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TMI Blog2025 (1) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... point in making separate provision for the assessment of Hindu Undivided Family . Thus, the said decision of the Supreme Court interpreting Section 3 of the Income Tax Act, 1922 will have no application to Section 141 of the NI Act. It is well-settled that the decision of a High Court will have the force of binding precedent only in the State or territories on which the court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect. By no amount of stretching of the doctrine of stare decisis, can judgment of one High Court be given the status of a binding precedent so far as other High Courts or Courts or Tribunals within their territorial jurisdiction are concerned. Conclusion - The term 'association of individuals' will include Hindu Undivided Family of which the business is said to be a joint concern. The Criminal Application is dismissed. - MADHAV J. JAMDAR, J. For the Applicant: Mr. Jagdish Nagar. For the Respondent No. 1: Ms. Rachna Mamnani i/by Mr. Prashant P. Kulkarni. For the Respondent No. 2-State: Mr. C.D. Mali, APP. JUDGMENT PER:- 1. Heard Mr. Jagdish Nagar, learned Counsel appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The same reads as under: 1) The Complainant states that he knows Accused and his wife, Mrs. Rina S. Kamdar and they are represented to be engaged in business in the name style of Arihant Enterprises, Silver Stars Co Sanjiv Kamdar HUF, wherein Accused No. 2 being Karta, accused No. 1 Firm and his wife Mrs. Rina Kamdar, Accused No. 3 is actively participating assisting him in day today business affairs of the firm as Member. That Accused approached complainant sometime in 2015-16, representing that he was in dire need of finance and requested for financial assistance for Rs. 2 crores (Rupees Two Crores only). That Complainant further states that Accused and his wife both further represented that they through their firms are looking out to buy various plots located at Vill: Mauje Parwadi, Tal.: Maval, Dist.: Pune from Land Owners cluster them into one for the purpe of development and the cost of procurement, proceedings including expenses towards registration and other expenses towards transfer will be around Rs 2,50,00,000/ including amount in Cash (herein after referred to as said Plots ) and would be willing to work with complainant, Mr. Murlidhar Tilwani on the said Plots after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the complaint shows that it is specifically mentioned in Paragraph No. 1 of the complaint that Sanjiv Jayantilal Kamdar (Accused No. 2) is the Karta of the Accused No. 1-M/s. Sanjiv Jayantilal Kamdar HUF and Accused No. 3 is the wife of Accused No. 2 and is actively participating and assisting in day-to-day business affairs of the firm as a Member. The complaint also mentions about the manner in which the Applicant is actively participating into the affairs of the Accused No. 1. It is specifically mentioned in the complaint that Accused Nos. 2 and 3 are part of M/s. Sanjiv Jayantilal Kamdar HUF and both Accused Nos. 2 and 3 are actively participating in the day-to-day business affairs of the Accused No. 1 and other sister concerns. The cheque in question is admittedly issued by said Sanjiv Jayantilal Kamdar HUF. The cheque is signed by the Accused No. 2 Sanjiv Jayantilal Kamdar. 6. Before consideration of the decisions relied on by both the contesting parties, it is necessary to set out relevant part of Section 141, which reads as under : 141(1) Offences by companies. (1) If the person committing an offence under section 138 is a company, every person who, at the time the offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e complaint that the person accused was in charge of, or responsible for, the conduct of the business of the company. (b) Whether a director of a company would be deemed to be in charge of, and responsible to, the company for conduct of the business of the company and, therefore, deemed to be guilty of the offence unless he proves to the contrary. (c) Even if it is held that specific averments are necessary, whether in the absence of such averments the signatory of the cheque and or the managing directors or joint managing director who admittedly would be in charge of the company and responsible to the company for conduct of its business could be proceeded against. The relevant discussion is in paragraph Nos. 10 to 14, which reads as under: 10. While analysing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company. The key words which occur in the section are every person . These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words: Who, at the time the offence was committed, was in charge of, and was responsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. In such a case, such persons are to be held liable. Provision has been made for directors, managers, secretaries and other officers of a company to cover them in cases of their proved involvement. 12. The conclusion is inevitable that the liability arises on account of conduct, act or omission on the part of a person and not merely on account of holding an office or a position in a company. Therefore, in order to bring a case within Section 141 of the Act the complaint must disclose the necessary facts which make a person liable. 13. The question of what should be the averments in a criminal complaint has come up for consideration before various High Courts in the country as also before this Court. Secunderabad Health Care Ltd. v. Secunderabad Hospitals (P) Ltd. [(1999) 96 Comp Cas 106 (AP)] was a case under the Negotiable Instruments Act specifically dealing with Sections 138 and 141 thereof. The Andhra Pradesh High Court held that every director of a company is not automatically vicariously liable for the offence committed by the company. Only such director or directors who were in charge of or responsible to the company for the conduct of business of the company at the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows: 19. In view of the above discussion, our answers to the questions posed in the reference are as under: (a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied. (b) The answer to the question posed in sub-para (b) has to be in the negative. Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases. (c) The answer to Question (c) has to be in the affirmative. The question n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground to quash the order of process issued against them. Needless to say, the impugned order is patently illegal and liable to be interfered with and deserves to be set aside. (Emphasis added) 12. Thus, a learned Single Judge of this Court has specifically held that the term Association of Individuals as contemplated in Section 141 will include Hindu Undivided Family and in case of cheque issued by business firm of Joint Hindu Family, all the members can be held responsible although the signatory of the cheque is one member of said association of individuals. Of course this will be subject to the law laid down by the Supreme Court in S.M.S. Pharmaceuticals Ltd. (supra). As already discussed herein above, the complaint in this case fulfills the criteria as set out in S.M.S. Pharmaceuticals Ltd. (supra) 13. Mr. Nagar, learned Counsel appearing for the Applicant has very strongly relied on the decision of the Hon ble Gujarat High Court in the case of Shah Nitinkumar (supra) and more particularly, on paragraph Nos. 8 to 24 of the same, which read as under: 8. The Apex Court in the case of Income Tax Officer, Gorakhpur (supra) held that the respondent was the Karta of an HUF which carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under : 11. The explanation (a) to Section 141 of the Act, would go to indicate that it is indisputably an inclusive definition. The use of the word includes would normally indicate the intention of the legislature to enlarge the meaning of the word used in the statute. As has been held by the Hon'ble Supreme Court in Ramanlal Bhailal Patel v. State of Gujarat (2008 (5) SCC 449) , consequently, the word must be construed as comprehending not only such things which they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. Thus, where a definition uses the word includes, as contrasted from means, the word defined not only bears its ordinary, popular and natural meaning, but in addition also bears the extended statutory meaning. In para 24, the Hon'ble Supreme Court has held as follows: 4. The ordinary, popular and natural meaning of the word person is a specific individual human being. But in law the word person has a slightly different connotation and refers any entity that is recognised by law as having the rights and duties of a human being. Salmond defines person as any being whom the law re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of Section 141 of the Act. 13. with this back ground, now, we have to analyse as to whether the expression Association of Individuals as explained in Section 141 of the Act will include a HUF so as to be called as a company in terms of Section 141 of the Act. 14. A similar question arose for consideration before the Hon ble Supreme Court in ITO v. Ram Prasad, ((1973) 3 SCC 25, at page 29). That was a case where the question arose for consideration before the Hon ble Supreme Court was as to whether the HUF is an Association of Persons in terms of the provisions of the Income Tax Act, 1922. Speaking for the three Judge Bench, Justice K.S. Hegde took note of the definition of the term person as found in Section 2 (17) of the Income Tax Act, wherein it states that the term persons includes a HUF . In view of the specific inclusion of HUF within the definition of the term persons, the Hon ble Supreme Court in paragraph No. 10 has held as follows: 10. This provision applies only to firms and associations of persons. Hindu undivided family is neither a firm nor an association of persons. It is a separate entity by itself. That is made clear by Section 3 of the Indian Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion as to whether the co-owners are together a person. 9. Normally, where a group of persons have not become co-owners by their own volition with a common purpose, they cannot be considered as a person. When the children of the owner of a property succeed to his property by testamentary succession or inherit by operation of law, they become co owners, but the co-ownership is not by volition of parties nor do they have any common purpose. Each can act in regard to his/her share, on his/her own, without any right or obligation towards the other owners. The legal heirs though co-owners, do not automatically become an association of persons/body of individuals. When different persons buy undivided shares in a plot of land and engage a common developer to construct an apartment building, with individual ownership in regard to respective apartment and joint ownership of common areas, the co-owners of the plot of land, do not become an association of persons/body of individuals, in the absence of a deeming provision in a statute or an agreement. Similarly, when two or more persons merely purchase a property, under a common sale deed, without any agreement to have a common or joint venture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable for the offence under Section 138 of the Act. 20. The Bombay High Court has also taken such a view in The Dadasaheb Rawal Coop v. Ramesh (2009(2)Mh.L.J). In that case, while dealing with a case under the Negotiable Instruments Act relating to a HUF business, in paragraph No.9 of the judgment, the Bombay High Court has held as follows:- 9.A plain reading of the expression company as used in subclause (a) of the Explanation is that it is inclusive of any body corporate or other association of individuals. The term association of individuals will include club, trust, business, etc. It shall have to be construed ejusdem generis along with other expressions company or firm. Therefore, a joint family business must be deemed as a juristic person like a company or firm. When it is specifically alleged that the respondent Nos.1 and 2 are the joint 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. 21. With respect, I am unable to persuade myself to agree with the views expressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Single Judge of this Court would go to show that the entire gamut of the argument was that since the cheques were not issued in respect of an account maintained by the HUF, a member of the HUF cannot be held responsible under Section 141 of the Act. Thus, the learned Judge had no occasion to examine the basic question as to whether a HUF is a company in terms of Section 141 of the Act. The learned Judge, eventually, quashed the complaint against a member of the HUF since, the cheque had not been issued in respect of an account maintained in the name of the HUF. Thus the said judgment is not on the question which is precisely before this Court now for consideration. 25. In view of the foregoing discussions, I hold that a HUF will not constitute an Association of Individuals as per the term company explained in Section 141 of the Act and so, in the instant cases, the petitioner who is stated to be only a member of the HUF shall not be vicariously liable for the offence allegedly committed by the Kartha of the HUF. In view of the above, the prosecutions in these cases against the petitioner are liable to be quashed. (Emphasis added) 14. It it significant to note that the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act, unless the context requires otherwise xxxxx (16) Joint family means a undivided Hindu family and in the case of other persons a group or unit the members of which by custom or usage are joint in estate or residence. Xxxxx (21) person includes a joint family; (Emphasis added) The relevant discussion of the Supreme Court in Ramanlal Patel (supra) is to be found in paragraphs 15, 16 and 17 which reads as under: 15. The word 'person' is defined in the Act, but it is an inclusive definition, that is a person includes a joint family. Where the definition is an inclusive definition, the use of the word 'includes' indicates an intention to enlarge the meaning of the word used in the Statute. Consequently, the word must be construed as comprehending not only such things which they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. Thus, where a definition uses the word 'includes', as contrasted from 'means', the word defined not only bears its ordinary popular and natural meaning, but in addition also bear the extended statutory meaning ( See S.K. Gupta v. K.P. Jain - AIR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the existing definition. Therefore the definition of person in the Ceiling Act, would include the definition of person in section 3(35) of General Clauses Act. The resultant position can be stated thus : The definition of person in General Clauses Act, being an inclusive definition, would include the ordinary, popular and general meaning and those specifically included in the definition. The inclusive definition of 'person' in the Ceiling Act, in the absence of any exclusion, would have the same meaning assigned to the word in the General Clauses Act, and in addition, a 'joint family' as defined. Thus, the word 'person' in the Ceiling Act will, unless the context otherwise requires, refer to : (i) a natural human being, (ii) any legal entity which is capable of possessing rights and duties, including any company or association of persons or body of individuals (whether incorporated or not); and 17. Thus it is clear that the discussion of the Supreme Court in the said Ramanlal Patel (supra) is with reference to the definition of joint family and person as defined under the Gujarat Ceiling Act. The said discussion will not apply to the explanation of the term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court are binding on all courts, except, however, the Supreme Court itself which is free to review the same and depart from its earlier opinion if the situation so warrants. What is binding is, of course, the ratio of the decision and not every expression found therein. (b) The decisions of the High Court are binding on the subordinate courts and authorities or Tribunals under its superintendence throughout the territories in relation to which it exercises jurisdiction. It does not extend beyond its territorial jurisdiction. (c) The position in regard to the binding nature of the decisions of a High Court on different Benches of the same court may be summed up as follows: (i) A single judge of a High Court is bound by the decision of another single judge or a Division Bench of the same High Court. It would be judicial impropriety to ignore that decision. Judicial comity demands that a binding decision to which his attention had been drawn should neither be ignored nor overlooked. If he does not find himself in agreement with the same, the proper procedure is to refer the binding decision and direct the papers to be placed before the Chief Justice to enable him to constitute a l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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