family (HUF) as party to such proceedings and as an equator - Hindu Undivided Family (HUF) can be considered a company or association of individuals or not - vicarious liability of karta of the family - invocation of extraordinary jurisdiction under Article 226 of the Constitution of India read with inherent powers under section 482 of the Code of Criminal Procedure, 1973 - HELD THAT - The Supreme Court in the case of Ramanlal Bhailal Patel v. State of Gujarat 2008 (2) TMI 859 - SUPREME COURT , while interpreting the Gujarat Agricultural Land Ceiling Act, 1960, was considering the definition of a person to hold that it is inclusive one and it includes 'a joint family' and word 'includes' indicates an intention to enlarge the meaning of the words used. The word 'include' is used in contrast from 'means'. The Court also held that the 'person' in Ceiling Act will, unless the context otherwise requires, refer to, a natural human being, any legal entity which is capable of possession of rights and duties, including any company or association of person or individuals (whether incorporated or not) and a Hindu Undivided Family or any other group or unit of persons, the members of which by custom or usage, are joint in estate and residence, are covered. The Court also held that the 'association of persons' or 'body of individuals' are the expressions which are interchangeable at legal connotation. The Apex Court has held that the HUF is a person for the purpose of Gujarat Agricultural Lands Ceiling Act. Section 2(21) of the said Act defined that a 'person' includes a joint family and section 2(16) of the very Act defined that a joint family means Undivided Hindu Family. The Apex Court held that the word 'person' in Ceiling Act will, unless the context otherwise requires refers to HUF as the definition is inclusive and also in absence of exclusion. There is no inclusion of HUF in the definition of the term 'company' under the Negotiable Instruments Act and, thus, in absence of any specific inclusion, it cannot be termed as 'company'. This Court essentially agrees with the reasonings given by the learned Single Judge of the Madras High Court in the case of Arpit Jhanwar 2012 (6) TMI 933 - MADRAS HIGH COURT , to hold that an HUF will not constitute the association of individuals as per the term ' company ' explained in section 141 of the Act and any member of the HUF would not be vicariously liable for commission of the offence punishable under section 138 of the Negotiable Instruments Act. Conclusion - The expression 'association of individuals' as explained in section 141 of the Act will not include an HUF so as to be called as a 'company' in terms of section 141 of the Act. The complaints against the petitioner as Karta of the HUF are maintainable without impleading the HUF as a party. Petition dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the complaints filed under Section 138 of the Negotiable Instruments Act, 2015, without impleading the Hindu Undivided Family (HUF), need to be quashed.
• Whether a Hindu Undivided Family (HUF) can be considered a "company" or "association of individuals" under Section 141 of the Negotiable Instruments Act, 2015.
• Whether the petitioner, as Karta of the HUF, can be held vicariously liable for the offence under Section 138 of the Act in the absence of the HUF being made a party to the proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Quashment of Complaints Without Impleading HUF

• Relevant Legal Framework and Precedents: The petitioner relied on Section 141 of the Negotiable Instruments Act and the decision in Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd., which held that a company must be arraigned as an accused for proceedings to be maintainable.
• Court's Interpretation and Reasoning: The court interpreted that the decision in Aneeta Hada does not apply as HUF is not a "company" under Section 141.
• Key Evidence and Findings: The court found that the HUF was not included in the definition of "association of individuals" as per the Act.
• Application of Law to Facts: The court applied the principles from Aneeta Hada but distinguished the case based on the definition of "company" and "association of individuals."
• Treatment of Competing Arguments: The petitioner's arguments were countered by the respondent's reliance on precedents that HUF is not a company or association of individuals.
• Conclusions: The court concluded that the complaints need not be quashed as the HUF is not a necessary party under the Act.

Issue 2: HUF as a "Company" or "Association of Individuals"

• Relevant Legal Framework and Precedents: The definition of "company" under Section 141 and various judgments, including Ramanlal Bhailal Patel v. State of Gujarat, which held that HUF is not an association of individuals.
• Court's Interpretation and Reasoning: The court reasoned that the term "association of individuals" does not include HUF as members do not join by volition or for a common purpose.
• Key Evidence and Findings: The court relied on precedents that HUF is a separate entity and not an association of individuals.
• Application of Law to Facts: The court applied the statutory interpretation principles to conclude that HUF is not a company under the Act.
• Treatment of Competing Arguments: The court dismissed arguments equating HUF with a company, citing lack of statutory basis.
• Conclusions: The court concluded that HUF cannot be considered a company or association of individuals under Section 141.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The expression 'association of individuals' as explained in section 141 of the Act will not include an HUF so as to be called as a 'company' in terms of section 141 of the Act."
• Core Principles Established: The court established that HUF is not an association of individuals or a company under the Negotiable Instruments Act, and thus, its members cannot be held vicariously liable under Section 138 unless specifically included.
• Final Determinations on Each Issue: The court dismissed the petitions, holding that the complaints against the petitioner as Karta of the HUF are maintainable without impleading the HUF as a party.

In conclusion, the court dismissed the petitions, affirming that the HUF is not a "company" or "association of individuals" under Section 141 of the Negotiable Instruments Act, and thus, the proceedings against the petitioner as Karta of the HUF are valid without the HUF being a party.