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TMI Blog2016 (4) TMI 1476X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner herein seeks 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. The challenge in the present petition is to the legality and validity of the order of issuance of process and continuity of proceedings in absence of impleadment of Hindu Undivided Family (hereinafter referred to as 'the HUF') as party to such proceedings and as an equator, the petitioner seeks quashment of the criminal cases pending before the Court of the learned Chief Judicial Magistrate, Patan. 3. The brief facts leading to filing of the petition are that the respondent No. 1-original complainant is a proprietary firm. The proprietor Shri Kanaiyalal (Kanubhai) Shivlal Shah, resident of Patan, acts as a commission agent and is a trader as well. The petitioner is a Karta of an HUF i.e. Riddhi Siddhi Traders, based at Patan. Because of the requirement of the monetary aspects, for the transaction of the business, the parties had monetary transactions. Various cheques in question were drawn in the name of the firm and were issued by the petitioner as a Karta of Riddhi Siddhi Traders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the complaint. According to them, the present petitions are premature at this stage. The Court must not to go into factual aspects of the matter and it would not be appropriate for this Court to look into the merits of the matters at this stage. They have further urged that once the trial Court has taken cognizance by issuing summons, no interference would be necessary and it is only in the extraordinary circumstances, this Court needs to exercise extraordinary powers of quashment. They have sought to rely upon a decision of the Apex Court rendered in a different context in the case of Income-tax Officer, Gorakhpur v. Ram Prasad, reported in (1973) 3 SCC 25, which provides that the HUF is neither a firm nor an association of persons. They also have sought to rely upon a decision of the Madras High Court in the case of Arpit Jhanwar v. Kamlesh Jain, reported in (2013) 1 CRIMES 51, in support of his arguments. 6. Having thus heard both the sides and having also considered the material on record, the sole issue that requires to be considered is as to whether the complaints which have been filed without impleading the HUF as party only against the petitioners, as Karta of the HUF, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etting out the elements of an offence; in requiring the fulfillment to the letter of statutory conditions precedent to the infliction of punishment; and in insisting on the strict observance of technical provisions concerning criminal procedure and jurisdiction." 42. We have referred to the aforesaid passages only to highlight that there has to be strict observance of the provisions regard being had to the legislative intendment because it deals with penal provisions and a penalty is not to be imposed affecting the rights of persons whether juristic entities or individuals, unless they are arrayed as accused. It is to be kept in mind that the power of punishment is vested in the legislature and that is absolute in Section 141 of the Act which clearly speaks of commission of offence by the company. The learned counsel for the respondents have vehemently urged that the use of the term as well as in the Section is of immense significance and, in its tentacle, it brings in the company as well as the director and/or other officers who are responsible for the acts of the company and, therefore, a prosecution against the directors or other officers is tenable even if the company is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and certain other areas covered under Section 138 of the Act. The same really do not render any aid or assistance to the case of the respondents and, therefore, we refrain ourselves from dealing with the said authorities. 45. Resultantly, the Criminal Appeal Nos. 838 of 2008 and 842 of 2008 are allowed and the proceedings initiated under Section 138 of the Act are quashed. 46. Presently, we shall advert to the other two appeals, i.e., Criminal Appeal Nos. 1483 of 2009 and 1484 of 2009 wherein the offence is under Section 67 read with Section 85 of the 2000 Act. In Criminal Appeal No. 1483 of 2009, the director of the company is the appellant and in Criminal Appeal No. 1484 of 2009, the company. Both of them have called in question the legal substantiality of the same order passed by the High Court. In the said case, the High Court followed the decision in Sheoratan Agarwal, (AIR 1984 SC 1824) (supra) and, while dealing with the application under Section 482 of the Code of Criminal Procedure at the instance of Avnish Bajaj, the Managing Director of the company, quashed the charges under Sections 292 and 294 of the Indian Penal Code and directed the offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income tax Officer, Gorakhpur (supra) held that the respondent was the Karta of an HUF which carried on business in the name and style of "Ram Nath Ram Prasad". The Income-tax assessments were made on the family for assessment years 1944-45 to 1947-48. In relation to the Income-tax Act, it has been held considering section 2(17) of the Income-tax Act that the definition of HUF when is considered with regard to the charging section 4, it could be held that the HUF is neither a firm nor an association of persons. It is a separate entity by itself and if the HUF is to be considered as an association of persons, there was no point in making separate provision for the assessment of Hindu Undivided Family. The Court also held that this conclusion is strengthened by section 25A of the Indian Income-tax Act, 1922, which provides for the assessment of Hindu Undivided Family after its partition. 9. The Madras High Court in the case of Arpit Jhanwar (supra) was dealing with a matter arising out of section 138 of the Negotiable Instruments Act raising the issue whether the term 'company' includes the association of individuals. It held and observed that the term 'association of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by law as having the rights and duties of a human being. Salmond defines person as any being whom the law regards as capable of rights and duties or as a being, whether human or not, of which rights and duties are the attributes (Jurisprudence, 12th Edn., p. 299). Thus the word person, in law, unless otherwise intended, refers not only to a natural person (male or female human being), but also any legal person (that is an entity that is recognised by law as having or capable of having rights and duties). The General Clauses Act thus defines a person as including a corporation or an association of persons or a body of individuals whether incorporated or not. The said general legal definition is, however, either modified or restricted or expanded in different statutes with reference to the object of the enactment or the context in which it is used. For instance, the definition of the word person in the Income Tax Act, is very wide and includes an individual, a Hindu Undivided Family, a company, a firm, an association of persons or body of individuals whether incorporated or not, a local authority and every other artificial juridical person. At the other extreme is the Citizenship Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r an association of persons. It is a separate entity by itself. That is made clear by Section 3 of the Indian Income Tax Act, 1922 which classifies the assessee under the heads individuals. Hindu undivided families, companies, local authorities, firms and other associations of persons. . . . . . . . . If Hindu undivided family is to be considered as an association of persons, there was no point in making separate provision for the assessment of Hindu undivided family. This conclusion is strengthened by Section 25A of the Indian Income Tax Act, 1922 which provides for the assessment of Hindu undivided family after its partition. 15. Again, more or less, a similar question arose for consideration before the Hon'ble Supreme Court in Ramanlal Bhailal Patel v. State of Gujarat (cited supra). That was a case relating to Gujarat Agricultural Lands Ceiling Act, 1960. In the said Act, the term person is defined in Section 2(21) of the Act which states that a person includes a joint family. Section 2(16) of Gujarat Agricultural Lands Ceiling Act defines the term joint family meaning thereby a Undivided Hindu Family and in the case of other persons a group or unit the members of which by c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilarly, when two or more persons merely purchase a property, under a common sale deed, without any agreement to have a common or joint venture, they will not become an association of persons/body of individuals. Mere purchase under a common deed without anything more, will not convert a coownership into a joint enterprise. Thus when there are ten coowners of a property, they are ten persons and not a body of individuals to be treated as a single person. But if the coowners proceed further and enter into an arrangement or agreement to have a joint enterprise or venture to produce a common result for their benefit, then the coowners may answer the definition of a person. Emphasis supplied) 18. This dictum laid down by the Hon'ble Supreme Court categorically answers the question involved in the instant cases. As we have seen, as per Section 141 of the Act, the term company includes an Association of Individuals. Here, the term Association of Individuals means, as has been held by the Hon'ble Supreme Court, a group of persons who have become coowners by their own volition with a common purpose. If the coownership is not by volition nor do they have any common purpose then, the coo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 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 by the Bombay High Court and the Andhra Pradesh High Court, in view of my foregoing discussions and the law laid down by the Hon'ble Supreme Court in Ramanlal Bhailal Patel v. State of Gujarat case (cited supra). 22. A learned Single Judge of this Court in Mrs. Gayathri v. S.R. Jayaraman (2009 (3) MWN (cr.) DCC 128) had an occasion to consider the same question. In paragraph No. 10 of the said judgement, the learned Judge has framed the following question : The pertinent question that arises here is whether an Hindu Undivided Family comes under the definition of Company found in Section 141 of the Negotiable Instruments Act, 1881, and has held as follows: 10. As per section 141, if the person committing an offence punishable under Section 138 happens to be a company then, every person, who at the time of commission of offence was in charge of and responsible to the company for the conduct of its business, as well as the Company shall be deemed to have committed the offence. Sub-Clause (2) of the Section p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted by the Kartha of the HUF. In view of the above, the prosecutions in these cases against the petitioner are liable to be quashed." 10. Yet another decision of the Madras High Court delivered on August 05, 2009, in the case of Gayathri v. S.R. Jayaraman, reported in 2011 ACD 200, whereby the Madras High Court was considering the question as to whether the members of an HUF can be held liable in respect of a cheque issued by the Karta of the HUF. The reference is made to the decision of the Andhra Pradesh High Court rendered in the case of Jagdish Rai Agarwal and others v. The State of Andhra Pradesh and others, reported in 2005 CrLJ 314, wherein it has been held that if the cheque issued by the Karta of the HUF is dishonoured, the sons of the Karta would be held liable for prosecution for the offence punishable under section 138 of the Act read with section 141 of the Act as they should be equated to the Directors of a company by virtue of the explanation found in section 141 of the Act. The Madras High Court did not agree with the said proposition and held that such a blanket proposition, according to the Madras High Court, without a qualification that such cheque should hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the meaning of the company as incorporated under subsection (2) of section 141 of the Act. The Court also referred to the decision in the case of Commissioner of Income tax, Bombay v. Indira Balkrishna, reported in AIR 1960 SC 1172, wherein while dealing with section 3 of the Income-tax Act, 1922, it was held that the word 'associate' means, according to the Oxford Dictionary, "to join in common purpose". Therefore, 'an association of persons' means two or more persons join in a common purpose or common action. The Court also held that the words occur in the section which imposes a tax on income, the association must be one the object of which is to produce in income, profits or gains. It would be beneficial to regurgitate the relevant paragraphs of the decision in the case of Alladi Narsimha Rao (supra), which read as under : "14. There is no specification in the Explanation (a) to Section 141 of the Act as to whether the words "other association of individuals" should be in relation to a business enterprise or a business deal. The intendment of these words can be gathered by examining in which context those words were employed. In order to have clear picture o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y business must be deemed as a juristic person like a company or firm. There being a unity of ownership and community of interest, the shares of the individual members in the profits and loss are not worked out unlike in case of partnership firm. So far as the business of a joint family is concerned, the Manager is liable not only to the extent of his share in the joint family property, but also personally. It would be profitable to reproduce the relevant paragraphs of the said decision, which read as under : "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, HUF business, etc. It shall have to be construed ejusdem generis alongwith 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Ramanlal Bhailal Patel v. State of Gujarat, reported in (2008) 5 SCC 449, 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. It would be profitable to reproduce the relevant observations of the said decision, which read as under : "20. The terms 'association of persons' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons/body of individuals' may refer to a combination of individuals who join together to acquire and own land as coowners and carry on agricultural operations as a joint enterprise. 21. Normally, where a group of persons have not become coowners by their 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 coowners, but the coownership 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 coowners, 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 coowners 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idical person", "legal entity" etc., In some countries, even human beings were not treated as persons in law, for example, in Roman Law, a slave was not a person and he had no right to a family. In other words, he was treated like an animal. In French colonies also, before slavery was abolished, the slaves were not treated as legal persons. They were given legal status of person only through statute during later period. With the development of Society, cooperation among various sections of people became absolutely necessary for the well being of the humanity. Therefore, it became a natural necessity for formation of institutions like corporations and companies, etc. These institutions like corporations, companies etc., were given legal status of a person. By virtue of the statutory recognition, these artificial persons came to own property and enjoy various statutory rights and even some constitutional rights. As the society started growing more and more, there came more number of fictional personalities viz., juristic persons in different names enjoying different kinds of rights and liabilities as recognized under various laws. In the words of the Hon'ble Supreme Court in Shir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided by the a Coram of three Hon'ble Judges. The main question before the Hon'ble Supreme Court was whether a Hindu deity can be treated as a unit of assessment under Sections 3 and 4 of the Income Tax Act, 1922. While analysing the said question, the Hon'ble Supreme Court had referred to a case in Manohar Ganesh Vs. Lakshmiram reported in ILR 12 Bom 247 which is also popularly known as "Dakor temple case", wherein, two Hon'ble English Judges by name "West" and "Birdwood", JJ have held as follows: "The Hindu Law, like the Roman Law and those derived from it, recognises not only incorporate bodies with rights of property vested in the corporation apart from its individual members but also juridical persons called foundations. A Hindu who wishes to establish a religious or charitable institution may according to his law express his purpose and endow it and the ruler will give effect to the bounty or at least, protect it so far at any rate as is consistent with his own Dharma or conception or morality. A trust is not required for the purpose; the necessity of a trust in such a case is indeed a peculiarity and a modern peculiarity of the English Law. In early law a g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c person for the purpose of Negotiable Instruments Act. The term person has not been defined in the Negotiable Instruments Act. Therefore, one has to again look for the definition in the General Clauses Act. Section 2(42) of the General Clauses Act defines the term 'person' as follows: "person" shall include any company or association or body of individuals, whether incorporated or not." Similarly Section 11 of the Indian Penal Code also defines the term 'person' as follows: "Section 11. "Person": The word person includes any Company or Association or body of persons, whether incorporated or not." 22. Undoubtedly, in both the enactments, the definition is inclusive. It is a well settled law, if the Legislature has used only an inclusive definition, the list enumerated in the definition clause shall not be treated as exhaustive. Applying the doctrine of "ejusdem generis" and going by the purpose and context, while interpreting the definition clause, it is for the Court to bring in any other similar artificial person into the ambit of the term 'person' as made in Section 3(42) of the General Clauses Act and Section 11 of the I.P.C. It is, of course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or more persons merely purchase a property, under a common sale deed, without any agreement to have a common or joint venture, they will not become an 'association of persons/body of individuals'. Mere purchase under a common deed without anything more, will not convert a coownership into a joint enterprise. Thus when there are ten coowners of a property, they are ten persons and not a 'body of individuals' to be treated as a 'single person'. But if the coowners proceed further and enter into an arrangement or agreement to have a joint enterprise or venture to produce a common result for their benefit, then the coowners may answer the definition of a 'person'." 35. In the above judgment, the Hon'ble Supreme Court has made it very clear that 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 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 requirement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd 'means' in a definition section, it was held that the intention was to make it more extensive. Further, a definition may be in the form of 'means and includes', where again the definition is exhaustive. Referring to the definition of 'charitable bequest' in a New Zealand statute, the Privy Council pointed out : "It is not said in terms that charitable bequest shall mean one or other of the things which are enumerated, but that it shall include them. The word 'include' is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used those words or phrases must be construed as comprehending, not only such things, as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. But the word 'include' is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions used. It may be equivalent to 'mean and inc ..... 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