TaxTMI 
TaxTMI 
2025 (1) TMI 129
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.... the NI Act. The Applicant is Accused No. 3. The Accused No. 1 is M/s. Sanjiv Jayantilal Kamdar HUF, Accused No. 2 is Sanjiv Jayantilal Kamdar and Accused No. 3 is Rina Sanjiv Kamdar. 3. It is the contention of Mr. Nagar, learned Counsel for the Applicant i.e. Accused No. 3-Rina Sanjiv Kamdar that she cannot be considered as actively involved in the said HUF. To substantiate his contention, he has relied on the decision dated 7th April 2016 of the Gujarat High Court in the matter of Shah Nitinkumar Dhirajlal Rameshchandra Vs. Patel Mahendrakumar passed in Special Criminal Application (Quashing) No. 2750 of 2015 along with other connected Applications. He therefore, submitted that the impugned order issuing process against Applicant/Accused No. 3 is required to be quashed and set aside. 4. On the other hand, it is the submission of Ms. Rachana Mamnani, learned Counsel appearing for the Respondent No. 1 that the Applicant is actively involved in day-to-day affairs of the said HUF. She pointed out the averments in the complaint. She also pointed out Agreement for Sale dated 16th April 2018 and Deed of Rectification dated 23rd April 2018 executed by Sanjiv J. Kamdar (HUF) through....
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....2017-March, 2017, And in May 20,00,000/- and August 25,00,000/- in 2017 in favour of Silver Star & Company, Sanjiv Kamdar & Rina S. Kamdar, and Sanjiv Kamdar HUF, Arihant Enterprise, as requested by Accused. In the subsequent meeting in July, 2017, Accused came with some Documents / papers pertaining to the said Plots intending to be acquired in their names and thereby painting rosy pictures & Convinced complainant that Accused are investing money in right place and that accused offered him to pay an interest in case payment is delayed. 4) The Complainant states that accordingly Accused have issued and delivered P.D. cheque in favour of My Client, in this transaction, duly signed by You, ie 1) Cheque No. 821067, dated 17.01.2019, for Rs. 20,00,000/-, drawn on Corporation Bank, Khar West Br., with assurance that the same shall be honoured as & when presented and that thus their liability existed and Accused were under legal obligation to clear the cheques, as agreed. 5) That the Complainant presented above cheques to his Bankers, namely Yes Bank Ltd., Bandra (W) Br., for realization of the same from their bankers on 18.01.2019, but to the utter surprise of complain....
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....on 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 attributable to, any neglect on the part of, any director, manager, secretary or other officer 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 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." (Emphasis added) 7. The explanation to Section 141 NI Act is very relevant. In the explanation, it is specifically....
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....y shall not fall within the ambit of the provision. It is only those persons who were in charge of and responsible for the conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. It follows from this that if a director of a company who was not in charge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable under the provision. The liability arises from being in charge of and responsible for the conduct of business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. Conversely, a person not holding any office or designation in a company may be liable if he satisfies the main requirement of being in charge of and responsible for the conduct of business of a company at the relevant time. Liability depends on the role one plays in the affairs of a company and not on designation or status. If being a director or manager or secretary was enough to cast criminal liability, the section would have said so. Instead of "every person" the section would have said "every director, manag....
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....material time when the offence was committed." 14. The same High Court in V. Sudheer Reddy v. State of A.P. [(2000) 107 Comp Cas 107 (AP)] held that: (Comp Cas p. 110) "The purpose of Section 141 of the Negotiable Instruments Act would appear to be that a person [who appears to be] merely a director of the company cannot be fastened with criminal liability for an offence under Section 138 of the Negotiable Instruments Act unless it is shown that he was involved in the day-to-day affairs of the company and was responsible to the company." Further, it was held that allegations in this behalf have to be made in a complaint before process can be issued against a person in a complaint. To the same effect is the judgment of the Madras High Court in R. Kannan v. Kotak Mahindra Finance Ltd. [(2003) 115 Comp Cas 321 (Mad)] In Lok Housing and Constructions Ltd. v. Raghupati Leasing and Finance Ltd. [(2003) 115 Comp Cas 957 (Del)] the Delhi High Court noticed that there were clear averments about the fact that Accused 2 to 12 were officers in charge of and responsible to the company in the conduct of the day-to-day business at the time of commission of the offence. ....
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....office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141." (Emphasis added) 10. If the averments in the complaint in this case are examined on the touchstone of the law laid down by the Supreme Court in S.M.S. Pharmaceuticals Ltd. (supra), then it is clear that the complaint contains necessary averments as regards Applicant i.e. Accused No. 3. 11. A learned Single Judge of this Court in the case of Dadasaheb Rawal (supra) has discussed the scope of the term "Association of Individuals" in paragraph 11, as under: "11. Section 141 is comprehensive. It would cover all types of business organisations which are shown therein. The definition is inclusive and is used to convey something more than what is defined. Consequently, the term "association of individuals" will include Hindu Undivided Family of which the business is said to be a joint concern....
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....) 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 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 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 individuals' means a group of persons who have become co-owners by their own volition with a common purpose. If the co-ownership is not by volition nor do they have any common purpose then, the co-owners will not constitute an Association of Individuals in terms of section 141 of the Act. In a HUF, the members do not become c....
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....herwise 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, Section 2(f) of which reads thus: Person does not include any company or association or body of individuals whether incorporated or not. Similarly, the definition under Section 2(g) of the Representation of People Act, 1950, is person does not include a body of persons. 12. In South Gujarat R....
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....ns. . . . . . . . . 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 custom or usage are joint in estate or residence. After having made a comparison of the General Clauses Act and Section 2 (21) and (16) of the Gujarat Agricultural Lands Ceiling Act, the Hon'ble Supreme Court has held as follows: The inclusive definition of person in the Ceil....
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....on deed without anything more, will not convert a co ownership into a joint enterprise. Thus when there are ten co-owners of a property, they are ten persons and not a body of individuals to be treated as a single person. But if the co-owners 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 co-owners 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 co-owners by their own volition with a common purpose. If the co-ownership is not by volition nor do they have any common purpose then, the co-owners will not constitute an Association of Individuals in terms of Section 141 of the Act. In a HUF, the members do not become co-owners by their own volition and there is also no common purpose in their co-ownership....
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....radesh 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 provides that a director of the Company, even if he does not come under the category of persons liable under sub-clause (1) shall be deemed to have committed the offence, if it is proved that the o....
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.... it significant to note that the judgment of a learned Single Judge in the case of Dadasaheb (supra) has been cited before the Gujarat High Court, however, the Gujarat High Court in paragraph 21 of Shah Nitinkumar (supra) has specifically observed that the Gujarat High court is not agreeable with the views expressed by the Bombay High Court in view of the discussion and law laid down by the Supreme Court in Ramanlal Bhailal Patel Vs. State of Gujarat Appeal (Civil) 4420 of 2004. 15. Perusal of said judgment of the Supreme Court in the case of Ramanlal Patel (supra) shows that the issue involved before the Supreme Court was relating to the interpretation of the word "person" In the Gujarat Agricultural Land Ceiling Act, 1960 (hereinafter referred to as "Gujarat Ceiling Act"). In paragraph No. 10 of the decision of the Supreme Court, the issue which arose before the Supreme Court for consideration has been specifically set out as follows : "10. On the contentions raised, the following questions arise for our consideration : (i) Whether the definition of 'person' in the Gujarat Agricultural Lands Ceiling Act, 1960, includes a body of individuals/associatio....
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....ed 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 1979 SC 734 following Dilworth vs. Commissioner of Stamps - 1899 AC 99 and Jobbins vs. Middlesex County Council - 1949 (1) KB 142). 16. 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 to any entity that is recognized 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 Edition Page 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 recognized 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 ....
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....aid 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 "Company" as given in Section 141 of the NI Act. 18. The Gujarat High Court in Shah Nitinkumar (supra) has also relied on other decisions of the Supreme Court which are arising out of the Income Tax Act. In this behalf it is important to note paragraph 10 of the decision of the Supreme Court in the case of ITO v/s. Ramprasad 1973 (3) SCC 25 on which Gujarat High Court has relied. The said paragraph 10 reads as under: "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, 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 asse....
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....inding 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 larger Bench to examine the question (see Food Corporation of India v. Yadav Engineer and Contractor, (1982) 2 SCC 499 : AIR 1982 SC 1302). (ii) A Division Bench of a High Court should follow the decision of another Division Bench of equal strength or a Full Bench of the same High Court. If one Division Bench differs from another Division Bench of the same High Court, it should refer the case to a larger Bench. (iii) Where there are conflicting decisions of courts of co-ordinate jurisdiction, the later decision is to be preferred if reached after full consideration of the earlier decisions. (d) The decision of one High Court is neither binding precedent for another High Court nor for courts or Tribunals outside its own territorial jurisdiction. It is well-settled that the decision of a High Court will have the force of binding precedent only in the State or territo....