TMI Blog2012 (8) TMI 1192X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a single trustee 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed and accordingly, they are dismissed. Consequently, the connected miscellaneous petitions are closed. - S. NAGAMUTHU, J. For the Appellant : A. Ramesh, Senior Counsel for V. Vijayakumar, Advocate For the Respondent : K.S. Dinakaran, Senior Counsel for Su. Srinivasan, Advocate, N.R. Elango, Senior Counsel, P.N. Prakash Sankaranarayanan, Advocates as Amicus Curiae ORDER S. Nagamuthu, J. 1. Whether a Public Charitable Trust is a juristic person and a company in terms of Section 141 of the Negotiable Instruments Act, 1881 is the issue involved in these petitions. The petitioners are the accused Nos. 1 and 3 to 9 in S.T.C No. 71 of 2012 as well as in S.T.C. No. 68 of 2012 on the file of the learned Judicial Magistrate (Fast Track Court), Hosur. Seeking to quash the said cases, the petitioners have come up with these Criminal Original Petitions. The common respondent in these Criminal Original Petitions is the complainant in both the cases before the Trial Court. 2. Since common issues have been raised in both these Criminal Original Petitions, they have been heard together and they are disposed of by means of this common order. 3. The facts of the cases would be as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... want of sufficient funds. Legal Notice 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 Public Charitable Trusts. He would further submit that a Trust is certainly an artificial person who can either sue or be sued and may prosecute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh 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 receiving such entrustment to use it only for the purpose of such a juristic person. The endowment may be given for various purposes, may be for a church, idol, gurdwara or such other things t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt (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 for the particular purpose. The other alternative was for the donor to create an institution or foundation himself. This would be a new juristic person which depended for its origin upon nothing else but the will of the founder provided it was directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the following persons are eligible for making applications viz., 2.2(a): A Society registered under the Registration of Societies Act 1860 through the Chairman or Secretary of society or (b) A Trust registered under the Charitable Trusts Act, 1950 or any other relevant Acts through the Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 which, under the law for the time being in force, they are so empowered. 24. A cursory reading of the above provision would go to show that it refers to every person capable of contracting . Undoubtedly, a Public Charitable Trust is capable of contracting under the Negotiable Instruments Act. A Trust is competent to issue cheques drawn as against the account mainta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 protest for honour of the drawer or of any one of the endorsers, such person is called an acceptor for honour. Payee. ---The person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid is called the payee . 28. Here again, the drawer is the one who makes a cheque. Under Section 138 of the Negotiable Instruments Act, if a drawer fails to pay the cheque amount as demanded under a Notice, he is liable for punishment. Therefore, it is undoubtedly cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 punished accordingly. Explanation: For the purpose of this section. - (a) Company means any body corporate and includes a firm or other association of individuals; and (b) Director , in relating to a firm, means a partner in the firm. [Emphasis supplied] 31. Admittedly, a Trust is neither a Body Corporate nor a Firm as enumerated in Section 141 of the Act. According to the learned Senior Counsel appearing for the petitioners, a Trust is not an Association of Individuals also, as envisaged in Explanation (a) to Section 141(2) of the Act. In this re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sly 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 of the Act and by having regard to the context in which Section 141 was incorporated, I had to express my inability to agree with the above views expressed by the Andhra Pradesh High Court and the Bombay High Court. According to me, a HUF is not an Association of Individuals . The said conclusion is based on the judgment of the Hon'ble Supreme Court in Ramanlal Bhailal Patel Vs. State of Gujarat reported in 2008 (5) SCC 449. wherein, in paragraph 29 of the said judgment the Hon'ble Supreme Court has held as follows: 29. Normally, where a group of persons have not become co-owners by their volition with a common purpose, they cannot be considered as a 'person'. When the children of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 by express word the term 'Trust' within the sweep of Section 141 of the Act, according to the learned senior counsel, would only go to show that the Legislature has consciously kept the 'Trust' out of the purview of Section 141 of the Act. 37. In order to substantiate this contention, the learned senior counsel has brought to my notice various penal statutes wherein the term 'Company' has been defined. He would point out that in all these statutes, the term 'Trust' has been enumerated in the list of institutions falling within the definition of the term 'Company'. Let us now consider them one after the other. 38. In Karnataka Educational Institutions (Prohibition of Capitation Fee) Act, 1984, as envisaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar 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 the company, as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to any punishment under this Act if he proves that the offence was committed without his knowledge and that he exercised all due diligence to prevent the commission of such offence. (2) Notwithstanding anything contained in sub-section (1), where as 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 attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary of other officer shall also be deem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;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 Individuals' as enumerated in Section 141 of the Negotiable Instruments Act. 47. As we have already extracted in the earlier paragraphs, in Ramanlal Bhailal Patel Vs. State of Gujarat reported in 2008 (5) SCC 449, the Hon'ble Supreme Court has laid down two important elements for a group of persons to constitute an 'Association of Individuals' as defined in Section 141 of the Act. To repeat, the combination of individuals should have been on their own volition and secondly the said combination is for a common purpose. If both the above elements are available, then combination of such persons will be an 'association of individuals' in terms of Section 141 of the Negotiable Instruments Act. 48. So far as a Trust having more than one Trustee, there is combination of individuals. The said combination of individuals is on their ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Section 141 of the Act has to be understood in the context in which the said Chapter was inserted and the purpose which is sought to be achieved by the same. The learned Amicus Curiae would further submit that if the interpretation which is sought to be made by the learned senior counsel for the petitioners is accepted, then, it will only defeat the very object of introduction of Chapter XVII in the Act. The learned Amicus Curiae would, therefore, submit that purposive construction alone would be appropriate in the given circumstances. 52. The learned Amicus Curiae would refer to a text book on Principles of Statutory Interpretation by Mr. Guru Prasanna Singh, sixth edition, where the author has observed as follows: Rule in Heydon's case; purposive construction : mischief rule ---When the material words are capable of bearing two or more constructions the most fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 fall within the meaning of tobacco as contained in item 4 of the First Schedule of the Act, which reads as follows: Tobacco means any form of tobacco, whether cured or uncured and whether manufactured or not, and includes the leaf, stalks and stems of the tobacco plant, but does not include any part of a tobacco plant while still attached to the earth. The Hon'ble Supreme Court was mainly concerned with the phrase means and includes . The contention before the Hon'ble Supreme Court on behalf of the State was that the definition, which covers both the expressions means as well as what it includes, is exhaustive. Since there is no mention of tobacco seed within the definition, it was contended before the Hon'ble Supreme Court that tobacco seed would not fall within the definition. In paragraph 12 of the said judgment, the Hon'ble Supreme Court has held as follows: 12. Looking, therefore, at the terms of the definition more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 means is used, what follows is intended to speak exhaustively. When the phrase means is used in the definition, to borrow the words of Lord Esher M.R. in Gough vs. Gough, it is a hard and fast definition and no meaning other than that which is put in the definition can be assigned to the same. On the other hand, when the word includes is used in the definition, the legislature does not intend to restrict the definition; makes the definition enumerative but not exhaustive. That is to say, the term defined will retain its ordinary meaning but its scope would be extended to bring within it matters, which in its ordinary meaning may or may not comprise. Therefore, the use of the word means followed by the word includes in Section 2(bb) of the ID Act is clearly indicative of the legislative intent to make the definition exhaustive and would cover only those banking companies which fall within the purview of the definition and no other. 57. It is the contention of the learned senior counsel Mr. A.Ramesh that as has been held by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ression in the 'means' clause then the Legislature will normally enumerate such things in the later 'inclusive' clause. As has been held by the Hon'ble Supreme Court, the said list is exhaustive and in general by means of judicial interpretation, no other thing which does not fall within the natural meaning of the expression may be included by the Court. 60. Section 141 of The Negotiable Instruments Act defines the term 'company' by using the words means and includes . As per the explanation a company means a body corporate and includes a firm or association of individuals. Therefore, any person who falls within the ordinary natural meaning of the expression body corporate will be undoubtedly a company. In the later inclusive clause, the Legislature has enumerated two persons viz., 'a firm' or 'association of individuals' which will not fall within the ordinary natural meaning of the expression 'body corporate'. As per the Rule of Interpretation, which we have referred to above, the intention of the Legislature is not to include any other person within the meaning of the term 'company' as the list in the inclusive clause i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted in 1990 (3) SCC 682, wherein the Hon'ble Supreme Court has held as follows:- However, a judge facing such a problem of interpretation can not simply fold his hands and blame the draftsman. Lord Denning in his Discipline of Law says at p. 12: Whenever a statute comes up for consideration it must be remembered that it is not within human powers to foresee the manifold sets of facts which may arise, and, even if it were, it is not possible to provide for them in terms free from all ambiguity. The English language is not an instrument of mathematical precision. Our literature would be much the poorer if it were. This is where the draftsman of Acts of Parliament have often been unfairly criticised. A judge, believing himself to be lettered by the supposed rule that he must look to the language and nothing else, laments that the draftsmen have not provided for this or that, or have been guilty of some or other ambiguity. It would certainly save the judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears a judge cannot simply fold his hands and blame the draftsman. He must set to work on the constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a company in terms of Section 141 of the Negotiable Instruments Act. (iii) For the offence under Section 138 of The Negotiable Instruments Act, committed by the Trust, every trustee, who was in-charge of the day-to-day affairs of the Trust shall also be liable for punishment besides the Trust. 67. Now turning to the facts of the case on hand, it should be examined as to whether the petitioners 2 to 8 who are the accused 3 to 9 were in-charge of the day-to-day affairs of the Trust during the relevant point of time. A perusal of the complaint would go to show that there are sufficient averments to the effect that these petitioners being the trustees of the Trust (Company) were in-charge of running of the Trust along with the second accused and they all entered into a Memorandum of Understanding on 06.10.2008, with the respondent in which they agreed to honour the cheques in question. The Memorandum of Understanding dated 06.10.2008, filed before the lower Court is found in page Nos. 69 to 88 of the typed set of papers filed by the petitioners. A reading of the above Memorandum of Understanding would go to show that the issuance of the said cheques in question on behalf of the first a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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