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TMI Blog2012 (8) TMI 1192X X X X Extracts X X X X X X X X Extracts X X X X ..... tee should also be brought within the definition of the term company and thus the expression Trust should be read into the Explanation a to Section 141 of the Negotiable Instruments Act. If this interpretation is not given, certainly Sections 138 and 141 of the Act will not have force and life, so far as they relate to a Trust having a single Trustee. Further, if one holds that a Trust having two or more trustees is a company falling within the sweep of Sections 138 and 141 of the Act, at the same time a Trust having a single trustee will not fall within the ambit of Sections 141 and 138 of the Act, the result, as I have already concluded is only an absurdity. In order to avoid the said absurdity and in order to give force and life to the provisions of Sections 138 and 141 of the Act, I hold that the expression company as explained in Section 141 of the Act takes into its ambit a Trust having a single trustee also. In view of this interpretation, I firmly hold, that a Trust, having either a single trustee or two or more trustees, is a company in terms of Section 141 of the Negotiable Instruments Act. My conclusions are summed up as follows:- (i) A Trust, either private or public / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscellaneous petitions are closed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ice was issued to all the accused under Section 138 of the Negotiable Instruments Act demanding the cheque amount. The accused did not pay the same. Therefore, the complainant instituted the case in S.T.C. No. 71 of 2012. 4. According to the complainant, the first accused is a company in terms of Section 141 of the Negotiable Instruments Act and therefore it is liable for punishment under Section 138 of the Act in both the cases. So far as the accused Nos. 3 to 9 are concerned, according to the complainant, they were the Trustees of the first accused Trust and they were in-charge of the day-to-day affairs of the first accused Trust and so, by virtue of Section 141 of the Act, they are also liable for punishment under Section 138 of the Negotiable Instruments Act. 5. In this petition, the foremost contention of the petitioners is that the first accused is neither "a person" nor "a company" as referred to in Section 141 of the Act. According to the petitioners, the first accused is only a Public Charitable Trust, which means, it is only an obligation attached to the Trust properties. The Trust by itself is not a juridical person and so, the prosecution of the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the instrument, if any, by which the trust is declared is called the "instrument of trust"; A breach of any duty imposed on a trustee, as such, by any law for the time being in force is called a "breach of trust"; And in this Act, unless there be something repugnant in the subject or context, registered" means registered under the law for the registration of documents for the time being in force; a person is said to have notice" of a fact either when he actually knows that fact, or when, but for willful abstention from inquiry or gross negligence, lie would have known it, or when information of the fact is given to or obtained by his agent, under the circumstances mentioned in the Indian Contract Act, 1872, Section 229; and all expressions used herein and defined in the Indian Contract Act, 1872, shall be deemed to have the meanings respectively attributed to them by that Act. 10. But, the learned senior counsel Mr. K.S. Dinakaran appearing for the respondent would submit that the provisions of the Indian Trust Act, 1882 cannot be made applicable to the first accused Trust since the said Act is applicable only to Private Trusts and not to Publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other natural person is in law also conferred with rights and obligations and is dealt with in accordance with law. In other words, the entity acts like a natural person but only through a designated person, whose acts are processed within the ambit of law. When an idol was recognised as a juristic person, it was known it could not act by itself. As in the case of minor a guardian is appointed, so in the case of idol, a Shebait or manager is appointed to act on its behalf. In that sense, relation between an idol and Shebait is akin to that of a minor and a guardian. As a minor cannot express himself, so the idol, but like a guardian, the Shebait and manager have limitations under which they have to act. Similarly, where there is any endowment for charitable purpose it can create institutions like a church, hospital, gurudwara etc. The entrustment of an endowed fund for a purpose can only be used by the person so entrusted for that purpose in as much as he receives it for that purpose alone in trust. When the donor endows for an idol or for a mosque or for any institution, it necessitates the creation of a juristic person. The law also circumscribes the rights of any person rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of most countries have sanctioned the creation of a fictitious person in the matter as is implied in the felicitous observation made in the work already cited "Perhaps the oldest of all juristic persons is the God, hero or the saint" (Pollock and Maitland's History of English Law, Volume 1, 481)." 14. In Yogendra Nath Naskar's case (cited supra), the Hon'ble Supreme Court while examining the issue as to how an artificial person in the form of a Trust came into being has held as follows:- The legal position is comparable in many respects to the, development in Roman Law. So far as charitable endowment is concerned Roman Law-as later developed recognised two kinds of juristic persons. One was a corporation or aggregate of persons which owed its juristic personality to State sanction. A private person might make over property by way of gift or legacy to a corporation already in existence and might at the same time prescribe the particular purpose for which the property was to be employed e.g. feeding the poor or giving relief to the poor distressed. The recipient corporate would be in a position of a trustee and would be legally bound to spend the funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon'ble Supreme Court in Yogendra Nath Naskar's case (cited supra), it is crystal clear that a Trust (an organisation) can be created by the founder of the Trust and such Trust (organisation) is an artificial person having legal status. 18. As has been held by the Hon'ble Supreme Court in Shiromani Gurdwara Prabandhak Committee's case (cited supra), referred to above, to make an artificial person as a juristic person, such artificial person requires recognition by law or the society at large as a juristic person. So far as the Trusts, either public or private, which are created by the founder/founders, there can be no controversy that such Trusts have been recognised by law and the society as juristic persons. 19. Mr. P.N.Prakash, learned Amicus Curiae has brought to my notice All India Council for Technical Education - Approval Process Handbook (2011-2012). As per the All India Council for Technical Education Act, the All India Council for Technical Education has been empowered to grant approval for setting up new institutions and improvement of existing ones. While dealing with the eligibility for application and requirements, it has been prescribed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itutions enumerated under Section 2(42) of the General Clauses Act, as well as, Section 11 of the Indian Penal Code. Therefore, applying the doctrine of ejusdem generis, I have no hesitation to hold that a Public Charitable Trust falls within the definition of the term 'person' as defined in Section 11 of the Indian Penal Code and Section 3(42) of the General Clauses Act. 23. Now turning to the provisions of the Negotiable Instruments Act, Section 26 deals with capacity to make, etc. Promissory notes, etc. which reads as follows: 26. Capacity to make, etc. promissory notes, etc.-- Every person capable of contracting, according to the law to which he is subject, may bind himself and be bound by the making, drawing, acceptance, endorsement, delivery and negotiation of a promissory note, bill of exchange or cheque. Minor. Where such an instrument is made, drawn or negotiated by a minor, the making, drawing or negotiating entitles the holder to receive payment of such instrument and to enforce it against any party thereto other than the minor. Nothing herein contained shall be deemed to empower a corporation to make, endorse or accept such instruments except in cases in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain obligations, it attains the status of a "juristic person". Thus, a Trust, whether private or public, is a juristic person who can sue/be sued or prosecute/be prosecuted. 27. To add strength to the above conclusion, we may also look into the term 'drawer' in Section 7 of the Act, which reads as follows: 7. "Drawer" The marker of a bill of exchange or cheque is called the "drawer;" the person thereby directed to pay is called the "drawee." "Drawee in case of need," When in the bill or in any endorsement thereon the name of any person is given in addition to the drawee to be resorted to in case of need such person is called a "drawee in case of need". "Acceptor" After the drawee of a bill has signed his assent upon the bill, or, if there are more parts thereof than one, upon one of such parts, and delivered the same, or given notice of such signing to the holder or to some person on his behalf he is called the "acceptor." "Acceptor for honour."--- When a bill of exchange has been noted or protested for non-acceptance or for better security, and any person accepts is supra pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the offence and shall be liable to be proceeded against and proceeded against and punished accordingly]; Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence. "Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attribute to, any neglect on the part of, any director, Manager, secretary, or other office of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and pun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proprietors/owners of the business of M/s New Sheetal Traders, which is a joint family business of themselves and their son- Sheetal, prima facie, they are covered under section 141 of the Negotiable Instruments Act in view of the Explanation appended thereto. 33. I had an occasion to deal with a similar question relating to HUF in Arpit Jhanwar Vs. Kamalesh Jain reported in 2012 (4) CTC 177. The question precisely before this Court was as follows: 1. A "Hindu Undivided Family - (HUF)" is an "Association of Individuals"; so it is a "company" in terms of Section 141 of the "Negotiable Instruments Act" and thus, every member of the HUF is vicariously liable for punishment for the offence under Section 138 of the Negotiable Instruments Act committed by the "Kartha" of the HUF. This is precisely the stand of the complainant, in these cases, which is seriously refuted by the accused. This question is the basis for the instant petitions. 34. The judgment of the Andhra Pradesh High Court and Bombay High Court referred to above were also placed before me by the learned Counsel. But, after having scientifically analyzed the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of individuals will not constitute an "Association of Individuals". To make it as an "Association of Individuals", in terms of Section 141 of the Act, it is absolutely necessary that the combination of individuals must be on their own volition. Secondly, it is also necessary that such combination of individuals must be with a common purpose. In an HUF, both the above essential requirements are absent inasmuch as an individual becomes a member of the HUF, not on his own volition but by birth. Similarly, there is no common purpose to be carried forward by a HUF. It is for these reasons, I had to hold that a HUF is not a Company in terms of Section 141 of the Negotiable Instruments Act. 36. Turning back to the Trust, the learned senior counsel for the petitioners would submit that a Trust cannot be brought within the sweep of Explanation 'a' appended to Section 141(2) of the Act at all. Had it been the intention of the Legislature to bring in the term "Trust" also within the sweep of Section 141 of the Act, the Legislature would not have omitted to expressly enumerate the same in the Statute itself, he contended. The absence of specific inclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereas, in the Negotiable Instruments Act, the Legislature has not expressly included the term 'Trust' within the meaning of the term 'Company' and such omission cannot be said to be an inadvertent omission. On the contrary, according to him, the Legislature has consciously omitted the same. 41. But, this contention, in my considered opinion, deserves only to be rejected for more than one reason. First of all, all the enactments referred to above are all State enactments. Therefore, it is difficult to compare the definition of the term 'company' made in these enactments with the definition of the term 'company' as made in the Negotiable Instruments Act which is a Central Statute. Therefore, let us now see as to how the term 'company' has been defined in similar Central penal Statutes. 42. In the "Explosives Act, 1884 Section 9C deals with 'offences by companies', which reads as follows: 9C. Offences by companies. - (1) Whenever an offence under this Act has been committed by a company, every person who at the time the offence was committed was in charge of, or was responsible to the company for the conduct of the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in all the Central enactments, while dealing with the offences committed by companies, the term 'Company' is explained in one and the same manner. No Central enactment, has been brought to my notice where the term 'Trust' has been specifically enumerated in the definition of the term 'Company'. 45. In view of the above, I find it difficult to agree with the learned senior counsel Mr. A.Ramesh that the term 'Trust' has been consciously omitted in Section 141 of the Negotiable Instruments Act alone. It cannot be said that the Parliament was not aware of the existence of 'Trusts' and their activities. It only gives the irrevocable impression that the Parliament would have been satisfied that the definition of the term 'Company' as made in all these enactments will very well take into its ambit the term 'Trust' also and so, there is no need to specifically incorporate the term 'Trust'. That is the reason why, I firmly believe, the term 'Trust' has not been included explicitly in the definition of the term 'Company'. 46. Now, we may examine, whether a Trust will fall within the ambit of 'Association of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, then it will lead only to absurdity. It is the basic principle of interpretation that an enactment cannot be interpreted so as to result in absurdity. To avoid such absurdity, we have to make purposive interpretation of the provisions of the Act so as to take forward the object of the Act. 50. In this regard, Mr. P.N.Prakesh, the learned Amicus Curiae would submit that the above interpretation sought to be made by the learned senior counsel for the petitioners does not reflect the intention of the Legislature behind incorporation of Section 141 to the Act. He would point out that Chapter XVII of the Negotiable Instruments Act was inserted in the Act w.e.f 01.04.1989, by amending the Act by means of Amendment Act 66 of 1988. This Chapter has been inserted with a view to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalty in case of bounce of cheque due to insufficiency of funds in the account or for the reason that it exceeds the arrangement made by the drawer with adequate safeguards to prevent harassment of honest drawer. 51. According to the learned Amicus Curiae, the explanation of the term 'Company' as made in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... What remedy the Parliament hath resolved and appointed to cure the disease of the commonwealth, and 4th - The true reason of the remedy; and then the office of all the judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro privato commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico. 54. In the instant case, therefore, while interpreting the word 'Company', as explained in Section 141 of the Act, necessarily, the Court has to apply the above Rule and accordingly construe the said term. 55. Before proceeding further with our discussion, let us have a look into yet another judgment of the Hon'ble Supreme Court in M/s.Mahalakshmi Oil Mills Vs. State of Andhra Pradesh reported in (1989) 1 SCC 164. That was a case where the Hon'ble Supreme Court was called upon to interpret the clause "means and includes" as employed in Andhra Pradesh General Sales Tax Act, 1957. In that judgment, the question was whether tobacco seed oil and tobacco seed cake will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Bank of India, [a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) [a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, and any subsidiary bank], as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959). While interpreting the said phraseology, in paragraph 23, the Hon'ble Supreme Court has held as follows: 23. Section 2(bb) of the ID Act as initially introduced by Act 54 of 1949 used the word "means... and includes" and was confined to a "Banking Company" as defined in Section 5 of the Banking Companies Act, 1949, having branches or other establishments in more than one province and includes Imperial Bank of India. Similarly, Section 2(kk), which was also introduced by Act 54 of 1949, defines Insurance Company as "an Insurance Company defined in Section 2 of the Insurance Act, 1938 (IV of 1938), having branches or other establishments in more than one province". It is trite to say that when in the definition clause given in any statute the word " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, and no other meaning can be assigned to the expression that is put down in the definition. The word 'includes' when used, enlarges the meaning of the expression defined so as to comprehend not only such things as they signify according to their natural import but also those things which the clause declares that they shall include. The words 'means and includes', on the other hand, indicate 'an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions. 59. It is needless to point out that if the words "means and includes" are used, then the expression 'means' used in the first part (means clause) shall carry its ordinary natural meaning and the same shall not be controlled by the list of things enumerated in the later inclusive clause. Thus, the expression which is defined by 'means' clause shall carry its fullest natural meaning and bring into its ambit everything that falls within the ordinary natural meaning of the expression. If the Legislature wants to bring any other thing within the definition which does not otherwise fall within the ordinary natural mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition clause of Section 141 of the Act is not with an intention to keep the trust out of the purview of Sections 138 and 141 of the Act. In my considered opinion, going by the purpose for which Section 138 and Section 141 were brought into being by means of amendment to the Negotiable Instruments Act and going by the very fact that a Trust having two or more trustees squarely falls within the ambit of Section 141 of the Act, I have no option but to hold that the Legislature's intention is to have the Trust also to fall within the meaning of the expression 'company', but it has omitted to expressly say so in Section 141 of the Act, which according to me is only a casus omissus. 64. When there is omission to expressly mention the expression 'Trust' within the meaning of the term 'company', by applying the principle of casus omissus, whether this Court could fill up the said gap by reading the expression 'Trust' into the interpretation clause of Section 141 of the Act. In this regard, I may refer to the Constitution Bench Judgment of the Hon'ble Supreme Court in Punjab Land Development and Reclamation Corporation Ltd., Chandigarh Vs. Pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act will not have force and life, so far as they relate to a Trust having a single Trustee. Further, if one holds that a Trust having two or more trustees is a 'company' falling within the sweep of Sections 138 and 141 of the Act, at the same time a Trust having a single trustee will not fall within the ambit of Sections 141 and 138 of the Act, the result, as I have already concluded is only an absurdity. In order to avoid the said absurdity and in order to give force and life to the provisions of Sections 138 and 141 of the Act, I hold that the expression 'company' as explained in Section 141 of the Act takes into its ambit a Trust having a single trustee also. In view of this interpretation, I firmly hold, that a Trust, having either a single trustee or two or more trustees, is a 'company' in terms of Section 141 of the Negotiable Instruments Act. 66. My conclusions are summed up as follows:- (i) A Trust, either private or public / charitable or otherwise, is a juristic person who is liable for punishment for the offence punishable under Section 138 of the Negotiable Instruments Act. (ii) A Trust, either private or public / charitable or otherwise, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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