TMI Blog2012 (8) TMI 1192X X X X Extracts X X X X X X X X Extracts X X X X ..... n heard together and they are disposed of by means of this common order. 3. The facts of the cases would be as follows: (i) The first accused is a public charitable trust known as M/s.Abraham Memorial Educational Trust . The said Trust is running a school in the name and style of Ebenezer International School in Bangalore. The common second accused in both these cases by name Abraham Ebenezer was its Chairman and Managing Trustee. The other petitioners herein are the Trustees of the first accused Trust. (ii) It is alleged that for the purpose of developing the school run by the first accused Trust, the second accused borrowed a sum of ₹ 7,00,00,000/- on behalf of the first accused from the respondent complainant. Assuring repayment of the above loan amount, the first accused had executed a registered Deed of Mortgage dated 06.10.2008 itself. Apart from that, the second accused has also executed two other registered Deeds of Mortgage dated 06.10.2008 in favour of the complainant mortgaging land and building where the school is housed and also mortgaging the agricultural land in Survey No. 45/1 at Gottamaranahalli village. The first accused also agreed to pay inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritable 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 first accused Trust is not maintainable. 6. The second contention of the petitioners is that since the first accused is neither a person nor a company as defined in Section 141 of the Act, the accused Nos. 3 to 9 who are only the Trustees cannot be prosecuted for the offence said to have been committed by the first accused Trust. 7. The third contention of the petitioners is that assuming that the first accused Trust is a company in terms of Section 141 of the Act, even then, the prosecution of the accused Nos. 3 to 9 is not maintainable since there are no sufficient averments to prima-facie show that these accused Nos. 3 to 9 were actually involved in the management and day-to-day affairs of the first accused Trust. 8. Since the legal issues involved in these petitions are very complex in nature and the answer to which is likely to have larger impact, this Court requested Senior Counsel Mr. N.R.Elango and Mr. P.N.Prakash to assist the Court as Amicus Curiae. I have heard the learned counsel appearing on either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 or be prosecuted. 11. Now, let us have a quick look into the history of the concept of an Artificial Person . Every human being is a person in the eye of law. When a person is ordinarily understood to be a natural person, it only means a human being. But a person is also artificially created and recognised in law as such. Such persons are called in different names, such as juristic person , juridical 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 nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that the human faculty may conceive of, out of faith and conscience but it gains the status of juristic person when it is recognised by the society as such. (Emphasis added) 12. In the above judgment, the Hon'ble Supreme Court has referred to the judgment in Yogendra Nath Naskar Vs. Commissioner of Income Tax, Calcutta reported in 1969 (1) SCC 555 with approval. That case was decided 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, recognis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 directed to a charitable purpose. The foundation would be the owner of the dedicated property in the eye of law and the administrators would be in the position of trustees bound to carry out the object of the foundation. (emphasis added) 15. Keeping in mind the above judgments, if we look into the definition of the term Trust , as made in Indian Trusts Act, the word 'Trust' denotes only an obligation attached to the property. In other words, Trust is nothing but a confidence reposed on the person whether natural or artificial. Such artificial person, upon whom trust is reposed, may even be founded by the creator of the Trust. As held by the Hon'ble Supreme Court, the trust obligation can be imposed on a person already in existence or the founder himself can create an artificial person upon whom the trust obligation can be imposed. 16. In this regard, we may also look into the dictionary meaning of the word 'Trust' to k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Chairman or Secretary of the trust or (c) A company established under Section 25 of Companies Act, 1956. (d) Central or State Government / UT Administration or by a Society or a Trust registered by them.(Emphasis supplied) 20. This is only an illustration to show that a Trust founded for a charitable purpose or for a private purpose has been recognised as a juristic person by the Government. Thus, a Public Charitable Trust is an organisation and the same enjoys legal status having rights, liabilities and obligations. 21. Now, let us examine the question as to whether such a Public Charitable Trust has been recognised as a juristic 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 maintained by the Trust. Thus, the Negotiable Instruments Act has recognised a Public Charitable Trust as a person capable of contracting and that is why the banking institutions, the Government and the customers have recognised such a Public Trust as a juristic person. Thus, Section 26 of the Negotiable Instruments Act obviates doubts, if any, and makes it crystal clear that a Public Trust is capable of contracting and thus capable of making a cheque or Bill of Exchange and so it is a juristic person for the purpose of the said Act. 25. At this juncture, we may notice that all the enactments including Negotiable Instruments Act, herein above referred to/dealt with are pre Constitutional enactments which came into being during colonial period, but adopted subsequently. The Constitution of India, which is a vibrant document under whose autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onour. 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 clear that a public charitable trust, being a drawer, is liable for punishment. 29. When the Trust (an artificial person) is prosecuted, though there is compulsory sentence of imprisonment prescribed under Section 138 of the Act, a Trust can be imposed only with fine or compensation. As a matter of fact, there were conflicting views prior to the Constitution Bench Judgment of the Hon'ble Supreme Court in Standard Chartered Bank Vs. Directorate of Enforcement reported in 2005 (3) C.T.C. 39. Some Courts had taken the view that in cases where there is compulsory sentence of imprisonment prescribed, artificial person cannot be prosecuted. But this conflict was once and for all settled in a crystallised form by majority judgment in Standard Chartered Bank case (cited supra), wherein, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 regard, I may state as to what actually the Legislature intends to mean by the term 'Association of Individuals' came up for consideration before various Courts on number of occasions. But, there is no uniformity in the opinion between various High Courts. The Andhra Pradesh High Court in Jagadish Rai Agarwal and others Vs. State of Andhra Pradesh and others, reported in 2005 (2) BC 497, while considering the scope of Section 141 of the Negotiable Instruments Act, held as follows: ....Since the dishonoured cheque was issued by the 1st petitioner as Kartha of the HUF, petitioners 2 to 4, being the sons of 1st petitioner and member of HUF, in view of the Explanation of Section 141 of the Act, like Directors of a Company, can be made liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Section 8 of the said Act, if a person committing an offence under the said Act is a Company, besides the Company, the other office bearers like Director etc., shall also be deemed to be guilty for that offence and shall also be liable to be punished. In this statute, the term Company is explained as follows: 8(2)(a) - 'company' means any body corporate and includes a trust, a firm, a society or other association of individuals. (Emphasis added) 39. Similarly in Section 8(2)(a) of The Prohibition of Capitation Fee Act, 1987 (Government of Maharashtra); Section 13(2)(a) of The Maharashtra Gunthewari Developments (Regularisation, Upgradation and Control) Act, 2001; Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation. - For the purposes of this section, - (a) company means any body corporate, and includes a firm or other association of individuals; and (b) director , in relation to a firm, means a partner in the firm. This is in pari materia to Section 141 of the Negotiable Instruments Act. 43. Similarly, in almost all the Central Statutes which also make the Director of the Companies liable for punishment for the offences committed by the Companies, the term 'Company' has been explained verbatim as has been don ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 own volition. If an individual agrees to be one of the Trustees, either by nomination or by election etc., then the combination is on his own volition. Apart from that, there will be at least a minimum of one common purpose in every Trust, which is the obligation imposed on the Trust. Thus, the Trust, being a combination of individuals, is an 'association of individuals' in terms of Section 141 of the Negotiable Instruments Act. Thus, there can be no difficulty in holding that a Trust, having two or more trustees, is undoubtedly a company for the purposes of Sections 138 and 141 of The Negotiable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 firmly established rule for construction of such words of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) is the rule laid down in Heydon's case which has now attained the status of a classic . The rule which is also known as 'purposive construction' or 'mischief rule', enables consideration of four matters in construing an Act : (i) What was the law before the making of the Act, (ii) What was the mischief or defect for which the law did not provide, (iii) What is the remedy that the Act has provided, and (iv) What ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 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 closely, it is quite clear that tobacco seeds do not fall within the second or inclusive part of the definition. This part of the definition is important. It specifically excludes from the definition any part of the tobacco plant so long as it is still attached to the earth. It makes mention only of parts of the plant after it is severed from the earth. It is common knowledge that when a plant is severed from the earth, its parts will comprise of not only the leaves, stalks and stems but also the seeds. Yet the inclusive part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 the Hon'ble Supreme Court in the above two referred to judgments, the phrase means and includes will clearly indicate the Legislature's intention that the definition is exhaustive and would only cover those institutions as enumerated in Section 141 of the Act. In other words according to the learned senior counsel, the term Trust has been consciously omitted to be included within the term Company as explained in Section 141 of the Act. Since the phrase means and includes indic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is exhaustive. 61. A Trust, admittedly does not fall within the ordinary natural meaning of the expression body corporate. Similarly, it does not fall within the ambit of a firm also. But as we have already concluded, a Trust having two or more persons will fall within the ambit of 'association of individuals' and thus such a Trust is a company. But a Trust having a single trustee will not fall within the ambit of 'association of individuals' and thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovide 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 constructive task of finding the intention of Parliament, and he must do this not only from the language of the statute, but also from a consideration of the social conditions which gave rise to it, and of the mischief which it was passed to remedy, and then he must supplement the written word so as to give 'force and life' to the intention of the legislature. 65. Applying the above law laid down by the Constitution Bench of the Hon'ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 accused has been admitted by the petitioners and that they have assured that the cheques will be honoured on presentation. The above averments in the complaint together with the Memorandum of Understanding would go to prima facie show that they were in-charge of the day-to-day affairs of the Trust (Company) and, therefore, the prosecution is maintainable as against them also. At this juncture, I wish to add that it is not my conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
