9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (2) TMI 927 - HC - Indian LawsProsecution of the Karta of HUF when cheque issued by the HUF got dishonored - whether an H.U.F. will constitute an association of individuals according to the term company as explained in Section 141 of the N.I. Act - legal entity - Liability of authorized signatory to be prosecuted under Section 138 of the Negotiable Instruments Act - Held that - A H.U.F. will not constitute an association of individuals within the meaning of Section of 141 of the N.I. Act. A H.U.F. is not a legal entity distinct and separate from that of the members who constitute it. although the H.U.F. in the case at hand may be engaged in a business and is running a firm in the name of M.S. Traders and may be having a common purpose, yet what is missing is the element of free will and volition. A mere combination of individuals will not constitute an association of individuals . To make it as an association of individuals , in terms of Section 141 of the N.I. Act, it is absolutely necessary that the combination of individuals must be on their own free will and volition. Secondly, it is also necessary that such combination of individuals must be with a common purpose. There may be a common purpose to be carried forward by an H.U.F., but an individual becomes a member of the H.U.F., not on his own free will and volition, but by status and birth. The principles laid down by the Supreme Court in the case of Aneeta Hada (2012 (5) TMI 83 - SUPREME COURT OF INDIA ) will not apply in the case of a H.U.F. - Decided against the petitioner.
Issues Involved:
1. Whether a Hindu Undivided Family (H.U.F.) constitutes an "association of individuals" under Section 141 of the Negotiable Instruments Act (N.I. Act). 2. Whether the 'Karta' of an H.U.F. can be prosecuted for an offence under Section 138 of the N.I. Act without arraigning the H.U.F. as an accused. 3. Applicability of the principles laid down by the Supreme Court in the case of Aneeta Hada vs. Godfather Travels & Tours Pvt. Ltd to an H.U.F. 4. Differences between a partnership and an H.U.F. business. 5. Concept of an "artificial person" and its relevance to the case. 6. Concept of "association of individuals" and its applicability to an H.U.F. Issue-wise Detailed Analysis: 1. Whether a Hindu Undivided Family (H.U.F.) constitutes an "association of individuals" under Section 141 of the Negotiable Instruments Act (N.I. Act): The court examined the concept of an H.U.F., noting that it is a family arrangement prevalent among Hindus, consisting of many generations living under the same roof. The joint family status arises from birth, not from a business or property relationship. The court emphasized that an H.U.F. is not a "person" in the same sense as a company or partnership and does not constitute an "association of individuals" under Section 141 of the N.I. Act. The court concluded that an H.U.F. is not a legal entity distinct and separate from its members. 2. Whether the 'Karta' of an H.U.F. can be prosecuted for an offence under Section 138 of the N.I. Act without arraigning the H.U.F. as an accused: The court held that the 'Karta' of an H.U.F. cannot be prosecuted under Section 138 of the N.I. Act without arraigning the H.U.F. as an accused. The court reasoned that the 'Karta' exists because of the H.U.F., and without the H.U.F., the 'Karta' has no legal existence. Therefore, the prosecution of the 'Karta' alone is not maintainable under Section 138 of the N.I. Act. 3. Applicability of the principles laid down by the Supreme Court in the case of Aneeta Hada vs. Godfather Travels & Tours Pvt. Ltd to an H.U.F.: The court concluded that the principles laid down by the Supreme Court in the case of Aneeta Hada do not apply to an H.U.F. The court noted that Section 141 of the N.I. Act pertains to offences by companies, and the explanation to Section 141 includes a "company" as any body corporate, firm, or other association of individuals. However, an H.U.F. does not fit into this definition as it is not formed by volition but by birth. 4. Differences between a partnership and an H.U.F. business: The court elaborated on the differences between a partnership and an H.U.F. business. A partnership arises out of a contract between partners, whereas an H.U.F. arises by the operation of Hindu Law. In a partnership, the liability of all partners is unlimited, while in an H.U.F., the liability of each member, except the 'Karta', is limited to the extent of his share in the property of the family. The court emphasized that an H.U.F. is not like a company, partnership firm, corporation, or limited concern. 5. Concept of an "artificial person" and its relevance to the case: The court discussed the concept of an "artificial person," which refers to entities recognized by law as having rights and duties of a human being, such as corporations and companies. The court noted that an H.U.F. is a legal entity capable of owning property but is not an artificial person in the same way as a company or partnership. Therefore, an H.U.F. cannot be prosecuted as a "person" under Section 138 of the N.I. Act. 6. Concept of "association of individuals" and its applicability to an H.U.F.: The court examined the concept of "association of individuals," noting that it implies a group of persons united by their own free will and volition for a common purpose. The court concluded that an H.U.F. does not meet this definition as its members do not become co-owners by their own volition but by birth. Therefore, an H.U.F. cannot be considered an "association of individuals" under Section 141 of the N.I. Act. Conclusion: The court rejected the application, concluding that an H.U.F. does not constitute an "association of individuals" under Section 141 of the N.I. Act, and the 'Karta' of an H.U.F. cannot be prosecuted under Section 138 of the N.I. Act without arraigning the H.U.F. as an accused. The court discharged the notice and vacated the ad-interim relief granted earlier.
|
